Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Ironwood Pharmaceuticals (NASDAQ:IRWD), a biopharmaceutical company with a focus on developing therapies to treat gastrointestinal disorders, rose as much as 18% after reporting its first-quarter results before the opening bell.
So what: For the quarter, Ironwood recorded $14.6 million in revenue, up dramatically from the $3.3 million reported in the year-ago period. Its revenue consisted of $8.4 million tied to the sale of Linzess -- a therapy approved for irritable bowel syndrome with constipation and chronic idiopathic constipation for which it's partnered with Forest Laboratories (NYSE:FRX) -- as well as $6.2 million from the sale of linaclotide's (the scientific name for Linzess) active pharmaceutical ingredient, and amortized revenue and/or milestone payments associated with Astellas Pharma, AstraZeneca, and Almirall. Net loss for the quarter shrunk noticeably to $49.6 million, or $0.38 per share, from $93.9 million or $0.87 per share in the prior year period. By comparison, Wall Street was expecting just $5 million in Linzess shared revenue and a wider loss of $0.42 per share.
Now what: Sales of Linzess appear to be progressing nicely, which should translate into a growing revenue stream for Ironwood, and hopefully shrinking losses. But with the majority of the revenue share going to Forest Labs (total Linzess sales were $60.8 million) I can't help but point out that it could be years before Ironwood is at breakeven in the profit-versus-loss column. Although the company has $332 million in cash, its midrange operating expense forecast of $230 million for 2014 is hefty. As such, with a $1.4 billion valuation and profits potentially years away, I would suggest sticking to the sidelines until Ironwood proves its worth.
Ironwood may be exploding higher today, but over the long run it may not be able to hold a candle to this top stock
Give me five minutes and I'll show how you could own the best stock for 2014. Every year, The Motley Fool's chief investment officer hand-picks 1 stock with outstanding potential. But it's not just any run-of-the-mill company. It's a stock perfectly positioned to cash in on one of the upcoming year's most lucrative trends. Last year his pick skyrocketed 134%. And previous top picks have gained upwards of 908%, 1,252% and 1,303% over the subsequent years! Believe me, you don't want to miss what could be his biggest winner yet! Just click here to download your free copy of "The Motley Fool's Top Stock for 2014" today.
Sean Williams has no material interest in any companies mentioned in this article, and neither does The Motley Fool. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.
Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.