Several Ways To Play The Linzess (linaclotide) Approval; Buy IRWD, FRX, SCMP, and SGYP

Forest Laboratories (NYSE:FRX) and partner Ironwood Pharmaceuticals (NASDAQ:IRWD) announced FDA approval of Linzess (generically known as linaclotide) for the treatment of irritable bowel syndrome with constipation (IBS-C) and chronic idiopathic constipation (CIC). The approval came a week early, but was expected. Mixed reaction Thursday (FRX up ~1%, IRWD down ~2%) was due to the high expectations for approval and slight negative of a boxed warning in the label noting that the drug should not be used in children or adolescents <16 years of age. Ironwood notes that the drug was not studied in this population, and therefore as planned, will not be sold in this patient segment.  While a direct competitor to Sucampo’s (NASDAQ:SCMP) Amitiza product (earlier coverage), Linzess should significantly expand the prescription market for IBS and CIC treatments, as most patients take over-the-counter medicines for the condition. IRWD and FRX stated on their investor conference call yesterday that there are over 40 million patients suffering from IBS and CIC, with 10 million currently seeing a doctor for treatment. According to IRWD and FRX, roughly 70% of those patients use an OTC medication and that will be a key target for Linzess as it aims to increase the number of patients getting a prescription. A significant marketing effort with direct-to-consumer advertising funded by both FRX and IRWD is expected to increase awareness of prescription options, increasing the overall market, and potentially benefitting SCMP’s Amitiza. (more…)