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Ironwood to Get New CEO, Current CEO to Head Latest Spinoff

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Ironwood Pharmaceuticals, Inc.’s (IRWD - Free Report) board announced the appointment of chief executive officers (“CEO”) for the two new companies that will emerge following the planned separation of the erstwhile Ironwood Pharma.

In a bid to achieve increased operational performance and strategic flexibility, Ironwood Pharma remains on track to spinoff into two separate entities. The entity focused on Linzess and gastrointestinal (“GI”) pipeline development will retain the current name of the company. Meanwhile, the other entity will focus on the development of the soluble guanylate cyclase (sGC) pipeline for the treatment of serious and orphan diseases and will be named Cyclerion. The transaction is expected to close in the first half of 2019. The separation of the entities is also being anticipated to be tax-free.

For the new Ironwood, the company’s board has appointed Mark Mellon as the CEO. Mellon has extensive experience in building and shaping businesses as well as a deep knowledge of GI gained during his 24 years of service at pharma-giant, AstraZeneca (AZN - Free Report) , in several leading positions. Meanwhile, Peter Hecht, the current CEO of Ironwood Pharma is set to lead the new company — Cyclerion.

Following the news, shares of Ironwood increased 11.3% on Jan 4. However, the stock has lost 45.6% in the past six months compared with the industry’s 15% decline.

The new Ironwood Pharma will have one marketed product in its portfolio, Linzess (linaclotide). The drug is approved for irritable bowel syndrome (“IBS”) with constipation and chronic idiopathic constipation. It is commercialized in collaboration with Allergan (AGN - Free Report) and has witnessed solid sales in the first nine months of 2019, generating over half a billion dollars in revenues. The company is also developing Linzess for label expansion in several IBS indications. Additionally, it is developing MD-7246, a delayed release version of linaclotide, for all subtypes of IBS.

The company will also have another GI candidate, IW-3718, in its pipeline. Currently, it is being developed for treating persistent gastroesophageal reflux disease in a phase III study and targets a patient population of approximately 10 million. Under the able leadership of Mellon, who has successfully launched and helped grow several GI drugs at AstraZeneca, Ironwood Pharma is expected to sail smoothly with its approved and pipeline drugs.

Furthermore, Ironwood Pharma appointed Michael Shetzline as chief medical officer, senior vice president and head of drug development for the GI-focused entity to strengthen its management team for GI pipeline. Shetzline has a proven track record across many areas of GI science and served as vice president and head of gastroenterology clinical sciences at Takeda Pharmaceuticals (TAK - Free Report) . He will join Ironwood on Jan 28, 2019.

Moreover, Cyclerion holds potential with two prospective sGC pipeline candidates — praliciguat and olinciguat. Both the candidates are in mid-stage of development. While praliciguat enjoys Fast Track designation for diabetic nephropathy and heart failure with preserved ejection fraction (HFpEF), olinciguat was granted Orphan drug status for sickle cell disease in 2018.

We expect the spinoff to be favorable for Ironwood Pharma as it will help the company to focus on its already successful GI portfolio. Cyclerion, if successful, will allow the company to look for a potential bidder for the sale of the business without affecting the GI business.

Zacks Rank

Ironwood currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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