Ironwood to slim down, split into 2 distinct companies

Ironwood CEO Peter Hecht told investors positive clinical results and long IP coverage on both sides helped set the stage for the company split. (Pixabay)

Ironwood Pharmaceuticals plans to split into two independent, publicly traded companies, spinning off some of its research and development work into a yet-unnamed business in the first half of 2019.

The new company’s pipeline will focus on orphan diseases and investigational products targeting the nitric oxide signaling pathway for blood flow—starting with the compounds praliciguat and olinciguat, which are currently undergoing phase 2 testing.

Praliciguat is being evaluated in hypertension, heart failure with preserved ejection fraction and diabetic nephropathy, while olinciguat is being studied in sickle cell disease and achalasia, a rare disease that makes it difficult for food to pass into the stomach.

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In addition, the R&D venture will be developing similar therapies targeting different tissues, including IW-6463 for the central nervous system, plus discovery programs in liver and lung diseases, the company said in a statement.

Meanwhile, a slimmed-down version of the 20-year-old Ironwood will retain its name and keep marketing its treatments for gastrointestinal diseases, gout and abdominal pain—such as formulations of Linzess (linaclotide) in irritable bowel syndrome, in collaboration with Allergan—as well as continuing to develop IW-3718 in gastroesophageal reflux disease.

RELATED: Ironwood slips as heartburn data underwhelm investors

Positive clinical results from praliciguat and IW-3718 helped set the stage for the split, Ironwood CEO Peter Hecht said during a conference call with investors.

The data—as well as long intellectual property coverage and a stable of potential first-in-category drugs—provided a convincing case for durable, long-term growth in both companies, Hecht said. In addition, phase 3 trials of IW-3718 are planned to launch in the third quarter of this year.

Last year, IW-3718 met its primary endpoint in a phase 2b heartburn trial, however, disappointing efficacy data that ultimately put pressure on the company’s stock.

Overall, the decision to split the company “underscores the strength of our in-market and development portfolio,” said Terrance McGuire, chairman of Ironwood’s board of directors. Ironwood also unveiled its first-quarter revenues, including a 33% year-over-year increase to $69 million, driven by Linzess’ U.S. net sales of $159 million.

The move ultimately comes, however, amid activist pressure from Alex Denner; its shares notched up 3% yesterday on the split, after inititally shooting down, settling at around $18.70 a share, highs not seen since last summer.

At the start of the year, it was around $13 a share, and only $14 a share a month ago, though it has been gaining since Denner started taking a stronger interest in the company's direction. 

Specifics on the structure of the two companies will be provided in the future, though they will have separate boards and management teams, Ironwood said. Both organizations are planned to be based in Cambridge, Mass., with employees transitioning over the coming months.

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