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Ironwood to End IW-3718 Development After Study Failure

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Ironwood Pharmaceuticals, Inc. (IRWD - Free Report) announced that its pipeline candidate, IW-3718, failed to meet primary endpoint in one of the two identical phase III studies, evaluating it in refractory gastroesophageal reflux disease ("GERD") patients following a planned early efficacy assessment by an independent data monitoring committee. Data showed that the candidate failed to achieve statistically significant improvement in heartburn severity.

Based on the study data, Ironwood is planning to discontinue development of IW-3718, including stopping enrollment in the second phase III study.

Shares of Ironwood declined almost 1.2% on Sep 29, following the study data readout. The company’s shares have lost 29.2% so far this year compared with the industry’s decrease of 7.6%.

Following the discontinuation of IW-3718 development, the company plans to implement an organizational restructuring. Under the restructuring program, the company will reduce its headcount by 100 or 35% of its current strength. The company expects to complete the workforce reduction in the first quarter of 2021. The company expects the restructuring to lead to total cost savings of greater than $95 million. The anticipated savings include at least $45 million in annualized cost savings from workforce reduction and approximately $50 million related to external spend for IW-3718 previously expected through 2021.

However, the company expects to incur one-time costs of approximately $10 million to $12 million related to its restructuring initiatives, especially workforce reduction, during the fourth quarter of 2020.

Please note that the failure of IW-3178 development is the second setback for the company in 2020. In May, the company’s delayed-release formulation of its marketed drug, Linzess — MD-7246 — failed to meet primary as well secondary endpoints in a phase II study.

These pipeline failures will hurt the company’s prospects. However, we note that Linzess sales remain encouraging.

Ironwood stated that it will now put focus on maximizing Linzess’ scope by strengthening its commercial efforts, primarily focusing on gastroenterologist. The drug is set to achieve blockbuster status by the end of 2020. Ironwood is also looking to expand Linzess’ label into multiple abdominal symptoms.

Please note that Ironwood markets Linzess in collaboration AbbVie (ABBV - Free Report) in the United States. The company has a collaboration agreement with AstraZeneca (AZN - Free Report) for the development and commercialization of Linzess in China. It also has a deal with Astellas for the development of the drug in Japan.

Zacks Rank & Key Pick

Ironwood currently has a Zacks Rank #2 (Buy).

Catalent, Inc. (CTLT - Free Report) is another stock to consider from the drug sector. It sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Catalent’s earnings per share estimates have moved up from $2.17 to $2.40 for 2020 and from $2.55 to $2.82 for 2021 in the past 30 days. The company delivered beat estimates in three of the trailing four quarters, with the earnings surprise being 4.38%, on average.

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