What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2025-03-31 compared with 2024-02-16 · 94 added, 102 removed, 326 unchanged (38% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Information

The following discussion of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the notes to those financial statements appearing elsewhere in this Annual Report on Form 10-K.

2 unchanged sentences

Discussion and analysis of our financial condition and results of operations for the fiscal year ended December 31, 2023 compared to the fiscal year ended December 31, 2022 is included in Part II, Item 7 – "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 filed with the SEC on February 16, 2024.

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

We are a biotechnology company developing and commercializing life-changing therapies for people living with gastrointestinal, or GI, and rare diseases.

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

1 unchanged sentence

FDA, in a class of GI medicines called GC-C agonists and is indicated for adult men and women suffering from IBS-C or CIC, and for pediatric patients ages 6-17 years-old suffering from FC.

LINZESS is available to adult men and women suffering from IBS-C or CIC in the U.S., Mexico, and Saudi Arabia, to adult men and women suffering from IBS-C or chronic constipation in Japan, IBS-C in China and for pediatric patients ages 6-17 with FC in the U.S.

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

LINZESS is available to adult men and women suffering from IBS-C or CIC in the U.S.

and Mexico, adult men and women suffering from IBS-C or chronic constipation in Japan, and adult men and women suffering from IBS-C in China, and pediatric patients ages 6-17 with FC in the U.S.

Linaclotide is available under the trademarked name CONSTELLA ® to adult men and women suffering from IBS-C or CIC and pediatric patients ages 6-17 years old with FC in Canada, and to adult men and women suffering from IBS-C in certain European countries.

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

and all countries worldwide other than China (including Hong Kong and Macau) and Japan, AstraZeneca in China (including Hong Kong and Macau), and Astellas in Japan.

We also aim to leverage our leading development and commercialization capabilities in GI to bring additional treatment options to GI patients.

In June 2023, we completed a tender offer to purchase outstanding ordinary shares of VectivBio.

In December 2023, we completed a squeeze-out merger to acquire all remaining shares.

The VectivBio Acquisition was partially funded with $400.0 million of borrowings under a new revolving credit facility, or the Revolving Credit Facility, as further described in Note 10, Debt , to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

Through the acquisition, the Company is advancing apraglutide, a next-generation, synthetic peptide analog of GLP-2, for rare gastrointestinal diseases, including SBS-IF, as well as several earlier stage assets.

In November 2021, we entered into the COUR Collaboration Agreement, with COUR, that grants us an option to acquire an exclusive license to research, develop, manufacture and commercialize, in the U.S., products containing CNP-104, a tolerizing immune modifying nanoparticle, for the treatment of PBC.

We also aim to leverage our development and commercialization capabilities in GI to bring additional treatment options to GI patients.

Through the VectivBio Acquisition, we are advancing apraglutide, a next-generation, synthetic long-acting peptide analog of GLP-2 for SBS patients who are dependent on PS.

In February 2024, we announced positive topline results from our pivotal Phase III clinical trial, STARS, which evaluated the efficacy and safety of once-weekly subcutaneous apraglutide in reducing parenteral support dependency in adult patients with SBS-IF.

In January 2025, we initiated a rolling NDA submission to the U.S.

FDA and plan to submit marketing applications to other regulatory authorities for apraglutide for use in adult patients with SBS who are dependent on PS.

In November 2021, we entered into the COUR Collaboration Agreement with COUR, that granted us an option to acquire an exclusive license to research, develop, manufacture and commercialize, in the U.S., products containing CNP-104, a tolerizing immune modifying nanoparticle, for the treatment of PBC.

In the third quarter of 2024, we received from COUR the topline data from COUR’s Phase II Clinical study for the treatment of PBC.

In September 2024, we notified COUR of our decision not to exercise the option to acquire an exclusive license to CNP-104.

As a result, the COUR Collaboration Agreement has terminated, and we retain no rights and have no obligations related to CNP-104.

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

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

In September 2024, we decided to end further recruitment for the Phase II proof of concept study in IC/BPS and analyze the data once all currently enrolled patients complete the full 12-week study assessment, which will inform the next steps in the program.

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

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

For the year ended December 31, 2023, we recorded net loss of approximately $1.0 billion, which included a charge of approximately $1.1 billion related to acquired in-process research and development, or IPR&D, in connection with the VectivBio Acquisition.

For the years ended 2022 and 2021, we recorded net income of $175.1 million and $528.4 million, respectively.

As of December 31, 2023, we had an

accumulated deficit of approximately $1.7 billion.

As of December 31, 2024, we had an accumulated deficit of approximately $1.7 billion.

We are unable to predict the extent of any future losses or guarantee that our company will be able to maintain positive cash flows.

4 unchanged sentences

● We recognized $351.4 million in total revenues during the year ended December 31 2024, compared to $442.7 million during the year ended December 31, 2023.

The increase was primarily driven by an in crease of $31.7 million in collaborative arrangements revenue related to sales of LINZESS in the U.S.

● We recognized $ 430.5 million in collaborative arrangements revenue related to sales of LINZESS in the U.S.

during the year ended December 31, 2023, compared to $398.8 million during the year ended December 31, 2022.

The increase was primarily driven by increased prescription demand, partially offset by inventory channel fluctuations.

● We generated a loss from operations of $ 945.4 million during the year ended December 31, 2023 compared to income from operations of $250.3 million during the year ended December 31, 2022.

The decrease was primarily attributable to approximately $1.1 billion in IPR&D expense related to the VectivBio Acquisition.

The decrease was primarily related to a $90.1 million decrease in our share of net profits from the sale of LINZESS in the U.S., which was driven by decreased net price (including a $43.0 million reduction to collaboration revenue as a result of changes in estimates of sales reserves and allowances associated with governmental and contractual rebates), partially offset by increases from prescription demand.

● We generated income from operations of $93.1 million during the year ended December 31, 2024 compared to a loss from operations of $ 945.4 million during the year ended December 31, 2023.

The increase was primarily attributable to incurring approximately $1.1 billion in IPR&D expense related to the VectivBio Acquisition in 2023.

● We generated $103.5 million in cash from operations during the year ended December 31, 2024, ending the year with $88.6 million in cash and cash equivalents.

14 unchanged sentences

These expenses consist primarily of compensation, benefits and other employee-related expenses, research and development related facility costs, third-party contract costs relating to nonclinical study and clinical trial activities, development of manufacturing processes, regulatory registration of third-party manufacturing facilities, and licensing fees for our product candidates.

Research and development expenses include amounts owed to AbbVie on an ongoing basis under cost-sharing provisions in our collaboration agreement for linaclotide.

Research and development expenses include amounts owed to AbbVie on an ongoing basis under cost-sharing

provisions in our collaboration agreement for linaclotide.

Reimbursements received for research and development activities under this agreement are netted against research and development expenses.

2 unchanged sentences

for the treatment of IBS-C or CIC in adults and for FC in pediatric patients ages 6-17 years-old.

Linaclotide is also available to adult men and women suffering from IBS-C or CIC in certain countries of the world, including China, Japan, and in a number of E.U.

Linaclotide is also available to adult men and women suffering from IBS-C or CIC in certain countries of the world, including China, Japan, and in a number of European countries.

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

11 unchanged sentences

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

Apraglutide .

Refer to Acquired In-Process Research and Development .

Through the COUR Collaboration Agreement, we and COUR are developing CNP-104 for the treatment of PBC, a rare autoimmune disease targeting the liver.

In December 2021, the U.S.

FDA granted Fast Track Designation to CNP-104.

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 developing IW-3300, a GC-C agonist, for the potential treatment of visceral pain conditions, including IC/BPS and endometriosis.

We successfully completed Phase I studies to evaluate the safety and tolerability of IW-3300 in healthy volunteers and are continuing the Phase II proof of concept study in IC/BPS.

We were developing IW-3718, a gastric retentive formulation of a bile acid sequestrant, for the potential treatment of refractory gastroesophageal reflux disease, or refractory GERD.

Apraglutide for SBS-IF .

SBS-IF, a rare and severe organ failure condition in which patients are dependent on PS, affects an estimated 18,000 adult patients in the U.S., Europe, and Japan.

We are also conducting an open-label extension study, STARS Extend, to further assess safety of apraglutide in adult patients with SBS-IF.

In January 2025, we initiated a rolling NDA submission to the U.S.

FDA and plan to submit marketing applications to other regulatory filings for apraglutide for use in adult patients with SBS who are dependent on PS.

Apraglutide for aGvHD.

In March 2024, we announced positive, primary results up to Day 91 for our Phase II exploratory trial, STARGAZE, to evaluate apraglutide in patients with steroid-refractory GI aGvHD, which evaluated the safety and tolerability of once-weekly apraglutide in aGvHD patients treated with standard of care, including systemic corticosteroids and ruxolitinib.

In December 2024, we decided to end further development of apraglutide for aGvHD to focus investment on other priorities.

Through the COUR Collaboration Agreement, we and COUR were developing CNP-104 for the treatment of PBC, a rare autoimmune disease targeting the liver.

In the third quarter of 2024, we received from COUR the topline data from COUR’s Phase II Clinical study for the treatment of PBC.

In September 2024, we notified COUR of our decision not to exercise the option to acquire an exclusive license to CNP-104.

As a result, the COUR Collaboration Agreement has terminated, and we retain no rights and have no obligations related to CNP-104.

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 were developing IW-3718, a gastric retentive formulation of a bile acid sequestrant, for the potential treatment of refractory GERD.

In September 2020, we announced that one of our two identical Phase III trials evaluating IW-3718 in refractory GERD did not meet the pre-specified criteria associated with a planned early efficacy assessment and, based on these findings, we discontinued development of IW-3718.

10 unchanged sentences

(1) Includes linaclotide in all indications, populations and formulations.

(2) Includes $11.3 million of share-based compensation expense and $3.5 million of employer payroll tax expense recognized in the second quarter of 2023 immediately after the closing of the VectivBio Acquisition in connection with the vesting acceleration and settlement of outstanding stock options and restricted stock units.

(2) Includes $11.4 million of share-based compensation expense and $3.5 million of employer payroll tax expense recognized immediately after the closing of the VectivBio Acquisition in the second quarter of 2023 in connection with the vesting acceleration and settlement of outstanding stock options and restricted stock units.

(3) Includes $6.0 million up-front payment recognized in the second quarter of 2023 in connection with the amendment to the COUR Collaboration Agreement.

The lengthy process of securing regulatory approvals for new drugs requires the expenditure of substantial resources.

(4) Includes $4.8 million reduction to research and development expense recognized in the first quarter of 2024 in connection with the settlement of a license-related contract liability.

The lengthy process of securing regulatory approvals for product candidates, including apraglutide, requires the expenditure of substantial resources.

Any failure by us to obtain, or any delay in obtaining, regulatory approvals would materially adversely affect our product development efforts and our business overall.

4 unchanged sentences

if or when linaclotide will be developed outside of its current markets, indications, populations or formulations;

or when, if ever, any of our other product candidates will generate revenues and cash flows.

or when, if ever, apraglutide or any of our other product candidates will generate revenues and cash flows.

We invest carefully in our pipeline, and the commitment of funding for each subsequent stage of our development programs is dependent upon the receipt of clear, supportive data.

3 unchanged sentences

● The duration of clinical trials may vary substantially according to the type, complexity and novelty of the product candidate ;

FDA and comparable agencies in foreign countries impose substantial and varying requirements on the introduction of therapeutic pharmaceutical products, typically requiring lengthy and detailed laboratory and clinical testing procedures, sampling activities and other costly and time-consuming procedures;

FDA and comparable foreign agencies impose substantial and varying requirements on the introduction of therapeutic pharmaceutical products, typically requiring lengthy and detailed laboratory and clinical testing procedures, sampling activities and other costly and time-consuming procedures ;

● Data obtained from nonclinical and clinical activities at any step in the testing process may be adverse and lead to discontinuation or redirection of development activity.

7 unchanged sentences

We anticipate that we will make determinations as to which additional programs to pursue and how much funding to direct to each program on an ongoing basis in response to the data of each product candidate, the competitive landscape and ongoing assessments of such product candidate’s commercial potential.

We expect to invest in our development programs for the foreseeable future.

We expect to invest in our development programs and incur substantial research and development expenses for the foreseeable future.

We will continue to invest in linaclotide, including the investigation of ways to enhance the clinical profile within its currently approved indications, and the exploration of its potential utility in other indications, populations and formulations.

We will continue to invest in our GI-focused product candidates as we advance them through pre-clinical and clinical trials, in addition to funding research and development activities under our external collaboration and license agreements.

We will continue to invest in our GI and rare disease-focused product candidates, including apraglutide, as we advance them through pre-clinical and clinical trials, in addition to funding research and development activities under our external collaboration and license agreements.

Acquired In-Process Research and Development.

Asset acquisition costs, license fees and development milestone payments related to acquired and in-licensed products and technology are expensed as acquired in-process research and development at the point that they have no established alternative future use.

Through the VectivBio Acquisition, we are advancing apraglutide, a next-generation, long-acting synthetic peptide analog of GLP-2, as a differentiated therapeutic for a wide range of rare diseases, including SBS-IF and aGvHD.

Apraglutide for SBS-IF .

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 during United European Gastroenterology (UEG) Week.

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.

In October 2023, we presented positive final data from the STARS Nutrition Phase II study during United European Gastroenterology (UEG) Week.

This multicenter, open-label study of nine patients was designed to evaluate the safety, pharmacokinetics, and efficacy of apraglutide on intestinal absorption in adult patients who have SBS-IF and colon-in-continuity.

Apraglutide for aGvHD :

We are 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.

Selling, General and Administrative Expense.

1 unchanged sentence

Other costs include legal costs of pursuing patent protection of our intellectual property, general and administrative related facility costs, insurance costs and professional fees for accounting, tax, consulting, legal and other services.

As we continue to invest in the commercialization of LINZESS and other product candidates, we expect our selling, general and administrative expenses will be substantial for the foreseeable future.

As we continue to invest in the development and commercialization of LINZESS, apraglutide and other product candidates, we expect our selling, general and administrative expenses will be substantial for the foreseeable future.

We include AbbVie’s selling, general and administrative cost-sharing payments in the calculation of the net profits and net losses from the sale of LINZESS in the U.S.

1 unchanged sentence

Restructuring Expenses.

Restructuring expenses pertain to a workforce reduction in April 2023 and restructuring initiatives, which commenced in June 2023 in connection with the VectivBio Acquisition.

Restructuring expenses pertain to a headquarters-based workforce reduction in April 2023 and restructuring initiatives in connection with the VectivBio Acquisition commencing in June 2023.

The workforce reduction and restructuring initiatives are more fully described in Note 16, Workforce Reductions and Restructuring , to our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K.

4 unchanged sentences

Interest and investment income consists of interest earned on our cash and cash equivalents, as well as significant financing components of payments due from collaboration partners.

Gain (Loss) on Derivatives.

Gain on Derivatives.

In June 2015, we issued 2.25% Convertible Senior Notes due June 15, 2022, or the 2022 Convertible Notes, and in August 2019, we issued the Convertible Senior Notes.

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

Gain (loss) on derivatives consists of the change in fair value of the Convertible Note Hedges and Note Hedge Warrants, which are recorded at fair value at each reporting date and changes in fair value are recorded in our consolidated statements of income (loss).

The Convertible Note Hedges and Note Hedge Warrants terminated unexercised upon expiry in June 2022 and April 2023, respectively.

The Convertible Note Hedges and Note Hedge Warrants are more fully described in Note 10, Debt, to our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K.

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

Gain on derivatives consists of the change in fair value of the Note Hedge Warrants, which are recorded at fair value at each reporting date and changes in fair value are recorded in our consolidated statements of income (loss).

The Note Hedge Warrants terminated unexercised upon expiry in April 2023.

The Note Hedge Warrants are more fully described in Note 10, Debt , to our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K.

Income Taxes.

We prepare our income tax provision based on our interpretation of the income tax accounting rules and each jurisdiction’s enacted tax laws and regulations.

At interim reporting dates, we record our income tax provision by applying our estimated annual effective tax rate to year-to-date pre-tax income, plus adjustments for significant unusual or infrequently occurring items.

For additional information refer to Note 14, Income Taxes, to our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K.

9 unchanged sentences

We evaluate acquisitions of assets and other similar transactions to assess whether the transaction should be accounted for as a business combination or asset acquisition by first applying a screen test to determine whether substantially all of the fair value of the gross assets acquired is concentrated into a single identifiable asset or group of similar identifiable assets.

If the screen test is met, a single asset or group of assets is not a business and is accounted for

as an asset acquisition.

If the screen test is met, a single asset or group of assets is not a business and is accounted for as an asset acquisition.

If the screen test is not met, further determination is required as to whether we have acquired inputs and processes that have the ability to create outputs that would meet the requirements of a business.

29 unchanged sentences

Milestone payments that are not within our control, such as regulatory approvals, are not considered probable of being achieved until those approvals are received.

The transaction price is then allocated to each performance obligation on a relative standalone selling price basis, for which we recognize revenue as or when the performance obligations under the

contract are satisfied.

The transaction price is then allocated to each performance obligation on a relative standalone selling price basis, for which we recognize revenue as or when the performance obligations under the contract are satisfied.

We re-evaluate the probability of achievement of such milestones and any related constraint at each reporting period, and any adjustments are recorded on a cumulative catch-up basis.

6 unchanged sentences

While ASC 808 provides guidance on classification, the standard is silent on matters of separation, initial measurement, and recognition.

Therefore, we apply the separation, initial measurement, and recognition principles of ASC Topic 606, Revenue from Contracts with Customers , to our collaboration agreements.

Therefore, we apply

the separation, initial measurement, and recognition principles of ASC Topic 606, Revenue from Contracts with Customers , to our collaboration agreements.

Our collaborative arrangements revenue generated from sales of LINZESS in the U.S.

10 unchanged sentences

We and AbbVie settle the cost sharing quarterly, such that our consolidated statements of income reflect 50% of the pre-tax net profit or loss generated from sales of LINZESS in the U.S.

Sale of Active Pharmaceutical Ingredient

The Company is not currently responsible for the supply of linaclotide API, finished drug product, finished goods or development materials to its partners, though the Company may provide development materials to certain of its partners on a periodic basis.

Sales of such development materials have been and are expected to continue to be immaterial.

We recognize revenue on linaclotide API, finished drug product, finished goods, and development materials when control has transferred to the partner, which generally occurs upon shipment after the material has passed all quality testing required for acceptance by the partner.

Deferred Revenue

Our deferred revenue balance consists of advance billings and payments received from customers in excess of revenue recognized.

17 unchanged sentences

Under our collaboration agreement with AbbVie for North America, we are reimbursed for certain research and development expenses and we net these reimbursements against our research and development expenses as incurred.

Research and development expenses also include up-front payment, non-contingent payment, and milestone payment obligations under the COUR Collaboration Agreement.

Research and development expenses also include up-front payment, non-contingent payment, and milestone payment obligations under certain collaboration arrangements.

Recognition of expense for such payments requires judgment with respect to when the obligation is probable.

15 unchanged sentences

As a result, if revisions are made to our underlying assumptions and estimates, our share-based compensation expense could vary significantly from period to period.

We utilize the asset and liability method of accounting for income taxes.

We use the asset and liability method of accounting for income taxes.

Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statement carrying amounts and tax basis of assets and liabilities using enacted tax rates in effect for years in which the temporary differences are expected to reverse.

At each quarterly reporting date, we reassess the valuation allowance on our deferred tax assets, weighing positive and negative evidence to assess the recoverability of the deferred tax assets.

We provide a valuation allowance when it is more likely than not that deferred tax assets will not be realized.

Prior to 2021, we maintained a valuation allowance on the majority of our net operating losses and other deferred tax assets.

On a periodic basis, we reassess the valuation allowance on our deferred tax assets, weighing positive and negative evidence to assess the recoverability of the deferred tax assets.

During the year ended December 31, 2021, we reassessed the valuation allowance noting the shift of positive evidence outweighing negative evidence, including:

continued strong prescription demand growth of LINZESS, continued profitability of a GI-focused business since completing the tax-free spin-off of Cyclerion, and expectations regarding future profitability.

After assessing both the positive evidence and negative evidence, we determined it was more likely than not that we will realize the majority of our deferred tax assets and therefore released the majority of our valuation allowance for the deferred tax assets that are expected to be utilized in future years.

We will continue to maintain a valuation allowance for deferred tax assets that are unlikely to be realized, which are primarily certain tax credits that are expected to expire prior to utilization.

Our valuation allowance is comprised primarily of certain tax credits that are expected to expire prior to utilization.

Significant judgment is required in making these assessments to maintain or reverse our valuation allowances and, to the extent our future expectations change we would have to assess the recoverability of these deferred tax assets at that time.

4 unchanged sentences

Significant judgment is required in evaluating whether our tax positions meet this two-step process.

The nature of the uncertain tax positions is often complex and subject to change, and the amounts at issue can be substantial.

The nature of the uncertain tax

positions is often complex and subject to change, and the amounts at issue can be substantial.

We re-evaluate these uncertain tax positions on a quarterly basis based on a number of factors including, but not limited to, changes in facts or circumstances, changes in tax law, and effectively settled issues under audit and new audit activity.

Any change in these factors could result in the recognition of a tax benefit or an additional charge to the tax provision.

Defined Benefit Pension Plan

Determining pension expense and obligations for our defined benefit pension plan uses actuarial estimates of participants’ age at retirement, life span, the long-term rate of return on investments and other factors.

In addition, pension expense is sensitive to the discount rate used to value the pension obligation.

As a sensitivity measure, an increase or decrease in our discount rate assumption of 1.00% would decrease and increase our pension expense by $1.8 million and $2.3 million, respectively.

These assumptions are subject to the risk of change, including macroeconomic conditions, as they require significant judgment and have inherent uncertainties that management or its actuaries may not control or anticipate.

A detailed discussion of our defined benefit pension plan is contained in Note 15 to our financial statements set forth in Item 8 of this Annual Report on Form 10-K.

Results of Operations

7 unchanged sentences

Selling, general and administrative

Restructuring expenses

Restructuring

Acquired in-process research and development

9 unchanged sentences

Net income (loss)

Net income (loss) attributable to noncontrolling interests

Net loss attributable to noncontrolling interests

Net income (loss) attributable to Ironwood Pharmaceuticals, Inc.

4 unchanged sentences

Collaborative arrangements revenue.

The increase in collaborative arrangements revenue of $32.1 million for the year ended December 31, 2023 compared to the year ended December 31, 2022 was primarily related to a $31.7 million increase in our share of net profits from the sale of LINZESS in the U.S., which was primarily driven by increased prescription demand, partially offset by inventory channel fluctuations.

The decrease in collaborative arrangements revenue of $91.3 million for the year ended December 31, 2024 compared to the year ended December 31, 2023 was primarily related to a $90.1 million decrease in our share of net profits from the sale of LINZESS in the U.S., which was driven by decreased net price (including a $43.0 million reduction to collaboration revenue as a result of changes in estimates of sales reserves and allowances associated with government and contractual rebates), partially offset by increases from prescription demand.

Cost and Expenses

(in thousands)

Operating expenses:

Costs and expenses:

Research and development

Selling, general and administrative

Restructuring expenses

Restructuring

Acquired in-process research and development

Total operating expenses

Total costs and expenses

Research and development.

The increase in research and development expenses of $71.8 million for the year ended December 31, 2023 compared to the year ended December 31, 2022 was primarily related to $43.3 million of apraglutide program costs, $11.3 million of share-based compensation and $3.5 million in related payroll taxes recognized immediately after the closing of the VectivBio Acquisition in connection with the vesting acceleration of outstanding stock options and RSUs under VectivBio’s 2021 Equity Incentive Plan, a $6.0 million payment to COUR related to CNP-104 in connection with the amendment of the COUR Collaboration Agreement, a $3.3 million increase in linaclotide program costs, and a $3.2 million increase in external costs associated with other pipeline programs.

Research and development expenses for the year ended December 31, 2023 included $15.1 million of acquisition-related costs.

The decrease in research and development expenses of $4.7 million for the year ended December 31, 2024 compared to the year ended December 31, 2023 was primarily related to $11.3 million of share-based compensation expense and $3.5 million in related payroll taxes recognized in the second quarter of 2023 immediately after the closing of the VectivBio Acquisition in connection with the vesting acceleration of outstanding stock options and RSUs under VectivBio’s 2021 Equity Incentive Plan, a $6.0 million payment to COUR in the second quarter of 2023 related to CNP-104 in connection with the amendment of the COUR Collaboration Agreement, a $4.8 million reduction to research and development expense in connection with the settlement of a license-related contract liability, and a $2.5 million decrease in external linaclotide costs, partially offset by a $15.9 million increase of apraglutide program costs, a $6.0 million increase in compensation, benefits, and other employee-related expenses, and a $2.0 million increase related to an amendment of the COUR Collaboration Agreement.

Selling, general and administrative.

Selling, general and administrative expenses increased $42.3 million for the year ended December 31, 2023 compared to the year ended December 31, 2022, primarily due to $16.2 million of share-based compensation and $3.0 million in related payroll taxes recognized immediately after the closing of the VectivBio Acquisition in connection with the vesting acceleration of outstanding stock options and RSUs under VectivBio’s 2021 Equity Incentive Plan, $12.9 million of general and administrative costs incurred for operating activities of the acquired VectivBio entities, a $5.8 million increase in compensation, benefits, and other employee-related expenses, a $3.7 million increase of professional services costs, and a $1.6 million increase in sales and marketing activities.

Selling, general and administrative expenses for the year ended December 31, 2023 included $25.6 million of acquisition-related costs.

Selling, general and administrative expenses decreased $14.0 million for the year ended December 31, 2024 compared to the year ended December 31, 2023, primarily due to $16.2 million of share-based compensation and $3.0 million in related payroll taxes recognized in the second quarter of 2023 immediately after the closing of the VectivBio Acquisition in connection with the vesting acceleration of outstanding stock options and RSUs under VectivBio’s 2021 Equity Incentive Plan, and a $0.9 million decrease in compensation, benefits, and other employee-related expenses, partially offset by a $8.0 million increase in professional services costs (including $4.5 million related to commercial launch planning for apraglutide, if approved).

Restructuring expenses .

Restructuring expenses were $18.3 million for the year ended December 31, 2023 related to employee severance, benefits and related costs for the headquarters-based workforce reduction and VectivBio Acquisition-related workforce reduction.

Restructuring expenses were $2.6 million for the year ended December 31, 2024 related to employee severance, benefits and related costs for the VectivBio Acquisition-related workforce reduction.

Restructuring expenses were $18.3 million for the year ended December 31, 2023 and were comprised of $3.4 million of employee severance, benefits and related costs for the headquarters-based workforce reduction and $14.9 million of employee severance, benefits and related costs for the VectivBio Acquisition-related workforce reduction.

Acquired In-Process Research & Development.

8 unchanged sentences

Interest expense and other financing costs.

Interest expense increased by $14.0 million during the year ended December 31, 2023 compared to the year ended December 31, 2022 primarily due to $15.3 million of interest expense incurred under the revolving credit facility used to partially finance the VectivBio Acquisition in June 2023.

Interest expense increased by $11.4 million during the year ended December 31, 2024 compared to the year ended December 31, 2023 primarily due to $13.2 million of interest expense incurred under the Revolving Credit Facility used to partially finance the VectivBio Acquisition in June 2023, partially offset by a decrease of $1.3 million of interest expense incurred on the 2024 Convertible Notes.

Interest and investment income.

Interest and investment income increased by $9.5 million in the year ended December 31, 2023 compared to the year ended December 31, 2022, resulting primarily from an increase in investment interest rates, as well as an increase in investment balances prior to the VectivBio Acquisition.

Interest and investment income decreased by $14.5 million in the year ended December 31, 2024 compared to the year ended December 31, 2023, primarily from a decrease in cash and investment balances following the VectivBio Acquisition in June 2023.

Gain on derivatives.

During the year ended December 31, 2023, we recorded an insignificant gain on derivatives resulting from a decrease in the fair value of the Note Hedge Warrants, which terminated unexercised upon expiry in April 2023.

During the year ended December 31, 2024, we recorded a gain of $0.6 million for pension-related activities.

Income taxes.

14 unchanged sentences

Sources of Liquidity

We had incurred losses since our inception in 1998 and until the year ended December 31, 2019.

However, after achieving profitability for the years ended December 31, 2020, 2021 and 2022, we incurred a loss of approximately $1.0 billion for year ended December 31, 2023 due to the approximately $1.1 billion IPR&D charge recognized in connection with the VectivBio Acquisition, and had an accumulated deficit of approximately $1.7 billion as of December 31, 2023.

We have financed our operations to date primarily through both the private sale of our preferred stock and the public sale of our common stock, debt financings, and cash generated from our operations .

As of December 31, 2023, our debt is comprised of $400.0 million aggregate principal amount of convertible notes, due at various dates between 2024 and 2026, and $300.0 million aggregate principal amount outstanding under our Revolving Credit Facility, which we entered into in May 2023 to partially finance the VectivBio Acquisition.

As of December 31, 2024, our debt is comprised of $200.0 million aggregate principal amount of convertible notes, due in 2026, and $ 385.0 million aggregate principal amount outstanding under our Revolving Credit Facility, which we entered into in May 2023 to partially finance the VectivBio Acquisition.

The Revolving Credit Facility provides for $550.0 million of borrowing capacity and includes a $10.0 million letter of credit subfacility.

Refer to Note 10, Debt, to our condensed consolidated financial statements included elsewhere in this Annual Report on Form 10-K, for information related to our debt obligations, including the Revolving Credit Facility.

Refer to Note 10, Debt , to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K, for information related to our debt obligations.

Summary of Cash Flows

9 unchanged sentences

Cash Flows from Operating Activities

Net cash provided by operating activities is derived by adjusting net income for non-cash items and changes in operating assets and liabilities, which reflect timing differences between the receipt and payment of cash associated with transactions and when they are recognized in the results of operations.

Net cash provided by operating activities is derived by adjusting net income (loss) for non-cash items and changes in operating assets and liabilities, which reflect timing differences between the receipt and payment of cash associated with transactions and when they are recognized in the results of operations.

Net cash inflows during the year ended December 31, 2024 totaled $103.5 million and were derived primarily from collaboration arrangements revenue related to sales of LINZESS in the U.S., partially offset by research and development expenditures for apraglutide.

Net cash inflows during the year ended December 31, 2023 totaled $183.4 million and were derived primarily from collaboration arrangements revenue related to sales of LINZESS in the U.S., partially offset by research and development expenditures for apraglutide and acquisition-related costs in connection with the VectivBio Acquisition.

Net cash inflows during the year ended December 31, 2022 totaled $273.8 million and were derived primarily from collaboration arrangements revenue related to sales of LINZESS in the U.S.

Cash Flows from Investing Activities

Cash used in investing activities for the year ended December 31, 2024 was insignificant and pertained to the purchase of property and equipment.

Cash used in investing activities for the year ended December 31, 2023 totaled approximately $1.0 billion and pertained primarily to the VectivBio Acquisition.

Cash used in investing activities for the year ended December 31, 2022 totaled $0.1 million and pertained to the purchase of property and equipment.

Cash Flows from Financing Activities

Cash provided by financing activities for the year ended December 31, 2023 totaled $277.2 million and was generated primarily from the incurrence of $400.0 million of borrowings under the Revolving Credit Facility, net of $100.0 million of principal repayments.

Cash used in financing activities for the year ended December 31, 2024 totaled $ 107.0 million was comprised primarily of the repayment of $200.0 million aggregate principal on the 2024 Convertible Notes upon their maturity in June 2024, partially offset by $85.0 million of net borrowings under the Revolving Credit Facility and $11.0 million from stock option exercises and employee stock purchases.

$100.0 million of principal repayments.

Additionally, we paid $26.3 million to acquire subsidiary shares from noncontrolling interests to complete the squeeze-out merger in connection with the VectivBio Acquisition.

Cash used in financing activities for the year ended December 31, 2022 totaled $237.6 million and resulted from $126.4 million of share repurchases and repayment of the $120.7 million remaining aggregate principal on the 2022 Convertible Notes upon maturity in June 2022, partially offset by $9.5 million of proceeds from the exercise of stock options and the issuance of shares under our ESPP.

Funding Requirements

6 unchanged sentences

with AbbVie will continue to constitute a significant portion of our total revenue for the foreseeable future and we cannot be certain that such revenues, as well as the revenues from our other commercial activities, will continue to enable us to generate positive cash flows, or to do so in the timeframes we expect.

We also anticipate that we will continue to incur substantial expenses for the next several years as we further develop and commercialize linaclotide in the U.S., develop and commercialize other products, including apraglutide, and invest in building our pipeline through internal or external opportunities, including potential payments associated with exercising the Option under the COUR Collaboration Agreement.

We also anticipate that we will continue to incur substantial expenses for the next several years as we further develop and commercialize linaclotide in the U.S., develop and commercialize other product candidates, including apraglutide, and invest in building our pipeline through internal or external opportunities.

We believe that our cash on hand as of December 31, 2024 will be sufficient to meet our projected operating needs at least through the next twelve months from the issuance of these financial statements.

from Astellas for Japan and AstraZeneca for China (including Hong Kong and Macau), and our goal to generate and maintain positive cash flows, are forward-looking statements that involve risks and uncertainties.

Our forecast of the period of time through which our financial resources will be adequate to support our operations, including the underlying revenue expectations and estimates regarding the costs to continue to develop, obtain regulatory approval for, and commercialize linaclotide in the U.S., develop and commercialize other product candidates, including apraglutide, and our goal to generate and maintain positive cash flows, are forward-looking statements that involve risks and uncertainties.

Our actual results could vary materially and negatively from these and other forward-looking statements as a result of a number of factors, including the factors discussed in the “Risk Factors” section of this Annual Report on Form 10-K.

7 unchanged sentences

● the time and costs involved in developing, and obtaining regulatory approvals for, our product candidates, including apraglutide, as well as the timing and cost of any post-approval development and regulatory requirements;

● the time and cost associated with integrating VectivBio’s business and assets into our business operations;

● the time and costs associated with commercial manufacturing, sales, marketing and distribution of apraglutide, if successfully developed and approved;

● the time and costs associated with commercial manufacturing, sales, marketing and distribution of apraglutide, if approved;

● the success of our research and development efforts;

10 unchanged sentences

Off-Balance Sheet Arrangements

We do not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, that would have been established for the purpose of

facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

As such, we are not exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in those types of relationships.

4 unchanged sentences

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

What changed 10-K

Item 7. Management’s Discussion and Analysis