Ladies and gentlemen good morning. My name is Abbey and I will be your conference operator today. At this time, I would like to welcome everyone to the Ironwood Pharmaceuticals Fourth Quarter and Full Year 2021 Investor Update Conference Call. Today’s conference is being recorded and all lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question-and-answer session. . And I would like to introduce Matt Roache, the Director of Investor Relations. Mr. Roache, you may begin your conference.

Thank you Abbey. Good morning and thanks for joining us for our fourth quarter and full year 2021 investor update. Our press release crossed the wire this morning and can be found on our website. 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 September 30, 2021, 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. Also included are non-GAAP financial measures, which will be considered only as a supplement to and not a substitute for or superior to GAAP measures. To the extent applicable, please refer to the tables at the end of our press release for reconciliations of these measures to the most directly comparable GAAP measures. During today's call, Tom McCourt, our CEO, will begin with an overview and provide an update on the commercial performance of LINZESS. Mike Shetzline, our Chief Medical Officer, will provide an update on our pipeline; Sravan Emany, our Chief Financial Officer will review our financial results and guidance. These webcast includes slides. For those of you dialing in, please go to the Events section of our website to access the accompanying slides. With that, I will turn the call over to Tom.

Thanks, Matt. Good morning, everyone and thanks for joining us today. When I became CEO last year, I was energized about the commitment to developing innovative solutions in the area of high unmet need in GI. In 2021, we made significant progress against this important mission. I am proud of the Ironwood team who even through the ongoing pandemic was resistant in their commitment to advancing the treatment of GI diseases and redefining standard of care for patients. Thanks to their hard work and dedication, we closed out the year with a lot to be proud of. We started 2021 with a clear road map, which included three strategic priorities: one, maximizing LINZESS; two, strengthening our innovative GI pipeline; and three, deliver sustained profits and generate cash flow. By the end of 2021, I'm excited to report that we made tremendous headway across all three of these key pillars. Let's begin on Slide 6 with a quick overview of some of our highlights and achievements in 2021. First, LINZESS has been an extraordinarily resilient, market-leading brand that continues to deliver strong demand growth and profitability. In 2021, I'm proud to share that LINZESS achieved blockbuster status exceeding $1 billion in U.S. net sales, representing 8% growth year-over-year. Prescription demand grew a robust 12% year-over-year, and commercial margins were 74%. The continued impressive LINZESS performance is no small feat and I want to acknowledge the dedication of our team who made this achievement of $1 billion in sales a reality. In addition, we previously announced that the FDA approved a revised label for LINZESS modifying the prior box warning, which included all children under 18 years of age to the warning of a risk of serious dehydration and contraindication against use in children to less than 2 years of age. This…

Thanks, Tom. We're thrilled that we have expanded our pipeline as we seek to bring new potentially first-in-class therapies to patients suffering from GI diseases and disorders that we think we can impact in a clinically meaningful way. I'll start with the linaclotide pediatric program on Slide 11. Functional constipation affects an estimated 4 million to 6 million, 6 to 17 year olds in the U.S. and there are currently no FDA-approved prescription pediatric therapies for functional constipation. We believe this is a significant opportunity to potentially expand the clinical utility of LINZESS to this large patient population. We're excited to continue to advance this program, and we expect the functional constipation study in 6 to 17 year olds to read out in the second half of this year. Next is an update on IW-3300. I'm pleased to share that our clinical study is officially underway. IW-3300 is a guanylate CKC agonist and a wholly owned asset for the potential treatment of visceral pain conditions, such as interstitial cystitis, bladder pain syndrome, and endometriosis. Interstitial cystitis and bladder pain syndrome affect an estimated 4 million to 12 million Americans according to the Interstitial Cystitis Association. These diseases have a limited number of treatment options available and significantly impact the patient quality of life. The scientific evidence to date supports the opportunity for IW-3300 acting in the colon to offer a pain benefit to other visceral organs through a mechanism known as cross-talk. Cross-talk is a biological phenomenon where sensations of injury originating in one abdominal or visual organ can result in altered sensation in a nearby organ because of overlapping nerve pathways. We're particularly excited about the launch of this Phase 1 study as it will be the foundation to clinically test the cross-talk hypothesis in humans for the first…

Thanks, Mike and good morning, everyone. I'm excited to be part of such a team, great team here at Ironwood and a great culture. As the new CFO, it is fantastic to report such great numbers and see how much Ironwood has strengthened its financial position over the past few years. I would like to provide a few updates. First, I will highlight our fourth quarter and full year 2021 performance, then I will discuss our capital allocation strategy and finally, I'll review our 2022 guidance. Please refer to our press release for our detailed financial information. I'll start on Slide 13 with LINZESS. U.S. net sales were $279 million in the fourth quarter of 2021, a slight increase over the fourth quarter of 2020. As a reminder, we saw fewer inventory channel fluctuations in 2021, which resulted in favorable net sales growth in the first half of the year which resulted in a dampening of net sales growth in the second half. Going forward, we expect quarterly inventory channels levels similar to 2021. For full year 2021, U.S. LINZESS net sales were $1.6 billion, an 8% increase compared to full year 2020. Growth was mostly driven by robust prescription demand. Turning to LINZESS brand profitability, commercial margin in the fourth quarter of 2021 was 76%. For full year 2021, commercial margins were 74% versus 72% for full year 2020. Moving to Ironwood revenues. In the fourth quarter, Ironwood revenues were $117 million. For full year 2021, Ironwood revenues were $414 million, with U.S. LINZESS collaboration revenues of $400 million. Ironwood U.S. LINZESS collaboration revenues increased 9% compared to full year 2020. GAAP net income was $41 million in the fourth quarter of 2021 and $528 million for the full year, which includes a nonrecurring income tax benefit of $338…

Thank you. . And we will take our first question from Boris Peaker with Cowen.

Good morning. Question on 3300, can you discuss what you need to see in the data update later this year to invest further in this drug and are there any kind of reference data sets or reference drugs that we should be considering when we're looking at this data?

Well, good morning Boris, this is Sravan. I'll hand it over to Mike to answer that question.

Yes, sure. So for 2022, we're actually, again, excited to kick off the program. The clinical program, as we said, started in quarter one, 2022. It's a significant undertaking because it's a very well-established medical need. So to your point, through 2022 we're going to complete the Phase 1 program. So we'll have data available from a safety and tolerability perspective, and we do plan to kick off what we call the Phase 2 proof-of-concept studies later this year. So that design of that study is actually being worked on as we speak today. But it's also found that in other analogs, there are a couple of products approved for bladder pain syndrome. They don't work well from the information we get from externals but that's just a clinical opinion. But -- and that's one of the reasons why we think the medical need is quite significant. So using those analogs, we're sort of designing the program and of course, we'll run it by the FDA to get their feedback as well. But it really is looking at the symptomatic improvement of patients suffering for visceral hypersensitivity from bladder pain syndrome.

Got it. And my last question is obviously, the valuation of biotech have come down quite significantly, you guys seem to be actively buying back your own shares. I'm just curious if with this new revaluated environment, are you being more aggressive in M&A, is that an objective or are you happy with the pipeline you have right now more focused on just returning cash to shareholders via buyback?

Yes, thanks Boris. Look, I think from where we stand today, again, I think we've said it a few times now that we're going to be pretty disciplined with our capital allocation strategy, whether that's deploying capital for future acquisitions or for repurchasing our own shares. And I think part of that comes down to when we find an opportunity that makes sense for us, and that we think creates value, we'll actively pursue it. Part of it's finding those opportunities, but we're open to whatever makes sense in the best interest of shareholders.

Yes, Boris, this is Tom. A couple of our thoughts, too. I think the thing that's been really kind of remarkable to me is the resilience of LINZESS and our ability to continue to refine the marketing mix and the investment to really drop bigger numbers to the bottom line, which is going to set us up for the future. And I think CNP-104 is a classic example of a really area of significant high unmet need and a potential game changer for the treatment. And its assets like that, that we would be excited to be able to bring on board and get through proof of concept to determine whether we continue to invest in the future. So we're very excited about where we are right now. I think about where we were three years ago and I think the team has just done a really strong job in kind of getting us on the right track.

Great, thank you very much for taking my questions.

And we will take our next question from Eric Joseph with J.P. Morgan.

Hey, good morning guys. Thanks for taking the questions. Just picking up on the pediatric opportunity. Any color that you might be willing to share in terms of the type of uptake you'd be expecting within that around 5 million patients or children with functional constipation that you're setting here, do you have a sense of how many children are -- or the extent to which children are currently managed with OTC laxatives with functional constipation?

Yeah, good morning Eric and thanks for your question. I'll hand it to Tom and then Mike.

Yes. I mean, what I can share with you is really kind of what we've learned in market research in this space and the reality is there's really not many good options for kids. And as Mike mentioned earlier, there's nothing actually currently approved for pediatric constipation or IBS. I think there's a couple of sizable pieces to this market; one is the adolescent population, which is probably the most visible high-need population that I think we can access very quickly. These -- a lot of these patients are treated both by gastroenterologists as well as primary care physicians and they're actively seeking here. I think the one difference in this population is when these kids are suffering, they're actively engaging physicians for help. And I think to have a drug that's actually approved and can not only improve your constipation symptoms, but also improve abdominal symptoms is a huge step forward for this population. Mike, maybe you can comment further with regard to kind of your clinical view of the need and the opportunity.

Yes, I think similarly, the key is that constipation in general is a significant medical morbidity for patients and primarily actually in one of the populations we're studying and the study that will be out later this year is the 6 to 17 year olds. So from a functional constipation perspective, from an IBS-C perspective or IBS with constipation perspective they're fairly prevalent conditions in the pediatric population. And as I mentioned, as you know, they sort of rotate through laxatives. They don't have really good alternatives and nothing is currently approved. So that's why we're really excited to see the data at the end of this year in the 6 to 17-year-old population because moving forward, with improving symptoms of bowel frequency in patients with functional constipation could provide a real good therapy for patients in this patient population.

One other closing thought in this, Eric, I mentioned there's always been this question as far as drug safety in the younger population and due to the hard work of Mike and his team, they've really kind of resolved many of those concerns, both with regard to the basic science as far as what was hypothesized when we launch a drug, but more importantly, what we're seeing in the clinical data that this drug does look like as well effective and well tolerated. We're going to continue to work with the FDA to make sure that it's going in the right direction. But we do see this as a very sizable commercial opportunity.

I was just trying to, Mike, to get a little more help for the premium expectations for the readout in the second half, which is the total study side, what might be -- what the trial is powered to go in terms of improvement in and really whether those -- that data set is positive to be used for the purposes of label expansion?

Yes, so the current study, which is a 6 to 17-year-old study, looking at -- it's looking at improving bowel function obviously in 6 to 17-year-olds with diagnosed functional constipation. So at that level and as with other constipation disorders, that's really founded in an improvement in bowel function. Bowel movement frequency, spontaneous bowel movement measurements, they're sort of the end points in what we're looking for seeing improvement in bowel movement function in those patients. And that hopefully will give us a path to an indication for functional constipation. Clearly, we've got to see the data at the end of the year, we'll have discussions with the agency actually earlier this year to prepare for that, and it will obviously be data-driven and discussion with the agency endeavor to move that forward.

Okay, great. Final question, if I could. Strong commercial margin for LINZESS exited fourth quarter. How should we be thinking about the trend in 2022, you talked earlier about sort of additional spend for the franchise, any I guess diminishment of that commercial margin we should be anticipating?

Yes, so first of all, let me just take a step back, Eric, and just say look, we're really proud of where LINZESS is from a profile perspective in terms of having a brand that's thriving and being able to produce double-digit prescription demand growth year-over-year, 10 years into its life cycle. At the same time, we've been pretty prudent in terms of what goes into our commercial spend to maintain that. And as Tom had mentioned, and I think we talked about it a little earlier, well we've made some choices as to where to make those investments in either payer access, marketing, etcetera to manage and drive that prescription demand growth. Because we think that's the ultimate driver of overall profitability and ultimate driver of overall cash flows for the company. Specifically, to your question what I would say is, look, I think like every other CFO, I'd be wanting if didn’t mention that we're in an inflationary environment, right. And like the broader economy, we're exposed to inflation repressions within our business, whether that's labor and the like. And so we continue to monitor that. But I think from where we stand today from a commercial margins perspective, we think we're going to hold steady about where we're at for 2022 and continue to drive profitability through cost containment.

Yes. Just one other, thanks Sravan. Just one other comment as I think about this is, we talked about the momentum that this brand has in the market, which has allowed us to really tune up the marketing mix. And as you know, we have dramatically pulled back on personal promotion, which is one of the biggest ticket items with regard to expense, and we haven't seen the demand growth waiver which says a lot for the effectiveness of this drug in the marketplace and ongoing growth. But obviously, we continue to look at promotional response. We look at investment both on the consumer and the professional side. And of course, the payer mix is also critically important, which has continued to enable patients to easily access the drug.

Excellent. Thanks guys for taking the questions.

And we will take our question from Tim Chiang with Northland Securities.

Thanks. Hey Tom, just given the revaluation in a lot of pharma biotech names, have you guys considered looking at other existing approved products complement LINZESS, just given the fact that you already have a commercial infrastructure in place?

So Tim, this is Sravan. Look, I'll start by saying that we don't comment on business development activities as a standard of course. What I will say is, look, we are open from a strategic direction perspective to whatever creates the most amount of value for the company, and we will evaluate any and all opportunities that we think can drive that for us. So it's a broad answer to your question, I appreciate that, but we are not going to get specific about where and what we're looking at.

Yes. I mean just, I mean, I agree. I think this is -- the environment is changing, which could create nice opportunities for us and the team is looking at a lot of different things right now, Tim. I think we have a number of opportunities in front of us that we're critically evaluating and working closely with our Board to make sure that we're making very sound decisions for you as an investor.

Okay, great. And maybe just a follow-up. Just on -- I know you guys have provided 2022 guidance, which I think -- which is solid. But, do you guys expect R&D expenses to ramp up this year or is it more of a flat type of year for R&D?

Yes. So just as a reminder, taking a step back, last year in 2022 -- in 2021 with respect to R&D expenses, first of all, one, Tim, we don't give guidance on R&D expenses. I think, is the first one. We just talk about EBITDA. But what I would say is our 2021 R&D expense included about $19.5 million associated with the COUR license option agreement, and we don't expect those costs to recur in 2022. At the same time, we've got some interesting things that we're looking to get readouts on this year, specifically pediatrics and the progress we're making on IW-3300 and I'm sorry, CNP-104 itself. So I'd just say that we don't have those recurring costs and we don't provide guidance on that.

Okay, great. Thanks.

And we'll take our next question from Jacob Hughes with Wells Fargo.

Hey good morning, it's Nick on for Jacob. Thanks for taking the question. Just one from us. Is there any update you can share on the LINZESS OTC pathway and maybe what progress you expect into this year?

Well, thanks for the question. At this time, we don't have an update on the OTC pathway and we'll provide an update when we have one.

Yes, I would just comment, I think that's spot on, Sravan. And we're still working through that, obviously, with our partner to look at feasibility and the timing of that. So right now, we're primarily focused on getting -- moving the pediatric program forward and resolving any outstanding questions that the FDA may have on drug safety before we can even really move forward with the OTC assessment.

Got it, thank you.

And ladies and gentlemen, that concludes our question-and-answer session. And this also concludes today's conference call. We do appreciate your participation, and you may now disconnect.