Ironwood Pharma to Halt Development of GERD Drug, Cut 100 Employees

Company Restructure_Compressed

Ironwood Pharmaceuticals is initiating an internal organizational restructuring that will start by cutting up to 100 full-time employees from its payroll following a review of unblinded data from the company’s Phase III trials, IW-3718-302, which show that its refractory gastroesophageal reflux disease (GERD) drug failed to reduce the severity of heartburn in patients with GERD.

The news is surprising to some, as Ironwood showed two years ago in a Phase IIb trial that their now-failed refractory GERD therapy, IW-3718, significantly improved symptoms of heartburn severity when added to a once-a-day proton pump inhibitor. Additionally, more than half of patients in this trial reported a clinically meaningful reduction in their heartburn severity with IW-3718 compared with placebo.

And in July, Ironwood reached a deal with the FDA to update its IW-3718 Phase III trials that resulted in changing the trials’ primary endpoint from a previous responder endpoint to a continuous endpoint. The company had planned to halt trial and conduct a blinded early assessment of the efficacy data.

“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,” Ironwood’s CEO Mark Mallon said in a statement. “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. We extend our gratitude to the patients, investigators and their staff and the entire Ironwood team who played a critical role in advancing IW-3718.”

The planned reduction in the company’s workforce of nearly 35% is expected to be completed in the first quarter of 2021, which the company suggests will result in a total cost savings of approximately $95 million.

Following the layoffs, Ironwood will be left with around 210 full-time employees. Ironwood says it expects to incur one-time costs of approximately $10 million to $12 million associated with trial discontinuation and workforce reduction.

In addition to cutting staff, findings from the IW-3718-302 Phase III trial has caused the GI-focused healthcare company to discontinue development of IW-3718 and halt enrollment of its second Phase III trial, IW-3718-301. Following this news, shares of Ironwood fell 18% to $7.80 before the bell, and shares plunged around 30% in premarket.

During these transitions, Ironwood will be switching its main focus to designing enhanced commercial efforts for LINZESS (linaclotide), a drug marketed by Ironwood and Allergan in the United States for the treatment of irritable bowel syndrome with constipation. Ironwood announced in early August that prescription demand for the drug has grown by 9% year-over-year, and the company hopes to harness this demand to drive additional growth.

Mallon commented: “We have made the difficult decision to re-align our resources and capital with our business moving forward. With a streamlined organization that we believe will be positioned well to deliver in this current environment, 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 U.S., and we remain steadfast in our mission to advance GI medicines and redefine the standard of care for these patients.”

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