PART I [Item 1. Business](index=8&type=section&id=Item%201.%20Business) Ironwood Pharmaceuticals is a GI healthcare company focused on developing and commercializing LINZESS and pipeline candidates, driven by strategic partnerships and subject to extensive regulation [Our Company Overview](index=8&type=section&id=Our%20Company%20Overview) Ironwood Pharmaceuticals is a GI healthcare company focused on LINZESS commercialization and pipeline development, prioritizing profits and cash flow - Ironwood Pharmaceuticals is a GI healthcare company focused on advancing GI disease treatment, with 2022 priorities including maximizing **LINZESS**, strengthening its pipeline, and delivering sustained profits and cash flow[25](index=25&type=chunk)[28](index=28&type=chunk) - **LINZESS (linaclotide)** is the first FDA-approved guanylate cyclase type C agonist for adult IBS-C and CIC, available globally[26](index=26&type=chunk) - Strategic partnerships for linaclotide include AbbVie (U.S. and global), AstraZeneca (China), and Astellas (Japan)[27](index=27&type=chunk) - The pipeline features **IW-3300** for visceral pain (IC/BPS, endometriosis) and **CNP-104** for primary biliary cholangitis (PBC), which received FDA Fast Track Designation[27](index=27&type=chunk)[28](index=28&type=chunk) [Performance Against 2022 Core Priorities](index=8&type=section&id=Performance%20Against%202022%20Core%20Priorities) The company achieved key 2022 priorities, including strong LINZESS revenue, positive pediatric Phase III data, pipeline advancement, and significant net income and cash flow 2022 Performance Highlights | Priority | Detail | | :------- | :----- | | Maximize LINZESS | **$398.8 million** in U.S. collaborative arrangements revenue (slight decrease YoY due to net price erosion and inventory fluctuations, offset by increased prescription demand) | | Maximize LINZESS | Positive topline Phase III data for linaclotide 72 mcg in pediatric FC (6-17 years), sNDA submitted to U.S. FDA in Dec 2022, granted priority review in Feb 2023 with PDUFA date of June 14, 2023 | | Strengthen Innovative GI Pipeline | **CNP-104** (for PBC) granted U.S. FDA Fast Track Designation in Dec 2021; early T-cell response data expected H2 2023 | | Strengthen Innovative GI Pipeline | **IW-3300** (for IC/BPS and endometriosis) completed Phase I, Phase II proof-of-concept study in IC/BPS patients expected to begin early 2023 | | Deliver Sustained Profits & Generate Cash Flow | Net income of **$175.1 million** in 2022 | | Deliver Sustained Profits & Generate Cash Flow | Generated **$273.8 million** in cash from operations in 2022, ending with **$656.2 million** in cash and cash equivalents | [GI Programs – IBS-C and CIC](index=10&type=section&id=GI%20Programs%20%E2%80%93%20IBS-C%20and%20CIC) LINZESS addresses IBS-C and CIC in millions of U.S. adults, with recent label updates and a pediatric sNDA submission for functional constipation - IBS-C affects up to **11.5 million** adults and CIC affects up to **28.5 million** adults in the U.S[34](index=34&type=chunk) - **LINZESS** (290 mcg for IBS-C, 145 mcg for CIC) was approved by the U.S. FDA in August 2012 for adults, with a 72 mcg dose for CIC approved in January 2017[35](index=35&type=chunk)[36](index=36&type=chunk) - The U.S. FDA approved an sNDA in September 2020 to include a more comprehensive description of **LINZESS's** effects on overall abdominal symptoms in adult IBS-C patients[37](index=37&type=chunk) - The U.S. FDA approved a revised **LINZESS** label in August 2021, modifying the boxed warning for serious dehydration risk in pediatric patients less than two years of age and a contraindication against its use in this group[38](index=38&type=chunk) - Positive Phase III data for linaclotide 72 mcg in pediatric FC (6-17 years) led to an sNDA submission in December 2022, granted priority review in February 2023, with no FDA-approved prescription pediatric therapies for FC currently existing[38](index=38&type=chunk) [Linaclotide—Global Commercialization](index=12&type=section&id=Linaclotide%E2%80%94Global%20Commercialization) Linaclotide is commercialized globally through partnerships with AbbVie in Europe/North America, Astellas in Japan, and AstraZeneca in China - AbbVie commercializes **CONSTELLA** in Europe and linaclotide (as CONSTELLA/LINZESS) in Canada and Mexico for IBS-C/CIC[39](index=39&type=chunk)[40](index=40&type=chunk) - Astellas commercializes **LINZESS** in Japan for adult IBS-C and chronic constipation[41](index=41&type=chunk) - AstraZeneca commercializes **LINZESS** in China (including Hong Kong and Macau) for adult IBS-C[42](index=42&type=chunk) [Pipeline Products (IW-3300, CNP-104)](index=12&type=section&id=Pipeline%20Products%20(IW-3300,%20CNP-104)) The pipeline includes IW-3300 for visceral pain conditions, with Phase II starting soon, and CNP-104 for PBC, which received Fast Track Designation - **IW-3300**, a GC-C agonist, is in development for visceral pain conditions like IC/BPS (affecting **4-12 million** U.S. sufferers) and endometriosis (affecting **4 million** U.S. women), with Phase II in IC/BPS expected to begin early 2023[43](index=43&type=chunk)[44](index=44&type=chunk) - **CNP-104** is being developed for primary biliary cholangitis (PBC), a rare autoimmune liver disease affecting approximately **130,000** people in the U.S., having received U.S. FDA Fast Track Designation in December 2021[45](index=45&type=chunk) [Collaborations and Partnerships](index=14&type=section&id=Collaborations%20and%20Partnerships) Ironwood leverages strategic partnerships for global linaclotide commercialization, with U.S. revenue primarily from the AbbVie collaboration - Ironwood's partnering strategy focuses on U.S. commercialization internally or with partners, and out-licensing global rights[46](index=46&type=chunk)[47](index=47&type=chunk) Revenue by Geography (as % of total revenue) | Year | U.S. (%) | Rest of world (%) | | :--- | :----- | :------------ | | 2022 | 98.1 % | 1.9 % | | 2021 | 97.8 % | 2.2 % | | 2020 | 95.8 % | 4.2 % | - Revenue from linaclotide partnerships constitutes substantially all total revenue, with the U.S. **LINZESS** collaboration with AbbVie being a significant portion[48](index=48&type=chunk) - Collaboration with AbbVie for North America involves joint and equal funding of U.S. development and commercialization with equal profit/loss sharing, plus mid-teens percent royalties for Canada and Mexico sales[49](index=49&type=chunk)[50](index=50&type=chunk) - License agreement with AbbVie for the "Expanded Territory" includes commercial milestones up to **$42.5 million** and escalating royalties (mid-single to upper-teens percent in Europe, upper-single to low-double digits elsewhere)[51](index=51&type=chunk) - License agreement with Astellas for Japan involves tiered royalties (mid-single to low-double digits percent) on net sales, with Astellas responsible for API supply since August 2019[52](index=52&type=chunk) - Collaboration with AstraZeneca for China grants exclusive rights, with non-contingent payments totaling **$35.0 million** (of which **$25.0 million** remained outstanding at December 31, 2022) and tiered royalties (mid-single digits up to **20%**) on net sales[53](index=53&type=chunk) - The COUR Collaboration Agreement grants an option for an exclusive U.S. license for **CNP-104**, involving an upfront payment of **$6.0 million**, potential non-contingent and milestone payments of **$13.5 million**, **$35.0 million** upon option exercise, and commercial milestones up to **$440.0 million** plus high-single to low-double digit royalties[54](index=54&type=chunk)[55](index=55&type=chunk)[56](index=56&type=chunk)[57](index=57&type=chunk) [Our Strategy](index=18&type=section&id=Our%20Strategy) Ironwood aims to be the leading U.S. GI-focused healthcare company by maximizing LINZESS, advancing its pipeline, and ensuring sustained profitability - Ironwood's vision is to become the leading U.S. GI-focused healthcare company[58](index=58&type=chunk) - The company's strategy focuses on three core priorities: maximizing **LINZESS**, strengthening its innovative GI portfolio, and delivering sustained profits and cash flow[58](index=58&type=chunk) - Key strategic elements include leveraging U.S. commercial capabilities for **LINZESS**, exploring development opportunities, collaborating with global partners, evaluating external assets, progressing the current pipeline (pediatric LINZESS, CNP-104, IW-3300), and applying disciplined capital allocation[62](index=62&type=chunk) [Competition](index=18&type=section&id=Competition) The pharmaceutical industry is highly competitive, with LINZESS facing competition from branded, generic, and OTC therapies for IBS-C and CIC - The pharmaceutical industry is intensely competitive, with competitors often possessing substantially greater financial, technical, and human resources[147](index=147&type=chunk) - **LINZESS** competes with branded and generic prescription therapies and over-the-counter (OTC) products for IBS-C and CIC treatment[59](index=59&type=chunk)[148](index=148&type=chunk) - **LINZESS** is the number one prescribed branded treatment in the U.S. for adults with IBS-C and CIC[60](index=60&type=chunk) - Key competitors include **AMITIZA**, **TRULANCE**, **MOTEGRITY**, and **IBSRELA**, alongside various OTC laxatives[61](index=61&type=chunk)[64](index=64&type=chunk)[148](index=148&type=chunk) [Manufacturing and Supply](index=20&type=section&id=Manufacturing%20and%20Supply) Ironwood relies on contract manufacturers and partners for linaclotide API and finished product manufacturing and distribution, aiming for a safe and redundant supply chain - Ironwood relies on contract manufacturers, partners, and other third parties for the manufacturing of linaclotide active pharmaceutical ingredient (API), finished drug product, and finished goods[65](index=65&type=chunk)[180](index=180&type=chunk) - The company aims for a safe and effective supply with redundancy, believing current commercial suppliers can produce linaclotide API in accordance with current good manufacturing practices (GMP)[65](index=65&type=chunk) - AbbVie, Astellas, and AstraZeneca are responsible for linaclotide API, finished drug product, and finished goods manufacturing and distribution in their respective territories[66](index=66&type=chunk) [Sales and Marketing](index=20&type=section&id=Sales%20and%20Marketing) Ironwood develops and commercializes drugs in the U.S. independently or with partners, while relying on partners for international territories, coordinating global brand efforts - Ironwood intends to develop and commercialize drugs in the U.S. alone or with partners, relying on partners for ex-U.S. territories while retaining worldwide oversight[68](index=68&type=chunk) - The company has established a high-quality U.S. commercial organization dedicated to marketing, patient engagement, and sales for existing and future products[69](index=69&type=chunk) - Ironwood coordinates with its linaclotide partners to launch and maintain an integrated, global linaclotide brand, leveraging collective knowledge and expertise[70](index=70&type=chunk) [Patents and Proprietary Rights](index=20&type=section&id=Patents%20and%20Proprietary%20Rights) Ironwood protects its proprietary technology through a broad patent portfolio for linaclotide, with U.S. patents expiring between 2024 and 2033, and has settled generic challenges - Ironwood actively protects its proprietary technology through patents covering products, compositions, formulations, methods of use, and manufacturing processes, also relying on trade secrets[71](index=71&type=chunk) - The linaclotide patent portfolio includes **14** U.S. patents (12 listed in the Orange Book), **8** granted European patents, **10** granted Japanese patents, **5** granted Chinese patents, and **80** issued patents in other foreign jurisdictions[74](index=74&type=chunk) - Issued U.S. patents for linaclotide expire between **2024** and **2033**, with composition of matter patents for **LINZESS** doses expiring in **2026** and commercial formulation patents in the early **2030s**[75](index=75&type=chunk) - U.S. Patent 7,304,036, covering linaclotide and its methods of use, received a patent term extension to August 30, 2026[77](index=77&type=chunk) - Ironwood and AbbVie have settled with five generic drug manufacturers, licensing them to market generic **LINZESS** versions (72 mcg, 145 mcg, and 290 mcg) as early as March 2029[78](index=78&type=chunk) [Government Regulation](index=22&type=section&id=Government%20Regulation) The pharmaceutical business is extensively regulated by the U.S. FDA and foreign authorities, covering all stages from R&D to post-marketing, with significant impact from pricing policies and healthcare reforms - The pharmaceutical business is subject to extensive regulation by the U.S. FDA and foreign authorities, covering all stages from research and development to post-marketing requirements[79](index=79&type=chunk)[80](index=80&type=chunk) - The U.S. FDA approval process involves nonclinical tests, IND submission, human clinical trials (Phase I, II, III), NDA submission, and satisfactory completion of manufacturing and clinical trial site inspections[82](index=82&type=chunk)[83](index=83&type=chunk)[84](index=84&type=chunk)[85](index=85&type=chunk)[87](index=87&type=chunk) - The Hatch-Waxman Act established abbreviated approval procedures for generic drugs (ANDA) and provides incentives like non-patent exclusivity periods (**5 years** for new chemical entities, **3 years** for new clinical investigations) and patent term extensions (up to **5 years**)[89](index=89&type=chunk)[92](index=92&type=chunk)[93](index=93&type=chunk)[96](index=96&type=chunk) - Paragraph IV certifications by generic manufacturers can trigger a **30-month** stay on U.S. FDA approval if a patent infringement suit is filed within **45 days** of notice[94](index=94&type=chunk)[95](index=95&type=chunk) - Post-approval, products are subject to ongoing compliance with GMP, safety and efficacy reporting, U.S. FDA approval for manufacturing/labeling changes, and strict promotion/advertising requirements, including prohibitions on "off-label" use[97](index=97&type=chunk)[98](index=98&type=chunk)[99](index=99&type=chunk)[100](index=100&type=chunk)[101](index=101&type=chunk)[102](index=102&type=chunk) - Pricing and reimbursement policies by government health programs, commercial insurance, and managed healthcare organizations significantly impact commercial success, facing increasing cost-containment pressures and scrutiny of pharmaceutical pricing[104](index=104&type=chunk)[105](index=105&type=chunk)[106](index=106&type=chunk)[107](index=107&type=chunk) - Healthcare reform efforts, such as the Inflation Reduction Act (IRA) of 2022, could reduce prices, increase discounts, and limit reimbursement for pharmaceutical products[107](index=107&type=chunk)[203](index=203&type=chunk) - Sales and marketing activities are subject to federal and state "fraud and abuse" laws and transparency laws, with violations potentially leading to criminal or civil sanctions and exclusion from federal healthcare programs[111](index=111&type=chunk)[112](index=112&type=chunk) [Human Capital](index=34&type=section&id=Human%20Capital) Ironwood prioritizes a diverse, equitable, and inclusive culture, offering competitive compensation and benefits, and emphasizing employee health and safety Employee Demographics (as of Dec 31, 2022) | Category | Number/Percentage | | :------- | :---------------- | | Total Employees | **219** | | Drug Development Team | **45** | | Sales and Commercial Team | **125** | | General and Administrative | **49** | | Women Employees | **~52%** | | Women in Leadership (VP+) | **27%** | | Women on Board of Directors | **33%** | | Racially/Ethnically Diverse Employees | **~18%** | | Racially/Ethnically Diverse New Hires (2022) | **~28%** | - The company fosters a diverse, equitable, and inclusive (DE&I) culture through learning and development, strengthened talent acquisition, and employee resource groups[114](index=114&type=chunk)[116](index=116&type=chunk)[117](index=117&type=chunk) - Employees receive equity and competitive pay/benefits with a focus on pay equity, and communication/engagement are fostered through various channels including town hall meetings and surveys[118](index=118&type=chunk)[119](index=119&type=chunk) - Health, wellness, and safety are top priorities, especially during the COVID-19 pandemic, with augmented healthcare, childcare, and leave benefits, and a dedicated working group for COVID-19 guidance[120](index=120&type=chunk) [Item 1A. Risk Factors](index=36&type=section&id=Item%201A.%20Risk%20Factors) Ironwood faces significant commercial, growth, operational, regulatory, and financial risks, including LINZESS dependency, pipeline uncertainty, third-party reliance, compliance challenges, and financial stability concerns [Risks Related to Commercializing LINZESS and Other Product Candidates](index=36&type=section&id=Risks%20Related%20to%20Commercializing%20LINZESS%20and%20Other%20Product%20Candidates) Commercial success of LINZESS and other candidates is threatened by side effects, regulatory warnings, pricing pressures, intense competition, and compliance failures - Ironwood is highly dependent on the commercial success of **LINZESS** (linaclotide) in the U.S., influenced by effectiveness, patient population, marketing, reimbursement, and competition[126](index=126&type=chunk) - **LINZESS** may cause undesirable side effects, such as diarrhea (reported in **2%** or less of patients), or other properties that could limit commercial potential, leading to impaired sales or regulatory actions[128](index=128&type=chunk)[130](index=130&type=chunk)[131](index=131&type=chunk)[132](index=132&type=chunk) - The U.S. FDA-approved label for **LINZESS** includes a boxed warning for serious dehydration risk in pediatric patients less than two years of age and a contraindication against its use in this group[132](index=132&type=chunk) - Uncertainty regarding pricing and reimbursement policies, including increasing pressure for discounts/rebates and the impact of healthcare reforms like the Inflation Reduction Act (IRA) of 2022, could hinder commercial success[133](index=133&type=chunk)[135](index=135&type=chunk)[137](index=137&type=chunk)[138](index=138&type=chunk)[139](index=139&type=chunk)[140](index=140&type=chunk)[141](index=141&type=chunk) - Effective collaboration with AbbVie is crucial for **LINZESS** commercialization in the U.S., requiring continuous adaptation of the commercial model and market strategy to evolving landscapes, including potential approval for pediatric FC[143](index=143&type=chunk)[144](index=144&type=chunk) - The company faces intense competition from existing branded (e.g., **AMITIZA**, **TRULANCE**, **MOTEGRITY**, **IBSRELA**) and generic prescription therapies, as well as over-the-counter products, potentially limiting demand and pricing for **LINZESS**[147](index=147&type=chunk)[148](index=148&type=chunk) - Post-approval development and regulatory requirements for **LINZESS**, including seeking approval for additional indications, present ongoing challenges and costs, with failure potentially leading to negative regulatory action[149](index=149&type=chunk)[150](index=150&type=chunk)[152](index=152&type=chunk)[153](index=153&type=chunk) - Failure by Ironwood, its partners, or manufacturing facilities to comply with applicable regulatory requirements (e.g., GMP) could result in product restrictions, recalls, withdrawal of approval, fines, or sanctions[154](index=154&type=chunk)[156](index=156&type=chunk) - Regulatory approval in one jurisdiction does not guarantee approval in another, and delays or failures in obtaining foreign regulatory approvals could negatively affect global commercialization[155](index=155&type=chunk)[157](index=157&type=chunk)[159](index=159&type=chunk) [Risks Related to Our Growth Strategy](index=48&type=section&id=Risks%20Related%20to%20Our%20Growth%20Strategy) Ironwood's growth strategy relies on uncertain and costly in-licensing, acquisitions, and pipeline development, with high risks of delays and commercial failure - Ironwood's future success depends heavily on its ability to successfully in-license or acquire externally developed GI products or product candidates and execute other value-creation transactions[160](index=160&type=chunk) - Identifying, selecting, negotiating, and integrating license or acquisition opportunities is lengthy, complex, highly competitive, and may incur significant costs without guaranteed benefits[160](index=160&type=chunk)[161](index=161&type=chunk) - Any in-licensed or acquired product candidates will require additional development efforts, including extensive clinical testing and regulatory approval, with no assurance of commercial viability[163](index=163&type=chunk) - Failure to successfully develop and commercialize additional product candidates (e.g., pediatric **LINZESS**, **IW-3300**, **CNP-104**) would impair growth and increase dependence on **LINZESS's** commercial success[164](index=164&type=chunk)[165](index=165&type=chunk) - Pharmaceutical product development is highly uncertain, costly, and prone to delays, with nonclinical and early clinical results not necessarily predictive of later-stage success or regulatory approval[165](index=165&type=chunk)[166](index=166&type=chunk) - Delays in clinical testing (e.g., due to COVID-19, regulatory approvals, patient enrollment, safety issues) could increase costs and delay or limit revenue generation[169](index=169&type=chunk)[170](index=170&type=chunk)[171](index=171&type=chunk)[174](index=174&type=chunk) - Inability to successfully partner for product development and commercialization would impair growth, as the company relies on partners for financial resources and industry experience outside the U.S[168](index=168&type=chunk) [Risks Related to Our Dependence on Third Parties](index=54&type=section&id=Risks%20Related%20to%20Our%20Dependence%20on%20Third%20Parties) Ironwood's reliance on third-party partners for linaclotide development, manufacturing, and commercialization introduces significant operational and supply chain risks - Ironwood is highly dependent on third-party partners (AbbVie, Astellas, AstraZeneca) for various aspects of linaclotide development, manufacturing, and worldwide commercialization[175](index=175&type=chunk) - Ineffective communication, coordination, insufficient resource allocation by partners, or material breaches of collaboration agreements could delay regulatory approval and commercialization of linaclotide[176](index=176&type=chunk) - The company relies entirely on contract manufacturers, its partners, and other third parties to manufacture and distribute linaclotide and other product candidates[180](index=180&type=chunk) - Manufacturing and supply chain risks include non-compliance with GMP, raw material sourcing difficulties, quality issues, production disruptions, and insufficient capacities, potentially harming development and commercialization[181](index=181&type=chunk)[182](index=182&type=chunk)[183](index=183&type=chunk)[184](index=184&type=chunk) - Changes in control or management of any linaclotide partner could adversely affect collaborative relationships, disrupt operations, and impact linaclotide's commercialization success[186](index=186&type=chunk) - If Ironwood reacquired rights due to a partner's change of control, it would need to establish or enhance its own operational capabilities, potentially leading to reduced efficiency or performance[187](index=187&type=chunk)[188](index=188&type=chunk) [Risks Related to Regulatory, Legal and Compliance Matters](index=60&type=section&id=Risks%20Related%20to%20Regulatory,%20Legal%20and%20Compliance%20Matters) Ironwood faces significant product liability, off-label promotion, and compliance risks under extensive healthcare regulations, with potential for substantial penalties and negative impacts from healthcare reforms - Ironwood faces potential product liability exposure from clinical trial use and approved product sales, which could result in substantial liabilities, decreased demand, regulatory investigations, and reputational harm[190](index=190&type=chunk)[191](index=191&type=chunk)[193](index=193&type=chunk) - Promoting "off-label" uses of products is strictly prohibited, and such promotion could lead to significant civil, administrative, and criminal sanctions[192](index=192&type=chunk) - The company must comply with extensive healthcare and other regulations, including federal anti-kickback laws, false claims laws, HIPAA, the FCPA, and various state laws, with non-compliance potentially resulting in substantial penalties, fines, and operational disruption[196](index=196&type=chunk)[197](index=197&type=chunk)[198](index=198&type=chunk)[199](index=199&type=chunk)[201](index=201&type=chunk)[202](index=202&type=chunk) - Healthcare reform efforts (e.g., ACA, IRA 2022) and other governmental/private payor initiatives aimed at controlling healthcare costs could negatively affect demand, pricing, and reimbursement for Ironwood's products[203](index=203&type=chunk)[204](index=204&type=chunk)[205](index=205&type=chunk)[206](index=206&type=chunk)[207](index=207&type=chunk) - The U.S. FDA's enhanced post-marketing authority, including requiring post-marketing studies, labeling changes, and risk evaluation/mitigation strategies, increases development costs and could restrict product sales[208](index=208&type=chunk) [Risks Related to the Separation of Cyclerion](index=66&type=section&id=Risks%20Related%20to%20the%20Separation%20of%20Cyclerion) The 2019 Cyclerion separation exposes Ironwood to potential claims and liabilities, including significant tax risks if the share distribution fails to qualify as tax-free - The 2019 separation of Cyclerion exposes Ironwood to potential claims and liabilities, as Cyclerion's financial responsibility for its business activities is not guaranteed to satisfy indemnification obligations[209](index=209&type=chunk)[210](index=210&type=chunk) - The distribution of Cyclerion shares was intended to be tax-free for U.S. federal income tax purposes, but failure to qualify could subject Ironwood and its stockholders to significant tax liabilities[211](index=211&type=chunk)[212](index=212&type=chunk)[213](index=213&type=chunk)[214](index=214&type=chunk) [Risks Related to Intellectual Property](index=68&type=section&id=Risks%20Related%20to%20Intellectual%20Property) Ironwood's success depends on maintaining patent protection and avoiding infringement, facing uncertainties in patent strength, costly litigation, and risks from generic launches - Ironwood's success depends on obtaining and maintaining sufficient patent protection for its products and candidates, preserving trade secrets, and operating without infringing others' proprietary rights[215](index=215&type=chunk) - The strength of pharmaceutical patents is uncertain, as applications may not be granted, or issued patents may be challenged, narrowed, invalidated, or circumvented[216](index=216&type=chunk) - Changes in U.S. patent statutes (e.g., America Invents Act) and Supreme Court rulings can make patent protection more difficult and costly to obtain, enforce, or defend[218](index=218&type=chunk)[219](index=219&type=chunk) - The company may face or be threatened with litigation by third parties alleging intellectual property infringement, potentially resulting in injunctions, substantial damages, or costly licenses[222](index=222&type=chunk)[223](index=223&type=chunk)[224](index=224&type=chunk)[225](index=225&type=chunk) - Involvement in legal proceedings (e.g., ANDA lawsuits, inter partes review, post-grant review) to protect or enforce intellectual property rights is expensive and time-consuming, with potential for adverse outcomes like patent invalidation or loss of protection[227](index=227&type=chunk)[228](index=228&type=chunk)[229](index=229&type=chunk)[230](index=230&type=chunk)[231](index=231&type=chunk)[232](index=232&type=chunk) - Loss of patent protection for a product or an "at-risk" launch by a generic manufacturer could significantly reduce revenues[232](index=232&type=chunk) - Reliance on unpatented trade secrets and know-how carries risks of independent development by competitors or breaches of confidentiality agreements[220](index=220&type=chunk) [Risks Related to Our Finances and Capital Requirements](index=74&type=section&id=Risks%20Related%20to%20Our%20Finances%20and%20Capital%20Requirements) Ironwood faces financial risks from its accumulated deficit, reliance on LINZESS revenue, potential need for additional funding, debt obligations, and fluctuating operating results - Ironwood incurred significant net losses from inception through 2018, with an accumulated deficit of **$696.4 million** as of December 31, 2022, and may incur future losses[236](index=236&type=chunk)[237](index=237&type=chunk) - Revenue is highly dependent on the **LINZESS** collaboration with AbbVie for the U.S., subject to fluctuations in demand, buying patterns, pricing, and reimbursement[236](index=236&type=chunk) - The company may need additional funding for commercialization, R&D, and acquisitions, but capital availability on acceptable terms is not assured, potentially leading to delays or reduced efforts[238](index=238&type=chunk)[241](index=241&type=chunk) - The ability to pay principal and interest on **$400.0 million** in outstanding convertible notes depends on sufficient cash flows from operations, particularly net quarterly payments from AbbVie[242](index=242&type=chunk)[245](index=245&type=chunk) - Indebtedness could adversely affect financial condition by limiting additional financing, requiring substantial cash flows for debt service, increasing vulnerability to adverse conditions, and limiting operational flexibility[245](index=245&type=chunk)[248](index=248&type=chunk) - Quarterly and annual operating results may fluctuate significantly due to factors including product demand, commercialization costs, milestone payments, strategic arrangements, asset impairments, tax changes, and regulatory developments[252](index=252&type=chunk)[253](index=253&type=chunk) - The ability to use net operating loss (NOL) and tax credit carryforwards is limited by Internal Revenue Code provisions (Sections 382 and 383) related to ownership changes, and carryforwards may expire before sufficient taxable income is generated[254](index=254&type=chunk)[255](index=255&type=chunk)[256](index=256&type=chunk) [General Risk Factors](index=82&type=section&id=General%20Risk%20Factors) General risks include the ongoing impact of the COVID-19 pandemic, reliance on key personnel, cybersecurity threats, anti-takeover provisions, and stock price volatility - The COVID-19 pandemic has impacted and may continue to impact business operations, commercial plans for **LINZESS**, and clinical trial enrollment, with significant uncertainties regarding its duration and extent[257](index=257&type=chunk)[258](index=258&type=chunk)[259](index=259&type=chunk)[260](index=260&type=chunk)[261](index=261&type=chunk)[262](index=262&type=chunk) - The company may not effectively manage its business if it loses current management or fails to attract, motivate, and retain key personnel, especially in the competitive biotechnology and pharmaceutical industry[263](index=263&type=chunk)[264](index=264&type=chunk) - Security breaches and IT system disruptions (internal or external) could compromise sensitive information, disrupt operations, and expose the company to liability, negatively impacting financial condition and reputation[266](index=266&type=chunk)[268](index=268&type=chunk) - Anti-takeover provisions under the company's charter documents and Delaware law could delay or prevent a change of control through various mechanisms[269](index=269&type=chunk)[270](index=270&type=chunk)[271](index=271&type=chunk) - Identification of a material weakness in internal control over financial reporting or an unqualified auditor opinion could adversely affect business, financial results, and Class A Common Stock trading price, especially due to reliance on partner-provided financial information[272](index=272&type=chunk)[273](index=273&type=chunk)[274](index=274&type=chunk)[275](index=275&type=chunk) - The price of Class A Common Stock is expected to fluctuate substantially due to various factors, including commercial performance, reimbursement policies, market conditions, product safety concerns, and external events[276](index=276&type=chunk)[277](index=277&type=chunk)[284](index=284&type=chunk) - Proxy contests or other stockholder actions can be costly, disruptive, and divert management attention, potentially impacting the market price of Class A Common Stock[279](index=279&type=chunk) [Item 1B. Unresolved Staff Comments](index=90&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company has no unresolved staff comments to report - The company has no unresolved staff comments[280](index=280&type=chunk) [Item 2. Properties](index=90&type=section&id=Item%202.%20Properties) Ironwood's corporate headquarters in Boston, Massachusetts, occupies 39,000 square feet under a lease expiring in June 2030, deemed suitable for foreseeable needs - Ironwood's corporate headquarters and operations are located in Boston, Massachusetts, occupying approximately **39,000** square feet of office space[281](index=281&type=chunk) - The lease for the headquarters facilities expires in June 2030[281](index=281&type=chunk) - The company believes its facilities are suitable and adequate for its needs for the foreseeable future[281](index=281&type=chunk) [Item 3. Legal Proceedings](index=90&type=section&id=Item%203.%20Legal%20Proceedings) The company has no material legal proceedings to report - The company has no material legal proceedings[282](index=282&type=chunk) [Item 4. Mine Safety Disclosures](index=90&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - This item is not applicable[283](index=283&type=chunk) PART II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=92&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity,%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Ironwood's Class A Common Stock trades on Nasdaq under "IRWD"; the company has 34 stockholders of record, does not pay dividends, and completed a **$150.0 million** stock repurchase program in May 2022 - Ironwood's Class A Common Stock is traded on the Nasdaq Global Select Market under the symbol "**IRWD**" since February 3, 2010[287](index=287&type=chunk) - As of January 31, 2023, there were **34** stockholders of record of the Class A Common Stock[287](index=287&type=chunk) - The company has never declared or paid cash dividends and does not anticipate doing so, intending to retain all future earnings to finance operations and strategic transactions[289](index=289&type=chunk) - A **$150.0 million** stock repurchase program, authorized in May 2021, was completed in May 2022, resulting in the repurchase and retirement of **13.1 million** shares of Class A Common Stock[313](index=313&type=chunk)[685](index=685&type=chunk)[686](index=686&type=chunk) [Item 6. Selected Financial Data](index=93&type=section&id=Item%206.%20Selected%20Financial%20Data) This item is reserved, indicating that no selected financial data is presented in this section of the report - Item 6 is reserved, indicating no selected financial data is provided in this section[295](index=295&type=chunk) [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=94&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section reviews Ironwood's financial condition and operations, detailing 2022 revenues, income, and cash flow, and outlining critical accounting policies and ongoing COVID-19 uncertainties [Overview](index=94&type=section&id=Overview) Ironwood is a GI healthcare company focused on LINZESS and pipeline candidates, reporting **$175.1 million** net income in 2022 and an accumulated deficit of **$696.4 million** - Ironwood is a gastrointestinal (GI) healthcare company focused on developing and commercializing innovative GI product opportunities, with **LINZESS** (linaclotide) as its commercial product[300](index=300&type=chunk)[301](index=301&type=chunk) - The company maintains strategic partnerships for linaclotide with AbbVie (U.S. and global), AstraZeneca (China), and Astellas (Japan)[302](index=302&type=chunk) - The pipeline includes **IW-3300** for visceral pain conditions and **CNP-104** (via COUR collaboration) for primary biliary cholangitis[303](index=303&type=chunk)[302](index=302&type=chunk) Net Income (in thousands) | Year | Net Income (in thousands) | | :--- | :--------- | | 2022 | $175,065 | | 2021 | $528,448 | | 2020 | $106,176 | - As of December 31, 2022, the company had an accumulated deficit of **$696.4 million**[304](index=304&type=chunk) [Key 2022 Financial Highlights](index=96&type=section&id=Key%202022%20Financial%20Highlights) In 2022, total revenues slightly decreased to **$410.6 million**, while income from operations increased to **$250.3 million**, and cash from operations reached **$273.8 million** 2022 Financial Highlights | Metric | 2022 (in millions) | 2021 (in millions) | Change (in millions) | | :----- | :----------------- | :----------------- | :------------------- | | Total Revenues | **$410.6** | **$413.8** | **$(3.2)** | | LINZESS U.S. Collaborative Arrangements Revenue | **$398.8** | **$400.4** | **$(1.6)** | | Income from Operations | **$250.3** | **$232.3** | **$18.0** | | Cash from Operations | **$273.8** | N/A | N/A | | Cash & Cash Equivalents (EOP) | **$656.2** | N/A | N/A | | Stock Repurchase Program | Completed **$150M** program, repurchased **10.8M** shares for **$123.4M** in 2022 | N/A | N/A | - The slight decrease in **LINZESS** U.S. collaborative arrangements revenue was primarily driven by net price erosion and inventory channel fluctuations, partially offset by increased prescription demand[313](index=313&type=chunk) - The increase in income from operations was primarily driven by the recognition of **$19.5 million** of research and development expense in 2021 for the upfront, non-contingent, and milestone payment obligations related to the COUR Collaboration Agreement[313](index=313&type=chunk) [Financial Operations Overview](index=96&type=section&id=Financial%20Operations%20Overview) Revenues are primarily from linaclotide collaborations, while R&D and SG&A expenses are significant, and interest/investment income and derivative gains/losses impact net results - Revenues are primarily generated through collaborative arrangements and license agreements related to linaclotide, with the majority from net profit/loss sharing from **LINZESS** sales in the U.S. with AbbVie[309](index=309&type=chunk)[310](index=310&type=chunk) - Cost of revenues primarily includes costs related to the sales of linaclotide API, finished drug product, and finished goods to partners outside of the U.S[311](index=311&type=chunk) - Research and development (R&D) expense comprises costs for product candidate development (linaclotide, **IW-3300**, **CNP-104**) and early research, including compensation, third-party contract costs, and licensing fees[312](index=312&type=chunk)[314](index=314&type=chunk)[315](index=315&type=chunk)[319](index=319&type=chunk)[320](index=320&type=chunk)[321](index=321&type=chunk) Research and Development Expenses (in thousands) | Program | 2022 (in thousands) | 2021 (in thousands) | 2020 (in thousands) | | :------ | :----- | :----- | :----- | | Linaclotide | $17,267 | $21,075 | $25,531 | | IW-3718 | $461 | $8,002 | $52,183 | | IW-3300 | $15,824 | $11,687 | $3,810 | | CNP-104 | $1,022 | $19,500 | $0 | | Early R&D | $9,691 | $10,141 | $6,538 | | **Total R&D** | **$44,265** | **$70,405** | **$88,062** | - Selling, general and administrative (SG&A) expense is substantial, covering personnel, legal, information technology, business development, commercial, sales, marketing, communications, and human resource functions[334](index=334&type=chunk) - Interest expense primarily consists of cash and non-cash interest costs related to convertible senior notes[336](index=336&type=chunk) - Interest and investment income consists of interest earned on cash and cash equivalents, as well as significant financing components of payments due from collaboration partners[337](index=337&type=chunk) - Gain (loss) on derivatives consists of the change in fair value of convertible note hedges and note hedge warrants[338](index=338&type=chunk) - Income taxes are prepared based on the asset and liability method, with a valuation allowance for deferred tax assets reassessed periodically[341](index=341&type=chunk) [Critical Accounting Policies and Estimates](index=103&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) Critical accounting policies involve significant judgment in revenue recognition, net profit/loss sharing, R&D expense accruals, share-based compensation, and income tax estimates - Revenue recognition requires significant judgment in identifying performance obligations, determining transaction price, allocating to standalone selling prices, and recognizing milestones and royalties[344](index=344&type=chunk)[345](index=345&type=chunk)[346](index=346&type=chunk)[347](index=347&type=chunk)[348](index=348&type=chunk)[349](index=349&type=chunk)[350](index=350&type=chunk) - Net profit or net loss sharing from **LINZESS** sales in the U.S. relies on AbbVie-provided amounts, involving estimates and judgments (e.g., product sales allowances, rebates) subject to future adjustments[352](index=352&type=chunk) - Research and development expenses are generally expensed as incurred, with nonrefundable advance payments capitalized; accruing CRO services and recognizing upfront/milestone payments (e.g., COUR Collaboration Agreement) require estimates[358](index=358&type=chunk)[359](index=359&type=chunk)[360](index=360&type=chunk)[361](index=361&type=chunk) - Share-based compensation expense requires subjective assumptions for fair value estimation (e.g., Black-Scholes for stock options and ESPP, Monte Carlo for performance-based RSUs) and judgment for anticipated achievement of performance targets[362](index=362&type=chunk)[363](index=363&type=chunk)[365](index=365&type=chunk)[366](index=366&type=chunk)[367](index=367&type=chunk) - Income taxes are accounted for using the asset and liability method, with deferred tax assets reduced by a valuation allowance based on recoverability assessment, requiring significant judgment for both the allowance and uncertain tax positions[368](index=368&type=chunk)[369](index=369&type=chunk)[370](index=370&type=chunk)[371](index=371&type=chunk) [Results of Operations](index=111&type=section&id=Results%20of%20Operations) In 2022, total revenues decreased slightly to **$410.6 million**, while income from operations increased to **$250.3 million**, and net income was **$175.1 million**, significantly impacted by a 2021 tax benefit Consolidated Statements of Income (in thousands) | Metric | 2022 (in thousands) | 2021 (in thousands) | 2020 (in thousands) | | :-------------------------------- | :----- | :----- | :----- | | Total Revenues | $410,596 | $413,753 | $389,523 | | Collaborative arrangements revenue | $410,596 | $412,784 | $381,545 | | Sale of active pharmaceutical ingredient | $0 | $969 | $7,978 | | Total Operating Expenses | $160,259 | $181,494 | $246,583 | | Research and development | $44,265 | $70,405 | $88,062 | | Selling, general and administrative | $115,994 | $111,133 | $140,003 | | Income from Operations | $250,337 | $232,259 | $142,940 | | Net Income | $175,065 | $528,448 | $106,176 | | Net income per share—basic | $1.13 | $3.26 | $0.67 | | Net income per share—diluted | $0.96 | $3.21 | $0.66 | Revenue Changes (2022 vs 2021, in thousands) | Revenue Type | 2022 (in thousands) | 2021 (in thousands) | Change (in thousands) | | :----------- | :----- | :----- | :----- | | Collaborative arrangements revenue | $410,596 | $412,784 | $(2,188) | | Sale of active pharmaceutical ingredient | $0 | $969 | $(969) | | **Total Revenues** | **$410,596** | **$413,753** | **$(3,157)** | - Collaborative arrangements revenue decreased by **$2.2 million**, primarily due to a **$1.6 million** decrease in Ironwood's share of net profits from **LINZESS** sales in the U.S., driven by net price erosion and inventory channel fluctuations, partially offset by increased prescription demand[375](index=375&type=chunk) - Sale of active pharmaceutical ingredient (API) decreased by **$1.0 million** due to non-recurring, insignificant sales during 2021[376](index=376&type=chunk) Operating Expense Changes (2022 vs 2021, in thousands) | Expense Type | 2022 (in thousands) | 2021 (in thousands) | Change (in thousands) | | :----------- | :----- | :----- | :----- | | Research and development | $44,265 | $70,405 | $(26,140) | | Selling, general and administrative | $115,994 | $111,133 | $4,861 | | Restructuring expenses | $0 | $(44) | $44 | | **Total Operating Expenses** | **$160,259** | **$181,494** | **$(21,235)** | - The **$26.1 million** decrease in research and development expense was primarily due to a **$19.4 million** decrease in expenses related to the COUR Collaboration Agreement and a **$5.4 million** decrease in external development costs for **IW-3718**, partially offset by a **$3.0 million** increase in external development costs for **IW-3300**[378](index=378&type=chunk) - Selling, general and administrative expenses increased by **$4.9 million**, mainly due to a **$3.4 million** increase in sales and marketing activities and a **$1.7 million** increase in compensation, benefits, and other employee-related expenses[379](index=379&type=chunk) Other (Expense) Income, Net Changes (2022 vs 2021, in thousands) | Item | 2022 (in thousands) | 2021 (in thousands) | Change (in thousands) | | :--- | :----- | :----- | :----- | | Interest expense | $(7,598) | $(31,150) | $23,552 | | Interest and investment income | $9,501 | $726 | $8,775 | | Gain (loss) on derivatives | $182 | $(1,178) | $1,360 | | **Total Other (Expense) Income, Net** | **$2,085** | **$(31,602)** | **$33,687** | - Interest expense decreased by **$23.6 million** due to a **$22.1 million** decrease in non-cash interest expense following ASU 2020-06 adoption and a **$1.5 million** decrease in coupon interest expense from 2022 Convertible Notes repayment[381](index=381&type=chunk) - Interest and investment income increased by **$8.8 million**, primarily due to an increase in investment interest rates[382](index=382&type=chunk) - Income tax expense was **$77.4 million** in 2022, compared to an income tax benefit of **$327.8 million** in 2021, with the 2021 benefit primarily related to the release of the valuation allowance on tax attributes and deferred tax assets[384](index=384&type=chunk)[385](index=385&type=chunk) [Liquidity and Capital Resources](index=115&type=section&id=Liquidity%20and%20Capital%20Resources) Ironwood maintains **$656.2 million** in cash and equivalents, with **$400.0 million** in convertible notes, and expects sufficient cash from operations to meet future obligations - Ironwood had an accumulated deficit of **$696.4 million** as of December 31, 2022, but has financed operations through equity, collaboration/license arrangements, debt financings, and cash from operations[387](index=387&type=chunk) - As of December 31, 2022, the company had **$656.2 million** of unrestricted cash and cash equivalents and **$400.0 million** aggregate principal amount of convertible notes outstanding[387](index=387&type=chunk)[388](index=388&type=chunk) Cash Flow Summary (in thousands) | Activity | 2022 (in thousands) | 2021 (in thousands) | 2020 (in thousands) | | :------- | :----- | :----- | :----- | | Net cash provided by operating activities | $273,763 | $261,895 | $168,836 | | Net cash used in investing activities | $(136) | $(265) | $(1,842) | | Net cash provided by (used in) financing activities | $(237,553) | $(4,550) | $18,546 | | **Net increase in cash, cash equivalents and restricted cash** | **$36,074** | **$257,080** | **$185,540** | - Cash and cash equivalents increased by **$36.1 million** during 2022, driven by **$273.8 million** in cash from operating activities, offset by **$237.6 million** in financing activities[389](index=389&type=chunk) - Net cash provided by operating activities totaled **$273.8 million** for 2022, primarily related to cash flows from net income and collaboration arrangements revenue from **LINZESS** sales in the U.S[389](index=389&type=chunk)[394](index=394&type=chunk)[395](index=395&type=chunk) - Net cash used in financing activities for 2022 totaled **$237.6 million**, resulting from **$126.4 million** of share repurchases and repayment of the **$120.7 million** remaining principal on the 2022 Convertible Notes[398](index=398&type=chunk) - The company anticipates its cash balance and expected net cash inflows from operations will be sufficient to meet its near-term and long-term cash obligations[390](index=390&type=chunk)[401](index=401&type=chunk) - Future funding requirements will depend on various factors, including **LINZESS** sales, R&D costs for product candidates, regulatory approvals, and strategic transactions[404](index=404&type=chunk) - The company may consider additional funding through new collaborative arrangements, strategic alliances, and additional equity and debt financings[405](index=405&type=chunk) [Trends and Uncertainties](index=121&type=section&id=Trends%20and%20Uncertainties) The COVID-19 pandemic continues to pose significant uncertainties for Ironwood's business, impacting commercial operations, **LINZESS** sales, and clinical trials - The COVID-19 pandemic, including containment and mitigation measures, has impacted and may continue to impact Ironwood's business and operations, particularly day-to-day operations and the collaboration agreement for North America with AbbVie[410](index=410&type=chunk) - New strains or variants of COVID-19 may present risks to the successful execution of the commercial operating plan for **LINZESS** due to potential limitations on in-person work practices for customer-facing employees[411](index=411&type=chunk) - The COVID-19 pandemic may negatively impact future net sales of **LINZESS** in the U.S., including through reduced in-person promotion or potential changes in patient access to healthcare and payor reimbursement levels[413](index=413&type=chunk) - The pandemic could also cause significant disruptions to manufacturing operations or supply of **LINZESS** and impact clinical trial enrollment or participation[412](index=412&type=chunk)[262](index=262&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures about Market Risk](index=121&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) Ironwood's market risk exposure is primarily from interest rate sensitivity on short-term investments and equity price risk on convertible notes, with no significant foreign currency risk [Interest Rate Risk](index=121&type=section&id=Interest%20Rate%20Risk) Ironwood's interest rate risk primarily stems from short-term marketable securities, with minimal material impact expected from rate changes due to portfolio characteristics - Ironwood's primary market risk exposure is interest income sensitivity, affected by changes in general interest rates, particularly for its short-term marketable securities investments[416](index=416&type=chunk) - Due to the short-term duration and low-risk profile of its investment portfolio, an immediate **1%** change in interest rates would not materially affect the fair market value, operating results, or cash flows[416](index=416&type=chunk) - The company's Convertible Senior Notes bear interest at a fixed rate, resulting in minimal exposure to interest rate changes, though future interest rates may be higher relative to market if credit rating improves or circumstances change[419](index=419&type=chunk) [Equity Price Risk](index=123&type=section&id=Equity%20Price%20Risk) The fair values of Ironwood's convertible notes are subject to equity price risk, mitigated by Capped Calls to minimize potential dilution - The fair values of Ironwood's convertible notes are dependent on the price and volatility of its Class A Common Stock[420](index=420&type=chunk) - To minimize potential dilution upon note conversion, the company entered into Convertible Note Hedges (terminated unexercised in June 2022) and Capped Calls (for the 2024 and 2026 Convertible Notes)[421](index=421&type=chunk) [Foreign Currency Risk](index=123&type=section&id=Foreign%20Currency%20Risk) Ironwood has no significant monetary assets or liabilities in foreign currencies and does not anticipate significant impact from foreign currency fluctuations - Ironwood has no significant monetary assets or liabilities expected to be settled in foreign currencies[423](index=423&type=chunk) - The company does not expect to be significantly impacted by foreign currency fluctuations[423](index=423&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=123&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) Consolidated financial statements and the independent auditor's report are presented in pages F-1 through F-50 of this Annual Report on Form 10-K - The consolidated financial statements and the independent registered public accounting firm's report appear at pages F-1 through F-50 of this Annual Report on Form 10-K[424](index=424&type=chunk) [Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=123&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) There have been no changes in or disagreements with accountants on accounting and financial disclosure - There have been no changes in or disagreements with accountants on accounting and financial disclosure[425](index=425&type=chunk) [Item 9A. Controls and Procedures](index=123&type=section&id=Item%209A.%20Controls%20and%20Procedures) Ironwood's management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2022, with no material changes during the fourth quarter [Evaluation of Disclosure Controls and Procedures](index=123&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) Management concluded that Ironwood's disclosure controls and procedures were effective at a reasonable assurance level as of December 31, 2022 - Management, including the principal executive and financial officers, concluded that Ironwood's disclosure controls and procedures were effective at the reasonable assurance level as of December 31, 2022[426](index=426&type=chunk) - These controls ensure that information required for Exchange Act reports is recorded, processed, summarized, and reported within specified time periods[426](index=426&type=chunk) [Management's Report on Internal Control Over Financial Reporting](index=123&type=section&id=Management%27s%20Report%20on%20Internal%20Control%20Over%20Financial%20Reporting) Management concluded that internal control over financial reporting was effective as of December 31, 2022, a conclusion affirmed by Ernst and Young LLP - Management is responsible for establishing and maintaining adequate internal control over financial reporting[428](index=428&type=chunk) - Based on a COSO (2013) framework evaluation, management concluded that internal control over financial reporting was effective as of December 31, 2022[429](index=429&type=chunk) - The effectiveness of internal control over financial reporting as of December 31, 2022, was audited by Ernst and Young LLP, who expressed an unqualified opinion thereon[430](index=430&type=chunk)[435](index=435&type=chunk) [Changes in Internal Control](index=125&type=section&id=Changes%20in%20Internal%20Control) No material changes to internal controls over financial reporting occurred during the quarter ended December 31, 2022 - Management concluded that no material changes occurred during the quarter ended December 31, 2022, affecting the company's internal controls over financial reporting[432](index=432&type=chunk) [Item 9B. Other Information](index=129&type=section&id=Item%209B.%20Other%20Information) No other information is reported under this item - No other information is reported under this item[443](index=443&type=chunk) PART III [Item 10. Directors, Executive Officers and Corporate Governance](index=129&type=section&id=Item%2010.%20Directors,%20Executive%20Officers%20and%20Corporate%20Governance) Ironwood has a code of business conduct and ethics for all personnel, with other required information incorporated by reference from its 2023 proxy statement - Ironwood has adopted a code of business conduct and ethics applicable to its directors, officers, employees, consultants, and their immediate family, available on its corporate website[445](index=445&type=chunk) - Other information required by this item is incorporated by reference from the definitive proxy statement for the 2023 Annual Meeting of Stockholders[446](index=446&type=chunk) [Item 11. Executive Compensation](index=129&type=section&id=Item%2011.%20Executive%20Compensation) Information regarding executive compensation is incorporated by reference from Ironwood's definitive proxy statement for its 2023 Annual Meeting of Stockholders - Information regarding executive compensation is incorporated by reference from the definitive proxy statement for the 2023 Annual Meeting of Stockholders[447](index=447&type=chunk) [Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=129&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Security ownership information is incorporated by reference from the 2023 proxy statement; as of December 31, 2022, **12,390,288** securities were issuable from outstanding options at a **$12.34** weighted-average exercise price - Information relating to security ownership of certain beneficial owners and management is incorporated by reference from the definitive proxy statement for the 2023 Annual Meeting of Stockholders[448](index=448&type=chunk) Securities Authorized for Issuance Under Equity Compensation Plans (as of Dec 31, 2022) | Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted average exercise price of outstanding options, warrants, and rights ($) | Number of securities remaining available for future issuance under equity compensation plans | | :------- | :---------------------------------------------------------------------------------------- | :------------------------------------------------------------------------- | :--------------------------------------------------------------------------------------- | | Equity compensation plans approved by security holders | **12,390,288** | **$12.34** | **7,366,153** | | Equity compensation plans not approved by security holders | — | — | — | | **Total** | **12,390,288** | **$12.34** | **7,366,153** | [Item 13. Certain Relationships and Related Transactions, and Director Independence](index=131&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions,%20and%20Director%20Independence) Information regarding certain relationships and related transactions, and director independence, is incorporated by reference from Ironwood's definitive proxy statement for its 2023 Annual Meeting of Stockholders - Information regarding certain relationships and related transactions, and director independence, is incorporated by reference from the definitive proxy statement for the 2023 Annual Meeting of Stockholders[452](index=452&type=chunk) [Item 14. Principal Accountant Fees and Services](index=131&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information regarding principal accountant fees and services is incorporated by reference from Ironwood's definitive proxy statement for its 2023 Annual Meeting of Stockholders - Information regarding principal accountant fees and services is incorporated by reference from the definitive proxy statement for the 2023 Annual Meeting of Stockholders[453](index=453&type=chunk) PART IV [Item 15. Exhibits and Financial Statement Schedules](index=132&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists consolidated financial statements and a comprehensive array of exhibits, including various agreements, corporate governance documents, financial instrument confirmations, and required certifications - This section lists documents filed as part of the report, including consolidated financial statements and exhibits[455](index=455&type=chunk)[456](index=456&type=chunk) - No financial statement schedules are submitted as they are not applicable, required, or the information is included in the Consolidated Financial Statements or Notes[455](index=455&type=chunk) - Exhibits include various agreements (e.g., Separation, Collaboration, License, Supply, Lease, Tax Matters, Employee Matters), corporate governance documents (e.g., Certificate of Incorporation, Bylaws), financial instrument confirmations (e.g., Indentures, Warrants, Call Option), and certifications (e.g., Independent Registered Public Accounting Firm Consent, CEO/CFO Certifications, XBRL documents)[455](index=455&type=chunk)[458](index=458&type=chunk)[459](index=459&type=chunk)[461](index=461&type=chunk)[462](index=462&type=chunk)[463](index=463&type=chunk)[465](index=465&type=chunk)[466](index=466&type=chunk)[467](index=467&type=chunk) [Item 16. Form 10-K Summary](index=144&type=section&id=Item%2016.%20Form%2010-K%20Summary) This item indicates that no Form 10-K Summary is provided in this report - No Form 10-K Summary is provided[470](index=470&type=chunk)

Financial Performance & Guidance - Ironwood's total revenues reached $1.002 billion in FY 2022[26] - GAAP net income for FY 2022 was $175.065 million, or $1.13 per share basic and $0.96 per share diluted[26,30] - Adjusted EBITDA for FY 2022 was $251.755 million[30] - Ironwood anticipates LINZESS U S net sales growth of 3%-5% in FY 2023[27] - Ironwood projects revenues between $420 million and $435 million and adjusted EBITDA exceeding $250 million for FY 2023[27] LINZESS Performance - LINZESS U S net sales reached $1.002 billion in FY 2022[26,31] - LINZESS commercial margin was 73% in FY 2022[26,31] - LINZESS prescription demand experienced a 9% year-over-year growth[7] - LINZESS achieved a market-leading TRx share of 45%[7] Pipeline Development - An sNDA for functional constipation (FC) in pediatric patients ages 6-17 has been submitted, with priority review granted and a PDUFA date of June 14, 2023[7,16] - Proof of concept study dosing for IW-3300 in patients with IC/BPS is expected to begin in early 2023[7] - Early data from the CNP-104 proof of concept study in primary biliary cholangitis (PBC) is expected in the second half of 2023[16]

Trulance (4%) Ibsrela (0%) Volume 1 IQVIA NPA Week Ending November 18, 2022. Strong LINZESS new-to-brand volume and 90-day prescriptions are key indicators of future growth potential 1 IQVIA Patient Insights, Q3 2022. 2 IQVIA Weekly NPA October 2022. 3 IQVIA Quantity Frequency October 2022. LINZESS NBRx Volume Growth1 17 LINZESS 90-Day Prescription ~21%2 120,000 125,000 130,000 135,000 140,000 Q3 2021 Q3 2022 +9% Y/Y 34 35 36 37 38 39 40 41 42 43 44 Average TRx fill size 3 The natural history of Primary Bil ...

PART I — FINANCIAL INFORMATION [Item 1. Financial Statements (unaudited)](index=6&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) Presents unaudited condensed consolidated financial statements, including balance sheets, income, equity, and cash flow statements, with detailed notes [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets and stockholders' equity decreased from December 2021 to June 2022, driven by reduced cash and paid-in capital Condensed Consolidated Balance Sheets (in thousands) | Metric | June 30, 2022 (in thousands) | December 31, 2021 (in thousands) | | :-------------------------------- | :----------------------------- | :------------------------------- | | Cash and cash equivalents | $504,365 | $620,129 | | Total current assets | $617,826 | $745,225 | | Total assets | $975,690 | $1,126,927 | | Total current liabilities | $23,298 | $161,698 | | Total stockholders' equity | $532,883 | $605,911 | - Total assets decreased by **$151.2 million** from **$1,126.9 million** at December 31, 2021, to **$975.7 million** at June 30, 2022[19](index=19&type=chunk) - Total current liabilities significantly decreased from **$161.7 million** to **$23.3 million**, largely due to the repayment of the current portion of convertible senior notes[19](index=19&type=chunk) [Condensed Consolidated Statements of Income and Comprehensive Income](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income%20and%20Comprehensive%20Income) Net income significantly decreased for Q2 and H1 2022 compared to 2021, due to a large prior-year income tax benefit Condensed Consolidated Statements of Income and Comprehensive Income (in thousands) | Metric (in thousands) | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total revenues | $97,231 | $104,031 | $194,760 | $192,876 | | Total operating expenses | $41,576 | $38,933 | $81,259 | $82,380 | | Income from operations | $55,655 | $65,098 | $113,501 | $110,496 | | Income before income taxes | $53,785 | $54,372 | $110,250 | $94,730 | | Income tax (expense) benefit | $(16,705) | $336,931 | $(34,369) | $336,499 | | Net income | $37,080 | $391,303 | $75,881 | $431,229 | | Net income per share—basic | $0.24 | $2.42 | $0.49 | $2.67 | | Net income per share—diluted | $0.21 | $2.39 | $0.42 | $2.64 | - Net income for the three months ended June 30, 2022, decreased by **90.5%** to **$37.1 million** from **$391.3 million** in the prior year, primarily due to a **$336.9 million** income tax benefit in Q2 2021[20](index=20&type=chunk) - Total revenues for the six months ended June 30, 2022, increased slightly by **1%** to **$194.8 million** compared to **$192.9 million** in the prior year[20](index=20&type=chunk) [Condensed Consolidated Statements of Stockholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) Total stockholders' equity decreased from December 2021 to June 2022, due to ASU 2020-06 adjustment and stock repurchases Condensed Consolidated Statements of Stockholders' Equity (in thousands) | Metric (in thousands) | December 31, 2021 | June 30, 2022 | | :-------------------- | :---------------- | :------------ | | Total Stockholders' Equity | $605,911 | $532,883 | | Cumulative-effect adjustment upon adoption of ASU 2020-06, net of tax | $(44,050) | | | Repurchases of common stock | | $(123,385) | | Net income | | $75,881 | - Total stockholders' equity decreased from **$605.9 million** at December 31, 2021, to **$532.9 million** at June 30, 2022[23](index=23&type=chunk) - The adoption of ASU 2020-06 resulted in a cumulative-effect adjustment of **$(44.1) million** to stockholders' equity[23](index=23&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash decreased for H1 2022, driven by financing outflows from debt repayment and share repurchases, despite positive operating cash flow Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity (in thousands) | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $125,489 | $122,262 | | Net cash used in investing activities | $(97) | $0 | | Net cash provided by (used in) financing activities | $(241,156) | $7,873 | | Net increase (decrease) in cash, cash equivalents and restricted cash | $(115,764) | $130,135 | | Cash, cash equivalents and restricted cash, end of period | $506,100 | $494,919 | - Net cash provided by operating activities increased slightly to **$125.5 million** for the six months ended June 30, 2022, from **$122.3 million** in the prior year[26](index=26&type=chunk) - Financing activities resulted in a net cash outflow of **$241.2 million** for the six months ended June 30, 2022, compared to an inflow of **$7.9 million** in the prior year, mainly due to the repayment of **$120.7 million** in 2022 Convertible Notes and **$126.4 million** in share repurchases[26](index=26&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Detailed notes cover business, accounting policies, EPS, collaborations, financial instruments, debt, stock plans, repurchases, and income taxes [1. Nature of Business](index=10&type=section&id=1.%20Nature%20of%20Business) Ironwood is a GI healthcare company focused on LINZESS® commercialization and advancing pipeline candidates like CNP-104 and IW-3300 - Ironwood's core product, LINZESS® (linaclotide), is approved for adult IBS-C or CIC in the U.S. and Mexico, and for IBS-C in Japan and China[29](index=29&type=chunk) - The company has strategic partnerships with AbbVie (U.S., Canada, Mexico, Europe, Expanded Territory), Astellas (Japan), and AstraZeneca (China) for linaclotide[31](index=31&type=chunk)[32](index=32&type=chunk) - Pipeline candidates include CNP-104 for primary biliary cholangitis (in collaboration with COUR Pharmaceutical) and IW-3300 for visceral pain conditions (e.g., interstitial cystitis/bladder pain syndrome, endometriosis)[33](index=33&type=chunk)[34](index=34&type=chunk) [2. Summary of Significant Accounting Policies](index=12&type=section&id=2.%20Summary%20of%20Significant%20Accounting%20Policies) Outlines accounting policies, including ASU 2020-06 adoption, simplifying convertible instrument accounting and impacting deferred tax assets and equity - The company adopted ASU 2020-06 on January 1, 2022, using the modified retrospective approach, which simplified accounting for convertible instruments by treating them as a single liability[44](index=44&type=chunk)[45](index=45&type=chunk) Consolidated Balance Sheet (in thousands) | Consolidated Balance Sheet (in thousands) | December 31, 2021 (As Reported) | Effect of the Adoption of ASU 2020-06 | January 1, 2022 (As Adjusted) | | :---------------------------------------- | :------------------------------ | :------------------------------------ | :---------------------------- | | Deferred tax assets | $333,294 | $16,855 | $350,149 | | Current portion of convertible senior notes | $116,858 | $3,581 | $120,439 | | Long-term portion of convertible senior notes | $337,333 | $57,324 | $394,657 | | Additional paid-in-capital | $1,543,357 | $(110,217) | $1,433,140 | | Retained earnings | $(937,608) | $66,167 | $(871,441) | - The adoption of ASU 2020-06 is expected to reduce non-cash interest expense by **$22.1 million** during the year ended December 31, 2022, and does not impact liquidity or cash flows[45](index=45&type=chunk)[46](index=46&type=chunk) [3. Net Income Per Share](index=16&type=section&id=3.%20Net%20Income%20Per%20Share) Details basic and diluted EPS, highlighting the change to the if-converted method for convertible notes following ASU 2020-06 adoption Net Income Per Share | Metric | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :-------------------------------------------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income per share—basic | $0.24 | $2.42 | $0.49 | $2.67 | | Net income per share—diluted | $0.21 | $2.39 | $0.42 | $2.64 | | Weighted average shares used in computing net income per share—diluted (thousands) | 184,876 | 163,495 | 187,315 | 163,134 | - Following ASU 2020-06 adoption, the dilutive impact of Convertible Senior Notes is determined using the if-converted method, assuming conversion at the beginning of the period and deducting interest charges from the numerator[51](index=51&type=chunk) - The 2022 Convertible Notes had no dilutive impact for the three and six months ended June 30, 2022, as the company elected a combination settlement of cash for principal and shares for conversion value in excess of principal[52](index=52&type=chunk) [4. Collaboration, License and Other Agreements](index=17&type=section&id=4.%20Collaboration,%20License%20and%20Other%20Agreements) Details revenue from linaclotide collaborations with AbbVie, AstraZeneca, and Astellas, plus the COUR collaboration for CNP-104 Revenue Source (in thousands) | Revenue Source (in thousands) | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :---------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | AbbVie (North America) | $95,061 | $101,038 | $189,962 | $187,537 | | AbbVie (Europe and other) | $528 | $574 | $1,138 | $1,174 | | AstraZeneca (China) | $148 | $200 | $340 | $410 | | Astellas (Japan) | $500 | $570 | $1,023 | $1,066 | | Alnylam (GIVLAARI) | $585 | $596 | $1,408 | $1,052 | | Total collaborative arrangements revenue | $97,231 | $103,386 | $194,760 | $192,051 | - Collaborative arrangements revenue from AbbVie (North America) decreased by **$5.9 million (5.9%)** for the three months ended June 30, 2022, primarily due to decreased net price and inventory fluctuations, partially offset by increased prescription demand[53](index=53&type=chunk)[180](index=180&type=chunk) - The company has an option to acquire an exclusive license for CNP-104 from COUR Pharmaceutical for primary biliary cholangitis, with a data readout estimated in 2023. Upfront and milestone payments totaling **$19.5 million** were recognized as R&D expense in 2021[73](index=73&type=chunk)[74](index=74&type=chunk)[75](index=75&type=chunk) [5. Fair Value of Financial Instruments](index=25&type=section&id=5.%20Fair%20Value%20of%20Financial%20Instruments) Provides fair value measurements for financial instruments, including cash, restricted cash, and derivatives, noting hedge termination Asset/Liability (in thousands) | Asset/Liability (in thousands) | June 30, 2022 (Fair Value) | December 31, 2021 (Fair Value) | | :----------------------------- | :------------------------- | :----------------------------- | | Money market funds | $211,355 | $595,233 | | Repurchase agreements | $277,007 | $0 | | Restricted cash (money market funds) | $1,735 | $1,735 | | Convertible note hedges | $0 | $1,115 | | Note hedge warrants | $152 | $1,316 | - Convertible Note Hedges, classified as Level 3 derivatives, terminated unexercised upon expiry in June 2022, resulting in a change in fair value of **$(1.1) million** for the six months ended June 30, 2022[83](index=83&type=chunk)[85](index=85&type=chunk) - Note Hedge Warrants, also Level 3 derivatives, had a fair value of **$152 thousand** at June 30, 2022, down from **$1.3 million** at December 31, 2021[80](index=80&type=chunk)[85](index=85&type=chunk) [6. Accrued Expenses and Other Current Liabilities](index=28&type=section&id=6.%20Accrued%20Expenses%20and%20Other%20Current%20Liabilities) Details accrued expenses and other current liabilities, which decreased from December 2021 to June 2022 due to reduced compensation and repurchases Accrued Expense (in thousands) | Accrued Expense (in thousands) | June 30, 2022 | December 31, 2021 | | :----------------------------- | :------------ | :---------------- | | Accrued compensation and benefits | $8,762 | $17,115 | | Stock repurchase | $0 | $3,009 | | Other | $4,663 | $3,442 | | Total accrued expenses and other current liabilities | $13,425 | $23,566 | - Total accrued expenses and other current liabilities decreased by **$10.1 million (42.9%)** from **$23.6 million** at December 31, 2021, to **$13.4 million** at June 30, 2022[89](index=89&type=chunk) [7. Leases](index=28&type=section&id=7.%20Leases) Details the company's lease portfolio, including costs, remaining term, discount rate, and future minimum lease payments Lease Cost (in thousands) | Lease Cost (in thousands) | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Operating lease cost | $627 | $630 | $1,256 | $1,261 | | Short-term lease cost | $264 | $214 | $523 | $428 | | Total lease cost | $891 | $844 | $1,779 | $1,689 | Lease Metric | Lease Metric | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :------------------------------------------ | :----------------------------- | :----------------------------- | | Weighted-average remaining lease term (years) | 7.8 | 8.8 | | Weighted-average discount rate | 5.8% | 5.8% | - Future minimum lease payments under non-cancelable operating leases total **$25.8 million** as of June 30, 2022, with operating lease liabilities of **$20.6 million**[92](index=92&type=chunk) [8. Notes Payable](index=32&type=section&id=8.%20Notes%20Payable) Details convertible senior notes, including 2022 repayment, outstanding 2024/2026 notes, and accounting changes from ASU 2020-06 - The company repaid the remaining **$120.7 million** aggregate principal amount of its 2022 Convertible Notes upon maturity in June 2022[97](index=97&type=chunk) Convertible Senior Notes (in thousands) | Convertible Senior Notes (in thousands) | June 30, 2022 | December 31, 2021 | | :-------------------------------------- | :------------ | :---------------- | | 2022 Convertible Notes (Principal) | $0 | $120,699 | | 2024 Convertible Notes (Principal) | $200,000 | $200,000 | | 2026 Convertible Notes (Principal) | $200,000 | $200,000 | | Net carrying amount | $395,451 | $454,191 | | Total interest expense (Six Months Ended June 30, 2022) | $4,548 | | | Total interest expense (Six Months Ended June 30, 2021) | | $15,358 | - Total interest expense related to convertible senior notes decreased by **$10.8 million** for the six months ended June 30, 2022, compared to the same period in 2021, primarily due to the adoption of ASU 2020-06, which eliminated non-cash interest expense from debt discount amortization[109](index=109&type=chunk)[115](index=115&type=chunk)[192](index=192&type=chunk) [9. Employee Stock Benefit Plans](index=42&type=section&id=9.%20Employee%20Stock%20Benefit%20Plans) Summarizes share-based compensation expense under employee stock benefit plans, including stock options, RSAs, and RSUs Share-based Compensation Expense (in thousands) | Share-based Compensation Expense (in thousands) | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :---------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Research and development | $1,133 | $1,134 | $2,291 | $2,377 | | Selling, general and administrative | $5,468 | $3,455 | $10,399 | $7,498 | | Total share-based compensation expense | $6,601 | $4,589 | $12,690 | $9,985 | - Total share-based compensation expense increased by **$2.1 million (45.6%)** for the three months ended June 30, 2022, and by **$2.7 million (27.1%)** for the six months ended June 30, 2022, compared to the respective prior periods[131](index=131&type=chunk) [10. Share Repurchase Plan](index=42&type=section&id=10.%20Share%20Repurchase%20Plan) Details the completed $150.0 million Class A Common Stock repurchase program, finished in May 2022, with all shares retired - The company completed its **$150.0 million** share repurchase program in May 2022[132](index=132&type=chunk) Share Repurchase Program | Period | Shares Repurchased | Aggregate Cost (in thousands) | | :-------------------------- | :----------------- | :---------------------------- | | Three months ended June 30, 2022 | 2.8 million | $32,900 | | Six months ended June 30, 2022 | 10.8 million | $123,400 | | Overall program (since Dec 2021) | 13.1 million | $150,000 | - The average price per share for the overall repurchase program was **$11.47**[133](index=133&type=chunk)[238](index=238&type=chunk) [11. Income Taxes](index=42&type=section&id=11.%20Income%20Taxes) Explains income tax provision, including the 2021 valuation allowance release and 2022 non-cash tax expense from NOL utilization Income Tax (in thousands) | Income Tax (in thousands) | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Income tax (expense) benefit | $(16,705) | $336,931 | $(34,369) | $336,499 | - In Q2 2021, the company recorded a significant income tax benefit of **$336.9 million** due to the release of the valuation allowance on the majority of its tax attributes and other deferred tax assets[136](index=136&type=chunk)[139](index=139&type=chunk) - For the three and six months ended June 30, 2022, the company recorded income tax expense of **$16.7 million** and **$34.4 million**, respectively, with the majority being non-cash due to the utilization of net operating losses[135](index=135&type=chunk)[196](index=196&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=27&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management's perspective on financial condition and results, analyzing revenues, expenses, taxes, liquidity, capital, and COVID-19 impact [Overview](index=44&type=section&id=Overview) Ironwood is a GI healthcare company focused on LINZESS® and pipeline, with Q2 2022 net income decreasing due to a prior-year tax benefit - Ironwood's commercial product, LINZESS, is a GC-C agonist indicated for adult IBS-C or CIC, available in the U.S., Mexico, Japan, and China[142](index=142&type=chunk) - The company is developing CNP-104 for primary biliary cholangitis (PBC) and IW-3300 for visceral pain conditions like IC/BPS and endometriosis[144](index=144&type=chunk) Net Income (in millions) | Metric (in millions) | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income | $37.1 | $391.3 | $75.9 | $431.2 | [Financial Operations Overview](index=46&type=section&id=Financial%20Operations%20Overview) Outlines financial operations: linaclotide revenues, R&D, SG&A, interest expense, and ASU 2020-06 impact on reporting - Revenues are primarily generated from collaborative arrangements and license agreements related to linaclotide, with the majority from U.S. LINZESS sales (**50%** net profit/loss share with AbbVie)[147](index=147&type=chunk)[148](index=148&type=chunk) - Research and development expenses are focused on linaclotide enhancements, CNP-104, and IW-3300, with IW-3718 development discontinued in September 2020[149](index=149&type=chunk)[154](index=154&type=chunk)[155](index=155&type=chunk)[156](index=156&type=chunk) - Interest expense primarily relates to convertible senior notes, with non-cash interest expense now solely from amortization of debt issuance costs following the ASU 2020-06 adoption[171](index=171&type=chunk) [Results of Operations](index=54&type=section&id=Results%20of%20Operations) Compares financial performance for Q2 and H1 2022 vs. 2021, noting stable revenues, decreased net income, and expense shifts Financial Performance (in thousands) | Metric (in thousands) | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total revenues | $97,231 | $104,031 | $194,760 | $192,876 | | Research and development | $11,452 | $12,163 | $22,274 | $27,647 | | Selling, general and administrative | $30,124 | $27,052 | $58,985 | $54,704 | | Net income | $37,080 | $391,303 | $75,881 | $431,229 | - Collaborative arrangements revenue decreased by **$6.2 million (6%)** for the three months ended June 30, 2022, but increased by **$2.7 million (1%)** for the six months ended June 30, 2022, primarily driven by LINZESS U.S. sales[180](index=180&type=chunk)[181](index=181&type=chunk) - Research and development expense decreased by **$0.7 million (6%)** for the three months and **$5.4 million (19%)** for the six months ended June 30, 2022, mainly due to reduced IW-3718 and linaclotide costs, partially offset by increased IW-3300 development[184](index=184&type=chunk)[185](index=185&type=chunk) - Selling, general and administrative expenses increased by **$3.1 million (11%)** for the three months and **$4.3 million (8%)** for the six months ended June 30, 2022, due to higher compensation and sales/marketing activities[186](index=186&type=chunk)[187](index=187&type=chunk) - Interest expense decreased significantly by **$5.5 million (71%)** for the three months and **$10.8 million (70%)** for the six months ended June 30, 2022, primarily due to the adoption of ASU 2020-06[191](index=191&type=chunk)[192](index=192&type=chunk) [Critical Accounting Policies and Estimates](index=52&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) No material changes to critical accounting policies were reported for Q2 and H1 2022 compared to the 2021 Annual Report - No material changes to critical accounting policies were reported for the three and six months ended June 30, 2022[176](index=176&type=chunk) [Liquidity and Capital Resources](index=58&type=section&id=Liquidity%20and%20Capital%20Resources) Discusses liquidity, capital resources, and funding needs, highlighting cash, debt repayment, and share repurchase completion - As of June 30, 2022, the company had **$504.4 million** in unrestricted cash and cash equivalents[198](index=198&type=chunk) - The company expects its cash balance and net cash inflows from operations to be sufficient to meet obligations for at least the next twelve months[199](index=199&type=chunk)[209](index=209&type=chunk) - In June 2022, the company repaid the **$120.7 million** remaining principal of its 2022 Convertible Notes upon maturity[200](index=200&type=chunk)[206](index=206&type=chunk) - The **$150.0 million** Class A Common Stock repurchase program, authorized in May 2021, was completed in May 2022, with **13.1 million** shares repurchased[201](index=201&type=chunk)[206](index=206&type=chunk) [Sources of Liquidity](index=60&type=section&id=Sources%20of%20Liquidity) Historically financed by stock and debt, the company holds $400.0 million in convertible notes and has generated net income since 2019 - As of June 30, 2022, the company had an accumulated deficit of **$795.6 million**[202](index=202&type=chunk) - Current debt consists of **$400.0 million** in convertible notes, maturing between 2024 and 2026[202](index=202&type=chunk) [Summary of Cash Flows](index=60&type=section&id=Summary%20of%20Cash%20Flows) Operating cash flows were positive, but financing outflows from debt repayment and share repurchases led to an overall cash decrease Cash Flow Activity (in thousands) | Cash Flow Activity (in thousands) | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $61,365 | $48,568 | $125,489 | $122,262 | | Net cash used in investing activities | $(88) | $0 | $(97) | $0 | | Net cash provided by (used in) financing activities | $(150,283) | $5,662 | $(241,156) | $7,873 | | Net increase (decrease) in cash, cash equivalents and restricted cash | $(89,006) | $54,230 | $(115,764) | $130,135 | - Net cash provided by operating activities increased by **$3.2 million** for the six months ended June 30, 2022, compared to the same period in 2021[204](index=204&type=chunk) - Cash used in financing activities for the six months ended June 30, 2022, was **$241.2 million**, driven by **$120.7 million** in 2022 Convertible Notes repayment and **$126.4 million** in share repurchases[206](index=206&type=chunk) [Funding Requirements](index=62&type=section&id=Funding%20Requirements) Aims for positive cash flows from LINZESS sales but anticipates substantial expenses, with future funding subject to various risks - The company's goal is to generate and maintain positive cash flows, driven by LINZESS sales and financial discipline[208](index=208&type=chunk) - Substantial expenses are expected for the foreseeable future for linaclotide development and commercialization, other product development, and pipeline investments, including potential payments for the CNP-104 option[209](index=209&type=chunk) - Future funding requirements are highly uncertain and depend on factors such as LINZESS revenue, R&D progress, regulatory approvals, and intellectual property costs[211](index=211&type=chunk) [New Accounting Pronouncements](index=64&type=section&id=New%20Accounting%20Pronouncements) Refers to Note 2 for recent accounting pronouncements, indicating no new material adoptions beyond those already discussed - For a discussion of recent accounting pronouncements, refer to Note 2, Summary of Significant Accounting Policies[214](index=214&type=chunk) [Trends and Uncertainties](index=64&type=section&id=Trends%20and%20Uncertainties) Discusses the ongoing impact of the COVID-19 pandemic on business, operations, and financial results, particularly on revenue - The COVID-19 pandemic has impacted, and may continue to impact, the company's business, operations, and financial results, particularly in day-to-day operations and the collaboration agreement with AbbVie[215](index=215&type=chunk) - The pandemic has not caused significant disruptions to manufacturing or supply of LINZESS in the U.S. as of the report date[217](index=217&type=chunk) - Fluctuations in quarterly settlement payments and potential negative impacts on future net sales of LINZESS in the U.S. may occur due to changes in selling activities (in-person vs. remote) and patient access to healthcare[218](index=218&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=66&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Outlines market risk exposure, including minimal interest rate risk and equity price risk from convertible notes and derivatives - The company's primary market risk exposure is interest income sensitivity, but due to short-term, low-risk investments (U.S. government securities, money market instruments), an immediate **1%** interest rate change would not materially affect its portfolio's fair value[221](index=221&type=chunk)[222](index=222&type=chunk) - Convertible senior notes bear fixed interest rates, limiting exposure to interest rate changes, but may result in paying higher rates relative to the market if credit rating improves[224](index=224&type=chunk) - Equity price risk stems from convertible notes and derivatives (Convertible Note Hedges, Note Hedge Warrants, Capped Calls) whose fair values are dependent on the price and volatility of the Class A Common Stock[225](index=225&type=chunk)[226](index=226&type=chunk) [Item 4. Controls and Procedures](index=66&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls and procedures were effective as of June 30, 2022, with no material changes to internal control - Management concluded that disclosure controls and procedures were effective at the reasonable assurance level as of June 30, 2022[229](index=229&type=chunk)[231](index=231&type=chunk) - No changes materially affected, or were reasonably likely to materially affect, the company's internal control over financial reporting during the period covered by the report[233](index=233&type=chunk) PART II — OTHER INFORMATION [Item 1A. Risk Factors](index=69&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors were reported compared to the 2021 Annual Report on Form 10-K - No material changes from the risk factors previously disclosed in the 2021 Annual Report on Form 10-K[237](index=237&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=69&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Reports the completion of the $150.0 million Class A Common Stock repurchase program in May 2022, with all shares retired - The **$150.0 million** Class A Common Stock repurchase program was completed in May 2022[238](index=238&type=chunk) Shares Purchased Under Repurchase Program | Period | Total Number of Shares Purchased | Average Price Paid Per Share | | :-------------------------- | :------------------------------- | :--------------------------- | | April 1, 2022 - April 30, 2022 | 1,305,881 | $12.14 | | May 1, 2022 - May 31, 2022 | 1,451,200 | $11.74 | | June 1, 2022 - June 30, 2022 | 0 | $0 | | Total (Q2 2022) | 2,757,081 | $11.93 | - A total of **13.1 million** shares were repurchased under the program at an average price of **$11.47** per share, and all were retired[238](index=238&type=chunk) [Item 6. Exhibits](index=70&type=section&id=Item%206.%20Exhibits) Lists exhibits filed with the Quarterly Report on Form 10-Q, including corporate documents, certifications, and XBRL documents - The exhibit index includes corporate documents (Certificate of Incorporation, Bylaws), certifications (CEO, CFO), and XBRL taxonomy documents[242](index=242&type=chunk) [Signatures](index=71&type=section&id=Signatures) Contains signatures of the CEO and VP, Corporate Controller, certifying the filing of the report - The report is signed by Thomas McCourt, Chief Executive Officer, and Ronald Silver, Vice President, Corporate Controller, on August 4, 2022[247](index=247&type=chunk)

Financial Data and Key Metrics Changes - Ironwood Pharmaceuticals reported Q1 2022 U.S. net sales of LINZESS at $232 million, an 8% increase year-over-year, driven by strong prescription demand despite net price erosion [26][28] - The commercial margin for LINZESS improved to 74% in Q1 2022 from 73% in Q1 2021 [28] - Ironwood's total revenues for Q1 2022 were $98 million, reflecting a 10% year-over-year increase [28] - GAAP net income for Q1 2022 was $39 million, with adjusted EBITDA at $58 million [29] Business Line Data and Key Metrics Changes - LINZESS prescription demand increased by 11% year-over-year in Q1 2022, marking five consecutive quarters of double-digit growth [11][26] - The share of 90-day prescriptions for LINZESS reached an all-time high of 21% at the end of Q1 2022 [11] - Ironwood's revenues from U.S. LINZESS collaboration were $94 million in Q1 2022 [28] Market Data and Key Metrics Changes - LINZESS holds an 83% share in the branded IBS-C and chronic constipation market and a 43% share in the combined branded and generic market [10][11] - The company has supported nearly 4 million unique patients with LINZESS since its launch in 2012 [11] Company Strategy and Development Direction - The company aims to maximize LINZESS, strengthen its pipeline through acquisitions, and maintain sustained profits and cash flow [9][16] - Ironwood is focused on advancing treatments for GI diseases and becoming a leading GI healthcare company in the U.S. [7][8] - The company plans to present new data at the Digestive Disease Meeting, highlighting its commitment to advancing GI therapies [16][17] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the continued strength of LINZESS, expecting double-digit prescription demand growth despite a forecast of low single-digit net sales growth for the year [33] - The company is well-positioned with $593 million in cash and cash equivalents, allowing for strategic investments and share repurchase programs [31][32] Other Important Information - Ironwood adopted a new convertible debt accounting standard in Q1 2022, affecting non-cash interest expense and diluted earnings per share calculations [30] - The company has repurchased $118 million of its common stock through March 31, 2022, as part of its share repurchase program [31] Q&A Session Summary Question: Pediatric opportunity for linaclotide - Management discussed expectations for the pediatric study, emphasizing the potential for clinically meaningful improvements in spontaneous bowel movements [41][61] Question: Business development and M&A potential - Management highlighted a cautious approach to M&A, focusing on value creation and capital preservation in the current market environment [54] Question: OTC version of linaclotide - Ongoing discussions with AbbVie regarding an OTC version of LINZESS were confirmed, with a focus on safety and regulatory metrics [50][52] Question: Marketing expenses for LINZESS - Management indicated ongoing discussions about optimizing marketing expenses without significantly impacting revenue, particularly in professional promotion [65]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 001-34620 IRONWOOD PHARMACEUTICALS, INC. (Exact name of registrant as specified in its charter) (State or other j ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 001-34620 IRONWOOD PHARMACEUTICALS, INC. (Exact name of registrant as specified in its charter) Delaware 04-3404176 (St ...

Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD) Q4 2021 Earnings Conference Call February 17, 2022 8:30 AM ET Company Participants Matt Roache - Director of IR Thomas McCourt - CEO Michael Shetzline - CMO and Head of R&D Sravan K. Emany - CFO Conference Call Participants Boris Peaker - Cowen & Company Eric Joseph - JPMorgan Timothy Chiang - Northland Capital Unidentified Analyst - Wells Fargo Operator Ladies and gentlemen, good morning. My name is Abby and I will be your conference operator today. At this time ...

Leading in GI through Growth and Innovation J.P. Morgan Healthcare Conference January 12, 2022 PRESENTED BY Tom McCourt, CEO Ironwood Pharmaceuticals, Inc. Safe Harbor Statement 2 This presentation contains forward-looking statements. Investors are cautioned not to place undue reliance on these forward-looking statements, including statements about our ability to execute on our vision and mission; our strategy, business, financial position and operations, including with respect to maximizing LINZESS® (linac ...

| --- | --- | |------------------|-------| | | | | | | | | | | | | | | | | Ironwood Q3 2021 | | | | | | Earnings Update | | | November 4, 2021 | | Ironwood Introduction Matt Roache Safe Harbor Statement This presentation contains forward-looking statements. Investors are cautioned not to place undue reliance on these forward-looking statements, including statements about our ability to execute on our vision and mission; our strategy, business, financial position and operations, including with respect to max ...