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 ...

| --- | --- | --- | |---------------------------|-------|-------| | | | | | | | | | Ironwood Q4 and Full Year | | | | | | | | | | | | 2021 Investor Update | | | | February 17, 2022 | | | 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 well against our strategic priorities; the Company's strategy, business, fi ...

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 ...

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 September 30, 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) (State or oth ...

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 June 30, 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) (State or other ju ...

| --- | --- | |------------------|-------| | | | | | | | | | | Ironwood 1Q 2021 | | | | | | Earnings Update | | Ironwood Introduction Meredith Kaya 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 maximizing LINZESS® (linaclotide), b ...

[PART I — FINANCIAL INFORMATION](index=7&type=section&id=PART%20I%20%E2%80%94%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=7&type=section&id=Item%201.%20Financial%20Statements) This section presents Ironwood Pharmaceuticals, Inc.'s unaudited condensed consolidated financial statements, including Balance Sheets, Income, Stockholders' Equity, Cash Flows, and accompanying notes [Condensed Consolidated Balance Sheets](index=7&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheet shows increased total assets and stockholders' equity as of March 31, 2021, compared to December 31, 2020 Condensed Consolidated Balance Sheets (in thousands) | | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | **Total current assets** | $538,246 | $495,839 | | **Total assets** | **$599,344** | **$559,238** | | **Total current liabilities** | $23,603 | $32,173 | | **Total liabilities** | $489,152 | $496,598 | | **Total stockholders' equity** | $110,192 | $62,640 | | **Total liabilities and stockholders' equity** | **$599,344** | **$559,238** | [Condensed Consolidated Statements of Income and Comprehensive Income](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income%20and%20Comprehensive%20Income) Total revenues and net income significantly increased in Q1 2021 compared to Q1 2020 Condensed Consolidated Statements of Income (in thousands, except per share amounts) | | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | **Total revenues** | $88,845 | $79,943 | | Collaborative arrangements revenue | $88,665 | $74,445 | | **Total cost and expenses** | $43,447 | $66,716 | | Research and development | $15,484 | $28,027 | | Selling, general and administrative | $27,652 | $36,450 | | **Income from operations** | $45,398 | $13,227 | | **Net income** | **$39,926** | **$3,345** | | **Net income per share—diluted** | **$0.25** | **$0.02** | [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash provided by operating activities significantly increased in Q1 2021, leading to a substantial rise in cash and equivalents Condensed Consolidated Statements of Cash Flows (in thousands) | | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | **Net cash provided by operating activities** | **$73,694** | **$43,603** | | Net cash used in investing activities | $0 | $(1,438) | | Net cash provided by financing activities | $2,211 | $11,955 | | **Net increase in cash, cash equivalents and restricted cash** | **$75,905** | **$54,120** | | Cash, cash equivalents and restricted cash, end of period | $440,689 | $233,364 | [Notes to Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes provide detailed information on the company's business, accounting policies, and key financial statement items - The company is a GI healthcare company focused on its commercial product **LINZESS® (linaclotide)**, indicated for IBS-C and CIC, with strategic partnerships for global commercialization[30](index=30&type=chunk)[31](index=31&type=chunk)[32](index=32&type=chunk) - In September 2020, the company discontinued development of IW-3718 after a Phase III trial did not meet its primary endpoint, leading to a workforce reduction of approximately **100 employees**[154](index=154&type=chunk) - On May 4, 2021, the Board of Directors authorized a stock repurchase program of up to **$150,000 thousand** of the company's common stock, effective until December 31, 2022[156](index=156&type=chunk) Collaborative Arrangements Revenue Breakdown (in thousands) | Partner/Agreement | Q1 2021 Revenue | Q1 2020 Revenue | | :--- | :--- | :--- | | AbbVie (North America) | $86,499 | $71,692 | | AbbVie (Europe and other) | $600 | $643 | | AstraZeneca (China) | $210 | $332 | | Astellas (Japan) | $496 | $479 | | Alnylam (GIVLAARI) | $456 | $945 | | **Total** | **$88,665** | **$74,445** | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=49&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q1 2021 financial performance, highlighting increased net income from higher collaborative revenue and reduced costs Q1 2021 vs Q1 2020 Results of Operations (in thousands) | | Q1 2021 | Q1 2020 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | **Total revenues** | **$88,845** | **$79,943** | **$8,902** | **11%** | | Collaborative arrangements revenue | $88,665 | $74,445 | $14,220 | 19% | | **Total cost and expenses** | **$43,447** | **$66,716** | **$(23,269)** | **(35)%** | | Research and development | $15,484 | $28,027 | $(12,543) | (45)% | | Selling, general and administrative | $27,652 | $36,450 | $(8,798) | (24)% | | **Income from operations** | **$45,398** | **$13,227** | $32,171 | 243% | | **Net income** | **$39,926** | **$3,345** | $36,581 | 1094% | - The increase in collaborative revenue was primarily due to a **$14,800 thousand** increase in the company's share of net profits from LINZESS sales in the U.S., driven by higher prescription demand[202](index=202&type=chunk) - The decrease in R&D expense was mainly due to an **$11,000 thousand** reduction in external development costs for IW-3718, which was discontinued in September 2020[206](index=206&type=chunk) - The company believes its cash on hand of **$438,500 thousand** as of March 31, 2021, is sufficient to meet operating needs for at least the next twelve months[213](index=213&type=chunk)[220](index=220&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=69&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risks are interest rate sensitivity on its investment portfolio and equity price risk from convertible notes - The primary market risk is interest income sensitivity on its short-term investment portfolio, where an immediate **1%** change in interest rates is not expected to have a material effect[236](index=236&type=chunk) - Equity price risk exists due to convertible senior notes, whose conversion and settlement provisions are based on the company's **Class A Common Stock** price, mitigated by convertible note hedges and capped call transactions[239](index=239&type=chunk)[240](index=240&type=chunk) - The company has minimal exposure to changes in interest rates on its fixed-rate convertible senior notes and does not expect to be significantly impacted by foreign currency fluctuations[238](index=238&type=chunk)[242](index=242&type=chunk) [Controls and Procedures](index=71&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of March 31, 2021, despite recent management changes - Management concluded that disclosure controls and procedures are effective at a reasonable assurance level as of the end of the period covered by the report[244](index=244&type=chunk) - Recent management changes include the resignation of CEO Mark Mallon, effective March 12, 2021, with President Thomas McCourt appointed as interim CEO, but these changes were not found to have materially affected internal controls[246](index=246&type=chunk)[247](index=247&type=chunk) [PART II — OTHER INFORMATION](index=71&type=section&id=PART%20II%20%E2%80%94%20OTHER%20INFORMATION) [Risk Factors](index=71&type=section&id=Item%201A.%20Risk%20Factors) This section details significant business risks, including LINZESS dependence, IP challenges, pipeline setbacks, partner reliance, and COVID-19 impact - The company is highly dependent on the commercial success of **LINZESS** in the U.S., and its revenue could be impacted by competition from products like AMITIZA, TRULANCE, and MOTEGRITY[253](index=253&type=chunk)[280](index=280&type=chunk) - The company faces intellectual property challenges, having received **Paragraph IV certification notices** for **LINZESS** from generic drug manufacturers, and while settlement agreements have been reached with **five filers**, future litigation is expected[358](index=358&type=chunk)[360](index=360&type=chunk) - The development pipeline has faced setbacks, including the discontinuation of **MD-7246** and **IW-3718** programs after failing to meet endpoints in **Phase II** and **Phase III** trials, respectively[297](index=297&type=chunk) - The **COVID-19** pandemic poses ongoing risks, potentially impacting **LINZESS** sales through reduced physician access, changes in patient insurance coverage, and disruptions to the supply chain or clinical trial enrollment[391](index=391&type=chunk)[394](index=394&type=chunk)[396](index=396&type=chunk) - The company relies entirely on partners (**AbbVie**, **Astellas**, **AstraZeneca**) and contract manufacturers for the manufacturing and distribution of **linaclotide**, exposing it to risks of supply disruption and compliance failures[305](index=305&type=chunk)[311](index=311&type=chunk) [Exhibits](index=131&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including corporate governance documents, material agreements, and CEO/CFO certifications - The exhibit index lists all documents filed with the report, including certifications from the **Chief Executive Officer** and **Chief Financial Officer** pursuant to **SEC rules**[419](index=419&type=chunk)

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 innovative GI products, primarily LINZESS, with a strategy to maximize its core product, build its pipeline, and deliver sustained profits - Ironwood Pharmaceuticals is a gastrointestinal (GI) healthcare company dedicated to advancing treatments for GI diseases, with a focus on innovative product opportunities in areas of unmet need[21](index=21&type=chunk) - LINZESS® (linaclotide) is the company's commercial product, approved by the U.S. FDA for adult men and women with irritable bowel syndrome with constipation (IBS-C) or chronic idiopathic constipation (CIC) and is available in multiple global markets[22](index=22&type=chunk) - Strategic partnerships include AbbVie Inc. (U.S. and global ex-China/Japan), AstraZeneca AB (China), and Astellas Pharma Inc. (Japan), alongside a U.S. disease education and promotional agreement with Alnylam Pharmaceuticals, Inc. for GIVLAARI®[23](index=23&type=chunk) - The company's refreshed GI-focused strategy for 2021 includes three core priorities: **maximize LINZESS**, **build an innovative GI pipeline**, and **deliver sustained profits and generate cash flow**[24](index=24&type=chunk)[52](index=52&type=chunk) 2020 Performance Against Core Priorities | Metric | Value (2020) | Change vs. 2019 | Notes | | :--- | :--- | :--- | :--- | | Collaborative arrangements revenue (LINZESS U.S.) | ~$368.6 million | +13% | Driven by increased LINZESS prescription demand | | Net Income | $106.2 million | N/A | Second full year of profitability | | Cash from Operations | $168.8 million | N/A | Ended year with $362.6 million in cash and cash equivalents | | Workforce Reduction | ~100 employees | N/A | Due to discontinuation of IW-3718 development | - Development programs MD-7246 (IBS-D) and IW-3718 (refractory GERD) were discontinued in 2020 due to failure to meet primary or key secondary endpoints in Phase II and Phase III trials, respectively[32](index=32&type=chunk) - The company is advancing IW-3300, a GC-C agonist, in pre-clinical development for visceral pain conditions, including Interstitial Cystitis / Bladder Pain Syndrome (IC / BPS) and Endometriosis[41](index=41&type=chunk) Revenue by Geographic Region (Percentage of Total Revenue) | Region | 2020 | 2019 | 2018 | | :--- | :--- | :--- | :--- | | U.S. | 95.8 % | 78.0 % | 79.0 % | | Japan | 1.1 % | 13.0 % | 20.1 % | | Rest of world | 3.1 % | 9.0 % | 0.9 % | | **Total** | **100.0 %** | **100.0 %** | **100.0 %** | - The linaclotide patent portfolio includes **14 U.S. patents** (12 Orange Book listed) expiring between 2024 and 2033, as well as granted patents in Europe, Japan, China, and other foreign jurisdictions[68](index=68&type=chunk)[69](index=69&type=chunk) - Settlement agreements with generic drug manufacturers allow for market entry of generic LINZESS (145mcg and 290mcg) as early as **March 2029**, and for 72mcg in **August 2030**, subject to U.S. FDA approval[72](index=72&type=chunk) - As of January 1, 2021, Ironwood had **232 employees**, with a significant workforce reduction of approximately **100 full-time employees** completed in Q4 2020 due to the discontinuation of IW-3718 development[109](index=109&type=chunk) [Item 1A. Risk Factors](index=36&type=section&id=Item%201A.Risk%20Factors) The company faces significant risks including heavy reliance on LINZESS, market competition, pipeline development challenges, intellectual property disputes, financial liabilities, and the ongoing impact of the COVID-19 pandemic - The company is highly dependent on the commercial success of **LINZESS® (linaclotide)** in the United States for the foreseeable future, and cannot guarantee sufficient revenues to cover expenses[120](index=120&type=chunk) - LINZESS® has a boxed warning for pediatric patients up to **six years of age** and advises against use in patients **six to less than 18 years of age**, based on nonclinical data and lack of pediatric clinical safety/efficacy data[126](index=126&type=chunk) - Uncertainty in U.S. and foreign pricing and reimbursement policies, including potential for increased discounts/rebates and government cost-containment measures, could hinder commercial success[127](index=127&type=chunk)[131](index=131&type=chunk)[133](index=133&type=chunk) - The company faces intense competition from branded and generic prescription therapies, as well as over-the-counter products for IBS-C and CIC[142](index=142&type=chunk)[143](index=143&type=chunk) - Failure to successfully in-license or acquire externally developed products or product candidates, or to realize anticipated benefits from such transactions, would materially adversely affect business and prospects[155](index=155&type=chunk) - Development programs for MD-7246 and IW-3718 were discontinued in 2020 due to unfavorable clinical trial results, highlighting the inherent uncertainties and risks in pharmaceutical product development[162](index=162&type=chunk) - The company relies heavily on third-party partners (AbbVie, Astellas, AstraZeneca) for the development, manufacturing, and commercialization of linaclotide globally, exposing it to risks related to partner performance and coordination[174](index=174&type=chunk)[178](index=178&type=chunk)[179](index=179&type=chunk) - Intellectual property risks include challenges to existing patents, potential infringement lawsuits by third parties, and the impact of changes in patent laws (e.g., America Invents Act)[213](index=213&type=chunk)[217](index=217&type=chunk)[218](index=218&type=chunk)[225](index=225&type=chunk) - The company incurred significant losses from inception through 2018, with an accumulated deficit of approximately **$1.5 billion** as of December 31, 2020, and may incur future losses[234](index=234&type=chunk) - As of December 31, 2020, total indebtedness was approximately **$520.7 million**, which could adversely affect financial condition or restrict future operations[241](index=241&type=chunk) - The COVID-19 pandemic has impacted operations, sales, clinical trials, and the supply chain, and continues to pose significant uncertainties and potential material adverse impacts on the business and financial condition[257](index=257&type=chunk)[258](index=258&type=chunk)[259](index=259&type=chunk)[260](index=260&type=chunk) - Mark Mallon resigned as CEO effective **March 12, 2021**, with Thomas McCourt appointed interim CEO, posing risks related to management transitions and attracting a permanent successor[263](index=263&type=chunk) [Item 1B. Unresolved Staff Comments](index=92&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) There are no unresolved staff comments to report for the period - No unresolved staff comments[279](index=279&type=chunk) [Item 2. Properties](index=92&type=section&id=Item%202.%20Properties) The company's corporate headquarters and operations are located in Boston, Massachusetts, occupying approximately 39,000 square feet of office space under a lease expiring in June 2030 - Corporate headquarters and operations are located in Boston, Massachusetts, occupying approximately **39,000 square feet** of office space[280](index=280&type=chunk) - The current lease for the headquarters expires in **June 2030**, and the facilities are deemed suitable and adequate for foreseeable needs[280](index=280&type=chunk) [Item 3. Legal Proceedings](index=92&type=section&id=Item%203.%20Legal%20Proceedings) There are no material legal proceedings to report for the period - No material legal proceedings[281](index=281&type=chunk) [Item 4. Mine Safety Disclosures](index=92&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) Mine safety disclosures are not applicable to the company's operations - Not applicable[282](index=282&type=chunk) Part II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=93&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Ironwood's Class A Common Stock trades on the Nasdaq Global Select Market under the symbol 'IRWD', with 160,962,175 shares outstanding as of February 10, 2021, and no cash dividends anticipated - Shares of Class A Common Stock are traded on the Nasdaq Global Select Market under the symbol **'IRWD'**[284](index=284&type=chunk) - As of **February 10, 2021**, there were **160,962,175 shares** of Class A Common Stock outstanding[4](index=4&type=chunk) - The company has never declared or paid any cash dividends on its capital stock and does not anticipate doing so in the foreseeable future, intending to retain future earnings to finance operations[286](index=286&type=chunk) - The corporate performance graph reflects total returns adjusted for the tax-free spin-off of the soluble guanylate cyclase (sGC) business into Cyclerion Therapeutics, Inc. on **April 1, 2019**[289](index=289&type=chunk)[290](index=290&type=chunk) [Item 6. Selected Financial Data](index=95&type=section&id=Item%206.%20Selected%20Financial%20Data) This section presents a five-year summary of selected consolidated financial data, reclassifying sGC business results as discontinued operations, highlighting the company's transition to profitability and changes in financial position - Results of operations related to the sGC business have been reclassified to reflect discontinued operations for all periods presented, following the spin-off on **April 1, 2019**[293](index=293&type=chunk) Selected Consolidated Statement of Operations Data (in thousands, except per share data) | Metric | 2020 | 2019 | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | :--- | :--- | | Collaborative arrangements revenue | $381,545 | $379,652 | $272,839 | $265,533 | $263,923 | | Product revenue, net | — | — | 3,445 | 3,061 | 109 | | Sale of active pharmaceutical ingredient | 7,978 | 48,761 | 70,355 | 29,682 | 9,925 | | **Total revenues** | **389,523** | **428,413** | **346,639** | **298,276** | **273,957** | | Cost of revenues | 3,136 | 23,875 | 32,751 | 19,097 | 1,868 | | Research and development | 88,062 | 115,044 | 101,060 | 88,145 | 101,903 | | Selling, general and administrative | 140,003 | 172,450 | 219,676 | 231,184 | 169,169 | | **Income (loss) from operations** | **142,940** | **120,123** | **(150,670)** | **(15,363)** | **(10,169)** | | **Net income (loss)** | **$106,176** | **$21,505** | **$(282,368)** | **$(116,937)** | **$(81,708)** | | Basic EPS from continuing operations | $0.67 | $0.38 | $(1.27) | $(0.37) | $(0.28) | | Diluted EPS from continuing operations | $0.66 | $0.38 | $(1.27) | $(0.37) | $(0.28) | | Basic Net EPS | $0.67 | $0.14 | $(1.85) | $(0.78) | $(0.56) | | Diluted Net EPS | $0.66 | $0.14 | $(1.85) | $(0.78) | $(0.56) | Selected Consolidated Balance Sheet Data (in thousands) | Metric | 2020 | 2019 | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | :--- | :--- | | Cash, cash equivalents and available-for-sale securities | $362,564 | $177,023 | $173,172 | $221,416 | $305,216 | | Total assets | $559,238 | $402,748 | $332,050 | $605,674 | $709,821 | | Debt financing and convertible notes | $430,256 | $407,994 | $413,692 | $396,091 | $366,492 | | Total liabilities | $496,598 | $495,999 | $528,421 | $595,826 | $643,105 | | Total stockholders' equity (deficit) | $62,640 | $(93,251) | $(196,371) | $9,848 | $66,716 | - Collaborative arrangements revenue related to U.S. LINZESS sales increased by approximately **$43.2 million** in 2020 compared to 2019, reaching **$368.6 million**[295](index=295&type=chunk) - The company recorded net income of **$106.2 million** in 2020, marking its second consecutive year of profitability after incurring net losses since its inception in 1998[315](index=315&type=chunk) [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=101&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section analyzes Ironwood's 2020 financial performance, detailing revenue, cost, and expense changes, critical accounting policies, liquidity, and the COVID-19 impact, highlighting substantial net income and positive cash flow driven by LINZESS sales and reduced expenses - For the year ended December 31, 2020, total revenues were approximately **$389.5 million**, a **9% decrease** from **$428.4 million** in 2019, primarily due to a decrease in the sale of active pharmaceutical ingredient (API)[317](index=317&type=chunk)[408](index=408&type=chunk) - Collaborative arrangements revenue related to U.S. LINZESS sales increased by **13%** to approximately **$368.6 million** in 2020, driven by increased prescription demand and lower collaboration-related selling expenses due to the COVID-19 pandemic[325](index=325&type=chunk)[408](index=408&type=chunk) - Net income for 2020 was approximately **$106.2 million**, a significant increase from **$21.5 million** in 2019, primarily due to increased LINZESS U.S. sales revenue and decreases in costs from discontinued development programs (MD-7246 and IW-3718)[325](index=325&type=chunk) - Research and development expenses decreased by approximately **$27.0 million (23%)** in 2020, mainly due to the discontinuation of IW-3718 development and other operating cost reductions[414](index=414&type=chunk) - Selling, general and administrative expenses decreased by approximately **$32.4 million (19%)** in 2020, attributed to reduced Separation-related costs and lower non-Separation costs, including travel due to COVID-19[415](index=415&type=chunk) - Restructuring expenses increased by approximately **$11.8 million (325%)** in 2020, primarily due to severance, benefits, and related costs from the workforce reduction associated with discontinuing IW-3718 development[417](index=417&type=chunk) - Net cash provided by operating activities totaled approximately **$168.8 million** in 2020, driven by profitable operations and non-cash adjustments[432](index=432&type=chunk) - As of December 31, 2020, the company had approximately **$362.6 million** in unrestricted cash and cash equivalents and approximately **$520.7 million** in aggregate principal amount of convertible notes[427](index=427&type=chunk)[428](index=428&type=chunk) Contractual Commitments and Obligations (as of December 31, 2020, in thousands) | Obligation Type | Total | Less Than 1 Year | 1 - 3 Years | 3 - 5 Years | More Than 5 Years | | :--- | :--- | :--- | :--- | :--- | :--- | | Operating lease obligations | $30,493 | $3,128 | $6,194 | $6,315 | $14,856 | | Convertible senior notes (principal + interest) | $546,523 | $7,216 | $131,057 | $206,750 | $201,500 | - The COVID-19 pandemic has impacted day-to-day operations (e.g., shift to virtual selling), LINZESS sales (due to changes in patient access and reimbursement), and clinical trial enrollment, with ongoing uncertainties regarding its future impact[458](index=458&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures about Market Risk](index=141&type=section&id=Item%207A.Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This section addresses the company's exposure to interest rate, equity price, and foreign currency risks, noting minimal interest rate sensitivity due to investment strategy and fixed-rate debt, equity price risk from convertible notes, and insignificant foreign currency risk - The company's primary exposure to market risk is interest income sensitivity, but 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 fair market value[463](index=463&type=chunk) - Convertible senior notes bear interest at a fixed rate, minimizing exposure to changes in interest rates, though there's a risk of paying a higher rate relative to the market if credit rating improves[465](index=465&type=chunk) - Equity price risk arises from convertible notes, whose conversion and settlement provisions are based on the price of Class A Common Stock, potentially affecting cash payments and dilution[466](index=466&type=chunk) - The company has no significant monetary assets or liabilities in foreign currencies and does not expect to be significantly impacted by foreign currency fluctuations[468](index=468&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=141&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This item indicates that the consolidated financial statements and the independent registered public accounting firm's report are included elsewhere in this Annual Report on Form 10-K - Consolidated financial statements and the independent registered public accounting firm report are presented at pages **F-1 through F-57** of this Annual Report on Form 10-K[471](index=471&type=chunk) [Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=143&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants on accounting and financial disclosure matters - No changes in and disagreements with accountants on accounting and financial disclosure[472](index=472&type=chunk) [Item 9A. Controls and Procedures](index=143&type=section&id=Item%209A.Controls%20and%20Procedures) Management concluded that the company's disclosure controls and internal control over financial reporting were effective as of December 31, 2020, with no material changes identified - Management concluded that disclosure controls and procedures were effective at the reasonable assurance level as of **December 31, 2020**[472](index=472&type=chunk) - Management concluded that internal control over financial reporting was effective as of **December 31, 2020**, based on the COSO framework[474](index=474&type=chunk) - The effectiveness of internal control over financial reporting as of **December 31, 2020**, was audited by Ernst and Young LLP, who expressed an unqualified opinion[475](index=475&type=chunk)[480](index=480&type=chunk) - No changes occurred during the quarter ended **December 31, 2020**, that materially affected, or are reasonably likely to materially affect, internal controls over financial reporting[478](index=478&type=chunk) [Item 9B. Other Information](index=147&type=section&id=Item%209B.%20Other%20Information) There is no other information to report under this item - None[488](index=488&type=chunk) Part III [Item 10. Directors, Executive Officers and Corporate Governance](index=147&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information regarding the company's directors, executive officers, and corporate governance, including its code of business conduct, is incorporated by reference from the 2021 proxy statement - The company has adopted a code of business conduct and ethics applicable to its directors, executive officers, and all other employees[490](index=490&type=chunk) - Information required by this item is incorporated by reference from the definitive proxy statement for the **2021 Annual Meeting of Stockholders**[491](index=491&type=chunk) [Item 11. Executive Compensation](index=147&type=section&id=Item%2011.%20Executive%20Compensation) Details concerning executive compensation are incorporated by reference from the company's definitive proxy statement for the 2021 Annual Meeting of Stockholders - Information required by this item is incorporated by reference from the definitive proxy statement for the **2021 Annual Meeting of Stockholders**[492](index=492&type=chunk) [Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=147&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) This section incorporates security ownership information from the 2021 proxy statement and details securities authorized for issuance under equity compensation plans as of December 31, 2020 - Information relating to security ownership of certain beneficial owners and management is incorporated by reference from the definitive proxy statement for the **2021 Annual Meeting of Stockholders**[493](index=493&type=chunk) Securities Authorized for Issuance Under Equity Compensation Plans (as of December 31, 2020) | Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) | Weighted average exercise price of outstanding options, warrants, and rights (b) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c) | | :--- | :--- | :--- | :--- | | Equity compensation plans approved by security holders | 18,216,454 | $12.25 | 9,651,783 | | Equity compensation plans not approved by security holders | — | — | — | | **Total** | **18,216,454** | **$12.25** | **9,651,783** | [Item 13. Certain Relationships and Related Transactions, and Director Independence](index=149&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information regarding certain relationships, related transactions, and director independence is incorporated by reference from the company's definitive proxy statement for the 2021 Annual Meeting of Stockholders - Information required by this item is incorporated by reference from the definitive proxy statement for the **2021 Annual Meeting of Stockholders**[497](index=497&type=chunk) [Item 14. Principal Accountant Fees and Services](index=149&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information on the fees and services provided by the principal accountant is incorporated by reference from the company's definitive proxy statement for the 2021 Annual Meeting of Stockholders - Information required by this item is incorporated by reference from the definitive proxy statement for the **2021 Annual Meeting of Stockholders**[498](index=498&type=chunk) Part IV [Item 15. Exhibits and Financial Statement Schedules](index=150&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists all documents filed as part of the Annual Report on Form 10-K, including consolidated financial statements, various corporate governance documents, debt instruments, and collaboration agreements - No schedules are submitted because they are not applicable, not required, or the information is included in the Consolidated Financial Statements or Notes to Consolidated Financial Statements[500](index=500&type=chunk) - The report includes a list of exhibits, such as the Separation Agreement, Certificate of Incorporation, Bylaws, Indentures for Convertible Senior Notes, Equity Incentive Plans, and various collaboration and supply agreements[500](index=500&type=chunk)[502](index=502&type=chunk)[505](index=505&type=chunk)[507](index=507&type=chunk)[509](index=509&type=chunk)[511](index=511&type=chunk) [Item 16. Form 10-K Summary](index=162&type=section&id=Item%2016.%20Form%2010-K%20Summary) The company has not provided a Form 10-K Summary in this report - No Form 10-K Summary is provided[514](index=514&type=chunk) [Signatures](index=163&type=section&id=Signatures) This section contains the required signatures of the registrant's principal executive officer, principal financial officer, principal accounting officer, and members of the board of directors, certifying the Annual Report on Form 10-K - The report is signed by Mark Mallon (Chief Executive Officer), Gina Consylman (Senior Vice President, Chief Financial Officer), Kelly MacDonald (Vice President, Finance and Chief Accounting Officer), and the Board of Directors[517](index=517&type=chunk)[519](index=519&type=chunk) [Index to Consolidated Financial Statements](index=165&type=section&id=Index%20to%20Consolidated%20Financial%20Statements) This index provides a list of the consolidated financial statements included in the report, such as the Consolidated Balance Sheets, Statements of Operations, Comprehensive Income (Loss), Stockholders' Equity (Deficit), Cash Flows, and accompanying Notes - The index lists the Consolidated Balance Sheets, Consolidated Statements of Operations, Consolidated Statements of Comprehensive Income (Loss), Consolidated Statements of Stockholders' Equity (Deficit), Consolidated Statements of Cash Flows, and Notes to Consolidated Financial Statements[522](index=522&type=chunk)