Good day, ladies and gentlemen and welcome to the Ironwood Pharmaceuticals’ Third Quarter 2012 Investor Update Conference Call. At this time all participants are in a listen-only-mode. Later we'll conduct the question-and-answer session and instructions will follow at that time. (Operator instructions). As a reminder, this conference is being recorded. I would now like to turn the call over to your host, Meredith Kaya. Please go ahead.

Good morning and thank you for joining us for our third quarter 2012 Investor update. Joining me for today's call are Michael Higgins, our Chief Operating Officer and Tom McCourt, our Chief Commercial Officer. We also have Peter Hecht, our Chief executive Officer; Mark Currie, our Chief Scientific Officer and Jim DeTore, our Vice President of Finance available for the question-and-answer portion of the call. By now, you should have a copy of our press release which crossed the wire earlier this morning. If you need a copy of the press release, you can go to our website, www.ironwoodpharma.com, to find an electronic copy. Some of the information discussed in today's call, particularly the information related to linaclotide, is based on information as of today, Tuesday, October 16, 2012, and contains forward-looking statements that involve risks and uncertainties. Actual results may differ materially from those set forth in such statements. We do not undertake any obligation to update any forward-looking statements made during this call or contained in the accompanying slides as a result of new information, future events or otherwise. For a discussion of these risks and uncertainties, you should review the forward-looking statements disclosure in our press release as well as the risks under the heading 'Risk Factors' in our quarterly report on Form 10-Q for the quarter ended June 30, 2012 and any of our future SEC filings. Additionally, please see the important safety information including the box warning for LINZESS on the slide. For full prescribing information, please visit www.LINZESS.com. I would now like to turn the call over to Michael.

Thanks Meredith, and thanks to everyone on the call for joining us this morning. Over the next several minutes I am going to walk you through some of our Ironwood’s recent corporate highlights and then I’ll pass it over to Tom, who will discuss our plans for the U.S. launch of LINZESS in more details. The past few months have been an incredible period for Ironwood as we made significant strides towards the launch of our first product in the U.S. and European markets offering a new treatment option for millions of adults suffering from Irritable bowel syndrome with constipation and Chronic Idiopathic Constipation. On August 30, LINZESS was approved by the FDA for the treatment of IBS-C and CIC (Chronic Idiopathic Constipation) in adult patients. With this approval, LINZESS is reaching a commercial starting line. LINZESS was approved with a strong label which Tom will talk more about shortly. Both Ironwood and Forest are finalizing our preparation for its launch in December. LINZESS will be provided at an addition price of $7.10 per day which supports our objective to maximize access and minimize barriers for the millions of adults with IBS-C and CIC. To take a brief step back, am proud to say that LINZESS was discovered in our laboratories by our Ironwood scientist back in 2003, who pioneers in the discovery and development of GC-C agonist and the recent approval of LINZESS demonstrates our continued leadership and expertise in this area. Due to hard work and determination by the teams at both Forest and Ironwood, we now have and approved medics that can help highly symptomatic adults, IBS-C and CIC patients. In addition to the benefits it can provide for these patients, LINZESS also represents a significant milestone for us at Ironwood and for our shareholders. Throughout its…

Thanks, Michael. As we approach the launch of LINZESS in just a couple of months, I’d like to spend a few minutes providing some comments on our launch plans and timelines now that LINZESS is approved. Our top priority is to fulfill the un-met needs of millions of adults suffering from IBS-C and chronic constipation. To do this, we have collaborated with Forest to develop a fully integrated launch strategy for LINZESS, supported by a strong label that we believe provides us with a highly differentiated brand with a significant commercial opportunity in the U.S. As we’ve discussed in previous calls, our teams have examined all primary creative launches since 2005. While the uptake and success of these launches varied widely, the more successful launches appeared to have some significant similarities including the existence of a significant un met need often targeting highly symptomatic disorders and a level of product differentiation that could be easily recognized and supported with clinical evidence. Our strategy for LINZESS is grounded in these aspects and to leverage the full market opportunities, we feel that it’s critical that we concentrate on few key areas. First, we must identify the appropriate patients who can benefit immediately from LINZESS. There are more than 45 million adult patients in the U.S. suffering from IBS-C and chronic constipation today. The patients we will be focusing on at launch will be the 10 million adults who are currently in physician’s offices actively seeking care and not fully satisfied with their treatment options. It is critical that we educate and encourage these patients to more effectively communicate their symptoms as well as treatment history to their physicians. Our teams have closely assessed and understand where these patients are seeking information about both IBS-C and chronic constipation and importantly what motivates them…

I think we are going to open up for questions.

Ladies and gentlemen, (operator instructions). Our first question comes from Irina Rivkind, from Cantor Fitzgerald. Your line is open.

Hi, thanks for taking the question. I just wanted to sort of explore the work a little bit. You expect to probably some sort of a gross to net discount offers at. Could you sort of share the best way you are thinking about there and also in terms of the pharmacy stocking, can you talk about what kind of stocking per pharmacy is typical? Thanks.

Irina, thanks for the question. I think as far as the $7.10 obviously that’s wrack. We do have contracting strategy in mind. We certainly if not shared that at this point and obviously the specifics of that will evolve over time based on obviously the need of the pair and the need to drive appropriate access. As far as the quantities for each – if I understand the question right Irina, are you looking at the quantities that will be shipped to each pharmacy?

That’s right.

Yeah. So we haven’t disclosed that but we certainly like want to make sure that they have adequate amounts on time so that it can handle multiple prescriptions.

Okay. And then just one final question. The R&D spending this quarter looked a little bit lower than other quarters in the year. Was that just due to some pushed off expenses or is this more of a going rate that we should think about?

No, Irina. As we’ve talked in the past, it’s hard for us to provide you with a going rate. So we wouldn’t recommend you think about it as an ongoing basis but things change as you progress. And so our view is that they – in fact we got the question last quarter about what are or not our R&D expenses were up. There is a couple of things that you should be aware now with approvals and the high probability of approval in Europe from a policy perspective all of the inventory is now goes up on the balance sheet. So that’s been a change and so as we build API inventory we were in the past before we had approval or we had probable – the least of approval then. Those were expenses, so that has been a shift. That’s probably the most significant single shift quarter-over-quarter. But again things do as we told you in the past, things do vary quarter-by-quarter and to draw the trend lines is always a difficult thing to do but primary change is on the inventory side.

Okay. Thanks.

Our next question comes from Geoffrey Meacham, from JPMorgan. Your line is open.

Hi guys, good morning and thanks for taking the question. There’s one for you in reimbursement and formulary status. If you can just maybe go over after approval of the marketing materials, maybe what you guys think would be a reasonable timeline for getting let’s just say the majority of sort of a private pay kind of reimbursement and sometime that we should think about in terms of the rollout?

I’ll take the question. Yeah, I think traditionally obviously we are looking at previous experiences and I think we see a wave of pairs making a decision at 6 months and 12 months. I think we have an ambitious goal in having the majority of these stations, covered live by the first 12 months in unrestricted status as well as roughly Tier-2 core pay. So I think we are pushing the envelope and we certainly our intention is to get broad unrestricted access at a reasonable core pay somewhere around Tier-2 within the first 12 months.

And Tom, based on your market research and your knowledge of this space. What percentage would you say would be private pay versus say Medic-care, Medicaid, I know you may have review this previously in other calls but it would helpful now though.

It’s a really good question Geff. We have been taking a close look at this – as you know, the real sweet spot in the market is really women from roughly 18 to 55 years. So it favors really the private pay, customer base, the commercial base as opposed to Medic-care, Medicaid, not to say this drug will not be used in the elderly, we believe it’s very effective in the elderly but that’s probably going to be more towards 15% to 20% but I think that’s the patient will be primarily going after out of the gate. So I think the disproportionate patient – the number of patients treated will be in the commercial paid space.

And final question maybe for Michael or for Peter. Any updates to you guys commercial strategy and non-part of geographies such as China, I know you are making some progress there. But just wondering if there’s any update for this quarter?

So Geff, I think the way we phrase is we continue to make progress, there’s multiple parties that are interested and our belief is that there’s significant value, I mean we focused most recently talking about both China and Brazil and we still believe that there’s significant value there, there are multiple parties that are interested and those conversations are going well as we stated in the past, it’s always difficult to determine exactly how long those discussions are going to take and when we’ll close it out but we are feeling bullish that we will be able to move forward with the partnership in the near term and our view is as we’ve talked about many times in the past, our view is that we want to be able to capture the long term upside in some of these and so in terms of the types of deals we are looking at, we are looking to retain significant value, capability scenarios where we don’t have capabilities ourselves.

That’s right. Okay, thanks.

Our next question comes from Corey Davis, from Jefferies. Your line is open.

Good morning, thanks. Two questions. First, which of the two indications do you expect to have the largest concentration of prescriptions out of the gate IBS-C or the chronic constipation, and same question over time at steady state, which one of those two do you expect to have more of the prescriptions?

Yeah. It’s a great question. Again, we can go back to kind of the previous analogs that I think out of the gate the reason to choose this drug for most physicians is pain relief as well as constipation relief, and so I think out of the gate it will be weighted more towards IBS-C and chronic constipation. That being said, if you look at where Zelnorm was over the first 12 to 18 months in which they only had an indication for IBS-C and constipation, it was almost 50/50. So understand that the chronic constipation market is so much bigger and the line between IBS-C and chronic constipation is very grey. I think you’re going to see a lot of use in both, but I think the early compelling case to choose the drug is really going to be around pain relief.

And does your sales pitch to non-specialist need to have them be able to differentially diagnose IBS and chronic constipation? Or can the pitch be simple and short as hey, do you have patients that are constipated? If so, here’s your drug.

Yeah. I think out of the gate it’s really going to be abdominal and constipation relief. Again, abdominal pain means many different things to many different people and sometimes you are on the idea side of line, sometimes you’re on the chronic complication side of the line. But I think we really want to focus is and keep this as simple as possible which is what symptoms are needed to be resolved and what symptoms does this drug target. And I think what we’re from physicians, from the market research is they don’t necessarily actively make a definitive diagnosis as to whether that patient is IBS and chronic constipation to choose the therapy. They’re really lining up the therapy with what is the primary need and how satisfied has the patient been based on previous treatment.

And last question, you mentioned pain a number of times, but I’ve also heard in the past that bloating is also a primary symptom of these patients. Are you more focused on pain and I actually don’t remember exactly what’s in the label because you have more information on the label for that and over time do you expect you could expand the label to include more of the symptoms of CC and IBS?

That’s a great question. Just so we’re clear, in the label based on the FDA guidance it’s really pain, abdominal pain. Bloating is not mentioned in IBS or chronic constipation by definition. I think over time we certainly want to make sure we can speak to bloating, but obviously we want to make sure we meet the regulatory standards so that we can actually show clear applicancy of it. We think the drug does work in bloating, but we won’t be promoting it for bloating as it in the label.

Perfect. Okay, thanks very much. That’s all I had.

Our next question comes from Raghuram Selvaraju from Aegis Capital. You line is open.

Thank you very much. Can you hear me?

Yep. Good morning Ram?

Morning. A couple of things. First of all, can you tell us a little bit about what you believe is likely to be the overall strength and nature of the commercial push on Constella in Europe i.e. approximately how many sales reps are going to be behind the products there assuming that Almirall has secure approval near term in those European territories?

Let me take it. It’s Michael. The quick answer there is that we can’t provide that level of detail right now. We’re working closely with Almirall in terms of establishing the launch plans for Constella across Europe. But we haven’t provided that level of detail. So we’ll be along with Constella, finalizing those plans and we’ll provide more detail in the future. But at this time we don’t have that level of detail available for you. We can say that Almirall is investing in a way that we’re very satisfied with and that they’re making the right inroads to get prepared for launch. So we’re excited about the potential in Europe. We know there’s an uphill battle. There’s a lot of work to be done there, but specific details around the size and the structure of sales force is not available at this time.

Okay. With respect to what you’ve disclosed regarding pricing, I had a utilization question. What do you expect is likely to be the initial utilization pattern among patients as LINZESS is rolled out? Can you give us an idea of how chronic the utilization is likely to be straight off the bat, how long patients are going to be likely to be on the drug based on initial feedback you’ve been getting from physicians?

Yeah, it’s a great question and obviously one of the core assumptions of, Ram, how big can this drug be. But again I think we tend to lean on the analogs. I think upfront I think knowing that this is a chronic disorder and these people are suffering on a weekly basis well over 100 days a year. So this is a chronic ongoing symptomatic condition. So it really leans towards chronic therapy. That being said, we have two kind of guideposts if you will. We certainly go back and look at Zelnorm which was certainly the most successful drug in this category. Previously annual days of therapy were right around 110 to 120. Now keeping in mind Zelnorm was a nice drug for constipation, it wasn’t very good on abdominal pain and 70% of patients discontinued therapy within the first 90 days because it didn’t relieve pain. But you contrast that to something that does provide chronic relief of pain i.e. the PPI category was at upwards of 200 days a year. Those are kind of the guide rails that we’ve been operating within. So our assumption is certainly north of Zelnorm. Is it all the way to the PPI class? Gosh, I hope so. But I think that’s kind of where – we’re not going to know until we get into the market and really see how well patients do on the drug in a broad population base. Does that help?

That is very helpful. And you said pricing is $7.10 per day?

Yeah. The work will be $7.10.

Okay. And then a couple of timing related questions. Do you know approximately what the timeframe is within which Astellas might be expected to complete that phase two study where you mentioned they just initiated patient enrolment? And then when do you expect your phase 2A study with IW9179 to report data?

Yeah. So we’re looking at the 9179 to be the second half of next year reporting data out and the first question I didn’t quite understand.

When does Astellas expect to finish that 500 patient study where they just kicked off patient enrolment?

I don’t think they’ve disclosed that at this time. So I really can’t comment any further.

Okay. Thank you.

Our next question comes from Rachel McMinn from Bank of America Merrill Lynch. Your line is open.

Yeah. A couple of questions, but I’m not sure if the first one you’ll be able to answer, but just given the large amount of inventory stocking that’s going to be going on, do you know if Forest is going to be recognizing that inventory in the first quarter of sales? Or is that something we’re just going to see a lot of companies are just going to be recognizing just tales that are shipped to patients?

So I don’t want to get into too much detail on the accounting, especially not Forest accounting right now Rachel, but they do in terms of scoring revenue they do book on an ex-factory basis so as they ship out they’ll score revenue that way. You were asking as a follow on question I think, if you can clarify it. Again I don’t want to comment specifically on Forest accounting practices, but I do want to make sure I try to answer…

I mean if they’re recognizing ex-factory sales then as whatever they ship out as opposed to the end user demand. So I just want to make sure that we understand how to interpret their sales versus the demand. So that’s helpful. And then in terms of the drug actually being available, you’ve talked about a number of times that you have to get your marketing materials approved before you actually launch it, but will the drug be prescribe-able before December? Will patients be able to access it if physicians are aware that it’s sitting on shelves?

The rules as you know, Rachel, the rules are the drug is approved today, if the drug is available the docs can prescribe it. Obviously we would love to be able to have the opportunity to talk to them and educate them before they make that choice, but as soon as it’s shipped physicians can certainly access the drug.

But is it sitting in pharmacies today? I think to use the future tense, like we plan to stock pharmacies.

Yeah. It is not currently stocked and we will be stocking as we get closer to the actual launch.

Okay. So do you have a specific date in mind?

We haven’t given guidance exactly when it would be shipped, but it will be well in advance of our launch in December.

Okay, great. And then just, Michael, I know I kind of ask this question very regularly, but wanting to get your latest view on cash needs for the company? If there are any – if you’re looking at any non-dilutive strategies over the next year or two to bring additional cash in? Thanks.

So Rachel, as we’ve talked about, our view is that we’re in a great spot as we prepare for launch to get the product out there to the patients. So heading into launch we feel like we’re in a great spot. You asked the question just right. On a non-diluted basis we’re looking to access capital in the form of partnerships. We’ve discussed already the ongoing activities that we have in China and Brazil, more broadly in South America. So we continue to look at those and we look at other ways. We want to make sure that as we’ve done in the past that as we look at funding the business and building the business for the long term that we always have sufficient access to capital. At this stage though, we feel like we’re in a good spot. We’re going to evaluate how things play out with the partnerships and then we’ll keep everyone informed as we move forward. But at this stage we’re feeling like we’re heading into the launch in a good spot. But I like the way you phrase it. Every time we think about raising capital, we think about it on the basis of what’s best for our shareholders and we think about it from a long term perspective. So you’re right, we are sensitive from a dilution perspective. But in no way do we think it’s appropriate to put this launch at risk. So we’re going to balance those things as we believe we’ve done to date. We’ll continue to do that on a go-forward basis.

And is 9179 or other stuff in the mix as potential partnership strategies?

Yes. Certainly everything that – we always want to develop an asset to the point where we can get fair value for it. But all of the assets that we have available are ones where we don’t have capabilities. We certainly consider utilizing them to access capital. So certainly 9179 is in the mix and all the other programs that we have would be in the mix when we get to the appropriate stage where we think we could capture appropriate value for our shareholders.

Perfect. Thanks so much.

Our next question comes from Greg Wade from Wedbush Securities. Your line is open.

Good morning and thanks for taking my questions as well. Michael, can you tell us how many of the approximately 160 sales people you had on your books in Q3? And then in that vein, if you could just drill down into the income statement for the quarter, what were costs associated with the Linaclotide effort versus your own efforts? Thanks.

So Greg, with regards to the sales force, we talked a little bit about the structure before. The only portion of the selling efforts that was in our investments in Q3 and earlier was the regional structure. So we have the leadership structure of the sales team that’s been on board. Over the course of the year we’ve built that team out. Tom and his team have done an incredible job of getting that team in place and getting ready for the sales force. But the sales force, the reps that Tom was alluding to earlier were not on board prior to the end of Q3. So they’re not included in that at all. So those were all based on offers that went out starting in Q4. In terms of the breakout between Linaclotide efforts and other efforts, we’ve talked in the past about our – I won’t drill down the specific breakdown between the two, but I will reiterate our position that in total for the year we still expect our non- Linaclotide efforts to be in the $70 million range. So I can give you that clarity, that we’re still trending in that direction and we continue to believe that that’s an important investment. As we move forward and get more clarity on the other portions of the P&L we’ll break down things into more detail going forward. But for right now I can just reiterate that portion of it to give you a little bit of help in that area.

Thanks Mike.

Our next question comes from David Friedman from Morgan Stanley. Your line is open.

Hi. Thanks for taking the question. Just wanted to see if you could talk a little bit about the types of DTC marketing you’re planning, either in terms of channels or and timing as well, whether that’s something that you would expect to be spending on right away from launch.

Thanks David. It’s Tom. I’ll pick the question. We’re going to go pretty aggressively right out of the gate in the digital space. As I mentioned earlier we’ve been looking at this group for the last 18 months as far as where they’re going to get information, where can we connect with them. As you know it’s become a very, very efficient place to engage patients, particularly patients actively seeking care who are obviously the most easily to motivate to get them to raise their hand and in the volume of traffic in fairly narrow syndicated sites which are available to us as far as immediate buy looks very efficient. So we’re going to make a pretty strong play in the digital space as well as in the physicians’ offices which is going to be the initial investment and then based on what kind of promotional response we see there, we’ll start looking at additional channels. As far as I think the question is do we get to network TV? We’ll certainly make a database decision on that, data driven decision on that. I think it looks very encouraging. I think there’s a lot of miles out there, particularly Zelnorm, when the TV was turned on that market tripled in a short period of time. But we certainly want to make a fully informed decision before we make that kind of an investment and it’s something obviously for us and we’ve been talking about for some time.

Great. Thank you.

Our next question comes from Juan F. Sanchez from Ladenburg. Your line is open.

Could you please talk to potential commercial milestones you might get from Forest? If that’s the case what would be a prudent timing for those?

Juan, it’s Michael. We haven’t disclosed the specific detail on it, but there is an additional sales milestone that’s available on Forest that’s from an achievement of our objectives it will be a happy day when we get to that level of sales. But there’s an additional $100 million in milestones that are available under the Forest agreement.

Got it. Thank you, Mike.

(Operator instructions). Our next question comes from Patti Bank from DISCERN Securities. Your line is open.

Good morning. Can you just talk a little bit in more detail about the samples in terms of the quantities that you’re going to put out there and I assume it’s maybe like a two week and a four week type path. And then along with that, I know Tom you’ve talked before about this being maybe S shaped launch. Do you still believe that and then how long do you think before we see a normalized run rate given the samples for them to kind of work through?

Thanks Patti, great question. I think again one of the things that we know for a fact in these kinds of disorders, the most important thing we can do is get patients to realize they feel better and docs to recognize that the patients are feeling better and the quickest way to get them there is to get them on drug which is obviously the whole rationale behind the early experience kits as well as the samples. As far as the early experience kits are actually 30 day units is actually a stockpile. And the sample units will be four day sample units. But as you know when physicians walk into a sample closet they tend to grab a handful of samples which we think generally is probably going to be around three units or about roughly 12 days of therapy. But we also believe that it will generally be accompanied with a prescription. If the physician is convinced that the drug is appropriate for the patient, generally they get them going and if the patients feel better, they have them fill the prescription and this is what we certainly saw. We’ve seen in other GI categories both with regard to PPI. This is exactly what we saw with Zelnorm. So I think getting as many patients on drugs as we can as fast as we can is what’s really going to drive the uptake curve. As far as how long that will take, I think it will move fairly quickly. I don’t think it’s going to be – the experience of the drug, I think what we’ve learned from the market research is physicians are responding very, very well to the profile of the drug and their willingness to prescribe was very high. I think that the real barometer will be what the co-pay looks like in the restrictions we see from payers and how quickly we can resolve that. But certainly we have a lot of, we’re planning on a lot of patient assistance with regard to co-pay etc to try to eliminate that barrier as fast as we can. But I think the uptake curve is really going to be affected by how the payer responds to a drug. I think that as physicians’ adoption I think that will look very encouraging. Does that help?

It does. And then just I guess a follow up to that, my understanding is that most of these patients are managed by PCPs. You obviously need to have the GIs leading the charge. So can you give us some barometer as to what you see as the portion of the business coming from GIs maybe upfront versus 18 months down the road?

That’s a great question, Patti and I think part of it is productivity, the prescribing productivity and what we do know is gastros are much more productive prescribers than PCPs. But there’s 8,000 to 9,000 of them versus 70,000 primary care. But I think out of the gate, I think you’re going to see a significant portion coming from gastroenterologists. That being said, we are pretty confident that 70% to 80% of the growth over the first 18 months will come from 20,000 to 25,000 physicians. Probably close to 20,000 are going to be primary care physicians. I think the other piece here is getting the gastros out of the gate fast. It has a huge influence on the prescriber base. So that’s the primary reason, one of the reasons why we’re going to be spending quite a bit of time with gastros, to make sure they’re comfortable with the drug and they’re educating their referral base on what’s appropriate as far as this patient population. And I think the last piece that we’ve learned in this category as far as gastros and PCPs is gastros tend to push these patients back to primary care because they’re not doing a lot of procedures on these patients and they really want primary care to manage these patients. They will be the educational fulcrum to make that happen, but I think you’re going to see a large proportion of gastros get out of the gate early and certainly the early adopting PCPs, the remaining 20,000 will go out fairly quickly as well. I think over time obviously the gastros will get diluted out as you get broader prescribers in PCPs

Perfect. That’s helpful. Thank you.

Our final question comes from Matthew Harrison from UBS. Your line is open.

Good morning. Thanks for taking the question. I just wondered if you had any comments on Forest to provide guidance where they put out $25 million for the rest of their fiscal year from LINZESS and do you have any expectations around how much of that is stocking versus demand? Thanks.

Matthew, no, we can’t comment specifically on Forest’s position on that. I do know that we have a great relationship with them and they keep us informed as to things that are relevant for LINZESS. So we’re certainly aware of that and they are well stated and kind of comment to the specifics of why they put the number out there the way they did. I’ll say for our purposes that we are not, we view that the large trajectory of this really with the product is very difficult to predict. So we’re not planning to put out specific guidance ourselves, but I think Forest mainly was responding to the fact that they had put out early guidance before the product, the FDA review time had been extended. So I think they were simply correcting that from a timeline perspective. But you’ll have to speak to them specifically about their comments on their guidance. I’ll just say for our purposes we feel extremely excited and bullish about the product. Nothing has changed since our last conversations about that. But we’re not going to be putting out specific guidance ourselves.

Okay, thanks.

All right. Well, thank you all for your time. We appreciate it. It’s been a great quarter and as we say here we’re just at the starting line again. So we’re looking forward to getting ready for launch and we will keep you guys informed as we go forward. Thanks for your time.

Ladies and gentlemen, that does conclude today's conference. You may all disconnect, and have a wonderful day.