IRONWOOD PHARMACEUTICALS INC

Previous wording

In June 2023, we completed a tender offer to purchase 98% of the outstanding ordinary shares of VectivBio Holding AG, or the VectivBio Acquisition. In December 2023, we completed a squeeze-out merger under Swiss law to acquire all remaining shares and VectivBio Holding AG was merged with and into Ironwood Pharmaceuticals GmbH, our wholly-owned subsidiary organized under the laws of Switzerland. The VectivBio Acquisition was partially funded with $400.0 million of borrowings under a new revolving credit facility, or the Revolving Credit Facility, as further described in Note 8,Debt, to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q. Through the acquisition, the Company is advancing apraglutide, a next-generation, synthetic peptide analog of glucagon-like peptide-2, or GLP-2, for rare gastrointestinal diseases, including short bowel syndrome with intestinal failure, or SBS-IF, as well as several earlier stage assets.

Current wording

In June 2023, we completed a tender offer to purchase 98% of the outstanding ordinary shares of VectivBio Holding AG, or the VectivBio Acquisition. In December 2023, we completed a squeeze-out merger under Swiss law to acquire all remaining shares and VectivBio Holding AG was merged with and into Ironwood Pharmaceuticals GmbH, our wholly-owned subsidiary organized under the laws of Switzerland. The VectivBio Acquisition was partially funded with $400.0 million of borrowings under a new revolving credit facility, or the Revolving Credit Facility, as further described in Note 9,Debt, to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q. Through the acquisition, we are advancing apraglutide, a next-generation, synthetic peptide analog of glucagon-like peptide-2, or GLP-2, for rare gastrointestinal diseases, including short bowel syndrome with intestinal failure, or SBS-IF, as well as several earlier stage assets.

Previous wording

To date, we have dedicated a majority of our activities to the research, development and commercialization of linaclotide, as well as to the research and development of our other product candidates. For the three months ended March 31, 2024 and 2023, we recorded net loss of $4.2 million and net income of $45.7 million, respectively. As of March 31, 2024, we had an accumulated deficit of approximately $1.7 billion. We are unable to predict the extent of any future losses or guarantee that our company will be able to maintain positive cash flows.

Current wording

To date, we have dedicated a majority of our activities to the research, development and commercialization of linaclotide, as well as to the research and development of our other product candidates. For the three and six months ended June 30, 2024, we recorded net loss of $0.9 million and $5.0 million, respectively. For the three and six months ended June 30, 2023, we recorded net loss of approximately $1.1 billion and $1.0 billion, respectively. As of June 30, 2024, we had an accumulated deficit of approximately $1.7 billion. We are unable to predict the extent of any future losses or guarantee that our company will be able to maintain positive cash flows.

Previous wording

Research and Development Expense. The core of our research and development strategy is to leverage our demonstrated expertise and capabilities in GI diseases to bring multiple medicines to patients. Research and development expense consists of expenses incurred in connection with the research into and development of products and product candidates. These expenses consist primarily of compensation, benefits and other employee-related

Current wording

Research and Development Expense. The core of our research and development strategy is to leverage our demonstrated expertise and capabilities in GI diseases to bring multiple medicines to patients. Research and development expense consists of expenses incurred in connection with the research into and development of products and product candidates. These expenses consist primarily of compensation, benefits and other employee-related expenses, research and development related facility costs, third-party contract costs relating to nonclinical study and clinical trial activities, development of manufacturing processes, regulatory registration of third-party manufacturing facilities, and licensing fees for our product candidates.

Previous wording

Linaclotide. Our commercial product, LINZESS, is commercially available in the U.S. for the treatment of IBS-C or CIC in adults and for FC in pediatric patients ages 6-17 years-old. Linaclotide is also available to adult men and women suffering from IBS-C or CIC in certain countries of the world, including China, Japan, and in a number of E.U. countries.

Current wording

Linaclotide. Our commercial product, LINZESS, is commercially available in the U.S. for the treatment of IBS-C or CIC in adults and for FC in pediatric patients ages 6-17 years-old. Linaclotide is also available to adult men and women suffering from IBS-C or CIC in certain countries of the world, including China, Japan, and in a number of European countries.

Previous wording

In addition, we and AbbVie have established a nonclinical and clinical post-marketing plan with the U.S. FDA to understand the safety and efficacy of LINZESS in pediatric patients. In August 2021, the U.S. FDA approved a revised label for LINZESS based on clinical safety data that had been generated thus far in pediatric studies. The updated label modified the boxed warning for risk of serious dehydration and contraindication against use in children to those less than two years of age. The boxed warning and contraindication previously applied to all children less than 18 years of age and less than 6 years of age, respectively. In June 2023, the U.S. FDA approved LINZESS as a once-daily treatment for pediatric patients ages 6-17 years-old with FC, making LINZESS the first and only FDA-approved prescription therapy for FC in this patient population. The safety and effectiveness of LINZESS in patients with FC less than 6 years of age or in patients with IBS-C less than 18 years of age have not been established. Additional clinical pediatric programs in IBS-C and FC are ongoing.

Current wording

In addition, we and AbbVie have established a nonclinical and clinical post-marketing plan with the U.S. FDA to understand the safety and efficacy of LINZESS in pediatric patients. In August 2021, the U.S. FDA approved a revised label for LINZESS based on clinical safety data that had been generated thus far in pediatric studies. The updated label modified the boxed warning for risk of serious dehydration and contraindication against use in children to those less than two years of age. The boxed warning and contraindication previously applied to all children less than 18 years of age and less than 6 years of age, respectively. In June 2023, the U.S. FDA approved LINZESS as a once-daily treatment for pediatric patients ages 6-17 years-old with FC, making LINZESS the first and only FDA-approved

Previous wording

The following table sets forth our research and development expenses related to our product pipeline for the three months ended March 31, 2024 and 2023, respectively. These expenses relate primarily to compensation, benefits and other employee-related expenses and external costs associated with nonclinical studies and clinical trial costs for our product candidates. We allocate costs related to facilities, depreciation, share-based compensation, research and development support services and certain other costs directly to programs.

Current wording

The following table sets forth our research and development expenses related to our product pipeline for the three and six months ended June 30, 2024 and 2023, respectively. These expenses relate primarily to compensation, benefits and other employee-related expenses and external costs associated with nonclinical studies and clinical trial costs for our product candidates. We allocate costs related to facilities, depreciation, share-based compensation, research and development support services and certain other costs directly to programs.

Previous wording

We expect to invest in our development programs and incur substantial research and development expenses for the foreseeable future. We will continue to invest in linaclotide, including the investigation of ways to enhance the clinical profile within its currently approved indications, and the exploration of its potential utility in other indications, populations and formulations. We will continue to invest in our GI-focused product candidates, including apraglutide, as we advance them through pre-clinical and clinical trials, in addition to funding research and development activities under our external collaboration and license agreements.

Current wording

We expect to invest in our development programs and incur substantial research and development expenses for the foreseeable future. We will continue to invest in linaclotide, including the investigation of ways to enhance the clinical profile within its currently approved indications, and the exploration of its potential utility in other indications, populations and formulations. We will continue to invest in our GI-focused product candidates, including apraglutide, as

Previous wording

During the three months ended March 31, 2024, there were no material changes to our critical accounting policies as reported in our 2023 Annual Report on Form 10-K.

Current wording

During the three and six months ended June 30, 2024, there were no material changes to our critical accounting policies as reported in our 2023 Annual Report on Form 10-K.

Previous wording

Three months ended March 31, 2024 compared to three months ended March 31, 2023

Current wording

Three and six months ended June 30, 2024 compared to three and six months ended June 30, 2023

Previous wording

Collaborative Arrangements Revenue. The decrease in collaborative arrangements revenue of $29.2 million for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 was primarily related to a $29.9 million decrease in our share of net profits from the sale of LINZESS in the U.S. During the three months ended March 31, 2024, the Company recognized a $38.0 million reduction to collaboration revenue, inclusive of a $30.0 million reduction related to information provided by AbbVie subsequent to the quarterly collaboration accounting settlement process, as a result of changes in estimates of sales reserves and allowances associated with governmental and

Current wording

Collaborative Arrangements Revenue. The decrease in collaborative arrangements revenue of $13.0 million for the three months ended June 30, 2024 compared to the three months ended June 30, 2023 was primarily related to a $13.3 million decrease in our share of net profits from the sale of LINZESS in the U.S., which was driven by decreased net price (including an $8.5 million reduction to collaboration revenue as a result of changes in estimates of sales reserves and allowances associated with governmental and contractual rebates), partially offset by increases from prescription demand and inventory channel fluctuations.

Previous wording

contractual rebates. Excluding the impact of the changes in estimates, our share of net profits from the sale of LINZESS in the U.S increased nominally during the three months ended March 31, 2024 compared to the three months ended March 31, 2023, with increases from prescription demand and inventory channel fluctuations partially offset by decreased net price.

Current wording

The decrease in collaborative arrangements revenue of $42.2 million for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 was primarily related to a $43.3 million decrease in our share of net profits from the sale of LINZESS in the U.S., which was driven by decreased net price (including a $38.0 million reduction to collaboration revenue as a result of changes in estimates of sales reserves and allowances associated with governmental and contractual rebates), partially offset by increases from prescription demand and inventory channel fluctuations.

Previous wording

Research and Development Expense. The increase in research and development expense of $13.0 million for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 was primarily related to $19.3 million in apraglutide costs, partially offset by a $4.8 million reduction to research and development expense in connection with the settlement of a license-related contract liability.

Current wording

The increase in research and development expenses of $8.8 million for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 was primarily related to a $27.0 million increase in external apraglutide costs, a $5.8 million increase in compensation, benefits, and other employee-related expenses, and a $2.0 million increase related to an agreement with COUR to increase the CNP-104 clinical study budget, partially offset by $11.3 million of share-based compensation expense and $3.5 million in related payroll taxes recognized in the second quarter of 2023 immediately after the closing of the VectivBio Acquisition in connection with the vesting acceleration of outstanding stock options and RSUs under VectivBio’s 2021 Equity Incentive Plan, a $6.0 million payment to COUR in the second quarter of 2023 related to CNP-104 in connection with the amendment of the COUR Collaboration Agreement, and a $4.8 million reduction to research and development expense in connection with the settlement of a license-related contract liability.

Previous wording

Restructuring Expenses. Restructuring expenses pertain to the restructuring initiatives that commenced in June 2023 in connection with the VectivBio Acquisition.

Current wording

Restructuring Expenses. Restructuring expenses during each of the three and six months ended June 30, 2024 and June 30, 2023 include restructuring initiatives that commenced in June 2023 in connection with the VectivBio Acquisition and restructuring expenses during each of the three and six months ended June 30, 2023 include a headquarters-based workforce reduction that commenced in April 2023. Both restructuring initiatives are more fully described in Note 12,Workforce Reductions and Restructuring.

Previous wording

Interest Expense and Other Financing Costs. Interest expense increased by $5.7 million for three months ended March 31, 2024 compared to the three months ended March 31, 2023 primarily due to $5.9 million of interest expense incurred under the revolving credit facility used to partially finance the VectivBio Acquisition in June 2023.

Current wording

Interest Expense and Other Financing Costs. Interest expense increased by $5.6 million for three months ended June 30, 2024 compared to the three months ended June 30, 2023 primarily due to an increase of $5.7 million of interest expense incurred under the revolving credit facility used to partially finance the VectivBio Acquisition in June 2023.

Previous wording

Interest and Investment Income. Interest and investment income decreased by $6.1 million for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 primarily from a decrease in cash and investment balances following the VectivBio Acquisition in June 2023.

Current wording

Interest and Investment Income. Interest and investment income decreased by $7.4 million for the three months ended June 30, 2024 compared to the three months ended June 30, 2023, primarily from a decrease in cash and investment balances following the VectivBio Acquisition in June 2023.

Previous wording

Gain on Derivatives.* For the three months ended March 31, 2023, we recorded an insignificant gain on derivatives resulting from a decrease in the fair value of our note hedge warrants, which terminated unexercised upon expiry during April 2023.

Current wording

Gain on Derivatives.* For the six months ended June 30, 2023, we recorded an insignificant gain on derivatives resulting from a decrease in the fair value of our note hedge warrants, which terminated unexercised upon expiry during April 2023.

Previous wording

*Income TaxExpense.*For the three months ended March 31, 2024 and 2023, we recorded income tax expense of $9.1 million and $20.1 million, respectively. Due to our ability to utilize our net operating losses to offset federal taxable income and taxable income in most states, the majority of our tax provision will be a non-cash expense until our net operating losses have been fully utilized.

Current wording

*Income TaxExpense.*For the three and six months ended June 30, 2024, we recorded income tax expense of $19.7 million and $28.9 million, respectively. For the three and six months ended June 30, 2023, we recorded income tax expense of $13.3 million and $33.4 million, respectively. Due to our ability to utilize our net operating losses to offset federal taxable income and taxable income in most states, the majority of our tax provision will be a non-cash expense until our net operating losses have been fully utilized.

Previous wording

As of March 31, 2024, we had $121.5 million of cash and cash equivalents. Our cash equivalents include amounts held in money market funds, U.S. Treasury securities and commercial paper. We invest cash in excess of immediate requirements in accordance with our investment policy, which limits the amounts we may invest in certain types of investments and requires all investments held by us to be at least A- rated, with a remaining final maturity when purchased of less than twenty-four months, so as to primarily achieve liquidity and capital preservation objectives.

Current wording

As of June 30, 2024, we had $105.5 million of cash and cash equivalents. Our cash equivalents include amounts held in money market funds, U.S. Treasury securities and commercial paper. We invest cash in excess of immediate requirements in accordance with our investment policy, which limits the amounts we may invest in certain types of investments and requires all investments held by us to be at least A- rated, with a remaining final maturity when purchased of less than twenty-four months, so as to primarily achieve liquidity and capital preservation objectives.

Previous wording

We may from time to time seek to retire, redeem or repurchase all or part of our outstanding debt through cash purchases and/or exchanges, in open market purchases, privately negotiated transactions, by tender offer or otherwise. Such repurchases, redemptions or exchanges, if any, of our debt will depend on prevailing market conditions, liquidity requirements, contractual restrictions and other factors, and the amounts involved may be material.

Current wording

We may from time to time seek to retire, redeem or repurchase all or part of our outstanding debt through cash purchases and/or exchanges, in open market purchases, privately negotiated transactions, by tender offer or otherwise.

Previous wording

We have financed our operations to date primarily through both the private sale of our preferred stock and the public sale of our common stock, debt financings, and cash generated from our operations. As of March 31, 2024, our debt is comprised of $400.0 million aggregate principal amount of convertible notes, due at various dates between 2024 and 2026, and $275.0 million aggregate principal amount outstanding under our Revolving Credit Facility, which we entered into in May 2023 to partially finance the VectivBio Acquisition. The Revolving Credit Facility provides for $500.0 million of borrowing capacity and includes a $10.0 million letter of credit subfacility. Refer to Note 8,Debt, to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for information related to our debt obligations.

Current wording

We have financed our operations to date primarily through both the private sale of our preferred stock and the public sale of our common stock, debt financings, and cash generated from our operations. As of June 30, 2024, our debt is comprised of $200.0 million aggregate principal amount of convertible notes, due in 2026, and $425.0 million aggregate principal amount outstanding under our Revolving Credit Facility, which we entered into in May 2023 to partially finance the VectivBio Acquisition. The Revolving Credit Facility provides for $500.0 million of borrowing capacity and includes a $10.0 million letter of credit subfacility. Refer to Note 9,Debt, to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for information related to our debt obligations.

Previous wording

The following table summarizes cash flows from operating, investing, and financing activities for the three months ended March 31, 2024 and 2023:

Current wording

The following table summarizes cash flows from operating, investing, and financing activities for the three and six months ended June 30, 2024 and 2023:

Previous wording

Net cash inflows for the three months ended March 31, 2024 and 2023 totaled $45.0 million and $80.2 million, respectively, and were derived primarily from collaboration arrangements revenue related to sales of LINZESS in the U.S.

Current wording

Net cash inflows for the three and six months ended June 30, 2024 totaled $33.5 million and $78.5 million, respectively, and were derived primarily from collaboration arrangements revenue related to sales of LINZESS in the U.S. Net cash inflows for the three and six months ended June 30, 2023 were $35.0 million and $115.1 million, respectively, and were primarily from collaboration arrangements revenue related to sales of LINZESS in the U.S.

Previous wording

Cash used in investing activities for each of the three months ended March 31, 2024 and 2023 was insignificant and pertained to the purchase of property and equipment.

Current wording

Cash used in investing activities for the three and six months ended June 30, 2024 was insignificant and pertained to the purchase of property and equipment. Cash used in investing activities for each of the three and six months ended June 30, 2023 was $999.5 million, and pertained primarily to the VectivBio Acquisition.

Previous wording

For a discussion of recent accounting pronouncements, refer to Note 2,Summary of Significant Accounting Policies, to our consolidated financial statements in our 2023 Annual Report on Form 10-K and Note 2,Summary of Significant Accounting Policies, appearing elsewhere in this Quarterly Report on Form 10-Q. We did not otherwise adopt any new accounting pronouncements during the three months ended March 31, 2024 that had a material effect on our condensed consolidated financial statements included in this report.

Current wording

For a discussion of recent accounting pronouncements, refer to Note 2,Summary of Significant Accounting Policies, to our consolidated financial statements in our 2023 Annual Report on Form 10-K and Note 2,Summary of Significant Accounting Policies, appearing elsewhere in this Quarterly Report on Form 10-Q. We did not otherwise adopt any new accounting pronouncements during the three and six months ended June 30, 2024 that had a material effect on our condensed consolidated financial statements included in this report.