Ironwood Pharmaceuticals has decided to walk away from its 2016 deal to license AstraZeneca’s billion-dollar gout treatment lesinurad in the U.S., following poor market performance of the drug, as Ironwood continues its march toward splitting into two separate public companies next year.

"After initiating the lesinurad market tests in early 2018 and assessing the results in July, we have decided to terminate our licensing agreement with AstraZeneca in its entirety," Ironwood CEO Peter Hecht said in a statement, alongside the company’s second-quarter financial results. "This action is not taken lightly, but it is an important decision that we believe enables us to allocate capital to the highest return opportunities and drive growth," he added, with the decision taking effect six months after the notice. "We are working to maintain appropriate availability of lesinurad for patients and physicians during the termination period."

Ironwood said it expects to save $75 million to $100 million in 2019 operating expenses with the move and also plans to lay off about 125 employees, mostly field-based sales representatives.

The Cambridge, Massachusetts-based company had acquired the exclusive U.S. rights to lesinurad, or Zurampic, for $100 million upfront, following the drug’s December 2015 FDA approval for the treatment of hyperuricemia associated with uncontrolled gout. Ironwood would also have been on the hook for milestone payments up to $165 million, plus royalties.

AstraZeneca, meanwhile, had signed a $1.26 billion deal to acquire Ardea Biosciences, with lesinurad as its lead, phase 3 product, in 2012. The company and analysts saw blockbuster potential for the drug, including through pairings with generic drugs like decades-old uric acid reducer allopurinol, which it also licensed to Ironwood as the fixed-dose combination Duzallo.

However, doubts over lesinurad’s safety profile persisted through its FDA approval, with a lower dose carrying a black-box warning for potential kidney failure, as well as requirements for a postmarket study in renal and cardiovascular events. In addition, the drug had missed all its primary endpoints in three late-stage studies.

In May, Ironwood announced its plans to split into two, spinning off some of its R&D programs focused on orphan diseases, including the phase 2 blood flow drugs praliciguat and olinciguat.

Meanwhile, the slimmed-down Ironwood would continue marketing treatments for gastrointestinal diseases, gout and abdominal pain such as Linzess, in collaboration with Allergan, as well as continuing phase 3 development of IW-3718 in gastroesophageal reflux disease.

Hecht said Ironwood saw about 25% year-over-year growth in revenue last quarter, up to $81 million, in part due to strong Linzess demand in irritable bowel syndrome, and the company remains on track for the split planned in the first half of next year.

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