Mary Conway - Investor Relations Peter Hecht - Chief Executive Officer Tom McCourt - Chief Commercial Officer Mark Currie - Chief Scientific Officer Michael Higgins - Chief Operating Officer.

Geoff Meacham - J.P. Morgan David Maris - BMO Capital Markets Jason Gerberry - Leerink Partners Gary Nachman - Goldman Sachs Mario Corso - Mizuho Priyanka Garg - Morgan Stanley Greg Wade - Wedbush Yi Chen - Aegis Capital.

Good morning, ladies and gentlemen. And welcome to the Ironwood Pharmaceuticals First Quarter 2014 Investor Update Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time.

(Operator Instructions) As a reminder, this conference call is being recorded. I would now like to turn the call over to Ms. Mary Conway of Investor Relations. Ms. Conway, you may begin..

Thank you, Bridget, and good morning. Thank you all of you for joining our first fourth quarter 2014 investor update. By now, you should have a copy of our press release, which crossed the wire earlier this morning. If you need a copy of the press release, you can go to our website, www.ironwoodpharma.com, to find an electronic copy.

Some of the information discussed in today's call is based on information as of today, Tuesday, April 29, 2014, and contains forward-looking statements that involve risks and uncertainties. Actual results may differ materially from those set forth in the statements.

We do not undertake any obligation to update any forward-looking statements made during this call or contained in the accompanying slides as a result of new information, future events or otherwise.

For a discussion of these risks and uncertainties, you should review the forward-looking statements disclosure in our press release and on the current slide under the heading, Safe Harbor Statement, as well as the risks under the heading Risk Factors in our quarterly report on Form 10-K for the year ended December 31, 2013, and any of our future SEC filings.

Joining me for today's call are Peter Hecht, Chief Executive Officer, who will provide introductory remarks; Tom McCourt, Chief Commercial Officer, who will give an update on the commercialization of LINZESS; Mark Currie, Chief Scientific Officer, who will summarize our pipeline efforts; and Michael Higgins, Chief Operating Officer, who will review our financial performance, guidance, and then open the call to your questions.

Our speakers will be referring to slides available via the webcast. For those of you dialing in, it may be helpful for you to go to the Events section of our website to access the webcast slides, if you haven't done it so already. I would now like to turn the call over to Peter..

Thanks, Mary. Good morning, everyone. Ironwood is off to a strong start in 2014, as we made substantial progress in the past quarter across all aspects of our strategy to build a leading GI therapeutics company.

As you recall, the tenants of our strategy are, first, maximizing LINZESS, second, leveraging our strong commercial capabilities, third, advancing our robust GI pipeline, and fourth, prioritizing investments on our key value drivers.

We have made important progress in each of these areas in the past quarter and I believe we are prime for further advances as this year unfold. Before I turn the call over to Tom, I want to share a few highlights of the quarter.

LINZESS continues to demonstrate healthy growth, with net sales reported by far to $60.8 million, up 19.9 -- up 19% quarter-over-quarter, with nearly 240,000 prescriptions up 11% quarter-over-quarter.

We believe our recently launched multi-channel, direct-to-consumer patient awareness campaign, which Tom will talk about in a moment, will help us reach more of our target patient population and further accelerate prescription growth.

On the IP front, we and Forest received notices of allowance for two separate patent applications covering the commercial formulation of LINZESS and methods of using it to treat patients with IBS-C or CIC.

Both of these patent applications are expected to issue in mid-2014 and extend LINZESS patent protection for another five years from 2026 into 2031. In addition, we continue to make advance across our robust GI pipeline.

For example, in the first quarter we initiated dosing of IW-3718, in a Phase IIa clinical trial for patients with GERD symptoms who have not responded adequately to treatment with a proton pump inhibitor.

Turning to the rest of the world, our partners are making progress in our shared effort to help millions of adult patients suffering from chronic abdominal pain and constipation associated with IBS-C.

In Europe, our partner Almirall has launched an appetite, marketed there as CONSTELLA in 10 countries, most recently in Italy and they plan further launches in additional European countries this year. Almirall and Forest recently received marketing approval for Linaclotide in New Mexico and in Canada as well, with both launches expected in midyear.

Unfortunately, in Germany, Almirall has not reached agreement with the German pricing authority on a reimbursement price that reflects the innovation and value of CONSTELLA. As a result, they expect the sustain commercialization in Germany in May pending completion of that process.

We continue to focus on efficiently running our business, while making discipline and appropriate investments to deliver on our strategy. We are also very appreciative of the strong investor interest that contributed to the successful completion of our common stock offering in February that raise net proceeds of $190 million.

With that, I'll hand it over to Tom for the commercial update..

Thanks, Peter, and good morning, everyone. I’m delighted to be here this morning to share our commercial progress of LINZESS.

We are pleased with the solid growth we are seeing and this growth has been driven by the physician's ability and willingness to choose LINZESS for appropriate patients, the continued improvement in payer coverage and demand from patient, that we believe will increase as we expand our patient awareness campaign design to improve patient physician communication and increase request for LINZESS.

Since we launched LINZESS with Forest in 2012, we have established strong commercial fundamentals across a number of leading indicators in line with some of the most successful recent primary care launches.

We remained focused on key metrics that we think are the most relevant performance indicators for LINZESS that includes physician adoption of productivity, payer coverage and patient persistency.

From launch through the first quarter this year more than 260,000 unique patients has been prescribed LINZESS and more than 800,000 total LINZESS prescriptions have been filled, including more than 240,000 in the first quarter this year, representing 11% growth quarter-over-quarter.

This growth was driven by both new patient starts and a strong refill rate, and based on relevant primary care analog the DTC campaign we are anticipating strong growth across all these metrics over the next three to six months, as we build overall awareness and provide support to improve patient physician communication.

We believe we are still early in the growth period for LINZESS and we built a solid foundation of physician awareness and payer coverage. We are now broadening our strategy to fuel acceleration in the marketplace over the upcoming months and years.

Beginning with physicians, the combined Forest and Ironwood sales force has establish a broad and growing prescriber base of more than 63,000 healthcare practitioners. This includes approximately 90% of high prescribing gastroenterologist and approximately 70% of high prescribing primary care physicians.

We are very encouraged by the abrasive prescriber base and the expansion of use for appropriate patient as these practitioners gain more experience with LINZESS.

We believe this behavior is a result of physician satisfaction with LINZESS and the observed clinical improvement in abdominal pain associated with IBS-C and the constipation symptoms of IBS-C and chronic constipation. In addition, 88% of physicians report a willingness to honor a patient request for LINZESS.

As we mentioned last quarter, we will continue to concentrate our education efforts on the highest potential prescribing physician to further accelerate the growth of LINZESS. We continue to make progress in the first quarter with payers, as we work to maximize access for appropriate patient at reasonable copay.

As of March, over 70% of people covered by commercial insurance and Medicare Part D plan have unrestricted access to LINZESS. Medicare Part D access is up from about 50% last quarter, largely fueled by positive coverage decision by United Healthcare.

Additionally, through our efforts with the payer and our copay solutions, over 70% of people with commercial insurance have access to LINZESS at a copay of $30 or less. Now turning to patients.

Based on the past year, we are very encouraged by the patient’s adherence to treatment and the high interest in new information concerning new treatment option that can relieve IBS-C and chronic constipation symptoms. We believe patient persistency to treatment is a strong indicator for treatment satisfaction.

This graph summarizes an analysis of four cohorts of patients tracked since launch. It compares patient’s persistency of LINZESS to Zelnorm and Amitiza based on a consistent strict definition. As you can see, LINZESS persistence continues to run from 38% to 65% higher than these launch aligned analog.

Raising awareness of IBS-C and chronic constipation and enabling appropriate patients to more effectively communicate the symptom, ask for help and request Zelnorm -- and request LINZESS is a critical growth driver for LINZESS.

We have consistently identified poor patient communication as the key barrier to effective treatment and underscores the importance for the patients to play a more active role in their own care.

We believe LINZESS is a very attractive candidate for successful consumer advertising campaign because it's well aligned with industry-proven growth drivers that includes the ability to target a highly symptomatic patient population with a clear unmet medical need, a patient population who can easily self identify with an advertising message and who have previously demonstrated a willingness to act.

We're very pleased with our patient awareness campaign based on the breakthrough creative that you see here, the clear message and the strong call to action design to inspire patients to talk to their physician.

Prior to making the final decision on our advertising concept, we extensively tested this in a simulated market analysis and in this -- and with that this ad, it exceeded industry benchmarks by over threefold. So we’re very optimistic about potential impact on the growth of LINZESS.

The campaign was initiated early April and appeared on TV for the first time April 9 during the primetime airing of Modern Family. This is a multifaceted campaign with a robust media plan encompassing TV, print, online and in-office program.

It's early but we immediately observed an increase in online traffic and after the first four week there was a 5% increase in total prescriptions and more than a 6% increase in new prescription volume.

We continue to make good progress on all key commercial fronts as we continue to advance our efforts to bring LINZESS to over 30 million dissatisfied evolved patients suffering from IBS and chronic constipation. There is a significant opportunity in front of us, and we believe we've only scratched the surface.

As we strive to help patients through our ongoing efforts to educate physicians, improved payer coverage and informed appropriate patients about LINZESS as potential treatment option.

We believe LINZESS today is well on its way to become a very important GI medicine, creating a new category in establishing the foundation for a GI franchise to help millions of suffering patients. With that, I’ll turn it over to Mark.

Mark?.

Thanks Tom. We continue to make important progress in advancing a robust platform of GI therapeutic candidates with multiple opportunities for proof-of-concept data through the end of 2015. Before I share a few highlights with you, I want to say how encouraged I am to see the recent increate in clinical progress and interest in the GI space.

This area encompasses many different disorders, affects million of patients and until recently has seen too little activity in development of new treatment. Ironwood is incredibly proud to have brought the first in a new class of GI treatment to market. Our flagship product LINZESS is the first GC-C agonist to be approved by the FDA and the EMA.

It is gratifying to see this product in the market helping patients. Building on our success with LINZESS, our research team is applying our vast body of GI and GTC expertise to our pipeline of programs in areas, including functional dyspepsia, gastroparesis, GERD, opioid-induced constipation and other GI conditions.

As you can see, we made some important progress during the first quarter in advancing our robust life pipeline. I want to highlight just a few items now. First as Peter mentioned, we initiated dosing in a Phase IIa clinical study of IW-3718.

The study is to evaluate the drug in patients with refractory GERD or GERD symptoms who have not responded adequately to treatment with proton pump inhibitor therapy. Refractory GERD is a significant unmet need affecting in estimated 7 million Americans.

IW-3718 is a bile acid sequestrant that is designed to intercept bile acid in the stomach before they reflux back into the esophagus with the intention of blocking the reflux and nerve fiber hyperactivity thought to play a role in refractory GERD. You can read more about this program in the press release we issued in March.

We expect the data in the first half of 2015. A second area that I want to highlight is our exploratory Phase II study of IW-9179 in functional dyspepsia. Let me remind you this is our second GC-C agonist. An early development studies have shown it is a highly potent agent with minimally systemic exposure.

We start the Phase II functional dyspepsia trial prior to completing enrollment, due to challenges with the rigorous enrollment criteria in the trials. Yet our initial analysis are encouraging and consistent with the FD symptom improvement we saw in FD subgroup analysis from our phase IIIb CIC trial with linaclotide.

A digital analysis is ongoing but our initial assessment is that the data supports further development of the program. And we’re continuing to work with regulatory authorities and key opinion leaders to try to define a broader inclusion and exclusion criteria which would help define a path forward for IW-9179 in functional dyspepsia patent.

It is a process that is establishing trial design standards in patient reported outcome for symptomatic diseases is familiar territory for us. And we have successfully navigated these processes in our linaclotide approval for IBS-C and CIC.

At the same time, we plan to initiate a Phase IIa clinical trial of IW-9179 in patients with gastroparesis in the first half of 2015. There is one more highlight I’d like to share. At our Investor Day in December, we told you about our soluble guanylate cyclase program at our sGC program.

This is a discovery program derived from our expertise with guanylate cyclase in other guanylate cyclase. We’re very excited about this program because soluble guanylate cyclase is a proven mechanism with the potential for broad therapeutic opportunity.

I'm pleased to report that our research team identified a development candidate in this program and advanced it into preclinical study. We also continue to make progress with our R&D program, including our linaclotide colonic delivery formulation efforts.

On the whole, we believe our pipeline demonstrates clearly that we are targeting precisely what Tom just said, building out a four GI franchise and transforming Ironwood into a leading GI therapeutic company. Turning to Japan, our partner, Astellas pharmaceuticals completed a Phase II trial of linaclotide in adult patients with IBS-C.

Preliminary data from the study that enrolled 559 patients indicates that all linaclotide dose group show numerically higher responder rates in the primary endpoint than placebo. However, the responder rate were not statistically significant compared to placebo and the primary endpoint was not met.

Linaclotide was well tolerated in all those groups and the preliminary safety and efficacy data are consistent with prior clinical studies of linaclotide. Both we and our partners, Astellas believe that the results support proceeding to a Phase III study in Japan.

All in all, it’s an exciting time for the GI field and Ironwood is delighted to be a leader of innovation in this space.

We look forward to seeing many of you next week and sharing some of our latest findings and insight with you at Digestive Disease Week in Chicago, where we will have a substantial presence and we will present our Phase IIIb data on building CIC as well as several other posters. With that, I will turn it over to Michael..

Thanks Mark. We continued to work diligently to efficiently allocate our shareholders’ capital, carefully investing across the key value drivers of the business. And we are very pleased with our progress during the first quarter. Let’s begin with the review of the financial performance of LINZESS, where we continue to see solid growth.

Forest reported $60.8 million in net sales of LINZESS for the first quarter of 2014, compared with the $51 million in net sales reported in the fourth quarter of 2013, a 19% increase quarter-over-quarter. And as Tom mentioned, total Rxs for the quarter grew to nearly $240,000, an increase of approximately 11% from last quarter.

We expect this favorable growth trajectory to accelerate as we head into the second half of 2014, with the support of the recently launched DTC campaign.

Wholesale inventory levels increased to the 4 to 5 week range during the first quarter, a one-week increase from the 3 to 4 weeks we reported in the fourth quarter, as wholesalers prepare for the anticipated increase in demand from the DTC campaign.

Gross to net discounts for the quarter were approximately 22% as compared to approximately 20% in the fourth quarter. We continue to expect gross to net discounts to settle into the mid-20% range over time. Quarterly fluctuations will continue as we work to advanced payer coverage for LINZESS, both in the commercial and Medicare Part D space.

As a reminder, we and Forest also increased the prices of LINZESS in early December by approximately 8.5% from a lock price of $7.10 per day to its current $7.70 per day. The Ironwood Forest LINZESS partnership produced collaboration revenue to Ironwood of $8.4 million on our P&L in the first quarter.

This is the second quarter in which we are reporting collaboration revenue from our partnership with Forest. In our preceding quarters, we recorded collaboration expense as the 50-50 profit share resulted in a payment from Ironwood to Forest in each of those quarters. Now let’s turn to Ironwood’s specific financial highlights for the quarter.

Beginning with our balance sheet, total cash and investments as of March 31 were $332 million, up from $198 million at year end 2013. Our cash position was boosted by the successful common stock offering that we completed in February raising $190 million. $58 million in cash was used for operations during the quarter.

But this was an increase from the $42 million in cash we used during the fourth quarter. This quarter included non-recurring payments related to the reduction in force, the annual payment of year-end bonuses and two API payments.

As we’ve stated, we are deploying our resources with financial discipline and we remain confident that we will see a decrease in use of cash as the year progresses through the revenue growth and continued expense management.

GAAP revenues for the first quarter were $14.6 million, including $8.4 million in collaborative arrangements revenue associated with our share of LINZESS in the U.S. as previously described. Also included in revenue is $6.2 million for the sale of linaclotide API to our ex-U.S.

partner’s, amortization from our existing collaborations and royalty and milestone payments from CONSTELLA in Europe. Ironwood’s GAAP revenues increased threefold from Q4’ 13 when they were approximately $5 million.

Total operating expenses excluding cost of goods during the first quarter were $57.1 million, compared with the $51.2 million in the fourth quarter of 2013. Included in operating expenses in the first quarter of ’14 were cost totaling $4.3 million associated with the reduction in force that I just described.

Our R&D expense for the first quarter were $27.1 million compared with the $22.5 million last quarter and SG&A expense for the first quarter were $30 million compared with $28.7 million from last quarter.

Finally on net loss, for the first quarter was $49.6 million or $0.38 per share versus a net loss of $52 million or $0.43 per share in the fourth quarter of 2013. With respect to guidance for 2014, we're reiterating that we expect our total operating expenses to be in the range of $215 million to $245 million.

This consists of $105 million to $120 million of R&D expenses, of which, approximately 45% were non-linaclotide R&D investments and $110 million to $125 million of SG&A expense. In addition, we continued to expect that the 2014 LINZESS sales and marketing share shared 50-50 with Forest will be in the range of $240 million to $270 million.

Thank you, all. With that, I will turn the call back over to Bridget to begin the Q&A portion of the call..

Thank you. (Operator Instructions) Our first question is from Geoff Meacham with J.P. Morgan. Your line is open..

Morning, guys. Congrats on the quarter and thanks for the question. Got a couple questions, one on the DTC campaign and one on the physician adoption.

So what are some of the benchmarks that we can measure the success of the DTC campaign, is it primarily NRx growth? Are your guys also expecting an impact on new prescribers? Second question is from one of your slides for the physician that are not willing to honor a patient request, what are the primary reasons, why and what can you do to address it? Thanks a lot.

Tom, can you take this?.

Sure. Thanks, Geoff.

As far as the DTC benchmarks, obviously there is a number of analogs we can look to, obviously the most relevant ones that we look to is the impact that we saw with Zelnorm, which as you know responded very, very well to a consumer message, which we certainly, as we understood this population better, once patients believe that there is hope or an opportunity do feel better, they will act.

And I think it’s really making them aware that there is a better treatment available or a good treatment available and providing them the language to speak to their docs that provides them the confidence to really take action. And we think that’s probably the most relevant analog in the marketplace.

As far as the physicians concerned, we have a very broad prescriber base. I mean, well out in front of even our own objective and it’s continuing to grow. And it’s continuing to grow as they see the patients and they have a positive experience with the product.

For those patients and keep in mind, physicians, as I mentioned 88% of physicians suggest that they will honor a patient request. I think the other 12% are probably physicians who are unaware of LINZESS or having observed or have experience with the product this far.

But certainly the DTC, not only will have an impact on a new patient, but also remind patients that are currently on LINZESS to rebuild a prescription and certainly drive demand across the medical community..

Thanks..

That helps, Geoff?.

Yeah, it does..

Thank you. And our next question is from David Maris with BMO Capital Markets. Your line is open..

Good morning. Great quarter. I had a question that’s little bit of odd even for me. But given the environment that we are in, I should ask it.

Given also where the stock is, can you talk a little bit about takeover defenses because you have the relationship with Forest, I would think that those companies would think that shouldn’t your natural partner, but maybe if you could talk a little bit about what the senses you might have, and what your thoughts are on the current consolidating industry? Thank you..

Thanks, David. It’s Peter. I will take the question.

I think that first of all, the best defense is a good offense, it’s creating value for your shareholders, and our goal is to deliver on our strategy, build a leading GI company, deliver on the products with LINZESS, build on the pipeline strength that we believe we are creating value here in the company, leverage the strength of our commercial business and our development capabilities that we built with along the course of developing and commercializing LINZESS.

I think we feel it pretty strongly that we’re very early days in building very exciting company and delivering great value for our shareholders. We do have some structural defenses in place. As I think you know, we have a very limited dual class voting structure that only kicks in on change of control situations.

We also have standstill agreements with all of our existing linaclotide partners. I think as important as those we have a very dedicated shareholder base who share our belief and the promise and the potential we can create for our shareholders.

With respect to what’s going on more broadly in the current climate, I think it’s pretty clear that consolidation is one way to create a lot of value for shareholders.

It’s also I think clear that the market pays for real innovation and we believe we have a very innovative products with LINZESS and an opportunity to as Tom said help millions of patients.

We think we are just scratching the surface today, and that we have a very focused and promising effort in our pipeline to create value for shareholders there as well with a lot of innovation..

Great. Thank you very much..

Thank you..

Thank you. And our next question is from Jason Gerberry from Leerink Partners. Your line is open..

Hi. Good morning. Thanks for taking the question. First, this question is for Tom, just quickly just looking at the LINZESS sales number you put up for the quarter, it looks like the implied average selling cost is around 250, but if I apply your gross to net assumption that comes to around 185.

So just kind of curious was the discrepancy really off stocking in the quarter as you go into the DTC campaign? And then my second question, just more broadly, just kind of curious maybe Pete if you can answer this one.

Your discussion so far to-date with Actavis regarding their commitment around LINZESS and how you think that the Furiex deal will impact LINZESS positioning if that product hits the market, just kind of curious we’ll get you comfortable that LINZESS will be sort of positioned first with the Forest threats? Thanks..

Thanks for the questions.

Michael, can you take the first question on financials?.

Yes. So I think broadly you’ve got the math right. I think directionally I will just comment on the few things. There is one element missing in your question. So you are trying to reconcile the Furiex to the overall revenue. As you know, we generated more than 240,000 Furiex.

If you use the gross price of 770 and take the gross to net adjustment, I think you get close to the number that you articulated per script. The one piece that you are missing in your calculation is that the average prescription is now north of 30 days, exactly about 34 days.

So when you do your math there, that’s how you kind of total out the numbers. So combination of those things, plus an anticipation of the growing demand, the wholesalers taking that additional week of inventory makes up the full amount of the revenue for the quarter..

On the questions about Actavis and around Furiex, maybe I will take a first whack at that. I would say we have a very strong partnership with our partner with Forest across every function. We have since the partnership initiated in more than five years ago now.

That continues to be a very tight collaboration every day, and we work to strengthen that in all of our areas across the business on a daily basis.

I think it was quite clear in the course of the discussions and the rationale for the Actavis/Forest merger that LINZESS was a very key element of the value that Actavis perceived in the Forest acquisition. And you can see from yesterday’s news about Furiex that Forest with the agreement of Actavis is very committed long term to the GI space.

As Forest said yesterday and we agree the Furiex product is a nice complementary product for them. We agree that it improves. When the product comes to market in a year or two we will improve Forest representatives’ relevance with healthcare providers and support LINZESS which they are very clear as their anchor GI product.

And I think for us anything that helps Forest with LINZESS is good for us. I think the deal also really emphasizes Forest and Actavis commitment to the GI space, which is another great signs for us and they are a long-term commitment. The Furiex asset if you guys know has a very long IP life as does linaclotide and linaclotide IP franchise.

So being very close with our partners for very long-term commitment and building a big space in GIs is great for us..

Okay. Thank you..

Thank you. And our next question is from Gary Nachman with Goldman Sachs. Your line is open..

Hi, thanks. Good morning..

Good morning, Gary..

Tom, first on the DTC campaign, could you comment on general expectations of where most of the incremental LINZESS volume will come from? Will it all need to be shift from OTC because some of they come from Amitiza and was that a similar dynamic as Zelnorm says? And then Mark on 9179, what was it about the criteria that were too strict for enrollment, if you could just elaborate on that?.

Thanks. I will take the first question. I think you spot on with regard to where the growth will come from. Keep in mind that about 80% of patients that are actively speaking here are actually managed with OTC treatment.

So we see most of the growth coming from switch from OTC directly to LINZESS, and it’s pretty consistent with what we’ve been all along. I mean, will we see switches from other prescription therapies? Absolutely. So I think the growth as far as new patients will likely come from OTCs.

I think the other piece that I mentioned just briefly earlier is this one of the strength of the DTC message is also reminding these 260,000 patients who have already been treated to go fill their prescription as symptoms return. So I think it certainly grows the product from a number of different directions..

Gary, this is Mark. Relative to the criteria, the real I think difficulty around trying to enroll the FD study was to get quote and cure FD population. FD patients have a lot of co-morbid symptoms. They have IBS and chronic constipations, GERD.

And so trying to narrow them down in to just where they have functional dyspepsia prove in that study quite challenging and previously quite challenging for other companies that have taken it on. Obviously, we learned a lot, we learned a lot about what the kind of newer understanding of patients reported outcomes and collecting of the data.

So we think we will be able to take that data back and utilize it to help broaden the definition that these patients aren’t -- they aren’t really cure or at least the remaining cured FD patients out there..

Okay. And actually, just one quick follow-up for Mike just to make sure we’re all clear that one week of additional inventory. Could you just quantify that for us as we are trying to do the math to get into the price -- the right price per prescription? Thanks..

Yes. So that additional week is actually as reported by the wholesalers. We take those in it, that’s on our basis, we don’t disclose the specific number associated with that, but it’s an as reported number. So, that one is a clean number that we get from wholesalers in terms of their inventory levels that they are holding..

Okay.

And then when you are out four to five weeks, I mean what’s normal for this product, should it come back down into the two to three week range at some point?.

Yes. Our expectation is that we will be in the -- we have been in the three to four week range. Our expectation is that we should level up in that range probably up three weeks. The way the contracts are written, that's the zone that the wholesalers are guided to and that's where we expect them to be.

This is very much like an initial launch where they are getting ready for additional demand. I believe they built in a little bit in front of DTC, but three week range is what we expect over time. And I do state it over time because it won’t happen overnight, so they do a great job of managing that.

So it will happen over the period of quarters probably..

Okay, thank you..

Thank you. And our next question is from Mario Corso with Mizuho. Your line is open..

Yes, thanks for taking my questions. Good morning.

A couple of things I wanted to ask about, on LINZESS, how do you think about penetration or market share at this point and kind of longer term, I mean absent those millions to patients? But in terms of what’s realizable and also within the context there, maybe a little bit more renewed investor interest in Synergy Pharmaceuticals drug with some clinical trial activities there.

Just wondering how you kind of frame that whole situation? And on 9179, so should we consider gastroparesis now as a lead indication? And I am wondering if you’re able to tell from the dyspepsia study if you were, I assume you’re able to limit the drug from going where one and therefore getting any kind of GI side effects? Thanks very much..

I think we got them all Mario. I think we do.

Tom, can you first take the penetration question?.

Yes, I just want to be clear Mario on the question you are asking, so as far penetration, as far the market share growth and what we expect or what we think we will observe is that what you’re specifically asking for?.

Yes.

Just trying to think about what the realizable market is and again outside of just pure patient numbers and as a corollary to that, room for other entrants potentially longer term?.

Yes, I mean, it’s a great question. I think the tricky part here again is when the majority of the market is outside the prescription market, right. So like you said, 80% of the patients that we are chasing or we’re expecting to get is OTC patients. We are continuing to grow our market share over time.

In fact, over the last week, as we turned on DTC, we almost jumped in an entire SharePoint. So we are clearly capturing a significant market share, but the majority of the business is going to come from OTCs which is going to grow the entire market. And so that's how we kind of looked at patients and how much therapy they are actually consuming.

So again, we pay attention to both. Obviously, the new Rxs and total Rxs as well as market share, but recognizing the majority of the growth is going to come from OTCs.

Does that make sense?.

Mark, can you take second questions.

Sure. So, I think, first of with ground ourselves, where we are with the LINZESS. Now, LINZESS is already helping hundreds of thousands of patients. We think by the time any competition comes along we will be out helping millions of patients. We have a very strong track record relative to publications and characterization, and also the label.

So we demonstrated quite clearly the safety and efficacy of this drug, quite strong effect on the abdominal pain in this patient population and we continue to innovate.

So we -- and I think we described, we advancing new linaclotide related projects -- product opportunities, the colonic delivery is one example that we think a very high priority and it gives us a chance to continue to broaden out and help more the patients as we move forward.

Relative to competition with the linaclotide itself, I think we see linaclotide is, there are still some areas that we want to understand more that very little data that's out there specifically around linaclotide. There is still a long way to go.

They are just starting their Phase -- second Phase III CIC study is what they announced, lots of regulatory interactions and lots of data they collect. So I think its still several years away and we said we will be moving along pretty faster at that time with other product opportunities.

So I think for us right now is still, we will wait and see what the data looks like relative to IBS, is there an effect on pain, how clear that effect on pain, obviously that is one of the key drivers. So we will stay tuned just like you and watch the data..

Mario, you had a question about 9179 gastroparesis, can you repeat it, I think we lost track on it..

Right.

Should we consider gastroparesis now kind of a lead indication and in the dyspepsia study I assume you are able to limit any GI tolerability, which is part of the goal of the formulation, right?.

Yeah. Mario, I’ll take that one. So, we -- as we indicated, we certainly are moving the project in a kind of dual fashion, somewhat like the way we did with CIC and IBSC when we brought linaclotide forward, both -- there are challenges that we have to address, I think for both gastroparesis and functional dyspepsia.

The learning that we have from functional dyspepsia, we are going to go back and take that do regulatory authorities and the KOLs and again, we are going to focus on finding a path because we think that such a large number of patients out there that are suffering.

With gastroparesis the path is better defined and but there are still work to do and we are -- like we have said we are going to initiate both.

So I wouldn’t say it has been eight right now, we think there is opportunity still, but we are going to obviously have to do more work on the current goal and regulatory path for functional dyspepsia at this point.

Relative to the side effect profile, at this point we are still using, obviously, very in proof of concept study, but still using very high doses. So we haven’t dose ranging study to really define that as this point.

Obviously, we believe we then made a molecule that will have less tolerability as we define the dose, but with proof of concept we are going pretty high dose..

Thank you. Our next question is from David Friedman with Morgan Stanley. Your line is open..

Hi. This is Priyanka Garg calling in for Dave. Congrats on the quarter. I just had a quick question with your agreement with Forest on LINZESS.

Is there anything in the agreement that would stipulate our position LINZESS needs to be in for a certain percentage of sales call?.

Yeah. This is Tom. Why don’t I think that question? Yes there is, but the joined commercial team actually sets the commercial plan on annual basis. So [Bill Murray] (ph), who heads up marketing and myself share that committee. And we build it full year commercial plan, which defines the specific call plans that both organizations will execute.

And that both organizations are compensated or reimbursed for that call based on the execution to the call plan. So there is very, very clear direction with regard to the order of the call and the position of the call in the bag.

We are very pleased with what we seen in terms of execution today, where LINZESS has been in the primary position, in the first position for the far and far majority of the calls and that will continue to be the case..

Thank you..

Thank you. And our next question is from Greg Wade with Wedbush. Your line is open..

Hi good morning and thanks for taking my question. Tom, I was wondering if you might share with us some of your analysis of the prescriber level data that you have.

Maybe let us know what percentage of prescriptions are coming from detailed versus non-detailed doctors? And how you expect those numbers to change overtime? And then how you’d be determining the effectiveness of the direct consumer expenditures both with the detailed and non-detailed physicians? Thanks..

Thank Greg, great question. As far as physicians, as I mentioned, we have about 63,000 physicians that have prescribed LINZESS. The majority of them are within our call deck as far as our targeted physicians.

What I can tell you is gastroenterologists make up roughly about 40% of the volume and about the remaining 60% is coming out of high decile primary care physicians. And as far as the amount of business, it’s probably over 80% of the business is coming from targeted physicians currently.

Now keep in mind as we turned on to DTC, it’s going to push patients to variety of physicians, which we believe will broaden the prescriber base. But the majority of the physicians that are continuing to generate the volume will still reside within the target population of physicians we’re calling on.

As far as the DTC and we have agreed on a very specific framework of data that we’re going to evaluate and will inform when we go forward as far as on investment.

I think we have a very robust but extremely precise media plan and which we are running a number of studies within that to really understand what is the right level of media we should be at to inform where we go in the future. So I think we’re going to learn an off a lot in the upcoming months that are going to inform where we go in the future.

But certainly the early sign look very encouraging..

Thanks..

Thank you. And our last question is from Yi Chen with Aegis Capital. Your line is open..

Hi, thank you for taking my questions.

My first question is depending on what you just said about DTC plan, is it -- so as the future is standing on DTC advertising will depend on your media study, is that correct?.

Correct..

Okay.

Second question is what are doctors’ most significant concerns about LINZESS at this stage?.

Great question. I think it’s really the experience with the drug. I think overall, as I mentioned, the satisfaction with LINZESS is quite high and it’s very, very encouraging. I think as they move forward, the opportunity for us is to broaden their view of who the appropriate patient is.

So, right now, early on, a lot of the physician reserved LINZESS for the more severe IBS population. And as we see physicians get greater and greater experience and more comfortable and see the patient response, they are clearly broadening their view of who the appropriate patient is and which results obviously in broader prescribing.

And when we look at those physicians that prescribed earlier, clearly their overall productivity as far as the number of patients they treat and prescriptions they are generating is growing over time. So, I think, all the lead indicators are heading in the right direction.

Right now, we are completely focused on how we can expand the patient, walking into the office and more effectively communicating their unmet medical needs. But also helping physicians to identify those patients and select appropriate patients for LINZESS..

Thank you.

My last question is what are the near-term catalysts from the pipeline?.

We have shown you in Investor Day a quite detailed outline of what the next things are. I think without going through the list over this question, I think the keys are watch for 3718, watch for OIC moving forward and also when we start the function of this, the gastrophoresis study for IW-9179 next year..

Thank you..

Thank you. And I’m not showing any further remarks. At this time, Mr. Hecht, please proceed with any further remarks..

Thank you, Bridget and thanks for helping us this morning. Thanks to all of you for your time and attention. As you’ve heard, I think you should be hearing from us that we are very pleased with the LINZESS progress to date. We are very excited about the potentials with DTC to raise awareness among the sufferers. It’s very early days for this brand.

We’re really just scratching the surface of the potential we can bring to the category and helping physicians and patients with this very large unmet need. We intend to leverage the development in commercial capabilities we built on LINZESS over time. And we are in a very strong cash position as we close in our LINZESS breakeven for the brand.

And with tight financial management, we feel confident that we have the dollars to invest appropriately in LINZESS and the pipeline as we build our company. So we’ll be around the rest of the day. If you have questions, you should contact Mary and feel free to follow-up. And we hope to see many of you at DDW, which is next Monday in Chicago. Thank you..

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect. Everyone have a wonderful day..