Ironwood Pharmaceuticals, Inc.
) share price increased 7.0% earlier this week on the
announcement of a 10% workforce reduction. Since then, the
company has gained approximately 8.4%.
The company expects to incur a severance and benefit cost of
$4.0-$4.5 million. The termination of employees is expected to be
carried out in the first quarter of 2014. The company expects to
have approximately 480 full-time employees after the
This move is in line with the strategy announced on the investor
day in Dec 2013. At that time, Ironwood had said that it is
working on reducing the net cash used in operating activities
through revenue growth and cost control. The company is focusing
on priority growth platform investments.
In the third quarter of 2013, the company recorded net cash used
in operating activities of $58 million, a decrease of
approximately 37.6% from the first quarter. The company expects
this trend to continue through 2014.
We are positive on Ironwood's cost control initiatives. We
believe that these will help the company to offset increasing
Linzess marketing costs. For 2014, Ironwood expects total
investment in sales and marketing for Linzess in the $250-$300
We remind investors that the company's sole marketed drug,
Linzess, was launched in Dec 2012 in collaboration with
Forest Laboratories, Inc.
) for patients suffering from irritable bowel syndrome with
constipation (IBS-C) or chronic idiopathic constipation (CIC).
The company is looking to broaden Linzess' label by expanding the
targeted patient population and gaining approval for additional
Ironwood carries a Zacks Rank #3 (Hold). Some better-ranked
stocks include Forest Labs,
Sucampo Pharmaceuticals, Inc.
). All three carry a Zacks Rank #1 (Strong Buy).
FOREST LABS A (FRX): Free Stock Analysis
GENTIUM SPA-ADR (GENT): Free Stock Analysis
IRONWOOD PHARMA (IRWD): Free Stock Analysis
SUCAMPO PHARMAC (SCMP): Free Stock Analysis
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