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Item 1A. Risk Factors

2024-02-16 compared with 2023-02-16 · 504 added, 310 removed, 467 unchanged (64% of the section changed)

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The trading price of our Class A Common Stock may decline due to these risks.

Risks Related to Commercializing LINZESS and Other Product Candidates

Risks Related to LINZESS, Apraglutide and Other Product Candidates

We are highly dependent on the commercial success of LINZESS (linaclotide) in the U.S.

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The commercial success of LINZESS depends on a number of factors, including:

● the effectiveness of LINZESS as a treatment for adult patients with irritable bowel syndrome with constipation, or IBS-C, or chronic idiopathic constipation, or CIC, and, if approved, as a treatment for pediatric patients aged 6-17 years with functional constipation, or FC;

● the effectiveness of LINZESS as a treatment for adult patients with IBS-C, or CIC, and as a treatment for pediatric patients aged 6-17 years-old with FC;

● the size of the treatable patient population;

● the effectiveness of the sales, managed markets and marketing efforts by us and AbbVie, including our ability to adapt our commercial model and market strategy to the evolving landscape;

● 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 and, if approved, for pediatric patients aged 6-17 years with FC;

● our success in educating and activating adult IBS-C and CIC patients to enable them to more effectively communicate their symptoms and treatment history to their physicians;

● the coverage and reimbursement levels set by governmental authorities, private health insurers and other third-party payors;

● 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 and for pediatric patients ages 6-17 years-old with FC;

● our success in educating and activating adult IBS-C and CIC patients, and children and adolescents ages 6-17 years-old FC patients and their caregivers, to seek physician care for their symptoms;

● our ability to both secure and maintain adequate reimbursement for, and optimize patient access to, LINZESS and our ability to demonstrate that LINZESS is safer, more efficacious and/or more cost-effective than alternative therapies;

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● the occurrence of any side effects, adverse reactions or misuse, or any unfavorable publicity in these or other areas, associated with linaclotide;

● the development or commercialization of competing products or therapies for the treatment of IBS-C or CIC, or their associated symptoms.

● the development or commercialization of products or therapies that compete with LINZESS.

Our revenues from the commercialization of LINZESS are subject to these and other factors, and therefore may be unpredictable from quarter-to-quarter.

Our products may cause undesirable side effects or have other properties that could limit their commercial potential.

Linaclotide has been prescribed to millions of patients since its launch in the U.S.

and other territories beginning in December 2012.

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.

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.

As patient experience increases and expands, we and others may identify previously unknown side effects, known side effects may be found to be more frequent and/or severe than in the past, and we and others may detect unexpected safety signals for our products or any products perceived to be similar to our products.

The foregoing, or the perception of the foregoing, may have the following effects, among others:

● sales of our products may be impaired;

● regulatory approvals for our products may be delayed, denied, restricted or withdrawn;

● we or our partners may decide to, or be required to, change the products’ label or send product warning letters or field alerts to physicians, pharmacists or hospitals;

● reformulation of the products, additional nonclinical or clinical studies, changes in labeling or changes to or re- approvals of manufacturing facilities may be required;

● we or our partners may be precluded from pursuing approval of linaclotide in new territories or from studying additional development opportunities to enhance our products’ clinical profiles, including within new or existing indications, populations or formulations, as well as in potential combination products;

● our or our products’ reputation in the marketplace may suffer;

● government investigations or lawsuits, including class action suits, may be brought against us or our partners.

Any of the above occurrences would harm or prevent sales of our products, increase expenses and impair our and our partners’ ability to successfully commercialize our products.

In addition, the U.S.

FDA-approved label for LINZESS contains a boxed warning describing the risk of serious

dehydration in pediatric patients less than two years of age and a contraindication against its use in these patients.

The safety and effectiveness of LINZESS in patients less than 18 years of age have not been established.

These and other restrictions could limit the commercial potential of LINZESS.

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.

In September 2022, we announced positive topline data from a Phase III clinical trial evaluating linaclotide 72 mcg in pediatric patients aged 6-17 years with FC, and in December 2022, we and AbbVie submitted a Supplemental New Drug Application, or sNDA, to the U.S.

FDA seeking approval of a new indication of linaclotide for FC in pediatric patients aged 6-17 years.

In February 2023, the U.S.

FDA granted priority review to our sNDA and assigned a Prescription Drug User Free Act, or PDUFA, date of June 14, 2023.

The Phase III clinical trial demonstrated acceptable safety in the pediatric population aged 6-17 years.

The most common adverse event in the study was diarrhea, which occurred in 4.3% of linaclotide-treated patients versus 1.8% in the placebo group.

Additional clinical pediatric programs in IBS-C and FC are ongoing.

There can be no assurances, however, that the sNDA will be approved by the U.S.

FDA, and if approved, whether there may be any significant unknown side effects that could limit the commercial potential of LINZESS in this pediatric population.

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

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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 have offered, 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.

Obtaining and maintaining favorable reimbursement can be a time consuming and expensive process, and there is no guarantee that we or AbbVie, with respect to linaclotide in the U.S., 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.

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In addition, our business could be adversely affected if government healthcare programs, private health insurers, including managed care organizations, or other reimbursing bodies or payors limit or reduce the indications for or conditions under which our products may be reimbursed.

Moreover, as discussed further below, 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, as well as the impacts to healthcare access or administration (including, for example, limitations on medications or procedures deemed “non-essential,” reduced interaction between patients and physicians, and increased unemployment), due to the COVID-19 pandemic or otherwise may materially harm our business and commercialization efforts.

We may experience pricing pressures in connection with the sale of our current and future products due to the healthcare reforms discussed below, as well as the trend toward initiatives aimed at reducing healthcare costs, the increasing influence of managed care, the scrutiny of pharmaceutical pricing, the ongoing debates on reducing government spending and additional legislative proposals.

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Certain of these efforts have resulted in legislative and regulatory reforms.

For example, and as discussed further below, the Inflation Reduction Act, or IRA, of 2022, which could have the effect of reducing the prices we can charge and increasing the discounts we provide for our products and product candidates.

For example, and as discussed further below, the IRA, which could have the effect of reducing the prices we can charge and increasing the discounts we provide for our products and product candidates.

As another example, legislation enacted in 2021 revised the Medicaid drug rebate program in which we and other manufacturers participate so that Medicaid rebates were no longer capped at 100% of the quarterly average manufacturer price, or AMP.

We anticipate that our ability to increase prices on our products, including LINZESS, and our revenues, may be adversely affected by legislative and regulatory reforms such as the Medicaid drug rebate program revisions.

Healthcare reform efforts or any future legislation or regulatory actions aimed at controlling and reducing healthcare costs, including through measures designed to limit reimbursement, restrict access or impose unfavorable pricing modifications on pharmaceutical products, could impact our and our partners’ ability to obtain or maintain reimbursement for our products at satisfactory levels, or at all, which could materially harm our business and financial results.

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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, 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 Pharma, Inc., or Astellas, is currently commercializing LINZESS in Japan.

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

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.

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Any of the foregoing or other consequences could adversely impact our reputation, financial results and business.

We cannot give any assurance that apraglutide will be successful in clinical trials, and if successful, will receive regulatory approval, which is necessary before it can be commercialized.

Upon the closing of the VectivBio Acquisition, we added apraglutide, VectivBio’s lead investigational asset, a next generation, long-acting GLP-2 analog in development for the treatment of patients with SBS-IF and aGvHD, to our pipeline.

Apraglutide will require extensive clinical development, management of nonclinical, clinical and manufacturing activities, regulatory approval, adequate manufacturing supply, and if approved, fully integrating apraglutide into the commercial infrastructure to support with the appropriate sales, marketing, and market access efforts to generate sales in pursuit of revenue.

We have not yet completed a pivotal trial for this product candidate.

We are not permitted to market or promote this product candidate before we receive regulatory approval from the U.S.

FDA, the EMA, or comparable foreign regulatory authorities in the applicable jurisdiction, and we may never receive any such regulatory approval for apraglutide.

To obtain regulatory approvals for apraglutide, we must demonstrate with substantial evidence from adequate and well-controlled clinical trials, and to the satisfaction of the U.S.

FDA, EMA or comparable foreign regulatory authorities, that such product candidates are safe and effective for their intended uses.

However, we cannot be certain that apraglutide will be successful in clinical trials.

Further, results from clinical trials can be interpreted in different ways, and apraglutide may not receive regulatory approval even if we believe it is successful in clinical trials.

Even if we do receive such regulatory approval, we may be unable to successfully commercialize apraglutide within any approved indications or develop apraglutide for the treatment of additional indications, which would materially adversely impact our business and prospects.

The regulatory approval processes in the U.S., in the E.U.

and in other foreign jurisdictions are lengthy, time consuming and inherently unpredictable.

If we are ultimately unable to obtain regulatory approval for apraglutide or our other product candidates, our business will be harmed.

The time required to obtain regulatory approval from the U.S.

FDA, EMA and other comparable regulatory authorities is unpredictable, typically takes many years following the commencement of clinical trials and depends upon numerous factors.

In addition, regulatory approval policies, regulations, or the type and amount of clinical data necessary to gain regulatory approval may change during the course of a product candidate’s clinical development and may vary among jurisdictions, which may cause delays in the regulatory approval of or may result in the decision not to approve apraglutide or other product candidates.

Regulatory approval is never guaranteed.

Data obtained from nonclinical studies and clinical trials are susceptible to varying interpretations, and regulatory authorities may not interpret our data as favorably as we do, which may further delay, limit or prevent development efforts, clinical trials, or regulatory approval.

Even if we believe the nonclinical or clinical data for our product candidates are sufficient to support approval, such data may not be considered sufficient to support approval by the U.S.

FDA, EMA and other comparable regulatory authorities.

Of the large number of drugs in development, only a small percentage successfully complete the U.S.

FDA, EMA or comparable regulatory approval processes and are commercialized.

Accordingly, it is possible that we will never obtain regulatory approval for apraglutide or our other product candidates.

FDA, EMA or other comparable regulatory authorities may delay, limit, or deny approval of our product candidates, including apraglutide, for many reasons, including the following:

FDA, EMA or other comparable foreign regulatory authorities may disagree with the design or implementation of our clinical trials or with our interpretation of data from preclinical studies or clinical trials;

● the population studied in the clinical program may not be sufficiently broad or representative to assure safety or efficacy in the full population for which we seek approval;

● the data collected from our clinical trials may not be sufficient to support the submission of a NDA, MMA, or other submission or to obtain regulatory approval in the U.S., Europe or elsewhere;

● participants in our clinical trials or individuals using drugs similar to our product candidates may experience serious and unexpected drug-related side effects;

● we may be unable to demonstrate to the U.S.

FDA, EMA or other comparable foreign regulatory authorities that a product candidate’s risk-to-benefit ratio for its proposed indications is acceptable;

FDA, EMA or the applicable foreign regulatory authority may disagree regarding the formulation, labeling and/or the specifications of a product candidate;

FDA, EMA or other comparable foreign regulatory authorities may fail to approve the

manufacturing processes, test procedures and specifications, or facilities of third-party manufacturers with which we contract for clinical and commercial supplies;

● the regulatory approval policies or regulations of the U.S.

FDA, EMA, or other applicable comparable foreign regulations in the E.U.

and other jurisdictions may significantly change in a manner rendering our clinical data insufficient for approval.

In addition, apraglutide may be also regulated as a drug and device combination product by the U.S.

FDA, EMA and comparable foreign regulatory authorities.

Developing and obtaining regulatory approval for combination products can pose unique challenges because they involve components that are regulated under different types of regulatory requirements and potentially by different U.S.

FDA centers or regulatory authorities.

As a result, combination product candidates may raise regulatory, policy and review challenges.

Differences in regulatory pathways for each component of a combination product can impact the regulatory processes for all aspects of product development and management, including clinical investigations, marketing applications, manufacturing and quality control, adverse event reporting, promotion and advertising, user fees and post-approval modifications.

Although the U.S.

FDA, EMA, and comparable foreign authorities have systems in place for the review and approval of combination products, we may experience additional delays in the development and commercialization of apraglutide due to regulatory timing constraints and uncertainties in the product development and approval process.

Moreover, although we expect that the device component would be reviewed in connection with the review of the drug marketing application for apraglutide, if and when submitted, and that no separate marketing authorization or certification for the device component will be required, the U.S.

FDA, EMA or comparable regulatory authorities may disagree and require that we obtain a separate marketing authorization or certification for the device component, which could further delay or prevent regulatory approval of apraglutide.

This lengthy regulatory approval process, as well as the unpredictability of the results of clinical trials, may result in our failure to obtain regulatory approval to potentially market apraglutide or our other product candidates, which would significantly harm our business, results of operations, and prospects.

Delays in the completion of clinical testing of any of our products or product candidates could result in increased costs and delay or limit our ability to generate revenues.

Delays in the completion of clinical testing could significantly affect our product development costs and timing of data readouts and regulatory submissions and potential approvals.

We do not know whether planned clinical trials will be completed on schedule, if at all.

The commencement and completion of clinical trials can be delayed for a number of reasons, including delays related to:

● obtaining regulatory authorization to commence a clinical trial;

● reaching agreement on acceptable terms with prospective contract research organizations, or CROs, and trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites;

● manufacturing sufficient quantities of a product candidate for use in clinical trials;

● obtaining institutional review board or ethics committee approval to conduct a clinical trial at a prospective site;

● recruiting and enrolling patients to participate in clinical trials for a variety of reasons, including competition from other clinical trial programs for the treatment of similar conditions;

● 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.

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 or ethics committee review and approval, which may adversely impact the costs, timing or successful completion of the associated clinical trials.

If we or our partners terminate or experience delays in the completion of any clinical trials, the commercial prospects for our products or product candidates may be harmed, and our ability to generate product revenues will be delayed.

In addition, many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of regulatory approval.

Our failure to successfully develop and commercialize additional product candidates or approved products would impair our ability to grow and/or adversely affect our business.

As part of our growth strategy, we intend to explore further linaclotide development opportunities as well as to advance the development of our other pipeline programs through internal or external opportunities.

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.

For example, 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.

In June 2023, the U.S.

FDA approved LINZESS as a once-daily treatment for pediatric patients ages 6-17 years-old with FC.

Additional clinical pediatric programs in IBS-C and FC are ongoing.

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

Furthermore, they may result in adverse events, or perceived adverse events, in certain patient populations that are then attributed to the currently approved patient population, which may result in adverse regulatory action at the U.S.

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

The strength of our company’s pipeline will depend in large part on the outcomes of studies of assets in our pipeline, such as apraglutide, CNP-104, IW-3300, and any other assets that we may acquire or license from third parties.

Through the VectivBio Acquisition we added apraglutide to our pipeline.

We are conducting a Phase III clinical trial, STARS, to assess the safety and efficacy of apraglutide in adult patients with SBS-IF, and expect to report topline results in March 2024.

In October 2023, we presented positive final data from the STARS Nutrition Phase II study of apraglutide in patients with SBS-IF and colon-in-continuity.

We are also conducting open label extension studies to further evaluate the efficacy, safety and tolerability of apraglutide in SBS-IF and to support potential submissions of marketing applications for apraglutide in the U.S., European Union, or E.U., and Japan.

We are also conducting a Phase II exploratory study, STARGAZE, to evaluate apraglutide in patients with steroid-refractory gastrointestinal aGvHD, and expect data in the first quarter of 2024.

Through the COUR Collaboration Agreement, we and COUR are developing CNP-104 for the treatment of PBC.

COUR is currently conducting a clinical study to evaluate the safety, tolerability, pharmacodynamic effects and efficacy of CNP-104 in PBC patients, with topline data expected in the third quarter of 2024.

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

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

Our product candidates must satisfy rigorous standards of safety and efficacy before they can be approved for sale by the U.S.

FDA, EMA or comparable foreign authorities.

To satisfy these standards, we must allocate resources among development programs and we must engage in costly and lengthy research and development efforts, which are subject to unanticipated delays and other significant uncertainties.

Despite our efforts, our product candidates may not offer therapeutic or other improvement over existing competitive drugs, be proven safe and effective in clinical trials, or meet applicable regulatory standards.

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

We have ongoing or planned nonclinical and clinical trials, including for linaclotide, apraglutide, and our other product candidates.

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

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

Results from clinical trials and findings from nonclinical studies could lead to abrupt changes in development activities, including the possible limitation or cessation of development activities associated with a particular product candidate or program.

We cannot be certain that apraglutide or our other product candidates will be successful in clinical trials.

Furthermore, our analysis of data obtained from nonclinical and clinical activities is subject to confirmation and interpretation by the U.S.

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

FDA, EMA 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.

FDA, EMA or other applicable regulatory requirements is costly, time-consuming, uncertain and subject to unanticipated delays.

We cannot give any assurance that apraglutide or our other product candidates will receive regulatory approval.

Even if we do receive such regulatory approval, we may be unable to successfully commercialize apraglutide or our other product candidates in any approved

indications or develop such product candidates for the treatment of additional indications, which would materially adversely impact our business and prospects.

The pricing of apraglutide and our other product candidates, if and when approved for marketing, will depend in part on pricing and reimbursement strategies adopted by our competitors.

The pricing of apraglutide and our other product candidates, if and when approved for marketing, will depend, in part, on the pricing and reimbursement strategies adopted by our competitors.

For example, with respect to apraglutide, a marketed GLP-2 product already exists in the U.S., E.U.

and other international markets, which may or may not be genericized within the coming years.

Additionally, another investigational GLP-2 may be launched in advance of the potential approval of apraglutide in the U.S.

Order of market entry and reimbursement decisions could place apraglutide at a competitive disadvantage, possibly deny market exclusivity rights, and/or elevate the need for significant clinical differentiation to support certain pricing decisions.

If these or other factors impact the price we can charge for apraglutide, we may reduce our revenue and results of operations could be affected.

Similar competitive factors could apply to pricing and reimbursement decisions for our other product candidates, if approved, in the future.

We must work effectively and collaboratively with AbbVie to market and sell LINZESS in the U.S., and we must adapt our commercial model and market strategy to the evolving landscape for LINZESS to achieve its maximum commercial potential.

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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 in an effort 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.

Our consumer marketing campaign 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 in an effort to optimize the education of key healthcare professionals 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, modify and adapt our commercialization plan in a coordinated and integrated fashion, including evaluating and adjusting as necessary the level and mix of marketing and promotion efforts, in response to changing business, market or other factors in order to advance the commercial potential of LINZESS, such as the potential approval of LINZESS in pediatric patients aged 6-17 years for FC.

Further, we and AbbVie must continue to focus our marketing campaign on the importance of treating both constipation and overall abdominal symptoms in adults with IBS-C and support an effective physician-patient dialogue around IBS-C, CIC and the potential for LINZESS as an appropriate therapy for such symptoms.

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.

FDA approval of LINZESS in pediatric patients ages 6-17 years-old for FC.

Further, we and AbbVie must continue to focus our combined sales and marketing efforts on educating customers about the relevant data and information for LINZESS in treating adults with IBS-C and CIC, and taking a measured approach to educating and raising awareness on the FC indication for pediatric patients ages 6-17 years-old.

We and AbbVie must ensure a highly targeted and efficient promotional mix combined with providing our sales forces with the highest quality support, guidance, and oversight for them to continue effectively promoting LINZESS to key healthcare professionals.

If we and AbbVie fail to evolve with the changing commercial landscape successfully and 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 commercial 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.

During 2022, in-person work practices for customer-facing employees returned to near pre-COVID 19 levels.

However, new strains or variants of the virus that cause outbreaks of COVID-19 may present in the future risks to successful execution of the commercial operating plan for LINZESS due in part to limitations on in-person work practices for our customer-facing employees.

T he virtual support we may provide to customers may not be as effective as in-person efforts, and our in-person efforts may be limited and/or 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 face competition and new products may emerge that provide different or better alternatives for treatment of the conditions that our products are approved to treat.

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These developments may render our products obsolete or noncompetitive.

Linaclotide competes with certain prescription therapies and over-the-counter products, including with products that have attained significant levels of market acceptance.

The availability of prescription competitors and over-the- counter products could limit the demand, and the price we are able to charge, for LINZESS unless we are able to achieve and maintain market acceptance among the medical community and patients and differentiate LINZESS on the basis of its cost and/or actual or perceived benefits.

Linaclotide competes with certain prescription therapies and OTC products, some of which have attained significant levels of market acceptance.

The availability of prescription competitors and OTC products could limit the demand, and the price we are able to charge, for LINZESS unless we are able to maintain market acceptance among the medical community and patients and differentiate LINZESS on the basis of its cost and/or actual or perceived benefits.

For example, Takeda’s AMITIZA (lubiprostone) is approved by the U.S.

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for the treatment of IBS-C, CIC and opioid-induced constipation;

Bausch Health’s TRULANCE (plecanatide) is approved by the U.S.

Bausch’s TRULANCE (plecanatide) is approved by the U.S.

FDA for sale in the U.S.

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for the treatment of CIC in adults;

and in April 2022, Ardelyx launched in the U.S.

in April 2022, Ardelyx launched in the U.S.

IBSRELA™ (tenapanor), a U.S.

FDA-approved treatment for IBS-C in adults;

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

and in August 2022, Vibrant Gastro Inc.

launched Vibrant, a drug-free capsule that the U.S.

FDA granted marketing authorization for the treatment of CIC in adults who have not experienced relief of their bowel symptoms by using laxative therapies at the recommended dosage for at least one month.

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

Additionally, we believe other companies are developing products that could compete with linaclotide, should they be approved by the U.S.

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In addition to competition from such prescription and over-the-counter products, we may also face competition from multiple low-cost generic versions of such products when available in the U.S.

For example, authorized generic versions of AMITIZA became available in the U.S.

by Endo International and Dash Pharmaceuticals in January 2021 and in October 2022, respectively, and we expect additional generic versions of AMITIZA to become available as early as 2023.

For example, an authorized generic version of AMITIZA was first launched in the U.S.

in January of 2021 and multiple versions are now available.

We expect additional generic versions to become available in the future.

In addition, any product candidates that we successfully develop and commercialize will compete with existing drugs and new drugs that may become available in the future.

Apraglutide, if successfully developed and approved, will compete with companies that are commercializing or developing drugs for SBS, such as Takeda, which currently distributes the GLP-2 analog teduglutide, marketed as GATTEX® (teduglutide) in the U.S.

and REVESTIVE® (teduglutide for injection) in Europe, and Zealand Pharma A/S, which is developing the GLP-2 analog glepaglutide for the treatment of SBS and which submitted an NDA to the U.S.

FDA in December 2023.

Hanmi Pharmaceutical is also developing a GLP-2 analog which is in a Phase 2 clinical trial.

Products with other mechanisms of action may emerge as future competition.

Our products or product candidates may cause undesirable side effects or have other properties that could delay or prevent their development, create unpredictable clinical trial results, impact its regulatory approval or limit their commercial potential.

Undesirable side effects caused by our products or product candidates, including adverse events associated with our product candidates, could cause us or regulatory authorities to interrupt, delay or halt clinical trials and could result in a more restrictive label or the delay or denial of regulatory approval by the U.S.

FDA, EMA or other comparable foreign regulatory authorities.

Additionally, with respect to our approved products, as patient experience increases and expands, or if one or more of our product candidates receives marketing approval, we, our partners, or others may later identify previously unknown side effects, known side effects may be found to be more frequent and/or severe than in the past, or detect unexpected safety signals for our products or any products perceived to be similar to our products.

The foregoing, or the perception of the foregoing, may have the following effects, among others:

● sales of our products may be impaired;

● regulatory approvals for our products may be delayed, denied, restricted or withdrawn;

● we or our partners may decide to, or be required to, change the products’ labeling or send product warning letters or field alerts to physicians, pharmacists or hospitals;

● reformulation of the products, additional nonclinical or clinical studies, changes in labeling or changes to or re-approvals of manufacturing facilities may be required;

● we or our partners may be precluded from pursuing approval of our products in new territories or from studying additional development opportunities to enhance our products’ clinical profiles, including within new or existing indications, populations or formulations, as well as in potential combination products;

● we may be required to create a Risk Evaluation and Mitigation Strategy, or REMS, plan, or similar actions in other jurisdictions which could include a medication guide outlining the risks of such side effects for distribution to patients, a communication plan for healthcare providers or other elements to assure safe use;

● our or our products’ reputation in the marketplace may suffer;

● government investigations or lawsuits, including class action suits, may be brought against us or our partners.

Any of the above occurrences could prevent us from achieving or maintaining market acceptance of our product candidates, if they are approved, and could significantly harm our business, results of operations, and prospects, prevent sales of our products, increase expenses and impair our and our partners’ ability to successfully commercialize our products.

Linaclotide has been prescribed to millions of patients since its launch in the U.S.

and other territories beginning in December 2012.

As the patient experience with linaclotide increases and expands, we and others may identify previously unknown side effects, known side effects may be found to be more frequent or severe than in the past, and others may detect unexpected safety signals for linaclotide or any products perceived to be similar to linaclotide.

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 in adults, 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 FC trial in pediatric patients ages 6-17 years-old, severe diarrhea was reported in one linaclotide-treated patient.

In addition, the U.S.

FDA-approved labeling for LINZESS contains a boxed warning describing the risk of serious dehydration in pediatric patients less than two years of age and a contraindication against its use in these patients.

The safety and effectiveness of LINZESS in patients with FC less than 6 years of age or in patients with IBS-C less than 18 years of age have not been established.

These and other restrictions could limit the commercial potential of LINZESS.

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.

In June 2023, the U.S.

FDA approved LINZESS as a once-daily treatment for pediatric patients ages 6-17 years-old with FC, making LINZESS the first and only FDA-approved prescription therapy for FC in this patient population.

Additional clinical pediatric programs in IBS-C and FC are ongoing.

There can be no assurances, however, whether there may be any significant unknown side effects that could limit the commercial potential of LINZESS in this pediatric population.

Patients treated with apraglutide may experience well known class-specific adverse events, including, but not limited to, abdominal pain, injection site reactions, nausea, headaches, abdominal distension, upper respiratory tract infection, vomiting and fluid overload.

There may be additional mechanistic side effects that only reveal themselves upon the completion of larger studies.

Additionally, apraglutide has been designed to have a long half-life, creating uncertainty about its long-term safety profile.

For example, the increased pleiotropic activity of apraglutide will need to be assessed in longer-term non-clinical safety studies.

Even though LINZESS is approved by the U.S.

FDA for use in adult patients, post-approval development and regulatory requirements still remain, which present additional challenges, and we may not be successful in obtaining approval for additional indications for LINZESS that we are seeking or may seek in the future.

FDA for use in adult and certain pediatric patients, post-approval development and regulatory requirements still remain, which may present additional challenges, and we may not be successful in obtaining approval for additional indications for LINZESS that we are seeking or may seek in the future.

In August 2012, the U.S.

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FDA requirements, including those governing the testing, manufacturing, labeling, packaging, storage, advertising, promotion, sale, distribution, recordkeeping and submission of safety and other post-market information.

FDA-approved label for LINZESS contains a boxed warning describing the risk of serious dehydration in pediatric patients less than two years of age and a contraindication against its use in these patients.

The safety and effectiveness of LINZESS in patients less than 18 years of age have not been established.

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.

FDA seeking approval of a new indication of linaclotide for FC in pediatric patients aged 6-17 years.

In February 2023, the U.S.

FDA granted priority review to our sNDA and assigned a PDUFA date of June 14, 2023.

We may not be successful in obtaining U.S.

FDA approval for this new indication of linaclotide for FC in

pediatric patients aged 6-17 years or any additional indications for linaclotide that we may seek in the future.

Additional clinical pediatric programs in IBS-C and FC are ongoing.

Our ability to expand the indication or label information for LINZESS to pediatrics will depend on, among other things, our successful completion of pediatric clinical programs.

These post-approval requirements impose burdens and costs on us.

In June 2023, the U.S.

The safety and effectiveness of LINZESS in patients with FC less than 6 years of age or in patients with IBS-C less than 18 years of age have not been established.

Additional clinical pediatric programs in IBS-C and FC are ongoing in support of post-approval requirements.

Our ability to expand the indication or labeling information for LINZESS will depend on, among other things, our successful completion of pediatric clinical programs.

These post-approval requirements impose resource and cost burdens on us.

Failure to effectively, appropriately and timely conduct and complete the required studies relating to our products, monitor and report adverse events and meet our other post-approval commitments would lead to negative regulatory action at the U.S.

FDA, which could include withdrawal of regulatory approval of our products for their currently approved indications and patient populations.

Manufacturers of drug products and their facilities are subject to continual review and periodic inspections by the U.S.

FDA and other regulatory authorities for compliance with current good manufacturing practices, or 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:

● issue warning letters or untitled letters;

● impose civil or criminal penalties;

● suspend or withdraw regulatory approval;

● suspend any ongoing clinical trials;

● refuse to approve pending applications or supplements to applications submitted by us or our partners;

● impose restrictions on operations, including costly new manufacturing requirements;

● seize or detain products or require us to initiate a product recall.

Even though linaclotide is approved for marketing in the U.S.

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● may not approve linaclotide for any or all indications or patient populations for which approval is sought;

● may require significant warnings or restrictions on use to the product label for linaclotide;

● may require significant warnings or restrictions on use to the product labeling for linaclotide;

● may change their approval policies or adopt new regulations.

If any of the foregoing were to occur, our or our partners’ receipt of regulatory approval in the applicable jurisdiction could be delayed or we or our partners may never receive approval at all.

Additionally, we or our partners cannot be certain of the duration or extent to which the COVID-19 pandemic may impact operations of regulatory authorities in jurisdictions around the world, and any reduction in resources dedicated to review and approval of products in applicable jurisdictions could delay or otherwise impact approval or other regulatory decisions or actions.

Further, regulatory approval in one jurisdiction does not ensure regulatory approval in another, but a failure or delay in obtaining regulatory approval in one jurisdiction may have a negative effect on the regulatory processes in others.

If linaclotide is not approved for all indications or patient populations or with the label requested, this would limit the uses of linaclotide and have an adverse effect on its commercial potential or require costly post-marketing studies.

If linaclotide is not approved for all indications or patient populations or with the labeling requested, this would limit the uses of linaclotide and have an adverse effect on its commercial potential or require costly post-marketing studies.

Risks Related to Our Growth Strategy

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The success of this strategy depends upon our ability to identify, select and acquire promising assets, platforms or other opportunities.

For example, in November 2021, we entered into a collaboration and license option agreement with COUR Pharmaceutical Development Company, Inc., or COUR, relating to COUR’s investigational therapy CNP-104, a potential treatment of primary biliary cholangitis, or PBC.

Under this agreement, COUR will conduct an initial clinical trial for CNP-104 in PBC patients, and we have been granted an option to acquire an exclusive license to research, develop, manufacture and commercialize products containing CNP-104 in the U.S.

For example, through the VectivBio Acquisition, we added apraglutide to our pipeline.

There is no assurance that apraglutide will be successful in clinical trials, and if successful, that it will receive regulatory approval.

For another example, through the COUR Collaboration Agreement, we and COUR are developing CNP-104 for the treatment of PBC, and we have been granted an option to acquire an exclusive license to research, develop, manufacture and commercialize products containing CNP-104 in the U.S.

for the treatment of PBC after reviewing the data from this study.

There is no assurance that we will exercise this option following COUR’s completion of this initial study, or that CNP-104 will be successful for the treatment of PBC.

There is no assurance that we will exercise the option for CNP-104, and if exercised, that we will complete subsequent clinical trials and receive regulatory approval.

In addition, the process of proposing, negotiating and implementing a license or acquisition is lengthy and complex and there is no assurance we will be able to enter into similar transactions in the future.

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Any product candidate that we in-license or acquire may require additional development efforts prior to commercial sale, including extensive clinical testing and approval by the U.S.

FDA and applicable foreign regulatory authorities.

We may also rely on our licensors and collaboration partners to conduct development activities for certain of our product candidates, and while we may have oversight of such development activities, such licensees or collaboration partners may not effectively develop any such product candidates.

FDA, EMA and applicable foreign regulatory authorities.

We may also rely on our licensors and collaboration partners to conduct development activities for certain of our product

candidates, and while we may have oversight of such development activities, such licensees or collaboration partners may not effectively develop any such product candidates.

All product candidates are prone to risks of failure typical of pharmaceutical product development, including the possibility that a product candidate will not be shown to be sufficiently safe and effective for approval by regulatory authorities or competitors may develop alternatives that render our potential product candidates obsolete or less attractive.

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If other licensees do not effectively develop or commercialize any such product outside the licensed territory, our reputation or the reputation of any such product may be impacted.

Our failure to successfully develop and commercialize additional product candidates or approved products would impair our ability to grow and/or adversely affect our business.

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

For example, 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.

FDA seeking approval of a new indication of linaclotide for FC in that age group.

In February 2023, the U.S.

FDA granted priority review to our sNDA and assigned a PDUFA date of June 14, 2023.

Additional clinical pediatric programs in IBS-C and FC are ongoing.

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

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

The strength of our company’s pipeline will depend in large part on the outcomes of studies of assets in our pipeline, such as IW-3300 for the potential treatment of interstitial cystitis/bladder pain syndrome, and any other assets that we may acquire or license from third parties, including CNP-104 for the treatment of PBC, for which we have been granted an option to acquire an exclusive license to research, develop, manufacture and commercialize, in the U.S., following COUR’s completion of the initial study of CNP-104.

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

Our product candidates must satisfy rigorous standards of safety and efficacy before they can be approved for sale by the U.S.

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

We have ongoing or planned nonclinical and clinical trials, including for linaclotide, and our product candidates.

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

Furthermore, our analysis of data obtained from nonclinical and clinical activities is subject to confirmation and interpretation by the U.S.

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.

FDA or other applicable regulatory requirements is costly, time-consuming, uncertain and subject to unanticipated delays.

We may be unable to maintain the benefits associated with orphan drug designation, including market exclusivity, which may harm our business.

In the U.S., orphan drug designation entitles a party to financial incentives such as opportunities for grant funding towards clinical trial costs, tax advantages, and user-fee waivers.

In addition, if a product receives the first U.S.

FDA approval for the indication for which it has orphan designation, the product is entitled to orphan drug exclusivity, which means the U.S.

FDA may not approve any other application to market the same drug for the same indication for a period of seven years, except in limited circumstances, such as a showing of clinical superiority over the product with orphan exclusivity or where the manufacturer is unable to assure sufficient product quantity.

In the E.U., orphan drug designation entitles a company to financial incentives such as reduction of fees or fee waivers and ten years of data and market exclusivity for the approved therapeutic indication following marketing authorization of a medicinal product, including biological medicinal products.

This period may be reduced to six years if, at the end of the fifth year, the medicinal product no longer fulfills the orphan designation criteria, including where it is shown that the product is sufficiently profitable not to justify maintenance of market exclusivity.

Because the extent and scope of patent protection for our products may in some cases be limited, orphan drug designation is especially important for our product candidates for which orphan drug designation may be available.

For eligible drugs, we plan to rely on the exclusivity period under the Orphan Drug Act to maintain a competitive position.

If we do not obtain orphan drug exclusivity for our drug product candidates that does not have a broad patent protection, our competitors may then sell the same drug to treat the same condition sooner than if we had obtained orphan drug exclusivity and our revenue will be reduced.

Even though we have orphan drug designation for apraglutide in the U.S.

and in the E.U., we may not be the first to obtain marketing approval for any particular orphan indication due to the uncertainties associated with developing pharmaceutical products.

Based on available preclinical and clinical data, both the U.D.

FDA and the EMA have granted apraglutide orphan drug designation for the treatment of SBS.

FDA also granted orphan drug designation for apraglutide for the prevention of aGvHD.

Orphan drug applicability will be reassessed by health authorities upon completion of clinical studies and submission of our marketing application.

In the E.U., the orphan designation for apraglutide may not be maintained at the time of grant of the marketing authorization if the EMA and COMP do not consider that there is sufficient confirmatory evidence to support that the criteria orphan designation continue to be met.

Even if we obtain orphan drug exclusivity for a product, that exclusivity may not effectively protect the product from competition because different drugs with different active moieties can be approved for the same condition.

Even after an orphan drug is approved, the U.S.

FDA or European Commission can subsequently approve the same drug with the same active moiety for the same condition if the U.S.

FDA or EMA concludes that the later drug is safer, more effective, or makes a major contribution to patient care.

Orphan drug designation neither shortens the development time or regulatory review time of a drug nor gives the drug any advantage in the regulatory review or approval process.

If we are unable to successfully partner with other companies to develop and commercialize products and/or product candidates, our ability to grow would be impaired and our business would be adversely affected.

As part of our business strategy, we may partner with pharmaceutical, biotechnology or other companies to develop and commercialize products or product candidates.

Although we have entered into such arrangements with respect to the development and commercialization of linaclotide worldwide, there can be no assurance that we will be able to do so in the future with respect to other products or product candidates that we either develop internally or in- license or that we will be able to gain the interest of potential partners;

Although we have entered into such arrangements with respect to the development and commercialization of linaclotide worldwide and of apraglutide in Japan, there can be no assurance that we will be able to do so in the future with respect to other products or product candidates that we either

develop internally or in- license or that we will be able to gain the interest of potential partners;

establish and maintain development, manufacturing, marketing, sales or distribution relationships on acceptable terms;

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If we are unable to establish successful partnering arrangements when advantageous, we may not gain access to the financial resources and industry experience necessary to develop, commercialize or successfully market our products or product candidates, may be forced to curtail, delay or stop a development program or one or more of our other development programs, delay commercialization, reduce the scope of our planned sales or marketing activities or undertake development or commercialization activities at our own expense, and therefore may be unable to generate revenue from products or product candidates or do so to their full potential.

Delays in the completion of clinical testing of any of our products or product candidates could result in increased costs and delay or limit our ability to generate revenues.

Delays in the completion of clinical testing could significantly affect our product development costs and timing

of data readouts and regulatory submissions and potential approvals We do not know whether planned clinical trials will be completed on schedule, if at all.

The commencement and completion of clinical trials can be delayed for a number of reasons, including delays related to:

● the ongoing COVID-19 pandemic, including restrictions on activities imposed by government authorities in response;

● obtaining regulatory approval to commence a clinical trial;

● reaching agreement on acceptable terms with prospective CROs and trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites;

● manufacturing sufficient quantities of a product candidate for use in clinical trials;

● obtaining institutional review board approval to conduct a clinical trial at a prospective site;

● recruiting and enrolling patients to participate in clinical trials for a variety of reasons, including competition from other clinical trial programs for the treatment of similar conditions;

The COVID-19 pandemic has impacted enrollment in our clinical trials and may impact clinical trial enrollment or participation in the future, for example due to suspension of in-person procedures required for enrollment or lower or discontinued patient participation compared to pre-COVID-19 pandemic levels as a result of new strains or variants.

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

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:

● failure to conduct the clinical trial in accordance with regulatory requirements or the study protocols;

● inspection of the clinical trial operations or trial sites by the U.S.

FDA or other regulatory authorities resulting in the imposition of a clinical hold;

● unforeseen safety issues;

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

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.

In addition, many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of regulatory approval.

Risks Related to the VectivBio Acquisition

We may be unable to successfully integrate the business and personnel of VectivBio, and may not realize the expected benefits and anticipated synergies of such acquisition.

In December 2023, we completed the VectivBio Acquisition.

We may not realize the expected benefits from such acquisition because of integration difficulties or other challenges.

The success of the VectivBio Acquisition will depend, in part, on our ability to realize all or some of the expected benefits from the acquisition and anticipated synergies from integrating its business with our existing business.

The integration process may be complex, costly and time-consuming and we may not ultimately realize the return on our investment.

Risks we may face in connection with the VectivBio Acquisition include, among others:

● failure to successfully implement our business plans for the combined business, including the development of apraglutide for SBS-IF;

● failure of the VectivBio Acquisition to further our business strategy as we expected, including the development and, if approved, the commercialization of apraglutide for SBS-IF;

● unexpected losses of key employees, customers or suppliers, and the complexities associated with integrating personnel from another company;

● unanticipated issues in conforming VectivBio’s standards, processes, procedures and controls with our operations;

● coordinating product candidate and process development;

● increasing the scope, geographic diversity and complexity of our operations;

● diversion of management’s attention from other business concerns;

● adverse effects on our or VectivBio’s existing business relationships;

● unanticipated changes in applicable laws and regulations;

● unanticipated expenses and liabilities associated with the VectivBio Acquisition;

● other difficulties in the assimilation of VectivBio operations, technologies, product candidates and systems.

We may have unanticipated or larger than anticipated liabilities for patent and trademark infringement claims, violations of laws, commercial disputes, taxes and other known and unknown types of liabilities.

There may be liabilities that we underestimated or did not discover in the course of performing our due diligence investigation.

If we experience difficulties with the integration process or if the business of VectivBio deteriorates, the anticipated benefits, cost savings, growth opportunities and other synergies of the VectivBio Acquisition may not be realized fully or at all, or may take longer to realize than expected.

If any of the above risks occur, our business, financial condition, results of operations and cash flows may be materially and adversely impacted, we may fail to meet the expectations of investors or analysts, and our stock price may decline as a result.

Risks Related to Our Dependence on Third Parties

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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 in certain countries including in Europe.

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

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

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We and/or our partners have commercial supply agreements with independent third parties to manufacture the linaclotide API.

The integration of our efforts with our partners’ efforts is subject to the uncertainty of the markets for pharmaceutical products in each partner’s respective territories, and accordingly, these relationships must evolve to meet any new challenges, including those arising out of the COVID-19 pandemic, that arise in those regions.

These integrated functions may not be carried out effectively and efficiently if we fail to communicate and coordinate with our linaclotide partners, and vice versa.

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If we do not effectively communicate with each partner and ensure that the entire network is making integrated and cohesive decisions focused on the global brand for linaclotide, linaclotide will not achieve its maximum commercial potential.

Further, we have limited ability to control the amount or timing of resources that our partners devote to linaclotide, particularly in light of the impact of the COVID-19 pandemic on our partners’ operations.

Further, we have limited ability to control the amount or timing of resources that our partners devote to linaclotide.

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.

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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;

each of Astellas, AstraZeneca and AbbVie is responsible

for reporting adverse event information from its territory to us.

each of Astellas, AstraZeneca and AbbVie is responsible for reporting adverse event information from its territory to us.

If we fail to perform such activities and maintain the global safety database for linaclotide or if our partners do not report adverse events related to linaclotide, or fail to do so in a timely manner, we may not receive the information that we or our partners are required to report to the U.S.

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If we or our partners are unsuccessful in any of the foregoing due to poor process, execution, systems, oversight, communication, adjudication or otherwise, then we may suffer any number of consequences, including the imposition of additional restrictions on the use of linaclotide, removal of linaclotide from the market, criminal prosecution, the imposition of civil monetary penalties, seizure of such products, or delay in approval of future products.

We rely entirely on contract manufacturers, our partners and other third parties to manufacture linaclotide and our other product candidates and distribute linaclotide.

We rely entirely on contract manufacturers, our partners and other third parties to manufacture linaclotide, apraglutide, and our other product candidates and to distribute linaclotide.

If they are unable to comply with applicable regulatory requirements, unable to source sufficient raw materials, experience manufacturing or distribution difficulties, or are otherwise unable to manufacture and distribute sufficient quantities to meet demand, our development and commercialization efforts may be materially harmed.

We have no internal manufacturing or distribution capabilities.

Instead, we rely on a combination of contract manufacturers and our partners to manufacture API, finished drug product and finished goods for linaclotide and our other product candidates.

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

Should we, or any of our partners or any third-party manufacturers we or our partners engage, experience setbacks or challenges in our manufacturing efforts, including setbacks related to the COVID-19 pandemic described further below, our development and commercialization efforts may be materially harmed.

Instead, we rely on a combination of contract manufacturers and our partners to manufacture API, finished drug product and finished goods for linaclotide, apraglutide, and our other product candidates.

For linaclotide, each of our partners is responsible for API, finished drug product and finished goods manufacturing (including bottling and packaging) for its respective territories and distributing the finished goods to wholesalers.

We and/or our partners have commercial supply agreements with independent third parties to manufacture linaclotide API.

For apraglutide, we design and develop the manufacturing process together with CDMOs for the manufacture for human use.

Should we, or any of our partners or any third-party manufacturers we or our partners engage, experience setbacks or challenges in our manufacturing efforts, our development and commercialization efforts may be materially harmed.

Each of our partners and the third-party manufacturers we or our partners engage, must comply with GMP and other stringent regulatory requirements enforced by the U.S.

FDA and foreign regulatory authorities in other jurisdictions.

FDA, EMA and other foreign regulatory authorities in other jurisdictions.

These requirements include, among other things, quality control, quality assurance and the maintenance of records and documentation, which occur in addition to our and our partners’ own quality assurance releases.

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:

● issue warning letters or untitled letters;

● impose civil or criminal penalties;

● suspend or withdraw regulatory approval;

● suspend any ongoing clinical trials;

● refuse to approve pending applications or supplements to applications submitted by us or our partners;

● impose restrictions on operations, including costly new manufacturing requirements;

● seize or detain products or require us to initiate a product recall.

Manufacturers of our products may be unable to comply with these GMP requirements and with other regulatory requirements.

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

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, we expect that apraglutide may be regulated by the U.S.

FDA as a drug-device combination product.

Our third-party manufacturers may not be able to comply with GMP regulations applicable to drug-device combination products, including applicable provisions of the U.S.

FDA’s drug GMP regulations and device GMP requirements embodied in the Quality System Regulation, or similar regulatory requirements outside the U.S.

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.

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.

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New manufacturers would need to develop and implement the necessary production techniques and processes, which along with their facilities, would need to be inspected and approved by the regulatory authorities in each applicable territory.

loss of product approval, fines and sanctions, reputational damage, shipment delays, inventory shortages, inventory write-offs and other product-related charges and increased manufacturing costs.

If our partners or the third-party manufacturers we or our partners engage fail to adhere to applicable GMP or other regulatory requirements, experience delays or disruptions in the availability of raw materials or experience manufacturing or distribution problems, we will suffer significant consequences, including product seizures or recalls, loss of product approval, fines and sanctions, reputational damage, shipment delays, inventory shortages, inventory write-offs and other product-related charges and increased manufacturing costs.

If we experience any of these results, or if maximum or available manufacturing capacities are insufficient to meet demand, our and our partners’ development or commercialization efforts may be materially harmed.

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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.

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Although the U.S.

FDA and other regulatory agencies do not regulate a physician’s choice of treatments, the U.S.

FDA and other regulatory agencies do not regulate

a physician’s choice of treatments, the U.S.

FDA and other regulatory agencies do restrict manufacturer communications on off-label use.

Companies are not permitted to promote drugs or medical devices for off-label uses or to promote unapproved drugs or medical devices.

Accordingly, we do not permit promotion of any product that we develop, license, commercialize, promote, co-promote or otherwise partner prior to approval or for any indication, population or use not described in or consistent with such product’s label.

FDA and other regulatory and enforcement authorities actively enforce laws and regulations prohibiting promotion of off-label uses and the promotion of products for which marketing approval has not been obtained.

A company that is found to have promoted off-label uses will be subject to significant liability, including civil and administrative remedies as well as criminal sanctions.

A company that is found to have promoted off-label uses or have engaged in improper pre-approval promotion will be subject to significant liability, including civil and administrative remedies as well as criminal sanctions.

Even if it is later determined that we were not in violation of these laws, we may be faced with negative publicity, incur significant expenses defending our actions and have to divert significant management resources from other matters.

Notwithstanding the regulatory restrictions on off-label promotion, the U.S.

FDA and other regulatory authorities allow companies to engage in truthful, non-misleading, and non-promotional scientific exchange concerning their products.

We intend to engage in medical education activities and communicate with healthcare providers in compliance with all applicable laws, regulatory guidance and industry best practices.

Although we believe we have put

in place a robust compliance program, which is designed to ensure that all such activities are performed in a legal and compliant manner, we cannot be certain that our program will address all areas of potential exposure and the risks in this area cannot be entirely eliminated.

FDA and other regulatory authorities allow companies to engage in truthful, non-misleading, and non-promotional disease awareness and scientific exchange concerning their products, investigational assets and therapeutic areas of interest.

We intend to engage in disease awareness and medical and scientific exchange and education activities and communicate with healthcare providers in compliance with all applicable laws, regulatory guidance and industry best practices.

Although we believe we have put in place a robust compliance program, which is designed to ensure that all such activities are performed in a legal and compliant manner, we cannot be certain that our program will address all areas of potential exposure and the risks in this area cannot be entirely eliminated.

If we fail to comply with healthcare and other regulations, we could face substantial penalties and our business, operations and financial condition could be adversely affected.

The products that we promote are marketed in the U.S.

and/or covered by federal healthcare programs, and, as a result, certain federal and state healthcare laws and regulations pertaining to product promotion, fraud and abuse, privacy and price reporting and payment are applicable to, and may affect, our business.

These laws and regulations include:

The marketing of pharmaceutical and biopharmaceutical products and related arrangements with healthcare providers, third-party payors, patients and other third parties in the healthcare industry are subject to a wide range of healthcare laws and regulations within the U.S.

and in foreign jurisdictions in which we operate.

These laws and regulations may constrain our business and/or financial arrangements.

Within the U.S., federal laws and regulations include:

● federal healthcare program anti-kickback laws, which prohibit, among other things, persons from offering, soliciting, receiving or providing remuneration, directly or indirectly, to induce either the referral of an individual for, or the purchasing or ordering of, a good or service for which payment may be made under federal healthcare programs such as Medicare and Medicaid;

● federal false claims laws which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, information or claims for payment from Medicare, Medicaid, or other third-party payors that are false or fraudulent, and which may apply to us for reasons including providing coding and billing advice to customers;

● the federal Health Insurance Portability and Accountability Act of 1996, which prohibits executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters and which also imposes certain requirements relating to the privacy, security and transmission of individually identifiable health information on certain types of entities, which include many healthcare providers with whom we interact and health plans with which we may interact;

● federal false claims laws which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, information or claims for payment from Medicare, Medicaid, or other third-party payors that are false or fraudulent, and which may apply to manufacturers for reasons including providing coding and billing advice to customers or engaging in prohibited off-label promotional activities;

● federal Health Insurance Portability and Accountability Act of 1996, which prohibits executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters and which also imposes certain requirements relating to the privacy, security and transmission of individually identifiable health information on certain types of entities, which include many healthcare providers with whom we interact and health plans with which we may interact;

● the Federal Food, Drug, and Cosmetic Act, which among other things, strictly regulates drug product and medical device marketing, prohibits manufacturers from marketing such products prior to approval or for off-label use and regulates the distribution of samples;

● 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 21 st Century Cures Act, which amends Section 114 of the Food and Drug Administration Modernization Act of 1997 to define healthcare economic information and the circumstances under which healthcare economic information may be disseminated;

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, certain non-physician practitioners and teaching hospitals 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.

We also are subject to the U.S.

Foreign Corrupt Practices Act which prohibits corporations and individuals from paying, offering to pay, or authorizing the payment of anything of value to any foreign government official, government staff member, political party, or political candidate in an attempt to obtain or retain business or to otherwise influence a person working in an official capacity, related to any ex-U.S.

There are also state law equivalents of certain of the above federal laws, many of which differ from each other in significant ways and often are not preempted by federal laws, thus complicating compliance efforts, which laws include 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.

Other laws and regulations have also been enacted by various states to regulate the sales and marketing practices of pharmaceutical or biopharmaceutical manufacturers.

The laws and regulations generally limit financial interactions between manufacturers and health care providers;

require manufacturers to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the U.S.

federal government;

and/or require disclosure to the government and/or public of financial interactions (so-called “sunshine laws”).

State laws may also require disclosure of pharmaceutical pricing information and marketing expenditures.

Certain state and local laws require the registration of pharmaceutical sales representatives.

Many of these laws and regulations contain ambiguous requirements or require administrative guidance for implementation.

Outside the U.S., our activities may be subject to healthcare laws.

For example, the provision of benefits or advantages to physicians to induce or encourage the prescription, recommendation, endorsement, purchase, supply, order, or use of medicinal products is prohibited in the E.U.

The provision of benefits or advantages to physicians is also governed by the national anti-bribery laws of E.U.

Member States, and by Bribery Act 2010 in the United Kingdom Infringement of these laws could result in substantial fines and imprisonment.

Payments made to physicians in certain E.U.

Member States must be publicly disclosed, and in the United Kingdom a public consultation on the introduction of equivalent transparency requirements is currently underway.

Moreover, agreements with physicians often must be the subject of prior notification and approval by the physician’s employer, his or her competent professional organization, and/or the regulatory authorities of the individual E.U.

Member States and the United Kingdom.

These requirements are provided in the national laws, self-regulatory industry codes, or professional codes of conduct applicable in the E.U.

Member States and the United Kingdom.

Failure to comply with these requirements could result in reputational risk, public reprimands, administrative penalties, fines, or imprisonment.

We also are subject to the FCPA which prohibits corporations and individuals from paying, offering to pay, or authorizing the payment of anything of value to any foreign government official, government staff member, political party, or political candidate in an attempt to obtain or retain business or to otherwise influence a person working in an official capacity, related to any ex-U.S.

activities, as well as other similar anti-bribery laws in any other country in which we may do business.

In addition, we may be subject to privacy and security laws in the various jurisdictions, both inside and outside the U.S., in which we operate, obtain or store personally identifiable information.

We are subject to stringent and changing U.S.

and foreign laws, regulations, rules, contractual obligations, policies and other obligations related to data privacy and security.

Our actual or perceived failure to comply with such obligations could lead to regulatory investigations or actions;

fines and penalties;

disruptions of our business operations;

reputational harm;

loss of revenue or profits;

disruptions of our operating results and business;

and other adverse business consequences.

We may be subject to privacy and security laws in the various jurisdictions, both inside and outside the U.S., in which we operate and/or obtain or store personally identifiable information, such as the E.U.

GDPR, the United Kingdom’s GDPR and the Swiss Federal Act on Data Protection, or FADP.

The legislative and regulatory landscape for privacy and data protection continues to evolve, and there has been an increasing focus on privacy and data protection issues with the potential to affect our business.

For example, we are subject to the California Consumer

Privacy Act, or CCPA, as amended by the California Privacy Rights Act, or CPRA, which became effective on January 1, 2023 (the CPRA, together with CCPA, the California Privacy Law).

For example, the GDPR, which took effect in May 2018, applies to the processing of personal data in the EEA.

The GDPR increases obligations with respect to clinical trials conducted in the EEA, by certain companies that process data in relation to (i) offering goods or services to, or (ii) monitoring the behavior of, individuals located in the EEA.

As such, we would be subject to the GDPR for data processing associated,

for example, with conducting clinical trials in the EEA or entering into research collaborations in the EEA.

The GDPR imposes stringent obligations for processing of personal data, such as setting high standards for consent, requiring the provision of detailed processing notices, facilitating the exercise of data subject rights and requiring reporting certain data breaches to regulators and affected individuals, as well as establishing standards for how we document our relationships with third parties that process GDPR-covered personal data on our behalf.

The FADP also applies to the collection and processing of personal data by companies located in Switzerland, or in certain circumstances, by companies located outside of Switzerland.

The FADP has been revised and adopted by the Swiss Parliament and took effect on September 1, 2023.

The revisions to the FADP may result in increased costs of compliance, risks of noncompliance and penalties for noncompliance.

The GDPR, United Kingdom’s GDPR and FADP also increase the scrutiny applied to transfers of personal data from the EEA, UK, and Switzerland, respectively (including from clinical trial sites in the EEA) to countries that are considered by the European Commission, United Kingdom or Switzerland, respectively, to lack an adequate level of data protection, such as the U.S.

In July 2020 the Court of Justice of the E.U.

(CJEU) invalidated the E.U.-U.S.

Privacy Shield Framework, under which personal data could be transferred from the EEA to U.S.

entities that had self-certified under the Privacy Shield scheme.

The framework has been replaced by the E.U.-U.S.

Data Privacy Framework for which the European Commission adopted am adequacy decision in July 2023.

While we do not currently rely upon this framework, we expect there to be legal challenges to this framework in the future, which could draw into question the legitimacy of other cross-border transfer mechanism, including the standard contractual clauses on which we rely to transfer personal data from the EEA to the U.S.

and other jurisdictions.

As supervisory authorities issue further guidance on personal data export mechanisms or where the standard contractual clauses cannot be used, we could incur additional compliance costs, complaints, and/or regulatory investigations and, if we are unable to otherwise transfer personal data among jurisdictions in which we operate, our services and geographical location or segregation of our relevant systems and operations could be affected.

In addition, in the U.S., we are subject to the California Consumer Privacy Act, or CCPA, as amended by the CPRA, which became effective on January 1, 2023 (the CPRA, together with CCPA, the California Privacy Law).

The California Privacy Law gives California consumers (defined to include all California residents) certain rights regarding personal information collected about them;

the California Privacy Law also imposes certain obligations and limitations on companies regarding the collection, use, selling or sharing (as defined in the California Privacy Law) of personal information collected from or about California consumers.

The compliance obligations imposed by the California Privacy Law, and other applicable privacy laws, have required us to revise our operations.

Breaches of applicable data protection requirements may result in substantial fines and other regulatory penalties, as well as confer a private right of action on consumers and their representatives for breaches of certain data protection requirements.

The compliance obligations imposed by the GDPR, United Kingdom’s GDPR, FADP, the California Privacy Law, and other applicable privacy laws, have required us to revise our operations.

Breaches of applicable data protection requirements may result in substantial fines and other regulatory penalties, as well as confer a private right of action on data subjects (in the case of the GDPR, UK GDPR and FADP) and consumers (in the case of the California Privacy Law) and their representatives for breaches of certain data protection requirements.

We expect to be subject to additional privacy laws at both the U.S.

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Achieving and sustaining compliance with applicable international, federal and state privacy, security, fraud and reporting laws may prove time-consuming and costly.

If our operations are found to be in violation of any of the laws described above or any other laws, rules or regulations that apply to us, we will be subject to penalties, including civil and criminal penalties, damages, fines and the curtailment or restructuring of our operations.

If our operations, or the operations of third parties upon which we rely, are found to be in violation of any of the laws described above or any other laws, rules or regulations that apply to us, we will be subject to penalties, including civil and criminal penalties, damages, fines and the curtailment or restructuring of our operations.

For example, under the GDPR and the United Kingdom’s GDPR, penalties for noncompliance could be up to 20 million Euros or 4% of our total worldwide annual revenue of the preceding financial year, whichever is greater.

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

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.

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.

Healthcare reform and other governmental and private payor initiatives may have an adverse effect upon, and could prevent, our products’ or product candidates’ commercial success.

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For example, in March 2010, the U.S.

Congress enacted the Patient Protection and Affordable Care Act, as modified by the Health Care and Education Reconciliation Act, or the ACA, which, among other things, expanded healthcare coverage through Medicaid expansion and the implementation of the individual health insurance mandate;

Congress enacted the PPACA, as modified by the Health Care and Education Reconciliation Act, or the ACA, which, among other things, expanded healthcare coverage through Medicaid expansion and the implementation of the individual health insurance mandate;

included changes to the coverage and reimbursement of drug products under government healthcare programs;

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and expanded government enforcement authority.

We face uncertainties because there have been, and may be additional, federal legislative and administrative efforts to repeal, substantially modify or invalidate some or all of the provisions of the ACA.

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

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.

Beyond the ACA, there have been ongoing legislative and administrative and other health care reform efforts.

Beyond the ACA, there have been ongoing legislative and administrative and other health care reform efforts, which could have an adverse effect on our products’ or product candidates’ commercial success.

Some healthcare reform efforts affect pricing or payment for drug products or the healthcare industry more generally.

Drug pricing and payment reform was a focus of the Trump Administration and has been a focus of the Biden Administration.

For example, federal legislation enacted in 2021 eliminates a statutory cap on Medicaid drug rebate program rebates effective January 1, 2024.

For example, under the Trump Administration, federal legislation increased the size of the discount on brand-name drugs that pharmaceutical manufacturers are required to offer Medicare beneficiaries who are in the Medicare Part D coverage gap, or “donut hole,” from 50 percent to 70 percent.

As another example, under the Biden Administration, federal legislation enacted in 2021 eliminates a statutory cap on Medicaid drug rebate program rebates effective January 1, 2024.

As another example, the IRA contains various drug pricing and payment provisions.

Among other provisions, the IRA imposes a yearly cap ($2,000 in 2025) on out-of-pocket prescription drug costs in Medicare Part D, implements a new Medicare Part D manufacturer discount drug program in 2025, requires manufacturers to pay a rebate to the federal government if prices for single-source drugs and biologicals covered under Medicare Part B and nearly all covered drugs under Part D increase faster than the rate of inflation and, in 2026, creates a drug price negotiation program under which the prices for certain high Medicare spend drugs and biologicals without generic or biosimilar competition will be limited by a cap that is defined by reference to, among other things, a specified non-federal average manufacturer price.

The effect of IRA on our business and the healthcare industry in general is not yet known.

Some of the health care reform changes have been and may continue to be subject to revisions to regulations under the federal anti-kickback statute that would remove protection for traditional Medicare Part D discounts offered by

pharmaceutical manufacturers to pharmacy benefit managers and health plans.

Pursuant to court order, the removal was delayed, and the IRA further delayed implementation of the rule until January 1, 2032.

Among other provisions, the IRA imposes a yearly cap ($2,000 in 2025) on out-of-pocket prescription drug prices in Medicare Parts B and D.

In addition, the IRA requires Medicare to negotiate prices for certain high-cost drugs and biologicals, including both physician-administered products covered under Medicare Part B benefit and self-administered drugs covered under the Medicare Part D benefit.

CMS annually selects a specified number of negotiation-eligible drugs from those drugs with the highest total Medicare Part B or D expenditures over a preceding 12-month period.

Eligible drugs generally include single source brand-name drugs or biological products that have been on the market without therapeutically-equivalent generic or biosimilar alternatives for a specified number of years with certain exceptions (e.g., orphan drugs indicated for only one rare disease or condition and drugs with less than $200 million in annual Medicare expenditures).

CMS will publish the negotiated price, known as the MFP for each of the selected products.

Manufacturers of selected drugs would be required to offer the drug for Medicare recipients at the MFP.

Manufacturers who fail to negotiate or offer the MFP can face significant civil money penalties or excise tax liability on sales of that drug.

The first drugs were selected in 2023 and the MFP for those drugs will take effect in 2026.

Only Medicare Part D drugs are selected for the first two years of the program (i.e., MFPs that take effect in 2026 and 2027).

Depending on the share of Medicare spending each year that is attributed to LINZESS or any other product candidate that we develop and whether or not those drugs become eligible for Medicare negotiation, those drugs and our revenue may be adversely impacted by this provision.

Health care reform efforts have been and may continue to be subject to scrutiny and legal challenge.

For example, with respect to the ACA, tax reform legislation was enacted that eliminated the tax penalty established for individuals who do not maintain mandated health insurance coverage beginning in 2019 and, in 2021, the U.S.

Supreme Court dismissed the latest judicial challenge to the ACA brought by several states without specifically ruling on the constitutionality of the ACA.

As another example, revisions to regulations under the federal anti-kickback statute would remove protection for traditional Medicare Part D discounts offered by pharmaceutical manufacturers to pharmacy benefit managers and health plans.

The revisions were challenged in court and, pursuant to court order, the removal was delayed, and recent legislation imposed a moratorium on implementation of the rule until January 2032.

Certain pharmaceutical manufacturers and organizations have filed lawsuits challenging the IRA drug price negotiation program.

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

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The Food and Drug Administration Amendments Act of 2007 also provides the U.S.

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 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.

FDA’s exercise of this authority has resulted (and is expected to continue to result) in increased development-related costs following the commercial launch of our products, and could result in potential restrictions on the sale and/or distribution of our products, even in such products’ approved indications and patient populations.

Risks Related to the Separation of Cyclerion

We may be exposed to claims and liabilities as a result of the separation of Cyclerion.

On April 1, 2019, we distributed all of the outstanding shares of Cyclerion Therapeutics, Inc., or Cyclerion, common stock to Ironwood stockholders in connection with the separation of our soluble guanylate cyclase business, or the Separation.

In connection with the distribution, we entered into a separation agreement and various other agreements, including a tax matters agreement and an employee matters agreement.

These agreements governed the separation and distribution as well as the relationship between us and Cyclerion, including with respect to potential tax-related losses associated with the separation and distribution.

The separation agreement provides for indemnification obligations designed to make Cyclerion financially responsible for many liabilities that may exist relating to its business activities, whether incurred prior to or after the distribution, including any pending or future litigation, but we cannot guarantee that Cyclerion will be able to satisfy its indemnification obligations.

It is also possible that a court would disregard the allocation agreed to between us and Cyclerion and require us to assume responsibility for obligations allocated to Cyclerion.

Third parties could also seek to hold us responsible for any of these liabilities or obligations, and the indemnity rights we have under the separation agreement may not be sufficient to fully cover all of these liabilities and obligations.

Even if we are successful in obtaining indemnification, we may have to bear costs temporarily.

In addition, our indemnity obligations to Cyclerion, including those related to assets or liabilities allocated to us, may be significant.

These risks could negatively affect our business, financial condition or results of operations.

If the distribution of the shares of Cyclerion common stock in connection with the Separation is not generally tax- free for U.S.

federal income tax purposes, we and our stockholders could be subject to significant tax liabilities.

The distribution, together with certain related transactions, is intended to qualify for tax-free treatment to us and our stockholders for U.S.

federal income tax purposes.

We received a favorable private letter ruling from the Internal Revenue Service, or IRS, under the pilot program established in Revenue Procedure 2017-52 relating to the U.S.

federal income tax treatment of the distribution.

Consistent with the guidelines set forth in Revenue Procedure 2017-52, the IRS private letter ruling does not cover all of the issues that are relevant to determining whether the distribution is generally

tax free for U.S.

federal income tax purposes.

Accordingly, completion of the distribution was conditioned upon, among other things, our receipt of an opinion from an outside tax advisor that the distribution will qualify as a transaction that is generally tax-free to both us and our stockholders for U.S.

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).

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.

Moreover, the opinion is not binding on the IRS or any courts.

Accordingly, notwithstanding receipt of the IRS private letter ruling and the opinion, the IRS could determine that the distribution and certain related transactions should be treated as taxable transactions for U.S.

federal income tax purposes.

If the distribution, together with certain related transactions, fails to qualify as a transaction that is generally tax-free under Sections 355 and 368(a)(1)(D) of the Internal Revenue Code, in general, for U.S.

federal income tax purposes, we would recognize taxable gain with respect to Cyclerion’s distributed common stock and our stockholders who received shares of Cyclerion common stock in the distribution would be subject to tax as if they had received a taxable distribution equal to the fair market value of such shares.

FDA’s exercise of this authority has resulted (and is expected to continue to result) in increased development-related costs following the commercial launch of our products and product candidates, and could result in potential restrictions on the sale and/or distribution of our products, even in such products’ approved indications and patient populations.

The VectivBio Acquisition increases our exposure to doing business in foreign jurisdictions.

Following the VectivBio Acquisition, we retained VectivBio’s legacy headquarters in Basel, Switzerland and, as a result, we now have employees and operations in foreign jurisdictions.

Operating in foreign jurisdictions exposes us to additional risks such as:

fluctuations in currency exchange rates;

compliance with different legal and regulatory environments;

foreign regulatory regimes applicable to clinical trials and obtaining approvals for product candidates;

compliance with applicable data privacy laws and regimes such as the E.U.

GDPR, the United Kingdom’s GDPR and the Swiss Federal Act on Data Protection;

risk relating to the political and economic status of foreign governments;

differences in the manner in which different cultures do business;

difficulties in staffing and managing foreign operations;

differences in financial reporting;

and operating difficulties;

among other factors.

The realization of any of these risks, if severe enough, could have an adverse effect on our consolidated financial position, results of operations and cash flows.

Risks Related to Intellectual Property

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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.

Patent and Trademark Office, or the USPTO, in the future.

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 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.

In addition, we have exclusive rights to apraglutide including issued composition of matter and method of use patents in the U.S.

in lead indications.

We aim to maintain a strong and broad estate of patents in the U.S.

and other geographic areas.

To this end, we have exclusively licensed 57 patents and 3 pending patent applications in the U.S., E.U., Japan, China and other jurisdictions protecting apraglutide.

We also own one patent and 36 pending patent applications worldwide that cover apraglutide, including ultrapure compositions, methods of manufacture and methods of use in various diseases including aGvHD.

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 USPTO in the future.

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

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 or apraglutide 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.

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Congress, the federal courts, the USPTO, and their foreign counterparts, the laws and regulations governing patents may change, or their interpretation or implementation may change, in unpredictable ways that could impact, potentially adversely, our ability to obtain new patents or to enforce and defend patents that we have already obtained or that we might obtain in the future.

For example, such changes may increase the costs and complexity associated with obtaining, enforcing or defending our patents, including in abbreviated new drug application, or ANDA, litigation.

For example, such changes may increase the costs and complexity associated with obtaining, enforcing or defending our patents, including in ANDA litigation.

We also rely upon unpatented trade secrets, unpatented know-how and continuing technological innovation to develop and maintain our competitive position, which we seek to protect, in part, by confidentiality agreements with our employees and our partners and consultants.

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As the biotechnology and pharmaceutical industry expands and more patents are issued, the risk increases that our potential products may give rise to claims of infringement of the patent rights of others.

There may be issued patents of third parties of which we are currently unaware that may be infringed by LINZESS or our product candidates.

Because patent applications can take many years to issue, there may be currently pending applications which may later result in issued patents that LINZESS or our product candidates may infringe.

We may be exposed to, or threatened with, litigation by third parties alleging that LINZESS or our product candidates infringe their intellectual property rights.

If LINZESS or one of our product candidates is found to infringe the intellectual property rights of a third party, we or our partners could be enjoined by a court and required to pay damages and could be unable to develop or commercialize LINZESS or the applicable product candidate unless we obtain a license to the intellectual property rights.

There may be issued patents of third parties of which we are currently unaware that may be infringed by LINZESS, apraglutide, or our product candidates.

Because patent applications can take many years to issue, there may be currently pending applications which may later result in issued patents that LINZESS, apraglutide, or our product candidates may infringe.

We may be exposed to, or threatened with, litigation by third parties alleging that LINZESS, apraglutide, or our product candidates infringe their intellectual property rights.

If LINZESS, apraglutide, or one of our product candidates is found to infringe the intellectual property rights of a third party, we or our partners could be enjoined by a court and required to pay damages and could be unable to develop or commercialize LINZESS, apraglutide, or the applicable product candidate unless we obtain a license to the intellectual property rights.

A license may not be available to us on acceptable terms, if at all.

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● redesigning our products so they do not infringe, which may not be possible or may require substantial monetary expenditures and time.

If we fail to comply with our obligations or have disagreements over contract interpretation in agreements under which we license intellectual property and other rights from third parties or otherwise experience disruptions to our business relationship with our licensor, the scope of our intellectual property or technology rights could be narrowed and we could lose license rights that are important to our business.

Licensing of intellectual property is of critical importance to our business and involves complex legal, business, and scientific issues.

Disputes may arise regarding intellectual property subject to a licensing agreement, including but not limited to:

● the scope of rights granted under the license agreement and other interpretation-related issues;

● the extent to which our technology and processes infringe intellectual property of the licensor that is not subject to the licensing agreement;

● the sublicensing of patent and other rights;

● our diligence obligations under the license agreement and what activities satisfy those diligence obligations;

● the ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our licensors, our collaborators and us;

● the priority of invention of patented technology;

● the fulfilment of our obligations under the license.

In addition, certain provisions in such agreements may be susceptible to multiple interpretations.

The resolution of any contract interpretation disagreement that may arise could narrow what we believe to be the scope of our rights to the relevant intellectual property or technology, or increase what we believe to be our financial or other obligations under the relevant agreement, either of which could harm our business, financial condition, results of operations and prospects.

If our licenses or material relationships or any in-licenses upon which our licenses are based are terminated or breached, we may:

● lose our rights to develop and market product candidates;

● lose patent protection for product candidates;

● experience significant delays in the development or commercialization of product candidates;

● not be able to obtain any other licenses on acceptable terms, if at all;

● incur liability for damages.

Apraglutide is among the assets that are subject to licensing agreements with third parties.

If disputes over intellectual property and other rights that we have licensed prevent or impair our ability to maintain our current licensing arrangements on acceptable terms, we may be unable to successfully develop and commercialize apraglutide.

We are currently a party to and may in the future be party to license agreements.

For example, we are a party to an amended and restated intellectual property license agreement with Ferring pursuant to which we have exclusive rights to apraglutide including issued composition of matter and method of use patents in the U.S.

in lead indications, or the Ferring Agreement.

The Ferring Agreement imposes, and other current or future license agreements may impose, various diligence, milestone payment, royalty, and other obligations on us.

These milestone, royalty, and other payments associated with the license, will make it less profitable for us to develop apraglutide or other product candidates that are the subject of current or future licenses.

If we fail to comply with our obligations under the Ferring Agreement, or we are subject to a bankruptcy, we may be required to make certain payments to Ferring, we may lose the exclusivity of our license, or Ferring may have the right to terminate the license.

If the Ferring Agreement is terminated, we could lose intellectual property rights that are important to our business, be liable for damages to the licensor or be prevented from developing and commercializing our apraglutide.

Termination of the agreement or reduction or elimination of our rights under the agreement may also result in us being required to negotiate a new or reinstated agreement with less favorable terms, and it is possible that we may be unable to obtain any such additional license at a reasonable cost or on reasonable terms and will be unable to develop and commercialize apraglutide.

These or similar risks may apply to other license agreements, including future license agreements.

In some cases, patent prosecution of our licensed technology is controlled solely by the licensor.

If our licensor fails to obtain or maintain a patent or other protection for the proprietary intellectual property we license from them, we could lose our rights to the intellectual property or our exclusivity with respect to those rights, and our competitors could market competing products using the intellectual property.

In certain cases, we control the prosecution of patents resulting from licensed technology.

In the event we breach any of our obligations related to such prosecution, we may incur significant liability to our licensing partners.

We have received notices of Paragraph IV certifications related to LINZESS in conjunction with ANDAs filed by generic drug manufacturers, and we may receive additional notices from others in the future.

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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.

FDA-approved drug

We filed patent infringement lawsuits against five companies making such ANDA filings and subsequently entered into settlement agreements with each of these filers.

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Litigation or interference proceedings may fail and, even if successful, may result in substantial costs and distraction of our management and other employees.

In addition, we may not be able to prevent, alone or with

our partners, misappropriation of our proprietary rights, particularly in countries where the laws may not protect those rights as fully as in the U.S.

In addition, we may not be able to prevent, alone or with our partners, misappropriation of our proprietary rights, particularly in countries where the laws may not protect those rights as fully as in the U.S.

Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, as well as the potential for public announcements of the results of hearings, motions or other interim proceeding or developments, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation.

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In recent years, we have focused primarily on developing, manufacturing and commercializing linaclotide, as well as developing our other product candidates.

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 that matured and were repaid in full on 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 2024 Convertible Notes, the Convertible Senior Notes).

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

For example, in June 2023, we acquired VectivBio and added apraglutide, a next generation long-acting GLP-2 analog, in development for the treatment of patients with SBS-IF, to our pipeline.

We have financed our business to date primarily through the issuance of equity, our collaboration and license arrangements, and debt issuances, including our August 2019 issuance of the $200.0 million aggregate principal amount of Convertible Senior Notes, bearing an interest of 0.75% and due in 2024, or the 2024 Convertible Notes, the $200.0 million aggregate principal amount of Convertible Senior Notes, bearing an interest of 1.50% and due in 2026, or the 2026 Convertible Notes (together with the 2024 Convertible Notes, the Convertible Senior Notes), and our four-year $500.0 million secured revolving credit facility, or the Revolving Credit Facility.

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.

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

As of December 31, 2022, we had an accumulated deficit of $696.4 million.

As of December 31, 2023, we had an accumulated deficit of approximately $1.7 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.

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● 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 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 clinical trial of apraglutide in adult patients with SBS-IF, 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;

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● the status, terms and timing of any collaboration, licensing, co-commercialization or other arrangements;

● the timing of any regulatory approvals of our product candidates;

● the timing of any regulatory approvals of apraglutide and our other product candidates;

● whether the holders of our Convertible Senior Notes hold the notes to maturity without conversion into our Class A Common Stock or cash and whether we are required to repurchase any of our Convertible Senior Notes prior to maturity upon a fundamental change, as defined in each of the indentures governing the Convertible Senior Notes;

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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 AbbVie under our collaboration agreement for North America.

In August 2019, we issued $200.0 million aggregate principal amount of our 2024 Convertible Notes bearing an annual interest rate of 0.75% and $200.0 million aggregate principal amount of our 2026 Convertible Notes bearing an annual interest rate of 1.50%, and we used a portion of the proceeds from this offering to repurchase $215.0 million aggregate principal amount of the 2022 Convertible Notes.

The 2022 Convertible Notes matured and were repaid in full on June 15, 2022.

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

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

Semi-annual payments on our Convertible Senior Notes began in December 2019.

In addition, in May 2023, we entered into the Revolving Credit Facility.

As of December 31, 2023, the outstanding principal balance on the Revolving Credit Facility was $300.0 million.

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.

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As of December 31, 2023, we had total indebtedness of $700.0 million and available cash and cash equivalents of $92.2 million.

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

We incurred significant new indebtedness in connection with the VectivBio Acquisition.

In May 2023, we entered into the Revolving Credit Facility, which includes a $10.0 million letter of credit subfacility.

In June 2023, we borrowed $400.0 million to fund a portion of the consideration paid to purchase VectivBio’s outstanding ordinary shares in connection with the VectivBio Acquisition.

As of December 31, 2023, we have repaid $100.0 million of the outstanding principal balance.

The agreement governing the Revolving Credit Facility, or the Revolving Credit Agreement, contains certain covenants applicable to us and certain of our subsidiaries that may, under certain circumstances, impose significant operating and financial restrictions on us, including, without limitation, limitations on additional indebtedness, liens, various fundamental changes, dividends and distributions, investments (including acquisitions), transactions with affiliates, asset sales, prepayment of junior financing, changes in business and other limitations customary in senior secured credit facilities.

The Revolving Credit Agreement also includes cross-default features providing that defaults under certain other indebtedness would result in a default under the Revolving Credit Agreement.

In addition, the Revolving Credit Agreement requires us to maintain a maximum consolidated secured net leverage ratio of 3.00 to 1.00 and a minimum interest coverage ratio of 3.00 to 1.00, in each case at the end of each fiscal quarter.

The Revolving Credit Agreement allows us to elect to increase the permitted maximum consolidated secured net leverage ratio to 3.50 to 1.00 for four fiscal quarters in the event we consummate an acquisition for consideration in excess of $50 million, subject to certain limitations on how often this election can be made.

Additionally, the lenders under the Revolving

Credit Agreement will be permitted to accelerate all outstanding borrowings and other obligations, terminate outstanding commitments and exercise other specified remedies upon the occurrence of customary events of default.

In addition, while none of the indentures governing our Convertible Senior Notes include covenants restricting the operation of our business except in certain limited circumstances, in the event of a default under any of the Convertible Senior Notes, the applicable noteholders or the trustee under the indenture governing the applicable Convertible Senior Notes may accelerate our payment obligations under such Convertible Senior Notes, which could have a material adverse effect on our business, financial condition and results of operations.

We are also required to offer to repurchase the Convertible Senior Notes upon the occurrence of a fundamental change, which could include, among other things, any acquisition of our company (other than an acquisition in which at least 90% of the consideration is Class A Common Stock listed on The Nasdaq Global Select Market or The New York Stock Exchange), subject to the terms of each of the indenture governing the Convertible Senior Notes.

The repurchase price must be paid in cash, and this obligation may have the effect of discouraging, delaying or preventing an acquisition of our company that would otherwise be beneficial to our security holders.

Each of the indentures governing our Convertible Senior Notes also includes cross-default features providing that certain failures to pay for outstanding indebtedness would result in a default under the indentures governing our Convertible Senior Notes.

In the event of such default, the trustee or noteholders could elect to declare all amounts outstanding to be immediately due and payable under the applicable indenture, which could have a material adverse effect on our business, financial condition and results of operations.

To the extent we become subject to such covenants, our ability to comply with such covenants in future periods will depend on our ongoing financial and operating performance, which in turn will be subject to economic conditions and to financial, market and competitive factors, many of which are beyond our control.

The ability to comply with these covenants in future periods will also depend on our ability to successfully implement our overall business strategy and realize the anticipated benefits of the VectivBio Acquisition, including synergies, cost savings, innovation and operational efficiencies.

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

● limiting our ability to obtain additional financing to fund future working capital, capital expenditures or other general corporate purposes, including product development, commercialization efforts, research and development activities, strategic arrangements, acquisitions and refinancing of our outstanding debt;

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● increasing our cost of borrowing.

If we do not generate sufficient cash flows from operations or if future borrowings are not available to us in an amount sufficient to pay our indebtedness, including payments of principal when due on our outstanding indebtedness or, in the case of our Convertible Senior Notes, in connection with a transaction involving us that constitutes a fundamental change under the indentures governing the Convertible Senior Notes, or to fund our liquidity needs, we may be forced to refinance all or a portion of our indebtedness on or before the maturity dates thereof, sell assets, reduce or delay currently planned activities or curtail operations, seek to raise additional capital or take other actions.

If we do not generate sufficient cash flows from operations or if future borrowings are not available to us in an amount sufficient to service our indebtedness, including payments of principal when due on our outstanding indebtedness or, in the case of our Convertible Senior Notes, in connection with a transaction involving us that constitutes a fundamental change under the indentures governing the Convertible Senior Notes, or under our Revolving Credit Facility, or to fund our liquidity needs, we may be forced to refinance all or a portion of our indebtedness on or before the maturity dates thereof, sell assets, reduce or delay currently planned activities or curtail operations, seek to raise additional capital or take other actions.

We may not be able to execute any of these actions on commercially reasonable terms or at all.

This, together with any of the factors described above, could materially and adversely affect our business, financial condition and results of operations.

In addition, while none of the indentures governing our Convertible Senior Notes includes covenants restricting the operation of our business except in certain limited circumstances, in the event of a default under any of the Convertible Senior Notes, the applicable noteholders or the trustee under the indenture governing the applicable Convertible Senior Notes may accelerate our payment obligations under such Convertible Senior Notes, which could have a material adverse effect on our business, financial condition and results of operations.

We are also required to offer to repurchase the Convertible Senior Notes upon the occurrence of a fundamental change, which could include, among other things, any acquisition of our company (other than an acquisition in which at least 90% of the consideration is Class A Common Stock listed on The Nasdaq Global or Global Select Market or The New York Stock Exchange), subject to the terms of each of the indenture governing the Convertible Senior Notes.

The note hedge warrant transactions entered into in connection with our 2022 Convertible Notes and capped call transactions entered into in connection with our 2024 Convertible Notes and our 2026 Convertible Notes may affect the value of our Class A Common Stock.

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.

In June 2022, the Convertible Note Hedges terminated unexercised upon expiry.

Note Hedge Warrants are exercisable at a strike price of $18.82 over the 150 trading day period beginning on September 15, 2022.

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.

The capped call transactions entered into in connection with our 2024 Convertible Notes and our 2026 Convertible Notes may affect the value of our Class A Common Stock.

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.

These transactions are expected generally to reduce the potential dilution upon any conversion of our 2024 Convertible Notes or our 2026 Convertible Notes, as applicable, or offset any cash payments we are required to make in excess of the principal amount of converted Convertible Senior Notes, as the case may be.

In connection with these transactions, the financial institutions likely purchased our Class A Common Stock in secondary market transactions and entered into various over-the-counter derivative transactions with respect to our Class A Common Stock.

In connection with these transactions, the financial institutions likely purchased our Class A Common Stock in secondary market transactions and entered into various OTC derivative transactions with respect to our Class A Common Stock.

These entities or their affiliates are likely to modify their hedge positions from time to time prior to conversion or maturity of the 2024 Convertible Notes and the 2026 Convertible Notes, as applicable, by purchasing and selling shares of our Class A Common Stock or other instruments they may wish to use in connection with such hedging.

Any of these activities could adversely affect the value of our Class A Common Stock and, as a result, the number of shares and the value of the Class A Common Stock noteholders will receive upon conversion of the 2024 Convertible Notes, or the 2026 Convertible Notes, as applicable.

In addition, under certain circumstances the counterparties have the right to terminate the Capped Calls and settle the Note Hedge Warrants on terms set forth in the applicable confirmations, which may result in us not receiving all or any portion of the anticipated benefit of the Capped Calls.

In addition, under certain circumstances the counterparties have the right to terminate the Capped Calls on terms set forth in the applicable confirmations, which may result in us not receiving all or any portion of the anticipated benefit of the Capped Calls.

If the price of our Class A Common Stock increases such that the hedge transactions settle in our favor, we could also be exposed to credit risk related to the counterparties to the Capped Calls, which would limit or eliminate the benefit of such transactions to us.

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● the level of underlying demand and price for our products in the countries in which they are approved;

● retail chains’ and wholesalers’ buying patterns and inventory levels with respect to our products;

● retail chains’ and wholesalers’ buying patterns, pricing and reimbursement and inventory levels with respect to our products;

● the costs associated with commercializing our products in the U.S.;

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● any material lawsuit in which we may become involved;

● the impact of the COVID-19 pandemic or other public health epidemics, including containment or mitigation measures, or natural disasters.

● the impact of public health emergencies, including containment or mitigation measures, or natural disasters.

If our operating results fall below the expectations of investors or securities analysts for any of the foregoing reasons or otherwise, the price of our Class A Common Stock could decline substantially.

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We have completed several financings since our inception which may have resulted in a change in control as defined by Section 382, or could result in a change in control in the future.

Our ability to use foreign tax loss carryforwards acquired in the VectivBio Acquisition may be limited.

Prior to our acquisition of VectivBio, VectivBio incurred significant net losses since its inception.

In Switzerland, tax loss carryforwards may, with certain limitations, be used to offset future taxable income.

However, if not utilized, the tax loss carryforwards, under Swiss laws, expire seven years after the tax year in which they were incurred.

Due to our current limited income in Switzerland, there is a high risk that the tax loss carryforwards will expire in part or in their entirety and will not be used to offset future taxable income.

Any limitations in our ability to use tax loss carryforwards to offset taxable income could adversely affect our financial condition.

If the distribution of the shares of Cyclerion Therapeutics, Inc., or Cyclerion, common stock in connection with the Separation is not generally tax- free for U.S.

federal income tax purposes, we and our stockholders could be subject to significant tax liabilities.

The distribution, together with certain related transactions, is intended to qualify for tax-free treatment to us and our stockholders for U.S.

federal income tax purposes.

We received a favorable private letter ruling from the Internal Revenue Service, or IRS, under the pilot program established in Revenue Procedure 2017-52 relating to the U.S.

federal income tax treatment of the distribution.

federal income tax purposes.

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

Moreover, the opinion is not binding on the IRS or any courts.

Accordingly, notwithstanding receipt of the

IRS private letter ruling and the opinion, the IRS could determine that the distribution and certain related transactions should be treated as taxable transactions for U.S.

federal income tax purposes.

General Risk Factors

Public health emergencies, epidemics, or pandemics, such as the COVID-19 pandemic, impact our business.

The COVID-19 pandemic has impacted, and may continue to impact, our business and operations in a number of ways.

Factors that will influence the impact on our business and operations include the duration and extent of the pandemic, the duration and extent of imposed or recommended containment and mitigation measures, periodic spikes in infection rates, new strains or variants of the virus that cause outbreaks of COVID-19, the rate of vaccinations, the availability and efficacy of vaccines for new strains or variants and vaccine mandates and the general economic consequences of the pandemic.

Addressing the impacts of the COVID-19 pandemic has required, and may continue to require significant time and has diverted, and may divert in the future, the attention of our management, other employees and our board of directors.

During 2022, in-person work practices for customer-facing employees returned to near pre-COVID 19 levels.

However, new strains or variants of the virus that cause outbreaks of COVID-19 may present risks to successful execution of the commercial operating plan for LINZESS due in part to limitations on in-person work practices for our customer facing employees.

Should we be unable to evolve with any further 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, headquarters employees have the option to work primarily remotely .

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 sales.

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 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.

In addition, the COVID-19 pandemic has impacted enrollment in our clinical trials, and may impact clinical trial enrollment or participation in the future compared to pre-COVID-19 pandemic levels.

In addition, the COVID-19 pandemic has impacted enrollment in our clinical trials and may impact clinical trial enrollment or participation in the future, for example, due to suspension of in-person procedures required for enrollment or lower or discontinued patient participation compared to pre-COVID-19 pandemic levels as a result of new strains or variants

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

healthcare and healthcare regulatory system.

Capital markets in the U.S.

and around the world may be negatively impacted and can potentially harm our business, including our ability to obtain future financing.

The COVID-19 pandemic, including containment and mitigation measures, has impacted our business and operations, and could have a material adverse impact on our financial condition and results of operations in the future, including for an extended period of time.

We may not be able to manage our business effectively if we lose any of our current management team or if we are unable to attract, motivate and retain key personnel.

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If we are not able to attract, motivate and retain 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 Thomas A.

McCourt, our chief executive officer;

Emany, our senior vice president, chief financial officer;

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

Sravan Emany, our senior vice president, chief financial officer;

Andrew Davis, our senior vice president, chief business officer;

John Minardo, our senior vice president, chief legal officer and secretary;

Jason Rickard, our senior vice president, chief operating officer;

and Michael Shetzline, our senior vice president, chief medical officer and head of research and drug development.

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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.

We also rely to a large extent on

information technology systems to operate our business, including to deliver our products.

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

We have outsourced elements of our confidential information processing and information technology structure, and as a result, we are managing independent vendor relationships with third parties who may or could have access to our confidential information.

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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.

While we have invested in information technology and security and the protection of confidential information, there can be no assurance that our efforts will prevent service interruptions or security breaches.

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.

While we have invested in information technology and security and the protection of confidential information, there can be no assurance that our efforts will prevent service interruptions or

security breaches.

Further, while some or all of our workforce, and those of our partners, vendors and other third-party providers, work remotely, 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.

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In addition, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which may prohibit certain business combinations with stockholders owning 15% or more of our outstanding voting stock.

These and other provisions in our certificate of incorporation and our bylaws and in the Delaware General Corporation

Law could make it more difficult for stockholders or potential acquirers to obtain control of our board of directors or initiate actions that are opposed by the then-current board of directors.

These and other provisions in our certificate of incorporation and our bylaws and in the Delaware General Corporation Law could make it more difficult for stockholders or potential acquirers to obtain control of our board of directors or initiate actions that are opposed by the then-current board of directors.

If we identify a material weakness in our internal control over financial reporting, it could have an adverse effect on our business and financial results and our ability to meet our reporting obligations could be negatively affected, each of which could negatively affect the trading price of our Class A Common Stock.

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We regularly review and update our internal controls, disclosure controls and procedures, and corporate governance policies.

In addition, we are required under the Sarbanes-Oxley Act of 2002 to report annually on our internal control over financial reporting.

In addition, we are required under the Sarbanes-Oxley Act of 2002 to report annually on our

internal control over financial reporting.

Our system of internal controls, however well-designed and operated, is based in part on certain assumptions and includes elements that rely on information from third parties, including our partners.

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● sales of additional shares of our Class A Common Stock or sales of securities convertible into Class A Common Stock or the perception that these sales might occur;

● any conversions of our Convertible Senior Notes into Class A Common Stock, exercises of the Note Hedge Warrants or activities undertaken by the counterparties to the Capped Calls;

● any conversions of our Convertible Senior Notes into Class A Common Stock or activities undertaken by the counterparties to the Capped Calls;

● additions or departures of key personnel;

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● discussion of us or our stock price in the financial or scientific press or in online investor communities;

● the impact of the COVID-19 pandemic or other public health epidemics, including containment or mitigation measures, or natural disasters.

● the impact of public health epidemics, including containment or mitigation measures, or natural disasters.

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

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Any such litigation brought against us could result in substantial costs and a diversion of management attention, which could hurt our business, operating results and financial condition.

Unresolved Staff Comments

Our corporate headquarters and operations are located in Boston, Massachusetts, where, as of December 31, 2022, we occupied approximately 39,000 square feet of office space under our lease expiring in June 2030.

We believe that our facilities are suitable and adequate for our needs for the foreseeable future.

Legal Proceedings

Mine Safety Disclosures

Not applicable.

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 1A. Risk Factors