What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2020-08-06 compared with 2020-05-06 · 158 added, 150 removed, 667 unchanged (32% of the section changed)

8 unchanged sentences

Government authorities in the U.S.

have recommended or imposed various social distancing, quarantine, and isolation measures on large portions of the population, and similar measures have also been taken in many other countries around the world.

have recommended or imposed various containment and mitigation measures on large portions of the population, and similar measures have also been taken in many other countries around the world.

Both the outbreak of COVID-19 and the containment and mitigation efforts have a serious adverse impact on the U.S.

2 unchanged sentences

The COVID-19 pandemic has impacted, and is expected to continue to impact, our business and operations in a number of ways and there are significant uncertainties surrounding the extent and duration of such impacts.

Factors that will influence the impact on our business and operations include the duration and extent of the outbreak, the extent of imposed or recommended containment and mitigation measures, and the general economic consequences of the pandemic.

Factors that will influence the impact on our business and operations include the duration and extent of the outbreak, the duration and extent of imposed or recommended containment and mitigation measures, and the general economic consequences of the

Addressing the impacts of the COVID-19 pandemic has, and likely will for an extended period, required significant time and has diverted the attention of our management, other employees and our board of directors.

Since March 16, 2020, our employees, including customer-facing employees, have been working remotely.

Customer-facing employees are providing support virtually through telephone and web-based technologies.

Additionally, all work-related travel has been discontinued.

Although we have developed plans to resume in-person work practices, the extent and duration of our remote working arrangements remains uncertain.

If our employees are unable to work from home effectively, for example due to illness, lack of resources or inadequate technology, and school and daycare closures, our business will be materially harmed .

In addition, l imiting the ability of our sales representatives to meet with physicians and patients to visit doctors and pharmacists may have an extended negative impact on LINZESS sales.

Moreover, the increase in virtual customer support, both by our and our competitors’ customer-facing employees, that was prompted by the COVID-19 pandemic, may fundamentally change our commercial model or the market strategy in the industry in the future.

As of the date of this Quarterly Report on Form 10-Q, many of our customer-facing employees have resumed in-person work practices;

however, they are limited in the number of in-person details they are able to conduct due to containment and mitigation measures related to the COVID-19 pandemic.

We monitor the impact of the COVID-19 pandemic in the territories where our customer-facing employees have resumed in-person work practices, and in some cases, we have paused or delayed in-person work practices as a result of the impact of the COVID-19 pandemic in those territories.

Customer-facing employees who are not providing in-person services continue to support their customers virtually through telephone and web-based technologies.

The majority of our headquarters employees continue to work remotely.

Although we have developed plans to resume in-person work practices for all employees, the extent and duration of our ongoing remote working arrangements remains uncertain.

We may delay these plans or otherwise stop or limit in-person work in the future pending relevant health authority guidance and additional safety or other considerations.

If our employees are unable to work from home effectively, or if the COVID-19 pandemic otherwise impacts employees’ ability to work, for example due to containment and mitigation measures related to the COVID-19 pandemic, illness, lack of resources or inadequate technology, or restrictions, closures or other limits on school and other childcare options, our business will be materially harmed .

Specifically, new or continuing limits on the ability of our customer-facing employees to meet with physicians and patients to visit healthcare providers and pharmacists (including due to continued or future remote working arrangements, containment and mitigation measures that limit access to customers or other restrictions related to the COVID-19 pandemic) may have an extended negative impact on LINZESS® (linaclotide) sales.

The increase in virtual customer support and limitations on customer access, both by our and our competitors’ customer-facing employees, that was prompted by the COVID-19 pandemic, may fundamentally change our commercial model or the market strategy in the industry.

Should we be unable to evolve with any changes in the commercial landscape, we may be unable to maintain or grow our revenues from the commercialization of LINZESS or successfully commercialize future products.

In addition, changes in insurance coverage or reimbursement levels by governmental authorities, private health insurers and other third-party payors, or in the type of such coverage held by patients, due to the impacts of the COVID-19 pandemic, including the related increase in unemployment in the U.S., may negatively impact our revenue from LINZESS.

Moreover, impacts to healthcare access or administration (including, for example, limitations on medications or procedures deemed “non-essential” and reduced interaction between patients and physicians) due to the COVID-19 pandemic may impact demand for LINZESS and materially harm our business and commercialization efforts.

Revenue from LINZESS sales or the progression of our clinical trials will be affected should the COVID-19 pandemic cause significant disruptions to manufacturing operations or supply of LINZESS to the U.S., for example due to impacts of the COVID-19 pandemic on personnel involved in the manufacturing and supply of active pharmaceutical ingredient, or API, finished drug product or finished goods for linaclotide or our other product candidates , international travel and shipping restrictions, inability of vendors to provide services, closed manufacturing sites, or any other disruptions in the international supply chain.

The COVID-19 pandemic has impacted and is expected to continue to impact enrollment in our ongoing clinical trials, including enrollment of new patients into the Phase III clinical trials with IW-3718 for the treatment of refractory gastroesophageal reflex disease, or refractory GERD.

As of the date of this Form 10-Q, most of the clinical trial sites have suspended screening new patients.

Patients who are already enrolled in the trials also may discontinue participation due to the various impacts of the COVID-19 pandemic, including impacts on the healthcare system and daily life.

Enrollment impacts to our Phase III clinical trials with IW-3718 have delayed the date by which we expect to receive top-line data for these trials;

we may experience further delays, which may continue for an extended period of time, or other impacts to the trials, and we expect to incur increased aggregate expenses relating to the trials, each due to the COVID-19 pandemic.

In addition, the progression of our pipeline assets could be impacted should any of our key vendors, including clinical research organizations, or CROs, and other clinical vendors, be unable to provide timely or sufficient services due to the impact of the COVID-19 pandemic.

The spread of COVID-19 is disrupting the U.S.

In addition, changes in insurance coverage or reimbursement levels by governmental authorities, private health insurers and other third-party payors, or changes in the type of such coverage held by patients (including changes from commercial insurance to Medicaid) or the loss of coverage by some patients, due to the impacts of the COVID-19 pandemic (including the related increase in unemployment in the U.S.) may negatively impact our revenue from LINZESS.

Moreover, continuing impacts to healthcare access or administration (including, for example, limitations on medications or procedures deemed “non-essential” and reduced interaction between patients and physicians) due to the COVID-19 pandemic may impact demand for LINZESS and materially harm our business and commercialization efforts.

Revenue from LINZESS sales or the progression of our trials will be affected should the COVID-19 pandemic cause significant disruptions to manufacturing operations or supply of LINZESS to the U.S.

or active pharmaceutical ingredient, or API, finished drug product or finished goods for linaclotide or our product candidates , for example due to impacts of the COVID-19 pandemic on personnel involved in the manufacturing and supply chain, international travel and shipping restrictions, inability of vendors to provide services, closed manufacturing sites, or any other disruptions in the international supply chain.

The COVID-19 pandemic has impacted and is expected to continue to impact enrollment in our clinical trials, and specifically our Phase III clinical trials of IW-3718 for the treatment of refractory gastroesophageal reflex disease, or refractory GERD.

Most of the IW-3718 Phase III clinical trial sites were not screening new patients during the second quarter of 2020 due to the suspension of in-person procedures required to enroll patients and lower patient participation compared to pre-COVID levels.

In line with new U.S.

Food and Drug Administration, or U.S.

FDA, guidance on statistical considerations for trials impacted by COVID-19, we have stopped enrollment of study subjects into one of our two Phase III clinical trials for IW-3718 to conduct an early efficacy assessment.

Many clinical sites have now resumed screening new patients in our ongoing clinical trial for IW-3718;

however, enrollment continues to be slower than prior to the COVID-19 pandemic.

Moreover, patients who are already enrolled in the trials also may discontinue participation due to the various impacts of the COVID-19 pandemic, including impacts on the healthcare system and daily life.

Enrollment impacts to our Phase III clinical trials with IW-3718 delayed the date by which we previously expected to receive top-line data for these trials;

we may experience further delays (including potential delays in the early efficacy assessment or receipt of top-line data from our IW-3718 program), which delays may continue for an extended period of time, or other impacts to the trials, and we expect to incur increased aggregate expenses relating to the trials, each due to the COVID-19 pandemic.

In addition, the progression of our pipeline could be impacted should any of our key vendors,

including clinical research organizations, or CROs, and other clinical vendors, be unable to provide timely or sufficient services due to the impact of the COVID-19 pandemic.

The spread of COVID-19 continues to disrupt the U.S.

healthcare and healthcare regulatory system.

5 unchanged sentences

we cannot guarantee that we will generate sufficient revenues from LINZESS to cover our expenses.

We and our partner, Allergan plc (together with its affiliates), or Allergan, began selling LINZESS in the U.S.

during December 2012.

We and our partner, AbbVie Inc.

(together with its affiliates), or AbbVie, (successor to Allergan plc (together with its affiliates), or Allergan), began selling LINZESS in the U.S.

in December 2012.

Revenues from our LINZESS collaboration constitute a significant portion of our total revenue, and we believe they will continue to do so for the foreseeable future.

2 unchanged sentences

● the size of the treatable patient population;

● the effectiveness of the sales, managed markets and marketing efforts by us and Allergan;

● the effectiveness of the sales, managed markets and marketing efforts by us and AbbVie;

● the adoption of LINZESS by physicians, which depends on whether physicians view it as safe and effective treatment for adult patients with IBS-C and CIC;

10 unchanged sentences

The most commonly reported adverse reaction since linaclotide became commercially available, as well as in the clinical trials for linaclotide in IBS-C and CIC, has been diarrhea.

In the linaclotide Phase III IBS-C and CIC trials, severe diarrhea was reported in 2% or less of the linaclotide-treated patients and its incidence was similar between the IBS-C and CIC populations.

In the linaclotide Phase III

IBS-C and CIC trials, severe diarrhea was reported in 2% or less of the linaclotide-treated patients and its incidence was similar between the IBS-C and CIC populations.

The number and type of patients treated with linaclotide could continue to grow if physicians prescribe linaclotide to more patients and as we and our partners conduct clinical trials, including in new indications, populations or formulations, as well as explore potential combination products, in existing and new territories.

10 unchanged sentences

In addition, the U.S.

Food and Drug Administration, or U.S.

FDA-approved label for LINZESS contains a boxed warning about its use in pediatric patients.

1 unchanged sentence

There is also a warning advising physicians to avoid the use of LINZESS in pediatric patients six to less than 18 years of age.

This warning is based on data in young juvenile mice and the lack of clinical safety and efficacy data in pediatric patients of any age group.

We and Allergan have established a nonclinical and clinical post-marketing plan with the U.S.

This warning is based on data in young juvenile mice and, at the time of approval, the lack of clinical safety and efficacy data in pediatric patients across age groups.

We and AbbVie have established a nonclinical and clinical post-marketing plan with the U.S.

FDA to understand the safety and efficacy of LINZESS in pediatric patients, which is discussed below.

12 unchanged sentences

We have little control over compliance with these regulations and standards by our partners and the third-party manufacturers we or our partners engage.

product specification and stability failures, procedural deviations, improper equipment installation or operation, utility failures, contamination, natural disasters and public health epidemics, including the COVID-19 pandemic.

In addition, the raw materials necessary to make API for our products are acquired from a limited number of sources.

Any delay or disruption in the availability of these raw materials or a change in raw material suppliers could result in production disruptions, delays or higher costs with consequent adverse effects on us.

Our partners and the third-party manufacturers we or our partners engage may experience problems with their respective manufacturing and distribution operations and processes, including, for example, quality issues, such as product specification and stability failures, procedural deviations, improper equipment installation or operation, utility failures, contamination, natural disasters and public health epidemics, including the COVID-19 pandemic.

In addition, the raw materials necessary to make API for our products and product candidates are acquired from a limited number of sources.

Any delay or disruption in the availability of raw materials or a change in raw material suppliers could result in production disruptions, delays or higher costs with consequent adverse effects on us.

The manufacture of pharmaceutical products requires significant expertise and capital investment, including the development of advanced manufacturing techniques and process controls.

13 unchanged sentences

and the other countries where it is approved, and develop, launch and commercialize linaclotide in other parts of the world, the drug’s success becomes more dependent on us maintaining highly collaborative and well aligned partnerships.

In June 2019, Allergan and AbbVie, Inc., or AbbVie, entered into a definitive agreement providing for the combination of the two companies.

If the transaction is completed, or if any of our linaclotide partners otherwise undergo a change of control or in management, we would need to reestablish many relationships and confirm continued alignment on our development and commercialization strategy for linaclotide.

Further, in connection with any change of control or change in management, there is inherent uncertainty and disruption in operations, which could result in distraction, inefficiencies, and misalignment of priorities.

In May 2020, AbbVie announced the completion of its acquisition of Allergan.

Our collaboration, now with AbbVie, for the development and commercialization of linaclotide in North America, and our license, now to AbbVie, to develop and commercialize linaclotide in all countries worldwide other than China (including Hong Kong and Macau) and Japan, remain in effect.

In connection with this transaction, we are in the process of reestablishing many relationships and confirming alignment, including on our development and commercialization strategy for linaclotide.

Any failure to do so could adversely affect the development and commercialization of linaclotide.

If any of our linaclotide partners undergoes a change of control or in management, we would similarly need to reestablish many relationships and confirm alignment, including on our development and commercialization strategy for linaclotide.

Further, in connection with any change of control or change in management,

there is inherent uncertainty and disruption in operations, which could result in distraction, inefficiencies, and misalignment of priorities.

As a result, in the event of a change of control or in management at one of our linaclotide partners, we cannot be sure that we will be able to successfully execute on our development and commercialization strategy for linaclotide in an effective and efficient manner and without disruption or reduced performance.

1 unchanged sentence

If any of our linaclotide partners undergoes a change of control and the acquirer either (i) is unable to perform such partner’s obligations under its collaboration or license agreement with us or (ii) does not comply with the divestiture or certain other provisions of the applicable agreement, we have the right to terminate the collaboration or license agreement and reacquire that partner’s rights with respect to linaclotide.

If we elect to exercise these rights in such circumstances, we will need to either establish the capability to develop, manufacture and commercialize

linaclotide in that partnered territory on our own or we will need to establish a relationship with a new partner.

If we elect to exercise these rights in such circumstances, we will need to either establish the capability to develop, manufacture and commercialize linaclotide in that partnered territory on our own or we will need to establish a relationship with a new partner.

We have assembled a team that represents the functional areas necessary to support the commercialization of LINZESS in the U.S.

If Allergan was subject to a change of control that allowed us to further commercialize LINZESS in the U.S.

on our own, and we chose to do so, we would need to enhance each of these functional aspects, as well as develop others, to replace the capabilities that Allergan was previously providing to the collaboration.

If AbbVie was subject to a change of control that allowed us to further commercialize LINZESS in the U.S.

on our own, and we chose to do so, we would need to enhance each of these functional aspects, as well as develop others, to replace the capabilities that AbbVie was previously providing to the collaboration.

Any such transition might result in a period of reduced efficiency or performance by our operations and commercialization teams, which could adversely affect our ability to commercialize LINZESS.

Although many members of our global operations, commercial and medical affairs teams have strategic oversight of, and a certain level of involvement in, their functional areas globally, we do not have corresponding operational capabilities in these areas outside of the U.S.

If Allergan, Astellas Pharma, Inc., or Astellas, or AstraZeneca AB (together with its affiliates), or AstraZeneca, was subject to a change of control that allowed us to continue linaclotide’s development or commercialization anywhere outside of the U.S.

If AbbVie, Astellas Pharma, Inc., or Astellas, or AstraZeneca AB (together with its affiliates), or AstraZeneca, was subject to a change of control that allowed us to continue linaclotide’s development or commercialization anywhere outside of the U.S.

on our own, and we chose to do so rather than establishing a relationship with a new partner, we would need to build operational capabilities in the relevant territory.

In any of these situations, the development and commercialization of linaclotide could be negatively impacted.

We must work effectively and collaboratively with Allergan to market and sell LINZESS in the U.S.

We must work effectively and collaboratively with AbbVie to market and sell LINZESS in the U.S.

for it to achieve its maximum commercial potential.

We are working closely with Allergan to execute our joint commercialization plan for LINZESS.

We are working closely with AbbVie to execute our joint commercialization plan for LINZESS.

The commercialization plan includes an agreed upon marketing campaign that targets the physicians who see patients who could benefit from LINZESS treatment.

Our marketing campaign also targets the adult men and women who suffer from IBS-C or CIC.

Our commercialization plan also includes an integrated call plan for our sales forces to optimize the education of specific gastroenterologists and primary care physicians on whom our and Allergan’s sales representatives call, and the frequency with which the representatives meet with them.

In order to optimize the commercial potential of LINZESS, we and Allergan must execute upon this commercialization plan effectively and efficiently.

In addition, we and Allergan must continually assess and modify our commercialization plan in a coordinated and integrated fashion in order to adapt to the promotional response.

Further, we and Allergan must continue to focus and refine our marketing campaign to ensure a clear and understandable physician-patient dialogue around IBS-C, CIC and the potential for LINZESS as an appropriate therapy.

In addition, we and Allergan must provide our sales forces with the highest quality support, guidance and oversight for them to continue to effectively promote LINZESS to gastroenterologists and primary care physicians.

Should the merger of Allergan and AbbVie be consummated, we and AbbVie must work together to ensure an orderly transition of this work plan and to continue these commercialization efforts.

If we and Allergan (or AbbVie, should the merger be consummated) fail to perform these commercial functions in the highest quality manner and in accordance with our joint commercialization plan and related agreements, LINZESS will not achieve its maximum commercial potential and we may suffer financial harm.

Our commercialization plan also includes an integrated call plan for our sales forces to optimize the education of specific gastroenterologists and primary care physicians on whom our and AbbVie’s sales representatives call, and the frequency with which the representatives meet with them.

In order to optimize the commercial potential of LINZESS, we and AbbVie must execute upon this commercialization plan effectively and efficiently.

In addition, we and AbbVie must continually assess and modify our commercialization plan in a coordinated and integrated fashion in order to adapt to the promotional response.

Further, we and AbbVie must continue to focus and refine our marketing campaign to ensure a clear and understandable physician-patient dialogue around IBS-C, CIC and the potential for LINZESS as an appropriate therapy.

In addition, we and AbbVie must provide our sales forces with the highest quality support, guidance and oversight for them to continue to effectively promote LINZESS to gastroenterologists and primary care physicians.

In light of the recently completed merger of AbbVie and Allergan, we and AbbVie must work together to ensure an orderly transition of this work plan and to continue these commercialization efforts.

If we and AbbVie fail to perform these commercial functions in the highest quality manner and in accordance with our joint commercialization plan and related agreements, LINZESS will not achieve its maximum commercial potential and we may suffer financial harm.

Our efforts to further target and engage adult patients with IBS-C or CIC may not effectively increase appropriate patient awareness or patient/physician dialogue and may not increase the revenues that we generate from LINZESS.

In addition, as described above, since March 16, 2020, our employees, including customer-facing employees, have been working remotely.

Customer-facing employees are providing support virtually through telephone and web-based technologies.

Additionally, all work-related travel has been discontinued.

The duration of these restrictions is uncertain.

We have developed plans to resume in-person work practices as we determine it to be safe to do so and pending relevant health authority guidance.

T he virtual support we provide to customers may not be as effective as in-person efforts.

If this were to occur, or if we, Allergan or any of our partners were unable to align on our strategy and development and commercial efforts as a result of the COVID-19 pandemic or otherwise, we may not be able to maintain or increase the revenues that we generate or our business may be otherwise materially harmed.

In addition, as described above, as of the date of this Quarterly Report on Form 10-Q, many of our customer-facing employees have resumed in-person work practices;

however, they are limited in the number of in-person details they are able to conduct due to containment and mitigation measures related to the COVID-19 pandemic.

We monitor the impact of the COVID-19 pandemic in the territories where our customer-facing employees have resumed in-person

work practices, and in some cases, we have paused the in-person work practices as a result of the impact of the COVID-19 pandemic in those territories.

Customer-facing employees who are not providing in-person services continue to support their customers virtually through telephone and web-based technologies.

Although we have developed plans to resume in-person work practices for all employees, the extent and duration of our ongoing remote working arrangements remains uncertain.

We may delay or otherwise limit in-person work in the future pending relevant health authority guidance and other safety considerations.

T he virtual support we continue to provide to customers may not be as effective as in-person efforts, and our in-person efforts may be limited in their effectiveness.

If this were to occur, or if we, AbbVie or any of our partners were unable to align on our strategy and development and commercial efforts as a result of the COVID-19 pandemic or otherwise, we may not be able to maintain or increase the revenues that we generate or our business may be otherwise materially harmed.

We are subject to uncertainty relating to pricing and reimbursement policies in the U.S.

which, if not favorable for our products, could hinder or prevent our products’ commercial success.

Our and our partner’s ability to commercialize our products successfully depend in part on the coverage and reimbursement levels set by governmental authorities, private health insurers and other third-party payors.

Our and our partner’s ability to commercialize our products successfully depends in part on the coverage and reimbursement levels set by governmental authorities, private health insurers and other third-party payors.

In determining whether to approve reimbursement for our products and at what level, we expect that third-party payors will consider factors that include the efficacy, cost effectiveness and safety of our products, as well as the availability of other treatments including generic prescription drugs and over-the-counter alternatives.

Further, in order to obtain and

maintain acceptable reimbursement levels and access for patients at copay levels that are reasonable and customary, we may face increasing pressure to offer discounts or rebates from list prices or discounts to a greater number of third-party payors or other unfavorable pricing modifications.

Obtaining and maintaining favorable reimbursement can be a time consuming and expensive process, and there is no guarantee that we or Allergan will be able to negotiate or continue to negotiate pricing terms with third-party payors at levels that are profitable to us, or at all.

Further, in order to obtain and maintain acceptable reimbursement levels and access for patients at copay levels that are reasonable and customary, we have faced and expect to continue to face increasing pressure to offer discounts or rebates from list prices or discounts to third-party payors or other unfavorable pricing modifications.

Obtaining and maintaining favorable reimbursement can be a time consuming and expensive process, and there is no guarantee that we or AbbVie will be able to negotiate or continue to negotiate pricing terms with third-party payors at levels that are profitable to us, or at all.

Certain third-party payors also require prior authorization for, or even refuse to provide, reimbursement for our products, and others may do so in the future.

19 unchanged sentences

Many third-party payors and governmental authorities also consider the price for which the same product is being sold in other countries to determine their own pricing and reimbursement strategy, so if linaclotide is priced low or gets limited reimbursement in a particular country, this could result in similarly low pricing and reimbursement in other countries.

ability to successfully commercialize linaclotide in such country would be impacted negatively.

If reimbursement for linaclotide is unavailable in any country in which reimbursement is sought, limited in scope or amount, or if pricing is set at or reduced to unsatisfactory levels, our and our partners’ ability to successfully commercialize linaclotide in such country would be impacted negatively.

Furthermore, if these measures prevent us or any of our partners from selling linaclotide on a profitable basis in a particular country, they could prevent the commercial launch or continued sale of linaclotide in that country.

CONSTELLA was first launched in certain European countries for the symptomatic treatment of moderate to severe IBS-C in adults in the second quarter of 2013 and our partner Allergan is currently commercializing CONSTELLA in a number of European countries, including the United Kingdom, Italy and Spain.

CONSTELLA was first launched in certain European countries for the symptomatic treatment of moderate to severe IBS-C in adults in the second quarter of 2013 and our partner AbbVie is currently commercializing CONSTELLA in a number of European countries, including the United Kingdom, Italy and Spain.

LINZESS was first launched in Japan for the treatment of IBS-C in adults in the first quarter of 2017, and for the treatment of chronic constipation in adults in the third quarter of 2018, and our partner Astellas is currently commercializing LINZESS in Japan.

In the first quarter of 2019, the Chinese National Medical Products Administration approved the marketing application for LINZESS for adults with IBS-C in China, and our partner, AstraZeneca, launched LINZESS in November 2019.

In addition, LINZESS was first launched in China for the treatment of IBS-C in adults in November 2019, and our partner AstraZeneca is currently commercializing LINZESS in China (including Hong Kong and Macau).

The pricing and reimbursement strategy is a key component of our partners’ commercialization plans for CONSTELLA in Europe and LINZESS in Japan and China.

7 unchanged sentences

Because we work with partners to develop, manufacture and commercialize linaclotide, we are dependent upon third parties, and our and our partners’ relationships with those third parties, in our and our partners’ efforts to obtain regulatory approval for, and to commercialize, linaclotide, as well as to comply with regulatory and other obligations with respect to linaclotide.

Allergan played a significant role in the conduct of the clinical trials for linaclotide and in the subsequent collection and analysis of data, and Allergan holds the new drug application, or NDA, for LINZESS.

In addition, we are commercializing LINZESS in the U.S.

with Allergan.

Allergan is also responsible for the development, regulatory approval and commercialization of linaclotide in countries worldwide other than Japan and China (including Hong Kong and Macau).

Allergan is commercializing LINZESS in Mexico and CONSTELLA in Canada, as well as commercializing CONSTELLA in certain countries in Europe.

AbbVie played a significant role in the conduct of the clinical trials for linaclotide and in the subsequent collection and analysis of data, and AbbVie holds the new drug application, or NDA, for LINZESS.

In addition, we are

commercializing LINZESS in the U.S.

AbbVie is also responsible for the development, regulatory approval and commercialization of linaclotide in countries worldwide other than Japan and China (including Hong Kong and Macau).

AbbVie is commercializing LINZESS in Mexico and CONSTELLA in Canada, as well as commercializing CONSTELLA in certain countries in Europe.

Astellas and AstraZeneca are responsible for development and commercialization of LINZESS in Japan and China (including Hong Kong and Macau), respectively.

7 unchanged sentences

If any of our partners fails to devote sufficient time and resources to linaclotide, or if its performance is substandard or otherwise hindered, it will delay the potential submission or approval of regulatory applications for linaclotide, as well as the manufacturing and commercialization of linaclotide in the particular territory.

A material breach by any of our partners of our collaboration or license agreement with such partner, or a significant

disagreement between us and a partner, could also delay the regulatory approval and commercialization of linaclotide, potentially lead to costly litigation, and could have a material adverse impact on our financial condition.

A material breach by any of our partners of our collaboration or license agreement with such partner, or a significant disagreement between us and a partner, could also delay the regulatory approval and commercialization of linaclotide, potentially lead to costly litigation, and could have a material adverse impact on our financial condition.

Moreover, although we have non-compete restrictions in place with each of our linaclotide partners, they may have competitive products or relationships with other commercial entities, some of which may compete with us.

1 unchanged sentence

In addition, adverse event reporting requires significant coordination with our partners and third parties.

We are the holder of the global safety database for linaclotide responsible for coordinating the safety surveillance and adverse event reporting efforts worldwide with respect to linaclotide, and each of Astellas, AstraZeneca and Allergan is responsible for reporting adverse event information from its territory to us.

We are the holder of the global safety database for linaclotide responsible for coordinating the safety surveillance and adverse event reporting efforts worldwide with respect to linaclotide, and each of Astellas, AstraZeneca and AbbVie is responsible for reporting adverse event information from its territory to us.

An AstraZeneca partner is the holder of the global safety database for lesinurad and is responsible for coordinating the safety surveillance and adverse event reporting efforts worldwide with respect to lesinurad.

8 unchanged sentences

FDA approved LINZESS as a once-daily treatment for adult men and women suffering from IBS-C or CIC.

Although we and Allergan completed additional nonclinical and clinical studies in adults that were required by the U.S.

Although we and AbbVie completed additional nonclinical and clinical studies in adults that were required by the U.S.

FDA in connection with the approval of LINZESS, LINZESS remains subject to ongoing U.S.

2 unchanged sentences

There is also a boxed warning advising physicians to avoid the use of LINZESS in pediatric patients six to less than 18 years of age.

This warning is based on data in young juvenile mice and the lack of clinical safety and efficacy data in pediatric patients of any age group.

We and Allergan have established a nonclinical and clinical post-marketing plan with the U.S.

warning is based on data in young juvenile mice and, at the time of approval, the lack of clinical safety and efficacy data in pediatric patients across age groups.

We and AbbVie have established a nonclinical and clinical post-marketing plan with the U.S.

FDA to understand the safety and efficacy of LINZESS in pediatric patients, and clinical pediatric programs in IBS-C and functional constipation currently are ongoing.

7 unchanged sentences

FDA and other regulatory authorities for compliance with GMP and other applicable regulations.

If we or a regulatory agency discovers previously unknown problems with a product, such as adverse events of unanticipated severity or frequency, or problems with a facility where the product is manufactured, a regulatory agency may impose restrictions on that product or the manufacturer, including withdrawal of the product from the market or suspension of

manufacturing.

If we, our partners or the manufacturing facilities for our products fail to comply with applicable regulatory requirements, a regulatory agency may take the following actions, among others:

24 unchanged sentences

The use of our product candidates in clinical trials and the sale of our approved products, including the sale of linaclotide and lesinurad, expose us to product liability claims.

If we do not successfully defend ourselves against

product liability claims, we could incur substantial liabilities.

If we do not successfully defend ourselves against product liability claims, we could incur substantial liabilities.

In addition, regardless of merit or eventual outcome, product liability claims may result in:

16 unchanged sentences

We compete in the marketing and sale of our products, the development of new products and the acquisition of rights to new products with commercial potential.

Certain of our competitors have substantially greater financial, technical and human resources than us.

Certain of our competitors have substantially greater financial, technical and human resources

Mergers and acquisitions in the pharmaceutical industry may result in even more resources being concentrated in our competitors and enable them to compete more effectively.

11 unchanged sentences

FDA for sale in the U.S.

for the treatment of CIC in adults, and US WorldMeds, LLC’s ZELNORM (tegaserod) is approved for sale in the U.S.

for treatment of IBS-C in

women under the age of 65.

for the treatment of CIC in adults, and Alfasigma USA’s ZELNORM (tegaserod) is approved for sale in the U.S.

for treatment of IBS-C in women under the age of 65.

Over-the-counter laxatives such as MiraLAX® and DULCOLAX®, and lactulose, a prescription laxative treatment, are also available for the treatment of constipation.

2 unchanged sentences

For example, although not currently commercially available, the U.S.

FDA approved Ardelyx, Inc.’s ISBRELA™ (tenapanor) for the treatment of IBS-C in adults.

FDA approved Ardelyx, Inc.’s IBSRELA™ (tenapanor) for the treatment of IBS-C in adults.

In addition, there are other compounds in late stage development and other potential competitors that are in earlier stages of development for the treatment of the indications for which our products are approved.

26 unchanged sentences

● federal laws, including the Medicaid Drug Rebate Program, that require pharmaceutical manufacturers to report certain calculated product prices to the government or provide certain discounts or rebates to government authorities or private entities, often as a condition of reimbursement under government healthcare programs;

● the so-called “federal sunshine” law, which requires pharmaceutical and medical device companies to monitor and report certain financial interactions with physicians and teaching hospitals (and additional categories of health care practitioners beginning with reports submitted in 2022) to the federal government for re-disclosure to the public;

● the so-called “federal sunshine” law, which requires pharmaceutical and medical device companies to monitor and report certain financial interactions with physicians and teaching hospitals (and additional categories of healthcare practitioners beginning with reports submitted in 2022) to the federal government for re-disclosure to the public;

● state law equivalents of the above federal laws, such as anti-kickback and false claims laws which may apply to items or services reimbursed by any third-party payor, including commercial insurers, state transparency laws, state laws limiting interactions between pharmaceutical manufacturers and members of the healthcare industry, and state laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and often are not preempted by federal laws, thus complicating compliance efforts.

5 unchanged sentences

For example, the processing of personal data in the European Economic Area, or the EEA, is subject to the General Data Protection Regulation, or the GDPR, which took effect in May 2018.

The GDPR increases obligations with respect to clinical trials conducted in the EEA, such as in relation to the provision of fair processing notices, exercising data subject rights and reporting certain data breaches to regulators and affected individuals, as well as how we document our relationships with third parties that process GDPR-covered personal data on our behalf.

individuals, as well as how we document our relationships with third parties that process GDPR-covered personal data on our behalf.

The GDPR also increases the scrutiny applied to transfers of personal data from the EEA (including from clinical trial sites in the EEA) to countries that are considered by the European Commission to lack an adequate level of data protection, such as the United States.

7 unchanged sentences

Any penalties, damages, fines, curtailment or restructuring of our operations could adversely affect our ability to operate our business and our financial results.

eliminated, particularly because the requirements and government interpretations of the requirements in this space are constantly evolving.

Although compliance programs can mitigate the risk of investigation and prosecution for violations of these laws, rules or regulations, we cannot be certain that our program will address all areas of potential exposure and the risks in this area cannot be entirely eliminated, particularly because the requirements and government interpretations of the requirements in this space are constantly evolving.

Any action against us for violation of these laws, rules or regulations, even if we successfully defend against it, could cause us to incur significant legal expenses and divert our management’s attention from the operation of our business, as well as damage our business or reputation.

9 unchanged sentences

Such efforts may lead to fewer Americans having more comprehensive health insurance compliant with the ACA, even in the absence of a legislative repeal.

For example, tax reform legislation was enacted at the end of 2017 that includes provisions to eliminate the tax penalty for individuals who do not maintain sufficient health insurance coverage beginning in 2019.

For example, tax reform legislation was enacted at the end of 2017 that eliminated the tax penalty for individuals who do not maintain sufficient health insurance coverage beginning in 2019.

The ACA has also been subject to judicial challenge.

1 unchanged sentence

In December 2019, a federal appeals court agreed that the individual mandate provision was unconstitutional, but remanded the case back to the district court to assess whether any provisions of the ACA were severable and could survive.

Pending appeals, which could take some time, the ACA is still operational in all respects.

In March 2020, the Supreme Court agreed to hear the case.

Pending resolution of the litigation, which could take some time, the ACA is still operational in all respects.

Additional healthcare reform efforts have sought to address certain issues related to the COVID-19 pandemic, including an expansion of telehealth coverage under Medicare and accelerated or advanced Medicare payments to healthcare providers.

Adoption of new healthcare reform legislation at the federal or state level could affect demand for, or pricing of, our products or product candidates if approved for sale.

7 unchanged sentences

FDA enhanced post-marketing authority, including the authority to require post-marketing studies and clinical trials, labeling changes based on new safety information, and compliance with risk evaluation and mitigation strategies approved by the U.S.

We and Allergan have established a nonclinical and clinical post-marketing plan with the U.S.

We and AbbVie have established a nonclinical and clinical post-marketing plan with the U.S.

FDA to understand the safety and efficacy of LINZESS in pediatrics.

12 unchanged sentences

As part of our growth strategy, we intend to explore further linaclotide development opportunities.

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

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

These development efforts may fail or may not increase the revenues that we generate from LINZESS.

1 unchanged sentence

FDA or in other countries or harm linaclotide’s reputation in the marketplace, each of which could materially harm our revenues from linaclotide.

We are also pursuing various other programs in our pipeline, including MD-7246, a delayed release form of linaclotide that is being developed as an oral, intestinal, non-opioid, pain relieving agent for patients suffering from abdominal pain associated with certain gastrointestinal diseases, the potential treatment of irritable bowel syndrome with diarrhea, and IW-3718, a gastric retentive formulation of a bile acid sequestrant for the potential treatment of refractory GERD, and the strength of our company’s pipeline will depend in large part on the outcomes of these studies.

We are advancing our pipeline, including developing IW-3718, a gastric retentive formulation of a bile acid sequestrant for the potential treatment of refractory GERD, and the strength of our company’s pipeline will depend in large part on the outcomes of studies of assets in our pipeline.

We may spend several years and make significant investments in developing any current or future internal product candidate, and failure may occur at any point.

3 unchanged sentences

It is possible that none of the product candidates we are developing will be approved for commercial sale, which would impair our ability to grow.

We have ongoing or planned nonclinical and clinical trials for linaclotide and our product candidates, including MD-7246 and IW-3718.

We have ongoing or planned nonclinical and clinical trials, including for linaclotide and IW-3718.

Many companies in the pharmaceutical industry have suffered significant setbacks in clinical trials even after achieving promising results in earlier nonclinical or clinical trials.

For example, in May 2020, we and AbbVie announced that our Phase II trial evaluating MD-7246, a delayed release formulation of linaclotide in adult patients with abdominal pain associated with irritable bowel syndrome with diarrhea, did not meet its primary or key secondary endpoints.

Based on these findings, we and AbbVie are discontinuing the development of MD-7246.

The findings from our completed nonclinical studies may not be replicated in later clinical trials, and our clinical trials may not be predictive of the results we may obtain in later-stage clinical trials or of the likelihood of regulatory approval.

2 unchanged sentences

FDA and other applicable regulatory authorities, which could delay, limit or prevent regulatory approval.

FDA or other regulatory authorities also may require additional clinical trials, which may be costly or delay, limit, prevent or otherwise impact regulatory submission or approval.

Satisfaction of U.S.

32 unchanged sentences

● maintaining patients who have initiated a clinical trial but may be prone to withdraw due to side effects from the therapy, lack of efficacy or personal issues, or who are lost to further follow-up.

Specifically, the COVID-19 pandemic has impacted and is expected to continue to impact enrollment of new patients into the Phase III clinical trials with IW-3718 for the treatment of refractory GERD.

As of the date of this Form 10-Q, most of the clinical trial sites have suspended screening new patients.

Patients who are already enrolled in the trials also may discontinue participation due to the various impacts of the COVID-19 pandemic on the healthcare system and daily life.

Enrollment impacts to our Phase III clinical trials with IW-3718 have delayed the date by which we expect to receive top-line data for these trials;

In line with new U.S.

FDA guidance on statistical considerations for trials impacted by COVID-19, we have stopped enrollment of study subjects into one of our two Phase III clinical trials for IW-3718 to conduct an early efficacy assessment.

Many clinical sites have now resumed screening new patients in our ongoing clinical trial for IW-3718;

however, enrollment continues to be slower than prior to the COVID-19 pandemic.

Enrollment impacts to our Phase III clinical trials with IW-3718 delayed the date by which we previously expected to receive top-line data for these trials;

we may experience further delays (including delays in the early efficacy assessment or receipt of top-line data from our ongoing clinical trial for IW-3718), which may continue for an extended period of time, or other impacts to the trials, and we expect to incur increased aggregate expenses relating to the trials, each due to the COVID-19 pandemic.

Clinical trials may also be delayed or discontinued as a result of ambiguous or negative interim results.

In addition, a clinical trial may be suspended or terminated by us, an institutional review board overseeing the clinical trial at a clinical trial site (with respect to that site), the U.S.

In addition, a clinical trial may be suspended or terminated by us, an institutional review board overseeing the clinical trial

at a clinical trial site (with respect to that site), the U.S.

FDA, or other regulatory authorities due to a number of factors, including:

4 unchanged sentences

● lack of adequate enrollment or funding to continue the clinical trial.

Additionally, changes in regulatory requirements and guidance may occur, and we may need to amend clinical trial protocols to reflect these changes.

Additionally, changes in regulatory requirements and guidance may occur, and we may need or otherwise determine to amend clinical trial protocols to reflect these changes.

Each protocol amendment would require institutional review board review and approval, which may adversely impact the costs, timing or successful completion of the associated clinical trials.

5 unchanged sentences

These agreements govern the separation and distribution and the relationship between us and Cyclerion going forward, including with respect to potential tax-related losses associated with the separation and distribution.

They also provide for the performance of services by each company for the benefit of the other for a period of time.

In addition, the development agreement provides for the performance of services by Cyclerion for our benefit for a period of time.

If Cyclerion is unable to satisfy its obligations under these agreements, we could incur losses or operational challenges or difficulties and may not have sufficient resources available for such services.

16 unchanged sentences

federal income tax purposes under Sections 355 and 368(a)(1)(D) of the Internal Revenue Code.

The private letter ruling and opinion were based on and relied on, among other things, certain facts and assumptions, as well as certain representations, statements and undertakings from us and Cyclerion (including those relating to the past and future conduct of us and Cyclerion).

The private letter ruling and opinion were based on and relied on, among other things, certain facts and assumptions, as well as certain representations, statements and undertakings from us and

Cyclerion (including those relating to the past and future conduct of us and Cyclerion).

If any of these facts, assumptions, representations, statements or undertakings is, or becomes, inaccurate or incomplete, or if we or Cyclerion breach any of our respective covenants relating to the distribution, the IRS private letter ruling and any tax opinion may be invalid.

12 unchanged sentences

We may not be able to attract or motivate qualified management and scientific, clinical, operations and commercial personnel due to the intense competition for qualified personnel among biotechnology, pharmaceutical and other businesses, particularly in the greater-Boston area.

If we are not able to attract and motivate necessary personnel to

accomplish our business objectives, we will experience constraints that will significantly impede the achievement of our objectives.

If we are not able to attract and motivate necessary personnel to accomplish our business objectives, we will experience constraints that will significantly impede the achievement of our objectives.

We are highly dependent on the drug research, development, regulatory, commercial, financial and other expertise of our management, particularly Mark Mallon, our chief executive officer;

9 unchanged sentences

Security breaches and other disruptions to our information technology structure could compromise our information, disrupt our business and expose us to liability, which would cause our business and reputation to suffer.

In the ordinary course of our business, we collect, process and store sensitive data, including intellectual property, our proprietary business information and that of our suppliers and business partners, as well as personally identifiable information of our patients, clinical trial participants and employees.

identifiable information of our patients, clinical trial participants and employees.

We also rely to a large extent on information technology systems to operate our business, including to deliver our products.

2 unchanged sentences

The secure maintenance of this information is critical to our operations and business strategy.

Despite our security measures, our large and complex information technology and infrastructure (and those of our partners, vendors and third-party providers) may be vulnerable to attacks by hackers or breached due to employee error, malfeasance or other disruptions.

We, our partners, vendors and other third-party providers could be susceptible to third party attacks on our, and their, information security systems, which attacks are of ever-increasing levels of sophistication and are made by groups and individuals with a wide range of motives and expertise, including organized criminal groups, hacktivists, nation states and others.

1 unchanged sentence

Further, while some or all of our workforce, and those of our partners, vendors and other third-party providers, work remotely as a result of the COVID-19 pandemic or otherwise, we may have greater vulnerability to cyberattacks or other losses of confidential information, as well as interruptions in information technology systems.

Any such interruptions, losses or breaches would substantially impair our ability to operate our business and would compromise our, or our partners, vendors and other third-party providers, networks.

and the information stored there could be accessed, publicly disclosed, lost or stolen.

Any such interruptions, losses or breaches would substantially impair our ability to operate our business and would compromise our, or our partners, vendors and other third-party providers, networks and the information stored there could be accessed, publicly disclosed, lost or stolen.

Any such access, disclosure or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, disrupt our operations, and damage our reputation, any of which could adversely affect our business.

While we maintain cyber liability insurance, this insurance may not be sufficient to cover the losses that may result from an interruption or breach of our (or our partners’, vendors’ and third-party providers’) systems.

While we maintain cyber liability insurance, this insurance may not be sufficient to cover the financial or other losses that may result from an interruption or breach of our (or our partners’, vendors’ and third-party providers’) systems.

Our business could be negatively affected as a result of a proxy contest or certain other stockholder actions.

11 unchanged sentences

We have several issued patents in the U.S.

related to LINZESS (linaclotide), including a LINZESS composition of matter and methods of use patent (U.S.

related to LINZESS, including a LINZESS composition of matter and methods of use patent (U.S.

Patent 7,304,036) expiring in 2026.

Additional U.S.

patents related to LINZESS include multiple patents relating to our commercial, room temperature stable formulations of the 145 mcg and 290 mcg doses of linaclotide and methods of using these formulations, the latest of which expires in the early 2030s, as well as other patents covering processes for making LINZESS, formulations thereof, and molecules related to LINZESS.

patents related to LINZESS include multiple patents relating to our commercial, room temperature stable formulations of the 72 mcg, 145 mcg and 290 mcg doses of linaclotide and methods of using these formulations, the latest of which expires in the early 2030s, as well as other patents covering processes for making LINZESS, formulations thereof, and molecules related to LINZESS.

Although none of these issued patents currently is subject to a patent reexamination or review, we cannot guarantee that they will not be subject to reexamination or review by the U.S.

1 unchanged sentence

In addition, we have several pending patent applications in the U.S.

For example, we are pursuing patent applications that cover the commercial formulation of the 72 mcg dose of LINZESS.

We believe in the strength of our LINZESS patent portfolio and that we have sufficient freedom to operate;

however, if any of our present or future patents is invalidated, or our pending patent applications are not granted, our ability to prevent third parties from competing with LINZESS could be limited and our business and financial results may be materially harmed.

however, if any of our present or future patents is

challenged, narrowed, invalidated or circumvented, or our pending patent applications are not granted, our ability to prevent third parties from competing with LINZESS could be limited and our business and financial results may be materially harmed.

Furthermore, the America Invents Act, which was signed into law in 2011, has made several major changes in the U.S.

38 unchanged sentences

FDA regulations.

When filing an ANDA for one of our products, a generic drug manufacturer may choose to challenge one or more of the patents that cover such product and seek to

commercialize generic versions of one or more LINZESS doses.

When filing an ANDA for one of our products, a generic drug manufacturer may choose to challenge one or more of the patents that cover such product and seek to commercialize generic versions of one or more LINZESS doses.

As such, we have brought, and may bring in the future, legal proceedings against generic drug manufacturers.

We and Allergan have received Paragraph IV certification notice letters, or Notice Letters, regarding ANDAs submitted to the U.S.

We and AbbVie have received Paragraph IV certification notice letters regarding ANDAs submitted to the U.S.

FDA by generic drug manufacturers requesting approval to engage in commercial manufacture, use, sale and offer for sale of linaclotide capsules (72 mcg, 145 mcg and 290 mcg), proposed generic versions of our U.S.

FDA-approved drug LINZESS.

For additional information relating to such ANDAs, see Item 1, Legal Proceedings , elsewhere in this Quarterly Report on Form 10-Q .

In the past, we have filed patent infringement lawsuits against five companies making such ANDA filings, and we have entered into settlement agreements dismissing the lawsuits with each company that has made ANDA filings.

Frequently, innovators receive multiple ANDA filings.

4 unchanged sentences

FDA is not permitted to approve any ANDA that is the subject of such lawsuit for 30 months from the date of the NDA holder’s and patent owner’s receipt of the ANDA filer’s notice letter, or until a court decides that the relevant patents are invalid, unenforceable and/or not infringed.

For additional information relating to such lawsuits and settlements, see Item 1, Legal Proceedings , elsewhere in this Quarterly Report on Form 10-Q .

Additionally, the validity of the patents relating to our products and our product candidates may be challenged by third parties pursuant to administrative procedures introduced by the America Invents Act, specifically inter partes review, or IPR, and/or post grant review, or PGR, before the USPTO.

2 unchanged sentences

We can provide no assurance concerning the duration or the outcome of any such patent-related lawsuits or administrative proceedings, including any settlements or other resolutions thereof which could, in addition to other risks, result in a shortening of exclusivity periods.

An adverse result in any litigation or defense proceedings could put one or more of the patents relating to our products and our product candidates at risk of being invalidated or interpreted narrowly, or could otherwise result in a loss of patent protection for the product or product candidate at issue, and could put our patent applications at risk of not issuing, which would materially harm our business.

product candidate at issue, and could put our patent applications at risk of not issuing, which would materially harm our business.

Upon any loss of patent protection for one of our products, or upon an “at-risk” launch (despite pending patent infringement litigation, before any court decision or while an appeal of a lower court decision is pending) by a manufacturer of a generic version of one of our patented products, our revenues for that product could be significantly reduced in a short period of time, which would materially and adversely affect our business.

9 unchanged sentences

We have financed our business to date primarily through the issuance of equity, our collaboration and license arrangements, and debt issuances, including our June 2015 issuance of our 2.25% Convertible Senior Notes due June 15, 2022, or the 2022 Convertible Notes, and our August 2019 issuance of our 0.75% Convertible Senior Notes due 2024, or the 2024 Convertible Notes, and our 1.50% Convertible Senior Notes due 2026, or the 2026 Convertible Notes (together with the 2022 Convertible Notes and the 2024 Convertible Notes, the Convertible Senior Notes).

We currently derive a significant portion of our revenue from our LINZESS collaboration with Allergan for the U.S.

We currently derive a significant portion of our revenue from our LINZESS collaboration with AbbVie for the U.S.

We believe that the revenues from the LINZESS collaboration will continue to constitute a significant portion of our total revenue for the foreseeable future.

3 unchanged sentences

Additionally, our sale of API outside of the U.S.

has fluctuated in the past and will significantly decrease in 2020.

has fluctuated in the past and has and will significantly decrease in 2020.

Under the terms of our amended and restated agreements with both Astellas and AstraZeneca, entered into in August 2019 and September 2019, respectively, we will no longer be responsible for the supply of linaclotide API to Astellas or AstraZeneca beginning in 2020.

Prior to the year ended December 31, 2019, we incurred net losses in each year since our inception in 1998.

As of March 31, 2020, we had an accumulated deficit of approximately $1.6 billion.

As of June 30, 2020, we had an accumulated deficit of approximately $1.5 billion.

We cannot be certain that sales of our products, and the revenue from our other commercial activities will not fall short of our projections or be delayed, particularly in light of the negative financial impact that the COVID-19 pandemic may have on our business in the future.

4 unchanged sentences

We have previously raised funds to finance our operations through capital raising activities, including the sale of shares of our Class A Common Stock in public offerings and convertible and other debt issuances.

However, marketing and selling primary care drugs, purchasing commercial quantities of pharmaceutical products, developing product candidates, conducting clinical trials and accessing externally developed products are expensive and uncertain.

marketing and selling primary care drugs, purchasing commercial quantities of pharmaceutical products, developing product candidates, conducting clinical trials and accessing externally developed products are expensive and uncertain.

Circumstances, our strategic imperatives, or opportunities to create or acquire new programs, as well as maturities, redemptions or repurchases of our outstanding debt securities, could require us to, or we may choose to, seek to raise additional funds.

4 unchanged sentences

● the regulatory approval of linaclotide within new indications, populations and formulations, as well as the associated development and commercial milestones and royalties;

● the rate of progress, the cost of our clinical trials and the other costs associated with our linaclotide product development programs, including our post-approval nonclinical and clinical studies of linaclotide in

pediatrics and our investment to enhance the clinical profile of LINZESS within IBS-C and CIC, as well as to study linaclotide in additional indications, populations and formulations to assess its potential to treat various conditions;

● the rate of progress, the cost of our clinical trials and the other costs associated with our development programs, including our post-approval nonclinical and clinical studies of linaclotide in pediatrics and our investment to enhance the clinical profile of LINZESS within IBS-C and CIC, as well as to study linaclotide in additional indications, populations and formulations to assess its potential to treat various conditions;

● the costs and timing of in-licensing additional products or product candidates or acquiring other complementary companies or assets;

6 unchanged sentences

If adequate funds are not available, we may be required to delay or reduce the scope of our commercialization efforts, delay, reduce or eliminate one or more of our development programs or delay or abandon potential strategic opportunities.

Our ability to pay principal of and interest on our outstanding debt securities will depend in part on the receipt of payments from Allergan under our collaboration agreement for North America.

Our ability to pay principal of and interest on our outstanding debt securities will depend in part on the receipt of payments from AbbVie under our collaboration agreement for North America.

In June 2015, we issued approximately $335.7 million aggregate principal amount of our 2022 Convertible Notes bearing an annual interest rate of 2.25%.

1 unchanged sentence

Semi-annual payments on our 2022 Convertible Notes began on December 15, 2015 and semi-annual payments on each of our 2024 Convertible Notes and 2026 Convertible Notes began on December 15, 2019.

We expect that for the next few years, at a minimum, the net quarterly payments from Allergan will be a significant source of cash flows from operations.

If the cash flows derived from the net quarterly payments that we receive from Allergan under the collaboration agreement for North America are insufficient on any particular payment date to fund the interest payment on our outstanding indebtedness, at a minimum, we will be obligated to pay the amounts of such shortfall out of our general funds.

The determination of whether Allergan will be obligated to make a net quarterly payment to us in respect of a particular quarterly period is a function of the revenue generated by LINZESS in the U.S.

as well as the development, manufacturing and commercialization expenses incurred by each of us and Allergan under the collaboration agreement for North America.

Accordingly, since we cannot guarantee that our company will maintain net income or positive cash flows, we cannot provide assurances that (i) we will have the available funds to fund the interest payment on our outstanding indebtedness, at a minimum, in the event that there is a deficiency in the net quarterly payment received from Allergan, (ii) there will be a net quarterly payment from Allergan at all or (iii) we will not also be required to make a true-up payment to Allergan under the collaboration agreement for North America, in each case, in respect of a particular quarterly period.

We expect that for the next few years, at a minimum, the net quarterly payments from AbbVie will be a significant source of cash flows from operations.

If the cash flows derived from the net quarterly payments that we receive from AbbVie under the collaboration agreement for North

America are insufficient on any particular payment date to fund the interest payment on our outstanding indebtedness, at a minimum, we will be obligated to pay the amounts of such shortfall out of our general funds.

The determination of whether AbbVie will be obligated to make a net quarterly payment to us in respect of a particular quarterly period is a function of the revenue generated by LINZESS in the U.S.

as well as the development, manufacturing and commercialization expenses incurred by each of us and AbbVie under the collaboration agreement for North America.

Accordingly, since we cannot guarantee that our company will maintain net income or positive cash flows, we cannot provide assurances that (i) we will have the available funds to fund the interest payment on our outstanding indebtedness, at a minimum, in the event that there is a deficiency in the net quarterly payment received from AbbVie, (ii) there will be a net quarterly payment from AbbVie at all or (iii) we will not also be required to make a true-up payment to AbbVie under the collaboration agreement for North America, in each case, in respect of a particular quarterly period.

Our indebtedness could adversely affect our financial condition or restrict our future operations.

As of March 31, 2020, we had total indebtedness of approximately $520.7 million and available cash and cash equivalents of approximately $231.1 million.

As of June 30, 2020, we had total indebtedness of approximately $520.7 million and available cash and cash equivalents of approximately $253.3 million.

Our indebtedness, combined with our other financial obligations and contractual commitments, could have important consequences on our business, including:

15 unchanged sentences

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

The Convertible Note Hedges and Note Hedge Warrants were partially terminated in

connection with the repurchase of $215.0 million aggregate principal amount of the 2022 Convertible Notes in August 2019.

The Convertible Note Hedges and Note Hedge Warrants were partially terminated in connection with the repurchase of $215.0 million aggregate principal amount of the 2022 Convertible Notes in August 2019.

Additionally, in connection with the issuance of our 2024 Convertible Notes and our 2026 Convertible Notes, we entered into capped call transactions, or the Capped Calls, with certain financial institutions.

42 unchanged sentences

● Stockholders must provide advance notice to nominate individuals for election to the board of directors or to propose matters that can be acted upon at a stockholders’ meeting.

Furthermore, as described above, until our board of directors is declassified, stockholders may only remove a member of our board of

directors for cause.

Furthermore, as described above, until our board of directors is declassified, stockholders may only remove a member of our board of directors for cause.

These provisions may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect such acquirer’s own slate of directors or otherwise attempting to obtain control of our company.

16 unchanged sentences

Our net profit or net loss generated from the sales of LINZESS in the U.S.

is partially determined based on amounts provided by Allergan and involves the use of estimates and judgments, which could be modified in the future.

We are highly dependent on our linaclotide partners for timely and accurate information regarding any revenues realized from sales of linaclotide in their respective territories, and in the case of Allergan for the U.S., the costs incurred in developing and commercializing it in order to accurately report our results of operations.

Our results of operations are also dependent on the timeliness and accuracy of information from any other licensing, collaboration or other partners we may have, as well as our and our partners’ use of estimates and judgments.

is partially determined based on amounts provided by AbbVie and involves the use of estimates and judgments, which could be modified in the future.

We are highly dependent on our linaclotide partners for timely and accurate information regarding any revenues realized from sales of linaclotide in their respective territories, and in the case of AbbVie for the U.S., the costs incurred in developing and commercializing it in order to accurately report our results of operations.

Our results of operations are also dependent on the timeliness and accuracy of information from any other licensing, collaboration or other partners we may have, as well as our and our

partners’ use of estimates and judgments.

If we do not receive timely and accurate information or if estimated activity levels associated with the relevant collaboration or partnership at a given point in time are incorrect, whether the result of a material weakness or not, we could be required to record adjustments in future periods.

9 unchanged sentences

● announcements of the introduction of new products by us or our competitors;

● announcements concerning product development results, including clinical trial results, or intellectual property rights of us or others;

● announcements concerning product development, including clinical trial results or timelines, or intellectual property rights of us or others;

● actual and anticipated fluctuations in our quarterly and annual operating results;

19 unchanged sentences

Incorporated by reference to Exhibit 3.2 of Ironwood Pharmaceuticals, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2009, filed with the SEC on March 30, 2010 .

Amended and Restated 2010 Employee Stock Purchase Plan.

Incorporated by reference to Exhibit 10.4 of Ironwood Pharmaceuticals, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on February 13, 2020 .

Form of Performance-Based Restricted Stock Unit Award Agreement under the 2019 Equity Incentive Plan .

Amended and Restated Executive Severance Agreement, February 26, 2019, between Ironwood Pharmaceuticals, Inc.

and Halley Gilbert.

Separation Agreement, dated as revised February 18, 2020, between Ironwood Pharmaceuticals, Inc.

and Halley Gilbert .

Services Agreement, February 29, 2020, between Ironwood Pharmaceuticals, Inc.

and Halley Gilbert .

Certification of Chief Executive Officer pursuant to Rules 13a-14 or 15d-14 of the Exchange Act .

13 unchanged sentences

‡ Furnished herewith.

Management contract or compensatory plan, contract, or arrangement.

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Ironwood Pharmaceuticals, Inc.

August 6, 2020

/s/ MARK MALLON

1 unchanged sentence

(Principal Executive Officer)

August 6, 2020

/s/ KELLY MACDONALD

3 unchanged sentences

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

What changed 10-Q

Item 1A. Risk Factors