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Transcript Summary

Ironwood Pharmaceuticals reported a solid 2025 and issued a bullish 2026 outlook, predicting LINZESS will return to blockbuster status with over $1.1 billion in U.S. net sales. Performance in 2025 saw $865 million in net sales and significant demand growth, alongside a key pediatric FDA approval. The company is pivoting toward its rare disease pipeline with the initiation of STARS II, a confirmatory Phase III trial for aproglutide in short bowel syndrome with intestinal failure, following FDA alignment on trial design. This study aims to address dosing administration issues identified in the previous trial. Financially, Ironwood is focused on debt reduction, planning to pay off 2026 convertible notes and achieve an adjusted EBITDA of over $300 million. In the Q&A, management defended their 124-patient trial size for aproglutide as a move toward robustness and expressed confidence in competing against potential GATTEX generics. While 2027 Medicare price negotiations remain a point of investor interest, management focused on the 2026 recovery. The company also clarified that while they are open to strategic alternatives, they have a strong standalone trajectory backed by increased LINZESS revenue and disciplined expense management.

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Full Earnings Call Transcript — Q4 • 2026-02-25

Greg Martini: Forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. 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 Annual Report on Form 10-K for the year ended 12/31/2024 and in our subsequent 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 should 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, our Chief Medical Officer will discuss how we are advancing aproglutide, and I will review our financial results and 2026 guidance. Tammy Gaskins, our Chief Commercial Officer, will also be available for Q&A at the end of the call. Today's webcast includes slides, so for those of you dialing in, please go to the Events section of our website to access the accompanying slides separately. With that, I will turn the call over to Tom.
Tom McCourt: Good morning, everyone, and thanks for joining us today to review the fourth quarter and full year 2025 financial results. Results and business updates. In 2025, we took several important steps to maximize LINZESS, advance aproglutide, and deliver sustained profits and cash flows to strengthen our financial position and position the company for long-term success. For LINZESS, we delivered on the full-year 2025 guidance with $865 million in LINZESS U.S. net sales supported by an impressive 11% demand growth and 8% new-to-brand volume growth year over year. We also further strengthened the clinical utility of LINZESS with FDA approval in November 2025 for the treatment of irritable bowel syndrome constipation in patients 7 years of age and older. This new indication establishes LINZESS as the first and only prescription drug approved for the treatment of IBS-C in patients 7 to 17 years of age, which is great for patients in need. In addition to expanding the clinical profile of LINZESS, we also took steps to lower the LINZESS list price effective January 1, 2026, in response to the evolving healthcare dynamics and to support ongoing patient access. For advancing aproglutide, we met with the FDA in the fourth quarter of 2025 and aligned on key elements of a confirmatory Phase III clinical trial design, which we will be referring to as STARS II. We are on track to begin site activation in the second quarter of this year and continue to believe that the data generated in the prior STARS Phase III trial will support an eventual NDA submission. Mike will discuss the Phase III trial design in more detail later in the call. Lastly, for 2025, we finished the year strong, delivering $138 million in adjusted EBITDA and ending the year with $250 million of cash and cash equivalents on the balance sheet, positioning us well for 2026. Looking ahead to 2026, on January 2, we announced a strong outlook for 2026 with our full-year financial guidance, highlighted by our expectation that LINZESS will return to blockbuster status with greater than $1.1 billion in U.S. net sales in 2026, driven by improved net price and low single-digit prescription demand growth. We expect increased LINZESS U.S. net sales and our continued disciplined expense management to drive greater than $300 million in adjusted EBITDA in 2026, which will enable us to continue to advance aproglutide and reduce our debt to further strengthen our financial position. As such, our priorities in 2026 are clear. We will continue to maximize LINZESS, we will advance aproglutide by initiating STARS II for short bowel syndrome patients with intestinal failure, and we will continue to emphasize disciplined expense management to deliver profits and meaningful cash flows, which will enable us to reduce our debt and further strengthen our financial position. With clear 2026 priorities and our improved financial position, we now have a clear path to execute our strategy. We have aproglutide, which has demonstrated strong efficacy and tolerability to date, becoming the first and only GLP-2 to achieve a statistically significant reduction in weekly parenteral support volume with once-weekly administration. Patients in our open-label extension study, STARS EXTEND, continued to reduce parenteral support volumes with longer-term exposure to aproglutide. Data presented at the American College of Gastroenterology meeting in October reported that patients have achieved and maintained enteral autonomy, or complete weaning of parenteral support, for at least three months. Our conviction for the commercial opportunity for aproglutide remains high because of the strength of these data and the fact that many GLP-2-eligible patients with high parenteral support burden go untreated or discontinue therapy. We believe that the clinical profile will demonstrate efficacy, tolerability, and once-weekly administration of aproglutide and redefine standard of care for short bowel syndrome with the potential to improve adherence and increase the number of GLP-2-treated patients to generate greater than $700 million U.S. peak net sales. The addition of potential approvals in geographies abroad further increases the opportunity. I would also like to take a moment to acknowledge patients suffering from GI and rare diseases. We also seek to increase awareness for people we serve year-round who are at the center of our work. Short bowel syndrome is a devastating condition, and we thank you for your trust as we work with urgency to deliver this important new medicine to short bowel syndrome patients who are dependent on parenteral support. With that, I will move to our commercial performance update on page seven. Throughout 2025, LINZESS has continued to maintain its prescription market leadership for the treatment of IBS-C and chronic constipation in the U.S., recently surpassing 5.7 million unique patients treated since launch and ending the year with roughly 45% market share. With over 40 million addressable patients in the U.S., we believe LINZESS still has significant potential to grow prescription demand over the coming years due to the significant unmet needs. For the full year in 2025, the second consecutive year delivering 11% prescription demand growth, LINZESS demand growth was consistent, driven by price headwinds associated with legislative change. We expect to continue to support ongoing patient access. As a result of this change, we expect more than a 30% increase in 2026 Medicaid. Due to this decrease, we still expect meaningful cash flows in 2026. In April 2025, we announced that the FDA requested a confirmatory Phase III trial to seek approval for aproglutide, given the pharmacokinetic analysis of our prior STARS Phase III data indicated that the exposure and dose delivered in the trial were lower than planned due to dose preparation and administration. As a reminder, STARS was the largest-ever Phase III trial conducted of a treatment for short bowel syndrome with intestinal failure, and we continue to anticipate this dataset, along with the data from STARS II, will support a future NDA submission. As I mentioned, we met with the FDA in the 2025 timeframe to align on the key elements of the program.
Michael Shetzline: STARS II is a randomized, double-blind, placebo-controlled study in short bowel syndrome with intestinal failure in a 1:1 randomization. Enrollment will include patients with both stoma and colon-in-continuity anatomy to be representative of the heterogeneity of the overall population of patients with this condition. Our primary endpoint for the study will be the same as our prior STARS Phase III clinical trial, evaluating the relative change from baseline in actual weekly parenteral support volume at week 24 in the overall patient population. Key secondary endpoints, also to be measured at week 24 for the overall population, include clinical response, defined as at least 20% reduction in parenteral support volume, number of days off parenteral support per week, and enteral autonomy. Patients will receive a 3.5 mg once-weekly dose of aproglutide to align with what was delivered in the prior Phase III trial. In designing the STARS II trial, we have leveraged learnings from the prior STARS Phase III to refine the instructions for use to optimize the dose preparation and administration. We are encouraged by the efficacy and tolerability data of aproglutide to date through the STARS trial and the long-term extension study, which give us confidence in the potential outcome of this confirmatory trial and in aproglutide's potential to be a best-in-class treatment for short bowel syndrome with intestinal failure as we pursue an eventual regulatory approval. We look forward to initiating the STARS II trial as we continue to grow our body of clinical evidence supporting aproglutide's potential to become the first long-acting once-weekly GLP-2 therapy for the treatment of short bowel syndrome, if approved. With that, I will turn it over to Greg to review our financial performance in 2025. Greg? Thanks, Mike.
Greg Martini: We ended 2025 in a strong financial position, achieving our latest full-year 2025 guidance. Turning to slide 14 to review full-year 2025 financial highlights, LINZESS U.S. net sales were supported by 11% prescription demand growth. Fourth-quarter net price was impacted by unfavorable quarterly phasing of gross-to-net rebate reserves due to units dispensed for the quarter exceeding units sold to wholesalers. As a reminder, in 2025, we noted a change in AbbVie's estimate of gross-to-net rebate reserves for 2025 based on expected rebates owed for units dispensed by channel in each quarter, which was expected to impact the quarterly phasing of LINZESS U.S. net sales but not impact full-year results. Accordingly, full-year LINZESS U.S. net sales decreased 6% year over year, with net price erosion primarily associated with the Medicare Part D redesign. Now moving to our balance sheet, we significantly improved our financial position. Disciplined expense management, including a $61 million reduction in operating expenses year over year, resulted in $127 million in cash flows from operations and $215 million of cash and cash equivalents at year-end. We expect our strong cash position and 2026 outlook will support deleveraging of our balance sheet while simultaneously funding investment to drive long-term growth. We plan to use our cash on hand and cash flows generated to reduce our total debt balance in 2026, including repayment of our 2026 convertible notes at maturity in June, and expect to end the year with approximately $300 million of debt on the balance sheet, less than 1.0x 2026 adjusted EBITDA by year-end. Moving to our financial guidance on slide 16, we are reiterating our 2026 guidance. This includes U.S. LINZESS net sales between $1.125 billion and $1.175 billion, a greater than 30% increase year over year, driven by improved net price and low single-digit prescription demand growth. We expect Ironwood Pharmaceuticals, Inc. revenue between $450 million and $475 million, and we expect to maximize LINZESS, advance aproglutide, and deliver sustained profits and cash flows. We look forward to beginning site initiation for STARS II, a confirmatory Phase III trial for aproglutide, in the second quarter, and we believe we have the opportunity to redefine standard of care for patients living with short bowel syndrome with intestinal failure. I want to close by thanking all of our employees, patients, caregivers, and advocates for their shared dedication to advancing life-changing therapies for patients with GI and rare diseases. Operator, you may now open up the line for questions.
Operator: At this time, I would like to remind everyone, in order to ask a question, press star then the number one on your telephone keypad. We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of Jason Butler from Citizens. Please go ahead.
Jason Butler: Hey, thanks for taking the question. Just a couple on STARS II. Can you give us any more details on the learnings from STARS and the refined instructions for use that you are now including in STARS II? In repeating the data from STARS I, and then just lastly, when you think about the enrollment timeline? Thanks.
Tom McCourt: Thanks, Jason. Mike?
Michael Shetzline: Yep. Yeah, thanks, Jason. So in terms of the learnings, as you know, the original STARS trial had a very successful outcome in terms of the primary endpoint and the benefit for patients, as well as the GI and other systemic tolerability. As we mentioned, what we learned most was about the dose preparation and administration, and we are refining administration with better kit components and also better instructions for use. I mean, that is the main difference, so to speak, in the two trials. In terms of your next question about the alignment on the endpoints, they remain pretty much the same, and we obviously have a high degree of confidence in the outcome of the STARS II trial because of that similarity. And we do think we have improved the instructions for use and the dose preparation and administration for patients, so we expect that to be a positive contribution for the study as well. In terms of timelines, we learned a lot with the original STARS program. We certainly have taken those learnings to better inform us to start the STARS II trial. We already have a lot of sites in the STARS EXTEND program, which we are going to continue to use as well. So we think we are in a good position to successfully enroll the program in a timely fashion. That is why we put the timelines on the table in this call. We are certainly going to do everything we can. It is a lot of work, and the team puts a lot of effort into it. We are going to push to make it successful, but we absolutely believe we can do that and achieve it in the timelines we propose.
Jason Butler: That is great. Appreciate all the details.
Operator: Your next question comes from the line of Chase Knickerbocker from Craig-Hallum. Please go ahead.
Chase Knickerbocker: Good morning. Thanks for taking the questions. Maybe just to start on the strategic alternatives process. I respect we are not getting, you know, a kind of a formal update. Can you maybe just update us on your thinking as far as now that you can, you know, at least in our model, clearly continue on as a stand-alone company, you know, retire the debt, kind of how you are thinking about the strategic process as we kind of go forward into 2026?
Tom McCourt: Our strategic alternatives, and I think because of that, you know, we clearly have a path forward to certainly leverage the revenue that is coming, the increased revenue that is coming off LINZESS, you know, as well as reduce our debt and mobilize the trial. That being said, we are obviously always open to alternatives that would increase shareholder value. You know, there was a lot of interest in Ironwood Pharmaceuticals, Inc. and our assets, but we wanted to make sure that we were really smart with regard to choices we made to make sure that we could protect the shareholders. So I think as we move forward, we will focus on executing as quickly as we can and as strong as we can, and always consider, you know, other ways in which we can increase shareholder value.
Chase Knickerbocker: Understood. Maybe just another one for Mike. On STARS II, you know, it seems like timelines, you know, expectations for full enrollment are somewhat similar to STARS I, maybe a little bit shorter. Maybe just talk about some of the assumptions you are making as far as that timeline to full enrollment. You know, I know there is another, you know, large study in the same patient population, you know, at least relative to overall kind of market size. Kind of talk about some of the assumptions that you are making on total enrollment as it compares to STARS?
Michael Shetzline: Well, I think that is a good question, Chase. Thanks for the question. I think you are correct. In a lot of ways, we have aligned with how we saw STARS I play out. We thought we did a fair job of executing that study as well, so that is where a lot of the assumptions are based. We certainly think we can achieve that in a STARS II program, and that is what the team is pushing and positioning to do and deliver the trial as we project here for an eventual NDA submission. But it really is grounded in what we did in STARS I, which, as we said, was a very successful study.
Tom McCourt: You know, the other thing to consider here, Chase, you know, it is a 24-week trial. So I think when you combine the fact that you have a very, very high probability of success, you have a highly effective, extremely well-tolerated once-weekly therapy in a 24-week trial, I think we are delighted with what Mike has been able to do with the FDA as far as not only get the trial up and running with the design we have, but also, you know, the length of the trial as well, which obviously is a big driver with regard to the time to get to market.
Chase Knickerbocker: Got it. Maybe just last for me on, you know, actually going to ask a question on 2027. But just on LINZESS, as we kind of approach that negotiated price, can you maybe just talk to us about what you have seen in the market from prior negotiated drugs as far as actually some volume acceleration as we kind of go into that negotiated price year, and kind of how you think, you know, we should be thinking about 2027 for LINZESS when the negotiated price goes in place?
Greg Martini: Yeah, thanks, Chase. This is Greg. So for 2026, we are clearly excited about the improved outlook that we have with our guidance that we provided back in January and reiterated today. We have significant growth we are expecting in LINZESS net sales for 2026. We have not provided any guidance for 2027 and beyond. I would say that we continue to be very optimistic about the future of the brand and its ability to continue to drive strong net sales, which will continue to deliver profits and cash flows for Ironwood Pharmaceuticals, Inc.
Operator: Your next question comes from the line of Amy Li from Bank of America. Please go ahead.
Amy Li: Is the FDA allowing you to bridge to the STARS dataset as you said, and is your planned enrollment size meant to reference or bridge to a future NDA? And I think people have noted your sample size is slightly higher than your competitor’s, which is enrolling 90 patients. So just curious if the trial size was by FDA request or is it a more conservative decision on your end to have a more robustly powered trial? And finally, given the competitive pressure in SBS-IF and the potential for GATTEX generic, could you potentially add a higher-dose arm to maximize efficacy differentiation?
Michael Shetzline: Yep, thanks, Amy. So in terms of the STARS II data, we are hoping to leverage the STARS data as much as possible, honestly. As we said, we are bridging based on the similar dose. The dose is aligned in the STARS II trial with what we put in the original STARS trial, so we are anticipating that we will be able to use the original STARS data in the NDA submission. Now, in terms of the size of STARS II, we certainly did align with the agency on the key elements of the program to take forward, and we believe this current sample size that we have put on the table here, with 124 patients, gives us adequate and robust power along the primary endpoint and secondary endpoints as well. The decision on the sample size was to make sure we had a very robust clinical trial and confidence in the outcome; that is what we wanted to achieve. We recognize there may be differences with some other trials being performed. On the question about the higher doses, we certainly have considered—and continue to consider—the opportunity with higher doses. I think we are well-positioned given the fact that STARS already has very robust efficacy data with the potential best-in-class profile and outstanding GI tolerability and weekly dosing; we certainly want to leverage that going forward. But we do continue to evaluate the opportunity to introduce a higher dose. As you know, not everybody responds in a clinical trial, so there is certainly opportunity to potentially increase the breadth of response. But right now, we are focused on getting fastest to market, and the best way to do that is to bridge with the original STARS dataset and complete this trial and confirm that evidence for an eventual submission.
Amy Li: Got it. Thank you so much.
Operator: Your next question comes from the line of Mohit Bansal from Wells Fargo. Please go ahead.
Mohit Bansal: Great. Thank you very much for taking my question, and congrats on all the progress here. A couple of questions from my side. So one is, did you ever see data from the STARS trial to look at patients who could achieve the optimum dose? Did they benefit more than the other patients who could not get to the optimum dose? That is the first question. And the second question, I would love to understand how you are thinking about market opportunity for aproglutide in the case, you know, you have GATTEX generic potentially reaching the market around the same time. What is the latest on the GATTEX generic at this point? Thank you.
Michael Shetzline: How about I start with the first question? Thanks. Good question. On the optimum dose, I think it is a really great question because obviously you raised the point of optimum dose. I think what has been amazing in the original STARS dataset is the robust efficacy in the presence of basically placebo-like tolerability. So that is a pretty amazing outcome in our industry, where you really do not see any really negative consequences, and it was a pretty robust, large trial. So that is quite a big learning. We really think we had a way to get into an optimum dose with the STARS trial. As I mentioned, that came out to be 3.5 mg, which is what we are taking forward in STARS II. I think in the background of your question is kind of what we alluded to earlier: is there an opportunity for greater efficacy? And as you know, we did do some early trials looking at 2.5, 5, and 10 mg from a biomarker perspective. So there clearly is some biomarker evidence that there could be some response out there above 3.5 mg, and as I said, we certainly have been considering that. But for right now, with, again, the optimum outcome we have in the original STARS trial—meaning robust efficacy in a very well-tolerated once-weekly therapy that people like, maintain, and continue, because we still see improvement even a year and two years out in the STARS EXTEND trial—we really think the best opportunity is to take that forward in the confirmatory trial and get to market as soon as possible because, as we are hearing, patients and investigators really like the drug and really want to maintain patients on it, and we would like to get it to market as soon as possible. I think for the market question—
Tammy Gaskins: Yeah. Hi, Mohit. This is Tammy. Thanks for the question on the commercial opportunity. Just to echo Mike’s comments, commercially we have very strong conviction in the overall clinical profile of aproglutide and its potential to be differentiated in the GLP-2 class, especially because, as Mike was just talking about, not only did we have a positive Phase III trial, but also in the STARS EXTEND long-term extension study, we continue to see increased improvement in PS volume reduction and days off of PS and even enteral autonomy achievement, which we know is really critical for patients in this market who are burdened by the everyday demands of being on parenteral support. And when we look to, as Tom referenced in the presentation, peak U.S. net sales of greater than $700 million, you know, that assumes that there will be aproglutide and at least one generic teduglutide on the marketplace. But even with that, we still believe in the potential to drive aproglutide to market leadership through expanding utilization of GLP-2 therapies and improved adherence. And we do not think that this would be a multisource generic market because of a lot of the demands required for a small patient size for a rare disease and the demands required to support these patients both clinically and from a reimbursement perspective. So full belief in the commercial opportunity and what aproglutide can do as a differentiated agent within that market.
Mohit Bansal: Helpful. Thank you.
Operator: Again, if you would like to ask a question, press star-one on your telephone keypad. Your next question comes from the line of Dominic Rose from Inshan Health. Please go ahead.
Dominic Rose: I have got two. My first question is, can you help us understand what channel mix effects drove the LINZESS rebate in Q4, and whether we should expect ongoing volatility in pricing this year? And my second question is that the LINZESS commercial volume looks to have fallen at the beginning of the year. So can you tell us what your formulary positioning looks like in this year versus the prior year? Thank you.
Greg Martini: Thanks, Dominic. This is Greg. So fourth-quarter pricing was not necessarily impacted by channel mix. It was really based on timing of recognition of gross-to-net rebate reserves. And in 2025, gross-to-net rebate reserves are based on units dispensed in the quarter. In the fourth quarter, we had a higher volume of units dispensed relative to the units sold to wholesalers, so we saw a disproportionate impact from those gross-to-net rebates. So it was not mix; it was really timing of when those rebates were recognized. And if you look across the full year, it really normalized from a timing perspective, and you do not see as significant of an impact on the full-year results as you did in first quarter and fourth quarter specifically, which were unfavorably impacted by that trend. Moving forward in 2026, we do not expect to have the same degree of volatility quarter over quarter. We do expect 2026 will be a bit more consistent sequentially quarter over quarter than what we saw in 2025. And then from an overall payer access, I will have Tammy talk to that in terms of 2026 coverage.
Tammy Gaskins: Yeah. So as we have talked about already, of course we issued our full-year guidance, which is significantly improved year over year due to a combination of improved net price as well as anticipated low single-digit demand volume growth. A big part of our decision to lower the list price was also to ensure patient access, and we have maintained broad patient access for LINZESS across our biggest books of business, both commercial and Medicare Part D, which was critical in this. And in terms of the low single-digit growth, we did expect some impact on Medicaid as a percentage of business as states may decide to respond to the removal of the inflationary component of the statutory rebates, but we feel that we have taken the right approach for the guidance and continue to give patients branded prescription-leading market access for LINZESS.
Tom McCourt: I think the other question he had was the reduction in volume year over year. And, you know, this drug has been on a linear growth curve since we launched it, and it is remarkable, you know, what sustained growth we have seen. We do see some seasonality in the first part of the year because of the high-deductible plans that there is a reset, so we generally always see—effectively for the last ten years—we saw a reduction in the first quarter versus the prior fourth quarter, then it accelerates through the year. So I think we are right on track from where we said we wanted to be, and we feel very, very good about, you know, what the outlook for 2026 looks like.
Dominic Rose: Okay. Thank you. That is very helpful.
Operator: Ladies and gentlemen, that concludes today’s call. Thank you all for joining. You may now disconnect.