Good day, ladies and gentlemen. And welcome to the Ironwood Pharmaceuticals’ 1Q 2015 Investor Update Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to introduce your host for today’s conference, Ms. Meredith Kaya. Ma’am, you may begin.

Good afternoon. And thanks for joining us for our first quarter 2015 investor update. Our press release crossed the wire earlier this afternoon and can be found on our website, www.ironwoodpharma.com. Today’s call and accompanying slides includes forward-looking statements. Such statements involve risks and uncertainties that may cause actual results to differ materially. A discussion of these statements and risks factors is available on the current Safe Harbor Statement file, as well as under the heading Risk Factors in our annual report on Form 10-K for the year ended December 31, 2014, and in our future SEC filings. All forward-looking statement speaks as of the date of this presentation and we undertake no obligation to update such statement. Joining me for today's call are Peter Hecht, Chief Executive Officer; Tom McCourt, Chief Commercial Officer; Mark Currie, Chief Scientific Officer; and Tom Graney, Chief Financial Officer, will open it up to the question-and-answer portion of the call. Our speakers will be referring to slides available via the webcast. For those of you dialing in, please go to the Events section of our website to access the webcast slides. I’d now like to turn the call over to Peter.

Thank you, Meredith, and Happy Cinco de Mayo to all of you. I feel very good about our execution in the first quarter. As we continue to deliver on our strategy and advance the key value drivers of our business. First, LINZESS continues to be one of the most successful primary care product introductions in years and the LINZESS brand had another solid quarter of profitability in U.S. With increased patient demand, strong operating leverage, IP protection until at least 2031 and further levers for growth from ongoing linaclotide development opportunity, we expect linaclotide to create substantial value for many years ahead. Second, we made encouraging progress within our pipeline during the quarter. It is great to see the growing interest in our development stage assets for many of you in the investment community, as we believe our pipeline is a source of substantial unrealized intrinsic value. We are advancing multiple innovative product candidates that have the potential to benefit millions of people. There are several important data readouts expected later this year and into 2016, and we look forward to sharing our progress with all of you. And third, we’ve began to execute on the key tenant of our strategy, leveraging our strong commercial capabilities to grow cash generating products in addition to LINZESS. Our clinical sales specialists recently began co-promoting Exact Sciences' Cologuard, an innovative noninvasive test for colorectal cancer screening. We are confident that we can add substantial value to Cologuard and to other product in GI and primary care space as well and we continue to look at the number of additional opportunities. With that, I'll hand it over to Tom McCourt to provide an update on LINZESS.

Thanks, Peter, and good afternoon, everyone. LINZESS growth continued through the first quarter, driven by the strength across key fundamentals in our business. Since the initiation of our DTC efforts in April 2014, total prescription market share for LINZESS has grown by over 65%, a new prescription share has increased by over 50%. Data show that LINZESS growth is coming primarily from patients taking OTC Laxative, with over 65% of new LINZESS patients having previously been treated with OTC. This patient population represents the greatest potential for continued growth and we are continued to work hard to bring LINZESS to millions of additional adults suffering from IBS-C in chronic constipation. We are still in the early chapters of the LINZESS story and the key metric the lead indicators continue to look strong. Approximately 460,000 LINZESS prescriptions were filled during the first quarter, a 90% increase compared to the first quarter in 2014. As we saw in the first quarter 2014, prescription growth in the category slowed early in the year, which we believe is primarily due to the seasonality of the market, changes in patient insurance plans or patients working through annual deductibles. We are anticipating an increase in prescription demand in the second quarter strengthened by the launch of our new DTC campaign early in early April, combined with seasonal market growth. Turning to patient persistency, we continue to see LINZESS performing approximately 40% to 60% better than Zelnorm and Amitiza on a launch aligned basis over 12 months, a metric that in our view is the key indicator patient satisfaction. The physician prescriber base is now grown to over 125,000 healthcare practitioners, thousands of these healthcare practitioners have generated more than 150 LINZESS’ prescriptions and many have generated over a 1000 since launched. And lastly, we continue to…

Thanks, Tom. We continue to make great progress across our R&D effort. As Peter mentioned, we are advancing multiple product candidate, and expect several important data readout this year and in 2016. This includes five mid-to-late stage linaclotide development program being advanced all or in part by our partners, two mid-stage GI candidates that we are moving forward independently and two initial compound within our wholly owned sGC platform. These candidates leverage our core therapeutic expertise in GI and our pharmacologic expertise in guanylate cyclase and build all of our success in bringing LINZESS to the market. Our GI pipeline is focused on highly symptomatic condition with a high level of unmet need in large patient populations in a limited number of treatment options. We are also building strong intellectual property protection with patent protection for many of our product opportunities expected into the mid 2030s. Additionally, our sGC platform had tremendous potential in multiple therapeutic areas. We are one of only two innovators in the sGC stimulator space with strong intellectual property across several product opportunities. Beginning with linaclotide, the Phase III 72 microgram clinical trial in adult CIC patients is enrolling faster than we anticipated. We now expect data from this trial in the second half of 2015 and if the data supported to file an sNDA in the first half of 2016. Updating the chronic release program, we and Actavis have selected two innovative formulations for our Phase IIb clinical study and expect to initiate in the second half of this year. This study is expected to inform the path forward for IBS-C as well as for other GI disorders with chronic abdominal pain and the predominant symptom. The first formulation is designed to enhance abdominal pain relief in adult IBS-C patient while continuing to relieve constipation.…

Thanks Mark. Really exciting developments in R&D and thank you everyone for joining us this afternoon. I will be walking through some key financial highlights for the quarter. Please refer to our press release for detailed financials. Now that we’ve entered into the third year since the launch of LINZESS, I will be providing year-over-year comparison each quarter, consistent within these three factors. We continued to see strong demand for LINZESS, which resulted in $95.5 million in net sales for the first quarter, up approximately 57% compared to the first quarter of 2014. As Tom noted earlier, total LINZESS prescriptions increased approximately 90% for the first quarter of 2015, compared to the first quarter of 2014. I’d like to point out that the difference in year-over-year growth of LINZESS net sales relative to growth of total LINZESS prescriptions is due to timing and P&L geography. As a reminder, net sales included a higher build of wholesaler inventory in the first quarter of 2014. Additionally, certain costs related to our co-pay assistance program were recorded as sales and marketing expenses in the first quarter of 2014. These costs are now recognized as gross to net adjustments. When we take these two items in consideration, the year-over-year growth in net sales of LINZESS is in line with growth in LINZESS prescriptions. We recorded approximately $25.1 million in collaboration revenue from Actavis in the first quarter of 2015, compared to $8.4 million in the first quarter of 2014. The LINZESS brand collaboration in the U.S. delivered solid profitability for the first quarter of 2015, with significant opportunity to create substantial value for many years to come. Quarterly profitability levels will fluctuate due to timing of activities, such as DTC and lifecycle management investments. For example, we expect to see heavier commercial investment in…

Thank you. [Operator Instructions] And our first question comes from Geoff Meacham from Barclays. Your line is now open.

Good afternoon, guys and thanks for taking the questions.

Hey, Geoff.

I wanted to ask you about the recently launched DTC campaign and I have a couple of follow-ups as well. But what do you guys view as a success? Is it an IRR benchmark versus the last campaign or is it something like just new starts on therapy or even new prescribers?

Yeah. This is Tom. As you know, we had a very strong performance at the initial campaign, in which we saw the 20% lift off the pre-DTC trend. As you move forward, obviously that growth gets build into your new baseline trend. So part of it is how you utilize DTC to maintain the ongoing growth of the brand. Hopefully, you see an additional incremental lift of the pre-baseline trend prior to initiating the new DTC. So the things that we're looking closely are one, what kind of lift do we see off the pre-DTC trends? Two, lift in new to brand patients and three, certainly what we are seeing in the lead indicators both with regard to new RXs, as far as volume. But also what we saw last time around is a lift in total RXs, as they had also reminded people to refill their prescriptions. So, we are going to be review monitoring all of those moving forward but we are quite encouraged. It is early days of the lead indicators with regard to web traffic, look very strong and certainly the first couple of data points look encouraging but certainly the upcoming weeks are going to tell us a lot more.

Got you. And then Tom in terms of persistent rates, what are the sensitivities to that if there are any among say different geographies or areas where you’ve invested more commercially or just trying to get a better sense for if you see fairly even persistent rates across the U.S.? And then what the levers are to maybe extend that even further? Thank you.

I think the biggest -- the overall biggest driver in persistent rate is really patient response and how satisfied patients are in therapy. And truly when they stop therapy, symptoms return which we believe is probably the single biggest driver for adherence. We started pulling apart some of those data with regard to certainly the patient demographics, it’s early days, but we certainly see a stronger compliance with the younger population than we do with the older population, but it isn’t dramatically different. So again I think everybody would agree that Zelnorm had a very strong performance with regard to its performance in the market as well as adherence rates and the fact that we are running 40% to 60% above them I think is very encouraging. But as we tear through the data, we are -- as we learn things, we will certainly share that as we move forward, but it’s still kind of early days for those data. But topline of the data looks very encouraging.

Okay. Thank you.

Thank you. Our next question comes from Irina Koffler from Cantor Fitzgerald. Your line is now open.

Hi. Thanks for taking the questions. If we look at this quarter JV commercial spend, it suggests that we may hit the lower end of the spending in your guidance, down at the $230 million level. So can you talk about if the spending is expected to increase throughout the year on the DTC? And also are there any -- are you expecting to continue DTC promotion next year?

This is Tom again. As far as the overall budget, this quarter, as Tom mentioned earlier, we knew we suspected that the growth in the market, which is exactly what we saw due to the plan changes and just the seasonality of the disease. So in the first quarter, we significantly pulled back in our DTC investment. So we could certainly maximize the return of our investment. And as we launch the new campaign, as we have launched the new campaign obviously our spend in the second quarter and the third quarter will be stronger, which is likely certainly going to drive the growth of the brand. As far as future investment, I think this is one where the data will guide our decision. Certainly everything we’ve seen so far, DTC has looked very strong. And as long as we continue to see the response in our investments, we are going to continue to invest, but I think it’s going to be roughly at the same level that we’ve seen in the past.

Okay. And I have a question on rest of oil spending in support, it looks like you spent somewhere between $12 million and $16 million this quarter on promotion in the OUS market. And given that you are not really getting much in the way of royalties out there, I mean how are you looking at the spending and what justifies it and when would you decide maybe to pull that spending?

Thanks for the question, Irina. This is Tom Graney. The spending actually isn’t against promotional spending. It’s in support of our registration and clinical trial development for market entry into OUS markets along with our -- in support of our partnership outside of the U.S.

Okay. Thanks. And then just one last one, would you expect Actavis to shift promotional spending towards Celandine if that drug is approved away from LINZESS at all?

This is Tom again, Irina. We certainly -- we’re in obviously ongoing communication with Actavis. I think what I can say is we are absolutely aligned with LINZESS as a core part of their growth strategy. It’s obviously one of their fastest growing brands right now with one of their critically important brands for the future. We see no risk at all with regard to distraction with you like Celandine in fact. I think we see an opportunity with you like celandine as we have another product in the IDS category that’s focusing on abdominal pain relief. So it’s going to amplify the share of voice and the focus on the key symptom that clearly differentiates LINZESS from other treatment options. So I think we see ongoing collaboration. We see the LINZESS being continues to be a top priority with Actavis. And I think we are absolutely aligned with the overall strategy. And I think we are delighted with the partnership.

Okay. Thank you very much.

Thank you. Our next question comes from Mario Corso from Mizuho USA. Your line is now open.

Good evening. Thanks for taking my questions. Just a few things I wanted to touch on. You mentioned early web traffic on the new DTC program. Wondering if there is anything you can quantify in that regard or any other metrics? And then on gross to net, anything you can talk about there in terms of at least the trend in Q1 and maybe how that may trend over the course of the year, I think you’re seeing on the managed care or contracting front. And then in terms of the pipeline related to LINZESS and whether it’s the colonic formulation or opioid-induced constipation, the low dose, any way to frame how you see those being additive commercially? If LINZESS is X, do you think those things together add 20% to X or something like that or equal to X, just trying to think about how commercially important those things maybe? Thanks very much.

Thanks, Mario. We will try to keep track of the questions. Tom, can you take the first question?

Sure. As far as the -- we haven’t shared any specific information with regard to web traffic, but what I can tell you is it is a very sensitive indicator and predictor of what follows as far as the correlation with what we saw with TRx growth the first time around. And we saw an immediate impact in the first campaign, we saw an immediate impact in this campaign and the traffic has always been high, but we saw a significant spike since we have launched the DTC. Now obviously, we will have to wait and see if that translates into TRx growth over time, but we will certainly get a good look at that over the next few weeks.

Give you a quick break. Tom Graney, do you get the question on gross to net?

Yes. Thanks for the question. Since launch we’ve really viewed access an as important part of our commercial strategy and we’ve made significant progress in expanding coverage and reimbursement in terms of covered lives. It’s a tradeoff that we make between price and access and really consider it part of our marketing mix just like any other investment. So we constantly monitor and refine our strategy and it will fluctuate over time. So we will keep an eye on making sure that we are creating as much value as we can in total for the brand. We don’t necessarily look at in discrete elements like gross to net but thanks for the question.

Mario, this is Tom again. Let me take it, kind of one-by-one, just to kind of frame them up as how I think about them commercially. First, with regard to the 72 microgram, as you know, the response that we are seeing from clinicians is very, very strong. We had over a 125,000 docs that have actually chosen LINZESS for a variety of patients. The 72 microgram has always been part of our core strategy. We wanted to see how physicians responded to the initial clinical profile, which has been very favorable. But what we did see, which we did expect to see is a lot of physicians see this is ineffective but very important drug in our use to patients. What we expect to see with 72 microgram is a broadening of utility in other patient types over time, which is what we expect is what we’re hearing certainly in market research and we’re very encouraged and excited to get 72 microgram into the marketplace. As far as the colonic release, I mean, this is really a game changer as far as raising the bar. So what we’re trying to do is improve the overall clinical profile of an already great product and providing better pain relief, faster pain relief in a molecule that’s very well tolerated, which really make this a better IBS-C in chronic constipation drug, which we believe will deepen its penetration into the market and likely expand its overall persistency in patients that respond to the drug. So that’s the first piece. The second piece is the second opportunity that we talked about where this drug can be used in other diseases where there is significant abdominal pain in patients that don't have constipation. So, we’re broadening the clinical utility into somewhere between 15 million and 20 million of additional patient types that we currently don't have access to. So, as I look at those three components of our lifecycle management, I mean we’re looking at a broad application and broadening the clinical utility of drug but also strengthening the clinical profile, which is certainly going to expand use but also raise the bar for emerging competitors.

Thank you. [Operator Instructions] And our next question comes from Gary Nachman from Goldman Sachs. Your line is open.

Hi. Good afternoon. I definitely appreciate the seasonality effect in 1Q, but the LINZESS prescription did slow down from 4Q more than we expected. So are you getting to a point where you think it's just harder to pull new patients from the OTC laxatives, even with the new DTC campaign? And why haven't you converted more from other prescription treatments if LINZESS is a better product?

So, I think, the first piece is let’s talk about the market and we’ll talk a little bit more specifically what we get. So very broadly, we actually saw the entire market go down in the first quarter, pretty significantly where we were up. So it is something that we've seen over the last two or three years, where the first quarter as far as the overall market growth is either flat or down. But in spite of that, we still saw an increase. And keep in mind, we also pulled back our investment in DTC during that period of time, which we know is the strong driver of our growth and we wanted to make sure that we’re investing it when we see the greatest impact. As far as the source of business, we are really focusing on converting OTCs. It’s where the greatest opportunity is. It’s where we want the source of business to come today and in the future. And that has been our focal point of our strategy and our execution, not on a switch strategy. So, I think, we’re encouraged that the strategy is working. And for it to sustain long-term growth, the business has to come from OTCs. As far as the question around, are we tapping out on patients, we certainly don't see any evidence of that. We've only really scratched the surface. We’ve only got, we’ve retreated 500,000, 600,000 patients out of the -- literally 10s of millions of patients that are out there. We’re learning. We kind of evolve our promotional efforts, targeting different patient segments that we haven't tapped into yet to grow the product over time. I think this is classic marketing in which area you focus on where you think your initial core source of business is. And as you learn, how do you tap into new source of the business that you haven’t found. So we’re very encouraged. And we’re going to keep on pushing it forward.

Okay. That’s very helpful. And just a follow-up on LINZESS, any changes in inventory levels in the quarter? I think you had some buying last quarter. And then after the Cologuard co-promote, you said there is room to put other products in the bag. What types of assets you’re looking at? Would they be more like co-promotes or acquisitions? And do you think, if you have a couple of more things for the salesforce, would that take away from the effort on LINZESS? Thanks.

Okay. Thanks for the question. This is Tom Graney. I’ll take the inventory question. We saw during the first quarter, inventory remained within the target two to three week range that we had expected, consistent with where we were in the fourth quarter.

As far as -- what we’re looking as far as product that we’re putting in the bag, I think first of all to be clear, LINZESS is the number one priority. Unless -- until we find an asset that’s going to outperform LINZESS, it is and will remain our number one priority. And we would only identify product that would complement that promotional effort, which is exactly what Cologuard is doing. We’re already seeing that the reps are getting more time. There is more selling opportunities for LINZESS. And I think that’s moving ahead very nicely. In terms of additional products we’re looking at a lot of different things right now. One of the exciting things for us is when you have a new entry and build a new category, you've done things very few of the companies have ever done and it attracts interest by a number of product companies. So we’re looking at a lot of different things right now, the bar is high. I think we’re less interested in co-promotion like relationships. I think we’re more interested in opportunities where we can extract greater value over time. So I think that’s our focal point. We have a lot of things on the table right now and we’re working through it to see what is our best next move.

Great. Thanks.

Thank you. And our next question comes from Anupam Rama from JPMorgan. Your line is now open.

Hey, guys. This is Erik in for Anupam. Thanks for taking my questions. Just a couple on 3718, just wondering what some of the gating factors might be to getting commercial ready formulation, is it potential for us seeing a once daily dose there? And how should we be thinking about the size, entire population and endpoints for the forthcoming Phase IIb? Thanks.

Yeah. Thanks Erick. So relative to the formulation again, we think we’ve made great progress and really on the verge of that commercial formulation. So we are feeling great about that. The endpoint, I think relative to what we’re thinking there and then I’ll turn the other part of the question relative to the market to Tom. On the endpoint, we’re focused again back on what we are seeing where the drugs appear to have its greatest efficacy in our IIa study and those are the classic GERD endpoint. We are excited about those because most of those have been well trodden. And we can understand those from a regulatory point of view to some degree, so that’s really the strategy for us on that point. So I'll let Tom dive in on the market.

Yeah. I think we’re very bullish on this molecule and the commercial opportunity. I think when we think about this, this is a very well developed market with very clear metrics of performance from patient, which is all around heartburn relief. So these patients that continue to have heartburn are easy to identify. Based on the clinical data, that we’re seeing, the initial clinical data still looks very encouraging. We’re probably talking some of its between 8 billion and 10 billion American still suffer from heartburn two or more days a week. And we have product that not only improves heartburn but also some of the earlier regurgitation data looks also very interesting. We have a very different kind of product than anybody else. So again, if the person category product is innovative, it’s absolutely aligned with our target position population. In that -- these are largely -- these will largely be gastroenterologist and very high decile busy PCPs. So it fits into our commercial strategy very well as far as synergies. So we're very excited about 3718.

Great. Thanks.

Thank you. And our next question comes from Catherine Hu from Bank of America. Your line is now open.

Thanks for taking my questions. I just have two. One is on the 72 microgram you spoke about earlier about broadening to less severe patients. Can you just give us an idea of how large this segment is? Is that 20% or 30% of the overall target market and are those patients actively seeking treatment in their physician’s office? And then just can you talk more about EU, any update and how that region is doing in terms of reimbursement uptake? And what you think can be done to the kind of accelerate uptake in that region? And then in terms of China, Japan now there are kind of moving into getting Phase III results in the next few quarters. How should we think of the uptake in these regions? Do we think of it more as mirroring the EU or the U.S.? Thank you.

So I’ll take the profit seven this time. I’ll take the 72 microgram. I think what we’ve we learnt so far as I mentioned physicians are very pleased with the overall clinical performance both between 90 and 145. The chronic constipation in population as you know is very large and extremely diverse. What we’ve seen initially with the docs choosing their chronic constipation patients is they are seeing the product as effective and fairly potent and they have focused primarily on the more severe patients which is exactly what you would expect to see. We've always felt that a lower dose will be helpful whether you call it mild to moderate, moderate to frequent, I think having the additional lower dose available I think provides docs with additional opportunity for patients that may have more mild disease. And of course, we’re talking about millions and millions of patients. So we think it’s a very sound investment to bring the 72 microgram forward to treat a broader set. But more importantly, it gives physicians another option for patients that they are treating. So we do see it an opportunity to expand the market. Peter, do you want to take EU?.

Thanks for the questions, Catherine. Welcome aboard. With respect to Europe, we will start by saying the product, which is called CONSTELLA, there has a terrific label. It’s a first drug indicated for IBS of any kind in Europe and it described clearly as a visceral analgesic on the label. However, it is a new category and the first IBS entrant. We knew it would take time to build awareness both with physicians and with patients. And we knew there was also the additional challenge in Europe relative to U.S. The DTC advertising has not allowed for pharmaceutical products in Europe. So we always expected the product to launch more slowly. The demographics is quite similar in Europe in terms of suffering number of patients than degree of suffering. So we're optimistic about the longer-term opportunity. What’s going on in the ground not much has changed with respect to Germany and that’s the biggest challenge that our partner Almirall has faced there. They’ve got a negative input from Germany in terms of their ability to launch at an appropriate price. And that’s clearly having a negative impact on their ability to grow revenues and get the drug into the European markets. They are working very hard on the launch and they are now in at least 10 countries. I think a couple more coming soon. And they're having good success in number of those countries. So we continue to watch and they continue to work very hard. With respect to China and what to expect there in terms of market penetration, I do think it's a little early to say we’ve a very good partner there in AstraZeneca. They’re greater in GI space in general. They're very strong in China with Prilosec and Nexium and it's a big, big market. It is also indicating China as it is in Europe that there hasn’t been an approved IBS product there. So I think that leaves the question open a little bit. Again, the demographics in terms of level of suffering and frequency of suffering is quite similar. Awareness among the GI docs in China is pretty good actually. And we and our partner, AstraZeneca are working to further advance that through medical education efforts by even pre-launch. So I think it’s a little early to predict the kinetics of growth there, but we do think there is a substantial opportunity.

All right. Thank you very much.

Thank you.

Thank you. I’m showing no further questions at this time. I would now like to turn the call back over to management for any closing remarks.

Well, I would just say thank you all for your time and attention today. We are here for the rest of the day. If you have questions, you can be in touch with Meredith and we are happy to follow up. And we appreciate your time and attention. Thanks very much.