Why Ironwood Pharmaceuticals Shares Spiked Higher

Before you go, we thought you'd like these...
Before you go close icon

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Ironwood Pharmaceuticals , a biopharmaceutical company focused on developing therapies to treat gastrointestinal, central nervous system, and cardiovascular diseases, rose more than 16% Tuesday after the company reported its fourth-quarter earnings results before the opening bell.

So what: For the quarter, Ironwood delivered $5 million in revenue, down 81% from the year-ago period, with royalties from its FDA-approved drug Linzess -- which is being co-marketed with Forest Laboratories as a treatment for irritable bowel syndrome with constipation - totaling $2.9 million. Total Linzess product sales increased to $51 million, a 48% quarter-over-quarter increase. Ironwood's net loss came in at $0.43 per share, $0.07 per share narrower than Wall Street's estimates thanks to lower research and development expenses outside of Linzess. Looking toward 2014, Ironwood anticipates it and Forest's combined marketing expenses for Linzess will total $240 million-$270 million, which could mean a decline from the $255.5 million spent in 2013.

Now what: Although Linzess sales growth has been strong, Ironwood still has a long way to go to reduce its expenses to a point where it has any chance of being profitable on a recurring basis. Don't get me wrong; Ironwood is well-capitalized with $198 million in cash and should see losses slowly shrink due to improved Linzess sales, so it's not like the company is in any financial danger. However, a significant move higher on earnings like we're seeing today seems unwarranted until its bottom line shows drastic improvement.

Ironwood may be soaring today, but it could have a hard time keeping up with this top stock in 2014!
There's a huge difference between a good stock and a stock that can make you rich. The Motley Fool's chief investment officer has selected his No. 1 stock for 2014, and it's one of those stocks that could make you rich. You can find out which stock it is in the special free report "The Motley Fool's Top Stock for 2014." Just click here to access the report and find out the name of this under-the-radar company.

The article Why Ironwood Pharmaceuticals Shares Spiked Higher originally appeared on Fool.com.

Fool contributor  Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name  TMFUltraLong , track every pick he makes under the screen name  TrackUltraLong , and check him out on Twitter, where he goes by the handle  @TMFUltraLong . Try any of our Foolish newsletter services  free for 30 days . We Fools may not all hold the same opinions, but we all believe that  considering a diverse range of insights  makes us better investors. The Motley Fool has a  disclosure policy .

Copyright © 1995 - 2014 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Read Full Story

Sign up for Finance Report by AOL and get everything from business news to personal finance tips delivered directly to your inbox daily!

Subscribe to our other newsletters

Emails may offer personalized content or ads. Learn more. You may unsubscribe any time.

People are Reading