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Ironwood Pharmaceuticals Inc (NASDAQ:IRWD)
Q4 2019 Earnings Call
Feb 13, 2020, 8:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by and welcome to the Ironwood Pharmaceuticals Fourth Quarter and Full-Year 2019 Investor Update Conference Call. [Operator Instructions]

I would now like to hand the conference over to your speaker Meredith Kaya. Ma'am, please go ahead.

Meredith Kaya -- Vice President, Strategy, Investor Relations and Corporate Communications

Good morning, and thanks for joining us for our fourth quarter and full-year 2019 investor update. Our press release crossed the wire this morning and can be found on our website, www.ironwoodpharma.com.

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 year ended September 30th, 2019, 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 should be considered only a supplement to and not as 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 this today's call, Mark Mallon will begin with an overview of the year; Tom McCourt will highlight our progress across our GI portfolio; Mike Shetzline will provide additional detail around our upcoming Phase II data readout for MD-7246; and Gina Consylman will close by discussing our fourth quarter and full-year 2019 financial results and 2020 financial guidance. We'll be referring to slides via the webcast. For those of you dialing in, please go to the Events section of our website to access the webcast lines.With that, I'll turn the call over to Mark.

Mark Mallon -- Chief Executive Officer

Thanks, Meredith. And thanks to everyone for joining today. 2019 was a transformative year for Ironwood and we are excited to share our full results with you.

In April 2019, Ironwood was launched as a newly focused company with a clear vision to become the leader in US GI healthcare. The GI landscape represents an area of large unmet need; one, where we believe we could have a real impact for patients. There are 70 million Americans suffering from GI diseases. That's one in every five people. Grounded in innovation with the demonstrated knowledge, expertise and capabilities to build blockbuster GI brands, Ironwood is dedicated to advancing the treatment of GI diseases and redefining the standard of care for these patients.

In order to achieve our vision we set out three strategic priorities: drive LINZESS growth, advance our late-stage pipeline and deliver sustainable profits. We are in the early stages of executing against each of these with substantial progress in 2019 and positioning us well for 2020 and beyond.

I'd like to hit on a few of our 2019 highlights and then pass it onto the team to talk in detail. First, LINZESS. LINZESS is now the number one prescribed product in the US for adults with IBS-C or chronic idiopathic constipation, having crossed that important threshold in the latter half of 2019. These results were driven by acceleration in prescription demand, growth up 14% in 2019, compared to 13% growth in 2018. Importantly, just in these past six weeks, we've entered into settlement agreements that resolve the outstanding LINZESS patent litigation with the earliest license generic entry for the 145 and 290 microgram doses in March of 2029. We are looking forward to working with our partner to continue to grow LINZESS franchise for many years to come. And as a reminder, we also have US patent applications pending, covering the commercial formulation of the 72 microgram dose, which if granted, will expire late -- as late as 3031.

Now turning to our GI pipeline. Last May, we initiated our Phase II study with 7246 in abdominal pain associated with IBS-D, and we are on track for a data readout mid-year. We are initially exploring 7246 in IBS-D, but we believe if it has the potential to become a non-opioid abdominal pain relieving agent for a number of GI diseases. Additionally, our two Phase III pivotal trials for 3718 in a refractory GERD continue to enroll patients with data targeted in the second half of 2020. If approved 3718 would be the first new medical innovation for the treatment of reflux disease in three decades, this is since the launch of the PPIs. And could be the first prescription option approved to improve regurgitation.

Lastly, we've significantly strengthened our financial profile. For the first time in Ironwood's history, we reported full-year profitability both on GAAP and non-GAAP basis. Through a number of important actions taken post separation, we've improved our capital structure, strengthen our commercial capabilities and are running a more efficient business. We expect 2020 to be another pivotal year with multiple catalysts that we believe will position us for long-term value creation. We will be unwavering in our efforts to drive LINZESS growth. We are more confident than ever that LINZESS is a durable asset that we expect to continue to grow for many years to come. We are thoughtfully and urgently advancing our late-stage pipeline toward two important data readouts this year. Each of us -- each of which will help define our path forward.

And lastly, we're focused on profitability, positioning Ironwood to become a strong cash flow generating business. We are a very different company today than we were a year ago. We believe that much of our future growth will come from our existing GI portfolio, as shown on this slide. LINZESS is already on track to become a $1 billion plus drug, if you add to that 3718 and 7246, which we believe could be two equally sized opportunities if approved this tremendous growth potential beyond 2020.

With that said, we continue to stay well informed on the broader GI landscape and are seeking to GI opportunities that would fit well within our GI-focused approach and aligned with our objective to advance care for patients and create value for shareholders. We continue to have a high bar in terms of these types of opportunities, the types of opportunities we would pursue. We do not intend to move forward with assets that would compromise LINZESS growth, limit our ability to invest in our portfolio or deliver processing.

Before I turn it over to Tom, I'd like to close by saying that I'm very proud of what the team has accomplished in such a short time. I'm also inspired by the millions of GI patients in need of new treatment options and more confident than ever in the opportunities we have in front of us at Ironwood.

With that, I'll turn it over to Tom.

Thomas McCourt -- President

Thanks, Mark. Our commercial performance in 2019 was headlined by the continued growth of LINZESS. LINZESS prescription demand increased 13% year-over-year during the fourth quarter of 2019 and as Mark mentioned, 14% for the full-year.

The strong underlying demand resulted in net sales of $231 million and $803 million, respectively. For a brand in its eight year on the market, we are very pleased with the growth we continue to see and the attributes -- and attribute this to a variety of factors, including the impact of the withdrawal of prescription MiraLAX in the market, our positive Phase IIIb data demonstrating that LINZESS improves overall abdominal symptoms of bloating, pain and discomfort; the continued impact of our DTC campaigns and the tens of millions of patients who continue to suffer.

In 2019, LINZESS achieved a significant milestone and became the number one prescribed product for IBS-C and chronic constipation. As you can see on this slide, LINZESS was generating approximately 300,000 prescriptions per month at the end of 2019, exceeding LACTULOSE, the leading generic IBS-C and chronic constipation prescription treatment.

The growth in net sales combined with focused investment behind the brand has generated substantial profits for Ironwood. In 2019, total LINZESS profitability, including both commercial and R&D expenses was $514 million translating to over $250 million to Ironwood. We believe we will continue to realize growth from the withdrawal prescription MiraLAX as physicians continue to choose LINZESS for more and more of their IBS-C and chronic constipation patients.

Additionally, our new DTC campaign is expected to launch this spring, leveraging the opportunity to communicate with consumers about the overall abdominal symptoms associated with IBS-C. We have seen a demand inflection every time we launch a new campaign including 2019, which was our most successful campaign to-date. We expect this trend to continue as our quantitative market research suggests that the 2020 campaign could be as strong, if not stronger.

2020 is positioned to be another strong year for LINZESS. We do expect to see the typical seasonality in the first quarter, primarily due to the changing health plans, resets in annual deductibles and the increased number of Americans using high-deductible health plans. We also tend to see a decrease in channel during the first quarter, both of which can impact net sales. The seasonality tends to stabilize in the second quarter with volume accelerated later in the year.

Turning to our partnership with Alnylam. GIVLAARI was launched late in the fourth quarter and we are encouraged by the initial feedback we're hearing from the field. Physicians are highly engaged, increasing the time that our field reps are getting with them and physicians are already identifying potential patients. Now our pipeline, beginning with 3718. There is an estimated 8 million to 10 million patients in the US were suffering from refractory GERD, despite being on standard care PPIs. Many of these patients are taking multiple drugs to treat their symptoms each and every day, including doubling their PPI dose, adding H2s and supplementing with antacids and are still suffering from significant reflux and regurgitation 3 times to 5 times a week on average.

As evidence suggests, the reason many of these patients continue to suffer, because even though they're taking PPIs, which is eliminating the stomach acid, they may actually be refluxing bile into the esophagus. 3718 is a gastric retentive bile acid sequestering agent, which we believe represents an opportunity to redefine standard of care for these patients. Our pivotal Phase III program is designed to evaluate the safety and efficacy of 3718, plus a PPI on refractory GERD in two identical trials. The trials were more than halfway enrolled by the end of 2019 and we're seeing a nice uptick in screening in 2020 so far. We continue to target top line data from the program in the second half of 2020.

Now 7246, there is approximately 15 million Americans suffering from some form of lower GI pain. We and Allergan are evaluating abdominal pain associated with IBS-C through a Phase II study and expect top line data in mid-2020. With 16 million Americans suffering from IBS-D and current treatment options often failing to provide adequate relief abdominal pain, there is a clear unmet medical need that we can fill.

With that I'm going to ask Mike to talk in more detail about the upcoming results of 7246 study.

Mike Shetzline -- Chief Medical Officer

Thanks, Tom. Our current data demonstrates that 7246 has a fundamentally different clinical profile from [Technical Issues] as we believe it can relieve abdominal pain associated with certain GI diseases without impacting valve function. This is very important as prior to this, many in the clinical community believed any abdominal pain benefit in IBS was solely related to improved bowel function. 7246 is designed to released in the coding further down the GI track than LINZESS and where we believe abdominal pain originates. It also bypasses small intestine, where we believe the impact on fluid secretion occurs thereby limiting the effect on bowel function.

This hypothesis was originally demonstrated in our previous proof-of-concept Phase II IBS-C trial with 7246. In that study, we demonstrated that the effect of 7246 on abdominal pain relief was the same as LINZESS, but with no appreciable effect on bowel function. Remember that these were IBS-C patients, so even though they remained highly constipated, they still had a meaningful reduction in their pain relief.

In the current Phase II trial in IBS-D, we're seeking to answer two important questions; first, does 7246 show abdominal pain relief in this patient population? We're using a similar abdominal pain responder endpoint that we used in our previous LINZESS and 7246 trials, defined as at least a 30% reduction in abdominal pain from baseline. In this study we hope to see an effect in a similar range of what we saw in the previous trial of LINZESS and 7246.

Second the 7246 have an impact on bowel function. As I just mentioned in the Phase II IBS-C study with 7246, we saw a clinically and significant effect on bowel function. We'll be looking to see if these data are replicated in the IBS-D population. We're exploring three doses of 7246 in this trial, 300, 600 and 1,200 micrograms versus placebo. The highest dose is 4 times that of LINZESS and the 7246 dose used in the IBS-C study. We're studying the higher doses in particular to evaluate the degree of abdominal pain relief that can be achieved toward these patients. We're finishing up dosing and look forward to reporting the topline results mid-year.

I'll now turn it over to Gina to discuss our financial results.

Gina Consylman -- Chief Financial Officer

Thanks, Mike. 2019 was an incredibly strong year, the strongest since I've been here, particularly as it relates to our financials. We delivered robust revenues and profitability in 2019 exceeding our external guidance. After separating Cyclerion from Ironwood, we took several additional actions in 2019 that we believe better position us for future success and profitability. These actions included restructuring our debt, which lowers our cash interest expense over the next few years, moving our headquarters to Boston, restructuring our ex-US linaclotide agreements, and securing the new partnership with Alnylam.

As a result in the three quarters following the separation and for the full-year 2019, we were profitable in GAAP and a non-GAAP basis. Over the next few minutes, I will highlight some of the progress we made in both the fourth quarter and full-year and share our full 2020 financial guidance. Please refer to our press release for additional details.

Revenues in the fourth quarter were $126 million, driven by $106 million in collaboration revenue and $21 million in sales of linaclotide API. LINZESS commercial margin was 81% in the fourth quarter, contributing to our growth in collaboration revenue. The year-over-year expansion in commercial margin in the fourth quarter was primarily driven by the timing impact of the collaboration expenses and higher revenue.

Turning to the full-year. Ironwood revenues were $428 million, which included $42 million in license and milestone revenue, resulting from our amended ex-US linaclotide agreements recorded in the third quarter. With the amended ex-US agreements we are no longer responsible for the supply of linaclotide API and as a result, our revenue from API sales is expected to decline to approximately $5 million in 2020 as we ship final batches to our partners.

R&D expenses were $27 million and $115 million in the fourth quarter and full-year. We plan to continue to invest significantly in R&D in 2020, as we continue to advance our ongoing clinical studies. SG&A expenses were $39 million and $172 million in the fourth quarter and full-year. The decrease in SG&A compared to 2018 is primarily due to the termination of the Lesinurad license agreement and the cost optimization actions implemented during the year.

Interest expense was $7 million and $37 million in the fourth quarter and full-year. In connection with the debt restructuring last August, we now expect our cash interest expense in 2020 to decrease by approximately $9 million year-over-year. With that said, due to the equity component of our convertible debt, total cash and non-cash interest expense are expected to be similar to total interest expense recorded in 2019.

Lastly, we delivered both GAAP and non-GAAP profitability for the fourth quarter and full-year. GAAP net income from continuing operations was $48 million for the fourth quarter and $59 million for the full-year. Adjusted EBITDA from continuing operations was $55 million in the fourth quarter. The fourth quarter is typically our strongest LINZESS collaboration revenue quarter. This combined with the timing impact of the collaboration expenses and API sales resulted in a strong finish to the year. We do not expect this to be a run rate for 2020 as quarterly profitability will fluctuate.

Adjusted EBITDA from continuing operations was $148 million for the full-year. One important reminder is that even though we are now profitable we have over $1 billion in NOLs as of year-end and expect them to offset tax liabilities for the next few years.

Turning to our 2020 financial guidance. In 2020 Ironwood expects US LINZESS year-over-year net sales growth in the mid single-digit percent range, driven by continued growth in volume demand and stable net price, which we consider to be plus or minus a few percent. We also expect total Ironwood revenue to be in the range of $360 million to $380 million. We anticipate continued year-over-year growth and collaborative arrangements revenue in 2020, due to the expected strong demand for LINZESS.

Thirdly, we expect adjusted EBITDA to be greater than $105 million in 2020. As a reminder 2019, total revenue and adjusted EBITDA from continuing operations included the $42 million in the ex-US license and milestone revenue and the sales of API. As you can see 2019 was a great year for Ironwood and we are positioned for near and long-term value creation. Our transition to profitability puts us in a strong position to invest thoughtfully into growing our business and our capital allocation strategy is aligned with our strategic priorities.

As Mark commented on earlier, we expect to continue to invest in the advancement of our GI portfolio. This is our highest priority and where we believe we can create the most value today. We are also focused on delivering sustainable profits over time, which is a critical threshold for any investment decision we make. This enables us to continue to invest thoughtfully into our portfolio and pay down our existing debt. We expect to settle the remaining portion of our 2022 convertible notes in cash and given our current projections over the next several years. Believe we will have the option to settle our 2024 and '26 Notes in cash as well.

Lastly, we are balancing our investments into our business in a way that allows us the financial flexibility to pursue external opportunities when we find something that meets the disciplined criteria that we have done.

With that, I'll now turn it back over to Mark for some closing comments before Q&A.

Mark Mallon -- Chief Executive Officer

Thanks, Gina. I want to take a moment to recognize the team members at Ironwood, who worked tirelessly and remain focused throughout the year to deliver these outstanding results. 2019 was a year full of favorable change for Ironwood. We delivered on LINZESS growth, completed the separation, relocated our headquarters and embarked on our vision to create a leading GI-focused company in the US. We're off to a great start and have put the company on the right path for long-term value creation.

That said, we understand that there is more to do to achieve our goals. We must continue to focus on executing across all areas of the business, driving LINZESS growth, advancing our late-stage pipeline and delivering sustainable profits. We have an exciting year ahead, full of important catalysts to continue the momentum we gained through 2019.

And so I'll close by saying thanks for joining us this morning and we look forward to your questions. Operator we can open the line for questions.

Questions and Answers:

Operator

[Operator Instructions] And your first question comes from Jacob Hughes with Wells Fargo.

Jacob Hughes -- Wells Fargo -- Analyst

Hi, good morning.

Mark Mallon -- Chief Executive Officer

Good morning, Jacob.

Jacob Hughes -- Wells Fargo -- Analyst

Hey, good morning. My first question is, in your view, what are the upside factors to your sales guidance? I mean, can pricing be better than the stable commentary you provided earlier this year?

And then secondly, has there been any changes with AbbVie and could LINZESS ultimately come back to Ireland -- or Ironwood without a partner?

Mark Mallon -- Chief Executive Officer

So let me take the second question, Jacob. And I'll ask Tom to comment on the first one. So we've had limited interactions with AbbVie at this point, as we've talked about before. They're focused fully, as you would expect on closing the transaction with Allergan. The Allergan team has stayed really strongly engaged and continue to work with us to drive LINZESS growth. We are looking forward to working with AbbVie in the future, they've got great commercial capabilities to build on the success that we've had with Allergan.

I've said in the past also that we remain open to options to really drive value to shareholders. So that hasn't changed, and we'll continue to be open to other -- sort of a full range of options that they really could make a big difference for shareholders. So I think that's what we can say right now about AbbVie, like everyone else, to hear that the transaction closed so that we can start to engage with them fully. I would say that in the limited interactions we've had with them, they've all been positive. I think, they certainly see LINZESS as one of the important products as part of the Allergan portfolio. So we're excited to work with them. Tom, do you want to talk about what opportunities for upside?

Thomas McCourt -- President

Yes. On the price specifically, first of all, I think it's important to recognize the brand is in a very, very healthy spot right now. When you look at the momentum that we're coming out of 2019 with certainly the volume of patients out there still underserved. We continue to see very steady, strong growth that's really founded on a high level of patient satisfaction, as well as a need for more effective therapy.

That being said, obviously, price plays a significant role and payer access is one of the core foundations for this near-term and long-term success. Certainly as everybody else in the industry, there's certainly pricing pressure here. Last year was a somewhat a typical year where there was a number of factors that really affected some price erosion. As we look at this upcoming year, we see that as we mentioned stabilizing. So last year, we lost about 9% -- 8%, 9% in price. We don't see that happening this year from what we can see so far.

So, hey, we're optimistic, we think we have a very strong value proposition for the payer. But we have to make some decisions on on some of the payer contracts, which we did, which obviously will maintain the stability and the price, but may affect some of our volume. But I think, overall, I think the brand is very healthy, I think we see nothing, but upside growth as we move forward.

Mark Mallon -- Chief Executive Officer

I would just say -- thanks, Tom. I think that's right. Just to come back to the question about upside opportunities. The large market of people suffering from IBS-C and chronic constipation that are not satisfied. We've shown that as we continue to add to what we do, particularly with the consumer space that we can really accelerate growth. And so that's where I would see really the biggest opportunity is continue to leverage and expand what we do with consumers. And of course we're still very early into communication of the abdominal symptom data, which our market research has shown to be highly impactful to visit physicians and patients. So definitely, things to keep driving growth.

Jacob Hughes -- Wells Fargo -- Analyst

Okay. Thanks guys.

Operator

And our next question comes from Eric Joseph with JPMorgan.

Eric Joseph -- JPMorgan -- Analyst

Hi, good morning. Thanks for taking the questions. Maybe just a further question on the mid single-digit growth guidance for LINZESS. Just to clarify, does that anticipate higher demand from the abdominal symptoms claims? And if not, how are you and Allergan assessing their impact to the brand? I guess, are there certain growth targets that you've put in place to measure the impact of abdominal symptom claims?

And then secondly on commercial margin, if I heard correctly, Gina, you said that we shouldn't use fourth quarter '19, the run rate for 2020? How should we be thinking about commercial spend for the brand directionally relative to 2019, considering that it looks favorable to 2018 and also kind of heading into the revised DTC effort? Thanks.

Gina Consylman -- Chief Financial Officer

Sure, Eric. This is Gina, I'll take the second part of your question first, and then probably turn it over to Tom. So in the commercial margin, you're right 81% for the fourth quarter, so it was really nice to see. It was just a combination of the fourth quarter is typically our strongest quarter for LINZESS revenue. So we again saw higher revenue in Q4. And then this time around, it was coupled with just lower level of expenses during the fourth quarter as well. So we saw some of our expenses related to personnel promotion earlier in the year rather than in Q4, so that's the timing comment.

So with that said, we do expect margins to continue to grow over time, but they will fluctuate quarter-to-quarter. And for instance, Q1, we typically see some seasonality impact where we will see lower level of revenue, but we expect to continue to see a higher level of expense in Q1 versus Q4. So our overall level of expense behind the brand, we're fully committed to supporting the brand. We have locked in that plan with Allergan for 2020 and expect roughly the same amount of expense in 2020 versus 2019.

Mark Mallon -- Chief Executive Officer

I mean, as far as what we think the impact of the additional abdominal symptoms will be as far as the upside. I think, it's important to first note that we have been on a very strong linear growth curve since launch. And in order to maintain that we constantly got to be able to identify and activate new sources of business, which is what we've done throughout the lifecycle of the product with regard to the expansion of our claims, the addition of the 72-microgram dose, etc. I mean, this again is a further extension of the overall strategy in that what we know about this marketplace is most patients do not identify with abdominal pain. They identify more with bloating and discomfort.

So we believe that by educating through our DTC campaign, we can get more patients to raise their hand and ask for help. In addition, these claims also broaden the physicians view of who the appropriate patient is. And we certainly see upside that we did build into the forecast, but obviously we're optimistic as far as what we'll see and we'll continue to optimize our promotional mix to try to accelerate the ongoing growth of the brand.

Eric Joseph -- JPMorgan -- Analyst

Tom, would you expect to see their impact reside with an expanded uptake for one of the dose levels, perhaps expansion of the 72-microgram dose formulation?

Thomas McCourt -- President

Yes. I think this -- obviously, the focus of the label change was really in the IBS like patients, which is the 290 and the 140 -- 290 particularly. But we also know that a lot of physicians will use lower doses for these patients. So I think we're going to see -- we could very well see growth across all doses as we move forward. But again, I think, until we get into the marketplace and really start pulling the levers, all the levers on communication to both patients and physicians. We're not going to see the full impact of what this additional claim will provide.

Eric Joseph -- JPMorgan -- Analyst

Got it. Thanks for taking the questions guys.

Mark Mallon -- Chief Executive Officer

Thanks, Eric.

Gina Consylman -- Chief Financial Officer

Thank you.

Operator

And your next question comes from Raghuram Selvaraju with H.C. Wainwright.

Edward Marks -- H.C. Wainwright -- Analyst

Good morning. This is Edward Marks on for Ram. I appreciate taking the question. I noticed in the JPMorgan presentation, you had mentioned that there were multiple efforts to support enrollment for the 3718 Phase III trial. I was just wondering what those multiple efforts were? And whether you could provide some guidance as to how confident you are that top line data can still be produced in the second half of this year?

Mark Mallon -- Chief Executive Officer

Mike?

Mike Shetzline -- Chief Medical Officer

Yes, certainly. So the 3718 trial, as you know is a fairly robust, large Phase III program with over 1,300 patients. And the patients to be enrolled have to go through a lot of steps, including invasive procedures like the Bravo [Phonetic]. So we did recognize early that, that enrollment in that trial would be challenging. We have kept abreast of that on a very regular basis and continue, to your point and the point of your question, adapt and mitigate enrollment to make sure we achieve that desired goal, which is the top line data in the end of 2020.

Some of those efforts actually include enhanced central recruiting. We're looking at even newer opportunities, not just using the traditional method where we use the Internet or ways to outreach to increase screening. We're actually taking a deeper dive into that using some newer technologies to actually try to target the phenotype of patients that will deliver the patient we need to be enrolled. And that's a step up above traditional screening efforts at central recruiting metrics have traditionally done. We've also just worked more closely with the site. We and then Mark's leadership team are actually visiting sites. We're very engaged with the principal investigators and trying to make sure we do everything we can to facilitate their activity in the clinical study.

So we can make sure that they're able to deliver the patients that they have in screening, because as you know some of these invasive procedures then require a little more time at the site to go through that. And so we're working very closely with the sites to improve that and facilitate that pass-through, so that the screened patients become enrolled.

Mark Mallon -- Chief Executive Officer

And Mike, just to be clear, I think we have great confidence that we can deliver the study by the end of the year. I mean, everything looks like and I -- as we mentioned earlier, we've actually seen an uptick in the screening rates, which has been very encouraging with these rather innovative approaches that we've been leveraging.

Edward Marks -- H.C. Wainwright -- Analyst

Okay, great. And then as much as you can provide guidance, I was wondering what the projected 2020 royalties might be from AbbVie's work in China and Astellas work in Japan?

Mark Mallon -- Chief Executive Officer

Yes. Gina will take that.

Gina Consylman -- Chief Financial Officer

Yes. So I'll try and take that from both sides. So, I'm going to start with Astellas. If you recall the Astellas royalties are, they started in the mid single-digits and they escalate to the low double-digits.

Astellas recently reported their revenues for the nine months ended 12/31/19, and it's approximately $40 million in sales. So, I think you do the calculation and in the math, hopefully. On the AstraZeneca side in China, we haven't called out a big amount of royalties within our guidance, but we would expect it to be rather modest in 2020 and that's just because they've only launched. And they are seeking reimbursement in 2020. We don't expect that until later in 2020. So right now, we have very modest expectations for 2020.

Edward Marks -- H.C. Wainwright -- Analyst

All right, thank you. I appreciate all the details.

Mark Mallon -- Chief Executive Officer

Thanks for the questions.

Operator

And your next question comes from Patrick Trucchio with Berenberg Capital.

Patrick Trucchio -- Berenberg Capital -- Analyst

Thanks, good morning. Just first question, just regarding 7246 in the top -- Phase II top line data expected mid-year. The expectation is to see similar improvement in pain as the prior Phase II trial. During this trial, the highest dose is four times the dose valuating the IBS-D trial. So I'm wondering what magnitude of pain relief from baselines should we anticipate. And if there are any dose limiting side effects which we concerned about, particularly at the high dose in the Phase II trial that's expected mid-year -- this year?

Mark Mallon -- Chief Executive Officer

Go ahead, Mike.

Mike Shetzline -- Chief Medical Officer

Yes. Thanks for that. It's a very good opportunity to clarify some of those important points around 7246. So as you mentioned, the dose we're taking into the IBS-D trial now is at 3 time to 4 times the doses that we've used in the Phase II. We're actually very confident in the safety profile for two important reasons; number one, as we know from the Phase II in the IBS-C patient population that we really didn't see any dose limiting side effects in that dose range. Now to your point that was up to 300 micrograms. But we have tested up to 3 grams or 3,000 micrograms in other studies, including healthy volunteer studies. And we didn't see any dose limiting side effects including around diarrhea. In fact, no healthy volunteers actually reported diarrhea in healthy volunteer study.

So again, this is a new patient population of IBS-C. But based on the mixes of action, and what we know about the distal and more colonic delivery for 7246, we're fairly confident in safety profile. Again, the IBS-D trial is ongoing, so the data is blinded. But I can tell you in a blinded fashion that we've seen no one expected safety concerns and it's been fairly well tolerated. So we're fairly confident in the safety profile to-date. However, that will obviously become much clearer when we see the data mid of this year.

Patrick Trucchio -- Berenberg Capital -- Analyst

That's helpful. And then just secondly, regarding the commercial collaboration with Alnylam. Can you discuss more specifically Ironwood's contribution to the commercial launch of GIVLAARI in terms of what proportion of patients that you believe Ironwood could help Alnylam discover? And then secondly, can you tell us what data Ironwood has that could be helpful for other rare liver disease commercial launches? And should we expect GIVLAARI agreement to be the first of more to come?

Mark Mallon -- Chief Executive Officer

So I'm going to have Tom answer that question. But just one last comment on 7246. Mike, I think, you covered it of course, our view on the safety profile. Well, I just want to add that, we talked about seeing the pain effect to that Phase II study. Obviously, that's something that -- there could be a possibility of getting even better results with the higher doses, we've not really been able to explore the dose response beyond 300 micrograms, because of the risk of the diarrhea. So, this is why we're doing the study is to learn what might be possible going beyond that. But we certainly, see the starting point based on the data we have already is exciting in terms of pain relief.

Thomas McCourt -- President

Yes, as far as our role working with Alnylam, I mean, our primary objective is to educate gastroenterologists and really key primary care docs about the disease and it's certainly about GIVLAARI. This is -- it's a great fit for us, because really the cardinal symptom that these people suffer from is pretty severe lower abdominal pain. And one of the things we do know as many of these patients are confused with IBS patients. So, they have the opportunity to have a sales force, as large as ours and as effective as ours within the GI community. It's -- I think, going to be a very powerful tool.

And what we do know about these patients, really all of them, at some point, consult with a gastroenterologist. The early signals we're seeing so far is very encouraging. We've begun to identify a number of patients, there could likely be candidates for GIVLAARI. And then as the mechanics work, we -- now once we identify those patients, we hand them off to Alnylam, who really kind of pulls through all the mechanics with regard to reimbursement and getting drug to patient. So far, the mechanics have worked well. The collaboration and communication is very effective. I think this is a great learning, as you mentioned for us in this space, to understand what does it take to be successful with an orphan disease in the GI hepatology arena.

And I think it's something we're going to continue to explore. Mark mentioned that, we have looked at a number of other GI related diseases, including rare diseases in which there's clearly some opportunities with regard to an emerging science. So I think we're very encouraged by what we've seen so far. With GIVLAARI we're going to learn a lot and I think there's a lot of possibilities coming out of this experience.

Mark Mallon -- Chief Executive Officer

I mean, I'll just quickly add, and I think that there are two core capabilities that we have that are going to be particularly helpful with this partnership, as well as if there are future opportunities in rare diseases. So one is, of course the ability to work with the physicians and office staffs identify patients on the ground. These are obviously difficult patients to necessarily find, there's a lot of testing involved. They're having the relationships, really strong and deep relationships with the physicians and, in particular, their office staff is I think, a critical success factor and we really have that in place.

And then the second thing is being able to sort of use advanced analytics and databases, to help practices, use the data that they have to identify these patients. And we've been applying some of these techniques already certainly in how we've been looking to accelerate the enrollment for 3718. But also identifying patients to -- within practices for LINZESS. So I think this will just further strengthen those core capabilities.

Patrick Trucchio -- Berenberg Capital -- Analyst

Thanks very much.

Mark Mallon -- Chief Executive Officer

Great. Thanks, Patrick.

Operator

And your next question comes from Boris Peaker with Cowen.

Boris Peaker -- Cowen and Company -- Analyst

Great. Thanks for taking my questions. Maybe just more on 7246. Can you comment on the timeline that if you have a positive Phase II readout mid-year this year? What's the timeline to actually doing a pivotal study? What size of study would you need to do and when can this is ultimately be on the label of all the studies are successful?

Mike Shetzline -- Chief Medical Officer

Yes, so thanks. We're -- again, we're committed to top line data for 7246, the Phase II study mid this year. Okay, we actually think that study is fairly robust as a Phase II trial. So we do recognize we'll need to consult with the agency for the formal design of Phase III program. And we will institute a rapid end of Phase II meeting with the FDA during the latter half of this year, pending the results of 7246 trials to put that in place. We're certainly hopeful to start that Phase III program as soon as possible and as early as the beginning of next year, hopefully. And if things go even better, maybe we could do it sooner, but we're pushing to at least do that by early 2021.

In terms of the timeline you're asking, and when it could be commercially available, that obviously will rest in the end of Phase II meeting, the sample size we need for the pivotal program whether we need to do one or two IBS-D studies, because we do think we have an opportunity just to do one IBS-D study given the breath and size of the Phase II program. And also our desire to do other sort of relevant indications, which we think could be supportive to an IBS-D submission. And so there the details that make that sort of final determination a little premature right now, but I do think we're committed to starting that Phase II program as soon as possible.

Mark Mallon -- Chief Executive Officer

Boris, I think it's really important to understand, as I look at the potential of this brand, this is a pain drug. And we think we've -- we we've mentioned, we've isolated the pain effect from the effect of bowel have which has obviously allowed us to push the dose and optimize the dose. But we see this as a complete different brand. I think, this is -- we do not see this as a line extension of LINZESS. We want to be able to enter the market purely as a pain drug. IBS-D is likely to be the first indication that will have as far as its demonstration of pain.

But then we see ourselves going well beyond that into all -- probably all forms of IBS, as well as other GI diseases where there's a significant lower abdominal pain symptom. So this -- the data that's coming out here could really open up real opportunity for us. But I think it is important to say, it's going to be important for us to really rebrand this and position this in a unique spot in the marketplace.

Boris Peaker -- Cowen and Company -- Analyst

Got you. I'm just curious, given the fact that you also saw this pain reduction, as you mentioned as a pain drug. Do you have any sense of any docs are currently using this, essentially to do exactly that to control lower GI pain?

Mark Mallon -- Chief Executive Officer

Yes. I think the one challenge -- first of all, yes. But that's generally in disorders that include constipation. Because one of the limitations of the current immediate-release formulation, as we push the dose, you're going to increase the prosecretory effect of the drug and increase the risk of diarrhea. But we also see a very clear dose ranging effect on the relief of pain. So yes, it's getting very broad application. Yes, most docs, I think almost all docs see this as a pain drug that's differentiated from other treatments. But it also does affect bowel function.

Boris Peaker -- Cowen and Company -- Analyst

Great. Thank you very much for taking my questions.

Operator

[Operator Instructions] Our next question comes from David Lebowitz with Morgan Stanley.

David Lebowitz -- Morgan Stanley -- Analyst

Thank you very much for taking my question. To expand off the last question. When you look forward to potentially marketing a drug like 7246. How would you compare that? What would be needed to be done for that experience to how the evolution of the LINZESS launch went?

Mark Mallon -- Chief Executive Officer

Tom?

Thomas McCourt -- President

Sure. This is Tom. Thanks, Mark. We learned an awful lot. LINZESS was a tremendous success and we're delighted. We've learned a lot about how to commercialize the product, what the marketing mix should look like in the marketing mix over time. I think what we've learned is these are largely going to be the same prescribers, as we saw with LINZESS with IBS-C. And that being said, it's a fair -- the early growth is from a fairly smaller group of physicians, somewhere between 20,000 to 25,000 docs drove about 70% to 80% of the early growth.

So I think there's certainly a path forward to more efficiently commercialize this product as we secure reimbursement over time. So I think we can leverage not only the things that we learned on LINZESS, but also some of the capabilities that we built over time. So Mark's point how do we proactively identify patients through electronic databases. How do we get patients to more efficiently raise their hand based on the symptoms? And of course, what's the alternative? These patients other than opioids, these patients have no alternative to treat these lower abdominal pain symptoms. So I think again we've learned a lot. I think we were well positioned to really increase the productivity of the overall commercial, particularly the selling effort as we move forward as an organization.

David Lebowitz -- Morgan Stanley -- Analyst

So, are we talking about a patient population that right now is either getting treated with opioids or nothing? Or would they be typically using just over the counter analgesics?

Mark Mallon -- Chief Executive Officer

They're using everything. I mean, a lot of it has to do with the severity of the pain, right? There has been certainly a number of studies that have been done in the past that have showed an increase use of opioids in this population. Obviously, we're trying -- everybody's in the healthcare industry is trying to get that under control. But yes, I mean they are using NSAIDs, they are using aspirins, they're using all kinds of things to try to manage a lower abdominals symptoms. But unfortunately, most of these treatments are insufficient. I mean, this is a very unique mechanism that could really affect the management of these lower abdominal pain symptoms.

David Lebowitz -- Morgan Stanley -- Analyst

Thank you for taking my questions.

Mark Mallon -- Chief Executive Officer

Thanks, David.

Operator

And I would now like to turn the call back over to Mark Mallon. Please go ahead.

Mark Mallon -- Chief Executive Officer

So operator just to confirm, we don't have any additional questions and people in the queue?

Operator

Correct.

Mark Mallon -- Chief Executive Officer

Okay. Then I just thank everybody on the call, we appreciate your time and interested in Ironwood and look forward to continue sharing the exciting development of Ironwood during the course of the year. Thanks.

Operator

[Operator Closing Remarks]

Duration: 48 minutes

Call participants:

Meredith Kaya -- Vice President, Strategy, Investor Relations and Corporate Communications

Mark Mallon -- Chief Executive Officer

Thomas McCourt -- President

Mike Shetzline -- Chief Medical Officer

Gina Consylman -- Chief Financial Officer

Jacob Hughes -- Wells Fargo -- Analyst

Eric Joseph -- JPMorgan -- Analyst

Edward Marks -- H.C. Wainwright -- Analyst

Patrick Trucchio -- Berenberg Capital -- Analyst

Boris Peaker -- Cowen and Company -- Analyst

David Lebowitz -- Morgan Stanley -- Analyst

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