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IRONWOOD PHARMACEUTICALS INC (IRWD)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 was impacted by an AbbVie gross-to-net rebate reserve estimate change, driving total revenue down to $41.143M and GAAP EPS to ($0.23); non-GAAP EPS was ($0.14) and adjusted EBITDA was ($4.742)M .
  • Street expected $56.7M revenue and ($0.03) EPS; IRWD materially missed both, with revenue ~27% below and EPS $0.11 below consensus (Primary EPS) — a significant miss tied to quarterly phasing of gross-to-net reserves rather than demand *.
  • LINZESS prescription demand grew 8% YoY (53M capsules), but U.S. net sales fell 46% to $138.5M; commercial margin compressed to 52% vs 71% a year ago .
  • Management raised FY2025 adjusted EBITDA guidance to >$105M and reiterated U.S. LINZESS net sales of $800–$850M and total revenue of $260–$290M, citing reduced launch spending and the shift toward the apraglutide confirmatory Phase 3 trial; Goldman Sachs engaged to explore strategic alternatives .

What Went Well and What Went Wrong

What Went Well

  • LINZESS demand resilience: 53M capsules in Q1 2025 (+8% YoY); management: “LINZESS demand continues to be strong, and we remain on track to meet our full-year 2025 guidance…” .
  • FY2025 outlook strengthened: adjusted EBITDA guidance raised to >$105M; total revenue and U.S. LINZESS net sales guidance reiterated .
  • Liquidity improved: cash and cash equivalents increased to $108.5M (vs $88.6M year-end); cash from operations was $20.0M .

What Went Wrong

  • Revenue/EPS miss vs consensus: $41.143M revenue (vs $56.7M est) and GAAP EPS ($0.23) (vs ($0.03) est), driven by AbbVie’s updated gross-to-net rebate reserve phasing *.
  • LINZESS U.S. net sales down 46% to $138.5M and commercial margin compressed to 52% (71% in Q1 2024), reducing collaboration profits .
  • Apraglutide timeline/risk increased: FDA feedback indicates a confirmatory Phase 3 trial is needed ahead of approval, shifting near-term investment and introducing added execution risk .

Financial Results

Summary vs prior year and prior quarter

MetricQ1 2024Q4 2024Q1 2025
Total revenue ($USD Millions)$74.877 $90.545 $41.143
GAAP EPS ($)($0.03) $0.02 ($0.23)
Non-GAAP EPS ($)($0.02) $0.02 ($0.14)
Adjusted EBITDA ($USD Millions)$21.142 $33.775 ($4.742)
Cash from Operations ($USD Millions)$45.0 $15.2 $20.0

Revenue composition

Revenue ComponentQ1 2024Q1 2025
U.S. collaborative arrangements revenue ($USD Millions)$71.715 (includes $30M reduction to reflect gross-to-net change) $38.768
Royalties and other revenue ($USD Millions)$3.162 $2.375

Operating KPIs

KPIQ4 2024Q1 2025
LINZESS capsules (IQVIA, millions)56 53
LINZESS U.S. net sales ($USD Millions)$223.0 $138.5
Commercial margin (%)64% 52%
Net profit – LINZESS U.S. brand collaboration ($USD Millions)$135.192 $65.892
IRWD U.S. collaboration revenue ($USD Millions)$88.378 $38.768
Cash and cash equivalents ($USD Millions)$88.559 (Dec 31, 2024) $108.481

Results vs S&P Global consensus (Q1 2025)

MetricConsensusActual
Revenue ($USD Millions)56.700*41.143
Primary EPS ($)(0.03)*(0.23)
# of EPS estimates2*—
# of Revenue estimates4*—

Values retrieved from S&P Global.*

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
U.S. LINZESS Net SalesFY 2025$800–$850M (high single-digit Rx demand growth; pricing erosion from Medicare Part D redesign) $800–$850M (same) Maintained
Total Revenue (IRWD)FY 2025$260–$290M $260–$290M Maintained
Adjusted EBITDAFY 2025>$85M (definition updated to exclude SBC effective Q1 2025) >$105M (excludes SBC) Raised

Notes: Management updated adjusted EBITDA definition to exclude stock-based compensation beginning Q1 2025 .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024, Q4 2024)Current Period (Q1 2025)Trend
Demand vs pricing headwindsQ3: strong demand (+13%), Medicaid mix headwinds; Q4: expect Part D redesign pricing headwinds in 2025 Guidance embeds high single-digit demand growth offset by Part D pricing erosion Persistent pricing pressure despite solid demand
Apraglutide regulatory pathQ3: on track to complete NDA in Q1 2025; Q4: rolling NDA initiated, completion expected Q3 2025 FDA feedback: confirmatory Phase 3 needed; long-term extension continues; strategic alternatives explored Timeline extended; added trial requirement
Strategic alternativesNot highlighted in prior calls/PRsGoldman Sachs engaged to explore alternatives New potential catalyst introduced
LINZESS market positionQ3/Q4: leadership, share resilience, strong new-to-brand growth 8% Rx growth; collaboration profits lower on gross-to-net phasing Demand intact; profits pressured near-term
Balance sheet/covenantsQ4: high confidence in covenant compliance; liquidity and deleveraging focus Cash increased to $108.5M; no new covenant commentary in Q1 PR Maintaining liquidity; focus on cash flow
R&D executionQ4: strong STARS/STARS Extend data; 27 patients achieved enteral autonomy; pre-launch planning Shift away from certain launch investments; focus on confirmatory Phase 3 Prioritize pivotal trial; defer launch spend
Regulatory/compliance—Nasdaq non-compliance notice re late 10-K filing (procedural; plan to regain compliance) Administrative timing item

Management Commentary

  • “LINZESS demand continues to be strong, and we remain on track to meet our full-year 2025 guidance and further, recently raised our adjusted EBITDA guidance. We are making a concerted effort to maximize stockholder value…including advancing plans for a confirmatory Phase 3 trial for apraglutide and exploring strategic alternatives.” — Tom McCourt, CEO .
  • “We are disappointed in this outcome…will now have to wait for the results of a confirmatory Phase 3 trial…we will be exploring strategic alternatives…we believe [apraglutide] still has the potential to be a blockbuster drug.” — Tom McCourt, CEO .
  • On LINZESS profitability focus: “We need to really look critically at how we continue to increase profits and cash flow…we will look at…contracting strategies to really maximize [profitability].” — Tom McCourt .
  • On covenants: “We have a high degree of confidence…we will be able to continue to maintain covenant compliance throughout the year…[adjusted EBITDA definition] gives…clarity…” — Greg Martini, CFO .

Q&A Highlights

  • Demand growth without Ironwood field force: Confidence in sustaining high single-digit demand via AbbVie sales coverage and DTC; brand momentum and payer access underpin outlook .
  • Cost savings cadence and R&D trajectory: Full SG&A run-rate from Q2; R&D stays elevated in 2025 for extension and CMC; inflection expected in 2026 .
  • Debt covenants: High confidence in maintaining compliance; adjusted EBITDA definition aligned with covenants; ongoing focus on disciplined expense management .
  • Apraglutide launch spend and 2026 convert: 2025 commercial planning expenses “not significant”; ramp closer to potential launch; capital structure actions evaluated with focus on deleveraging .
  • Medicare Part D redesign timing: Full-year guidance incorporates anticipated impact; quarterly cadence monitored .

Note: A Q1 2025 call transcript was not available in our document set; Q&A themes reflect the latest available (Q4 2024).

Estimates Context

  • Revenue: Actual $41.143M vs consensus $56.700M — significant miss, driven by updated AbbVie gross-to-net reserve estimate impacting quarterly phasing (management expects no full-year impact) *.
  • EPS: Actual GAAP EPS ($0.23) vs consensus ($0.03) — miss of $0.20 on GAAP EPS; non-GAAP EPS ($0.14) also below expectations *.
  • Magnitude and drivers suggest near-term estimate revisions lower on reported revenue/EPS, with limited change to full-year run-rate if rebate phasing reverses in subsequent quarters as indicated .

Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Near-term print was weak on reported revenue/EPS due to gross-to-net phasing; demand remains healthy. Expect partial reversal in subsequent quarters per management, limiting full-year impact .
  • FY2025 profitability outlook strengthened: adjusted EBITDA guidance raised to >$105M; reduced launch planning spend offsets trial shift for apraglutide .
  • Strategic alternatives introduce an additional stock catalyst; diligence should track timeline, scope (asset vs corporate), and alignment with apraglutide development path .
  • LINZESS cash flows remain core; monitor commercial margin trajectory (52% in Q1) and pricing headwinds from Part D redesign as key drivers of collaboration profits .
  • Regulatory path for apraglutide lengthened; confirmatory Phase 3 is now gating — reassess timing/peak adoption curve and interim data cadence for de-risking .
  • Balance sheet/liquidity improved; management reiterated covenant confidence — continued deleveraging could enhance equity value resilience into 2026 convert maturity .
  • Trading setup: Expect estimate cuts and near-term volatility post-miss; watch for Q2 phasing recovery, strategic alternatives headlines, and any apraglutide trial design clarity as potential positive inflections .