Ironwood’s preparation for activist-driven R&D split puts 40 staffers out of work

Red Exit sign
Ironwood expects its layoff process to wrap up by the end of this year. (Leeroy Agency)

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.