Ironwood(US:IRWD)2021-05-06 20:10PART I — FINANCIAL INFORMATION Item 1. Financial Statements 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 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 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 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 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 commercialization303132 - 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 employees154 - 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, 2022156 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 | $74,445 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2021 financial performance, highlighting increased net income from higher collaborative revenue and reduced costs Q1 2021 vs Q1 2020 Results of Operations (in thousands) | | Q1 2021 | Q1 2020 | Change ($) | 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 demand202 - 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 2020206 - 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 months213220 Quantitative and Qualitative Disclosures About Market Risk 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 effect236 - 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 transactions239240 - 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 fluctuations238242 Controls and Procedures 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 report244 - 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 controls246247 PART II — OTHER INFORMATION Risk Factors 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 MOTEGRITY253280 - 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 expected358360 - 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, respectively297 - 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 enrollment391394396 - 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 failures305311 Exhibits 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 rules419