Ironwood may have avoided sparring with activists by introducing an R&D split-off, but its employees paid the price.
The Massachusetts drugmaker last week pink-slipped 40 workers, or about 6% of its total staff, according to an SEC filing. The layoffs came “in connection with Ironwood’s intent to separate” its R&D unit from its marketed meds and GI business, the company said.
Ironwood didn’t give details about which departments were hit, other than saying it spared its field-based sales force. Approximately 630 full-time employees will remain on the roster after the reduction, which will likely cost between $5 million and $5.5 million to execute and wrap up by year’s end, the company added.
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"We’re making strong progress on executing this separation, including the recent identification of employee roles and responsibilities within the two new companies,” a company spokeswoman told the Boston Business Journal in a statement.
The drugmaker, which markets GI product Linzess alongside Allergan, unveiled plans for the R&D divorce in May after fielding demands from activist Sarissa Capital. Under the blueprint, Ironwood will keep Linzess and its treatments for gout and abdominal pain, as well as a prospect for gastroesophageal reflux disease. The new company’s pipeline, meanwhile, includes therapies for orphan diseases and products targeting the nitric oxide signaling pathway for blood flow.
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And the strategy worked: Shortly thereafter, Sarissa said it would back Ironwood’s board in its current form instead of trying to win a seat for its leader, Carl Icahn protégé Alex Denner. The spin “is a good first step toward creating shareholder value at Ironwood while preserving strategic optionality,” Sarissa said in a statement at the time.