Ironwood Pharma may satisfy activist Denner with split-up plan, but he still seeks board seat

• Ironwood Pharmaceuticals plans to separate into two entities next year.
• One entity would control the company's pipeline assets.
• Activist investor Alex Denner of Sarissa Capital has invested in the company and is seeking a seat on its board.

Alex Denner, CIO, Sarissa Capital Management

Mark Neuling | CNBC

Ironwood Pharmaceuticals' stock rose Tuesday after the company said it plans to separate next year, immediately establishing profitability for its commercial entity and separating some of its pipeline assets into another unit.

The moves come after activist investor Alex Denner of Sarissa Capital said he was seeking a board seat. Denner said in an interview Tuesday he supports the moves, but is still seeking the seat. Sarissa filed its proxy statement to that effect Tuesday afternoon.

"We have made the point to the company that they are sub-scale to be in primary care," Denner said in an interview, meaning Ironwood is too small to sell a drug to primary-care physicians, which generally requires a large salesforce. "While the details of their proposed spin matter enormously to shareholder value creation, this transaction could be a way to unlock value."

Ironwood's main product is the irritable bowel syndrome drug Linzess, which drew net sales in the U.S. of $701 million in 2017. The company splits proceeds from the drug with its partner Allergan.

In the split, Linzess and a few other products would stay with Ironwood, while other pipeline assets would be spun into a new company. Both would be publicly traded. Ironwood said the separation is expected to be completed in the first half of next year and be tax-free to Ironwood shareholders.

A strategic review for Ironwood began last fall, Chairman Terrance McGuire said in a statement Tuesday. He said the board and management team unanimously agreed the split "presents the best way to drive operating performance, accelerate growth and unlock value."

Denner, who started Sarissa Capital in 2012 after leading health-care investments for Carl Icahn, acquired Ironwood shares in the fourth quarter of last year, building a stake of 1.65 million shares. Ironwood's stock jumped 10 percent the day the company disclosed Denner's interest in joining the board last month.

While Denner didn't comment on his thoughts about whether the company should remain independent, his involvement prompted those questions; at Sarissa and with Icahn, he's orchestrated sales of a number of biotech companies, most recently Bioverativ to Sanofi for $11.6 billion in November, and Ariad to Takeda for $5.2 billion in 2017.

Denner said Tuesday he recently met with Ironwood's governance committee.

"They indicated they'd like me to meet with other board members, which apparently is being set up," he said.

Ironwood declined to comment. The company's shares were up nearly 3 percent Tuesday afternoon.