What changed in this filing

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Item 1. Business

2021-02-17 compared with 2020-02-13 · 172 added, 193 removed, 307 unchanged (54% of the section changed)

We are a gastrointestinal, or GI, healthcare company dedicated to advancing the treatment of GI diseases and redefining the standard of care for millions of GI patients.

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

We are a gastrointestinal, or GI, healthcare company dedicated to advancing the treatment of GI diseases and redefining the standard of care for GI patients.

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

LINZESS ® (linaclotide), our commercial product, is the first product approved by the United States Food and Drug Administration, or U.S.

FDA, in a class of GI medicines called guanylate cyclase type C, or GC-C, agonists, and is indicated for adult men and women suffering from irritable bowel syndrome with constipation, or IBS-C, or chronic idiopathic constipation, or CIC.

FDA, in a class of GI medicines called guanylate cyclase type C agonists and is indicated for adult men and women suffering from irritable bowel syndrome with constipation, or IBS-C, or chronic idiopathic constipation, or CIC.

LINZESS is available to adult men and women suffering from IBS-C or CIC in the United States, or the U.S., and Mexico and to adult men and women suffering from IBS-C in Japan and China.

Linaclotide is available under the trademarked name CONSTELLA ® to adult men and women suffering from IBS-C or CIC in Canada, and to adult men and women suffering from IBS-C in certain European countries.

We have strategic partnerships with leading pharmaceutical companies to support the development and commercialization of linaclotide throughout the world, including with Allergan plc (together with its affiliates), or Allergan, in the U.S., AstraZeneca AB (together with its affiliates), or AstraZeneca, in China (including Hong Kong and Macau), and Astellas Pharma Inc., or Astellas, in Japan.

We and Allergan are also advancing MD-7246, a delayed release formulation of linaclotide, as an oral, intestinal, non-opioid, pain-relieving agent for patients with abdominal pain associated with certain GI diseases.

MD-7246 is designed to have the pain-relieving effect of linaclotide with minimal impact on bowel function.

In May 2019, we and Allergan announced the initiation of a Phase II clinical trial evaluating the safety and efficacy of MD-7246 in adult patients with abdominal pain associated with IBS with diarrhea, or IBS-D.

We are advancing another GI development program, IW-3718, a gastric retentive formulation of a bile acid sequestrant for the potential treatment of refractory gastroesophageal reflux disease, or refractory GERD.

In June 2018, we initiated two Phase III clinical trials evaluating the safety and efficacy of IW-3718 in patients with refractory GERD.

We are also leveraging our leading capabilities in GI to bring additional treatment options to GI patients.

This includes our U.S.

disease education and promotional agreement with Alnylam Pharmaceuticals, Inc., or Alnylam, for Alnylam’s GIVLAARI™ (givosiran), an RNAi therapeutic targeting aminolevulinic acid synthase 1, for the treatment of acute hepatic porphyria, or AHP.

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

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

and all countries worldwide other than China (including Hong Kong and Macau) and Japan, AstraZeneca AB (together with its affiliates, or AstraZeneca) in China (including Hong Kong and Macau), and Astellas Pharma Inc., or Astellas, in Japan.

We also aim to leverage our leading capabilities in GI to bring additional treatment options to GI patients;

for example, we have a U.S.

disease education and promotional agreement with Alnylam Pharmaceuticals, Inc., or Alnylam, for Alnylam’s GIVLAARI® (givosiran) for the treatment of acute hepatic porphyria, or AHP.

On April 1, 2019, we completed a tax-free spin-off of our soluble guanylate cyclase, or sGC, business into a separate publicly traded company, Cyclerion Therapeutics, Inc., or Cyclerion.

In completing the separation of our sGC business into Cyclerion, or the Separation, we advanced our strategy to drive growth as a GI-focused healthcare company, building on our commercial success with LINZESS and advancing our GI development capabilities.

In 2021, we refreshed our GI-focused strategy following our decision to discontinue our IW-3718 and MD-7246 development programs and now are focused on three core priorities:

maximize LINZESS, build our innovative GI pipeline and deliver sustained profits and generate cash flow.

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

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

Recent Corporate Highlights:

On April 1, 2019, we completed a tax-free spin-off of our soluble guanylate cyclase, or sGC, business into a separate publicly traded company, Cyclerion Therapeutics, Inc., or Cyclerion.

Our strategy is focused on three core priorities:

drive LINZESS growth, advance our GI development portfolio and strengthen our financial profile.

Performance Against 2020 Core Priorities

Drive LINZESS Growth

● Grew our share of collaborative arrangements revenue related to sales of LINZESS in the U.S.

to $325.4 million for the year ended December 31, 2019.

● Reported positive topline data from the Phase IIIb clinical trial evaluating LINZESS 290 mcg on overall abdominal symptoms (bloating, pain and discomfort) in adult patients with IBS-C.

We and Allergan began communicating these additional benefits of LINZESS to healthcare practitioners in July 2019 and submitted a Supplemental New Drug Application, or sNDA, with the U.S.

FDA in November 2019 to seek a more comprehensive description of the effects of LINZESS on its approved label.

● Entered into settlements resolving LINZESS patent litigation with Sandoz Inc., or Sandoz, and Teva Pharmaceuticals, USA, or Teva, brought in response to Sandoz’s and Teva’s abbreviated new drug applications, or ANDAs, seeking approval to market generic versions of LINZESS prior to the expiration of our and Allergan’s applicable patents.

For additional information relating to the resolution of such litigation, see Item 3, Legal Proceedings , elsewhere in this Annual Report on Form 10-K.

Advance GI Development Portfolio

● Continued enrollment in our two pivotal Phase III clinical trials of IW-3718 for the potential treatment of refractory GERD.

● Initiated a Phase II clinical trial with Allergan to evaluate the safety and efficacy of MD-7246 in adult patients with abdominal pain associated with IBS-D.

The trial completed enrollment in December 2019.

● Expanded our GI development organization through key roles including Chief Medical Officer, Head of Regulatory and Head of Biostatistics.

Strengthen Financial Profile

● Issued $200.0 million in 0.75% Convertible Senior Notes due 2024 and $200.0 million in 1.50% Convertible Senior Notes due 2026.

The proceeds of these issuances were used to pay approximately $25.2 million in connection with associated capped call transactions, repurchase $215.0 million aggregate principal amount of our outstanding 2.25% Convertible Senior Notes due 2022 and redeem all of our outstanding 8.375% Notes due 2026.

● Amended and restated our ex-U.S.

linaclotide partnerships with Astellas for Japan and AstraZeneca for China (including Hong Kong and Macau).

As a result, we recognized $10.0 million in revenue from Astellas related to upfront payments and approximately $32.4 million in revenue from AstraZeneca related to non-contingent payments in 2019.

● Announced a new U.S.

GI disease education and promotional agreement for Alnylam’s GIVLAARI.

● Relocated our headquarters to a new office in downtown Boston, Massachusetts occupying approximately 39,000 square feet at 100 Summer Street, from our previous location in Cambridge, Massachusetts.

Monthly base rent payments were contractually reduced in connection with the execution of the 100 Summer Street lease.

The following table presents the status of selected key development programs in our pipeline:

The status of our development programs in the table above represents the ongoing phase of development and does not correspond to the completion of a particular phase.

Drug development involves a high degree of risk and investment, and the status, timing and scope of our development programs are subject to change.

Important factors that could adversely affect our drug development efforts are discussed in the “Risk Factors” section of this Annual Report on Form 10-K.

● We recognized approximately $368.6 million in collaborative arrangements revenue related to sales of LINZESS in the U.S.

during the year ended December 31, 2020, a 13% increase compared to the year ended December 31, 2019.

This increase was primarily driven by an increase in LINZESS prescription demand in the U.S.

in 2020 compared to 2019.

FDA approved a supplemental New Drug Application, or NDA, for LINZESS, resulting in updated U.S.

prescribing information with data demonstrating that linaclotide improved the overall abdominal symptoms of bloating, discomfort, and pain in adult patients with IBS-C compared to placebo.

● We and AbbVie entered into settlement agreements with the two remaining generic drug manufacturers resolving all pending patent infringement litigation brought in response to abbreviated New Drug

Applications seeking approval to market generic versions of LINZESS prior to the expiration of our and AbbVie’s applicable patents.

● The United States Patent and Trademark Office granted patents covering the formulation of the 72 mcg dose of LINZESS and methods of using the formulation.

The patents are expected to expire in 2031.

GI Development Portfolio

We and AbbVie announced top-line data from a 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, or IBS-D.

The Phase II trial did not meet its primary or key secondary endpoints.

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

We announced that one of our two identical Phase III trials evaluating IW-3718, a gastric retentive formulation of a bile acid sequestrant, in refractory gastroesophageal reflux disease, or refractory GERD, did not meet the pre-specified criteria associated with a planned early efficacy assessment.

Following the assessment from an independent data monitoring committee, we unblinded the data and confirmed that the data from this Phase III trial did not meet the criteria, including the study’s primary endpoint of achieving a statistically significant improvement in heartburn severity.

Based on these findings, we are discontinuing the development of IW-3718.

Deliver Sustainable Profits

● Delivered net income of $106.2 million during the year ended December 31, 2020, reflecting our second full year of profitability.

● We generated $168.8 million in cash from operations during the year ended December 31, 2020, ending the year with $362.6 million in cash and cash equivalents.

● In connection with our decision to discontinue IW-3718 development, we reduced our workforce by approximately 100 full-time employees.

This workforce reduction affected both field-based and home-office employees, including the relevant general and administrative support functions.

We substantially completed the reduction in our workforce in the fourth quarter of 2020.

Impact of the COVID-19 Pandemic on our Business

There continue to be significant uncertainties surrounding the extent and duration of the impact of the COVID-19 pandemic on our business and operations.

The COVID-19 pandemic resulted in changes to our business and operations which impacted our financial condition and results of operations for the year ended December 31, 2020 and the COVID-19 pandemic may have a material adverse impact on our business and financial condition in the future.

We took important actions in 2020 designed to mitigate the impacts of the COVID-19 pandemic on our business.

We continue to evaluate the impact of the COVID-19 pandemic on our operating results and financial condition.

The impact of COVID-19 on our business and financial condition is more fully described below in Part II, Item 7:

Management's Discussion and Analysis of Financial Condition and Results of —Trends and Uncertainties.

GI Programs – IBS-C and CIC

IBS-C and CIC are chronic, functional GI disorders that afflict millions of sufferers worldwide.

As many as 11.5 million adults suffer from IBS-C and as many as 28.5 million adults suffer from CIC in the U.S.

alone, according to the Lieberman GI Patient Landscape Survey performed in 2010, or the Lieberman Survey.

Symptoms of IBS-C include abdominal pain, discomfort or bloating and constipation symptoms (e.g., incomplete evacuation, infrequent bowel movements, hard/lumpy stools), while CIC is primarily characterized by constipation symptoms.

As many as 11.5 million adults suffer from IBS-C and as many as 28.5 million adults suffer from CIC in the U.S., according to the Lieberman GI Patient Landscape Survey performed in 2010, or the Lieberman Survey.

Symptoms of IBS-C include abdominal pain, discomfort and/or bloating and constipation symptoms (e.g., incomplete evacuation, infrequent bowel movements, hard/lumpy stools), while CIC is primarily characterized by constipation symptoms.

Greater than 65% of IBS-C patients suffer from bloating and/or discomfort at least one time per week, according to the Lieberman Survey.

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FDA approved LINZESS as a once-daily treatment for adult men and women suffering from IBS-C (290 mcg dose) or CIC (145 mcg dose).

We and Allergan began commercializing LINZESS in the U.S.

We and AbbVie began commercializing

LINZESS in the U.S.

in December 2012.

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FDA approved a 72 mcg dose of linaclotide for the treatment of adult men and women with CIC.

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

In June 2019, we announced positive topline data from our Phase IIIb trial demonstrating the efficacy and safety of LINZESS 290 mcg on the overall abdominal symptoms of bloating, pain and discomfort, in adult patients with IBS-C.

We submitted an sNDA to the U.S.

FDA in November 2019 to seek a more comprehensive description of the effects of LINZESS on its approved label.

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

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

In September 2020, based on Phase IIIb data demonstrating the efficacy and safety of LINZESS 290 mcg on the overall abdominal symptoms of bloating, pain and discomfort, in adult patients with IBS-C, the U.S.

FDA approved our Supplemental New Drug Application to include a more comprehensive description of the effects of LINZESS in its approved label.

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.

Clinical pediatric programs in IBS-C and functional constipation currently are ongoing.

LINZESS is covered by a U.S.

composition of matter patent that expires in 2026, including patent term extension, as well as multiple patents relating to our commercial, room temperature stable formulation of the 145 mcg and 290 mcg doses of linaclotide and methods of using this formulation, 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.

We and Allergan have received Paragraph IV certification notice letters, or 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 LINZESS.

We and Allergan have entered into settlement agreements with five generic drug manufacturers resolving all outstanding patent infringement litigation brought in response to their ANDAs seeking approval to market generic versions of LINZESS prior to the expiration of our and Allergan’s applicable patents.

For additional information relating to the resolution of such litigation, see Item 3, Legal Proceedings , elsewhere in this Annual Report on Form 10-K.

Clinical pediatric programs in IBS-C and functional constipation are ongoing.

Linaclotide—Global.

Allergan has rights to develop and commercialize linaclotide in all countries worldwide other than China (including Hong Kong and Macau) and Japan.

AbbVie has rights to develop and commercialize linaclotide in all countries worldwide other than China (including Hong Kong and Macau) and Japan.

In November 2012, the European Commission granted marketing authorization to CONSTELLA for the symptomatic treatment of moderate to severe IBS-C in adults.

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CONSTELLA first became commercially available in certain European countries beginning in the second quarter of 2013.

Allergan is commercializing CONSTELLA in a number of European countries, including the United Kingdom, Italy and Spain.

AbbVie is commercializing CONSTELLA in a number of European countries, including the United Kingdom, Italy and Spain.

In December 2013 and February 2014, linaclotide was approved in Canada and Mexico, respectively, as a treatment for adult men and women suffering from IBS-C or CIC.

Allergan has exclusive rights to commercialize linaclotide in Canada as CONSTELLA and in Mexico as LINZESS.

AbbVie has exclusive rights to commercialize linaclotide in Canada as CONSTELLA and in Mexico as LINZESS.

In May 2014, CONSTELLA became commercially available in Canada and in June 2014, LINZESS became commercially available in Mexico.

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In January 2019, the Chinese National Medical Products Administration approved the marketing application for LINZESS for adults with IBS-C in China.

AstraZeneca launched LINZESS in China in November 2019.

Abdominal Pain

MD-7246 is a delayed-release formulation of linaclotide being evaluated as an oral, intestinal, non-opioid, pain-relieving agent for patients suffering from abdominal pain associated with certain GI diseases.

MD-7246 is designed to provide targeted delivery of linaclotide to the colon, where the majority of abdominal pain is believed to originate, and to limit additional fluid secretion in the small intestine resulting in minimal impact on bowel function.

We and Allergan are initially exploring MD-7246 in a Phase II clinical trial evaluating the safety and efficacy of MD-7246 in adult patients with abdominal pain associated with IBS-D.

There are an estimated 16 million Americans who suffer from symptoms of IBS-D, according to Grundmann and Yoon in Irritable Bowel Syndrome:

epidemiology, diagnosis and treatment:

an update for health-care practitioners (published in the Journal of Gastroenterology and Hepatology in 2010) and the United States Census Bureau.

Refractory GERD

There are an estimated 8 to 10 million Americans who suffer regularly from symptoms of refractory GERD, such as heartburn and regurgitation, despite receiving treatment with the current standard of care, a proton pump inhibitor, to suppress stomach acid, according to the American Community Survey conducted in 2018, Lieberman GERD Survey conducted in 2019, My Total Health Survey conducted in 2018, and the AHRI GERD Survey conducted in 2018.

Research suggests some refractory GERD patients may experience reflux of bile from the intestine into the stomach and esophagus.

We recently changed our description of the disease from “persistent GERD” to “refractory GERD” to reflect established medical terminology.

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

Our clinical research has demonstrated that reflux of bile from the intestine into the stomach and

esophagus plays a key role in the ongoing symptoms of refractory GERD.

IW-3718 is a novel formulation of a bile acid sequestrant designed to release in the stomach over an extended period of time, bind to bile that refluxes into the stomach, and potentially provide symptomatic relief in patients with refractory GERD.

In June 2018, we initiated two Phase III clinical trials evaluating the safety and efficacy of IW-3718 in patients with refractory GERD.

AstraZeneca began commercializing LINZESS in China in November 2019.

We are also advancing IW-3300, a GC-C agonist, which is in pre-clinical development for the potential treatment of visceral pain conditions, including Interstitial Cystitis / Bladder Pain Syndrome (IC / BPS) and Endometriosis.

IC/BPS affects an estimated four to 12 million Americans, according to the Interstitial Cystitis Association.

An estimated four million reproductive-age women in the U.S.

have diagnosed endometriosis, according to a study published in Gynecologic and Obstetric Investigation in 2017.

Both diseases have a limited number of treatment options available.

Collaborations and Partnerships

As part of our strategy, we have established development and commercial capabilities that we plan to leverage as we seek to bring multiple medicines to patients.

As part of our GI-focused strategy, we have established development and commercial capabilities that we plan to leverage as we seek to bring multiple medicines to patients.

We intend to play an active role in the development and commercialization of our products in the U.S., either independently or with partners that have strong capabilities.

We also intend to establish strong global brands by out-licensing development and commercialization rights to our products in other key territories to high-performing partners.

We believe in the long-term value of our drug candidates, so we seek collaborations that increase the value of our programs by providing meaningful economics and incentives for us and any potential partner.

Furthermore, we seek partners who share our values, culture, processes and vision for our products, which we believe will enable us to work with those partners successfully for the entire potential patent life of our drugs.

We intend to continue to expand our expertise in GI by accessing innovative externally developed products through strategic transactions and to leverage our existing capabilities to develop and commercialize these products in the U.S.

We plan to seek collaborations that increase the value of our products by providing meaningful economics and incentives for us and any potential partner.

We intend to continue to expand our expertise in GI by accessing innovative externally developed products and to leverage our existing capabilities to develop and commercialize these products in the U.S.

We have pursued a partnering strategy for commercializing linaclotide that has allowed us to focus our commercialization efforts in the U.S.

and enabled partners with strong global capabilities to commercialize linaclotide in territories outside of the U.S.

The following chart shows our revenue for the U.S.

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Revenue attributable to our linaclotide partnerships comprised substantially all of our revenue for each of the years indicated.

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

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

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

Our revenue from our LINZESS collaboration with Allergan for the U.S.

Our revenue from our LINZESS collaboration with AbbVie for the U.S.

is highly dependent on the responsiveness of patients to fill prescriptions and other factors such as wholesaler buying patterns.

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Our collaborative arrangements revenue may continue to fluctuate as a result of the timing and amount of royalties from sales of linaclotide in the markets in which it is currently approved, or any other markets where linaclotide receives approval, as well as clinical and commercial milestones received and recognized under our current and future strategic partnerships outside of the U.S.

Additionally, our sale of active pharmaceutical ingredient, or API, outside of the U.S.

has fluctuated for the years ended December 31, 2019, 2018, and 2017 and will significantly decrease beginning 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.

We have pursued a partnering strategy for commercializing linaclotide that has allowed us to focus our commercialization efforts in the U.S.

and enabled partners with strong global capabilities to commercialize linaclotide outside of the U.S.

Collaboration Agreement for North America with Allergan

In September 2007, we entered into a collaboration agreement with Allergan to develop and commercialize linaclotide for the treatment of IBS-C, CIC and other GI conditions in North America.

Under the terms of the collaboration agreement, we and Allergan are jointly and equally funding the development and commercialization of LINZESS in the U.S., with equal share of any profits or losses.

Additionally, we granted Allergan exclusive rights to

develop and commercialize linaclotide in Canada and Mexico for which we receive royalties in the mid-teens’ percent on net sales in those countries.

Allergan is solely responsible for the further development, regulatory approval and commercialization of linaclotide in those countries and funding any costs.

License Agreement with Allergan (All countries other than the countries and territories of North America, China (including Hong Kong and Macau), and Japan)

Collaboration Agreement for North America with AbbVie

In September 2007, we 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 the collaboration agreement, we and AbbVie are jointly and equally funding the development and commercialization of LINZESS in the U.S., with equal share of any profits or losses.

Additionally, we granted AbbVie exclusive rights to develop and commercialize linaclotide in Canada and Mexico for which we receive royalties in the mid-teens percent on net sales in those countries.

AbbVie is solely responsible for the further development, regulatory approval and commercialization of linaclotide in those countries and funding any costs.

License Agreement with AbbVie (All countries other than the countries and territories of North America, China (including Hong Kong and Macau), and Japan)

In April 2009, we entered into a license agreement with Almirall S.A., or Almirall, or the European License Agreement, to develop and commercialize linaclotide in Europe (including the Commonwealth of Independent States and Turkey) for the treatment of IBS-C, CIC and other GI conditions.

In October 2015, Almirall transferred its exclusive license to develop and commercialize linaclotide in Europe to Allergan.

In January 2017, we and Allergan entered into an amendment to the European License Agreement.

In October 2015, Almirall transferred its exclusive license to develop and commercialize linaclotide in Europe to AbbVie.

In January 2017, we and AbbVie entered into an amendment to the European License Agreement.

The European License Agreement, as amended, extended the license 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.

On a country-by-country and product-by-product basis in such additional territory, Allergan is obligated to pay us 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.

We refer to the additional licensed countries as the Expanded Territory.

Under the European License agreement, AbbVie is obligated to pay us (i) certain commercial milestones totaling up to $42.5 million, (ii) royalties based on sales volume in Europe, beginning in the mid-single digits percent and escalating to the upper-teens percent, and (iii) 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 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.

License Agreement for Japan with Astellas

In November 2009, we entered into a license agreement with Astellas, as amended, to develop and commercialize linaclotide for the treatment of IBS-C, CIC and other GI conditions in Japan.

Pursuant to this license agreement, we were responsible for the supply of linaclotide API to Astellas.

In November 2009, we entered into a license agreement with Astellas to develop and commercialize linaclotide for the treatment of IBS-C, CIC and other GI conditions in Japan.

Pursuant to this license agreement, as amended, we were responsible for the supply of linaclotide active pharmaceutical ingredient, or API, to Astellas.

On August 1, 2019, we and Astellas amended and restated the license agreement.

Under the terms of the amended and restated license agreement, we will no longer be responsible for the supply of linaclotide API to Astellas and Astellas will be responsible for its own supply of linaclotide API in Japan beginning in 2020.

Beginning in 2020, Astellas is obligated to pay royalties to us 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 API.

Under the terms of the amended and restated license agreement, we are no longer responsible for the supply of linaclotide API to Astellas and Astellas is responsible for its own supply of linaclotide API in Japan.

Astellas is obligated to pay royalties to us at rates beginning in the mid-single-digits percent and escalating to low-double-digits percent, based on aggregate annual net sales in Japan of products containing linaclotide API.

Collaboration Agreement for China (including Hong Kong and Macau), with AstraZeneca

In October 2012, we entered into a collaboration agreement with AstraZeneca to co-develop and co-commercialize linaclotide in China (including Hong Kong and Macau).

In January 2019, the Chinese National Medical Products Administration approved the marketing application for LINZESS for adults with IBS-C in China.

In September 2019, we and AstraZeneca amended and restated the collaboration agreement, under which AstraZeneca obtained the exclusive right to develop, manufacture and commercialize products containing linaclotide in the territory.

Under the terms of the amended and restated agreement, we will be transferring all manufacturing responsibilities in China (including Hong Kong and Macau) to AstraZeneca beginning in 2020, and we will receive non-contingent payments totaling $35.0 million in three installments through 2024.

In addition, AstraZeneca may be required to make milestone payments totaling up to $90.0 million contingent on the achievement of certain sales targets and will be required to pay tiered royalties to us 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 territory.

Under the terms of the amended and restated agreement, we transferred all manufacturing responsibilities in China (including Hong Kong and Macau) to AstraZeneca, and we are entitled to receive non-contingent payments totaling $35.0 million in three installments through 2024, of which $10.0 million was received in January 2021.

In addition, AstraZeneca may be required to make milestone payments totaling up to $90.0 million contingent on the achievement of certain sales targets and is required to pay tiered royalties to us at rates beginning in the mid-single-digits percent and increasing up to twenty percent based on the aggregate annual net sales of products containing linaclotide in the territory.

Co-Promotion and Other Commercial Agreements

Co-Promotion Agreement with Allergan

In April 2019, we entered into an agreement with Allergan to promote VIBERZI ® (eluxadoline) through December 31, 2019.

Under the terms of the agreement, we received approximately $3.7 million in collaborative arrangements revenue based on the number of VIBERZI sales details performed between April and December 2019.

We and Allergan terminated the agreement effective January 1, 2020.

Disease Education and Promotional Agreement with Alnylam

In August 2019, we and Alnylam entered into a disease education and promotional agreement for Alnylam’s GIVLAARI for the treatment of AHP.

We are entitled to receive service fees, payable by Alnylam quarterly, totaling up to $9.5 million over the term of the agreement, which is approximately three years.

We are also eligible to receive a royalty based on a percentage of net sales of GIVLAARI that are directly attributable to our promotional efforts.

In August 2019, we and Alnylam entered into a disease education and promotional agreement for Alnylam’s GIVLAARI for the treatment of AHP and in December 2020, this agreement was amended.

Under the agreement, we received service fees totaling approximately $5.5 million for services rendered from the commencement of the agreement through December 31, 2020 and are eligible to receive royalties based on a percentage of net sales of GIVLAARI that are directly attributable to our promotional efforts over the term of the agreement, which is approximately three years.

Our vision is to become the leading U.S.

GI-focused healthcare company.

To achieve this vision, we are dedicated to leveraging our development and commercial expertise to advance the treatment of GI diseases and redefine the standard of care for millions of patients in the U.S.

suffering from GI diseases.

To achieve this vision, we are dedicated to leveraging our development and commercial expertise to advance the treatment of GI diseases and redefine the standard of care for patients suffering from GI diseases.

Our strategy is focused on three core priorities:

drive LINZESS growth, advance our GI development portfolio, and strengthen our financial profile.

maximize LINZESS, build our innovative GI pipeline, and deliver sustained profits and generate cash flow.

Key elements of our strategy include:

● assembling a team with a singular passion and documented success in creating, developing and commercializing GI medicines that can make a significant difference in patients’ lives;

● successfully and profitably commercializing LINZESS in collaboration with Allergan in the U.S.;

● successfully and profitably commercializing LINZESS in collaboration with AbbVie in the U.S.;

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

● leveraging our U.S.-focused commercial capabilities in marketing, reimbursement, patient engagement and sales to expand the commercial potential of LINZESS and our other product candidates in the U.S.

and collaborating with global partners who share our vision, values, culture, and processes to develop and commercialize linaclotide outside of the U.S.;

● investing in our pipeline of novel product candidates IW-3718 and MD-7246;

● evaluating external candidates for in-licensing or acquisition opportunities;

● leveraging our U.S.-focused commercial capabilities in marketing, reimbursement, patient engagement and sales, as well as advancing a hybrid (virtual and in-person) selling model and technologies such as telehealth, to expand the commercial potential of LINZESS;

collaborating with global partners who share our vision, values, culture, and processes to develop and commercialize linaclotide outside of the U.S.;

● evaluating innovative, externally developed products for in-licensing or acquisition opportunities, prioritizing assets that address serious, organic GI diseases, provide scientific innovation, sound mechanistic rational, a strong clinical safety profile, a clear development path towards commercialization and in disease areas primarily managed by gastroenterologists;

● executing our strategy with our stockholders’ long-term interests in mind by delivering sustainable profits and long-term per share cash flows.

Linaclotide competes globally with certain prescription therapies and over-the-counter, or OTC, products for the treatment of IBS-C and CIC, or their associated symptoms.

OTC and generic laxatives make up the majority of the IBS-C and CIC treatment market, according to the Lieberman Survey and the 2018 U.S.

Linaclotide and lactulose account for the majority of prescription treatments in the U.S.

IBS-C and CIC markets, according to 2019 data from IQVIA Inc.

Linaclotide competes globally with certain branded and generic prescription therapies and over the counter, or OTC, products for the treatment of IBS-C and CIC, or their associated symptoms.

OTC laxatives make up the majority of the treatments in the U.S.

for IBS-C and CIC, according to our internal research.

LINZESS accounts for the majority of prescriptions in the U.S.

for adults with IBS-C and CIC, according to 2020 data from IQVIA Inc.

National Prescription Audit.

Given the low barriers to access, many IBS-C and CIC sufferers try OTC fiber and laxatives, such as MiraLAX ® and DULCOLAX ® , but according to the Lieberman Survey, less than half of them are very satisfied with the ability of OTC products to manage their symptoms.

Until the launch of LINZESS, the only available branded prescription therapy for IBS-C and CIC in the U.S.

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by Takeda Pharmaceuticals Limited.

AMITIZA also is being commercialized for the treatment of adults with CIC in certain European countries, including the United Kingdom and Switzerland by Sucampo AG, and for the treatment of chronic constipation in Japan by Mylan N.V.

Synergy Pharmaceuticals, Inc., or Synergy, obtained approval of TRULANCE ® (plecanatide) in the U.S.

for the treatment of CIC in adults in January 2017 and for the treatment of IBS-C in adults in

January 2018.

In March 2019, Bausch Health Companies acquired substantially all of Synergy’s assets, including all rights to TRULANCE, dolcanatide and all related intellectual property in the context of a Chapter 11 bankruptcy process.

in January 2021 and is being commercialized by Endo International plc.

TRULANCE® (plecanatide) was approved in the U.S.

for the treatment of CIC in adults in January 2017 and for the treatment of IBS-C in adults in January 2018 and is being commercialized in the U.S.

by Bausch Health Companies.

Shire plc obtained approval of MOTEGRITY™ (prucalopride) in the U.S.

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Linaclotide production consists of three phases—manufacture of the API (sometimes referred to as drug substance), manufacture of finished drug product and manufacture of finished goods.

We or our partners have commercial supply agreements with multiple third-party manufacturers for the production of linaclotide API.

We and/or our partners have commercial supply agreements with multiple third-party manufacturers for the production of linaclotide API.

We believe the current commercial suppliers have the capabilities to produce linaclotide API in accordance with current good manufacturing practices, or GMP, on a sufficient scale to meet the worldwide development and commercial needs for linaclotide.

The commercial suppliers of linaclotide API are subject to routine inspections by regulatory agencies worldwide and also undergo periodic audit and certification by our quality department.

Allergan is responsible for linaclotide API, finished drug product and finished goods manufacturing (including bottling and packaging) and distributing the finished goods to wholesalers for the U.S.

and its other territories.

Astellas is responsible for linaclotide finished drug product and finished goods manufacturing (including bottling and packaging) and distributing the finished goods to wholesalers for Japan, and in connection with the amended and restated license agreement we and Astellas entered into in August 2019, Astellas became responsible for its own supply of linaclotide API for Japan beginning in 2020 .

Under our original collaboration with AstraZeneca, we were responsible for linaclotide API, finished drug product and finished goods manufacturing for China and for linaclotide API and finished drug product manufacturing for Hong Kong and Macau, with AstraZeneca accountable for finished goods manufacturing for Hong Kong and Macau.

Under the terms of the amended and restated collaboration agreement we and AstraZeneca entered into in September 2019, we will be transferring all manufacturing responsibilities in these territories to AstraZeneca beginning in 2020.

The commercial suppliers of linaclotide API are subject to routine inspections by regulatory agencies worldwide and also undergo periodic audit and certification by our partners’ or our own quality department.

Each of AbbVie, Astellas and AstraZeneca is responsible for linaclotide API, finished drug product and finished goods manufacturing (including bottling and packaging) and distributing the finished goods to wholesalers in its respective territories.

Prior to linaclotide, there was no precedent for long-term room temperature shelf storage formulation for an orally dosed peptide to be produced in millions of capsules per year.

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alone or with partners, and expect to rely on partners to develop and commercialize our drugs in territories outside the U.S.

In executing our strategy, our goal is to retain oversight over the worldwide development and commercialization of our products by playing an active role in their commercialization or finding partners who share our vision, values, culture and processes.

In executing our

strategy, our goal is to retain oversight over the worldwide development and commercialization of our products by playing an active role in their commercialization or finding partners who share our vision, values, culture and processes.

To date, we have established a high-quality commercial organization dedicated to bringing innovative, highly-valued GI healthcare solutions to our customers, including patients, payors, and healthcare providers.

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Patents and Proprietary Rights

their manufacture, as well as any other relevant inventions and improvements that are commercially important to the development of our business.

We actively seek to protect the proprietary technology that we consider important to our business, including pursuing patents that cover our products, compositions, and formulations, their methods of use and the processes for their manufacture, as well as any other relevant inventions and improvements that are commercially important to the development of our business.

We also rely on trade secrets that may be important to the development of our business.

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Linaclotide Patent Portfolio

Our linaclotide patent portfolio is currently composed of ten U.S.

Our linaclotide patent portfolio is currently composed of 14 patents in the U.S., including 12 U.S.

patents listed in the U.S.

FDA publication, “Approved Drug Products with Therapeutic Equivalence Evaluations”, or the Orange Book, five granted European patents, all of which have been validated in all available European countries, ten granted Japanese patents, five granted Chinese patents, 52 issued patents in other foreign jurisdictions, and numerous pending U.S., foreign and Patent Cooperation Treaty, or PCT, patent applications.

FDA publication, “Approved Drug Products with Therapeutic Equivalence Evaluations”, or the Orange Book, seven granted European patents, most of which have been validated in available European countries, ten granted Japanese patents, five granted Chinese patents, 61 issued patents in other foreign jurisdictions, and numerous pending U.S., foreign and Patent Cooperation Treaty, or PCT, patent applications.

We own or jointly own all of the issued patents and pending applications.

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patents, which will expire between 2024 and 2033, contain claims directed to the linaclotide molecule, pharmaceutical compositions thereof, methods of using linaclotide to treat GI disorders, processes for making the molecule, and room temperature stable formulations of linaclotide and methods of use thereof.

The 72 mcg, 145 mcg and 290 mcg LINZESS doses are covered by various composition of matter patents, the latest of which expires in 2026.

In addition, the commercial formulations of the 145 mcg and 290 mcg LINZESS doses are covered by patents that expire in the early 2030s.

The 72 mcg, 145 mcg and 290 mcg LINZESS doses are covered by various composition of matter patents in the U.S., the latest of which expires in 2026.

In addition, the commercial formulations of the 72 mcg, 145 mcg and 290 mcg LINZESS doses are covered by patents in the U.S.

that expire in the early 2030s.

The granted European patents, which will expire between 2024 and 2036, some of which are subject to potential patent term extension, contain claims directed to the linaclotide molecule, pharmaceutical compositions thereof, uses of linaclotide to prepare medicaments for treating GI disorders, and room temperature stable formulations of linaclotide and their use in treating IBS-C and chronic constipation.

The granted Chinese patents, which will expire between 2024 and 2032, the granted Japanese patents, which will expire between 2025 and 2036, some of which are subject to potential patent term extension, and the granted patents in other foreign jurisdictions, which will expire between 2024 and 2032, some of which may be subject to potential patent term extension, contain claims directed to the linaclotide molecule, pharmaceutical compositions of linaclotide for use in treating GI disorders, and room temperature stable formulations of linaclotide.

We have pending patent applications in certain countries worldwide that, if issued, will expire between 2024 and 2032 and which include claims covering the linaclotide molecule, methods of using linaclotide to treat GI disorders, the current commercial formulation of linaclotide and uses thereof to treat GI disorders.

We have multiple additional U.S.

patent applications covering commercial formulations related to our 72 mcg LINZESS dose that, if issued, would expire in 2029 and 2031.

MD-7246 is covered by several granted patents covering linaclotide the latest of which expires in 2026 in the U.S.

and the latest of which expires in 2029 outside the U.S.

In addition, we have pending patent applications in the U.S., PCT and foreign jurisdictions directed to formulations of MD-7246 and methods of using MD-7246 to treat various diseases and disorders, such as IBS-D, that, if issued, will expire between 2029 and 2037.

The granted Chinese patents, which will expire between 2024 and 2032, the granted Japanese patents, which will expire between 2025 and 2036, some of which are subject to granted and potential patent term extension, and the granted patents in other foreign jurisdictions, which will expire between 2024 and 2034, some of which may be subject to potential patent term extension, contain claims directed to the linaclotide molecule, pharmaceutical compositions of linaclotide for use in treating GI disorders, and room temperature stable formulations of linaclotide.

We have pending patent applications in certain countries worldwide that, if issued, will expire between 2024 and 2037 and which include claims covering the linaclotide molecule, methods of using linaclotide to treat GI disorders, the current commercial formulations of linaclotide and uses thereof to treat GI disorders.

The patent term of a patent that covers an U.S.

FDA approved drug is also eligible for patent term extension, which permits patent term restoration as compensation for some of the patent term lost during the U.S.

FDA approved drug is also eligible for patent term extension, which permits patent term extension as compensation for some of the patent term lost during the U.S.

FDA regulatory review process.

The Hatch Waxman Act permits a patent term extension of a single patent applicable to an approved drug for up to five years beyond the expiration of the patent but the extension cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval by the U.S.

The United States Patent and Trademark Office, or USPTO, has issued a Certificate of Patent Term Extension for U.S.

The United States Patent and Trademark Office has issued a Certificate of Patent Term Extension for U.S.

Patent 7,304,036, which covers linaclotide and methods of use thereof.

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Similar provisions are available in Europe and certain other foreign jurisdictions to extend the term of a patent that covers an approved drug.

We have received patent term

extensions in Japan for several of our linaclotide patents.

We have received patent term extensions in Japan for several of our linaclotide patents.

We have also received patent term extensions, called supplementary protection certificates, for certain linaclotide patents from several national patent offices in Europe.

We and Allergan received Notice Letters regarding ANDAs submitted to the U.S.

We and AbbVie received Notice Letters regarding ANDAs submitted to the U.S.

FDA by five generic drug manufacturers requesting approval to engage in commercial manufacture, use, sale and offer for sale of linaclotide capsules, proposed generic versions of LINZESS.

All five manufacturers requested approval for their 145 mcg and 290 mcg generic doses of LINZESS and two requested additional approval for their 72 mcg generic doses of LINZESS.

We and Allergan have entered into settlement agreements with all five of these generic drug manufacturers providing for licenses to market their 145 mcg and 290 mcg generic versions of LINZESS, beginning as early as March 2029 (subject to U.S.

We and AbbVie have entered into settlement agreements with all five of these generic drug manufacturers providing for licenses to market their 145 mcg and 290 mcg generic versions of LINZESS, beginning as early as March 2029 (subject to U.S.

FDA Approval), unless certain limited circumstances, customary for settlement agreements of this nature, occur.

In addition, we and Allergan entered into a settlement agreement providing one generic drug manufacturer a license to market its 72 mcg generic version of LINZESS beginning in August 2030 (subject to U.S.

In addition, we and AbbVie entered into a settlement agreement providing one generic drug manufacturer a license to market its 72 mcg generic version of LINZESS beginning in August 2030 (subject to U.S.

FDA Approval), unless certain limited circumstances, customary for settlement agreements of this nature, occur.

For additional information relating to such ANDAs and any resolution of related litigation, see Item 3.

Legal Proceedings , elsewhere in this Annual Report on Form 10-K.

Our patent portfolio relating to our IW-3718 development program is currently composed of one issued U.S.

patent and ten issued patents in foreign jurisdictions, which are directed to a sustained-release, gastro-retentive dosage form of a bile acid sequestrant and its use in treating disorders related to the bile acid in the upper GI tract, such as refractory GERD;

and numerous pending U.S., foreign and PCT patent applications.

We own all of the issued patents and pending applications.

The issued U.S.

patent expires in 2031.

The foreign issued patents expire between 2027 and 2034.

The pending patent applications, if issued, will expire between 2027 and 2038.

Government Regulation

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FDA Approval Process

We believe that our product candidates will be regulated by the U.S.

FDA as drugs.

No company may market a new drug until it has submitted an NDA to the U.S.

No company may market a new drug in the U.S.

until it has submitted an NDA to the U.S.

FDA, and the U.S.

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The review process, however, may be extended by U.S.

FDA requests for additional information, nonclinical or

clinical studies, clarification regarding information already provided in the submission, or submission of a risk evaluation and mitigation strategy.

FDA requests for additional information, nonclinical or clinical studies, clarification regarding information already provided in the submission, or submission of a risk evaluation and mitigation strategy.

FDA may refer an application to an advisory committee for review, evaluation and recommendation as to whether the application should be approved.

FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully when making decisions.

FDA is not bound by the

recommendations of an advisory committee, but it considers such recommendations carefully when making decisions.

Before approving an NDA, the U.S.

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The results of nonclinical studies and initial clinical trials of our product candidates are not necessarily predictive of the results from large-scale clinical trials, and clinical trials may be subject to additional costs, delays or modifications due to a number of factors, including difficulty in obtaining enough patients, investigators or product candidate supply.

Failure by us or our collaborators, licensors or licensees, including Allergan, Astellas and AstraZeneca, to obtain, or any delay in obtaining, regulatory approvals or in complying with requirements could adversely affect commercialization and our ability to receive product or royalty revenues.

Failure by us or our collaborators, licensors or licensees, including AbbVie, Astellas and AstraZeneca, to obtain, or any delay in obtaining, regulatory approvals or in complying with requirements could adversely affect commercialization and our ability to receive product or royalty revenues.

Hatch-Waxman Act

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FDA may not accept an ANDA or 505(b)(2) application for five years after the date of approval of previously approved drug, or four years in the case of an ANDA or 505(b)(2) application that challenges a patent claiming the reference drug (see discussion below regarding Paragraph IV Certifications).

The Hatch ‑ Waxman Act also provides three years of exclusivity for approved applications for drugs that are not new chemical entities, if the application contains the results of new clinical investigations (other than bioavailability studies) that were essential to approval of the application.

The Hatch‑Waxman Act also provides three years of exclusivity for approved applications for drugs that are not new chemical entities, if the application contains the results of new clinical investigations (other than bioavailability studies) conducted or sponsored by the applicant that were essential to approval of the application.

Examples of applications that may require new clinical investigations essential to approval and receive three-year exclusivity include applications for new indications, dosage forms (including new drug delivery systems), strengths, or conditions of use for an already approved product.

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When an ANDA or 505(b)(2) application is submitted, it must contain one of several possible certifications regarding each of the patents listed in the Orange Book for the reference drug.

A certification that a listed patent is invalid, unenforceable or will not be infringed by the sale of the proposed product is called a “Paragraph IV” certification.

A certification that

a listed patent is invalid, unenforceable or will not be infringed by the sale of the proposed product is called a “Paragraph IV” certification.

A certification that provides the date a listed patent will expire, but does not challenge the validity, enforceability or infringement of the patent, is called a “Paragraph III” certification.

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FDA may approve the proposed product before the expiration of the 30‑month stay only if a court finds the patent invalid or not infringed, and the court may shorten or lengthen the 30-month stay under certain limited circumstances.

Patent Term Restoration.

Patent Term Extension.

Under the Hatch ‑Waxman Act, a portion of the patent term lost during product development and U.S.

FDA review of an NDA or 505(b)(2) application is restored if approval of the application is the first permitted commercial marketing of a drug containing the active ingredient.

The patent term restoration period is generally one ‑ half the time between the effective date of the IND and the date of submission of the NDA, plus the time between the date of submission of the NDA and the date of U.S.

FDA review of an NDA or 505(b)(2) application is extended if approval of the application is the first permitted commercial marketing of a drug containing the active ingredient.

The patent term extension period is generally one‑half the time between the effective date of the IND and the date of submission of the NDA, plus the time between the date of submission of the NDA and the date of U.S.

FDA approval of the product.

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FDA approval of the product.

Only one unexpired patent claiming the drug product, a method of using the product or a method of manufacturing the product is eligible for restoration and the patent holder must apply for restoration within 60 days of approval.

Only one unexpired patent claiming the drug product, a method of using the product or a method of manufacturing the product is eligible for extension and the patent holder must apply for extension within 60 days of approval.

Patent and Trademark Office, in consultation with the U.S.

FDA, reviews and approves the application for patent term restoration.

FDA, reviews and approves the application for patent term extension.

Other Regulatory Requirements

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FDA requirements can have negative consequences, including adverse publicity, warning or untitled letters from the U.S.

FDA, mandated

corrective advertising or communications with doctors or patients, and civil or criminal penalties.

FDA, mandated corrective advertising or communications with doctors or patients, and civil or criminal penalties.

Although physicians may prescribe legally available drugs for off-label uses, manufacturers may not market or promote such off-label uses.

Changes to some of the conditions established in an approved application, including changes in indications, labeling, or manufacturing processes or facilities, require submission and U.S.

FDA approval of a new NDA or NDA supplement before the change can be implemented.

FDA approval of a new NDA or NDA

supplement before the change can be implemented.

An NDA supplement for a new indication typically requires clinical data similar in type and quality to the clinical data supporting the original application for the original indication, and the U.S.

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and foreign patents and Patent Cooperation Treaty patent applications.

The Separation and related agreements are more fully described in Note 3, Cyclerion Separation , to our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K.

Uncontrolled Gout Programs

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The post-marketing clinical study to further evaluate the renal and cardiovascular safety of lesinurad was terminated following the termination of the lesinurad license agreement.

As of December 31, 2019, we had 317 employees.

Approximately 60 were in our drug development team, 196 were in our sales and commercial team, and 61 were in general and administrative functions.

None of our employees are represented by a labor union, and we consider our employee relations to be good.

During the years ended December 31, 2019 and 2018, we commenced certain reductions in our workforce.

Refer to Note 19, Workforce Reduction, to our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K for further details.

We requested that the U.S.

FDA withdraw approval of the NDA for the Lesinurad Products, and in January 2021, the NDA withdrawal for DUZALLO became effective.

Human Capital

As of January 1, 2021, Ironwood had 232 employees.

Of these employees, 42 were on our drug development team, 128 were on our sales and commercial team, and 62 were in general and administrative functions.

In connection with our decision to discontinue development of IW-3718, we reduced our workforce by approximately 100 full-time

employees, which reduction was substantially completed in the fourth quarter of 2020.

For information regarding reductions in our workforce during the years ended December 31, 2020, 2019 and 2018, refer to Note 18, Workforce Reduction and Restructuring , to our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K.

We consider our employee relations to be good.

Equity, Diversity, and Inclusion (EDI)

We believe that creating an equitable, diverse, and inclusive culture is critical to attracting, motivating and retaining the talent necessary to deliver on our mission.

Approximately 50% of our employees are women, and women represent approximately 30% of our leadership team (vice president and above) and nearly 30% of our board of directors (including our board and audit chairs).

Additionally, approximately 20% of our employees are racially or ethnically diverse and, in 2020, approximately 40% of our new hires were racially or ethnically diverse.

In 2020, we established an EDI workgroup dedicated to advancing key EDI initiatives.

Ironwood’s leadership team and board of directors champions these efforts.

In October 2020, our management adopted a long-term EDI strategy and, in January 2021, our board of directors approved a specific corporate goal for 2021 aimed at fostering an environment where employees feel included and empowered.

Current EDI initiatives include empowering our employee resource groups, such as Ironwomen and ISTAR (Ironwood Stands Together Against Racism), introducing new learning and development opportunities, strengthening our talent acquisition strategies, and introducing new metrics and measurements on outreach to diverse candidate sources, retention, career advancement, and employee survey feedback from diverse populations.

Compensation and Benefits

All our employees receive equity and are encouraged to think and act as owners of Ironwood.

We strive to provide pay, benefits, and services that are competitive to market and to create incentives to attract, motivate and retain our employees.

We are focused on pay equity and regularly monitor our pay practices among similar roles and responsibilities throughout our organization.

Communication and Engagement

We strongly believe that Ironwood’s success depends on employees understanding how their work contributes to Ironwood’s ability to execute on its vision, mission and strategy.

Communication and engagement have been especially critical in 2020 in light of challenges brought on by macro events such as the COVID-19 pandemic and the racial injustice in the U.S., as well as internal factors including the recent reduction in our workforce.

To this end, we utilize a variety of channels to facilitate open and direct communication, including frequent town hall meetings, Ironwood intranet, CEO blog, leadership engagement opportunities, regular communications regarding business updates, and employee engagement surveys.

Health, Wellness and Safety in the Face of the COVID-19 Pandemic

The health and safety of all our employees is a top priority for us.

In 2020, we augmented certain healthcare, childcare and leave benefits in an effort to support our employees and their families in the face of the unique challenges brought on by the COVID-19 pandemic.

In addition, we established a working group focused on creating and keeping employees well informed about the company’s latest plans and guidance around COVID-19.

We also provided personal protective equipment and safety trainings for field-based employees, a home supply stipend to create home office space, reallocated commuter benefits for home office use, extended additional wellness benefits including backup childcare, and provided our employees with resilience training, among other efforts.

Available Information

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The contents of our website are not incorporated by reference into this report and you should not consider information provided on our website to be part of this report.

PART II OTHER INFORMATION

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

What changed 10-K

Item 1. Business