IRONWOOD PHARMACEUTICALS INC 10-K

Item 5. Market for Registrant’s Common Equit y, Related Stockholder Matters and Issuer Purchases of Equity Securities Shares of our Class A Common Stock are traded on the Nasdaq Global Select Market under the symbol “IRWD.” Our shares have been publicly traded since February 3, 2010. As of February 10, 2021, there were 51 stockholders of record of our Class A Common Stock. The number of record holders is based upon the actual number of holders registered on the books of the company at such date and does not include holders of shares in “street names” or persons, partnerships, associations, corporations or other entities identified in security position listings maintained by depositories. Subject to preferences that may apply to any shares of preferred stock outstanding at the time, the holders of Class A Common Stock are entitled to share equally in any dividends that our board of directors may determine to issue from time to time. In the event a dividend is paid in the form of shares of common stock or rights to acquire shares of common stock, the holders of Class A Common Stock will receive Class A Common Stock, or rights to acquire Class A Common Stock, as the case may be. We have never declared or paid any cash dividends on our capital stock, and we do not currently anticipate declaring or paying cash dividends on our capital stock in the foreseeable future. We currently intend to retain all of our future earnings, if any, to finance operations. Any future determination relating to our dividend policy will be made at the discretion of our board of directors and will depend on a number of factors, including future earnings, capital requirements, financial conditions, future prospects, contractual restrictions and covenants and other factors that our board of directors may deem relevant. The information required to be disclosed by Item 201(d) of Regulation S-K, “Securities Authorized for Issuance Under Equity Compensation Plans,” is referenced under Item 12 of Part III of this Annual Report on Form 10-K. Corporate Performance Graph The following performance graph and related information shall not be deemed to be “soliciting material” or to be “filed” with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933, as amended, or the Securities Act, except to the extent that we specifically incorporate it by reference into such filing. On April 1, 2019, we completed the separation, or the Separation, of our soluble guanylate cyclase, or sGC, business, and certain other assets and liabilities, into a separate, independent publicly traded company, Cyclerion Therapeutics, Inc., or Cyclerion. The Separation was effected by means of a distribution of all the outstanding shares of common stock, with no par value, of Cyclerion, through a dividend of Cyclerion’s common stock to our stockholders of record as of the close of business on March 19, 2019. The following graph compares the performance of our Class A Common Stock to the Nasdaq Benchmark TR Index (U.S.) and to the Nasdaq Pharmaceutical Benchmark TR Index (U.S.) from December 31, 2015 through December 31, 2020. The comparison assumes $100 was invested after the market closed on December 31, 2014 in our Class A Common Stock and in each of the presented indices, and it assumes reinvestment of dividends, if any (other than any Cyclerion common stock distributed in connection with the Separation). Total returns reflected in the following graph for periods prior to the date of the Separation have been adjusted for the effect of the Separation to exclude the sGC business. 48 Table of Contents COMPARISON OF QUARTERLY CUMULATIVE TOTAL RETURN Among The Nasdaq Benchmark TR Index (U.S.), the Nasdaq Pharmaceutical Benchmark TR Index (U.S.) and Ironwood Pharmaceuticals, Inc. ​ ​ ​ ​ 49 Table of Contents Item 6. Selected Financial Data ​ You should read the following selected financial data together with our consolidated financial statements and the related notes appearing elsewhere in this Annual Report on Form 10-K. We have derived the consolidated statements of operations data for the years ended December 31, 2020, 2019, and 2018 and the consolidated balance sheet data as of December 31, 2020 and 2019 from our audited financial statements included elsewhere in this Annual Report on Form 10-K. We have derived the consolidated statements of operations data for the years ended December 31, 2017 and 2016 and the consolidated balance sheet data as of December 31, 2018, 2017, and 2016 from our audited financial statements not included in this Annual Report on Form 10-K. During the year ended December 31, 2019, we completed the separation of our soluble guanylate cyclase, or sGC, business, or the Separation. Results of operations related to our sGC business have been reclassified to reflect discontinued operations for all periods presented. Our historical results for any prior period are not necessarily indicative of results to be expected in any future period. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2020 ​ 2019 ​ 2018 ​ 2017 ​ 2016 ​ ​ (in thousands, except per share data) Consolidated Statement of Operations Data: ​ ​ ​ ​ ​ Revenues: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Collaborative arrangements revenue (1) ​ $ 381,545 ​ $ 379,652 $ 272,839 $ 265,533 ​ $ 263,923 ​ Product revenue, net ​ — ​ — ​ ​ 3,445 ​ ​ 3,061 ​ 109 ​ Sale of active pharmaceutical ingredient ​ ​ 7,978 ​ ​ 48,761 ​ ​ 70,355 ​ ​ 29,682 ​ ​ 9,925 ​ Total revenues ​ ​ 389,523 ​ ​ 428,413 ​ ​ 346,639 ​ ​ 298,276 ​ ​ 273,957 ​ Cost and expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cost of revenues, excluding amortization of acquired intangible assets (2) ​ 3,136 ​ 23,875 ​ 32,751 ​ 19,097 ​ 1,868 ​ Write-down of commercial supply and inventory to net realizable value and (settlement) loss on non-cancellable purchase commitments (3) ​ — ​ (3,530) ​ 247 ​ 309 ​ 374 ​ Research and development ​ 88,062 ​ 115,044 ​ 101,060 ​ 88,145 ​ 101,903 ​ Selling, general and administrative ​ 140,003 ​ 172,450 ​ 219,676 ​ 231,184 ​ 169,169 ​ Amortization of acquired intangible asset (4) ​ ​ — ​ ​ — ​ ​ 8,111 ​ ​ 6,214 ​ ​ 981 ​ (Gain) loss on fair value remeasurement of contingent consideration (4) ​ — ​ — ​ ​ (31,045) ​ ​ (31,310) ​ 9,831 ​ Gain on lease modification (5) ​ ​ — ​ ​ (3,169) ​ ​ — ​ ​ — ​ ​ — ​ Restructuring expenses (6) ​ ​ 15,382 ​ ​ 3,620 ​ ​ 14,715 ​ ​ — ​ ​ — ​ Impairment of intangible assets (4) ​ ​ — ​ ​ — ​ ​ 151,794 ​ ​ — ​ ​ — ​ Total cost and expenses ​ 246,583 ​ 308,290 ​ 497,309 ​ 313,639 ​ 284,126 ​ Income (loss) from operations ​ 142,940 ​ 120,123 ​ (150,670) ​ (15,363) ​ (10,169) ​ Other (expense) income: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest expense ​ (29,478) ​ (36,602) ​ (37,724) ​ (36,370) ​ (39,153) ​ Interest and investment income ​ 1,504 ​ 2,862 ​ 2,991 ​ 2,111 ​ 1,169 ​ Gain (loss) on derivatives (7) ​ (6,129) ​ 3,023 ​ (8,743) ​ (3,284) ​ 8,146 ​ Loss on extinguishment of debt (8) ​ ​ — ​ ​ (30,977) ​ ​ — ​ ​ (2,009) ​ ​ — ​ Other income (9) ​ 24 ​ 514 ​ — ​ — ​ — ​ Other expense, net ​ (34,079) ​ (61,180) ​ (43,476) ​ (39,552) ​ (29,838) ​ Income (loss) from continuing operations ​ 108,861 ​ 58,943 ​ ​ (194,146) ​ ​ (54,915) ​ (40,007) ​ Income tax expense ​ ​ 2,685 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ Income from continuing operations ​ ​ 106,176 ​ ​ 58,943 ​ ​ (194,146) ​ ​ (54,915) ​ ​ (40,007) ​ Loss from discontinued operations, net of income taxes ​ — ​ (37,438) ​ ​ (88,222) ​ ​ (62,022) ​ (41,701) ​ Net income (loss) and comprehensive income (loss) ​ $ 106,176 ​ $ 21,505 ​ $ (282,368) ​ $ (116,937) ​ $ (81,708) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Income per share from continuing operations, net of income taxes—basic ​ $ 0.67 ​ $ 0.38 ​ $ (1.27) ​ $ (0.37) ​ $ (0.28) ​ Income per share from continuing operations, net of income taxes— diluted ​ ​ 0.66 ​ ​ 0.38 ​ ​ (1.27) ​ ​ (0.37) ​ ​ (0.28) ​ Loss per share from discontinued operations, net of income taxes—basic and diluted ​ ​ — ​ ​ (0.24) ​ ​ (0.58) ​ ​ (0.42) ​ ​ (0.29) ​ Net income (loss) per share—basic ​ ​ 0.67 ​ ​ 0.14 ​ ​ (1.85) ​ ​ (0.78) ​ ​ (0.56) ​ Net income (loss) per share—diluted ​ ​ 0.66 ​ ​ 0.14 ​ ​ (1.85) ​ ​ (0.78) ​ ​ (0.56) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted average shares used in computing net income per share—basic: ​ 159,427 ​ 156,023 ​ ​ 152,634 ​ ​ 148,993 ​ 144,928 ​ Weighted average shares used in computing net income per share— diluted: ​ ​ 160,655 ​ ​ 156,023 ​ ​ 152,634 ​ ​ 148,993 ​ ​ 144,928 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (1) Collaborative arrangements revenue for the year ended December 31, 2020 included approximately $368.6 million related to our share of sales of LINZESS ® (linaclotide) in the U.S. ​ Collaborative arrangements revenue for the year ended December 31, 2019 included approximately $325.4 million related to our share of sales of LINZESS in the U.S., approximately $32.4 million in non-contingent payments from 50 Table of Contents AstraZeneca AB (together with its affiliates), or AstraZeneca, and $10.0 million related to the upfront fee from Astellas Pharma Inc. ​ Collaborative arrangements revenue for the year ended December 31, 2018 included approximately $264.2 million related to our share of sales of LINZESS in the U.S., which included an approximately $29.9 million adjustment related to a change in estimate of gross-to-net sales reserves and allowances, primarily associated with governmental and contractual rebates. ​ Collaborative arrangements revenue for the year ended December 31, 2017 included approximately $256.2 million related to our share of sales of LINZESS in the U.S. ​ Collaborative arrangements revenue for the year ended December 31, 2016 included approximately $217.7 million related to our share of sales of LINZESS in the U.S. and $30.0 million related to the receipt of milestone payments. ​ (2) Cost of revenues for the year ended December 31, 2020 included approximately $3.1 million related to sales of linaclotide API and finished drug product. Cost of revenues for the year ended December 31, 2019 included approximately $23.9 million related to sales of linaclotide API and finished drug product. Cost of revenues for the year ended December 31, 2018 included approximately $31.6 million related to sales of linaclotide API and finished drug product. Cost of revenues for the year ended December 31, 2017 included approximately $16.5 million related to sales of linaclotide API and finished drug product. (3) During the year ended December 31, 2019, we recorded settlements of approximately $3.5 million related to the reversal of certain previously accrued non-cancelable purchase commitments. During the year ended December 31, 2018, we wrote down approximately $0.2 million of ZURAMPIC ® commercial supply as a result of revised demand forecasts due to the termination of our exclusive license to develop, manufacture, and commercialize in the U.S. products containing lesinurad as an active ingredient, or the Lesinurad License, including ZURAMPIC and DUZALLO ® . During the years ended December 31, 2017 and 2016, we wrote down approximately $0.3 million and approximately $0.4 million, respectively, of prepaid ZURAMPIC commercial supply primarily as a result of revised demand forecasts. (4) Amortization of acquired intangible assets was based on the economic consumption of intangible assets. Our amortization was related to the ZURAMPIC and DUZALLO intangible assets. (Gain) loss on fair value remeasurement of contingent consideration was related to our contingent consideration liability pursuant to our exclusive license to develop, manufacture, and commercialize products containing lesinurad as an active ingredient, including ZURAMPIC and DUZALLO, in the U.S. During the year ended December 31, 2018, we delivered to AstraZeneca a notice of termination of the lesinurad license agreement. As a result, we recorded an impairment charge of approximately $151.8 million due to the impairment of the ZURAMPIC and DUZALLO intangible assets. As a result, a gain on fair value remeasurement of contingent consideration of approximately $31.0 million was recorded during the year ended December 31, 2018. (5) During the year ended December 31, 2019, we recorded a gain on lease modification of approximately $3.2 million related to the modification of our former headquarters lease. (6) During the year ended December 31, 2020, we incurred approximately $15.4 million in restructuring expenses, primarily due to severance, benefits, and related costs associated with the September 2020 workforce reduction. During the year ended December 31, 2019, we incurred approximately $3.6 million in restructuring expenses, primarily due to severance, benefits, and related costs associated with the February 2019 workforce reduction. 51 Table of Contents During the year ended December 31, 2018, we incurred approximately $14.7 million in restructuring expenses, primarily due to severance, benefits, and related costs associated with the June 2018 and August 2018 workforce reductions. (7) In June 2015, we issued 2.25% Convertible Senior Notes due June 15, 2022, or the 2022 Convertible Notes. 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. Gain (loss) on derivatives consists of the change in fair value of the Convertible Note Hedges and Note Hedge Warrants, which are recorded at fair value at each reporting period and changes in fair value are recorded in our consolidated statements of operations. (8) For the year ended December 31, 2019, we recorded a loss on extinguishment of debt of approximately $31.0 million due to the write-off of unamortized debt issuance costs and debt discount related to the partial repurchase of the 2022 Convertible Notes in August 2019 and the prepayment premium and write-off of the remaining unamortized debt issuance costs and debt discount on the 8.375% Notes due 2026 Notes, or the 2026 Notes, as part of the redemption of all of the outstanding principal amount of the 2026 Notes in September 2019. For the year ended December 31, 2017, we recorded a loss on extinguishment of debt of approximately $2.0 million due to the write-off of remaining unamortized debt issuance costs on the 11% PhaRMA Notes due 2024 as part of the redemption in January 2017. (9) For the year ended December 31, 2019, we recorded other income of approximately $0.5 million related to a transition services agreement with Cyclerion Therapeutics, Inc., or Cyclerion, in connection with the Separation. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of Year Ended December 31, ​ ​ 2020 ​ 2019 ​ 2018 ​ 2017 ​ 2016 ​ ​ (in thousands) Consolidated Balance Sheet Data: ​ ​ ​ ​ ​ ​ Cash, cash equivalents and available-for-sale securities ​ $ 362,564 ​ $ 177,023 ​ $ 173,172 ​ $ 221,416 ​ ​ 305,216 ​ Working capital (excluding deferred revenue) ​ 463,666 ​ 266,798 ​ 146,911 ​ 245,569 ​ ​ 289,050 ​ Assets of discontinued operations, including current portion (1) ​ ​ — ​ ​ — ​ ​ 10,490 ​ ​ 7,256 ​ ​ 6,097 ​ Right-of-use assets (2) ​ ​ 16,576 ​ ​ 17,743 ​ ​ — ​ ​ — ​ ​ — ​ Total assets ​ 559,238 ​ 402,748 ​ 332,050 ​ 605,674 ​ ​ 709,821 ​ Current liabilities of discontinued operations (1) ​ ​ — ​ ​ — ​ ​ 15,739 ​ ​ 9,997 ​ ​ 6,618 ​ Debt financing and convertible notes, including current portion (3) ​ 430,256 ​ 407,994 ​ 413,692 ​ 396,091 ​ ​ 366,492 ​ Capital lease obligations, including current portion ​ — ​ — ​ 231 ​ 4,077 ​ ​ 6,309 ​ Operating lease obligations, including current portion ​ ​ 23,446 ​ ​ 23,228 ​ ​ — ​ ​ — ​ ​ — ​ Total liabilities ​ 496,598 ​ 495,999 ​ 528,421 ​ 595,826 ​ ​ 643,105 ​ Total stockholders’ equity (deficit) ​ 62,640 ​ (93,251) ​ (196,371) ​ 9,848 ​ ​ 66,716 ​ (1) During the year ended December 31, 2019, we completed the Separation. Assets and liabilities related to Cyclerion have been reclassified as assets and liabilities of discontinued operations for the periods presented. ​ (2) During the year ended December 31, 2019, we implemented Accounting Standards Codification Topic 842, Leases , or ASC 842. As a result, we recorded right-of-use assets and associated lease liabilities for operating leases on our consolidated balance sheet. ​ (3) In August 2019, we issued $200.0 million in aggregate principal amount of the 0.75% Convertible Senior Notes due 2024, or the 2024 Convertible Notes, and $200.0 million in aggregate principal amount of the 1.50% Convertible Senior Notes due 2026, or the 2026 Convertible Notes. We received net proceeds of approximately $391.0 million from the sale of the 2024 Convertible Notes and the 2026 Convertible Notes, after deducting fees and expenses of approximately $9.0 million. The proceeds from the issuance of the 2024 Convertible Notes and the 2026 Convertible Notes were used to pay the cost of the associated capped call transactions, redeem all of the outstanding principal balance of the 2026 Notes, and repurchase $215.0 million aggregate principal amount of the 2022 Convertible Notes. ​ 52 Table of Contents