IRONWOOD PHARMACEUTICALS INC
For the period ended Dec 31, 2024. Filed Mar 31, 2025.
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FY2024 · Filed Mar 31, 2025
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Item 8. Report of Independent Registered Public Accounting Firm
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Ironwood Pharmaceuticals, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Ironwood Pharmaceuticals, Inc. (the Company) as of December 31, 2024 and 2023, the related consolidated statements of income (loss), comprehensive income (loss), stockholders' equity (deficit) and cash flows for each of the three years in the period ended December 31, 2024, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated March 31, 2025 expressed an adverse opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
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| | | Valuation of Employee Retirement Plan |
| Description of the Matter | | The Company maintains a defined benefit plan for employees at its VectivBio entity. At December 31, 2024, the Company’s aggregate defined benefit pension obligation was $18.5 million and exceeded the fair value of pension plan assets of $15.7 million, resulting in an unfunded defined benefit pension obligation of $2.8 million. As explained in Note 15 of the consolidated financial statements, the Company updates the estimates used to measure employee benefit obligations in the fourth quarter and upon a remeasurement event to reflect the updated actuarial assumptions. |
| Auditing the employee benefit obligation was complex due to the judgment in determining the discount rate used to measure the pension obligation. This assumption had a significant effect on the projected benefit obligation. Further, the identified material weakness relating to the financial statement close process, affected the defined benefit pension obligation and our audit procedures in this area. | ||
| How We Addressed the Matter in Our Audit | | To test the discount rate used in the pension obligation, our audit procedures included, among others, evaluating the methodology used to determine the discount rate with the assistance of an actuarial specialist. We compared the discount rate used by management to historical trends, current economic factors and evaluated the change in the discount rate from prior year. In addition, we compared the discount rate with our independently calculated discount rate as well as with publicly available comparative rates. The nature and extent of our audit procedures considered the material weakness described above. |
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/s/Ernst & Young LLP
We have served as the Company’s auditor since 1998.
Boston, Massachusetts
March 31, 2025
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