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Shares in Ironwood Pharma are plunging 11% in Tuesday’s pre-market session after the gastrointestinal-focused health company announced plans to discontinue the development of IW-3718, tested for the treatment of refractory gastroesophageal reflux disease (GERD).
Ironwood (IRWD) disclosed that data from IW-3718-302, one of its 2 identical Phase III trials evaluating IW-3718 for GERD, did not meet the pre-specified criteria associated with a planned early efficacy assessment. Following the assessment from an independent data monitoring committee, Ironwood unblinded the data and confirmed that IW-3718-302 did not meet the criteria, including the study’s primary endpoint of achieving a statistically significant improvement in heartburn severity. IW-3718 was generally well-tolerated in study IW-3718-302.
Ironwood said that based on these findings, it plans to halt enrolment in IW-3718-301, the second Phase III trial.
“The outcome of this assessment is deeply disappointing for Ironwood and for patients, given the large unmet need among patients with refractory GERD for an alternative to standard treatment options,” said Ironwoond CEO Mark Mallon. “IW-3718-302 was a robust and well-conducted Phase III trial, and while we plan to conduct a complete analysis of the data set, we believe these findings are definitive.”
In addition, Ironwood announced an organizational restructuring plan to reduce its headcount by about 100 full-time employees, or almost 35% of the current workforce. Following the changes, the company expects to have approximately 210 full-time employees. The workforce reduction move is set to be completed in the first quarter of 2021.
As a result, Ironwood expects total cost savings of more than $95 million, which breaks down into at least $45 million in annualized cost savings related to the planned workforce reduction and an additional $50 million related to external spend for IW-3718 previously expected through 2021. Furthermore, the company will need to incur one-time costs of about $10 million to $12 million in connection with halting the development of IW-3718. The costs are expected to be incurred primarily in the fourth quarter of 2020.
Ironwood said it will now focus on the commercialization of Linzess, its prescribed brand for the treatment of adult patients with irritable bowel syndrome with constipation and chronic idiopathic constipation.
“We aim to continue our efforts to maximize Linzess and to drive further growth and profitability. There are approximately 70 million people today living with GI diseases in the US, and we remain steadfast in our mission to advance GI medicines and redefine the standard of care for these patients,” Mallon added.
Northland Securities analyst Tim Chiang earlier this month reiterated a Buy rating on the stock with a $14 price target (47% upside potential), saying that Linzess remains a growth asset.
“We continue to favor IRWD shares based on the steady growth profile for Linzess, combined with management's focus on generating profits,” Chiang wrote in a note to investors. “In addition, we expect more visibility on IW-3718 in 4Q20, which could have meaningful potential in treating refractive GERD.”
Meanwhile, the other 2 analysts recently covering the stock have Hold ratings, which together add up to a Moderate Buy consensus. With shares down 29% so far this year, the $12 average analyst price target promises 26% upside potential lies ahead.
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