Bullish indicating open at $55-$60, IPO prices at $37
On Monday, Leerink Partners issued an update on Ironwood Pharmaceuticals (NASDAQ:IRWD) stock, reducing its price target to $1.00 from the previous $3.00 while maintaining a Market Perform rating. The adjustment follows Ironwood’s announcement that an additional Phase 3 trial for apraglutide in treating short bowel syndrome (SBS) is required before seeking regulatory approval. This news signifies a setback for the company, as apraglutide was anticipated to be a key asset following the loss of exclusivity (LOE) for its Linzess product. The stock, currently trading at $0.64, has fallen nearly 89% over the past year, with InvestingPro data showing the price is significantly below its 52-week high of $8.45.
Leerink Partners highlighted the added financial uncertainty for Ironwood due to this development, which aligns with their existing Market Perform thesis on the stock. Despite the challenges, InvestingPro analysis indicates the company maintains strong liquidity with a current ratio of 4.69, and analysts have set price targets ranging from $3 to $14. Ironwood is currently exploring strategic options to enhance shareholder value amidst these challenges. According to Leerink Partners, the company’s future prospects could be more positive if it successfully sells the cash flows related to Linzess at a fair price.
Ironwood’s decision to conduct another Phase 3 trial for apraglutide adds to the company’s hurdles, as it was banking on the drug to be the next chapter of growth following the Linzess LOE. The requirement for further clinical testing implies a delay in potential revenue from apraglutide, which was a central component of Ironwood’s strategy. The company’s revenue declined by 20.6% in the last twelve months, though it maintained a remarkable gross profit margin of 97.85%.
The firm reiterated its Market Perform rating but noted that the path forward for Ironwood involves some degree of uncertainty. The potential sale of Linzess-related cash flows is seen as a key factor that could determine the company’s ability to navigate through the current challenges and secure a stable financial position.
In summary, Leerink Partners’ revised price target reflects the increased risks and uncertainties facing Ironwood Pharmaceuticals, particularly concerning the commercialization timeline and approval process for apraglutide. The company’s search for strategic alternatives, including a possible sale of Linzess-related cash flows, remains a critical aspect to watch in the near future.
In other recent news, Ironwood Pharmaceuticals announced a requirement for an additional Phase 3 trial for apraglutide, a treatment for short bowel syndrome with intestinal failure, after discussions with the U.S. Food and Drug Administration. This decision follows a pharmacokinetic analysis revealing lower than expected drug exposure and dosage, despite previously promising results from the STARS Phase 3 trial. The company maintains that the STARS trial data will be integral to their New Drug Application. Ironwood is also working with Goldman Sachs to explore strategic alternatives to enhance shareholder value.
Additionally, Ironwood reported fourth-quarter adjusted earnings per share of $0.02, missing analyst estimates of $0.06, and revenue of $90.55 million, which was below the consensus of $92.5 million. Despite the earnings miss, the company initiated a rolling New Drug Application submission for apraglutide, with completion anticipated in the third quarter of 2025. Ironwood also reported an 11% year-over-year prescription demand growth for Linzess, although U.S. net sales for the drug declined 15% to $916.3 million for 2024 compared to the previous year. Looking ahead, Ironwood provided 2025 revenue guidance of $260-290 million, compared to analyst expectations of $287.6 million.
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