CEO Moves to Small-Cap R&D Spinoff Reflects Confidence
The last biotech Spinoff was in June 2017 where Actelion (ATLS) in Switzerland Spun off its clinical R&D arm, Idorsia (IDIA). In IDIA’s first year, the stock doubled, significantly outperforming the healthcare index at the time. Almost 2 years later, Ironwood Pharmaceuticals, Inc. (IRWD) will be Spinning off its rare diseases R&D segment, Cyclerion Therapuetics (CYCN) on April 2, 2019. For those who can look at this small cap biotech name, we are encouraged by the fact that the CEO is going to run the Spinoff and there is an proven biotech activist in the name.What’s Interesting?
With a limited amount of biotech firms in the Cambridge, Massachusetts area having an approved drug on the commercial market, Ironwood Pharmaceuticals (IRWD) will be spinning off its R&D segment (rare diseases), Cyclerion Therapeutics (CYCN), to which the CEO (Peter Hecht) will be taking over. The new CEO of IRWD will be UK based AstraZeneca’s (AZN) executive VP, Mark Mallon. The main points to be aware of are:
Activist Investor with a Track Record;
Similar CEO Move to R&D Spinoff;
IRWD (ex-Spin), Core Play on Approved Drug;
Potential Takeover Play;
R&D Spinoff (CYCN) Debt Free Balance Sheet;
Similar R&D Spinoffs...
We have highlighted some of the previous global R&D Spinoffs from 2012 to 2018 and documented their performance 1 month, 6 month and 1 year return as well as versus the MSCI Healthcare index to get a broad picture of how have these Spinoffs in the past performed.
Ironwood Pharmaceuticals is a gastrointestinal (GI), healthcare company focusing on developing the treatment of GI diseases. The company's commercial product, LINZESS? (linaclotide), a guanylate cyclase type C agonists, is indicated for adult men and women suffering from irritable bowel syndrome with constipation, or chronic idiopathic constipation. In addition, the company is developing MD-7246, an oral, intestinal, non-opioid, pain-relieving agent for patients with abdominal pain associated with certain GI diseases. The company is also developing IW-3718, a gastric retentive formulation of a bile acid sequestrant for the potential treatment of refractory gastroesophageal reflux disease.
The Edge Group - Global Fundamental Catalyst Investing. The Edge provides investors with access to hidden corporate value from Global Special Situations using a pioneering approach to investments. Founded in 2005 by fund management and investment banking professionals to provide high quality, private equity-level research on Global Corporate Divestitures for the benefit of fundamental event-driven, growth and value-oriented investors in this difficult to track, but proven investment space.
The Edge will look to screen and analyze include Spinoffs; Reverse Morris Trusts; Squeeze Outs; Privatizations; Demutualization; Deep Discounted; Rights Issues; Rights Offering; Restructuring; Insider Purchases / Buying Change of Management / CEO Change; Deteriorating fundamentals; Post-Bankruptcy; Reorganization; Tender Offer; M&A Deals; Secondary Offering; Share Swap; Thrift Conversions; Share Buybacks; Activist; Mergers. All analyzed from a fundamental point of view.
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