Now that Ironwood's spinning off R&D, activist Alex Denner is easing up

Activist investor Sarissa Capital said it would support Ironwood's board in light of its recently announced move to spin off most of its R&D unit. (Pixabay)

Ironwood’s activist investor likes what it’s seen recently from the drugmaker—so much so that it held off on pushing for a spot on the company's board.

On Thursday, Sarissa Capital, the fund run by Carl Icahn protégé Alex Denner, said it would support Ironwood’s board instead of working to win Denner a seat on it. The reason? It believes Ironwood’s recently announced plan to spin off most of its R&D—which the fund lobbied for—“is a good first step toward creating shareholder value at Ironwood while preserving strategic optionality,” it said in a statement.

Denner added that “the numerous conversations” Sarissa and Ironwood have had since just before the fund sent notice of its board plans “have been productive.”

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RELATED: Ironwood to slim down, split into 2 distinct companies

Under the spinoff plan, unveiled in May, Ironwood will hang onto its treatments for GI diseases, gout and abdominal pain—including Linzess, a product it shares with Allergan—as well as a candidate for gastroesophageal reflux disease. The new company’s pipeline, meanwhile, will center on treatments for orphan diseases and products targeting the nitric oxide signaling pathway for blood flow.

The move doesn’t mean Ironwood’s off the hook, though. “The details of the spin are of paramount importance,” Sarissa said. In particular, it wants to see two completely separate companies with no cross-ownership—a la Biogen and its 2017 hemophilia spinoff Bioverativ, which Sarissa also just so happened to advocate for.

RELATED: Ready to rumble, Ironwood? Activist investor Alex Denner suits up for board-seat bid

And if Sarissa doesn’t like the outcome? There could be consequences, Credit Suisse analyst Vamil Divan wrote to clients.

“If the spinoff does not appear truly independent and investors believe there is too much cross-pollination between the companies, we could see a negative impact on shares and a ramp up in activist pressure,” he said.

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