Item 9A. Controls and Procedures
Item 9A. Controls and Procedures
Limitations on Effectiveness of Controls and Procedures
In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.
Evaluation of Disclosure Controls and Procedures
As required by Rule 13a-15(b) of the Securities Exchange Act of 1934, or Exchange Act, our management, including our principal executive officer and our principal financial officer, conducted an evaluation as of the end of the period covered by this Annual Report on Form 10-K of the effectiveness of the design and operation of our disclosure controls and procedures. Based on that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of December 31, 2025, at the reasonable assurance level in ensuring that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports we file under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over our financial reporting. Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act as the process designed by, or under the supervision of, our Chief Executive Officer and Chief Financial Officer, and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of our financial statements for external purposes in accordance with generally accepted accounting principles, and includes those policies and procedures that:
(1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of assets;
(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with the authorizations of management and directors; and
(3) provide reasonable assurance regarding the prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on our financial statements.
Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework provided in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Based on this evaluation, our management concluded that our internal control over financial reporting was effective as of December 31, 2025.
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The effectiveness of our internal control over financial reporting as of December 31, 2025 has been audited by KPMG LLP, an independent registered public accounting firm, as stated in their report, which appears in this Annual Report on Form 10-K.
Remediation of Previously Identified Material Weaknesses
As previously described in described in “Part II, Item 9A – Controls and Procedures” of our Annual Report on Form 10-K for the year ended December 31, 2024, management identified material weaknesses in our internal control over financial reporting related to the design, implementation and/or operating effectiveness of entity-level controls, information technology, or IT, general controls, controls over the financial statements close process, IT application controls, and IT dependent manual controls.
During the year ended December 31, 2025, management took several steps to remediate the previously disclosed material weaknesses including the following:
1) Engaging third-party specialists to assess and strengthen our design and operating effectiveness of our IT general controls and IT application controls, including change management controls;
2) Implementing system approval and monitoring controls to mitigate segregation of duties risks within certain financial processes;
3) Hiring and engaging incremental personnel with appropriate expertise in accounting, financial reporting and internal controls commensurate with the type, volume and complexity of our operations; and
4) Conducting and delivering employee trainings around completeness and accuracy procedures of key data and reports used in control activities.
As a result of these remediation activities, management has concluded that the controls were designed, implemented and operating effectively, such that the material weaknesses previously identified as of December 31, 2024 have been remediated as of December 31, 2025.
Changes in Internal Control Over Financial Reporting
As required by Rule 13a-15(d) of the Exchange Act, our management, including our principal executive officer and our principal financial officer, conducted an evaluation of the internal control over financial reporting to determine whether any changes occurred during the quarter ended December 31, 2025 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
Based on management’s evaluation, and except with respect to changes in connection with our implementation of the remediation efforts as described above, our principal executive officer and principal financial officer concluded that no other changes during the quarter ended December 31, 2025 materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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Item 9B. Other Information
(b) Director and Officer Trading Arrangements
During the quarter ended December 31, 2025, no director or officer (as defined in Rule 16a-1(f) under the Exchange Act) of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10 b5- 1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.
Item 9C. Disclos ure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
PART III
Item 10. Directors, Executive Officers and Corporate Governance
We have adopted a code of business conduct and ethics applicable to our directors, officers, employees, consultants and all their immediate family or other household members. A copy of that code is available on our corporate website at http://www.ironwoodpharma.com. Any amendments to the code of business conduct and ethics, and any waivers thereto that are required to be disclosed pursuant to SEC rules, will be also available on our corporate website. A printed copy of these documents will be made available upon request. The content on our website is not incorporated by reference into this Annual Report on Form 10-K.
We have adopted an insider trading prevention policy governing the purchase, sale and other dispositions of our securities that applies to each of our directors, officers, employees, consultants and their immediate family members. We believe the insider trading prevention policy is reasonably designed to promote compliance with insider trading laws, rules and regulations, and Nasdaq listing standards. A copy of our insider trading prevention policy is filed as Exhibit 19.1 hereto. It is also our policy that we do not engage in transactions in Company securities while in possession of material nonpublic information concerning the Company or our securities.
The other information required by this item is incorporated by reference from our proxy statement for our 2026 Annual Meeting of Stockholders.
Item 11. Executive Compensation
The information required by this item is incorporated by reference from our proxy statement for our 2026 Annual Meeting of Stockholders.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information relating to security ownership of certain beneficial owners of our common stock and information relating to the security ownership of our management required by this item is incorporated by reference from our proxy statement for our 2026 Annual Meeting of Stockholders.
The table below sets forth information with regard to securities authorized for issuance under our equity compensation plans as of December 31, 2025. As of December 31, 2025, we had four active equity compensation plans, each of which was approved by our stockholders:
● Amended and Restated 2010 Employee, Director and Consultant Equity Incentive Plan;
● 2019 Equity Incentive Plan;
● Amended and Restated 2019 Equity Incentive Plan; and
● Amended and Restated 2010 Employee Stock Purchase Plan.
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Plan Category
Number of securities to be issued upon exercise of outstanding options, warrants and rights (1)
Weighted-average exercise price of outstanding options, warrants, and rights (2)
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (3)
(a)
(b)
(c)
Equity compensation plans approved by security holders
10,473,433
$12.00
9,920,123
Equity compensation plans not approved by security holders
—
—
—
Total
10,473,433
$12.00
9,920,123
(1)
Amount includes the number of shares subject to issuance upon exercise of 3,399,109 outstanding stock options and vesting of 7,074,324 RSUs.
(2)
Amount includes all outstanding stock options but does not include RSUs, which do not have an exercise price.
(3)
Consists of 6,185,663 shares available for future issuance under the Amended and Restated 2019 Equity Incentive Plan and 3,734,460 shares available for future issuance under the Amended and Restated 2010 Employee Stock Purchase Plan.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this item is incorporated by reference from our proxy statement for our 2026 Annual Meeting of Stockholders.
Item 14. Principal Accountant Fees and Services
The information required by this item is incorporated by reference from our proxy statement for our 2026 Annual Meeting of Stockholders.
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PART IV
Item 15. Exhibits and Financial Statement Schedules
1.
List of documents filed as part of this report
1.
Consolidated Financial Statements listed under Part II, Item 8 and included herein by reference.
2.
Consolidated Financial Statement Schedules
No schedules are submitted because they are not applicable, not required or because the information is included in the Consolidated Financial Statements or Notes to Consolidated Financial Statements.
3.
Exhibits
Incorporated by reference herein
Number
Description
Form
Date
2.1
Separation Agreement, dated as of March 30, 2019, by and between Ironwood Pharmaceuticals, Inc. and Cyclerion Therapeutics, Inc.
Current Report on Form 8-K (File No. 001-34620)
April 4, 2019
2.2
Transaction Agreement, dated May 21, 2023, by and between Ironwood Pharmaceuticals, Inc. and VectivBio Holding AG
Current Report on Form 8-K (File No. 001-34620)
May 22, 2023
3.1
Eleventh Amended and Restated Certificate of Incorporation
Annual Report on Form 10-K (File No. 001-34620)
March 30, 2010
3.2
Certificate of Retirement
Registration Statement on Form 8-A/A (File No. 001-34620)
January 3, 2019
3.3
Certificate of Amendment
Current Report on Form 8-K (File No. 001-34620)
May 31, 2019
3.4
Fifth Amended and Restated Bylaws
Annual Report on Form 10-K (File No. 001-34620)
March 30, 2010
4.1
Specimen Class A Common Stock certificate
Registration Statement on Form S-1, as amended (File No. 333-163275)
January 20, 2010
4.2
Indenture, dated as of August 12, 2019, by and between Ironwood Pharmaceuticals, Inc. and U.S. Bank National Association (including the form of the 1.50% Convertible Senior Note due 2026)
Current Report on Form 8-K (File No. 001-34620)
August 13, 2019
4.2.1
Form of 1.50% Convertible Senior Note due 2026
Current Report on Form 8-K (File No. 001-34620)
August 13, 2019
4.3
Description of Securities of Ironwood Pharmaceuticals, Inc.
Annual Report on Form 10-K (File No. 001-34620)
February 17, 2021
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10.1#
Amended and Restated 2010 Employee, Director and Consultant Equity Incentive Plan
Registration Statement on Form S-8, as amended (File No. 333-184396)
October 12, 2012
10.1.1#
Form of Stock Option Agreement under the Amended and Restated 2010 Employee, Director and Consultant Equity Incentive Plan
Quarterly Report on Form 10-Q (File No. 001-34620)
November 6, 2018
10.1.2#
Form of Restricted Stock Unit Agreement under the Amended and Restated 2010 Employee, Director and Consultant Equity Incentive Plan
Quarterly Report on Form 10-Q (File No. 001-34620)
November 6, 2018
10.2#
2019 Equity Incentive Plan
Quarterly Report on Form 10-Q (File No. 001-34620)
July 30, 2019
10.2.1#
Form of Non-statutory Stock Option Agreement under the 2019 Equity Incentive Plan
Quarterly Report on Form 10-Q (File No. 001-34620)
July 30, 2019
10.2.2#
Form of Restricted Stock Unit Agreement under the 2019 Equity Incentive Plan
Quarterly Report on Form 10-Q (File No. 001-34620)
July 30, 2019
10.2.3#
Form of Restricted Stock Agreement under the 2019 Equity Incentive Plan
Quarterly Report on Form 10-Q (File No. 001-34620)
July 30, 2019
10.2.4#
Form of Performance-Based Restricted Stock Unit Award Agreement under the 2019 Equity Incentive Plan
Quarterly Report on Form 10-Q (File No. 001-34620)
May 6, 2020
10.3#
Amended and Restated 2019 Equity Incentive Plan
Current Report on Form 8-K (File No. 001-34620)
June 22, 2023
10.3.1#
Form of Restricted Stock Unit Agreement under the Amended and Restated 2019 Equity Incentive Plan
Quarterly Report on Form 10-Q (File No. 001-34620)
November 9, 2023
10.4#
Amended and Restated 2010 Employee Stock Purchase Plan
Annual Report on Form 10-K (File No. 001-34620)
February 13, 2020
10.5#
Change of Control Severance Benefit Plan, as amended and restated
Quarterly Report on Form 10-Q (File No. 001-34620)
April 29, 2014
10.6#
Form of Executive Severance Agreement
Annual Report on Form 10-K (File No. 001-34620)
February 25, 2019
10.7#
Form of Executive Severance Agreement
Current Report on Form 8-K (File No. 001-34620)
December 1, 2021
10.8#
Second Amended and Restated Executive Severance Agreement, dated as of June 22, 2021, between Ironwood Pharmaceuticals, Inc. and Thomas McCourt
Current Report on Form 8-K/A (File No. 001-34620)
June 24, 2021
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10.9#
Second Amended and Restated Non-employee Director Compensation Policy, effective January 1, 2024
Annual Report on Form 10-K (File No. 001-34620)
February 16, 2024
10.10#
Form of Indemnification Agreement with Directors and Officers
Registration Statement on Form S-1, as amended (File No. 333-163275)
December 23, 2009
10.11+
Collaboration Agreement, dated as of September 12, 2007, as amended on November 3, 2009, by and between Forest Laboratories, Inc. and Ironwood Pharmaceuticals, Inc.
Registration Statement on Form S-1, as amended (File No. 333-163275)
February 2, 2010
10.11.1
Amendment No. 2 to the Collaboration Agreement, dated as of January 8, 2013, by and between Forest Laboratories, Inc. and Ironwood Pharmaceuticals, Inc .
Annual Report on Form 10-K (File No. 001-34620)
February 21, 2013
10.12+
Commercial Agreement, dated as of January 31, 2017, by and among Allergan USA, Inc., Forest Laboratories, LLC and Ironwood Pharmaceuticals, Inc.
Quarterly Report on Form 10-Q (File No. 001-34620)
May 8, 2017
10.13+
License Agreement, dated as of April 30, 2009, by and between Allergan Pharmaceuticals International Ltd. (formerly with Almirall, S.A.) and Ironwood Pharmaceuticals, Inc.
Registration Statement on Form S-1, as amended (File No. 333-163275)
February 2, 2010
10.13.1+
Amendment No. 1 to License Agreement, dated as of June 11, 2013, by and between Allergan Pharmaceuticals International Ltd. (formerly with Almirall, S.A.) and Ironwood Pharmaceuticals, Inc .
Quarterly Report on Form 10-Q (File No. 001-34620)
August 8, 2013
10.13.2+
Amendment to the License Agreement, dated as of October 26, 2015, by and between Allergan Pharmaceuticals International Ltd. and Ironwood Pharmaceuticals, Inc.
Annual Report on Form 10-K (File No. 001-34620)
February 19, 2016
10.13.3+
Amendment to the License Agreement dated as of January 31, 2017, by and between Allergan Pharmaceuticals International Ltd., and Ironwood Pharmaceuticals, Inc .
Quarterly Report on Form 10-Q (File No. 001-34620)
May 8, 2017
10.14+
Novation Agreement, dated as of October 26, 2015, by and among Almirall, S.A., Allergan Pharmaceuticals International Ltd. and Ironwood Pharmaceuticals, Inc .
Annual Report on Form 10-K (File No. 001-34620)
February 19, 2016
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10.15++
Amended and Restated License Agreement, dated as of August 1, 2019, by and between Ironwood Pharmaceuticals, Inc. and Astellas Pharma Inc .
Current Report on Form 8-K (File No. 001-34620
August 1, 2019
10.15.1
Amendment to the Amended and Restated License Agreement, dated as of January 8, 2021, by and between Ironwood Pharmaceuticals, Inc. and Astellas Pharma Inc.
Annual Report on Form 10-K (File No. 001-34620)
February 17, 2021
10.16++
Amended and Restated License and Collaboration Agreement, dated as of September 16, 2019, by and between AstraZeneca AB and Ironwood Pharmaceuticals, Inc.
Current Report on Form 8-K (File No. 001-34620)
September 18, 2019
10.17+
Commercial Supply Agreement, dated as of June 23, 2010, by and among PolyPeptide Laboratories, Inc. and Polypeptide Laboratories (SWEDEN) AB, Forest Laboratories, Inc. and Ironwood Pharmaceuticals, Inc .
Quarterly Report on Form 10-Q (File No. 001-34620)
August 10, 2010
10.18+
Commercial Supply Agreement, dated as of March 28, 2011, by and among Corden Pharma Colorado, Inc. (f/k/a Roche Colorado Corporation), Ironwood Pharmaceuticals, Inc. and Forest Laboratories, Inc .
Quarterly Report on Form 10-Q (File No. 001-34620)
May 13, 2011
10.18.1+
Amendment No. 3 to Commercial Supply Agreement, dated as of November 26, 2013, by and between Corden Pharma Colorado, Inc. (f/k/a Roche Colorado Corporation), Ironwood Pharmaceuticals, Inc. and Forest Laboratories, Inc.
Annual Report on Form 10-K (File No. 001-34620)
February 7, 2014
10.19++
Amended and Restated Exclusive License Agreement by and between Ferring International Center S.A. and GlyPharma Therapeutic Inc. dated as of December 6, 2016, as amended
Registration Statement on Form F-1 (File No. 333-254523)
March 19, 2021
10.19.1++
Third Amendment to the Amended and Restated Exclusive License Agreement dated as of December 18, 2025, by and among VectivBio AG and Ferring International Center S.A., and, solely for purposes of a limited payment guarantee, Ironwood Pharmaceuticals, Inc.
Current Report on Form 8-K (File No. 001-34620)
December 23, 2025
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10.20++
Development and Commercialization Agreement by and between VectivBio AG and Asahi Kasei Pharma Corporation, dated as of March 30, 2022
Annual Report on Form 20-F (File No. 001-40316)
April 19, 2023
10.21
Credit Agreement, dated May 21, 2023, by and among Ironwood Pharmaceuticals, Inc., as borrower, Wells Fargo Bank, National Association, as administrative agent, collateral agent, a letter of credit issuer and a lender, and the other agents, lenders and letter of credit issuers parties thereto
Current Report on Form 8-K (File No. 001-34620)
May 22, 2023
10.21.1
Amendment No. 1 to Credit Agreement, dated September 27, 2024, by and among Ironwood Pharmaceuticals, Inc., as borrower, Wells Fargo Bank, National Association, as administrative agent, collateral agent, a letter of credit issuer and a lender, and the other agents, lenders and letter of credit issuers parties thereto
Current Report on Form 8-K (File No. 001-34620)
September 30, 2024
10.22
Lease Agreement for facilities at 100 Summer Street, Boston, Massachusetts, dated as of June 11, 2019, by and between Ironwood Pharmaceuticals, Inc. and MA-100 Summer Street Owner, L.L.C.
Current Report on Form 8-K (File No. 001-34620)
June 13, 2019
10.23
Tax Matters Agreement, dated as of March 30, 2019, by and between Ironwood Pharmaceuticals, Inc. and Cyclerion Therapeutics, Inc.
Current Report on Form 8-K (File No. 001-34620)
April 4, 2019
10.24
Employee Matters Agreement, dated as of March 30, 2019, by and between Ironwood Pharmaceuticals, Inc. and Cyclerion Therapeutics, Inc.
Current Report on Form 8-K (File No. 001-34620)
April 4, 2019
10.25
Base Call Option Transaction Confirmation for the 2026 Notes, dated as of August 7, 2019, between Ironwood Pharmaceuticals, Inc. and JPMorgan Chase Bank, National Association
Current Report on Form 8-K (File No. 001-34620)
August 13, 2019
10.26
Base Call Option Transaction Confirmation, for the 2026 Notes, dated as of August 7, 2019, between Ironwood Pharmaceuticals, Inc. and Credit Suisse Capital LLC
Current Report on Form 8-K (File No. 001-34620)
August 13, 2019
10.27
Additional Call Option Transaction Confirmation for the 2026 Notes, dated as of August 12, 2019, between Ironwood Pharmaceuticals, Inc. and JPMorgan Chase Bank, National Association
Current Report on Form 8-K (File No. 001-34620)
August 13, 2019
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10.28
Additional Call Option Transaction Confirmation for the 2026 Notes, dated as of August 12, 2019, between Ironwood Pharmaceuticals, Inc. and Credit Suisse Capital LLC
Current Report on Form 8-K (File No. 001-34620)
August 13, 2019
19.1
Insider Trading Prevention Policy
Annual Report on Form 10-K (File No. 001-34620)
March 31, 2025
21.1*
Subsidiaries of Ironwood Pharmaceuticals, Inc.
23.1*
Consent of KPMG LLP, Independent Registered Public Accounting Firm
23.2*
Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm
31.1*
Certification of Chief Executive Officer pursuant to Rules 13a-14 or 15d-14 of the Exchange Act
31.2*
Certification of Chief Financial Officer pursuant to Rules 13a-14 or 15d-14 of the Exchange Act
32.1‡
Certification of Chief Executive Officer pursuant to Rules 13a-14(b) or 15d-14(b) of the Exchange Act and 18 U.S.C. Section 1350
32.2‡
Certification of Chief Financial Officer pursuant to Rules 13a-14(b) or 15d-14(b) of the Exchange Act and 18 U.S.C. Section 1350
97.1
Policy for Recoupment of Incentive Compensation
Annual Report on Form 10-K (File No. 001-34620)
February 16, 2024
101.INS*
XBRL Instance Document – The Instance Document does not appear in the Interactive Data Files because its XBRL tags are embedded within the Inline XBRL document
101.SCH*
XBRL Taxonomy Extension Schema Document
101.CAL*
XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB*
XBRL Taxonomy Extension Label Linkbase Database
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101.PRE*
XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF*
XBRL Taxonomy Extension Definition Linkbase Document
104*
The cover page from this Annual Report on Form 10-K, formatted in Inline XBRL
*
Filed herewith.
‡
Furnished herewith.
+
Confidential treatment has been granted as to certain portions of the exhibit, which portions have been omitted and have been separately filed with the SEC pursuant to the confidential treatment request.
++
Portions of this exhibit have been omitted pursuant to Item 601(b)(10)(iv) of Regulation S-K.
#
Management contract or compensatory plan, contract, or arrangement.
Item 16. Form 10-K Summary
None.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Boston, Commonwealth of Massachusetts, on the 26 th day of February 2026.
Ironwood Pharmaceuticals, Inc.
By:
/s/ Thomas M c Court
Thomas McCourt
Chief Executive Officer
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated.
Signature
Title
Date
/s/ Thomas McCourt
Chief Executive Officer and Director (Principal Executive Officer)
February 26, 2026
Thomas McCourt
/s/ Gregory Martini
Senior Vice President, Chief Financial Officer (Principal Financial Officer)
February 26, 2026
Gregory Martini
/s/ Ronald Silver
Senior Vice President, Corporate Controller & Chief Accounting Officer (Principal Accounting Officer)
February 26, 2026
Ronald Silver
/s/ Julie H. McHugh
Chair of the Board
February 26, 2026
Julie H. McHugh
/s/ Mark Currie
Director
February 26, 2026
Mark Currie
/s/ Alexander Denner
Director
February 26, 2026
Alexander Denner
/s/ Jon Duane
Director
February 26, 2026
Jon Duane
/s/ Marla Kessler
Director
February 26, 2026
Marla Kessler
/s/ Catherine Moukheibir
Director
February 26, 2026
Catherine Moukheibir
/s/ Jay P. Shepard
Director
February 26, 2026
Jay P. Shepard
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Index to Consolidated Financial Statements of
Ironwood Pharmaceuticals, Inc.
Page
Report of Independent Registered Public Accounting Firm (PCAOB ID: 185 )
F-2
Report of Independent Registered Public Accounting Firm (PCAOB ID: 42 )
F-4
Consolidated Balance Sheets as of December 31, 2025 and 2024
F-5
Consolidated Statements of Income for the Years Ended December 31, 2025 and 2024
F-6
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2025 and 2024
F-7
Consolidated Statements of Stockholders’ Deficit for the Years Ended December 31, 2025 and 2024
F-8
Consolidated Statements of Cash Flows for the Years Ended December 31, 2025 and 2024
F-9
Notes to Consolidated Financial Statements
F-10
F-1
Table of Contents
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors
Ironwood Pharmaceuticals, Inc.:
Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting
We have audited the accompanying consolidated balance sheet of Ironwood Pharmaceuticals, Inc. and subsidiaries (the Company) as of December 31, 2025, the related consolidated statements of income, comprehensive income, stockholders’ deficit, and cash flows for the year then ended, and the related notes (collectively, the consolidated financial statements). We also have audited the Company’s internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2025, and the results of its operations and its cash flows for the year then ended, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025 based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Basis for Opinions
The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (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 audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audit of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated 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 consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of
F-2
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management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated 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 consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a 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.
Measurement of the pension benefit obligation
As discussed in Notes 2 and 14 to the consolidated financial statements, the Company maintains a defined benefit plan for employees in Switzerland. As of December 31, 2025, the Company’s projected benefit obligation was $15.5 million. The measurement of the projected benefit obligation is based on actuarial assumptions that require judgment, which include the discount rate used in determining the projected benefit obligation.
We identified the evaluation of the projected benefit obligation as a critical audit matter. Subjective auditor judgment was required to evaluate the discount rate used in determining the projected benefit obligation because of the need to involve professionals with specialized skills and knowledge.
The following are the primary procedures we performed to address the critical audit matter. We evaluated the design and tested the operating effectiveness of certain controls over the Company’s projected benefit obligation measurement process, including a control related to the determination of the discount rate. We involved an actuarial professional with specialized skills and knowledge, who assisted in 1) understanding and assessing the actuarial method and assumptions used to measure the projected benefit obligation, and 2) evaluating changes in the discount rate from prior year against changes in published indices.
/s/ KPMG LLP
We have served as the Company’s auditor since 2025.
Boston, Massachusetts
February 26, 2026
F-3
Table of Contents
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 sheet of Ironwood Pharmaceuticals, Inc. (the Company) as of December 31, 2024, the related consolidated statement of income, comprehensive income, stockholders' deficit, and cash flows for the year 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 the results of its operations and its cash flows for the year ended December 31, 2024, in conformity with U.S. generally accepted accounting principles.
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.
/s/ Ernst & Young LLP
We have served as the Company’s auditor from 1998 to 2025.
Boston, Massachusetts
March 31, 2025
F-4
Table of Contents
Ironwood Pharmaceuticals, Inc.
Consolidated Balance Sheets
(In thousands, except share and per share amounts)
December 31,
December 31,
2025
2024
ASSETS
Current assets:
Cash and cash equivalents
$
215,456
$
88,559
Accounts receivable, net
46,745
81,886
Prepaid expenses and other current assets
11,977
11,923
Total current assets
274,178
182,368
Property and equipment, net
3,408
4,495
Operating lease right-of-use assets
9,340
11,028
Intangible assets, net
2,040
2,860
Deferred tax assets
103,433
144,234
Other assets
4,502
5,923
Total assets
$
396,901
$
350,908
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable
$
2,898
$
2,127
Accrued research and development costs
3,149
6,681
Accrued expenses and other current liabilities
33,239
26,849
Current portion of operating lease liabilities
3,252
3,189
Current portion of convertible senior notes
199,680
—
Total current liabilities
242,218
38,846
Operating lease obligations, net of current portion
9,870
12,304
Convertible senior notes, net of current portion
—
198,988
Revolving credit facility
385,000
385,000
Other liabilities
21,648
17,105
Commitments and contingencies (Note 10)
Stockholders’ deficit:
Preferred stock, $ 0.001 par value, 75,000,000 shares authorized, no shares issued and outstanding
—
—
Class A Common Stock, $ 0.001 par value, 500,000,000 shares authorized and 163,058,316 shares issued and outstanding as of December 31, 2025 and 500,000,000 shares authorized and 160,205,899 shares issued and outstanding as of December 31, 2024
163
160
Additional paid-in capital
1,412,780
1,395,317
Accumulated deficit
( 1,673,718 )
( 1,697,735 )
Accumulated other comprehensive income (loss)
( 1,060 )
923
Total stockholders’ deficit
( 261,835 )
( 301,335 )
Total liabilities and stockholders’ deficit
$
396,901
$
350,908
The accompanying notes are an integral part of these consolidated financial statements.
F-5
Table of Contents
Ironwood Pharmaceuticals, Inc.
Consolidated Statements of Income
(In thousands, except per share amounts)
Years Ended December 31,
2025
2024
Revenues:
Collaborative arrangements revenue
$
296,151
$
351,410
Total revenues
296,151
351,410
Costs and expenses:
Research and development
95,136
111,421
Selling, general and administrative
82,256
144,272
Restructuring, net
20,257
2,593
Total costs and expenses
197,649
258,286
Income from operations
98,502
93,124
Other income (expense):
Interest expense and other financing costs
( 32,746 )
( 33,034 )
Interest and investment income
4,076
4,468
Other
193
640
Other income (expense), net
( 28,477 )
( 27,926 )
Income before income taxes
70,025
65,198
Income tax expense
( 46,008 )
( 64,318 )
Net income
$
24,017
$
880
Net income per share — basic and diluted
$
0.15
$
0.01
Weighted average shares used in computing net income per share — basic:
161,842
159,083
Weighted average shares used in computing net income per share — diluted:
162,983
160,084
The accompanying notes are an integral part of these consolidated financial statements.
F-6
Table of Contents
Ironwood Pharmaceuticals, Inc.
Consolidated Statements of Comprehensive Income
(In thousands, except per share amounts)
Years Ended December 31,
2025
2024
Net income
$
24,017
$
880
Other comprehensive income (loss), net of tax:
Currency translation adjustment
( 2,754 )
2,901
Defined benefit pension plan
771
1,053
Total other comprehensive income (loss), net of tax
( 1,983 )
3,954
Comprehensive income
$
22,034
$
4,834
The accompanying notes are an integral part of these consolidated financial statements.
F-7
Table of Contents
Ironwood Pharmaceuticals, Inc.
Consolidated Statements of Stockholders’ Deficit
(In thousands, except share amounts)
Accumulated
Class A
Additional
other
Total
Common Stock
paid-in
Accumulated
comprehensive
stockholders’
Shares
Amount
capital
deficit
income (loss)
deficit
Balance as of December 31, 2023
156,354,238
$
156
$
1,355,195
$
( 1,698,615 )
$
( 3,031 )
$
( 346,295 )
Issuance of common stock related to share-based awards and employee stock purchase plan
3,851,661
4
11,009
—
—
11,013
Share-based compensation expense related to share-based awards and employee stock purchase plan
—
—
29,850
—
—
29,850
Taxes paid related to net share settlement of share-based awards
—
—
( 737 )
—
—
( 737 )
Net income
—
—
—
880
—
880
Other comprehensive income, net of tax
—
—
—
—
3,954
3,954
Balance as of December 31, 2024
160,205,899
$
160
$
1,395,317
$
( 1,697,735 )
$
923
$
( 301,335 )
Issuance of common stock related to share-based awards and employee stock purchase plan
2,852,417
3
213
—
—
216
Share-based compensation expense related to share-based awards and employee stock purchase plan
—
—
17,250
—
—
17,250
Net income
—
—
—
24,017
—
24,017
Other comprehensive loss, net of tax
—
—
—
—
( 1,983 )
( 1,983 )
Balance as of December 31, 2025
163,058,316
$
163
$
1,412,780
$
( 1,673,718 )
$
( 1,060 )
$
( 261,835 )
The accompanying notes are an integral part of these consolidated financial statements.
F-8
Table of Contents
Ironwood Pharmaceuticals, Inc.
Consolidated Statements of Cash Flows
(In thousands)
Year Ended December 31,
2025
2024
Cash flows from operating activities:
Net income
$
24,017
$
880
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
1,881
2,011
Loss on disposal of property and equipment
89
75
Share-based compensation expense
17,250
29,850
Non-cash interest expense
1,668
1,904
Non-cash lease expense
1,688
1,558
Deferred income taxes
40,801
68,090
Changes in assets and liabilities:
Accounts receivable, net
35,148
47,236
Prepaid expenses and other current assets
367
89
Other assets
447
( 854 )
Accounts payable and accrued expenses
6,201
( 20,208 )
Accrued research and development costs
( 4,106 )
( 14,650 )
Operating lease liabilities
( 2,371 )
( 2,176 )
Other liabilities
3,964
( 10,256 )
Net cash provided by operating activities
127,044
103,549
Cash flows from investing activities:
Purchases of property and equipment
( 34 )
( 142 )
Net cash used in investing activities
( 34 )
( 142 )
Cash flows from financing activities:
Proceeds from exercise of stock options and employee stock purchase plan
216
11,013
Taxes paid related to net share settlement of share-based awards
—
( 737 )
Repayment of 2024 Convertible Notes
—
( 200,000 )
Proceeds from revolving credit facility
—
150,000
Costs associated with revolving credit facility
—
( 2,246 )
Repayments of revolving credit facility
—
( 65,000 )
Net cash provided by (used in) financing activities
216
( 106,970 )
Effect of exchange rate changes on cash and cash equivalents
( 329 )
( 32 )
Net increase (decrease) in cash and cash equivalents
126,897
( 3,595 )
Cash and cash equivalents, beginning of period
88,559
92,154
Cash and cash equivalents, end of period
$
215,456
$
88,559
Supplemental cash flow disclosure:
Cash paid for interest
$
30,333
$
32,563
Cash paid for income taxes
$
3,543
$
8,408
The accompanying notes are an integral part of these consolidated financial statements.
F-9
Table of Contents
Ironwood Pharmaceuticals, Inc.
Notes to Consolidated Financial Statements
1. Nature of Business
Ironwood Pharmaceuticals, Inc. (“Ironwood” or the “Company”) is a biotechnology company developing and commercializing life-changing therapies for people living with gastrointestinal (“GI”) and rare diseases. The Company is focused on the development and commercialization of innovative product opportunities in areas of significant unmet need, leveraging its demonstrated expertise and capabilities in GI and rare diseases.
LINZESS® (linaclotide), the Company’s commercial product, is the first product approved by the United States Food and Drug Administration (the “U.S. FDA”) in a class of GI medicines called guanylate cyclase type C agonists (“GC-C agonists”) and is indicated, in the U.S., for the treatment of irritable bowel syndrome with constipation (“IBS-C”) in adults and pediatric patients 7 years of age and older, chronic idiopathic constipation (“CIC”) in adults, and functional constipation (“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.
The Company has strategic partnerships with leading pharmaceutical companies to support the development and commercialization of linaclotide throughout the world. The Company and its partner, AbbVie Inc. (together with its affiliates, “AbbVie”), began commercializing LINZESS in the U.S. in December 2012. Under the Company’s collaboration for North America with AbbVie, total net sales of LINZESS in the U.S., as recorded by AbbVie, are reduced by commercial costs incurred by each party, and the resulting amount is shared equally between the Company and AbbVie. Additionally, development costs are shared equally between the Company and AbbVie.
Outside of the U.S., the Company earns royalties as a percentage of net sales of products containing linaclotide as an active ingredient by the Company’s collaboration partners. AbbVie has an exclusive license from the Company to develop and commercialize linaclotide in all countries other than China (including Hong Kong and Macau), Japan and the countries and territories of North America (the “AbbVie License Territory”). In addition, AbbVie has exclusive rights to commercialize linaclotide in Canada as CONSTELLA and in Mexico as LINZESS. Astellas Pharma Inc. (“Astellas”), the Company’s partner in Japan, has an exclusive license to develop, manufacture, and commercialize linaclotide in Japan. AstraZeneca AB (together with its affiliates) (“AstraZeneca”), the Company’s partner in China, has the exclusive right to develop, manufacture, and commercialize products containing linaclotide in China (including Hong Kong and Macau) (the “AstraZeneca License Territory”).
Through the acquisition of VectivBio Holding AG (“VectivBio”) in June 2023 (the “VectivBio Acquisition”), the Company is advancing apraglutide, a next-generation, synthetic peptide long-acting analog of glucagon-like peptide-2, developed for short bowel syndrome (“SBS”) patients who are dependent on parenteral support (“PS”).
The Company was incorporated in Delaware on January 5, 1998 as Microbia, Inc. On April 7, 2008, the Company changed its name to Ironwood Pharmaceuticals, Inc. To date, the Company has dedicated a majority of its activities to the research, development and commercialization of linaclotide, as well as to other research and development programs, including apraglutide.
2. Summary of Significant Accounting Policies
Principles of Consolidation
The accompanying consolidated financial statements as of December 31, 2025 include the accounts of Ironwood, its wholly-owned subsidiaries, Ironwood Pharmaceuticals Securities Corporation, Ironwood Pharmaceuticals GmbH, VectivBio AG, and GlyPharma Therapeutic Inc. (“GlyPharma”). All intercompany transactions and balances are eliminated in consolidation.
F-10
Table of Contents
Segment Information
Operating segments are components of an enterprise for which separate financial information is available and is evaluated regularly by the Company’s chief operating decision-maker in deciding how to allocate resources and in assessing performance. The Company currently operates in one reportable business segment – human therapeutics. The Company’s reportable business segment is more fully described in Note 16, Segment Reporting , to these consolidated financial statements.
Use of Estimates
The preparation of consolidated financial statements in accordance with U.S. generally accepted accounting principles requires the Company’s management to make estimates and judgments that may affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the amounts of revenues and expenses during the reported periods. On an ongoing basis, the Company’s management evaluates its estimates, judgments and methodologies. Estimates and assumptions in the consolidated financial statements include those related to revenue recognition; accounts receivable; useful lives of long-lived assets; impairment of long-lived assets, including goodwill; valuation procedures for right-of-use assets and operating lease liabilities; income taxes, including uncertain tax positions and the valuation allowance for deferred tax assets; research and development expenses; contingencies; defined benefit pension liabilities and certain investment fund assets; and share-based compensation. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ materially from these estimates under different assumptions or conditions. Changes in estimates are reflected in reported results in the period in which they become known.
Cash and Cash Equivalents
The Company considers all highly liquid investment instruments with a remaining maturity when purchased of three months or less to be cash equivalents. Investments qualifying as cash equivalents primarily consist of money market funds, U.S. Treasury securities, and commercial paper. The carrying amount of cash equivalents approximates fair value. The amount of cash equivalents included in cash and cash equivalents was $ 184.3 million and $ 55.0 million as of December 31, 2025 and 2024, respectively.
Concentrations of Suppliers
The Company relies on its collaboration partners and their suppliers to manufacture linaclotide API, linaclotide finished drug product, and finished goods.
If any of the Company’s collaboration partners and their suppliers were to limit or terminate production or otherwise fail to meet the quality or delivery requirements needed to satisfy the supply commitments, the process of locating and qualifying alternate sources could require up to several months, during which time production could be delayed. Such delays could have a material adverse effect on the Company’s business, financial position and results of operations.
Accounts Receivable
The Company makes judgments as to its ability to collect outstanding receivables and provides an allowance for credit losses when collection becomes doubtful. Provisions are made based upon a specific review of all significant outstanding invoices and the overall quality and age of those invoices not specifically reviewed. The Company’s receivables relate primarily to amounts reimbursed under its collaboration, license, and other agreements. The Company believes that credit risks associated with these partners are not significant. The Company reviews the need for an allowance for credit losses for its receivables based on various factors including payment history and historical bad debt experience. The Company had no allowance for credit losses as of December 31, 2025 or 2024.
F-11
Table of Contents
Concentrations of Credit Risk
Financial instruments that subject the Company to credit risk primarily consist of cash and cash equivalents, restricted cash, and accounts receivable. The Company maintains its cash and cash equivalent balances with high-quality financial institutions and the Company believes that such funds are subject to minimal credit risk. The Company has adopted an investment policy which limits the amounts the Company may invest in certain types of investments, and requires all investments held by the Company to be at least A- rated, thereby reducing credit risk exposure.
Accounts receivable primarily consists of amounts due under the linaclotide collaboration agreement with AbbVie for North America (Note 4). The Company does not obtain collateral for its accounts receivable.
The percentages of revenue recognized from significant collaborative partners of the Company in the years ended December 31, 2025 and 2024 and the account receivable balances, net of any payables due, as of December 31, 2025 and 2024 are included in the following table:
Accounts
Receivable
Revenue
December 31,
Year Ended December 31,
2025
2024
2025
2024
Collaborative Partner:
AbbVie (North America and Europe)
99
%
99
%
100
%
99
%
Property and Equipment
Property and equipment, including leasehold improvements, are recorded at cost, and are depreciated when placed into service using the straight-line method based on their estimated useful lives as follows:
Estimated Useful Life
Asset Description
(In Years)
Laboratory equipment
5
Computer and office equipment
3
Furniture and fixtures
7
Software
3
Included in property and equipment are certain costs of software obtained for internal use. Costs incurred during the preliminary project stage are expensed as incurred, while costs incurred during the application development stage are capitalized and amortized over the estimated useful life of the software. The Company also capitalizes costs related to specific upgrades and enhancements when it is probable the expenditures will result in additional functionality. Maintenance and training costs related to software obtained for internal use are expensed as incurred.
Leasehold improvements are amortized over the shorter of the estimated useful life of the asset or the lease term.
Costs for capital assets not yet placed into service have been capitalized as construction in process, and will be depreciated in accordance with the above guidelines once placed into service. Maintenance and repair costs are expensed as incurred.
Intangible Assets
Intangible assets are comprised of the assembled workforce acquired in the VectivBio Acquisition and are amortized on a straight-line basis over an estimated useful life of five years .
F-12
Table of Contents
Impairment of Long-Lived Assets
The Company regularly reviews the carrying amount of its long-lived assets to determine whether indicators of impairment may exist, which warrant adjustments to carrying values or estimated useful lives. If indications of impairment exist, projected future undiscounted cash flows associated with the asset are compared to the carrying amount to determine whether the asset’s value is recoverable. If the carrying value of the asset exceeds such projected undiscounted cash flows, the asset will be written down to its estimated fair value.
Income Taxes
The Company provides for income taxes under the asset and liability method. Deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates in effect when the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to reflect the uncertainty associated with their ultimate realization.
The Company accounts for uncertain tax positions recognized in the consolidated financial statements in accordance with the provisions of Accounting Standards Codification (“ASC”) Topic 740, Income Taxes, by prescribing a more-likely-than-not threshold for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. When uncertain tax positions exist, the Company recognizes the tax benefit of tax positions to the extent that the benefit will more likely than not be realized. The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances. The Company evaluates uncertain tax positions on a quarterly basis and adjusts the level of the liability to reflect any subsequent changes in the relevant facts surrounding the uncertain positions. Any changes to these estimates, based on the actual results obtained and/or a change in assumptions, could impact the Company’s income tax provision in future periods. Interest and penalty charges, if any, related to unrecognized tax benefits are classified as income tax expense in the Company’s consolidated statements of income.
Financing Costs
Financing costs include costs directly attributable to the Company’s offerings of its equity securities and its debt financings. Costs attributable to equity offerings are charged as a reduction to stockholders’ equity against the proceeds of the offering once the offering is completed. Costs attributable to debt financings are deferred and amortized to interest expense over the term of the debt using the effective interest method. In accordance with ASC Topic 835, Interest, the Company presents on its balance sheet unamortized debt issuance costs related to convertible notes as a direct deduction from the associated debt liability and unamortized debt issuance costs related to revolving credit arrangements as other assets.
Leases
The Company’s lease portfolio for the year ended December 31, 2025 included: office leases for its current headquarters location and other locations, vehicle leases, and leases for computer and office equipment. The Company determines if an arrangement is a lease at the inception of the contract and determines the classification of its leases at lease commencement. The asset component of the Company’s operating leases is recorded as operating lease right-of-use assets, and the liability component is recorded as current portion of operating lease liabilities and operating lease liabilities, net of current portion in the Company’s consolidated balance sheets. As of December 31, 2025, the Company did not record any finance leases.
Right-of-use assets and operating lease liabilities are recognized based on the present value of lease payments over the lease term at the lease commencement date. The lease term used to measure the right-of-use asset and operating lease liability may include options to extend the lease when it is reasonably certain that the Company will exercise the option. The Company accounts for lease components and non-lease components together as a single lease component for the asset class of right-of-use real estate assets. The Company uses an incremental borrowing rate based on the information available at lease commencement in determining the present value of lease payments, if an implicit rate of return is not readily determinable. Operating lease right-of-use assets are adjusted for prepaid rent, initial direct costs, and lease incentives.
F-13
Table of Contents
Right-of-use assets and operating lease liabilities are remeasured upon reassessment events and modifications to leases using the present value of remaining lease payments and estimated incremental borrowing rate at the time of remeasurement, as applicable.
Operating lease cost is recognized on a straight-line basis over the lease term, and includes amounts related to short-term leases. The Company has elected to not recognize lease terms with a term of twelve months or less on its balance sheet for all classes of underlying asset types. The Company recognizes variable lease payments as operating expenses in the period in which the obligation for those payments is incurred. Variable lease payments primarily include common area maintenance, utilities, real estate taxes, insurance, and other operating costs that are passed on from the lessor in proportion to the space leased by the Company.
Derivative Assets and Liabilities
In August 2019, the Company issued 0.75 % Convertible Senior Notes due 2024 (the “2024 Convertible Notes”) and 1.50 % Convertible Senior Notes due 2026 (the “2026 Convertible Notes”). In connection with the issuance of the 2024 Convertible Notes and the 2026 Convertible Notes, the Company entered into the Capped Calls (as defined in Note 9, Debt , below). The Capped Calls cover the same number of shares of Class A Common Stock that initially underlie the 2024 Convertible Notes and the 2026 Convertible Notes (subject to anti-dilution and certain other adjustments). These instruments meet the conditions outlined in ASC Topic 815, Derivatives and Hedging (“ASC 815”) to be classified in stockholders’ equity (deficit) and are not subsequently remeasured as long as the conditions for equity classification continue to be met. The Capped Calls related to the 2024 Convertible Notes expired unexercised upon maturity of the 2024 Convertible Notes in June 2024.
Revenue Recognition
The Company’s revenues are generated primarily through collaborative arrangements and license agreements related to the research and development and commercialization of linaclotide. The terms of the collaborative research and development, license, co-promotion and other agreements contain multiple performance obligations which may include (i) licenses, (ii) research and development activities, including participation on joint steering committees, (iii) the manufacture of finished drug product, API, or development materials for a partner, which are reimbursed at a contractually determined rate, and (iv) education or co-promotion activities by the Company’s clinical sales specialists. Non-refundable payments to the Company under these agreements may include (i) up-front license fees, (ii) payments for research and development activities, (iii) payments for the manufacture of finished drug product, API, or development materials, (iv) payments based upon the achievement of certain milestones, (v) payments for sales detailing, promotional support services and medical education initiatives, and (vi) royalties on product sales. The Company receives its share of the net profits or bears its share of the net losses from the sale of linaclotide in the U.S. through its collaboration agreement with AbbVie for North America. The Company has adopted a policy to recognize revenue net of tax withholdings, as applicable.
Collaboration, License, and Other Commercial Agreements
Upon licensing intellectual property to a customer, the Company determines if the license is distinct from the other performance obligations identified in the arrangement. The Company recognizes revenues from the transaction price, including non-refundable, up-front fees allocated to the license when the license is transferred to the customer if the license has distinct benefit to the customer. For licenses that are combined with other promises, the Company assesses the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time. For performance obligations that are satisfied over time, the Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition.
F-14
Table of Contents
The Company’s license and collaboration agreements include milestone payments, such as development and other milestones. The Company evaluates whether the milestones are considered probable of being reached and estimates the amount to be included in the transaction price using the most likely amount method at the inception of the agreement. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within the control of the Company, such as regulatory approvals, are not considered probable of being achieved until those approvals are received. The transaction price is then allocated to each performance obligation on a relative standalone selling price basis, for which the Company recognizes revenue as or when the performance obligations under the contract are satisfied. The Company re-evaluates the probability of achievement of such milestones and any related constraint at each reporting period, and any adjustments are recorded on a cumulative catch-up basis.
Agreements that include the supply of active pharmaceutical ingredient (“API”) or drug product for either clinical development or commercial supply at the customer’s discretion are generally considered as options. The Company assesses if these options provide a material right to its partner, and if so, they are accounted for as separate performance obligations. If the Company is entitled to additional payments when the customer exercises these options, any additional payments are recorded as revenue when the customer obtains control of the goods, which is typically upon shipment for sales of API and finished drug product.
For agreements that include sales-based royalties, including milestone payments based on the level of sales, and the license is deemed to be the predominant item to which the royalties relate, the Company recognizes revenue when the related sales occur in accordance with the sales-based royalty exception.
Net Profit or Net Loss Sharing
In accordance with ASC Topic 808, Collaborative Arrangements (“ASC 808”), the Company considers the nature and contractual terms of the arrangement and the nature of the Company’s business operations to determine the classification of payments under the Company’s collaboration agreements. While ASC 808 provides guidance on classification, the standard is silent on matters of separation, initial measurement, and recognition. Therefore, the Company applies the separation, initial measurement, and recognition principles of ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”), as applicable.
The Company’s collaborative arrangements revenues generated from sales of LINZESS in the U.S. are considered akin to sales-based royalties. In accordance with the sales-based royalty exception, the Company recognizes its share of the pre-tax commercial net profit or net loss generated from the sales of LINZESS in the U.S. in the period the product sales are earned, as reported by AbbVie, and related cost of goods sold and selling, general and administrative expenses as incurred by the Company and AbbVie. 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. The Company is highly dependent on AbbVie for timely and accurate information regarding net revenues from sales of LINZESS in the U.S. in accordance with both ASC 808 and ASC 606, and the related costs, in order to accurately report its results of operations. If the Company does not receive timely and accurate information or incorrectly estimates activity levels associated with the collaboration at a given point in time, the Company could be required to record adjustments in future periods.
In accordance with ASC 606-10-55, Principal Agent Considerations , the Company records revenue transactions as net product revenue in its consolidated statements of income if it is deemed the principal in the transaction, which includes being the primary obligor, retaining inventory risk, and control over pricing. Given that the Company is not the primary obligor and does not have the inventory risks in the collaboration agreement with AbbVie for North America, it records its share of the net profits or net losses from the sales of LINZESS in the U.S. on a net basis and presents the settlement payments to and from AbbVie as collaboration expense or collaborative arrangements revenue, as applicable. The Company and AbbVie settle the cost sharing quarterly such that the Company’s statements of income reflect 50 % of the pre-tax net profit or loss generated from sales of LINZESS in the U.S.
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Other
The Company’s deferred revenue balance consists of advance billings and payments received from collaboration partners in excess of revenue recognized.
Research and Development Costs
The Company generally expenses research and development costs to operations as incurred. The Company capitalizes nonrefundable advance payments made by the Company for research and development activities and defers expense recognition until the related goods are received or the related services are performed.
Research and development expenses are comprised of costs incurred in performing research and development activities, including salary, benefits, share-based compensation, and other employee-related expenses; laboratory supplies and other direct expenses; facilities expenses; overhead expenses; third-party contractual costs relating to nonclinical studies and clinical trial activities and related contract manufacturing expenses, development of manufacturing processes and regulatory registration of third-party manufacturing facilities; licensing fees for the Company’s product candidates; and other outside expenses.
The Company has certain collaboration agreements pursuant to which it shares or has shared research and development expenses related to linaclotide. The Company records expenses incurred under such linaclotide collaboration arrangements as research and development expense. Under the Company’s collaboration agreement with AbbVie for North America, the Company is reimbursed for certain research and development expenses and nets these reimbursements against its research and development expenses as incurred.
Research and development expense includes up-front payment, non-contingent payment, and milestone payment obligations under certain collaboration arrangements. Expense is recognized when the obligation is determined to be probable.
Restructuring Expenses
Restructuring expenses are comprised primarily of costs associated with exit and disposal activities in accordance with ASC Topic 420, Exit or Disposal Cost Obligations , and ASC Topic 712, Compensation – Nonretirement Postemployment Benefits , and include one-time termination benefits and contract-related costs. Such costs are based on estimates of fair value in the period liabilities are incurred. The Company evaluates and adjusts these costs for changes in circumstances as additional information becomes available.
Selling, General and Administrative Expenses
The Company expenses selling, general and administrative costs to operations as incurred. Selling, general and administrative expenses consist primarily of compensation, benefits and other employee-related expenses for personnel in the Company’s administrative, finance, legal, information technology, business development, commercial, sales, marketing, communications and human resource functions. Other costs include legal costs of pursuing patent protection of the Company’s intellectual property, general and administrative related facility costs, insurance costs and professional fees for accounting, tax, consulting, legal and other services.
The Company includes AbbVie’s selling, general and administrative cost-sharing payments in the calculation of the net profits and net losses from the sale of LINZESS in the U.S. and presents the net payment to or from AbbVie as collaboration expense or collaborative arrangements revenue, respectively.
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Defined Benefit Pension Obligations
Pension benefits earned during the year, as well as interest on projected benefit obligations (“PBO”), are accrued. Service costs are recognized within research and development expenses or selling, general and administrative expenses, depending on the function of the plan participant. All other components of net period costs are recognized within other income (expense), net. Prior service costs and credits resulting from changes in plan benefits are recognized in other comprehensive income (loss) in the period in which they occur and then amortized to net periodic benefit costs generally over the average remaining service period of the active participants. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are recognized in other comprehensive income (loss) in the period in which they occur. To the extent such gains and losses exceed 10% of the PBO or the estimated fair value of plan assets, the excess is amortized into net periodic benefit costs, generally over the average remaining service period of the active participants. The Company recognizes a pension plan’s funded status as either an asset or liability in its consolidated balance sheets.
Share-Based Compensation Expense
The Company grants awards under its share-based compensation programs, including stock awards, restricted stock awards (“RSAs”), restricted stock units (“RSUs”) (including both time-based and performance-based RSUs), stock options, and shares issued under the Company’s employee stock purchase plan (“ESPP”). Share-based compensation is recognized as expense in the consolidated statements of income based on the grant date fair value over the requisite service period, net of estimated forfeitures. The Company estimates forfeitures over the requisite service period using historical forfeiture activity and records share-based compensation expense only for those awards that are expected to vest.
The Company estimates the fair value of stock options 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 the Company’s Class A Common Stock on the date of grant, with the exception of performance-based RSUs with market conditions, which are measured using the Monte Carlo simulation method on the date of grant (Note 12). Discounted stock purchases under the Company’s 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.
For awards that vest based on service conditions and market conditions, the Company uses a straight-line method to recognize compensation expense over the respective service period. For awards that contain performance conditions, the Company determines the appropriate amount to expense at each reporting date based on the anticipated achievement of performance targets, which requires judgement, including forecasting the achievement of future specified targets. At the date performance conditions are determined to be probable of achievement, the Company records a cumulative expense catch-up, with remaining expense amortized over the remaining service period. Throughout the performance period, the Company re-assesses the estimated performance and updates the number of performance-based awards that it believes will ultimately vest. Discounted stock purchases under the Company’s ESPP are recognized over the offering period.
Compensation expense related to modified awards is measured based on the fair value for the awards as of the modification date. Any incremental compensation expense arising from the excess of the fair value of the awards on the modification date compared to the fair value of the awards immediately before the modification date is recognized at the modification date or ratably over the requisite remaining service period, as appropriate.
While the assumptions used to calculate and account for share-based compensation awards represent management’s best estimates, these estimates involve inherent uncertainties and the application of management’s judgment. As a result, if revisions are made to the Company’s underlying assumptions and estimates, the Company’s share-based compensation expense could vary significantly from period to period.
Patent Costs
Legal and other fees related to patents are charged to selling, general and administrative expenses as incurred.
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Net Income (Loss) Per Share
Basic net income (loss) per common share is computed by dividing the net income by the weighted average number of common shares outstanding during the period. Diluted net income (loss) per share reflects the potential dilution beyond common shares for basic net income (loss) per share that could occur if securities or other contracts to issue common shares were exercised, converted into common shares, or resulted in the issuance of common shares that would have shared in the Company’s earnings.
Foreign Currency Translation
For subsidiaries with a different functional currency than the U.S. dollar, assets and liabilities are translated at the exchange rates as of the balance sheet date and income and expense items are translated at the average exchange rates for the reporting period. Adjustments resulting from the translation of the financial statements of foreign subsidiaries are recorded in accumulated comprehensive income (loss), a separate component of stockholders’ deficit.
Comprehensive Income (Loss)
Comprehensive income (loss) is comprised of net income (loss) and other comprehensive income (loss). Other comprehensive income (loss) includes foreign currency translation adjustments and certain changes in the fair value of pension plan assets and projected benefit obligation attributed to the Company’s defined benefit pension plans. Accumulated other comprehensive income (loss) is presented as a separate component of stockholders’ deficit.
Subsequent Events
The Company considers events or transactions that have occurred after the balance sheet date of December 31, 2025, but prior to the filing of the financial statements with the Securities and Exchange Commission (“SEC”) to provide additional evidence relative to certain estimates or to identify matters that require additional recognition or disclosure. Subsequent events have been evaluated through the filing of the financial statements accompanying this Annual Report on Form 10-K.
New Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (the “FASB”) or other standard setting bodies that are adopted by the Company as of the specified effective date. Except as set forth below, the Company did not adopt any new accounting pronouncements during the year ended December 31, 2025 that had a material effect on its consolidated financial statements.
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”). The guidance in ASU 2023-09 improves the transparency of annual income tax disclosures by requiring greater disaggregation of information in the rate reconciliation and income taxes paid disaggregated by jurisdiction. The standard is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. Upon adoption, ASU 2023-09 may be applied prospectively or retrospectively. The Company adopted ASU 2023-09 during the year ended December 31, 2025, on a prospective basis. The expanded disclosures are included in the consolidated financial statements (Note 13).
In November 2024, the FASB issued ASU No. 2024-03, Disaggregation of Income Statement Expenses (“ASU 2024-03”). The guidance in ASU 2024-03 requires new financial statement disclosures in tabular format, disaggregating information about prescribed categories underlying any relevant income statement expense captions. The standard is effective for fiscal years beginning after December 15, 2026 and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. Upon adoption, ASU 2024-03 may be applied prospectively or retrospectively. The Company is currently evaluating the impact that the adoption of ASU 2024-03 may have on its disclosures in its consolidated financial statements.
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In November 2024, the FASB issued ASU No. 2024-04, Debt—Debt with Conversion and Other Options (Subtopic 470-20) (“ASU 2024-04”). The guidance in ASU 2024-04 clarifies the requirements related to accounting for the settlement of a debt instrument as an induced conversion. The standard is effective for fiscal years beginning after December 15, 2025, and interim periods within fiscal years beginning after December 15, 2025, with early adoption permitted as of the beginning of a reporting period if the entity has also adopted ASU 2020-06 for that period. The Company is currently evaluating the impact that the adoption of ASU 2024-04 may have on its disclosures in its consolidated financial statements.
In July 2025, the FASB issued ASU No. 2025-05, Measurement of Credit Losses for Accounts Receivable and Contract Assets (“ASU 2025-05”). The guidance in ASU 2025-05 amends ASC Topic 326, Financial Instruments—Credit Losses , to provide a practical expedient to simplify estimating expected credit losses for current accounts receivable and current contract assets arising from transactions accounted for under ASC Topic 606, Revenue from Contracts with Customers . The practical expedient, if elected, allows entities to assume that current conditions as of the balance sheet date do not change for the remaining life of the asset. The standard is effective for annual fiscal years beginning after December 15, 2025 and interim periods within fiscal years beginning after December 15, 2025, with early adoption permitted. Entities that elect the practical expedient should apply the guidance prospectively. The Company is currently evaluating the impact that the adoption of ASU 2025-05 may have on its consolidated financial statements.
In September 2025, the FASB issued ASU No. 2025-06, Targeted Improvements to the Accounting for Internal-Use Software (“ASU 2025-06”). The guidance in ASU 2025-06 amends certain aspects of the accounting for and disclosure of software costs under ASC Subtopic 350-40, Internal Use Software . The standard is effective for fiscal years beginning after December 15, 2027 and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. Entities may elect to apply the guidance prospectively, retrospectively, or through a modified prospective transition method. The Company is currently evaluating the impact that the adoption of ASU 2025-06 may have on its consolidated financial statements.
In September 2025, the FASB issued ASU No. 2025-07, Derivatives Scope Refinements and Scope Clarification for Share-Based Noncash Consideration from a Customer in a Revenue Contract (“ASU 2025-07”). The guidance in ASU 2025-07 expands the scope exceptions within ASC Topic 815, Derivatives and Hedging , to include certain nonexchange-traded contracts with underlyings that are based on operations or activities specific to one of the parties to the contract, including research and development funding arrangements. The standard is effective for annual fiscal years beginning after December 15, 2026 and interim periods within fiscal years beginning after December 15, 2026, with early adoption permitted. Entities should apply the amendments either prospectively for contracts entered into on or after the date of adoption or on a modified retrospective basis through a cumulative-effect adjustment to the opening balance of retained earnings for contracts that exist as of the beginning of the annual reporting period of adoption. The Company is currently evaluating the impact that the adoption of ASU 2025-07 may have on its consolidated financial statements.
In December 2025, the FASB issued ASU No. 2025-11, Narrow-Scope Improvements (“ASU 2025-11”). The guidance in ASU 2025-11 amends ASC Topic 270, Interim Reporting , to provide clarity on the current interim reporting requirements as well as requires entities to disclose events since the end of the last annual reporting period that have a material impact on the entity through the addition of the disclosure principle. The standard is effective for interim reporting periods within annual reporting periods beginning after December 15, 2027, with early adoption permitted. Upon adoption, ASU 2025-11 may be applied prospectively or retrospectively. The Company is currently evaluating the impact that the adoption of ASU 2025-11 may have on its consolidated financial statements.
In December 2025, the FASB issued ASU No. 2025-12, Codification Improvements (“ASU 2025-12”). The guidance in ASU 2025-12 provides incremental improvements to accounting standards for a broad range of topics. The standard is effective for annual fiscal years beginning after December 15, 2026 and interim periods within fiscal years beginning after December 15, 2026, with early adoption permitted. Upon adoption, ASU 2025-12 may be applied prospectively or retrospectively on an issue-by-issue basis. The Company is currently evaluating the impact that the adoption of ASU 2025-12 may have on its consolidated financial statements.
Other recent accounting pronouncements issued, but not yet effective, are not expected to be applicable to the Company or have a material effect on the consolidated financial statements upon future adoption.
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3. Net Income Per Share
The following table sets forth the computation of basic and diluted net income per common share (in thousands, except per share amounts):
Year Ended December 31,
2025
2024
Numerator:
Net income
$
24,017
$
880
Numerator used in computing net income per share — basic & diluted
$
24,017
$
880
Denominator:
Weighted average number of common shares outstanding used in computing net income per share — basic
161,842
159,083
Effect of dilutive securities:
Time-based RSUs
598
425
Performance-based RSUs
396
480
Restricted stock
147
96
Dilutive potential common shares
Weighted average number of common shares outstanding used in computing net income per share — diluted
162,983
160,084
Net income per share — basic & diluted
$
0.15
$
0.01
The dilutive impact of the convertible senior notes is determined using the if-converted method. Under the if-converted method, the convertible senior notes are assumed to be converted into common stock at the beginning of the period (or at the time of issuance, if later). Interest charges are deducted from the numerator, unless the principal amount of the convertible instruments is required to be paid in cash. The dilutive impact of all other types of dilutive securities is determined using the treasury stock method.
On December 15, 2025, the Company elected to settle conversions of the 2026 Convertible Notes through cash payment equal to the principal value and shares of Class A Common Stock for the conversion premium, if any (Note 9). Accordingly, interest expense is added to the numerator and the calculated spread is added to the denominator only for the period the 2026 Convertible Notes were outstanding prior to the settlement method election, to the extent an assumed conversion is dilutive. Interest expense was excluded from the numerator and there was no calculated spread added to the denominator because an assumed conversion would be anti-dilutive.
The outstanding securities set forth in the following table have been excluded from the computation of diluted weighted average shares outstanding, as applicable, as their effect would be anti-dilutive (in thousands):
Year Ended December 31,
2025
2024
Stock options
3,709
4,821
Time-based RSUs
3,403
3,596
Performance-based RSUs
—
34
2026 Convertible Notes
14,277
14,934
Total
21,389
23,385
There was no dilutive impact of the 2024 Convertible Notes for the year ended December 31, 2024 because the Company had elected prior to the beginning of the period to settle the conversion of 2024 Convertible Notes, if any, with a combination settlement of a cash payment equal to the principal value of converted notes and shares of Class A Common Stock equal to the conversion value in excess of the principal value, if any (Note 9) . Accordingly, interest expense was removed from the numerator and there was no calculated spread added to the denominator because the average market price of the Company’s Class A Common Stock during the period was not in excess of the conversion price.
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4. Collaboration, License, and Other Agreements
The Company has linaclotide collaboration agreements with AbbVie for North America and AstraZeneca for China (including Hong Kong and Macau), as well as linaclotide license agreements with Astellas for Japan and with AbbVie for the AbbVie License Territory. The following table provides amounts included in the Company’s consolidated statements of income as collaborative arrangements revenue attributable to transactions from these and other agreements (in thousands):
Year Ended December 31,
Collaborative Arrangements Revenue
2025
2024
Linaclotide Collaboration and License Agreements:
AbbVie (North America)
$
292,356
$
343,154
AbbVie (Europe and other)
3,633
3,236
AstraZeneca (China, including Hong Kong and Macau)
321
364
Astellas (Japan)
1,685
1,673
Other Agreements:
Asahi Kasei Pharma Corporation (apraglutide)
( 1,931 )
2,249
Other
87
734
Total collaborative arrangements revenue
$
296,151
$
351,410
Accounts receivable, net, included $ 46.7 million and $ 81.9 million primarily related to collaborative arrangements revenue, collectively, as of December 31, 2025 and 2024, respectively. Accounts receivable, net, included $ 46.2 million and $ 81.3 million due from the Company’s partner, AbbVie, net of $ 2.7 million and $ 3.1 million of accounts payable, as of December 31, 2025 and 2024, respectively.
The Company routinely assesses the creditworthiness of its license and collaboration partners. The Company did not experience any material losses related to receivables from its license or collaboration partners during the years ended December 31, 2025 or 2024.
Linaclotide Agreements
Collaboration Agreement for North America with AbbVie
In September 2007, the Company entered into a collaboration agreement with AbbVie to develop and commercialize linaclotide for the treatment of IBS-C, CIC, and other GI conditions in North America. Under the terms of this collaboration agreement, the Company received an upfront licensing fee, equity investment, and development and regulatory milestones, and shares equally with AbbVie all development costs as well as net profits or losses from the development and sale of linaclotide in the U.S. In addition, the Company receives royalties in the mid-teens percent based on net sales in Canada and Mexico. AbbVie is solely responsible for the further development, regulatory approval and commercialization of linaclotide in those countries and funding any costs.
During the years ended December 31, 2025 and 2024, the Company incurred $ 7.5 million and $ 7.4 million, respectively, in total research and development expenses under the linaclotide collaboration for North America. As a result of the research and development cost-sharing provisions of the linaclotide collaboration for North America, the Company incurred $ 5.0 million and $ 8.6 million in incremental research and development costs during the years ended December 31, 2025 and 2024, respectively, to reflect the obligations of each party under the collaboration to bear 50 % of the development costs incurred.
The Company and AbbVie began commercializing LINZESS in the U.S. in December 2012. The Company receives 50 % of the net profits and bears 50 % of the net losses from the commercial sale of LINZESS in the U.S. Net profits or net losses consist of net sales of LINZESS to third-party customers and sublicense income in the U.S. less the cost of goods sold as well as selling, general and administrative expenses. LINZESS net sales are calculated and recorded by AbbVie and may include gross sales net of discounts, rebates, allowances, sales taxes, freight and insurance charges, and other applicable deductions.
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The Company evaluated its linaclotide collaboration arrangement for North America and concluded that all development-period performance obligations had been satisfied as of September 2012. The Company has determined that there are three remaining commercial-period performance obligations, which include the sales detailing of LINZESS, participation in the joint commercialization committee, and approved additional trials. The consideration remaining includes cost reimbursements in the U.S. and net profit and loss sharing payments based on net sales in the U.S. Additionally, the Company receives royalties in the mid-teens percent based on net sales in Canada and Mexico. Royalties and net profit and loss sharing payments will be recorded as collaborative arrangements revenue or expense in the period earned, as these payments relate predominantly to the license granted to AbbVie. The Company records royalty revenue in the period earned based on royalty reports from its partner, if available, or based on the projected sales and historical trends. The cost reimbursements received from AbbVie during the commercialization period will be recognized as earned in accordance with the right-to-invoice practical expedient, as the Company’s right to consideration corresponds directly with the value of the services transferred during the commercialization period.
Under the Company’s linaclotide collaboration agreement for North America, LINZESS net sales are calculated and recorded by AbbVie and include gross sales net of discounts, rebates, allowances, sales taxes, freight and insurance charges, and other applicable deductions, as noted above. These amounts include the use of estimates and judgments, which could be adjusted based on actual results in the future. The Company records its share of the net profits or net losses from the sales of LINZESS in the U.S. less commercial expenses on a net basis, and presents the settlement payments to and from AbbVie as collaboration expense or collaborative arrangements revenue, as applicable. This treatment is in accordance with the Company’s revenue recognition policy, given that the Company is not the primary obligor and does not have the inventory risks in the collaboration agreement with AbbVie for North America. The Company relies on AbbVie to provide accurate and complete information related to net sales of LINZESS in accordance with U.S. generally accepted accounting principles in order to calculate its settlement payments to and from AbbVie and record collaboration expense or collaborative arrangements revenue, as applicable.
During the year ended December 31, 2024, the Company recognized 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. Excluding the changes in estimates, net income per share – basic and net income per share – diluted would have been $ 0.21 and $ 0.19 , respectively, for the year ended December 31, 2024.
The following table summarizes collaborative arrangements revenue from the linaclotide collaboration agreement for North America during the years ended December 31, 2025 and 2024 as follows (in thousands):
Year Ended December 31,
2025
2024
Collaborative arrangements revenue related to sales of LINZESS in the U.S.
$
289,317
$
340,394
Royalty revenue
3,039
2,760
Total collaborative arrangements revenue
$
292,356
$
343,154
The Company incurred $ 4.4 million and $ 39.3 million in total selling, general and administrative costs related to the sale of LINZESS in the U.S. in accordance with the cost-sharing arrangement with AbbVie for the years ended December 31, 2025 and 2024, respectively.
In May 2014, CONSTELLA ® became commercially available in Canada and, in June 2014, LINZESS became commercially available in Mexico. The Company records royalties on sales of CONSTELLA in Canada and LINZESS in Mexico in the period earned. The Company recognized $ 3.0 million and $ 2.8 million of combined royalty revenues from Canada and Mexico during the years ended December 31, 2025 and 2024, respectively.
License Agreement with AbbVie (All countries other than the countries and territories of North America, China (including Hong Kong and Macau), and Japan)
The Company has a license agreement with AbbVie to develop, manufacture and commercialize linaclotide in (i) Europe, and (ii) all other countries other than China (including Hong Kong and Macau), Japan, and the countries and territories of North America, or collectively the “Expanded Territory”, for the treatment of IBS-C, CIC and other GI conditions.
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Under the license agreement, as amended, AbbVie is obligated to pay the Company, (i) royalties based on sales volume in Europe in the upper-teens percent, and (ii) on a country-by-country and product-by-product basis in the Expanded Territory, a royalty as a percentage of net sales of products containing linaclotide as an active ingredient in the upper-single digits for five years following the first commercial sale of a linaclotide product in a country, and in the low-double digits thereafter. The royalty rate for products in Europe and the Expanded Territory will decrease, on a country-by-country basis, to the lower-single digits, or cease entirely, following the occurrence of certain events. The license agreement also contains certain sales-based milestones and commercial launch milestones, which could total up to $ 42.5 million.
The Company recognized $ 3.6 million and $ 3.2 million of royalty revenue during the years ended December 31, 2025 and 2024, respectively.
License Agreement for Japan with Astellas
The Company has a license agreement with Astellas to develop, manufacture, and commercialize linaclotide for the treatment of IBS-C, CIC and other GI conditions in Japan.
Under the license agreement, as amended, Astellas is required to pay royalties to the Company at rates beginning in the mid-single digit percent and escalating to low-double-digit percent, based on aggregate annual net sales in Japan of products containing linaclotide as an active ingredient. These royalty payments are subject to reduction following the expiration of certain licensed patents and the occurrence of generic competition in Japan.
During the years ended December 31, 2025 and 2024, the Company recognized $ 1.7 million and $ 1.7 million of royalty revenue, respectively.
Collaboration Agreement for China (including Hong Kong and Macau) with AstraZeneca
The Company has a collaboration agreement with AstraZeneca under which AstraZeneca has the exclusive right to develop, manufacture and commercialize products containing linaclotide in the AstraZeneca License Territory.
Under the collaboration agreement, AstraZeneca is required to pay tiered royalties to the Company at rates beginning in the mid-single-digit percent and increasing up to twenty percent based on the aggregate annual net sales of products containing linaclotide in the AstraZeneca License Territory. In addition, AstraZeneca may be required to make milestone payments totaling up to $ 90.0 million contingent on the achievement of certain sales targets.
During the years ended December 31, 2025 and 2024, the Company recognized $ 0.3 million and $ 0.4 million of royalty revenue, respectively.
Apraglutide Agreements
Development and Commercialization Agreement with AKP
In March 2022, VectivBio entered into a development and commercialization agreement with Asahi Kasei Pharma Corporation (“AKP”) in which VectivBio granted an exclusive license to AKP, with the right to sublicense in multiple tiers, to develop, commercialize and exploit products derived from apraglutide in Japan.
Pursuant to the terms of the development and commercialization agreement with AKP, VectivBio received an upfront payment of JPY 3,000 million ($ 24.6 million at date of agreement) and development-related payments of JPY 1,600 million in the aggregate ($ 13.1 million at date of agreement), and is eligible to receive development milestones of JPY 1,000 million ($ 8.2 million at date of agreement) and up to JPY 19,000 million ($ 155.8 million at date of agreement) of commercial and sales-based milestone payments. VectivBio is also eligible to receive payments in the commercial period for manufacturing supply equal to cost-plus manufacturing mark-up and tiered royalties of up to a mid-double-digit percentage on product sales continuing until the later of (i) expiration of regulatory exclusivity in Japan, or (ii) expiration of the last valid patent claim that provides exclusivity to apraglutide in Japan (the “Royalty Term”). The development and commercialization agreement will terminate upon the expiration of the Royalty Term.
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The Company identified two performance obligations consisting of the (i) exclusive license for the development and commercialization of apraglutide in Japan and (ii) development activities for conducting global trials and sharing of associated development data necessary for obtaining and maintaining regulatory approval in Japan. Each performance obligation was capable of being distinct and distinct in the context of the contract. The initial transaction price was allocated to each performance obligation on a relative standalone selling price basis. The Company assessed that it provided a right to use the license as the license exists (in terms of form and functionality) at the point in time at which it is granted and therefore, was satisfied at the inception of the arrangement. The development activities are being recognized over time as the Company performs development activities related to the global trials. The Company recognizes revenue associated with the development activities using an input method, according to the costs incurred, which in management’s judgment, is the best measure of progress towards satisfying the performance obligation. Under the sales-or-usage-based royalty exception, revenue related to sales-based milestone payments and royalty payments will be recognized as the underlying sales occur.
Prior to the VectivBio Acquisition, VectivBio had received the upfront payment of JPY 3,000 million ($ 24.6 million at date of agreement), development-related payments of JPY 1,100 million ($ 9.0 million at date of agreement), and development milestones of JPY 500 million ($ 4.1 million at date of agreement). Upon the acquisition of VectivBio on June 29, 2023, the Company assumed a contract liability for deferred revenue related to the development-related payments at its fair value of $ 4.3 million.
In April 2024, VectivBio received the final development-related payment of JPY 500 million ($ 4.1 million at date of agreement).
During the second quarter of 2025, the Company recorded a $ 2.9 million reduction to cumulative collaborative arrangements revenue due to an increase in estimated development costs in connection with the confirmatory Phase III clinical trial needed to seek U.S. FDA approval for apraglutide.
The Company recognized a net reduction of revenue in the amount of $ 1.9 million during the year ended December 31, 2025, related to development activities. The Company recognized $ 2.2 million of revenue during the year ended December 31, 2024. As of December 31, 2025, current deferred revenue of $ 1.1 million and non-current deferred revenue of $ 5.3 million is reported within accrued expenses and other current liabilities and other liabilities, respectively, on the consolidated balance sheets. Deferred revenue related to development activities is expected to be recognized over the course of the development activities, which are anticipated to be substantially complete by 2030.
License Agreement with Ferring
In August 2012, as subsequently amended and restated in December 2016, GlyPharma entered into an exclusive licensing agreement with Ferring International Center S.A. (“Ferring”), pursuant to which Ferring granted GlyPharma an exclusive, worldwide, sublicensable license under certain patent rights and know-how controlled by Ferring relating to apraglutide and certain know-how controlled by Ferring relating to specified alternate drug compounds, to research, develop, manufacture, make, have made, import, export, use, sell, distribute, promote, advertise, dispose of or offer to sell (i) products containing apraglutide whose manufacture, use or sale is covered by a valid claim of the licensed patents, or licensed products and (ii) products, containing a specified alternate drug compound, or alternate drug products. In April 2021, the license agreement was transferred and assigned to VectivBio AG, a subsidiary of VectivBio.
Under the license agreement, as partial consideration for the rights Ferring granted to it, VectivBio AG is required to pay Ferring a high single-digit percentage royalty on worldwide annual net sales of licensed products and alternate drug products until, on a country-by-country basis and licensed product-by-licensed product or alternate drug product-by-alternate drug product basis, as applicable, the date on which the manufacture, use or sale of such licensed product or alternate drug product, as applicable, ceases to be covered by a valid claim of a patent within the licensed patents in such a country. GlyPharma was also required to issue Ferring a certain number of warrants and Class A preferred shares pursuant to a shareholders’ agreement. The equity obligations under the license agreement have been fully performed by GlyPharma.
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The Company is also obligated to pay Ferring a specified percentage of the annual consideration VectivBio AG or its affiliates, including the Company, received in connection with sales of licensed product or alternate drug product by any third parties to which VectivBio AG or its affiliates, including the Company, grant a sublicense of any of the rights licensed to VectivBio AG by Ferring under this license agreement. Such percentage is in the high single digits for sales of both licensed products and alternate drug products, and such payments are owed for the duration of the royalty term for licensed products or alternate drug products, as applicable.
On October 2, 2025, Ferring filed a complaint against VectivBio AG, for trade secret misappropriation and correction of patent inventorship and ownership in the U.S. District Court in the Eastern District of Texas. On December 18, 2025 , the Company and Ferring entered into an agreement to settle the claims for $ 12.5 million and amended the terms of the licensing agreement to require VectivBio AG to pay a low single-digit percentage royalty from the end of the seventh year from such first commercial sale through the date on which such licensed product ceases to be covered by a valid claim of a patent. In connection with the settlement, the Company recorded a charge of $ 12.5 million as selling, general, and administrative expense in the consolidated statements of income during the year ended December 31, 2025. VectivBio AG paid $ 7.5 million in December 2025 and is obligated to pay the remaining $ 5.0 million on or by December 31, 2026, subject to accelerated payment in certain circumstances. As of December 31, 2025, the remaining obligation of $ 5.0 million is recorded in accrued expenses and other liabilities in the consolidated balance sheet.
Other Collaboration and License Agreements
Collaboration and License Option Agreement with COUR
In November 2021, the Company entered into the collaboration and license option agreement (the “COUR Collaboration Agreement”) with COUR Pharmaceutical Development Company, Inc. (“COUR”), pursuant to which the Company was granted an option (the “Option”) to acquire an exclusive license to research, develop, manufacture and commercialize, in the U.S., products containing CNP-104 for the treatment of PBC. COUR has initiated a Phase II clinical study to evaluate the safety, tolerability, and pharmacodynamic effects and efficacy of CNP-104 in PBC patients. After reviewing the data from the clinical study for CNP-104, the Company had the right to exercise the Option and pay COUR $ 35.0 million in exchange for the license, subject to the Company’s right to apply a credit against such payment as described below.
In April 2023, the Company and COUR executed an amendment to the COUR Collaboration Agreement, in which the Company agreed to pay a one-time, non-refundable, upfront payment of $ 6.0 million to COUR in exchange for the right to apply a credit of $ 6.6 million against future amounts due to COUR in connection with the exercise of the Option, commercial milestones, or royalties. In connection with such payment, COUR also granted the Company a right of first negotiation over certain additional potential research and development programs. The $ 6.0 million payment was recognized as research and development expense in the second quarter of 2023.
In the third quarter of 2024, the Company received from COUR the topline data from COUR’s Phase II clinical study for the treatment of PBC. In September 2024, the Company notified COUR of its decision not to exercise the option to acquire an exclusive license to CNP-104. As a result, the collaboration and license option agreement between the Company and COUR has terminated, and the Company retains no rights and has no obligations related to CNP-104.
5. Fair Value of Financial Instruments
The tables below present information about the Company’s assets and liabilities that are measured at fair value on a recurring basis as of December 31, 2025 and 2024 and indicate the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value. In general, fair values determined by Level 1 inputs utilize observable inputs such as quoted prices in active markets for identical assets or liabilities. Fair values determined by Level 2 inputs utilize data points that are either directly or indirectly observable, such as quoted prices for similar instruments in active markets, interest rates and yield curves. Fair values determined by Level 3 inputs utilize unobservable data points in which there is little or no market data, which require the Company to develop its own assumptions for the asset or liability.
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The Company’s investment portfolio may include fixed income securities that do not always trade on a daily basis. As a result, the pricing services used by the Company apply other available information as applicable through processes such as benchmark yields, benchmarking of like securities, sector groupings and matrix pricing to prepare valuations. In addition, model processes are used to assess interest rate impact and develop prepayment scenarios. These models take into consideration relevant credit information, perceived market movements, sector news and economic events. The inputs into these models may include benchmark yields, reported trades, broker-dealer quotes, issuer spreads and other relevant data. The Company validates the prices provided by its third-party pricing services by obtaining market values from other pricing sources and analyzing pricing data in certain instances. The Company periodically invests in certain reverse repurchase agreements, which are collateralized by Government Securities and Obligations for an amount not less than 102 % of their principal amount. The Company does not record an asset or liability for the collateral as the Company is not permitted to sell or re-pledge the collateral. The collateral has at least the prevailing credit rating of U.S. Government Treasuries and Agencies. The Company uses a third-party custodian to manage the exchange of funds and ensure the collateral received is maintained at 102 % of the reverse repurchase agreements principal amount on a daily basis.
The following tables present the assets the Company has measured at fair value on a recurring basis (in thousands):
Fair Value Measurements at Reporting Date Using
Quoted Prices in
Significant Other
Significant
Active Markets for
Observable
Unobservable
December 31,
Identical Assets
Inputs
Inputs
2025
(Level 1)
(Level 2)
(Level 3)
Assets:
Cash and cash equivalents:
Money market funds
$
164,907
$
164,907
$
—
$
—
U.S. Treasury securities
11,479
—
11,479
—
Commercial paper
7,880
—
7,880
—
Total assets measured at fair value
$
184,266
$
164,907
$
19,359
$
—
Fair Value Measurements at Reporting Date Using
Quoted Prices in
Significant Other
Significant
Active Markets for
Observable
Unobservable
December 31,
Identical Assets
Inputs
Inputs
2024
(Level 1)
(Level 2)
(Level 3)
Assets:
Cash and cash equivalents:
Money market funds
$
36,010
$
36,010
$
—
$
—
U.S. Treasury securities
11,044
—
11,044
—
Commercial paper
7,928
—
7,928
—
Total assets measured at fair value
$
54,982
$
36,010
$
18,972
$
—
Cash equivalents, accounts receivable, prepaid expenses and other current assets, accounts payable, accrued research and development costs, accrued expenses and other current liabilities and current portion of operating lease obligations as of December 31, 2025 and 2024 are carried at amounts that approximate fair value due to their short-term maturities.
Convertible Senior Notes
In August 2019, the Company issued $ 200.0 million aggregate principal amount of its 2026 Convertible Notes (No te 9) . The fair value of the 2026 Convertible Notes, which differs from their carrying value, is influenced by interest rates, the price of the Company’s Class A Common Stock and the volatility thereof, and the prices for the 2026 Convertible Notes observed in market trading, which are Level 2 inputs.
The estimated fair value of the 2026 Convertible Notes was $ 189.3 million and $ 186.6 million as of December 31, 2025 and 2024, respectively.
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Capped Calls with Respect to 2026 Convertible Notes
In connection with the issuance of the 2026 Convertible Notes, the Company entered into the Capped Calls (as defined in Note 9, Debt , below) with certain financial institutions. The Capped Calls cover 14,933,740 shares of Class A Common Stock (subject to anti-dilution and certain other adjustments), which is the same number of shares of Class A Common Stock that initially underlie the 2026 Convertible Notes. The Capped Calls have an initial strike price of approximately $ 13.39 per share, which corresponds to the initial conversion price of the 2026 Convertible Notes, and have a cap price of approximately $ 17.05 per share (Note 9). The strike price and cap price are subject to anti-dilution adjustments generally similar to those applicable to the 2026 Convertible Notes. These instruments meet the conditions outlined in ASC 815, to be classified in stockholders’ equity and are not subsequently remeasured as long as the conditions for equity classification continue to be met (Note 9).
Revolving Credit Agreement
Outstanding borrowings under the revolving credit facility (Note 9) are carried at amounts that approximate fair value based on their nature, terms, credit spreads, and variable interest rates, which are Level 3 inputs.
6. Leases
The Company’s lease portfolio for the year ended December 31, 2025 included: an office lease for its current headquarters location and other locations, vehicle leases, and leases for computer and office equipment.
The Company’s headquarters office lease and vehicle leases require letters of credit totaling $ 0.6 million to secure the Company’s obligations under the lease agreements. The letters of credit are maintained under a subfacility of the revolving credit agreement (Note 9).
Lease cost is recognized on a straight-line basis over the lease term. The components of lease cost for the years ended December 31, 2025 and 2024 are as follows (in thousands):
Year Ended
December 31,
2025
2024
Operating lease cost
$
2,507
$
2,507
Short-term lease cost
354
1,520
Total lease cost
$
2,861
$
4,027
Supplemental information related to leases for the periods reported is as follows:
Year Ended December 31,
2025
2024
Cash paid for amounts included in the measurement of lease liabilities (in thousands)
$
3,189
$
3,126
Weighted-average remaining lease term of operating leases (in years)
4.4
5.4
Weighted-average discount rate of operating leases
5.8
%
5.8
%
Summer Street Lease
In June 2019, the Company entered into a non-cancelable operating lease (the “Summer Street Lease”) for approximately 39,000 square feet of office space on the 23 rd floor of 100 Summer Street, Boston, Massachusetts, which has been the Company’s headquarters since October 2019. The Summer Street Lease terminates on June 11, 2030 and includes a 2 % annual rent escalation, free rent periods, a tenant improvement allowance, and an option to extend the term of the lease for an additional five years at a market base rental rate. The extension option is not included in the lease term used for the measurement of the lease, as it is not reasonably certain to be exercised. The lease expense, inclusive of the escalating rent payments and lease incentives, is recognized on a straight-line basis over the lease term.
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As of lease commencement, the Company recorded a right-of-use asset and a lease liability using an incremental borrowing rate of 5.8 %. As of December 31, 2025, the balances of the right-of-use asset and operating lease liability were $ 9.3 million and $ 13.1 million, respectively. As of December 31, 2024, the balances of the right-of-use asset and operating lease liability were $ 11.0 million and $ 15.5 million, respectively.
Lease costs recorded during each of the years ended December 31, 2025 and 2024 were $ 2.5 million.
Future minimum lease payments under the Summer Street Lease as of December 31, 2025 are as follows (in thousands):
2026
$
3,252
2027
3,317
2028
3,384
2029
3,451
2030
1,450
Total future minimum lease payments
14,854
Less: present value adjustment
( 1,732 )
Operating lease liabilities
13,122
Less: current portion of operating lease liabilities
( 3,252 )
Operating lease liabilities, net of current portion
$
9,870
7. Property and Equipment
Property and equipment, net consisted of the following (in thousands):
December 31,
2025
2024
Software
$
214
$
1,567
Leasehold improvements
7,443
7,407
Furniture and fixtures
1,759
1,732
Computer and office equipment
1,997
2,154
11,413
12,860
Less accumulated depreciation and amortization
( 8,005 )
( 8,365 )
$
3,408
$
4,495
Depreciation expense of property and equipment was $ 1.1 million and $ 1.2 million for the years ended December 31, 2025 and 2024, respectively.
8. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following (in thousands):
December 31,
2025
2024
Accrued compensation and benefits
$
11,590
$
14,547
Accrued litigation settlement
5,000
—
Accrued interest
4,437
4,771
Deferred revenue
1,107
2,032
Accrued taxes
927
521
Accrued restructuring liabilities
771
560
Other
9,407
4,418
Total accrued expenses and other current liabilities
$
33,239
$
26,849
As of December 31, 2025 and 2024, other accrued expenses were comprised primarily of $ 9.4 million and $ 4.3 million of uninvoiced vendor liabilities, respectively.
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9. Debt
0.75 % Convertible Senior Notes due 2024 and 1.50 % Convertible Senior Notes due 2026
In August 2019, the Company issued $ 200.0 million aggregate principal amount of the 2024 Convertible Notes and $ 200.0 million aggregate principal amount of the 2026 Convertible Notes, pursuant to separate indentures (each an “Indenture” and together the “Indentures”), between the Company and U.S. Bank National Association, as trustee (the “Trustee”). The Company received net proceeds of $ 391.0 million from the sale of the 2024 Convertible Notes and 2026 Convertible Notes, after deducting fees and expenses of $ 9.0 million. The Company used $ 25.2 million of the net proceeds from the sale of the 2024 Convertible Notes and 2026 Convertible Notes to pay the cost of the Capped Calls, as described below.
In June 2024, the Company repaid the $ 200.0 million aggregate principal amount of the 2024 Convertible Notes upon maturity. The 2024 Convertible Notes bore cash interest at the annual rate of 0.75 % payable on June 15 and December 15 of each year. No conversions were exercised by holders of the 2024 Convertible Notes.
The 2026 Convertible Notes bear cash interest at the annual rate of 1.50 %, payable on June 15 and December 15 of each year. The 2026 Convertible Notes will mature on June 15, 2026, unless earlier converted or repurchased.
The initial conversion rate for the 2026 Convertible Notes is 74.6687 shares of Class A Common Stock (subject to adjustment as provided for in the Indenture) per $ 1,000 principal amount of the 2026 Convertible Notes, which is equal to an initial conversion price of approximately $ 13.39 per share.
The Company held the option to determine the settlement method for conversions of the 2026 Convertible Notes through payment or delivery, as the case may be, of cash, shares of the Company’s Class A Common Stock, or a combination of cash and shares of Class A Common Stock (subject to, and in accordance with, the settlement provisions of the applicable Indenture). The Company has elected to settle conversion of the 2026 Convertible Notes through cash payment equal to the principal value and shares of Class A Common Stock for the conversion premium, if any.
Holders of the 2026 Convertible Notes had the right to convert their 2026 Convertible Notes at their option at any time prior to the close of business on the business day immediately preceding December 15, 2025 upon the occurrence of certain circumstances and no such conversions occurred. On or after December 15, 2025, until the close of business on the second scheduled trading day immediately preceding June 15, 2026, holders may convert their 2026 Convertible Notes, in multiples of $ 1,000 principal amount, at the option of the holder.
Upon the occurrence of fundamental changes, as described in the Indenture, prior to the maturity date of the 2026 Convertible Notes, holders of such notes may require the Company to repurchase for cash all or a portion of their notes at a repurchase price equal to 100 % of the principal amount of the notes to be repurchased, plus accrued and unpaid interest. If a make-whole fundamental change, as described in the Indenture, occurs and a holder elects to convert its notes in connection with such make-whole fundamental change, such holder may be entitled to an increase in the conversion rate as described in the Indenture.
The Indenture does not contain any financial covenants or restrict the Company’s ability to repurchase the Company’s securities, pay dividends or make restricted payments in the event of a transaction that substantially increases the Company’s level of indebtedness. The Indenture provides for customary events of default. In the case of an event of default arising from specified events of bankruptcy or insolvency, all outstanding notes will become due and payable immediately without further action or notice. If any other event of default under the Indenture occurs or is continuing, the Trustee or holders of at least 25 % in aggregate principal amount of the then outstanding notes may declare the principal amount of such notes to be immediately due and payable.
The Company accounts for convertible debt instruments as a single liability measured at amortized cost.
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The Company’s outstanding balance for the 2026 Convertible Notes consisted of the following (in thousands):
2025
2024
Principal:
$
200,000
$
200,000
Less: unamortized debt issuance costs
( 320 )
( 1,012 )
Net carrying amount
$
199,680
$
198,988
The outstanding balance of the 2026 Convertible Notes is classified as a current liability and non-current liability as of December 31, 2025 and December 31, 2024, respectively.
In connection with the issuance of the 2026 Convertible Notes, the Company incurred $ 4.5 million of debt issuance costs, which primarily consisted of initial purchaser’s discounts and legal and other professional fees. The debt issuance costs are reflected as a reduction in the carrying value of the 2026 Convertible Notes and recorded as interest expense over the life of the 2026 Convertible Notes.
The Company determined the expected life of the 2026 Convertible Notes was equal to its approximately seven-year term. The effective annual interest rate of the 2026 Convertible Notes for the period from the date of issuance through December 31, 2025 was 1.9 %. The effective annual interest rate is computed using the contractual interest and the amortization of debt issuance costs.
The following table sets forth total interest expense recognized related to convertible senior notes (in thousands):
Year Ended December 31,
2025
2024
Contractual interest expense
$
3,000
$
3,688
Amortization of debt issuance costs
692
1,119
Total interest expense
$
3,692
$
4,807
Capped Calls with Respect to 2024 Convertible Notes and 2026 Convertible Notes
To minimize the impact of potential dilution to the Company’s Class A common stockholders upon conversion of the 2024 Convertible Notes and the 2026 Convertible Notes, the Company separately entered into the capped call transactions in August 2019 (the “Capped Calls”) in connection with the issuance of the 2024 Convertible Notes and the 2026 Convertible Notes. The Company paid the counterparties $ 25.2 million to enter into the Capped Calls, of which $ 25.0 million related to the premium payments and $ 0.2 million related to transaction costs. These instruments meet the conditions outlined in ASC 815 to be classified in stockholders’ equity and are not subsequently remeasured as long as the conditions for equity classification continue to be met.
The Capped Calls in connection with the issuance of the 2024 Convertible Notes, which covered 14,933,740 shares of Class A Common Stock, terminated unexercised upon expiry in June 2024.
The Capped Calls in connection with the 2026 Convertible Notes have an initial strike price of approximately $ 13.39 per share, which corresponds to the initial conversion price of the 2026 Convertible Notes and is subject to anti-dilution adjustments generally similar to those applicable to the 2026 Convertible Notes. The Capped Calls have a cap price of approximately $ 17.05 per share, subject to certain adjustments. The Capped Calls cover 14,933,740 shares of Class A Common Stock (subject to anti-dilution and certain other adjustments), which is the same number of shares of Class A Common Stock that initially underlie the 2026 Convertible Notes. Holders of the 2026 Convertible Notes do not have any rights with respect to the Capped Calls.
The Capped Calls are expected generally to reduce the potential dilution to the Class A Common Stock upon conversion of the 2026 Convertible Notes in the event that the market price per share of Class A Common Stock is greater than the strike price of the Capped Calls as adjusted pursuant to the anti-dilution adjustments. If, however, the market price per share of Class A Common Stock exceeds the cap price of the Capped Calls, there would nevertheless be dilution upon conversion of the 2026 Convertible Notes to the extent that such market price exceeds the cap price of the Capped Calls.
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Revolving Credit Facility
In May 2023, in connection with the VectivBio Acquisition, the Company entered into a credit agreement with Wells Fargo Bank, N.A., as administrative agent (in such capacity, the “Agent”), collateral agent, a letter of credit issuer and a lender, and the other agents, lenders and letter of credit issuers parties thereto (collectively, the “Lenders”). In September 2024, the Company, the Agent and the Lenders entered into the first amendment to the revolving credit agreement (as amended from time to time, the “Revolving Credit Agreement”) to, among other things, increase the borrowing capacity from $ 500.0 million to $ 550.0 million, extend the maturity date, and increase the Company’s permitted maximum consolidated secured net leverage ratio.
The Revolving Credit Agreement provides for a $ 550.0 million secured revolving credit facility (the "Revolving Credit Facility”), which includes a $ 10.0 million letter of credit subfacility, and loans made thereunder will mature on the earliest to occur of (i) December 31, 2028 or (ii) the date that is 91 days prior to the stated maturity date of the Company’s existing convertible notes then outstanding, unless, in the case of clause (ii), the Company’s minimum liquidity equals or exceeds certain agreed levels.
At the Company’s election, borrowings under the Revolving Credit Agreement will bear interest at a rate equal to (a) Adjusted Term Secured Overnight Financing Rate (“Adjusted Term SOFR”) (as defined in Revolving Credit Agreement) plus the applicable rate (ranging from 1.75 % to 3.00 %) or (b) the highest of (1) the weighted average overnight Federal funds rate, as published by the Federal Reserve Bank of New York, plus one half of 1.0% , (2) the prime lending rate or (3) the one-month Adjusted Term SOFR plus 1.0 % in effect from time to time plus the applicable rate (ranging from 0.75 % to 2.00 %). The applicable rates are based on the Company’s consolidated secured net leverage ratio (as defined under the Revolving Credit Facility) at the time of the applicable borrowing.
The Company pays a quarterly commitment fee of 0.30 % to 0.425 % on the daily amount by which the commitments under the Revolving Credit Agreement exceed the outstanding loans and letters of credit.
The loans and other obligations under the Revolving Credit Agreement are secured by substantially all of the Company’s personal property, including a pledge of all the capital stock of subsidiaries held directly by the Company or any subsidiary that guarantees the Revolving Credit Agreement following the closing date (which pledge, in the case of any foreign subsidiary, is limited to 65 % of the voting stock), subject to certain customary exceptions and limitations. The Revolving Credit Agreement generally prohibits any other liens on the assets of the Company and its restricted subsidiaries, subject to certain exceptions as described in the Revolving Credit Agreement.
Under the terms of the Revolving Credit Agreement, the Company will be able to request an increase in the commitments or the addition of a term loan secured by a pari passu lien on the collateral of up to an additional amount equal to the greater of $ 200.0 million and 100 % of the trailing twelve-month Consolidated Adjusted EBITDA (as defined in the Revolving Credit Agreement) upon satisfaction of customary conditions, including receipt of commitments from either new lenders or increased commitments from existing lenders.
The Revolving Credit Agreement contains certain customary covenants applicable to the Company and its Restricted Subsidiaries (as defined in the Revolving Credit Agreement). The Company is required to maintain a maximum consolidated secured net leverage ratio of 3.50 to 1.00 until the end of the final quarter of 2025 (the “Initial Period”), (ii) 3.25 to 1.00 until the end of the first quarter of 2026 (the “Interim Period”) and (iii) 3.00 to 1.00 thereafter, and a minimum interest coverage ratio of 3.00 to 1.00, in each case at the end of each fiscal quarter. The Revolving Credit Agreement allows the Company to elect to increase the permitted maximum consolidated secured net leverage ratio to (i) 4.00 to 1.00 during the Initial Period, (ii) 3.75 to 1.00 during the Interim Period and (iii) 3.50 to 1.00 thereafter, in each case for up to four fiscal quarters in the event it consummates an acquisition for consideration in excess of $ 50.0 million, subject to certain limitations on how often this election can be made. As of December 31, 2025, the Company was in compliance with all covenants under the Revolving Credit Agreement.
In connection with the initial execution of the Revolving Credit Agreement during the second quarter of 2023 and the amendment executed in the third quarter of 2024, the Company incurred $ 2.9 million and $ 2.2 million of debt issuance costs, respectively, which consisted primarily of lender fees. The debt issuance costs are classified as other assets and are amortized on a straight-line basis over the term of the Revolving Credit Agreement. The Company had unamortized capitalized debt issuance costs of $ 2.9 million and $ 3.9 million as of December 31, 2025 and 2024, respectively.
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The outstanding principal balance on the Revolving Credit Facility was $ 385.0 million as of December 31, 2025 and 2024.
The following table sets forth total interest expense recognized related to Revolving Credit Agreement (in thousands):
Year Ended December 31,
2025
2024
Contractual interest expense
$
27,341
$
27,643
Amortization of debt issuance costs
976
785
Other financing costs
737
50
Total interest expense
$
29,054
$
28,478
10. Commitments and Contingencies
Commitments with AbbVie
The Company and AbbVie are jointly obligated to make minimum purchases of linaclotide API for the territories covered by the Company’s collaboration with AbbVie for North America. Currently, AbbVie fulfills all such minimum purchase commitments.
Under the collaboration agreement with AbbVie for North America, the Company shares all development and commercialization costs related to linaclotide in the U.S. with AbbVie. The actual amounts that the Company pays to AbbVie or that AbbVie pays to the Company will depend on numerous factors outside of the Company’s control, including the success of certain clinical development efforts with respect to linaclotide, the content and timing of decisions made by the regulators, the reimbursement and competitive landscape around linaclotide and the Company’s other product candidates, and other factors.
Other Funding Commitments
As of December 31, 2025, the Company has ongoing studies in various pre-clinical and clinical trial stages. The Company’s most significant clinical trial expenditures are to contract research organizations and contract manufacturing organizations. These contracts are generally cancellable, with notice, at the Company’s option and do not have any significant cancellation penalties.
The Company has entered into a manufacturing supply agreement for apraglutide , which includes certain minimum purchase commitments . The future minimum purchase commitments under this agreement range from $ 1.0 million to $ 3.9 million per year through 2030.
Guarantees
As permitted under Delaware law, the Company indemnifies its directors and certain of its officers for certain events or occurrences while such director or officer is, or was, serving at the Company’s request in such capacity. The maximum potential amount of future payments the Company could be required to make is unlimited; however, the Company has directors’ and officers’ insurance coverage that is intended to limit its exposure and enable it to recover a portion of any future amounts paid.
The Company enters into certain agreements with other parties in the ordinary course of business that contain indemnification provisions. These typically include agreements with business partners, contractors, landlords, clinical sites and customers. Under these provisions, the Company generally indemnifies and holds harmless the indemnified party for losses suffered or incurred by the indemnified party as a result of the Company’s activities. These indemnification provisions generally survive termination of the underlying agreements. The maximum potential amount of future payments the Company could be required to make under these indemnification provisions is unlimited. However, to date the Company has not incurred material costs to defend lawsuits or settle claims related to these indemnification provisions. As a result, the estimated fair value of these obligations is minimal. Accordingly, the Company did no t have any liabilities recorded for these obligations as of December 31, 2025 and 2024.
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Litigation
From time to time, the Company is involved in various legal proceedings and claims, either asserted or unasserted, which arise in the ordinary course of business. While the outcome of these other claims cannot be predicted with certainty, management does not believe that the outcome of any of these ongoing legal matters, individually and in aggregate, will have a material adverse effect on the Company’s consolidated financial statements.
For details regarding the Ferring legal matter, refer to Note 4, Collaboration, License and Other Agreements.
11. Stockholders’ Equity
Preferred Stock
The Company’s preferred stock may be issued from time to time in one or more series, with each such series to consist of such number of shares and to have such terms as adopted by the board of directors. Authority is given to the board of directors to determine and fix such voting powers, full or limited, or no voting powers, and such designations, preferences and relative participating, optional or other special rights, and qualifications, limitation or restrictions thereof, including without limitation, dividend rights, conversion rights, redemption privileges and liquidation preferences.
Common Stock
The Company has one class of common stock (“Class A Common Stock”). Class A Common Stock is entitled to one vote per share. The Company has reserved, out of its authorized but unissued shares of Class A Common Stock, sufficient shares to effect the conversion of the 2026 Convertible Notes pursuant to the terms thereof (Note 9).
The Company’s stockholders are entitled to dividends if and when declared by the board of directors.
12. Employee Stock Benefit Plans
The Company has several share-based compensation plans under which stock options, RSAs, RSUs, and other share-based awards are available for grant to employees, officers, directors and consultants of the Company.
The following table summarizes share-based compensation expense by award type (in thousands):
Year Ended December 31,
2025
2024
Time-based RSUs
$
13,486
$
21,425
Performance-based RSUs
2,767
6,422
Restricted stock awards
654
1,492
Employee stock purchase plan
184
451
Stock options
99
—
Stock awards
60
60
Total share-based compensation expense
$
17,250
$
29,850
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The following table summarizes the share-based compensation expense reflected in the consolidated statements of income (in thousands):
Year Ended December 31,
2025
2024
Share-based compensation expense:
Research and development
$
5,447
$
7,552
Selling, general and administrative
11,704
22,298
Restructuring
99
—
Total share-based compensation expense included in operating expenses
17,250
29,850
Income tax expense
2,519
3,414
Total share-based compensation expense, net of tax
$
14,731
$
26,436
Restructuring expenses include modifications to share-based awards held by employees impacted by certain workforce reductions (Note 15).
Stock Benefit Plans
As of December 31, 2025, the Company has the following active stock benefit plans pursuant to which awards are currently outstanding: the Amended and Restated 2019 Equity Incentive Plan (the “A&R 2019 Equity Plan”), the 2019 Equity Incentive Plan (the “2019 Equity Plan”), the Amended and Restated 2010 Employee Stock Purchase Plan (the “2010 Purchase Plan”) and the Amended and Restated 2010 Employee, Director, and Consultant Equity Incentive Plan (the “2010 Equity Plan”). As of December 31, 2025, there were 9,920,123 shares available for future grant under the A&R 2019 Equity Plan and the 2010 Purchase Plan.
A&R 2019 Equity Plan
During 2023, the Company’s stockholders approved the A&R 2019 Equity Plan under which stock options, RSAs, RSUs, and other stock-based awards may be granted to employees, officers, directors, or consultants of the Company. Under the A&R 2019 Equity Plan, 6,000,000 shares of Class A Common Stock were initially reserved for issuance. Subsequent to the approval of the A&R 2019 Equity Plan, shares available for grant under the 2019 Equity Plan are made available for grant under the A&R 2019 Equity Plan and awards that are returned to the A&R 2019 Equity Plan, 2019 Equity Plan and 2010 Equity Plan as a result of their expiration, cancellation, termination or repurchase are automatically made available for future grant under the A&R 2019 Equity Plan. As of December 31, 2025, 6,185,663 shares were available for future grant under the A&R 2019 Equity Plan.
2019 Equity Plan
During 2019, the Company’s stockholders approved the 2019 Equity Plan under which stock options, RSAs, RSUs, and other stock-based awards may be granted to employees, officers, directors, or consultants of the Company. Under the 2019 Equity Plan, 10,000,000 shares of Class A Common Stock were initially reserved for issuance. Prior to the approval of the A&R 2019 Equity Plan, awards that were returned to the 2010 Equity Plan as a result of their expiration, cancellation, termination or repurchase were automatically made available for issuance under the 2019 Equity Plan and awards that expired, cancelled, terminated, or were repurchased under the 2019 Equity Plan were no longer available for future grant. As of December 31, 2025, there were no shares available for future grant under the 2019 Equity Plan.
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2010 Purchase Plan
During 2010, the Company’s stockholders approved the 2010 Purchase Plan, which gives eligible employees the right to purchase shares of common stock at the lower of 85 % of the fair market value on the first or last day of an offering period. Each offering period is six months . There were 400,000 shares of common stock initially reserved for issuance pursuant to the 2010 Purchase Plan. The number of shares available for future grant under the 2010 Purchase Plan may be increased on the first day of each fiscal year by an amount equal to the lesser of: (i) 1,000,000 shares, (ii) 1 % of the Class A shares of common stock outstanding on the last day of the immediately preceding fiscal year, or (iii) such lesser number of shares as is determined by the board of directors. As of December 31, 2025, there were 3,734,460 shares available for future grant under the 2010 Purchase Plan.
2010 Equity Plan
The 2010 Equity Plan provided for the granting of stock options, RSAs, RSUs, and other share-based awards to employees, officers, directors, consultants, or advisors of the Company. As of December 31, 2025, there were no shares available for future grant under the 2010 Equity Plan.
Restricted Stock Awards
RSAs are granted to non-employee members of the board of directors under restricted stock agreements in accordance with the terms of the Company’s equity plans and the Company’s non-employee director compensation policy, effective May 2019. Annual restricted stock grants to each non-employee member of the board of directors vest in full on the date immediately preceding the next annual meeting of stockholders, provided the individual continues to serve on the Company’s board of directors through each vest date. Initial restricted stock grants to new non-employee members of the board of directors vest annually over a three-year period from the date of grant provided the individual continues to serve on the Company’s board of directors through each vest date.
A summary of restricted stock activity for the year ended December 31, 2025 is presented below:
Weighted-
Average
Number of
Grant Date
Shares
Fair Value
Unvested as of December 31, 2024
194,488
$
5.70
Granted
360,000
0.80
Vested
( 194,488 )
5.70
Forfeited
( 45,000 )
0.80
Unvested as of December 31, 2025
315,000
$
0.80
The weighted-average grant date fair value per share of RSAs granted during the years ended December 31, 2025 and 2024, was $ 0.80 and $ 5.70 , respectively. The total fair value of RSAs that vested during the years ended December 31, 2025 and 2024 was $ 0.1 million and $ 1.0 million, respectively.
Restricted Stock Units
RSUs granted under the Company’s equity plans represent the right to receive one share of the Company’s Class A Common Stock pursuant to the terms of the applicable award agreement. Shares of the Company’s Class A Common Stock are delivered to the employee upon vesting, subject to payment of applicable withholding taxes.
Time-based RSUs
Time-based RSUs generally vest over a two -to- four-year period on the approximate anniversary of the date of grant until fully vested, provided the individual remains in continuous service with the Company through each vesting date. The fair value of all time-based RSUs is based on the market value of the Company's Class A Common Stock on the date of grant. Compensation expense, including the effect of estimated forfeitures, is recognized over the applicable service period.
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A summary of time-based RSU activity for the year ended December 31, 2025 is as follows:
Weighted-
Average
Number
Grant Date
of RSUs
Fair Value
Outstanding as of December 31, 2024
5,351,507
$
10.89
Granted
4,017,510
1.65
Vested and released
( 1,878,766 )
10.47
Forfeited
( 2,053,525 )
8.36
Outstanding as of December 31, 2025
5,436,726
$
4.87
The weighted-average grant date fair value per share of time-based RSUs granted during the years ended December 31, 2025 and 2024 was $ 1.65 and $ 11.53 , respectively. The total fair value of time-based RSUs that vested during the years ended December 31, 2025 and 2024 was $ 3.6 million and $ 22.0 million, respectively.
Performance-based RSUs
Performance-based RSUs (“PSUs”) are granted to certain executives. PSUs currently outstanding vest upon the achievement of specified performance criteria over a three-year performance period, generally subject to the executive remaining in continuous service with the Company through the applicable vesting dates. The performance criteria applicable to the PSUs granted in 2025 consisted of relative total shareholder return goals (the “Relative TSR PSUs”). The performance criteria applicable to the PSUs granted in 2024 consisted of an equal weighting of (i) Relative TSR PSUs and (ii) achieving specified stock price targets (the “Absolute TSR PSUs”).
The Relative TSR PSUs and Absolute TSR PSUs are valued using the Monte Carlo simulation method on the date of grant. The weighted average assumptions used to estimate the fair value of Relative TSR PSUs and Absolute TSR PSUs were as follows for the years ended December 31, 2025 and 2024:
Year Ended December 31,
2025
2024
Relative
Relative
Absolute
TSR PSUs
TSR PSUs
TSR PSUs
Fair value of common stock
$
0.76
$
12.41
$
12.41
Expected volatility
74.1
%
38.0
%
38.0
%
Expected term (in years)
2.8
3.0
3.0
Risk-free interest rate
3.8
%
4.2
%
4.2
%
Expected dividend yield
—
%
—
%
—
%
A summary of PSU activity for the year ended December 31, 2025 is as follows:
Weighted-
Average
Number
Grant Date
of PSUs
Fair Value
Outstanding as of December 31, 2024
1,108,506
$
13.91
Granted
1,017,777
0.17
Vested and released
( 260,063 )
13.27
Forfeited
( 228,622 )
10.40
Outstanding as of December 31, 2025
1,637,598
$
5.15
The weighted-average grant date fair value per share of PSUs granted during the years ended December 31, 2025 and 2024 was $ 0.17 and $ 14.91 , respectively. The total fair value of PSUs that vested during the years ended December 31, 2025 and 2024 was $ 1.0 million and $ 9.8 million, respectively.
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Stock Options
Stock options granted under the Company’s equity plans represent the right to purchase one share of the Company’s Class A Common Stock pursuant to the terms of the applicable award agreement. Shares of the Company's Class A Common Stock are delivered to the employee upon exercise, subject to payment of applicable withholding taxes.
The Company ceased granting stock options during the year ended December 31, 2020. Stock options previously granted under the Company’s equity plans generally have a ten-year term and vest over a period of four years , provided the individual continues to serve at the Company through the vesting dates. Options granted under all equity plans are exercisable at a price per share not less than the fair market value of the underlying common stock on the date of grant. The estimated fair value of options, including the effect of estimated forfeitures, is recognized over the requisite service period, which is typically the vesting period of each option.
The following table summarizes stock option activity under the Company’s share-based compensation plans:
Weighted-
Weighted-
Number of
Average
Average
Aggregate
Stock
Exercise
Contractual
Intrinsic
Options
Price (1)
Life
Value
(in years)
(in thousands)
Outstanding as of December 31, 2024
4,540,264
$
12.37
1.97
$
—
Granted
—
—
—
—
Exercised
—
—
—
—
Cancelled
( 1,141,155 )
13.46
—
—
Outstanding as of December 31, 2025
3,399,109
12.00
1.31
—
Vested or expected to vest as of December 31, 2025
3,399,109
12.00
1.31
—
Exercisable as of December 31, 2025
3,399,109
$
12.00
1.31
$
—
(1) Amounts relating to stock options granted prior to the separation of the Company’s soluble guanylate cycle business, and certain other assets and liabilities, into Cyclerion Therapeutics, Inc. (the “Separation”) on April 1, 2019 have not been adjusted to reflect the effect of the Separation on the Company’s stock price.
The total intrinsic value of options exercised during the year ended December 31, 2024 was $ 2.0 million. The intrinsic value was calculated as the difference between the fair value of the Company’s Class A Common Stock at the date of exercise and the exercise price of the option issued.
The following table sets forth the Company's unrecognized share-based compensation expense, net of estimated forfeitures, as of December 31, 2025, by type of award and the weighted-average period over which that expense is expected to be recognized:
Unrecognized
Weighted-Average
Expense, Net
Remaining
of Estimated
Recognition
Forfeitures
Period
(in thousands)
(in years)
Type of award:
Time-based RSUs
$
12,891
2.42
Performance-based RSUs
925
1.61
Restricted stock awards
111
0.44
The total unrecognized share-based compensation cost will be adjusted for future changes in estimated forfeitures.
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13. Income Taxes
The Company is subject to U.S. federal, state, and foreign income taxes. The components of income before income taxes during the years ended on December 31, 2025 and 2024 consisted of the following (in thousands):
Year Ended December 31,
2025
2024
United States
$
161,155
$
167,091
Foreign
( 91,130 )
( 101,893 )
Income before income taxes
$
70,025
$
65,198
The components of the provision for (benefit from) income taxes during the years ended December 31, 2025 and 2024 consisted of the following (in thousands):
Year Ended December 31,
2025
2024
Current taxes:
Federal
$
—
$
—
State
4,374
( 4,487 )
Foreign
833
754
Total current taxes
5,207
( 3,733 )
Deferred taxes:
Federal
39,071
32,584
State
1,730
35,467
Foreign
—
—
Total deferred taxes
40,801
68,051
Income tax expense
$
46,008
$
64,318
During the year ended December 31, 2025, the Company recorded income tax expense of $ 46.0 million, comprised of non-cash tax expense of $ 40.9 million and cash tax expense of $ 5.1 million, primarily for state income taxes in certain states in which state taxable income exceeded available net operating losses. During the year ended December 31, 2024, the Company recorded income tax expense of $ 64.3 million, comprised of non-cash tax expense of $ 57.8 million and cash tax expense of $ 6.5 million for state income taxes in certain states in which state taxable income exceeded available net operating losses. Due to the Company’s ability to utilize its net operating losses to offset federal taxable income and taxable income in many states, the majority of the Company’s tax provision is a non-cash tax expense until the Company’s net operating losses have been fully utilized.
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A reconciliation of income taxes computed using the U.S. federal statutory rate of 21 % to that reflected in the consolidated statements of income, after the adoption of ASU 2023-09, is as follows (in thousands, except percentages):
Year Ended December 31,
2025
Amount
Percent
Income tax expense using U.S. federal statutory rate
$
14,705
21.0 %
State income taxes, net of federal benefit (1)
4,823
6.9 %
Foreign tax effects
Switzerland
Statutory tax rate difference
12,403
17.7 %
Change in valuation allowance
6,624
9.5 %
Other
90
0.1 %
Other foreign jurisdictions
213
0.3 %
Nontaxable or nondeductible items
Limitation on executive compensation
( 461 )
( 0.7 )%
Stock compensation
6,389
9.1 %
Other
152
0.2 %
Tax credits
—
0.0%
Change in valuation allowance
428
0.6 %
Change in unrecognized tax benefits
686
1.0 %
Other adjustments
( 44 )
( 0.1 )%
Income tax expense and effective tax rate
$
46,008
65.6 %
(1) State taxes in California, Colorado, Florda, Illinois, Massachusetts, New Jersey, New York, New York City and Pennsylvania comprised the majority of the tax effect in this category.
A reconciliation of income taxes computed using the U.S. federal statutory rate of 21 % to that reflected in the consolidated statements of income, prior to the adoption of ASU 2023-09, is as follows (in thousands):
Year Ended December 31,
2024
Income tax expense (benefit) using U.S. federal statutory rate
$
13,692
Foreign tax rate differential
8,111
Permanent differences
788
State income taxes, net of federal benefit
10,992
Executive compensation - Section 162(m)
2,683
Excess tax benefits
749
Tax credits
( 1,244 )
Expiring net operating losses and tax credits
1,187
Effect of change in state tax rate on deferred tax assets and deferred tax liabilities
1,538
Change in the valuation allowance
25,564
Other
258
Income tax expense
$
64,318
The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities. These differences are measured using the enacted statutory tax rates that are expected to be in effect for the years in which differences are expected to reverse. Deferred tax assets and liabilities were determined based on the difference between financial statement and tax bases using enacted tax rates in effect for the year in which the differences are expected to reverse.
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December 31,
2025
2024
Deferred tax assets:
Net operating loss carryforwards
$
155,036
$
146,978
Tax credit carryforwards
56,980
58,494
Capitalized research and development
1,528
22,350
Share-based compensation
5,710
9,508
Basis difference on collaboration agreement for North America with AbbVie
3,787
3,585
Accruals and reserves
2,010
3,804
Basis difference on Convertible Notes
240
714
Intangible assets
3,615
3,411
Operating lease liability
3,255
3,892
Other
588
1,452
Total deferred tax assets
232,749
254,188
Deferred tax liabilities:
Fixed assets
( 692 )
( 898 )
Operating lease right-of-use asset
( 2,317 )
( 2,777 )
Total deferred tax liabilities
( 3,009 )
( 3,675 )
Net deferred tax asset
229,740
250,513
Valuation allowance
( 126,307 )
( 106,279 )
Net deferred tax asset
$
103,433
$
144,234
On a periodic basis, the Company reassesses the valuation allowance on its deferred income tax assets, weighing positive and negative evidence to assess the recoverability of the deferred tax assets. As of December 31, 2025 and 2024, the Company maintained a valuation allowance of $ 126.3 million and $ 106.3 million, respectively, on deferred tax assets not expected to be realized, related primarily to deferred tax assets acquired in the VectivBio Acquisition comprised primarily of net operating loss carryforwards in Switzerland, as well as certain state net operating losses and state tax credits that are expected to expire prior to utilization.
The valuation allowance increased by $ 20.0 million during the year ended December 31, 2025, primarily to offset foreign net operating losses incurred in Switzerland.
The valuation allowance increased by $ 20.6 million during the year ended December 31, 2024 primarily to offset the foreign net operating losses incurred in Switzerland, to offset certain state net operating losses that are expected to expire prior to utilization, and to offset certain US tax credits that are expected to expire prior to utilization.
Subject to the limitations described below, as of December 31, 2025, the Company had federal net operating loss carryforwards of $ 190.3 million, of which $ 60.6 million is subject to expiration between 2036 and 2037 and $ 129.6 million may be carried forward indefinitely. As of December 31, 2025, the Company had state net operating loss carryforwards of $ 286.5 million to offset future state taxable income, which is subject to expiration at various dates through 2040. The Company also had tax credit carryforwards of $ 59.7 million as of December 31, 2025 to offset future federal and state income taxes, which is subject to expiration at various dates through 2045. The Company had foreign net operating loss carryforwards of $ 798.6 million, which are subject to expiration at various dates through 2032.
Utilization of federal and state net operating loss carryforwards and research and development credit carryforwards may be subject to a substantial annual limitation due to ownership change limitations that could occur in the future in accordance with Section 382 of the Internal Revenue Code of 1986 (“IRC Section 382”) and with Section 383 of the Internal Revenue Code of 1986, as well as similar state provisions. These ownership changes may limit the amount of net operating loss carryforwards and research and development credit carryforwards that can be utilized annually to offset future taxable income and taxes, respectively. In general, an ownership change, as defined by IRC Section 382, results from transactions increasing the ownership of certain stockholders or public groups in the stock of a corporation by more than 50 percentage points over a three-year period.
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The following table summarizes the changes in the Company’s unrecognized income tax benefits for the years ended December 31, 2025 and 2024 (in thousands):
December 31,
2025
2024
Balance at the beginning of the period
$
11,585
$
98,218
Increases based on tax positions related to the current period
4,359
4,093
Decreases for tax positions in prior periods
( 4,093 )
( 90,726 )
Balance at the end of the period
$
11,851
$
11,585
The Company had gross unrecognized tax benefits of $ 11.9 million and $ 11.6 million as of December 31, 2025 and 2024, respectively . Of the $ 11.9 million of total unrecognized tax benefits as of December 31, 2025, $ 7.8 million would, if recognized, affect the Company’s effective tax rate, and the remaining amount would not affect the Company’s effective tax rate, as it relates to a temporary timing difference. Reserves for uncertain tax positions of $ 13.1 million and $ 11.8 million are recorded in other liabilities on the Company’s consolidated balance sheets as of December 31, 2025 and 2024, respectively.
The Company recognizes interest and penalties, if any, related to uncertain tax positions in income tax expense. The Company recognized $ 0.9 million and $ 0.8 million of interest and penalties related to uncertain tax positions during the years ended December 31, 2025 and 2024, respectively. As of December 31, 2025 and 2024, $ 6.0 million and $ 5.1 million of interest and penalties have been accrued, respectively.
The statute of limitations for assessment by the Internal Revenue Service (“IRS”) and state tax authorities is open for tax years ended December 31, 2022 through the present, although net operating losses generated from years prior to 2022 could be subject to examination and adjustments to the extent utilized in future years. There are currently no federal or state income tax audits in progress. The statute of limitations for assessment for foreign jurisdictions is open for tax years ended December 31, 2021 through the present.
The Company made the following income tax payments (net of refunds received) during the year ended December 31, 2025 (in thousands):
Year Ended December 31,
2025
US federal
$
*
US state and local
California
1,642
Illinois
*
Maryland
281
New Jersey
206
New York
*
Wisconsin
218
Other
983
3,330
Foreign
Belgium
213
Total income tax payments (net of refunds received)
$
3,543
* The amount of income taxes paid during the year does not meet the 5% disaggregation threshold.
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14. Retirement Plans
Defined Contribution Retirement Plans
The Ironwood Pharmaceuticals, Inc. 401(k) Savings Plan is a defined contribution plan in the form of a qualified 401(k) plan in which substantially all employees are eligible to participate upon employment. Subject to certain IRS limits, eligible employees may elect to contribute from 1 % to 100 % of their compensation. Company contributions to the plan are at the sole discretion of the Company. During the years ended December 31, 2025 and 2024, the Company provided a matching contribution equal to the greater of: (a) 100 % of employee contributions on the first 3 % of eligible compensation and 50 % of employee contributions on the next 3 % of eligible compensation; or (b) 75 % of the first $ 10,000 of employee contributions. During the years ended December 31, 2025 and 2024, the Company recorded $ 1.2 million and $ 2.4 million of expense, respectively, related to its 401(k) company match.
Defined Benefit Retirement Plans
The Company maintains a defined benefit plan for employees in Switzerland, as required by local laws. The pension plan provides employees retirement benefits and risk insurance for death and disability. The contributions of employers and employees in general are defined in percentages of the insured’s salary. The retirement pension is calculated based on the old-age credit balance on retirement multiplied by the fixed conversion rate. The employee has the option to withdraw the capital on demand. As is customary with Switzerland pension plans, the assets of the plan are invested in a collective fund with multiple employers. The Company has no investment authority over the assets of the plan, which are held and invested by a Switzerland-based financial services provider. The investment strategy of the Swiss Plan is managed by an independent asset manager with the objective of achieving a consistent long-term return which will provide sufficient funding for future pension obligations while limiting risk. 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.
The defined benefit plan in Switzerland is comprised of a basic plan as of December 31, 2025 and 2024.
During each of the years ended December 31, 2025 and 2024, the Company recognized service cost expense in the amount of $ 1.0 million. Additionally, during the year ended December 31, 2024, the Company recognized a $ 2.1 million curtailment due to terminations, which reduced net periodic pension cost.
During the year ended December 31, 2025, the Company recognized an increase in accumulated other comprehensive income of $ 0.8 million, primarily due to actuarial gains. During the year ended December 31, 2024, the Company recognized decrease in accumulated other comprehensive income of $ 1.1 million, primarily due to the amortization of previously unrecognized actuarial losses.
During the year ended December 31, 2025, employer contributions and employee contributions were $ 0.7 million and $ 0.7 million, respectively, and benefits paid, inclusive of settlements, and net of deposits from pension plan assets totaled $ 6.8 million. During the year ended December 31, 2024, employer contributions and employee contributions were $ 0.8 million and $ 0.8 million, respectively, and benefits paid, inclusive of settlements, and net of deposits from pension plan assets totaled $ 18.1 million. The Company estimates future benefit payments from 2026 to 2030 to range from $ 0.8 million to $ 1.2 million per year, and from 2031 and thereafter to be $ 4.6 million.
As of December 31, 2025, the total fair value of pension plan assets was $ 13.0 million and the fair value of projected benefit obligations was $ 15.5 million, resulting in a net liability status of $ 2.5 million recorded as other liabilities. As of December 31, 2024, the total fair value of pension plan assets was $ 15.7 million and the fair value of projected benefit obligations was $ 18.5 million, resulting in a net liability status of $ 2.8 million recorded as other liabilities. The discount rate used in determining the projected benefit obligation as of December 31, 2025 and 2024 were 1.30 % and 1.00 %, respectively. The accumulated benefit obligation was $ 15.0 million and $ 17.9 million as of December 31, 2025 and 2024, respectively.
The pension plan assets are predominantly comprised of Level 2 assets in the fair value hierarchy, primarily consisting of fixed income, equities and real estate, except for certain mortgage-backed securities valued at $ 1.8 million and $ 1.9 million as of December 31, 2025 and 2024, respectively, which are Level 3 assets in the fair value hierarchy.
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15. Workforce Reductions and Restructuring
In June 2023, the Company commenced the elimination of certain positions in connection with the VectivBio Acquisition. The majority of the eliminations were substantially completed during the year ended December 31, 2023. The Company recorded $ 0.2 million and $ 2.6 million of restructuring expenses, which are primarily comprised of employee severance, benefits and related costs, during the year ended December 31, 2025 and 2024, respectively.
In January 2025, following an analysis of its strategy and core business needs, and in an effort to streamline focus and support the continued development of the Company’s pipeline, the Company commenced a reduction in the Company’s workforce of approximately 50 %, primarily consisting of field-based sales employees. The reduction in workforce was substantially completed during the first quarter of 2025. During the year ended December 31, 2025, the Company recorded $ 17.6 million of restructuring expenses, primarily comprised of severance, benefits, and related costs.
In August 2025, the Company eliminated certain positions supporting apraglutide commercialization efforts, in consideration of delays in development timelines. The reduction in workforce was comprised of 10 positions and was completed during the third quarter of 2025. During the year ended December 31, 2025, the Company recorded $ 2.4 million of restructuring expenses, primarily comprised of severance, benefits, and related costs.
The following table summarizes the accrued liabilities activity recorded in connection with the reductions in workforce and related restructuring activities during the year ended December 31, 2025 and 2024, respectively (in thousands):
Amounts
Amounts
Accrued at
Accrued at
December 31, 2024
Charges
Amount Paid
Adjustments
December 31, 2025
January 2025 field-based sales employees reduction
$
—
$
18,011
$
( 17,576 )
$
( 363 )
$
72
August 2025 commercial-related workforce reduction
—
2,224
( 1,312 )
( 222 )
690
VectivBio Acquisition-related workforce reduction
615
415
( 923 )
( 96 )
11
Total
$
615
$
20,650
$
( 19,811 )
$
( 681 )
$
773
Amounts
Amounts
Accrued at
Accrued at
December 31, 2023
Charges
Amount Paid
Adjustments
December 31, 2024
Headquarters-based workforce reduction
$
270
$
—
$
( 270 )
$
—
$
—
VectivBio Acquisition-related workforce reduction
8,102
2,612
( 9,990 )
( 109 )
615
Total
$
8,372
$
2,612
$
( 10,260 )
$
( 109 )
$
615
16. Segment Reporting
The Company operates in one reportable business segment—human therapeutics. The human therapeutics segment revenues are generated primarily through collaborative arrangements and license agreements related to research and development and commercialization of linaclotide. The accounting policies of the human therapeutics segment are the same as those described in the summary of significant accounting policies.
The Company has identified the Chief Executive Officer and the Chief Financial Officer as the chief operating decision-maker (“CODM”). The CODM uses consolidated net income (loss) to understand and evaluate the Company’s operating performance and trends, to prepare and approve the annual budget, and to develop short-term and long-term operating plans. Revenues, costs and expenses, other income (expense), and income tax expense are provided to the CODM as presented in the statement of income (loss). Total assets are not reviewed by the CODM when evaluating the segment’s performance.
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17. Selected Quarterly Financial Data (Unaudited)
The following table contains quarterly financial information for the years ended December 31, 2025 and 2024. The Company believes that the following information reflects all normal recurring adjustments necessary for a fair presentation of the information for the periods presented. The operating results for any quarter are not necessarily indicative of results for any future period.
First
Second
Third
Fourth
Total
Quarter
Quarter
Quarter
Quarter
Year
(in thousands, except per share data)
2025
Total revenues
$
41,143
$
85,239
$
122,060
$
47,709
$
296,151
Total cost and expenses
70,251
39,918
46,576
40,904
197,649
Other income (expense), net
( 7,164 )
( 7,499 )
( 7,464 )
( 6,350 )
( 28,477 )
Net income (loss)
( 37,386 )
23,599
40,080
( 2,276 )
24,017
Comprehensive income (loss)
( 38,015 )
21,279
40,392
( 1,622 )
22,034
Net income (loss) per share—basic (1)
( 0.23 )
0.15
0.25
( 0.01 )
0.15
Net income (loss) per share—diluted (1)
( 0.23 )
0.14
0.23
( 0.01 )
0.15
(1) The summation of quarterly basic and diluted net income per share does not equate to the calculation for the full fiscal year, as quarterly calculations are performed on a discrete basis.
First
Second
Third
Fourth
Total
Quarter
Quarter
Quarter
Quarter
Year
(in thousands, except per share data)
2024
Total revenues
$
74,877
$
94,396
$
91,592
$
90,545
$
351,410
Total cost and expenses
63,857
69,419
65,956
59,054
258,286
Other income (expense), net
( 6,062 )
( 6,101 )
( 8,267 )
( 7,496 )
( 27,926 )
Net income (loss)
( 4,162 )
( 860 )
3,646
2,256
880
Comprehensive income (loss)
( 2,053 )
( 408 )
2,064
5,231
4,834
Net income (loss) per share—basic (1)
( 0.03 )
( 0.01 )
0.02
0.01
0.01
Net income (loss) per share—diluted (1)
( 0.03 )
( 0.01 )
0.02
0.01
0.01
(1) The summation of quarterly basic and diluted net income per share does not equate to the calculation for the full fiscal year, as quarterly calculations are performed on a discrete basis.
F-44
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.