Good day, ladies and gentlemen and welcome to the Ironwood Pharmaceuticals Second Quarter 2015 Investor Update Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] As a reminder, today’s program is being recorded. I would now like to introduce your host for today’s program, Meredith Kaya, Investor Relations. Please go ahead.

Good afternoon and thanks for joining us for our second 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 include forward-looking statements. Such statements involve risks and uncertainties that may cause actual results to differ materially. A discussion of these statements and risk factors is available on the current Safe Harbor statement slide as well as under the heading Risk Factors in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2015 and in our future SEC filings. All forward-looking statements speak as of the date of this presentation and we undertake no obligation to update such statements. 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, who 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 live. I would now like to turn the call over to Peter.

Thanks, Meredith. Good afternoon, everyone. We made important progress during the second quarter, executing across the key value drivers of our business, growing LINZESS, advancing our exciting pipeline and strengthening our commercial business. First, LINZESS, which is the branded market leader in its category, reported 56% year-over-year prescription growth and approximately $112 million in net sales in its tenth full quarter since launch. This drove another solid quarter of profitability for the U.S. brand. Second, we made great progress in advancing our innovative pipeline. Mark will update you on a few key R&D successes, including the positive top line data we recently reported from IW-1973, the first candidate advancing from our sG stimulators platform. And third, we continue to leverage our strong commercial capabilities. The latest addition is today’s co-promotion agreement for VIBERZI, Allergan’s recently approved IBS-D drug, which Tom McCourt will talk about shortly. As we head into the latter half of the year, we are well positioned to achieve our 2015 objectives and to execute on our mission to build a great pharmaceutical accompany, grounded in innovation and making drugs that can change patient’s lives. We believe that by continuing to execute on this mission we will create significant value for our patients and our shareholders alike. With that, I will turn it over to Tom McCourt to provide an update on LINZESS and our commercial business.

Thanks, Peter and good afternoon everyone. The second quarter proved to be another period of strong growth for LINZESS. More than 510,000 LINZESS prescriptions were filled in the second quarter. And as Peter mentioned, this resulted in year-over-year growth of approximately 56%. The fundamental for the business is strong, with over 760,000 patients having filled nearly 3 million total LINZESS prescriptions since launch. We continue to see strong patient persistency, tracking approximately 40% to 60% above the industry analog to Zelnorm and Amitiza. Approximately 140,000 healthcare practitioners have prescribed LINZESS and they continue to prescribe more and more for their patients. And finally, the payer team continues to provide broad payer access in reimbursement for LINZESS. Our combined commercial efforts have grown the entire category and we have captured significant market share. The graph on the left illustrates quarterly total prescription volume growth for the IBS-C in chronic constipation category over the past five years. It’s important to note that prior to the launch of LINZESS, there was minimal growth in the prescription category. Since the launch of LINZESS, the market has grown by over 30%. At the same time, there has been approximately an 80% increase in LINZESS market share alone since the initiation of LINZESS DTC campaign into April 2014. We believe the growth in this category as well as the increased number of prescribers and the rate of prescribing has been driven by physician satisfaction with LINZESS. In a recent market research study that we conducted with approximately 200 physicians, over 60% of surveyed physicians report to be highly to very highly satisfied with LINZESS overall and specifically identified effective abdominal pain relief, improvement of constipation and the low incidence of diarrhea as the key attributes driving their choice of LINZESS for their patients. These scores are…

Thanks, Tom. We are generating a lot of momentum within our pipeline, leveraging our core expertise in GI and our vast experience in the area of guanylate cyclases that builds our success in bringing LINZESS to the market. We achieved several important milestones during the second quarter. I will spend the next few minutes highlighting four specific programs, IW-1973, linaclotide, 72 microgram, linaclotide colonic release and IW-3718. I will begin with sGC. As we just recently announced exciting new data from our first sGC clinical candidate, IW-1973. And I would like to provide additional context. The nitric oxide soluble guanylate cyclase cyclic GMP pathway is a fundamental regulator of blood flow, inflammation and fibrosis in human tissues throughout the body. It also plays a critical role in modulating pathophysiology across multiple diseases, such as cardiovascular, fibrosis and muscular dystrophy among others. This area is rich in pharmacology. Nitroglycerin has been used as a vasodilator for over 130 years and many other nitro donors have been used to stimulate soluble guanylate cyclase in a nonselective manner. With the discovery of the class of molecules called soluble guanylate cyclase stimulators, come additional opportunities to effectively regulate the pathway and to increase soluble guanylate cyclase activity by enhancing the endogenous effect of nitric oxide. We believe we have the opportunity with our broad library of sGC stimulators to develop multiple blockbuster drugs targeting severe cardiovascular and fibrotic diseases with large unmet needs. We are one of two innovators evaluating a broad range of potential indications for the sGC stimulator class which had already been validated by an approved product for pulmonary hypertension. As Peter mentioned, we recently announced exciting top line data from our Phase 1 clinical study evaluating IW-1973. This is an important value creating step forward for us, the distinct properties…

Thanks Mark. I will be spending the last few minutes detailing some of the key financial highlights from the quarter. Please refer to our press release for the detailed financials. Demand for LINZESS continues to be strong resulting in approximately $112 million in net sales for the second quarter, growth of approximately 79% compared to the second quarter of 2014. The LINZESS brand collaboration in the U.S. recorded $15 million in total net profit for the second quarter. As expected, commercial expenses were higher in the second quarter due to investments in the new DTC campaign. In the second half, we expect continued prescription growth and lower commercial investments. This is expected to result in an increase in total net profit for the LINZESS brand compared to the first half of 2015. In the second quarter of 2015, we recorded approximately $24.3 million in collaboration revenue from Allergan compared to $1.8 million in the second quarter of 2014. Now, turning to Ironwood’s financial highlights for the quarter. Revenue for the second quarter was approximately $27.7 million, made up of revenue from our collaboration with Allergan as well as additional collaboration, royalty and amortization and revenue from our global partnerships. Cost of revenue in the second quarter was approximately $8.2 million. The China Food and Drug Administration recently made regulatory changes to the approval process in China which resulted in an extended timeline to commercialization for linaclotide. Additionally Almirall lowered its inventory demand forecast in Europe. As a result of these two items, we wrote down approximately $5 million of existing linaclotide API as well as approximately $3.2 million for excess future purchase commitments. Moving to the balance sheet, in June we raised approximately $336 million in a convertible debt offering. This offering enables us to improve our capital structure, pursue strategic initiatives and support continued investment in our business. Including the convertible debt offering, we ended the second quarter with approximately $493 million in total cash and investments. We used approximately $26 million of cash for operations during the second quarter of 2015, as compared to approximately $36 million in the second quarter of 2014. Before I turn it over to Q&A, I want to highlight some of the key points from today’s call. First, LINZESS continues to generate strong profitable growth with significant opportunity to create meaningful value through at least 2031. Second, we are generating great momentum within our pipeline with multiple product candidates advancing an important catalyst expected in the coming months. And third, our commercial capabilities are proving to be invaluable for growing an important brand, LINZESS. We are leveraging these capabilities to generate increased cash flows by promoting additional marketed products such as VIBERZI and Cologuard. Together, these three points underscore why we are confident in our growth prospects and ability to deliver enhanced value to our shareholders. Thank you. And with that, I will hand it back to Jonathan to begin the Q&A portion of the call.

[Operator Instructions] Our first question comes from the line of Catherine Hu from Bank of America, your question please.

Hi everyone. Thanks for taking my questions. Just two for me, one on LINZESS, can you give any sort of commentary about any notable changes in gross to net this quarter versus prior quarters. And more longer-term how you are thinking about pricing strategy on especially with maybe competition coming in on the market over the next year or two? And then on the Allergan agreement, can you just give us any additional details on that, any sort of financial terms or performance metrics? And then how long should we expect the agreement to last? Thanks.

Thanks, Catherine. This is Tom Graney. I will take the first question on gross-to-net. As we have said in the past, we continued to measure ourselves in our operational performance on TRx growth in the brand. And as you heard, we had pretty significant growth compared to the prior year with 56% TRx growth year-over-year, which we are very pleased with. We will continue and as we have in the past to see fluctuations quarter-to-quarter both in gross-to-net as well as wholesaler inventory levels. What I can say is the wholesaler inventory levels were remaining within the two to three-week range that we have expected. And in terms of future price strategy, I will turn that over to Tom McCourt.

Yes, Catherine. On the price side, as you know, previously, we have taken three price increases from 9% to 10%. It’s something we constantly evaluate as far as the value proposition to the payer as we are going through ongoing negotiation with the payer, but we are in a really strong position and that we are still significantly underneath Amitiza and we have a fair bit of flexibility with regard to how we will evolve our pricing strategy over time to create additional value. As far as the Allergan question, this is a 2-year arrangement. We will be compensated through basically our calls as well as performance milestones. We are extremely excited about the opportunity to put these two products together in the bag and it’s a wonderful opportunity to have an innovative product like this. We think this is a very efficient call. It’s going to be a high impact call. And we think it’s going to greatly benefit LINZESS as well as drive certainly incremental value for VIBERZI.

Great. Thank you, guys.

Thank you. Our next question comes from the line of Boris Peaker from Cowen. Your question please.

Great. So, I just want a question on DTC, I am just curious how do you measure the success of your DTC campaign? And how does the current campaign on that basis compare to the initial marketing campaign?

As you know, the initiation of the campaign, the first generation campaign was a highly effective campaign and we saw a strong infection point off of pre-DTC trend of somewhere between 20% and 25%. And as you know, DTC campaigns tend to tire over time. So, the real objective is how do we identify, connect and motivate more additional new patients to raise their hand to maintain the growth that we kind of reset the slope of the curve, and we are definitely seeing that with the new campaign. So, when we look at the overall performance, certainly the control is the pre-DTC trend and how we can maintain the new trajectory of the line. We have learned a lot from the previous campaign that we applied. We are clearly accessing and motivating a lot of additional new patients and we are in the process right now of continuing to evolve that campaign to try to engage and motivate even a broader audience of patients.

Got it. And also a question in terms of breakdown of sales between IBS-C versus CIC, could you give us at least a ballpark of how that’s approximately broken out?

This is a really fuzzy line. As you know, this is a continuum of patients. There is no real clear line between chronic constipation and IBS. So, when does chronic constipation end and IBS begin? What we do know is physicians tend to focus on symptoms. And what they treat is patients that tend to have more constipation or more abdominal discomfort. So, it’s really hard to really draw the line. I mean, based on what we have seen in market research, the majority of the patients that we are currently getting on people are patients that are suffering from both abdominal and constipation symptoms, which is clearly the space we own in the marketplace. So, you really can’t just look the sales of 145 versus 290, that’s roughly a 45% to 55% split, 55% going to 145, about 45% of that going to the 290. But I think the most important thing is physicians are choosing to treat a broader and broader population of patients, which we feel good about. So, we are growing certainly into the IBS market, but we are also penetrating the chronic constipation market very nicely.

Great. And my last question, I am just curious kind of similar to the prior question is if you have a sense of what fraction of patients take the drug just episodically or just for a few days versus take it more consistently on a chronic basis?

Yes. Based on the market research we have done so far, the patients that respond well to therapy take it pretty religiously. We go back and look at the cohorts of patients that we continue to follow comparing those patients to Zelnorm and Amitiza. And LINZESS treated patients basically are running above 40% to 60% higher with regard to overall adherence compared to Zelnorm. So, this is chronic management of a chronic disease and patients are continuing to be quite persistent and quite satisfied with the treatment.

But do you have a specific breakdown in terms of at least percentage that are chronic versus maybe just episodic these ballpark?

I mean, that’s really hard to measure. I think what we are seeing is primarily chronic disease, chronic management. I can’t give you specific number of breakdowns, but certainly that’s what patients and physicians are reporting.

Great. Well, thank you very much for taking my questions.

Thank you. Our next question comes from the line of Matthew Harrison from Morgan Stanley. Your question please.

Hi, this is Styris calling in for Matthew. Thanks for taking my question. So, for this co-promote deal that you guys have, can you provide any sort of indication of any sort of offset that you are going to see to your sales force cost and how these would be handled?

Yes. I mean, this is actually a structured deal. We are clearly being compensated for what’s equivalent to a second physician call plus some performance milestones on top of that over two years. So, we feel that this is a very strong deal for us. I think it’s a very strong deal for Allergan. These products are going to fit together so well. And really the clear benefit of this whole thing is amplifying the need to treat abdominal pain, which is really the core differentiator for LINZESS and really is going to allow us to strengthen our position in the marketplace.

Great, thank you.

Thank you. Our next question comes from the line of Derek Archila from Leerink Partners. Your question please.

Hi, thanks for taking my questions. I just have two. First, when we think about the VIBERZI and Cologuard deal, I mean, how much additional capacity do you have for additional products that reps could also detail? And then second, could you characterize the China opportunity a little bit more? I mean, is Astra going to have to run large-scale DTC to create awareness and any peak sales projections would be helpful? Thanks.

I will take the first one and then Peter will take the China question. With regard to VIBERZI, the thing we are working – the call that we are working on with Allergan right now is almost a galvanized call around basically abdominal pain and bowel habit improvement. And it’s essentially one – it’s one call. I mean, it’s a very efficient clear message that is quite efficient. So, we think we have plenty of room in the bag to deliver that combined call in addition to Cologuard. Certainly, as we look at other opportunities, we will be able to move products around and we still believe that we have significant capacity in the bag for additional products. And certainly, we would – depending on the opportunity we would certainly take a look at how would we evolve the selling resource itself.

And with respect to China, Derek, this is Peter we have a very good collaboration ongoing with AstraZeneca. Astra is a very strong participant in the pharmaceutical market in China. They are really one of the leaders there and the collaboration I just reported a very good Phase 3 data in the last quarter hitting again all of the primary and secondary endpoints. As we have seen now, that’s our fifth Phase 3 trial where we have hit all the primaries and the secondaries and with a very good tolerability data as well as we have always seen with the drug. And in this case, I think single – low single-digit diarrhea rates as well. So we are very pleased about that, teams are working hard to get the application into the Chinese FDA. And we will wait eagerly for its review and approval. With respect to the market opportunity there, there hasn’t been any drugs yet indicated or approved for IBS. So it will be an effort to grow awareness and to build awareness, both in the physician side and on the patient side in China. Having said that, over the longer term, we feel very good about the opportunity there, as you know now over 700 million Chinese accessing the medical system and with capacity to pay for medicines, they can help benefit their lives and that’s continuing to grow and the medical markets, the pharmaceutical markets are growing nicely in China. And certainly the demographic suggest that the level of suffering and the amount of IBS and current constipation in China is quite similar to what we see here in the U.S. So substantial opportunity, lots of opportunity to build the new category and grow awareness.

Great. Thanks guys.

Thank you. Our next question comes from the line of Gary Nachman from Goldman Sachs, your question please.

Good afternoon. This is Divya Harikesh on behalf of Gary Nachman. I had a couple of questions. Number one, was there any stocking in the quarter at all. And then secondly, we touched on DTC previously, but just curious to know as we get into the second half, are there – is it going to be a staggered kind of a campaign for DTC or is it going to be moved through the year as we think about the inflection points in terms of prescription growth. And lastly, we recently saw Phase 3 CIC data from Synergy Pharma plecanatide, just your thoughts on it and potential impact to market dynamics? Thank you.

Hi, this is Tom Graney. I will take the first question and Tom McCourt will take the second and third questions. In terms of stocking levels, we have seen pretty consistently over the last few quarters that wholesale inventory levels have remained in our target range of 2 weeks to 3 weeks and beyond that we don’t really have much else to say. So Tom?

As far as DTC is concerned, we really study this as far as when to best invest. So and we tend to follow what generally happens as far as market growth. And we have mentioned in the past there is some seasonality here in that the spring tends to accelerate, the summer tends to slow and then the fall accelerates again. And so we wanted to be in the market strong, certainly in April and May and June we saw really good growth there. We pulled back the investment a bit over the summer. But we still continued to capture market share over this summer. And if the market accelerates in the fall, we will push harder as far as our media in the back half to take advantage of that. So I think we really like where we are lining up as far as how the year will end with regards to our current growth. The second piece was – second question concerning plecanatide and Synergy data. I don’t think we saw any surprises. As you know they reported data on basically the increased number of bowel movements. I think it’s important to note that it’s difficult to compare the data without any direct head-to-head trial, as well as it’s a little hard to interpret because they really didn’t report any of the secondary endpoints .But if you are going to compare it’s really, really important that placebo address the data, adjust the data, so you really at least in part, comparing apples-and-apple as opposed to looking at absolute numbers. That being said, we are in a very, very strong position in the marketplace. As the market leader, we have very high satisfaction with physicians and patients, as well as the strong position in the payer. We also will have – we also have an indication for both IBS, as well as chronic constipation with two doses. And we are continuing to raise the bar. Mark had mentioned earlier that we will be launching a 72-microgram, so we will have three separate doses for patients – for doctors to tailor therapy to patients. And also, how do we continue to strengthen the performance of the drug with the colonic release that we believe will further improve our ability to relieve pain and improve the overall tolerability and clinical profile. So I think we are in a very good spot. I think the one comment that I will make is with additional share of voice in the marketplace, it’s going to grow the entire market. And as the market leader, the market leader generally benefits as long as you continue to raise the bar, and that’s our intention.

Thank you very much.

Thank you. Our next question comes from the line of David Maris from BMO Capital Markets, your question please.

Hi. This is Katie Brennan for David Maris. Thank you for taking my question. I am just curious if you guys find success in the chronic relief, do you see any possibility of cannibalizing some of the LINZESS population and if not, why not? Thank you.

Yes. I think of course, you will cannibalize some of that population. But the primary objective is how do you improve the overall clinical performance of the drug. The reason why patients seek care is because they have significant pain. And we believe we can improve the actual pain relief that patients will experience, which obviously will penetrate the market deeper, but it’s likely to increase adherence and compliance to the therapy which obviously is going to accelerate the growth of the drug. The other piece of the equation here I mean is can we actually broaden the clinical utility of the drug into other indications in broader patient populations. So for instance, other forms of IBS, chronic pain, related to inflammatory bowel disease or diverticulitis could be areas that we should grow into, if we can target and target the drug appropriately, improve the pain effect and actually minimize any effect on bowel function. So we are extremely excited about the opportunity that we see with the colonic release formulation.

Katie, its Peter, if I can add just a couple of comments on the colonic release and the cannibalization question, I think this is a market that’s so large and with so many patients suffering symptoms heterogeneously across the spectrum that there is plenty of room for multiple entrance with differentiated attributes in the category and for them all to grow. You see that in really big categories, you think back to cholesterol category or the PPI category, multiple differentiated entrants grew and grew the market and took share. So we feel good about that. And I would remind you that the colonic release would have intellectual property coverage at lease an additional 5 years beyond the current LINZESS covers that goes out to 2031 and because it’s a minimally exposed compound with unique pharmacodynamics, it may be very challenging for a generic to come in behind it at any point.

Thank you.

Thank you. [Operator Instructions] Our next question comes from the line of Geoff Meacham from Barclays, your question please.

Hi guys. Thanks for taking the question, congrats on the quarter. I also have a DTC question and a pipeline one. On DTC, I mean clearly the focus is on new starts, but I wanted to see if you guys would expect any impact on persistence rates, are they from what you have so far for the current DTC campaign or last year or any sort of trends you give us from for script demand coming from low to mid-deciles?

Yes. So I will take the first question. Geoff, as far as what we are seeing with patient persistency, we are continuing to track that’s still little early to interpret what we are seeing. But I think we would anticipate some growth over time with regard to the adherence of therapy. And certainly, the early signs are clearly reminding people to fill their prescription. So there are certainly some positive – there is a positive impact with regard to the portion of the market that we are getting from refills which continues to grow nicely, actually faster than we are seeing with new RXs, which is very encouraging. And I am trying to remember second question.

Question about expanding lower deciles...?

Lower deciles position, so as you know, we are now at 140,000 physicians that have written a prescription. We have a fairly sizable population of very high prescribers and there appears to be a tipping point with some of the lower prescribers that seem to be accelerating nicely. And part of that I think is with ongoing experience and satisfaction with the therapy, but I think the other piece is clearly the patients coming in and asking for the drug, which is really pushing the lower decile docs to try or expand their use.

Geoff, you had a pipeline question as well?

Then on the [Technical Difficulty] recent data, how do you guys do proof-of-concept studies in like cardiovascular? How do you all think about the development path and sort of balancing spend with commercial opportunities?

Hi, Geoff, this is Mark. Thanks for the question. Yes, so first we are really excited about this opportunity. We think as we indicated soluble guanylate cyclase stimulator in particularly our molecule 1973 and 1701 have very unique opportunities for relative to where we are, we have seen already proof of mechanism and pharmacodynamic activity and starting to understand the doses that we would potentially move forward with, so all quite positive data from the Phase 1 single-dose. Relative to the indications, as we indicated, we will prioritize both strength of what we think the rationale, the clinical rationale and the preclinical data supporting that rationale in the unmet need and then feed the market. So, we haven’t provided yet where we intend to go yet on our first proof-of-concept. It’s a very, obviously, with a very large competitor with Baird and Merck in their collaboration. We are using the time right now to really determine where we can best compete and also keep that kind of information at this particular time confidential.

Okay, thanks.

Thank you. Our next question comes from the line of Anupam Rama from JPMorgan. Your question please.

Hey, guys. This is Eric Joseph in for Anupam. Thanks for taking my questions. Just a first question on LINZESS, we saw recently that Amitiza was excluded from the CVS Caremark formulary list for 2016. Just wondering what you are expecting in terms of any incremental impact to the LINZESS business, whether you are expecting any shifts in reimbursement coverage? And just a pipeline question on 3718 in the Phase 2b there, starting next year, wondering if you could give any color on how you are thinking about the size of that trial, the target population and potential endpoints in the study? Thanks.

So, first of all, thanks for acknowledging our recent win with CVS. I mean, it’s a big one, a real big one that we are very encouraged by with something the team has been working on for quite some time. The team came to terms with CVS. And to be one of one on the formulary puts us on a very good position in a big market. So, we are bullish on what that can do for us. It was in markets where we were struggling a bit because of the restrictions, the limitations we had with CVS, but it’s a big win. And we have also kept several other Blue Cross Blue Shield wins across the upper Midwest as well as Texas and Oklahoma, which again are very sizable, somewhat underperforming markets because of our payer access, which now will open up. So, I think we are excited about the opportunity and we are certainly going to take full advantage of it. And Mark, do you want to take the 3718?

Yes. So, what we saw with 2a data that we released earlier this year that we were quite excited about really has kind of guided us into the refractory GERD population. Certainly, we have been looking at what – where we think the drug performed best relative to the patient population that we looked at across the patients that had bile acids reflux and also overall reflux. So, it will be we think targeted to very active refluxing refractory GERD patients would be the first part of that. Relative to the size of the trial, again I think it’s a little early for us to give out that kind of indication, but it’s a normal – there is nothing that I don’t think will be too surprising at the 2b dose ranging study and again using endpoints that have been previously validated. So, I think, it’s in a normal range of a 2b for symptomatic study. In the endpoints, these are the GERD endpoints we think that we will utilize based on our data, positive data from the 2a, heartburn-free days heartburn symptoms. So, those are the type of things that we saw very positive effects on and we expect to utilize in our 2b.

Great, thanks.

Thank you. This does conclude the question-and-answer session of today’s program. I would like to hand the program back to Peter Hecht for any further remarks.

Thank you, Jonathan and thank you for your help on the call. Thanks to the Ironwood team for your hard work and excellent performance in the quarter and thanks to all of you for your time and attention on the call. We will be around this evening and tomorrow if you have any further questions or suggestions for us, please reach out to Meredith and we will set something up. Thanks again. Have a great evening.