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Item 7. Management’s Discussion and Analysis

2026-02-26 compared with 2025-03-31 · 86 added, 119 removed, 301 unchanged (41% of the section changed)

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As a result of many factors, such as those set forth under “Risk Factors” in Item 1A of this Annual Report on Form 10-K, our actual results may differ materially from those anticipated in these forward-looking statements.

Discussion and analysis of our financial condition and results of operations for the fiscal year ended December 31, 2023 compared to the fiscal year ended December 31, 2022 is included in Part II, Item 7 – "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 filed with the SEC on February 16, 2024.

We are a biotechnology company developing and commercializing life-changing therapies for people living with gastrointestinal, or GI, and rare diseases.

We are focused on the development and commercialization of innovative GI product opportunities in areas of significant unmet need, leveraging our demonstrated expertise and capabilities in GI diseases.

We are focused on the development and commercialization of innovative product opportunities in areas of significant unmet need, leveraging our demonstrated expertise and capabilities in GI and rare diseases.

LINZESS ® (linaclotide), our commercial product, is the first product approved by the U.S.

FDA, in a class of GI medicines called GC-C agonists and is indicated for adult men and women suffering from IBS-C or CIC, and for pediatric patients ages 6-17 years-old suffering from FC.

LINZESS is available to adult men and women suffering from IBS-C or CIC in the U.S.

and Mexico, adult men and women suffering from IBS-C or chronic constipation in Japan, and adult men and women suffering from IBS-C in China, and pediatric patients ages 6-17 with FC in the U.S.

Linaclotide is available under the trademarked name CONSTELLA ® to adult men and women suffering from IBS-C or CIC and pediatric patients ages 6-17 years old with FC in Canada, and to adult men and women suffering from IBS-C in certain European countries.

FDA, in a class of GI medicines called GC-C agonists and is indicated for the treatment of irritable bowel syndrome with constipation, or IBS-C, in adults and pediatric patients 7 years of age and older, chronic idiopathic constipation, or CIC, in adults, and functional constipation, or FC, in pediatric patients ages 6-17 years-old.

LINZESS is also available for the treatment of adults with IBS-C or CIC in Mexico, adults with IBS-C or chronic constipation in Japan, and adults with IBS-C in China.

Linaclotide is available under the trademarked name CONSTELLA® for the treatment of adults with IBS-C or CIC and pediatric patients ages 6-17 years old with FC in Canada, and to adults with IBS-C in certain European countries.

We have strategic partnerships with leading pharmaceutical companies to support the development and commercialization of linaclotide throughout the world, including with AbbVie in the U.S.

and all countries worldwide other than China (including Hong Kong and Macau) and Japan, AstraZeneca in China (including Hong Kong and Macau), and Astellas in Japan.

We also aim to leverage our development and commercialization capabilities in GI to bring additional treatment options to GI patients.

Through the VectivBio Acquisition, we are advancing apraglutide, a next-generation, synthetic long-acting peptide analog of GLP-2 for SBS patients who are dependent on PS.

In February 2024, we announced positive topline results from our pivotal Phase III clinical trial, STARS, which evaluated the efficacy and safety of once-weekly subcutaneous apraglutide in reducing parenteral support dependency in adult patients with SBS-IF.

In January 2025, we initiated a rolling NDA submission to the U.S.

FDA and plan to submit marketing applications to other regulatory authorities for apraglutide for use in adult patients with SBS who are dependent on PS.

In November 2021, we entered into the COUR Collaboration Agreement with COUR, that granted us an option to acquire an exclusive license to research, develop, manufacture and commercialize, in the U.S., products containing CNP-104, a tolerizing immune modifying nanoparticle, for the treatment of PBC.

In the third quarter of 2024, we received from COUR the topline data from COUR’s Phase II Clinical study for the treatment of PBC.

In September 2024, we notified COUR of our decision not to exercise the option to acquire an exclusive license to CNP-104.

As a result, the COUR Collaboration Agreement has terminated, and we retain no rights and have no obligations related to CNP-104.

We are also advancing IW-3300, a GC-C agonist, for the potential treatment of visceral pain conditions, such as IC/BPS, and endometriosis.

In September 2024, we decided to end further recruitment for the Phase II proof of concept study in IC/BPS and analyze the data once all currently enrolled patients complete the full 12-week study assessment, which will inform the next steps in the program.

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, including apraglutide.

We are also conducting an open-label extension study, STARS Extend, to further assess the safety of apraglutide in adult patients with SBS-IF.

In April 2025, we announced that, based on discussions with the U.S.

FDA, a confirmatory Phase III clinical trial is needed to seek approval of a new drug application or NDA, for apraglutide for patients with SBS-IF who are dependent on PS.

In the fourth quarter of 2025, we met with the U.S.

FDA and aligned on key design elements of a confirmatory Phase III clinical trial, STARS-2, of apraglutide.

Site initiations are expected to begin in the second quarter of 2026.

To date, we have dedicated a majority of our activities to the research, development and commercialization of linaclotide, as well as other research and development programs, including apraglutide.

Prior to the year ended December 31, 2019, we incurred net losses in each year since inception.

As of December 31, 2025, 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.

We are unable to predict the extent of any future losses or guarantee that our company will be able to generate and maintain positive cash flows.

We were incorporated in Delaware on January 5, 1998 as Microbia, Inc.

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● We recognized $296.2 million in total revenues during the year ended December 31, 2025, compared to $351.4 million during the year ended December 31, 2024.

The decrease was primarily related to a $90.1 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 $43.0 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.

● We generated income from operations of $93.1 million during the year ended December 31, 2024 compared to a loss from operations of $ 945.4 million during the year ended December 31, 2023.

The increase was primarily attributable to incurring approximately $1.1 billion in IPR&D expense related to the VectivBio Acquisition in 2023.

The decrease was primarily related to a $51.1 million decrease in our share of net profits from the sale of LINZESS in the U.S., which was driven by decreased net price and inventory channel fluctuations, partially offset by increased prescription demand.

In addition, results for the year ended December 31, 2024 included a $43.0 million reduction to collaboration revenue as a result of changes in estimates of sales reserves and allowances associated with

governmental and contractual rebates.

● We generated income from operations of $ 98.5 million during the year ended December 31, 2025, compared to income from operations of $ 93.1 million during the year ended December 31, 2024.

The increase was primarily driven by a $60.6 million decrease in operating expenses resulting from restructuring activities in 2025 in an effort to streamline focus and support the continued development of our pipeline, which offset the decrease in collaborative arrangements revenue.

● We generated $127.0 million in cash from operations during the year ended December 31, 2025, ending the year with $215.5 million in cash and cash equivalents.

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In addition, our collaborative arrangements revenue may fluctuate as a result of the timing and amount of license fees and clinical and commercial milestones received and recognized under our current and future strategic partnerships as well as timing and amount of royalties from the sales of linaclotide in the European, Canadian, Mexican, Japanese, or Chinese markets or any other markets where linaclotide receives approval and is commercialized.

Cost of Revenues .

Cost of revenues primarily includes costs related to the sales of linaclotide API, finished drug product, and finished goods to our partners, which generally occurs upon shipment for sales of API, finished drug product and finished goods after the material has passed all quality testing required for acceptance by the partner to certain of our partners outside of the U.S.

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.

Research and Development Expenses.

The core of our research and development strategy is to leverage our demonstrated expertise and capabilities in GI and rare diseases to bring medicines to patients.

Research and development expenses consist 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.

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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.

for the treatment of IBS-C in adults and pediatric patients 7 years of age and older, CIC in adults and FC in pediatric patients ages 6-17 years-old.

Linaclotide is also available to adults suffering from IBS-C or CIC in certain countries of the world, including China, Japan, and in a number of European countries.

We and AbbVie continue to explore ways to enhance the clinical profile of LINZESS by studying linaclotide in additional indications, populations and formulations to assess its potential to treat various conditions.

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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.

FDA approved LINZESS as a once-daily

treatment for pediatric patients ages 6-17 years-old with FC, making LINZESS the first and only U.S.

FDA-approved prescription therapy for FC in this patient population.

On October 15, 2025, the U.S.

FDA granted us a pediatric exclusivity for studies conducted on linaclotide, and in November 2025, approved LINZESS for pediatric patients 7 years of age and older with IBS-C.

Additional clinical pediatric programs in FC are ongoing.

Apraglutide for SBS-IF .

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SBS-IF, a rare and severe organ failure condition in which patients are dependent on PS, affects an estimated 18,000 adult patients in the U.S., Europe, and Japan.

We are also conducting an open-label extension study, STARS Extend, to further assess safety of apraglutide in adult patients with SBS-IF.

In January 2025, we initiated a rolling NDA submission to the U.S.

FDA and plan to submit marketing applications to other regulatory filings for apraglutide for use in adult patients with SBS who are dependent on PS.

Apraglutide for aGvHD.

In March 2024, we announced positive, primary results up to Day 91 for our Phase II exploratory trial, STARGAZE, to evaluate apraglutide in patients with steroid-refractory GI aGvHD, which evaluated the safety and tolerability of once-weekly apraglutide in aGvHD patients treated with standard of care, including systemic corticosteroids and ruxolitinib.

In December 2024, we decided to end further development of apraglutide for aGvHD to focus investment on other priorities.

Through the COUR Collaboration Agreement, we and COUR were developing CNP-104 for the treatment of PBC, a rare autoimmune disease targeting the liver.

We are also conducting an open-label extension study, STARS Extend, to further assess the safety of apraglutide in adult patients with SBS-IF.

In April 2025, we announced that, based on discussions with the U.S.

FDA, a confirmatory Phase III clinical trial is needed to seek approval of an NDA for apraglutide for patients with SBS-IF who are dependent on PS.

In the fourth quarter of 2025, we met with the U.S.

FDA and aligned on key design elements of a confirmatory Phase III clinical trial, STARS-2, of apraglutide.

Site initiations are expected to begin in the second quarter of 2026.

We were developing IW-3300, a GC-C agonist, for the potential treatment of visceral pain conditions, such as IC/BPS.

In April 2025, based on analysis of the Phase II data, we decided to cease developing IW-3300 for IC/BPS.

Through a collaboration and license option agreement, or the COUR Collaboration Agreement, we and COUR Pharmaceutical Development Company, Inc., or COUR, were developing CNP-104 for the treatment of PBC, a rare autoimmune disease targeting the liver.

In the third quarter of 2024, we received from COUR the topline data from COUR’s Phase II Clinical study for the treatment of PBC.

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As a result, the COUR Collaboration Agreement has terminated, and we retain no rights and have no obligations related to CNP-104.

We are also advancing IW-3300, a GC-C agonist, for the potential treatment of visceral pain conditions, such as IC/BPS and endometriosis.

We were developing IW-3718, a gastric retentive formulation of a bile acid sequestrant, for the potential treatment of refractory GERD.

In September 2020, we announced that one of our two identical Phase III trials evaluating IW-3718 in refractory GERD did not meet the pre-specified criteria associated with a planned early efficacy assessment and, based on these findings, we discontinued development of IW-3718.

Early research and development .

Our early research and development efforts have been focused on supporting our development stage GI programs, including exploring strategic options for further development of certain of our internal programs, as well as evaluating external development-stage GI programs.

Our early research and development efforts have been focused on supporting our development stage GI and rare diseases programs, including exploring strategic options for further development of certain of our internal programs, as well as evaluating external development-stage programs.

The following table sets forth our research and development expenses related to our product pipeline for the years ended December 31, 2025 and 2024, respectively.

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Linaclotide (1)

Apraglutide (2)

Early research and development (2)

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(1) Includes linaclotide in all indications, populations and formulations.

(2) Includes $11.4 million of share-based compensation expense and $3.5 million of employer payroll tax expense recognized immediately after the closing of the VectivBio Acquisition in the second quarter of 2023 in connection with the vesting acceleration and settlement of outstanding stock options and restricted stock units.

(3) Includes $6.0 million up-front payment recognized in the second quarter of 2023 in connection with the amendment to the COUR Collaboration Agreement.

(2) Includes $4.8 million reduction to research and development expense recognized in the first quarter of 2024 in connection with the settlement of a license-related contract liability.

The lengthy process of securing regulatory approvals for product candidates, including apraglutide, requires the expenditure of substantial resources.

Any failure by us to obtain, or any delay in obtaining, regulatory approvals would materially adversely affect our product development efforts and our business overall.

We and AbbVie are exploring development opportunities to enhance the clinical profile of LINZESS by studying linaclotide in additional indications, populations and formulations to assess its potential to treat various conditions.

We cannot currently estimate with any degree of certainty the amount of time or money that we will be required to expend in the future on linaclotide for additional indications, populations or formulations.

Given the inherent uncertainties that come with the development of pharmaceutical products, we cannot estimate with any degree of certainty how our programs will evolve, and therefore the amount of time or money that would be required to obtain regulatory approval to market them.

The lengthy process of securing regulatory approvals for product candidates, including apraglutide, requires the expenditure of substantial resources.

Any failure by us to obtain, or any delay in obtaining, regulatory approvals would materially adversely affect our product development efforts and our business overall.

Given the inherent uncertainties

that come with the development of pharmaceutical products, we cannot estimate with any degree of certainty how our programs will evolve, and therefore the amount of time or money that would be required to obtain regulatory approval to market them.

As a result of these uncertainties surrounding the timing and outcome of any approvals, we are currently unable to estimate precisely when, if ever, linaclotide’s utility will be expanded within its currently approved indications;

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Data obtained from these activities also are susceptible to varying interpretations, which could delay, limit or prevent regulatory approval;

FDA and comparable foreign agencies may require additional clinical trials and other studies, which may be costly or delay, limit, prevent or otherwise impact regulatory submission or approval;

● The duration and cost of early research and development, including nonclinical studies and clinical trials, may vary significantly over the life of a product candidate and are difficult to predict;

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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 our GI and rare disease-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.

Acquired In-Process Research and Development.

Asset acquisition costs, license fees and development milestone payments related to acquired and in-licensed products and technology are expensed as acquired in-process research and development at the point that they have no established alternative future use.

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, and in apraglutide, as we advance it through clinical trials, in addition to funding research and development activities under our external collaboration and license agreements with respect to our products and product candidates.

Selling, General and Administrative Expense.

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Restructuring Expenses.

Restructuring expenses pertain to a headquarters-based workforce reduction in April 2023 and restructuring initiatives in connection with the VectivBio Acquisition commencing in June 2023.

Restructuring expenses pertain to a workforce reduction initiative in connection with the VectivBio Acquisition, as well as workforce reductions in January 2025 consisting primarily of field-based sales employees and August 2025 consisting of certain positions supporting apraglutide commercialization efforts.

The workforce reduction and restructuring initiatives are more fully described in Note 15, Workforce Reductions and Restructuring , to our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K.

Interest Expense and Other Financing Costs.

Interest expense consists primarily of cash and non-cash interest costs related to our convertible senior notes and Revolving Credit Facility.

Interest expense consists primarily of cash and non-cash interest costs related to our convertible senior notes and our $550.0 million secured revolving credit facility, or the Revolving Credit Facility.

Non-cash interest expense consists of amortization of debt issuance costs.

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Interest and investment income consists of interest earned on our cash and cash equivalents, as well as significant financing components of payments due from collaboration partners.

Gain on Derivatives.

In June 2015, we issued 2.25% Convertible Senior Notes due June 15, 2022, or the 2022 Convertible Notes, and in August 2019, we issued the Convertible Senior Notes.

In connection with the issuance of our 2022 Convertible Notes, we entered into note hedge warrant transactions, or the Note Hedge Warrants, with certain financial institutions.

Gain on derivatives consists of the change in fair value of the Note Hedge Warrants, which are recorded at fair value at each reporting date and changes in fair value are recorded in our consolidated statements of income (loss).

The Note Hedge Warrants terminated unexercised upon expiry in April 2023.

The Note Hedge Warrants are more fully described in Note 10, Debt , to our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K.

Income Taxes.

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Our significant accounting policies are more fully described in Note 2, Summary of Significant Accounting Policies , to our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K.

We evaluate acquisitions of assets and other similar transactions to assess whether the transaction should be accounted for as a business combination or asset acquisition by first applying a screen test to determine whether substantially all of the fair value of the gross assets acquired is concentrated into a single identifiable asset or group of similar identifiable assets.

If the screen test is met, a single asset or group of assets is not a business and is accounted for as an asset acquisition.

If the screen test is not met, further determination is required as to whether we have acquired inputs and processes that have the ability to create outputs that would meet the requirements of a business.

We account for business combinations using the acquisition method of accounting, which requires the acquiring entity to recognize the fair value of assets acquired and liabilities assumed and establishes the acquisition date as the fair value measurement point.

We determine the fair value of assets acquired and liabilities assumed based on management’s estimate of the fair value of assets acquired and liabilities assumed in the acquisition.

Goodwill represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired.

Transaction costs are expensed as incurred.

We account for asset acquisitions that are not determined to be a business combination by recognizing net assets based on the consideration paid, inclusive of transaction costs, on a relative fair value basis.

In an asset acquisition, the cost allocated to acquired IPR&D with no alternative future use is charged to research and development expense at the acquisition date.

We classify asset acquisitions of acquired IPR&D as investing activities on its consolidated statements of cash flows.

Revenue Recognition

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While ASC 808 provides guidance on classification, the standard is silent on matters of separation, initial measurement, and recognition.

Therefore, we apply

the separation, initial measurement, and recognition principles of ASC Topic 606, Revenue from Contracts with Customers , to our collaboration agreements.

Therefore, we apply the separation, initial measurement, and recognition principles of ASC Topic 606, Revenue from Contracts with Customers , to our collaboration agreements.

Our collaborative arrangements revenue generated from sales of LINZESS in the U.S.

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These amounts are partially determined based on amounts provided by AbbVie and involve the use of estimates and judgments, such as product sales allowances and accruals related to prompt payment discounts, chargebacks, governmental and contractual rebates, wholesaler fees, product returns, and co-payment assistance costs, which could be adjusted based on actual results in the future.

We are highly dependent on AbbVie for timely and accurate information regarding any net revenues realized from sales of LINZESS in the U.S.

We are highly dependent on AbbVie for timely and accurate information regarding any net revenues

realized from sales of LINZESS in the U.S.

in accordance with ASC 808, and the related costs, in order to accurately report its results of operations.

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We estimate the fair value of stock options on the date of grant using the Black-Scholes option-pricing model, which requires the use of subjective assumptions including volatility and expected term, among others.

The fair value of stock awards, RSAs, and RSUs is based on the market value of our Class A Common Stock on the date of grant, with the exception of PSUs with market conditions, which are measured using the Monte Carlo simulation method.

The fair value of

stock awards, RSAs, and RSUs is based on the market value of our Class A Common Stock on the date of grant, with the exception of PSUs with market conditions, which are measured using the Monte Carlo simulation method.

Discounted stock purchases under our ESPP are valued on the first date of the offering period using the Black-Scholes option-pricing model to compute the fair value of the lookback provision plus the purchase discount.

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Significant judgment is required in evaluating whether our tax positions meet this two-step process.

The nature of the uncertain tax

positions is often complex and subject to change, and the amounts at issue can be substantial.

The nature of the uncertain tax positions is often complex and subject to change, and the amounts at issue can be substantial.

We re-evaluate these uncertain tax positions on a quarterly basis based on a number of factors including, but not limited to, changes in facts or circumstances, changes in tax law, and effectively settled issues under audit and new audit activity.

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Defined Benefit Pension Plan

Determining pension expense and obligations for our defined benefit pension plan uses actuarial estimates of participants’ age at retirement, life span, the long-term rate of return on investments and other factors.

In addition, pension expense is sensitive to the discount rate used to value the pension obligation.

As a sensitivity measure, an increase or decrease in our discount rate assumption of 1.00% would decrease and increase our pension expense by $1.8 million and $2.3 million, respectively.

As a sensitivity measure, an increase or decrease in our discount rate assumption of 1.00% would decrease and increase our pension benefit obligation by $2.0

million and $2.6 million, respectively.

These assumptions are subject to the risk of change, including macroeconomic conditions, as they require significant judgment and have inherent uncertainties that management or its actuaries may not control or anticipate.

A detailed discussion of our defined benefit pension plan is contained in Note 15 to our financial statements set forth in Item 8 of this Annual Report on Form 10-K.

A detailed discussion of our defined benefit pension plan is contained in Note 14, Retirement Plans, to our consolidated financial statements, which appears in this Annual Report on Form 10-K.

Results of Operations

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Selling, general and administrative

Restructuring

Acquired in-process research and development

Restructuring, net

Total costs and expenses

Income (loss) from operations

Income from operations

Other income (expense):

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Interest and investment income

Gain on derivatives

Other income (expense), net

Income (loss) before income taxes

Income before income taxes

Income tax expense

Net income (loss)

Net loss attributable to noncontrolling interests

Net income (loss) attributable to Ironwood Pharmaceuticals, Inc.

Year Ended December 31, 2025 Compared to Year Ended December 31, 2024

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Collaborative arrangements revenue.

The decrease in collaborative arrangements revenue of $91.3 million for the year ended December 31, 2024 compared to the year ended December 31, 2023 was primarily related to a $90.1 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 $43.0 million reduction to collaboration revenue as a result of changes in estimates of sales reserves and allowances associated with government and contractual rebates), partially offset by increases from prescription demand.

Cost and Expenses

The decrease in collaborative arrangements revenue of $55.3 million for the year ended December 31, 2025 compared to the year ended December 31, 2024 was primarily related to a $51.1 million decrease in our share of net profits from the sale of LINZESS in the U.S., which was driven by decreased net price and inventory channel fluctuations, partially offset by increased prescription demand.

Costs and Expenses

(in thousands)

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Selling, general and administrative

Restructuring

Acquired in-process research and development

Restructuring, net

Total costs and expenses

Research and development.

The decrease in research and development expenses of $4.7 million for the year ended December 31, 2024 compared to the year ended December 31, 2023 was primarily related to $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, a $4.8 million reduction to research and development expense in connection with the settlement of a license-related contract liability, and a $2.5 million decrease in external linaclotide costs, partially offset by a $15.9 million increase of apraglutide program costs, a $6.0 million increase in compensation, benefits, and other employee-related expenses, and a $2.0 million increase related to an amendment of the COUR Collaboration Agreement.

The decrease in research and development expenses of $16.3 million for the year ended December 31, 2025 compared to the year ended December 31, 2024 was primarily related to $9.6 million decrease in external apraglutide costs, a $5.9 million decrease in costs associated with the IW-3300 development program, a $2.8 million decrease in costs associated with the COUR Collaboration Agreement, and a $1.8 million decrease in external linaclotide costs, partially offset by a $4.8 million reduction to research and development expense recognized during the first quarter of 2024 in connection with the settlement of a license-related contract liability.

Selling, general and administrative.

Selling, general and administrative expenses decreased $14.0 million for the year ended December 31, 2024 compared to the year ended December 31, 2023, primarily due to $16.2 million of share-based compensation and $3.0 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, and a $0.9 million decrease in compensation, benefits, and other employee-related expenses, partially offset by a $8.0 million increase in professional services costs (including $4.5 million related to commercial launch planning for apraglutide, if approved).

Selling, general and administrative expenses decreased by $62.0 million for the year ended December 31, 2025 compared to the year ended December 31, 2024, primarily due to a $47.8 million decrease in compensation, benefits, and other employee-related expenses, and a $13.5 million decrease in sales and marketing expenses, both resulting from the restructuring initiatives during 2025, as well as a decrease of $5.9 million in professional services expenses.

The decrease was partially offset by a $12.5 million legal settlement incurred in 2025 which is more fully described in Note 4, Collaboration, License, and Other Agreements .

Restructuring expenses .

Restructuring expenses were $2.6 million for the year ended December 31, 2024 related to employee severance, benefits and related costs for the VectivBio Acquisition-related workforce reduction.

Restructuring expenses were $18.3 million for the year ended December 31, 2023 and were comprised of $3.4 million of employee severance, benefits and related costs for the headquarters-based workforce reduction and $14.9 million of employee severance, benefits and related costs for the VectivBio Acquisition-related workforce reduction.

Acquired In-Process Research & Development.

We incurred approximately $1.1 billion of expense during the year ended December 31, 2023 in connection with the VectivBio Acquisition to acquire apraglutide.

The increase in restructuring expense of $17.7 million for the year ended December 31, 2025 compared to the year ended December 31, 2024, is primarily related to the workforce reduction in January 2025.

Workforce reduction and restructuring initiatives are more fully described in Note 15, Workforce Reduction and Restructuring .

Other Income (Expense), Net

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Interest and investment income

Gain on derivatives

Total other income (expense), net

Interest expense and other financing costs.

Interest expense increased by $11.4 million during the year ended December 31, 2024 compared to the year ended December 31, 2023 primarily due to $13.2 million of interest expense incurred under the Revolving Credit Facility used to partially finance the VectivBio Acquisition in June 2023, partially offset by a decrease of $1.3 million of interest expense incurred on the 2024 Convertible Notes.

Interest expense decreased by $0.3 million for the year ended December 31, 2025 compared to the year ended December 31, 2024, primarily due to a decrease of $1.1 million in interest expense associated with the 2024 Convertible Notes, which were fully repaid upon maturity in June 2024, partially offset by a $0.7 million increase in other financing costs.

Interest and investment income.

Interest and investment income decreased by $14.5 million in the year ended December 31, 2024 compared to the year ended December 31, 2023, primarily from a decrease in cash and investment balances following the VectivBio Acquisition in June 2023.

Gain on derivatives.

During the year ended December 31, 2023, we recorded an insignificant gain on derivatives resulting from a decrease in the fair value of the Note Hedge Warrants, which terminated unexercised upon expiry in April 2023.

During the year ended December 31, 2024, we recorded a gain of $0.6 million for pension-related activities.

Interest and investment income decreased by $0.4 million for the year ended December 31, 2025 compared to the year ended December 31, 2024, primarily due to a decrease in interest rates.

During the years ended December 31, 2025 and 2024, we recorded a gain of $0.2 million and $0.6 million, respectively, for pension-related activities.

Income taxes.

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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.

We anticipate our cash balance and our expected net cash inflows from operations to allow us to meet our near-term and long-term cash obligations, which are reflected in our consolidated balance sheets.

Our most significant fixed obligations are debt obligations and lease commitments, for which annual payments are disclosed in Note 10, Debt , and Note 7, Leases , respectively, to our financial statements included elsewhere in this Annual Report on Form 10-K.

We anticipate our cash and cash equivalents balance, our expected net cash inflows from operations, our borrowing capacity on our Revolving Credit Facility, and/or additional capital sources to allow us to meet our short-term and long-term cash obligations, which are reflected in our consolidated balance sheets.

Our most significant fixed obligations are debt obligations, supply purchase commitments, and lease commitments, for which annual payments are disclosed in Note 9, Debt , Note 10, Commitments and Contingencies , and Note 6, Leases , respectively, to our financial statements included elsewhere in this Annual Report on Form 10-K.

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.

In May 2021, our board of directors authorized a program to repurchase up to $150.0 million of our Class A Common Stock.

The program was completed in May 2022 and the repurchased shares were retired.

Additional information regarding the repurchase program is disclosed in Note 12, Stockholders’ Equity , to our financial statements included elsewhere in this Annual Report on Form 10-K.

Sources of Liquidity

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 December 31, 2024, our debt is comprised of $200.0 million aggregate principal amount of convertible notes, due in 2026, and $ 385.0 million aggregate principal amount outstanding under our Revolving Credit Facility, which we entered into in May 2023 to partially finance the VectivBio Acquisition.

As of December 31, 2025, our debt is comprised of $200.0 million aggregate principal amount of convertible notes, due in June 2026, and $385.0 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 $550.0 million of borrowing capacity and includes a $10.0 million letter of credit subfacility.

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Financing activities

Effect of exchange rate changes on cash, cash equivalents and restricted cash

Net increase (decrease) in cash, cash equivalents and restricted cash

Effect of exchange rate changes on cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

Cash Flows from Operating Activities

Net cash provided by operating activities is derived by adjusting net income (loss) for non-cash items and changes in operating assets and liabilities, which reflect timing differences between the receipt and payment of cash associated with transactions and when they are recognized in the results of operations.

Net cash inflows during the year ended December 31, 2024 totaled $103.5 million and were derived primarily from collaboration arrangements revenue related to sales of LINZESS in the U.S., partially offset by research and development expenditures for apraglutide.

Net cash inflows during the year ended December 31, 2023 totaled $183.4 million and were derived primarily from collaboration arrangements revenue related to sales of LINZESS in the U.S., partially offset by research and development expenditures for apraglutide and acquisition-related costs in connection with the VectivBio Acquisition.

Net cash inflows during the year ended December 31, 2025 and 2024 totaled $127.0 million and $103.5 million, respectively, and were derived primarily from collaboration arrangements revenue related to sales of LINZESS in the U.S., partially offset by research and development expenditures for apraglutide.

Cash Flows from Investing Activities

Cash used in investing activities for the year ended December 31, 2024 was insignificant and pertained to the purchase of property and equipment.

Cash used in investing activities for the year ended December 31, 2023 totaled approximately $1.0 billion and pertained primarily to the VectivBio Acquisition.

Cash used in investing activities for the year ended December 31, 2025 and 2024 were insignificant and pertained to the purchase of property and equipment.

Cash Flows from Financing Activities

Cash provided by financing activities for the year ended December 31, 2025 was $0.2 million and was generated from employee stock purchases.

Cash used in financing activities for the year ended December 31, 2024 totaled $107.0 million was comprised primarily of the repayment of $200.0 million aggregate principal on the 2024 Convertible Notes upon their maturity in June 2024, partially offset by $85.0 million of net borrowings under the Revolving Credit Facility and $11.0 million from stock option exercises and employee stock purchases.

Cash provided by financing activities for the year ended December 31, 2023 totaled $277.2 million and was generated primarily from the incurrence of $400.0 million of borrowings under the Revolving Credit Facility, net of

$100.0 million of principal repayments.

Additionally, we paid $26.3 million to acquire subsidiary shares from noncontrolling interests to complete the squeeze-out merger in connection with the VectivBio Acquisition.

Funding Requirements

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We also anticipate that we will continue to incur substantial expenses for the next several years as we further develop and commercialize linaclotide in the U.S., develop and commercialize other product candidates, including apraglutide, and invest in building our pipeline through internal or external opportunities.

We believe that our cash on hand as of December 31, 2024 will be sufficient to meet our projected operating needs at least through the next twelve months from the issuance of these financial statements.

We believe that our cash and cash equivalents on hand as of December 31, 2025, our expected cash inflows from operations, and our borrowing capacity on our Revolving Credit Facility will be sufficient to meet our projected operating needs at least through the next twelve months from the issuance of these financial statements.

We have short-term and long-term debt obligations, including convertible notes that mature on June 15, 2026, which are disclosed in Note 9, Debt , to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K .

There is no assurance we will have sufficient liquidity to meet our debt obligations when they become due.

Our forecast of the period of time through which our financial resources will be adequate to support our operations, including the underlying revenue expectations and estimates regarding the costs to continue to develop, obtain regulatory approval for, and commercialize linaclotide in the U.S., develop and commercialize other product candidates, including apraglutide, and our goal to generate and maintain positive cash flows, are forward-looking statements that involve risks and uncertainties.

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We did not otherwise adopt any new accounting pronouncements during the fiscal year ended December 31, 2025 that had a material effect on our consolidated financial statements included in this report.

Quantitative and Qualitative Disclosures about Market Risk

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended, and are not required to provide the information otherwise required under this item.

Financial Statements and Supplementary Data

Our consolidated financial statements, together with the report of independent registered public accounting firms appear at pages F-1 through F-44, of this Annual Report on Form 10-K for the years ended December 31, 2025 and 2024.

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis