What changed in this filing

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Item 9A. Controls and Procedures

2025-03-31 compared with 2024-02-16 · 423 added, 397 removed, 1291 unchanged (39% of the section changed)

4 unchanged sentences

Evaluation of Disclosure Controls and Procedures

As required by Rule 13a-15(b) of the Securities Exchange Act of 1934, or Exchange Act, our management, including our principal executive officer and our principal financial officer, conducted an evaluation as of the end of the period covered by this Annual Report on Form 10-K of the effectiveness of the design and operation of our disclosure controls and procedures.

Based on that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures are effective at the reasonable assurance level in ensuring that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

period covered by this Annual Report on Form 10-K of the effectiveness of the design and operation of our disclosure controls and procedures.

Based on that evaluation, our principal executive officer and principal financial officer concluded that, as a result of material weaknesses in internal control over financial reporting as described below, our disclosure controls and procedures were not effective at the reasonable assurance level in ensuring that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports we file under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

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(3) provide reasonable assurance regarding the prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on our financial statements.

As permitted by guidance issued by the SEC that an assessment of internal control over financial reporting of a recently acquired business may be omitted from management's evaluation of disclosure controls and procedures, management excluded an assessment of the internal controls of VectivBio, which we acquired on June 29, 2023, from its evaluation of the effectiveness of our disclosure controls and procedures.

VectivBio represented approximately 5% of total assets and 6% of total liabilities as of December 31, 2023, and less than 1% and 2% of revenues and net loss, respectively, for the year ended December 31, 2023.

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework provided in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework).

Based on this evaluation, our management concluded that our internal control over financial reporting was effective as of December 31, 2023.

The effectiveness of our internal control over financial reporting as of December 31, 2023 has been audited by Ernst and Young LLP, an independent registered public accounting firm, as stated in their report, which is included herein.

Based on this evaluation, our management concluded that our internal control over financial reporting was not effective at the reasonable assurance level as of December 31, 2024 as a result of material weaknesses in internal control over financial reporting as described below.

We identified certain control deficiencies in the design and implementation of our internal control over financial reporting that constituted material weaknesses.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.

Specifically, we did not design and or implement an effective control environment or control activities as further detailed below.

● We did not have appropriately designed entity-level controls impacting the (1) control environment, (2) risk assessment procedures, (3) identification of control activities, (4) information and communication and (5) monitoring activities to prevent or detect material misstatements to the financial statements and assess whether the components of internal control were present and functioning.

We did not adequately communicate to employees responsible for the execution of controls the relevant information, including objectives and responsibilities, necessary to support the functioning of internal controls over financial reporting.

We did not develop and perform sufficient ongoing evaluations to ascertain whether the components of internal control were present and functioning or perform adequate risk assessment procedures within our control environment.

These deficiencies were attributed to an insufficient number of qualified resources to effectively perform control design and execution activities and oversee internal control over financial reporting.

● We did not design and maintain effective information technology (IT) general controls around our key accounting and reporting IT systems, specifically related to change management, user access, and data

migration, as part of the Company’s enterprise resource planning (ERP) system, and these controls were not operating effectively.

Consequently, IT application controls (ITAC) and IT dependent manual (ITDM) business process controls that rely upon information from the ERP system, were also deemed ineffective.

● We did not design and/or operate effective controls over the financial statement close process as well as transaction level controls across various significant accounts and processes to address all material risk of misstatement as of December 31, 2024.

Controls were not designed or operating effectively to support (1) the sufficiency of the review including level of precision and retention of evidence, (2) the completeness and accuracy of key data and reports used in the control activities, and/or (3) the timeliness of execution of management controls.

● We did not design and/or operate effective ITDM and ITAC business process controls including appropriate segregation of duties and the completeness and accuracy of data and reports used in control activities and timeliness of execution to address the risk related to the initiation, authorization, and recording of expenditures.

Notwithstanding the material weaknesses, no material misstatements were identified in our financial statements as of and for the year ended December 31, 2024 and we have concluded that the financial statements and other financial information included in this Annual Report fairly present in all material respects our financial condition, results of operations and cash flows for the periods presented in conformity with accounting principles generally accepted in the United States.

The Company’s independent registered public accounting firm, Ernst & Young LLP, has audited the effectiveness of the Company’s internal control over financial reporting as of December 31, 2024.

Their report is set forth herein.

Remediation of Material Weaknesses in Internal Control over Financial Reporting

Immediately following the identification of the material weaknesses described above, and with the oversight of the Audit Committee, we commenced a process to remediate the underlying control deficiencies contributing to the above material weaknesses.

We have started remediating the control deficiencies and will continue these efforts throughout 2025.

Our plan for remediation includes the following:

● We have started the process of identifying and recruiting additional personnel who have experience working at public companies and expertise in accounting, financial reporting and internal controls commensurate with the type, volume and complexity of our operations.

We have also commenced the search for a Head of IT and plan to centralize the accounting for foreign subsidiaries by transitioning the majority of accounting operations to the U.S.

● We have implemented incremental system approvals and manual monitoring controls to mitigate segregation of duties risk within certain financial processes, and will continue to engage with third party consultants with the requisite knowledge and experience to assess our ERP system and identify opportunities to enhance our use of the system while maintaining appropriate levels of segregation of duties;

● We will enhance our system implementation and development lifecycle documentation to include the following:

o Formally define policies and procedures for user roles, including emergency access roles, and requirements for lookback reviews during the implementation and post-implementation user access review phases;

o The nature and level of change management documentation required to be maintained during the implementation and post-implementation review phases;

o Enhance policies and procedures around data migration, including formally defining the specific material data elements for validation;

the procedures to be followed when validating the completeness and accuracy of data migrations;

and the level of documentation required to evidence that data migration testing was performed and reviewed;

● We will enhance our training processes, which include conducting and delivering training on a regular basis to our finance and accounting and IT team members on how to execute internal control responsibilities, including the importance of completeness and accuracy procedures and maintaining sufficient documentation and/or evidence to support the performance of control activities;

● To the extent certain control improvements were implemented in 2024 that management believes are operating, but did not have the requisite time period to demonstrate operating effectiveness as of December 31, 2024, we will continue to focus on effectively operating such controls.

When fully implemented and operational, we believe the measures described above will remediate the material weaknesses we have identified and strengthen our internal control over financial reporting.

As we continue to evaluate and work to improve our internal control over financial reporting, our management may determine to take additional measures.

The measures we are implementing are subject to continued management review supported by confirmation and testing, as well as Audit Committee oversight.

Management and the Audit Committee remain committed to the implementation of remediation efforts to address the material weaknesses.

We will continue to implement measures to remedy our internal control deficiencies, though there can be no assurance that our efforts will be successful or avoid potential future material weaknesses.

In addition, until remediation steps have been completed and are operated for a sufficient period of time, and subsequent evaluation of their effectiveness is completed, the material weaknesses previously disclosed, and as described above, will continue to exist.

Changes in Internal Control Over Financial Reporting

As required by Rule 13a-15(d) of the Exchange Act, our management, including our principal executive officer and our principal financial officer, conducted an evaluation of the internal control over financial reporting to determine whether any changes occurred during the quarter ended December 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

Based on management’s evaluation, our principal executive officer and principal financial officer concluded no changes during the quarter ended December 31, 2023 materially affected, or were reasonably likely to materially affect, our internal controls over financial reporting.

Based on management’s evaluation, and except as described above, our principal executive officer and principal financial officer concluded that no other changes during the quarter ended December 31, 2024 materially affected, or were reasonably likely to materially affect, our internal control over financial reporting.

During the third quarter of 2024, we implemented a new global enterprise resource planning, or ERP system.

The implementation of the system will continue through early 2025.

The ERP system replaces the existing financial systems we have historically relied on.

Throughout the implementation, we reassessed our processes and procedures, which resulted in changes to our internal control over financial reporting.

In connection with this implementation, we identified a material weakness in our information technology general controls, as described above.

On June 29, 2023, we acquired VectivBio and in our 2023 Annual Report on Form 10-K, we excluded VectivBio from our evaluation of internal control over financial reporting.

This exclusion was in accordance with the SEC’s guidance that a recently acquired business may be omitted from the assessment scope for up to one year from the date of acquisition.

We have extended our oversight and monitoring processes that support our internal control over financial reporting, as well as our disclosure controls and procedures, to the acquired operations of VectivBio, and we have incorporated VectivBio into our annual assessment of internal control over financial reporting for our fiscal year ended December 31, 2024.

Report of Independent Registered Public Accounting Firm

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We have audited Ironwood Pharmaceuticals, Inc.’s internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria).

In our opinion, Ironwood Pharmaceuticals, Inc.

(the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on the COSO criteria.

As indicated in the accompanying Management’s Report on Internal Control Over Financial Reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of VectivBio Holding AG, which is included in the 2023 consolidated financial statements of the Company and constituted approximately 5% and 6% of total assets and total liabilities, respectively, as of December 31, 2023 and less than 1% and 2% of revenues and net loss, respectively, for the year then ended.

Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internal control over financial reporting of VectivBio Holding AG.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2023 and 2022, the related

consolidated statements of income (loss), comprehensive income (loss), stockholders’ equity (deficit) and cash flows for each of the three years in the period ended December 31, 2023, and the related notes and our report dated February 16, 2024 expressed an unqualified opinion thereon.

In our opinion, because of the effect of the material weaknesses described below on the achievement of the objectives of the control criteria, Ironwood Pharmaceuticals, Inc.

(the Company) has not maintained effective internal control over financial reporting as of December 31, 2024, based on the COSO criteria.

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.

The following material weaknesses have been identified and included in management’s assessment.

Management has identified pervasive material weaknesses throughout the Company’s internal control processes that involve the control environment, risk assessment, control activity, information and communication, and monitoring components of the COSO framework, as well as internal controls across various significant accounts and information technology general controls, that are described in more detail in management’s assessment.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the 2024 consolidated financial statements of the Company.

These material weaknesses were considered in determining the nature, timing and extent of audit tests applied in our audit of the 2024 consolidated financial statements, and this report does not affect our report dated March 31, 2025, which expressed an unqualified opinion thereon.

Basis for Opinion

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A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

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Boston, Massachusetts

February 16, 2024

March 31, 2025

Other Information

During the quarter ended December 31, 2023, the following directors and officers (as defined in Rule 16a-1(f) under the Exchange Act) of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K, for the purchase or sale of our securities, the material terms of which are set forth in the table below.

Action Taken (Date of Action)

Type of Trading Arrangement

Nature of Trading Arrangement

Duration of Trading Arrangement (1)

Aggregate Number of Securities

Ronald Silver ( Corporate Controller )

Adoption ( December 15, 2023 )

trading arrangement

December 15, 2025

Indeterminable (2)

(1) The dates in this column represent the scheduled expiration date of each director or officer’s Rule 10b5-1 trading arrangement.

Each Rule 10b5-1 trading arrangement may terminate earlier than the date provided should all transactions contemplated thereunder occur prior to such date.

Silver’s Rule 10b5-1 trading arrangement provides for the (i) sale of 40,873 shares of common stock;

(ii) sale of an indeterminable number of shares of common stock that Mr.

Silver may purchase under the Company’s ESPP;

and (iii) sale of an indeterminable number of shares of common stock.

The number of shares in clause (iii) subject to RSUs that will be sold to satisfy applicable tax withholding obligations upon vesting is unknown as the number will vary based on the extent to which vesting conditions are satisfied and the market price of the Company’s common stock at the time of settlement.

This trading arrangement, which applies to RSUs vesting, is based on the passage of time provides for the automatic sale of shares that would otherwise be issuable on each settlement date of a RSU in an amount sufficient to satisfy the applicable withholding obligation, with the proceeds of the sale delivered to the Company in satisfaction of the applicable withholding obligation.

(a) On February 27, 2025, we issued a press release announcing unaudited financial results for the quarter and year ended December 31, 2024, which was furnished on a Current Report on Form 8-K filed on February 27, 2025, and we presented, via webcast, a supplemental earnings presentation setting forth such results, or collectively, the Earnings Materials.

Subsequent to the date of presenting our Earnings Materials, we recorded immaterial adjustments to the fourth quarter and full year of 2024 results.

We have updated the Earnings Materials on the Investors section of our website at www.ironwoodpharma.com to reflect the adjustments made.

(b) During the quarter ended December 31, 2024, no director or officer (as defined in Rule 16a-1(f) under the Exchange Act) of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10 b5- 1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

Disclos ure Regarding Foreign Jurisdictions that Prevent Inspections

Not applicable.

Directors, Executive Officers and Corporate Governance

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A copy of that code is available on our corporate website at http://www.ironwoodpharma.com.

Any amendments to the code of business conduct and ethics, and any waivers thereto involving any of our directors or executive officers, will be also available on our corporate website.

Any amendments to the code of business conduct and ethics, and any waivers thereto that are required to be disclosed pursuant to SEC rules, will be also available on our corporate website.

A printed copy of these documents will be made available upon request.

The content on our website is not incorporated by reference into this Annual Report on Form 10-K.

We have adopted an insider trading prevention policy governing the purchase, sale and other dispositions of our securities that applies to each of our directors, officers, employees, consultants and their immediate family members.

We believe the insider trading prevention policy is reasonably designed to promote compliance with insider trading laws, rules and regulations, and Nasdaq listing standards.

A copy of our insider trading prevention policy is filed as Exhibit 19.1 to this Annual Report on Form 10-K.

It is also our policy that we do not engage in transactions in Company securities while in possession of material nonpublic information concerning the Company or our securities.

The other information required by this item is incorporated by reference from our proxy statement for our 2025 Annual Meeting of Stockholders.

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Amount includes all outstanding stock options but does not include restricted stock units, which do not have an exercise price.

Amount includes 4,272,975 shares available for future issuance under the Amended and Restated 2010 Employee Stock Purchase Plan.

Consists of 8,391,775 shares available for future issuance under the Amended and Restated 2019 Equity Incentive Plan and 4,082,543 shares available for future issuance under the Amended and Restated 2010 Employee Stock Purchase Plan.

Certain Relationships and Related Transactions, and Director Independence

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August 13, 2019

Indenture, dated as of August 12, 2019, by and between Ironwood Pharmaceuticals, Inc.

Bank National Association (including the form of the 1.50% Convertible Senior Note due 2026)

Current Report on Form 8-K (File No.

August 13, 2019

Form of 1.50% Convertible Senior Note due 2026

Current Report on Form 8-K (File No.

August 13, 2019

Description of Securities of Ironwood Pharmaceuticals, Inc.

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December 1, 2021

Second Amended and Restated Executive Severance Agreement, June 22, 2021 between Ironwood Pharmaceuticals, Inc.

Second Amended and Restated Executive Severance Agreement, dated as of June 22, 2021, between Ironwood Pharmaceuticals, Inc.

and Thomas McCourt

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Second Amended and Restated Non-employee Director Compensation Policy, effective January 1, 2024

Annual Report on Form 10-K (File No.

February 16, 2024

Form of Indemnification Agreement with Directors and Officers

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Current Report on Form 8-K (File No.

Amendment No.

1 to Credit Agreement, dated September 27, 2024, by and among Ironwood Pharmaceuticals, Inc., as borrower, Wells Fargo Bank, National Association, as administrative agent, collateral agent, a letter of credit issuer and a lender, and the other agents, lenders and letter of credit issuers parties thereto

Current Report on Form 8-K (File No.

September 30, 2024

Lease Agreement for facilities at 100 Summer Street, Boston, Massachusetts, dated as of June 11, 2019, by and between Ironwood Pharmaceuticals, Inc.

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Base Call Option Transaction Confirmation, for the 2026 Notes, dated as of August 7, 2019, between Ironwood Pharmaceuticals, Inc.

and JPMorgan Chase Bank, National Association

Current Report on Form 8-K (File No.

August 13, 2019

Base Call Option Transaction Confirmation for the 2024 Notes, dated as of August 7, 2019, between Ironwood Pharmaceuticals, Inc.

and Credit Suisse Capital LLC

1 unchanged sentence

August 13, 2019

Base Call Option Transaction Confirmation, for the 2026 Notes, dated as of August 7, 2019, between Ironwood Pharmaceuticals, Inc.

and Credit Suisse Capital LLC

Current Report on Form 8-K (File No.

August 13, 2019

Additional Call Option Transaction Confirmation for the 2026 Notes, dated as of August 12, 2019, between Ironwood Pharmaceuticals, Inc.

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Additional Call Option Transaction Confirmation for the 2026 Notes, dated as of August 12, 2019, between Ironwood Pharmaceuticals, Inc.

and JPMorgan Chase Bank, National Association

Current Report on Form 8-K (File No.

August 13, 2019

Additional Call Option Transaction Confirmation for the 2024 Notes, dated as of August 12, 2019, between Ironwood Pharmaceuticals, Inc.

and Credit Suisse Capital LLC

1 unchanged sentence

August 13, 2019

Additional Call Option Transaction Confirmation for the 2026 Notes, dated as of August 12, 2019, between Ironwood Pharmaceuticals, Inc.

and Credit Suisse Capital LLC

Current Report on Form 8-K (File No.

August 13, 2019

Insider Trading Prevention Policy

Subsidiaries of Ironwood Pharmaceuticals, Inc.

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Policy for Recoupment of Incentive Compensation

Annual Report on Form 10-K (File No.

February 16, 2024

XBRL Instance Document – The Instance Document does not appear in the Interactive Data Files because its XBRL tags are embedded within the Inline XBRL document

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Furnished herewith.

Confidential treatment granted under 17 C.F.R.

§§200.80(b)(4) and 230.406.

The confidential portions of this exhibit have been omitted and are remeasured accordingly.

The confidential portions have been provided separately to the SEC pursuant to the confidential treatment request.

Schedules and exhibits have been omitted pursuant to Item 601(b)(2)(ii) of Regulation S-K.

Ironwood will furnish copies of any such schedules and exhibits to the SEC upon request.

Confidential treatment has been granted as to certain portions of the exhibit, which portions have been omitted and have been separately filed with the SEC pursuant to the confidential treatment request.

Portions of this exhibit have been omitted pursuant to Item 601(b)(10)(iv) of Regulation S-K.

Management contract or compensatory plan, contract, or arrangement.

Form 10-K Summary

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Boston, Commonwealth of Massachusetts, on the 16 th day of February 2024.

Ironwood Pharmaceuticals, Inc.

/s/ Thomas Mccourt

/s/ Thomas M c Court

Thomas McCourt

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Chief Executive Officer and Director (Principal Executive Officer)

February 16, 2024

March 31, 2025

Thomas McCourt

/s/ Sravan k.

/s/ Gregory Martini

Senior Vice President, Chief Financial Officer (Principal Financial Officer)

February 16, 2024

March 31, 2025

Gregory Martini

/s/ Ronald Silver

Vice President, Corporate Controller (Principal Accounting Officer)

February 16, 2024

Senior Vice President, Corporate Controller (Principal Accounting Officer)

March 31, 2025

Ronald Silver

Chair of the Board

February 16, 2024

March 31, 2025

/s/ Mark Currie

February 16, 2024

March 31, 2025

Alexander Denner

/s/ Andrew Dreyfus

February 16, 2024

March 31, 2025

Andrew Dreyfus

/s/ Jon Duane

February 16, 2024

March 31, 2025

/s/ Marla Kessler

February 16, 2024

March 31, 2025

Marla Kessler

/s/ Catherine Moukheibir

February 16, 2024

March 31, 2025

Catherine Moukheibir

February 16, 2024

March 31, 2025

Index to Consolidated Financial Statements of

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generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 16, 2024 expressed an unqualified opinion thereon.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated March 31, 2025 expressed an adverse opinion thereon.

Basis for Opinion

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We believe that our audits provide a reasonable basis for our opinion.

Adoption of New Accounting Standard

As discussed in Note 2 to the consolidated financial statements, the Company changed its method of accounting for convertible senior notes in 2022 due to the adoption of ASU 2020-06.

Critical Audit Matter

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The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Collaboration Agreement for North America with AbbVie Inc.

Valuation of Employee Retirement Plan

Description of the Matter

Revenue recognized from the Collaboration Agreement for North America with AbbVie Inc.

(together with its affiliates, or “AbbVie”) was $430.5 million for the sale of LINZESS in the U.S.

for the year ended December 31, 2023.

As discussed in Note 5 to the consolidated financial statements, the Company generates the majority of its revenue from a collaboration arrangement with AbbVie related to linaclotide (LINZESS).

The Company records its share of the net profits or net losses from the sale of LINZESS in the U.S., less commercial expenses, and presents the

settlement payments to and from AbbVie as collaboration expense or collaborative arrangements revenue, as applicable.

Auditing revenue recognition under the AbbVie collaboration was especially challenging and required significant auditor judgment because the Company relies on AbbVie for timely and accurate information regarding net profits realized from the sale of LINZESS in the U.S.

Management uses the information provided by AbbVie, which includes net revenues from sales of LINZESS in the U.S.

and related costs, to record its collaboration revenue.

Certain of such information received from AbbVie are determined by AbbVie by using estimates and judgments, which could be adjusted based on actual results in the future.

The Company maintains a defined benefit plan for employees at its VectivBio entity.

At December 31, 2024, the Company’s aggregate defined benefit pension obligation was $18.5 million and exceeded the fair value of pension plan assets of $15.7 million, resulting in an unfunded defined benefit pension obligation of $2.8 million.

As explained in Note 15 of the consolidated financial statements, the Company updates the estimates used to measure employee benefit obligations in the fourth quarter and upon a remeasurement event to reflect the updated actuarial assumptions.

Auditing the employee benefit obligation was complex due to the judgment in determining the discount rate used to measure the pension obligation.

This assumption had a significant effect on the projected benefit obligation.

Further, the identified material weakness relating to the financial statement close process, affected the defined benefit pension obligation and our audit procedures in this area.

How We Addressed the Matter in Our Audit

We obtained an understanding, evaluated the design and tested the operating effectiveness of the Company’s internal controls over its collaboration revenue process, including controls over the Company’s evaluation of the completeness and accuracy of information related to net sales of LINZESS provided from AbbVie.

Our audit procedures included, among others, inspecting reported information provided by AbbVie to the Company related to the net profits realized from the sale of LINZESS in the U.S.

We analyzed the gross sales and certain adjustments to arrive at net sales, cost of goods sold, and related costs contributing to Ironwood’s share of net profits and compared current period results to historical trends .

We also tested settlement payments received by the Company throughout the year.

In addition, we confirmed directly with AbbVie the collaborative arrangement revenue for the year ended December 31, 2023 related to the sale of LINZESS in the U.S.

as well as the amounts due to the Company as of December 31, 2023.

To test the discount rate used in the pension obligation, our audit procedures included, among others, evaluating the methodology used to determine the discount rate with the assistance of an actuarial specialist.

We compared the discount rate used by management to historical trends, current economic factors and evaluated the change in the discount rate from prior year.

In addition, we compared the discount rate with our independently calculated discount rate as well as with publicly available comparative rates.

The nature and extent of our audit procedures considered the material weakness described above.

/s/ Ernst & Young LLP

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Boston, Massachusetts

February 16, 2024

March 31, 2025

Ironwood Pharmaceuticals, Inc.

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Prepaid expenses and other current assets

Restricted cash

Total current assets

Restricted cash, net of current portion

Accounts receivable, net of current portion

Property and equipment, net

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Deferred tax assets

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:

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Current portion of convertible senior notes

Note hedge warrants

Total current liabilities

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Commitments and contingencies

Stockholders’ equity (deficit):

Stockholders’ deficit:

Preferred stock, $ 0.001 par value, 75,000,000 shares authorized, no shares issued and outstanding

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( 1,697,735 )

( 1,698,615 )

Accumulated other comprehensive loss

Total stockholders’ equity (deficit)

Total liabilities and stockholders’ equity

Total stockholders’ deficit

Total liabilities and stockholders’ deficit

The accompanying notes are an integral part of these consolidated financial statements.

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Collaborative arrangements revenue

Sale of active pharmaceutical ingredient

Total revenues

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Selling, general and administrative

Restructuring expenses

Restructuring

Acquired in-process research and development

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Interest and investment income

Gain (loss) on derivatives

Gain on derivatives

Other income (expense), net

Income (loss) before income taxes

Income tax (expense) benefit

Income tax expense

Net income (loss)

( 1,031,559 )

Net income (loss) attributable to noncontrolling interests

Net loss attributable to noncontrolling interests

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

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( 1,002,239 )

Other comprehensive loss, net of tax:

Other comprehensive income (loss), net of tax:

Currency translation adjustment

Defined benefit pension plan

Total other comprehensive loss, net of tax

Total other comprehensive income (loss), net of tax

Other comprehensive loss attributable to noncontrolling interest

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Balance at December 31, 2021

( 1,466,056 )

Issuance of common stock related to share-based awards and employee stock purchase plan

Share-based compensation expense related to share-based awards and employee stock purchase plan

Repurchases of common stock

( 2,357,000 )

Balance at December 31, 2021

Cumulative effect adjustment upon adoption of ASU 2020-06, net of tax

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( 1,698,615 )

Issuance of common stock related to share-based awards and employee stock purchase plan

Share-based compensation expense related to share-based awards and employee stock purchase plan

Taxes paid related to net share settlement of share-based awards

Other comprehensive income, net of tax

Balance at December 31, 2024

( 1,697,735 )

The accompanying notes are an integral part of these consolidated financial statements.

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( 1,031,559 )

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation and amortization

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Change in fair value of note hedge warrants

Change in fair value of convertible note hedges

Non-cash interest expense

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Proceeds from exercise of stock options and employee stock purchase plan

Taxes paid related to net share settlement of share-based awards

Purchase of subsidiary shares from noncontrolling interests

Repayment of 2024 Convertible Notes

Repurchases of common stock

Repayment of 2022 Convertible Notes

Proceeds from revolving credit facility

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Repayments of revolving credit facility

Repurchases of common stock

Net cash provided by (used in) financing activities

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Non-cash investing and financing activities

Stock repurchases payable in accrued expenses

Stock option exercise proceeds receivable in other current assets

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Ironwood Pharmaceuticals, Inc.

(“Ironwood” or the “Company”) is a gastrointestinal (“GI”) healthcare company dedicated to advancing the treatment of GI diseases and redefining the standard of care for GI patients.

(“Ironwood” or the “Company”) is a biotechnology company developing and commercializing life-changing therapies for people living with gastrointestinal (“GI”) and rare diseases.

The Company is focused on the development and commercialization of innovative GI product opportunities in areas of significant unmet need, leveraging its demonstrated expertise and capabilities in GI diseases.

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FDA”) in a class of GI medicines called guanylate cyclase type C agonists (“GC-C agonists”) and is indicated for adult men and women suffering from irritable bowel syndrome with constipation (“IBS-C”) or chronic idiopathic constipation (“CIC”) and for pediatric patients ages 6-17 years-old suffering from functional constipation (“FC”).

LINZESS is available to adult men and women suffering from IBS-C or CIC in the United States (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 pediatric patients ages 6-17 years old 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 United States (the “U.S.”) and Mexico, adult men and women suffering from IBS-C or chronic constipation in Japan, and IBS-C in China, and pediatric patients ages 6-17 years old 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.

The Company has strategic partnerships with leading pharmaceutical companies to support the development and commercialization of linaclotide throughout the world.

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AstraZeneca AB (together with its affiliates) (“AstraZeneca”), the Company’s partner in China, has the exclusive right to develop, manufacture, and commercialize products containing linaclotide in China (including Hong Kong and Macau) (the “AstraZeneca License Territory”).

In June 2023, the Company completed a tender offer to purchase 98 % of the outstanding ordinary shares of VectivBio Holding AG (“VectivBio”), a clinical-stage biotechnology company focused on the discovery and development of treatments for severe, rare GI conditions for which there is a significant unmet medical need.

In December 2023, the Company completed a squeeze-out merger under Swiss law to acquire all remaining outstanding ordinary shares and VectivBio Holding AG was merged with and into Ironwood Pharmaceuticals GmbH, a wholly-owned subsidiary of Ironwood organized under the laws of Switzerland.

Through the acquisition, the Company is advancing apraglutide, a next-generation, synthetic peptide analog of glucagon-like peptide-2 (“GLP-2”), for rare GI diseases, including short bowel syndrome dependent on parenteral support (“SBS-IF”).

The Company has a collaboration and license option agreement (the “COUR Collaboration Agreement”) with COUR Pharmaceutical Development Company, Inc.

(“COUR”), a biotechnology company developing novel immune-modifying nanoparticles to treat autoimmune diseases.

The COUR Collaboration Agreement grants the Company an option to acquire an exclusive license to research, develop, manufacture and commercialize, in the U.S., products containing CNP-104, a potential treatment for primary biliary cholangitis, a rare autoimmune disease targeting the liver.

These and other agreements are more fully described in Note 5, Collaboration, License, and Other Agreements, to these consolidated financial statements.

The Company is also advancing IW-3300, a GC-C agonist, for the potential treatment of visceral pain conditions, including interstitial cystitis / bladder pain syndrome (“IC/BPS”) and endometriosis.

Through the acquisition of VectivBio Holding AG (“VectivBio”), the Company is advancing apraglutide, a next-generation, synthetic peptide long-acting analog of glucagon-like peptide-2, developed for short bowel syndrome (“SBS”) patients who are dependent on parenteral support (“PS”).

The acquisition of VectivBio is more fully described in Note 3, Acquisitions, to these consolidated financial statements.

The Company also has IW-3300, a GC-C agonist, for the potential treatment of visceral pain conditions, such as interstitial cystitis / bladder pain syndrome (“IC/BPS”) and endometriosis.

In the fourth quarter of 2024, the Company 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.

The Company was incorporated in Delaware on January 5, 1998 as Microbia, Inc.

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Principles of Consolidation

The accompanying consolidated financial statements as of December 31, 2023 include the accounts of Ironwood, its wholly-owned subsidiaries, Ironwood Pharmaceuticals Securities Corporation and Ironwood Pharmaceuticals GmbH, as well as Ironwood Pharmaceuticals GmbH’s wholly-owned subsidiaries, VectivBio AG, VectivBio Comet AG, GlyPharma Therapeutic Inc.

and VectivBio US, Inc.

The accompanying consolidated financial statements as of December 31, 2024 include the accounts of Ironwood, its wholly-owned subsidiaries, Ironwood Pharmaceuticals Securities Corporation, Ironwood Pharmaceuticals GmbH, VectivBio AG, and GlyPharma Therapeutic Inc.

(“GlyPharma”).

All intercompany transactions and balances are eliminated in consolidation.

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The Company reports noncontrolling interests in consolidated entities as a component of equity separate from the Company’s equity.

The Company acquired control of VectivBio on June 29, 2023 (Note 3).

Accordingly, the accompanying consolidated financial statements reflect the results of operations and cash flows of VectivBio from the acquisition date through December 31, 2023.

Net income (loss) and comprehensive income (loss) attributable to noncontrolling interests was recorded during the period between the acquisition date and the completion of the squeeze-out merger on December 12, 2023 (Note 1).

As of December 31, 2023, there were no remaining noncontrolling interests in consolidated entities.

Segment Information

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The Company currently operates in one reportable business segment – human therapeutics.

The Company’s reportable business segment is more fully described in Note 17, Segment Reporting , to these consolidated financial statements.

Reclassifications

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accounts receivable;

useful lives of long-lived assets, impairment of long-lived assets, including goodwill;

useful lives of long-lived assets;

impairment of long-lived assets, including goodwill;

valuation procedures for right-of-use assets and operating lease liabilities;

fair value of derivatives;

income taxes, including uncertain tax positions and the valuation allowance for deferred tax assets;

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contingencies;

defined benefit pension liability;

defined benefit pension liabilities and certain investment fund assets;

and share-based compensation.

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The Company considers all highly liquid investment instruments with a remaining maturity when purchased of three months or less to be cash equivalents.

Investments qualifying as cash equivalents primarily consist of money market funds, repurchase agreements, commercial paper, and corporate bonds.

Investments qualifying as cash equivalents primarily consist of money market funds, U.S.

Treasury securities, and commercial paper.

The carrying amount of cash equivalents approximates fair value.

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Collateral used to secure letters of credit is classified as restricted cash.

The amount of restricted cash in current assets and non-current assets was $ 1.3 million and $ 0.5 million at December 31, 2022, respectively.

There was no restricted cash as of December 31, 2023.

There was no restricted cash as of December 31, 2024 or 2023.

Concentrations of Suppliers

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Included in property and equipment are certain costs of software obtained for internal use.

Costs incurred during the preliminary project stage are expensed as incurred, while costs incurred during the application development stage are capitalized and amortized over the estimated useful life of the software.

Costs incurred during the preliminary project stage are expensed as incurred, while costs incurred during the application development

stage are capitalized and amortized over the estimated useful life of the software.

The Company also capitalizes costs related to specific upgrades and enhancements when it is probable the expenditures will result in additional functionality.

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The Company’s lease portfolio for the year ended December 31, 2024 included:

an office lease for its headquarters location and other locations, vehicle leases for its salesforce representatives, and leases for computer and office equipment.

an office lease for its headquarters location and other locations, vehicle leases for its salesforce representatives, and leases for computer and

office equipment.

The Company determines if an arrangement is a lease at the inception of the contract and determines the classification of its leases at lease commencement.

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In June 2015, the Company issued 2.25 % Convertible Senior Notes due June 15, 2022 (the “2022 Convertible Notes”), and in August 2019, the Company issued 0.75 % Convertible Senior Notes due 2024 (the “2024 Convertible Notes”) and 1.50 % Convertible Senior Notes due 2026 (the “2026 Convertible Notes”, and together with the 2022 Convertible Notes and the 2024 Convertible Notes, the “Convertible Senior Notes”).

I n connection with the issuance of the 2022 Convertible Notes, the Company entered into convertible note hedge transactions (the “Convertible Note Hedges”) and separate note hedge warrant transactions (the “Note Hedge Warrants”), with certain financial institutions (Note 10).

In connection with the issuance of the 2022 Convertible Notes, the Company entered into convertible note hedge transactions (the “Convertible Note Hedges”) and separate note hedge warrant transactions (the “Note Hedge Warrants”), with certain financial institutions (Note 10).

In connection with the partial repurchase of the 2022 Convertible Notes in August 2019, the Company terminated its Convertible Note Hedges and Note Hedge Warrants proportionately.

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These derivatives are recorded as assets or liabilities at fair value each reporting date and the fair value is determined using the Black-Scholes option-pricing model.

The changes in fair value are recorded as a component of

other (expense) income in the consolidated statements of income.

The changes in fair value are recorded as a component of other (expense) income in the consolidated statements of income.

Significant inputs used to determine the fair value include the price per share of the Company’s Class A Common Stock, expected terms of the derivative instruments, strike prices of the derivative instruments, risk-free interest rates, and expected volatility of the Company’s Class A Common Stock.

Changes to these inputs could materially affect the valuation of the derivative instruments.

Cash flows related to the purchase and settlement of derivatives are classified as financing activities and gains and losses upon revaluation and settlement are classified as operating activities on the consolidated statement of cash flows.

In August 2019, in connection with the issuance of the 2024 Convertible Notes and the 2026 Convertible Notes, the Company entered into the Capped Calls.

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These instruments meet the conditions outlined in ASC 815 to be classified in stockholders’ equity (deficit) and are not subsequently remeasured as long as the conditions for equity classification continue to be met.

The Capped Calls related to the 2024 Convertible Notes expired unexercised upon maturity of the 2024 Convertible Notes in June 2024.

Share Repurchases

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The Company and AbbVie settle the cost sharing quarterly such that the Company’s 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.

The Company recognizes 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 passed all quality testing required for acceptance by the partner.

The Company’s deferred revenue balance consists of advance billings and payments received from collaboration partners in excess of revenue recognized.

Cost of Revenues

Cost of revenues includes cost related to the sales of linaclotide API, finished drug product, and finished goods and are generally recognized upon shipment to certain of the Company’s partners outside of the U.S.

The Company’s cost of revenues for linaclotide consists of the internal and external costs of producing such API, finished drug product, and finished goods.

Research and Development Costs

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Under the Company’s collaboration agreement with AbbVie for North America, the Company is reimbursed for certain research and development expenses and nets these reimbursements against its research and development expenses as incurred.

Research and development expense includes up-front payment, non-contingent payment, and milestone payment obligations under the COUR Collaboration Agreement (Note 5).

Research and development expense includes up-front payment, non-contingent payment, and milestone payment obligations under certain collaboration arrangements.

Expense is recognized when the obligation is determined to be probable.

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The Company expenses selling, general and administrative costs to operations as incurred.

Selling, general and administrative expenses consist primarily of compensation, benefits and other employee-related expenses for personnel in the Company’s administrative, finance, legal, information technology, business development, commercial, sales, marketing, communications and human resources functions.

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

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

The Company includes 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.

and presents the net payment to or from AbbVie as collaboration expense or collaborative arrangements revenue, respectively.

Defined Benefit Pension Obligations

Pension benefits earned during the year, as well as interest on projected benefit obligations, are accrued.

Service costs are recognized within research and development expenses or selling, general and administrative expenses, depending on the function of the plan participant.

Prior service costs and credits resulting from changes in plan benefits are generally amortized over the average remaining service period of the employees expected to receive benefits.

Actuarial gains and losses are recognized in other income (expense), net, in the year in which they occur.

The Company recognizes a pension plan’s funded status as either an asset or liability in its consolidated balance sheets.

Share-Based Compensation Expense

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For awards that contain performance conditions, the Company determines the appropriate amount to expense at each reporting date based on the anticipated achievement of performance targets, which requires judgement, including forecasting the achievement of future specified targets.

At the date performance conditions are determined to be probable of achievement, the Company records a cumulative expense catch-up, with remaining expense amortized over the remaining service period.

At the date performance conditions are determined to be probable of achievement, the Company

records a cumulative expense catch-up, with remaining expense amortized over the remaining service period.

Throughout the performance period, the Company re-assesses the estimated performance and updates the number of performance-based awards that it believes will ultimately vest.

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Subsequent events have been evaluated through the filing of the financial statements accompanying this Annual Report on Form 10-K.

Refer to Note 16 for subsequent events relating to workforce reductions and restructuring.

New Accounting Pronouncements

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The guidance in ASU 2023-07 expands prior reportable segment disclosure requirements by requiring entities to disclose significant segment expenses that are regularly provided to the Chief Operating Decision Maker (“CODM”) and details of how the CODM uses financial reporting to assess their segment’s performance.

The guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2023, with early adoption permitted.

The Company is currently evaluating the impact that the adoption of ASU 2023-07 may have on its consolidated financial statements.

The standard is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted.

The ASU is required to be applied retrospectively upon adoption .

The expanded disclosure requirements are included in the consolidated financial statements (Note 17).

In December 2023, the FASB issued ASU No.

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Improvements to Income Tax Disclosures (“ASU 2023-09”).

The guidance in ASU 2023-09 improves the transparency of income tax disclosures by greater disaggregation of information in the rate reconciliation and income taxes paid disaggregated by jurisdiction.

The standard is effective for public companies for fiscal years beginning after December 15, 2024, with early adoption permitted.

The Company is currently evaluating the impact that the adoption of ASU 2023-09 may have on its consolidated financial statements.

The guidance in ASU 2023-09 improves the transparency of annual income tax disclosures by requiring greater disaggregation of information in the rate reconciliation and income taxes paid disaggregated by jurisdiction.

The standard is effective for fiscal years beginning after December 15, 2024, with early adoption permitted.

Upon adoption, ASU 2023-09 may be applied prospectively or retrospectively.

The Company is currently evaluating the impact that the adoption of ASU 2023-09 may have on its disclosures in its annual consolidated financial statements.

In November 2024, the FASB issued ASU No.

2024-03, Disaggregation of Income Statement Expenses (“ASU 2024-03”).

The guidance in ASU 2024-03 requires new financial statement disclosures in tabular format, disaggregating information about prescribed categories underlying any relevant income statement expense captions.

The standard is effective for fiscal years beginning after December 15, 2026 and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted.

Upon adoption, ASU 2024-03 may be applied prospectively or retrospectively.

The Company is currently evaluating the impact that the adoption of ASU 2024-03 may have on its disclosures in its consolidated financial statements.

In November 2024, the FASB issued ASU No.

2024-04, Debt—Debt with Conversion and Other Options (Subtopic 470-20) (“ASU 2024-04”).

The guidance in ASU 2024-04 clarifies the requirements related to accounting for the settlement of a debt instrument as an induced conversion.

The standard is effective for fiscal years beginning after December 15, 2025, and interim periods within fiscal years beginning after December 15, 2025, with early adoption permitted as of the beginning of a reporting period if the entity has also adopted ASU 2020-06 for that period.

The Company is currently evaluating the impact that the adoption of ASU 2024-04 may have on its disclosures in its consolidated financial statements.

Other recent accounting pronouncements issued, but not yet effective, are not expected to be applicable to the Company or have a material effect on the consolidated financial statements upon future adoption.

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Interest expense recognized in subsequent periods is reduced as a result of accounting for convertible debt instruments as a single liability measured at amortized cost, with a decrease of $ 22.1 million of non-cash interest expense during the year ended December 31, 2022 compared to the year ended December 31, 2021 related to convertible debt instruments outstanding on the adoption date.

The adoption of ASU 2020-06 does not impact the Company’s liquidity or cash flows.

On June 29, 2023 , the Company completed a tender offer to purchase 98 % of the outstanding ordinary shares of VectivBio (the “VectivBio Shares”) at a price per share of $ 17.00 , net to the shareholders of VectivBio in cash, without interest and subject to any applicable withholding taxes (the “VectivBio Acquisition”).

The adoption of ASU 2020-06 did not impact the Company’s liquidity or cash flows.

In June 2023, the Company completed a tender offer to purchase 98 % of the outstanding ordinary shares of VectivBio, a clinical-stage biotechnology company focused on the discovery and development of treatments for severe, rare GI conditions for which there is a significant unmet medical need, at a price per share of $ 17.00 , net to the shareholders of VectivBio in cash, without interest and subject to any applicable withholding taxes (the “VectivBio Acquisition”).

In December 2023, the Company completed a squeeze-out merger under Swiss law to acquire all remaining outstanding ordinary shares in cash at a price per share of $ 17.00 , totaling $ 26.3 million, and VectivBio Holding AG was merged with and into Ironwood Pharmaceuticals GmbH, a wholly-owned subsidiary of Ironwood organized under the laws of Switzerland (the “Squeeze-out Merger”).

The aggregate consideration paid by the Company to acquire the shares accepted for payment was approximately $ 1.2 billion.

The Company financed the acquisition through proceeds from the borrowings under the Revolving Credit Agreement (as defined elsewhere below), cash on hand.

The Company financed the acquisition through proceeds from the borrowings under the Revolving Credit Agreement (as defined elsewhere below) and cash on hand.

As of December 31, 2023, there was no remaining noncontrolling interest in VectivBio.

The total purchase consideration for VectivBio is as follows (in thousands):

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Total purchase consideration

(1) The cash consideration paid to selling shareholders was determined based on the total number of VectivBio Shares tendered at closing of 61,258,315 at a per share price of $ 17.00 .

(1) The cash consideration paid to selling shareholders was determined based on the total number of the outstanding ordinary shares of VectivBio (the “VectivBio Shares”) tendered at closing of 61,258,315 at a per share price of $ 17.00 .

(2) The cash consideration paid to settle VectivBio RSUs and stock options issued under VectivBio’s equity incentive plans was determined based on the total number of underlying VectivBio Shares of 8,904,171 at a per share price of $ 17.00 , less the exercise price for stock options.

(3) The cash consideration paid to settle VectivBio warrants was determined based on the total number of VectivBio warrant shares outstanding at close of 324,190 at a per share price of $ 11.4757 calculated as the per share price of $ 17.00 , less the exercise price of $ 5.5243 per share.

(4) The fair value of the noncontrolling interest was determined based on the total number of VectivBio Shares outstanding at closing of 1,547,723 at the closing date of the tender offer, using the VectivBio closing share price on

June 28, 2023 of $ 16.94 .

On December 12, 2023, the Company completed a squeeze-out merger under Swiss law to acquire all remaining outstanding VectivBio Shares in cash at a price per share of $ 17.00 , totaling $ 26.3 million.

As of December 31, 2023, there was no remaining noncontrolling interest in VectivBio.

The purchase of subsidiary shares from the noncontrolling interests is recorded as an equity transaction, with no gain or loss reflected in the consolidated statements of income (loss), and is reflected as a financing activity in the consolidated statements of cash flows.

The VectivBio Acquisition was accounted for as an asset acquisition under ASC Topic 805, Business Combinations, because substantially all of the fair value of the gross assets acquired was concentrated in a single identifiable IPR&D asset, apraglutide, VectivBio’s lead investigational asset.

Apraglutide is a next generation, long-acting synthetic GLP-2 analog being developed for a range of rare GI diseases and is currently in Phase III clinical trial for the potential treatment of SBS-IF.

The VectivBio Acquisition was accounted for as an asset acquisition under Accounting Standards Codification (“ASC”) Topic 805, Business Combinations, because substantially all of the fair value of the gross assets acquired was concentrated in a single identifiable in-process research and development (“IPR&D”) asset, apraglutide, VectivBio’s lead investigational asset.

Apraglutide is a next generation, long-acting synthetic GLP-2 analog being developed for SBS patients who are dependent on PS.

The Company recognized the acquired assets and assumed liabilities based on the consideration paid, inclusive of transaction costs, on a relative fair value basis.

In accordance with the accounting for asset acquisitions, an entity that acquires IPR&D assets in an asset acquisition follows the guidance in ASC Topic 730, Research and Development , which requires that both tangible and intangible identifiable research and development assets with no alternative future use be allocated a portion of the consideration transferred and recorded as research and development expense at the acquisition date.

As a result, the Company recorded approximately $ 1.1 billion in acquired in-process research and development expense related to the apraglutide IPR&D asset during the second quarter of 2023.

As a result, the Company recorded approximately $ 1.1 billion in acquired IPR&D expense related to the apraglutide IPR&D asset during the second quarter of 2023.

The following is the allocation of the purchase consideration based on the relative fair value of assets acquired and liabilities assumed by the Company (in thousands):

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Net assets acquired

The Company incurred acquisition-related expenses of $ 55.6 million for the year ended December 31, 2023, of which $ 25.6 million was included in selling, general and administrative expenses, $ 15.1 million was included in research and development expense, and $ 14.9 million was included in restructuring expense within the Company’s consolidated statement of income (loss) for the year ended December 31, 2023.

Acquisition-related expenses include direct and incremental costs incurred in connection with the transaction, including integration-related professional services and

employee retention-related benefits.

Acquisition-related expenses include direct and incremental costs incurred in connection with the transaction, including integration-related professional services and employee retention-related benefits.

Acquisition-related expenses exclude transaction costs included in the computation of total consideration paid.

Intangible assets are comprised of the assembled workforce acquired in the VectivBio Acquisition.

The Company recognized $ 0.4 million of amortization expense during the period between acquisition date on June 29, 2023 through December 31, 2023 and the net carrying value of the assembled workforce at December 31, 2023 is $ 3.6 million.

Future annual amortization expense will be $ 0.8 million for each of the years ended December 31, 2024 through December 31, 2027 and $ 0.4 million for the year ended December 31, 2028 .

The Company tracked and disclosed acquisition-related expenses incurred through the end of the second quarter of 2024.

For the six months ended June 30, 2024, the Company incurred acquisition related expenses of $ 3.6 million , of which $ 1.1 million was included in selling, general, and administrative expenses and $ 2.5 million was included in restructuring expenses within the Company’s consolidated statement of income (loss).

Intangible assets are comprised of the assembled workforce and are amortized on a straight-line basis over an estimated useful life of five years .

The Company recognized $ 0.8 million of amortization expense during the year ended December 31, 2024.

The Company recognized $ 0.4 million of amortization expense during the period between acquisition date on June 29, 2023 through December 31, 2023.

The net carrying value of the assembled workforce at December 31, 2024 is $ 2.9 million.

Future annual amortization expense will be $ 0.8 million for each of the years ended December 31, 2025 through December 31, 2027 and $ 0.4 million for the year ending December 31, 2028.

Net Income (Loss) Per Share

The following table sets forth the computation of basic and diluted net income per common share (in thousands, except per share amounts):

The following table sets forth the computation of basic and diluted net income (loss) per common share (in thousands, except per share amounts):

Year Ended December 31,

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( 1,031,559 )

Net income (loss) attributable to noncontrolling interests

Net loss attributable to noncontrolling interests

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

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Restricted stock

Shares subject to issuance under Employee Stock Purchase Plan

2024 Convertible Notes assumed conversion

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(1) The Company incurred a net loss during the year ended December 31, 2023 and therefore did not differentiate basic and diluted earnings per share, as the effect of dilutive securities would be anti-dilutive.

The outstanding securities have been excluded from the computation of diluted weighted average shares outstanding, as applicable, as their effect would be anti-dilutive (in thousands):

The dilutive impact of the Convertible Senior Notes is determined using the if-converted method.

Under the if-converted method, the Convertible Senior Notes are assumed to be converted into common stock at the beginning of the period (or at the time of issuance, if later).

Interest charges are deducted from the numerator, unless the principal amount of the convertible instruments is required to be paid in cash.

The dilutive impact of all other types of dilutive securities is determined using the treasury stock method.

The outstanding securities set forth in the following table have been excluded from the computation of diluted weighted average shares outstanding, as applicable, as their effect would be anti-dilutive (in thousands):

Year Ended December 31,

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2026 Convertible Notes

2024 Convertible Notes

2026 Convertible Notes

Prior to the adoption of ASU 2020-06, the potentially dilutive impact of the Convertible Senior Notes (Note 10) was determined using the treasury stock method.

Under this method, no numerator or denominator adjustments arose from the principal and interest components of the Convertible Senior Notes because the Company had the intent and ability to settle the Convertible Senior Notes’ principal and interest in cash.

Instead, the Company was required to increase the diluted net income per share denominator by the variable number of shares that would be issued upon conversion if it settled the conversion spread obligation with shares.

For diluted net income per share purposes, the conversion spread obligation was calculated based on whether the average market price of the Company’s Class A Common Stock during the reporting period was in excess of the conversion price of the Convertible Senior Notes.

There was no calculated spread added to the denominator for the years ended December 31, 2021 or 2020.

Following the adoption of ASU 2020-06 on January 1, 2022, the dilutive impact of the Convertible Senior Notes is determined using the if-converted method.

Under the if-converted method, the Convertible Senior Notes are assumed to be converted into common stock at the beginning of the period (or at the time of issuance, if later).

Interest charges are deducted from the numerator, unless the principal amount of the convertible instruments is required to be paid in cash.

There was no dilutive impact of the 2022 Convertible Notes for the year ended December 31, 2022 because the Company had elected prior to the beginning of the period to settle the conversion of 2022 Convertible Notes, if any, with a combination settlement of a cash payment equal to the principal value of converted notes and shares of Class A Common Stock equal to the conversion value in excess of the principal value, if any.

Accordingly, interest expense was not removed from the numerator and there was no calculated spread added to the denominator because the average market price of the Company’s Class A common stock during the portion of each period in which the 2022 Convertible Notes were outstanding was not in excess of the conversion price.

There was no dilutive impact of the 2024 Convertible Notes (as defined below) and the 2022 Convertible Notes for the year ended December 31, 2024 and December 31, 2022, respectively, because the Company had elected prior to the beginning of the period to settle the conversion of 2024 Convertible Notes and 2022 Convertible Notes, if any, with a combination settlement of a cash payment equal to the principal value of converted notes and shares of Class A Common Stock equal to the conversion value in excess of the principal value, if any (Note 10) .

Accordingly, interest expense was not removed from the numerator and there was no calculated spread added to the denominator because the average market price of the Company’s Class A common stock during the portion of each period in which the 2024 Convertible Notes and the 2022 Convertible Notes were outstanding was not in excess of the conversion price.

Collaboration, License, and Other Agreements

The Company has linaclotide collaboration agreements with AbbVie for North America and AstraZeneca for China (including Hong Kong and Macau), as well as linaclotide license agreements with Astellas for Japan and with AbbVie for the AbbVie License Territory.

The following table provides amounts included in the Company’s

consolidated statements of income (loss) as collaborative arrangements revenue and sale of API attributable to transactions from these and other agreements (in thousands):

The following table provides amounts included in the Company’s consolidated statements of income (loss) as collaborative arrangements revenue attributable to transactions from these and other agreements (in thousands):

Year Ended December 31,

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Alnylam (GIVLAARI)

AKP (apraglutide)

Asahi Kasei Pharma Corporation (apraglutide)

Total collaborative arrangements revenue

Linaclotide Agreements:

Astellas (Japan)

AstraZeneca (China, including Hong Kong and Macau)

Total sale of API

Accounts receivable, net, included $ 81.9 million and $ 129.1 million primarily related to collaborative arrangements revenue, collectively, as of December 31, 2024 and 2023, respectively.

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The Company routinely assesses the creditworthiness of its license and collaboration partners.

The Company has not experienced any material losses related to receivables from its license or collaboration partners during the years ended December 31, 2023, 2022, or 2021.

The Company did not experience any material losses related to receivables from its license or collaboration partners during the years ended December 31, 2024, 2023, or 2022.

Linaclotide Agreements

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

Under the terms of this collaboration agreement, the Company received an upfront licensing fee, equity investment, and development and regulatory milestones, and shares equally with AbbVie all development costs as well as net profits or losses from the development and sale of linaclotide in the U.S.

Under the terms of this collaboration agreement, the Company received an upfront licensing fee, equity investment, and development and

regulatory milestones, and shares equally with AbbVie all development costs as well as net profits or losses from the development and sale of linaclotide in the U.S.

In addition, the Company receives royalties in the mid-teens percent based on net sales in Canada and Mexico.

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less the cost of goods sold as well as selling, general and administrative expenses.

LINZESS net sales are calculated and

recorded by AbbVie and may include gross sales net of discounts, rebates, allowances, sales taxes, freight and insurance charges, and other applicable deductions.

LINZESS net sales are calculated and recorded by AbbVie and may include gross sales net of discounts, rebates, allowances, sales taxes, freight and insurance charges, and other applicable deductions.

The Company evaluated its linaclotide collaboration arrangement for North America and concluded that all development-period performance obligations had been satisfied as of September 2012.

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generally accepted accounting principles in order to calculate its settlement payments to and from AbbVie and record collaboration expense or collaborative arrangements revenue, as applicable.

During the year ended December 31, 2024, the Company recognized 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.

Excluding the changes in estimates, net income per share – basic and net income per share – diluted would have been $ 0.21 and $ 0.19 , respectively, for the year ended December 31, 2024.

The following table summarizes collaborative arrangements revenue from the linaclotide collaboration agreement for North America during the years ended December 31, 2024, 2023, and 2022 as follows (in thousands):

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These royalty payments are subject to reduction following the expiration of certain licensed patents and the occurrence of generic competition in Japan.

During the years ended December 31, 2023 and 2022, the Company recognized $ 1.8 million and $ 2.0 million of royalty revenue, respectively.

During the year ended December 31, 2021, the Company recognized $ 2.2 million of royalty revenue and $ 0.2 million from the sale of API to Astellas under the Amended Astellas License Agreement.

During the years ended December 31, 2024, 2023, and 2022, the Company recognized $ 1.7 million, $ 1.8 million and $ 2.0 million of royalty revenue, respectively.

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

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Under the collaboration agreement, AstraZeneca is required to pay tiered royalties to the Company at rates beginning in the mid-single-digit percent and increasing up to twenty percent based on the aggregate annual net sales of products containing linaclotide in the AstraZeneca License Territory.

During the years ended December 31, 2023 and 2022, the Company recognized $ 0.4 million and $ 0.6 million of royalty revenue, respectively.

During the year ended December 31, 2021, the Company recognized $ 0.7 million in collaborative arrangements revenue related to the Amended AstraZeneca Agreement, of which $ 0.5 million related to royalties and $ 0.2 million related to services provided under a transition services agreement, and recognized $ 0.6 million in sales of API relating to the supply of development material.

The Company is entitled to receive non-contingent payments totaling $ 35.0 million in three installments through 2024, of which $ 15.0 million remained outstanding at December 31, 2023.

In addition, AstraZeneca may be required to make milestone payments totaling up to $ 90.0 million contingent on the achievement of certain sales targets.

The significant financing component of the transaction was $ 2.6 million and is recognized as interest income through 2024 using the effective interest method.

At December 31, 2023, the non-contingent receivable due from AstraZeneca was $ 15.0 million and was classified as current.

At December 31, 2022, the current portion and the non-current portion of the non-contingent receivable due from AstraZeneca were $ 10.0 million and $ 14.6 million, respectively.

During the years ended December 31, 2024, 2023, and 2022, the Company recognized $ 0.4 million, $ 0.4 million and $ 0.6 million of royalty revenue, respectively.

At December 31, 2023, the Company had accounts receivable in the amount of $ 15.0 million related to the third and final installment of a non-contingent receivable due from AstraZeneca in connection with an amendment to the collaboration agreement executed during 2019.

The non-contingent receivable was collected in full during the first quarter of 2024.

Apraglutide Agreements

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In March 2022, VectivBio entered into a development and commercialization agreement with Asahi Kasei Pharma Corporation (“AKP”) in which VectivBio granted an exclusive license to AKP, with the right to sublicense in multiple tiers, to develop, commercialize and exploit products derived from apraglutide in Japan.

Pursuant to the terms of the development and commercialization agreement with AKP, VectivBio received an upfront payment of JPY 3,000 million ($ 24.6 million at date of agreement) and was eligible to receive development related payments of JPY 1,600 million in the aggregate ($ 13.1 million at date of agreement), development milestones of JPY 1,000 million ($ 8.2 million at date of agreement) and up to JPY 19,000 million ($ 155.8 million at date of agreement) of commercial and sales-based milestone payments.

Pursuant to the terms of the development and commercialization agreement with AKP, VectivBio received an upfront payment of JPY 3,000 million ($ 24.6 million at date of agreement) and development-related payments of JPY 1,600 million in the aggregate ($ 13.1 million at date of agreement), and is eligible to receive development milestones of JPY 1,000 million ($ 8.2 million at date of agreement) and up to JPY 19,000 million ($ 155.8 million at date of agreement) of commercial and sales-based milestone payments.

VectivBio is also eligible to receive payments in the commercial period for manufacturing supply equal to cost-plus manufacturing mark-up and tiered royalties of up to a mid-double-digit percentage on product sales continuing until the later of (i) expiration of regulatory exclusivity in Japan, or (ii) expiration of the last valid patent claim that provides exclusivity to apraglutide in Japan (the “Royalty Term”).

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Under the sales-or-usage-based royalty exception, revenue related to sales-based milestone payments and royalty payments will be recognized as the underlying sales occur.

Prior to its acquisition by the Company, VectivBio had received the upfront payment of JPY 3,000 million ($ 24.6 million at date of agreement), development-related payments of JPY 1,100 million ($ 9.0 million at date of agreement), and development milestones of JPY 500 million ($ 4.1 million at date of agreement).

Prior to the VectivBio Acquisition, VectivBio had received the upfront payment of JPY 3,000 million ($ 24.6 million at date of agreement), development-related payments of JPY 1,100 million ($ 9.0 million at date of agreement), and development milestones of JPY 500 million ($ 4.1 million at date of agreement).

Upon the acquisition of VectivBio on June 29, 2023, the Company assumed a contract liability for deferred revenue related to the development-related payments at its fair value of $ 4.3 million.

In April 2024, VectivBio received the final development-related payment of JPY 500 million ($ 4.1 million at date of agreement).

The Company recognized $ 2.2 million of revenue during the year ended December 31, 2024.

The Company recognized $ 2.0 million of revenue during the period between the acquisition date of June 29, 2023 and December 31, 2023 related to development activities.

As of December 31, 2023, deferred revenue of $ 2.6 million is reported within accrued expenses and other current liabilities on the consolidated balance sheets.

As of December 31, 2024, current deferred revenue of $ 2.0 million and non-current deferred revenue of $ 1.8 million is reported within accrued expenses and other current liabilities and other

liabilities, respectively, on the consolidated balance sheets.

Deferred revenue and future payments received related to development activities are expected to be recognized over the course of the development activities, which are expected to occur through 2028.

License Agreement with Ferring

In August 2012, as subsequently amended and restated in December 2016, GlyPharma Therapeutic Inc., a subsidiary of VectivBio (“GlyPharma”), entered into an exclusive licensing agreement with Ferring International Center, S.A.

In August 2012, as subsequently amended and restated in December 2016, GlyPharma entered into an exclusive licensing agreement with Ferring International Center, S.A.

(“Ferring”), pursuant to which Ferring granted GlyPharma an exclusive, worldwide, sublicensable license under certain patent rights and know-how controlled by Ferring relating to apraglutide and certain know-how controlled by Ferring relating to specified alternate drug compounds, to research, develop, manufacture, make, have made, import, export, use, sell, distribute, promote, advertise, dispose of or offer to sell (i) products containing apraglutide whose manufacture, use or sale is covered by a valid claim of the licensed patents, or licensed products and (ii) products, containing a specified alternate drug compound, or alternate drug products.

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Under the license agreement, as partial consideration for the rights Ferring granted to it, VectivBio AG is required to pay Ferring a high single-digit percentage royalty on worldwide annual net sales of licensed products and alternate drug products until, on a country-by-country basis and licensed product-by-licensed product or alternate drug product-by-alternate drug product basis, as applicable, the date on which the manufacture, use or sale of such licensed product or alternate drug product, as applicable, ceases to be covered by a valid claim of a patent within the licensed patents in such a country.

GlyPharma was also required to pay Ferring a certain number of warrants and Class A preferred shares pursuant to a shareholders’ agreement.

GlyPharma was also required to issue Ferring a certain number of warrants and Class A preferred shares pursuant to a shareholders’ agreement.

The equity obligations under the license agreement have been fully performed by GlyPharma.

The Company is also obligated to pay a specified percentage of the annual consideration VectivBio AG or its affiliates, including the Company, received in connection with sales of licensed product or alternate drug product by any third parties to which VectivBio AG or its affiliates, including the Company, grant a sublicense of any of the rights licensed to VectivBio AG by Ferring under this Agreement.

The Company is also obligated to pay Ferring a specified percentage of the annual consideration VectivBio AG or its affiliates, including the Company, received in connection with sales of licensed product or alternate drug product by any third parties to which VectivBio AG or its affiliates, including the Company, grant a sublicense of any of the rights licensed to VectivBio AG by Ferring under this license agreement.

Such percentage is in the high single digits for sales of both licensed products and alternate drug products, and such payments are owed for the duration of the royalty term for licensed products or alternate drug products, as applicable.

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Collaboration and License Option Agreement with COUR

In November 2021, the Company entered into the COUR Collaboration Agreement, pursuant to which the Company has been granted an option (the “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 (“CNP-104”) for the treatment of primary biliary cholangitis (“PBC”).

COUR has initiated a clinical study to evaluate the safety, tolerability, and pharmacodynamic effects and efficacy of CNP-104 in PBC patients .

Pursuant to the terms of the COUR Collaboration Agreement, the Company made an upfront, non-refundable payment of $ 6.0 million to COUR during the year ended December 31, 2021, and agreed to pay $ 13.5 million in non-contingent payments and milestone payments in connection with certain development activities and regulatory milestones.

After reviewing the data from the clinical study for CNP-104, if the Company exercises the Option, the Company will pay COUR $ 35.0 million in exchange for the license, subject to Ironwood’s right to apply a credit against such payment as described below.

Upon commercialization, COUR will be eligible to receive commercial milestone payments of up to $ 440.0 million over the term of the agreement and royalties in the high-single digits to low-double digits percentage of the aggregated annual net sales in the U.S.

of products containing CNP-104.

During the year ended December 31, 2021, the Company recognized research and development expense totaling $ 19.5 million related to the up-front payment, non-contingent payment, and milestone payments for which payment was probable to occur.

At December 31, 2022, payment obligations of $ 3.8 million were included in accrued research and development costs.

No payment obligations remained as of December 31, 2023.

In November 2021, the Company entered into the COUR Collaboration Agreement, pursuant to which the Company was granted an option (the “Option”) to acquire an exclusive license to research, develop, manufacture and commercialize, in the U.S., products containing CNP-104 for the treatment of PBC.

COUR has initiated a Phase II clinical study to evaluate the safety, tolerability, and pharmacodynamic effects and efficacy of CNP-104 in PBC patients.

After reviewing the data from the clinical study for CNP-104, the Company had the right to exercise the Option and pay COUR $ 35.0 million in exchange for the license, subject to the Company’s right to apply a credit against such payment as described below.

In April 2023, the Company and COUR executed an amendment to the COUR Collaboration Agreement, in which the Company agreed to pay a one-time, non-refundable, upfront payment of $ 6.0 million to COUR in exchange for the right to apply a credit of $ 6.6 million against future amounts due to COUR in connection with the exercise of the Option, commercial milestones, or royalties.

In connection with such payment, COUR also granted the Company a right of first negotiation over certain additional potential research and development programs.

The $ 6.0 million payment was recognized as research and development expense during the year ended December 31, 2023.

The $ 6.0 million payment was

recognized as research and development expense in the second quarter of 2023.

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

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

As a result, the collaboration and license option agreement between the Company and COUR has terminated, and the Company retains no rights and has no obligations related to CNP-104.

Other Agreements

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The Company remained eligible to receive royalties based on a percentage of net sales of GIVLAARI that are directly attributable to the Company’s promotional efforts through September 30, 2022, which was one year following the termination of the agreement.

During the years ended December 31, 2022 and 2021, the Company recognized $ 2.2 million and $ 2.4 million, respectively, in royalty revenue.

During the year ended December 31, 2022 the Company recognized $ 2.2 million in royalty revenue.

Fair Value of Financial Instruments

The tables below present information about the Company’s assets and liabilities that are measured at fair value on a recurring basis as of December 31, 2023 and 2022 and indicate the fair value hierarchy of the valuation techniques

the Company utilized to determine such fair value.

The tables below present information about the Company’s assets and liabilities that are measured at fair value on a recurring basis as of December 31, 2024 and 2023 and indicate the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value.

In general, fair values determined by Level 1 inputs utilize observable inputs such as quoted prices in active markets for identical assets or liabilities.

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The Company utilizes a third-party custodian to manage the exchange of funds and ensure the collateral received is maintained at 102 % of the reverse repurchase agreements principal amount on a daily basis.

The following tables present the assets and liabilities the Company has measured at fair value on a recurring basis (in thousands):

The following tables present the assets the Company has measured at fair value on a recurring basis (in thousands):

Fair Value Measurements at Reporting Date Using

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Money market funds

Repurchase agreements

Treasury securities

Commercial paper

Restricted cash:

Money market funds

Total assets measured at fair value

Note hedge warrants

Total liabilities measured at fair value

Cash equivalents, accounts receivable, prepaid expenses and other current assets, accounts payable, accrued research and development costs, accrued expenses and other current liabilities and current portion of operating lease obligations at December 31, 2024 and 2023 are carried at amounts that approximate fair value due to their short-term maturities.

Convertible Note Hedges and Note Hedge Warrants with Respect to 2022 Convertible Notes

The Company’s Convertible Note Hedges, which expired unexercised in June 2022, and Note Hedge Warrants, which expired unexercised in April 2023, were recorded as derivative assets and liabilities, respectively, and were classified as Level 3 measurements under the fair value hierarchy.

These derivatives were not actively traded and were valued using the Black-Scholes option-pricing model, which required the use of subjective assumptions.

The following inputs were used in the fair market valuation of the Note Hedge Warrants:

December 31, 2022

Risk-free interest rate (1)

Expected term

Stock price (2)

Strike price (3)

Common stock volatility (4)

Dividend yield (5)

(1) Based on U.S.

Treasury yield curve, with terms commensurate with the expected term of the Note Hedge Warrants.

(2) The closing price of the Company’s Class A Common Stock on the last trading day of the quarter ended December 31, 2022.

(3) As per the agreements for the Note Hedge Warrants.

(4) Expected volatility based on historical volatility of the Company’s Class A Common Stock.

(5) The Company has not paid and does not anticipate paying cash dividends on its shares of common stock in the foreseeable future;

therefore, the expected dividend yield is assumed to be zero .

The Convertible Note Hedges and the Note Hedge Warrants were recorded at fair value at each reporting date and changes in fair value were recorded in other income (expense), net within the Company's consolidated statements of income.

The following table reflects the change in the Company's Level 3 Note Hedge Warrants from December 31, 2021 through December 31, 2023 (in thousands):

Balance at December 31, 2021

Change in fair value, recorded as a component of gain (loss) on derivatives

Balance at December 31, 2022

Change in fair value, recorded as a component of gain on derivatives

Balance at December 31, 2023

Convertible Senior Notes

In August 2019, the Company issued $ 200.0 million aggregate principal amount of its 2024 Convertible Notes and $ 200.0 million aggregate principal amount of its 2026 Convertible Notes (Note 10) .

In August 2019, the Company issued $ 200.0 million aggregate principal amount of its 0.75 % convertible senior notes due 2024 (the “2024 Convertible Notes”) and $ 200.0 million aggregate principal amount of its 1.50 % convertible senior notes due 2026 (the “2026 Convertible Notes”) (No te 10) .

The fair value of the respective convertible senior notes, which differs from their carrying value, is influenced by interest rates, the price of the Company’s Class A Common Stock and the volatility thereof, and the prices for the respective convertible senior notes observed in market trading, which are Level 2 inputs.

The estimated fair value of the 2024 Convertible Notes was $ 209.6 million and $ 215.9 million as of December 31, 2023 and 2022, respectively.

In June 2024, the Company repaid the aggregate principal amount of the 2024 Convertible Notes upon maturity (Not e 10) .

The estimated fair value of the 2024 Convertible Notes was $ 209.6 million as of December 31, 2023.

The estimated fair value of the 2026 Convertible Notes was $ 186.6 million and $ 217.1 million as of December 31, 2024 and 2023, respectively.

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In connection with the issuance of the 2024 Convertible Notes and the 2026 Convertible Notes, the Company entered into the Capped Calls with certain financial institutions.

The Capped Calls cover 29,867,480 shares of Class A

Common Stock (subject to anti-dilution and certain other adjustments), which is the same number of shares of Class A Common Stock that initially underlie the 2024 Convertible Notes and the 2026 Convertible Notes.

The Capped Calls cover 29,867,480 shares of Class A Common Stock (subject to anti-dilution and certain other adjustments), which is the same number of shares of Class A Common Stock that initially underlie the 2024 Convertible Notes and the 2026 Convertible Notes.

The Capped Calls have an initial strike price of approximately $ 13.39 per share, which corresponds to the initial conversion price of the 2024 Convertible Notes and the 2026 Convertible Notes, and have a cap price of approximately $ 17.05 per share (Note 10).

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Non-recurring Fair Value Measurements

Acquired In-Process Research & Development

The fair value of the acquired IPR&D asset, apraglutide, was determined on the VectivBio acquisition date using the multi-period excess earnings method using Level 3 fair-value measurements and inputs including estimated cash flows and probabilities of success.

Acquired IPR&D

The fair value of the acquired IPR&D asset, apraglutide, was determined using the multi-period excess earnings

method using Level 3 fair value measurements and inputs including estimated cash flows and probabilities of success.

Assembled Workforce

The fair value of the assembled workforce was determined on the VectivBio acquisition date using the replacement cost method using Level 3 fair-value measurements and inputs including estimated costs and productivity metrics.

The Company’s lease portfolio for the year ended December 31, 2023 includes:

The fair value of the assembled workforce was determined using the replacement cost method using Level 3 fair value measurements and inputs including estimated costs and productivity metrics .

The Company’s lease portfolio for the year ended December 31, 2024 included:

an office lease for its current headquarters location and other locations, vehicle leases for its salesforce representatives, and leases for computer and office equipment.

The Company’s headquarters office lease and vehicle lease require letters of credit to secure the Company’s obligations under the lease agreements totaling $ 1.2 million and $ 1.7 million at December 31, 2023 and 2022, respectively.

As of December 31, 2022, the letters of credit were collateralized by money market accounts recorded as restricted cash on the Company’s consolidated balance sheets.

During the year ended December 31, 2023, the letters of credit were transitioned to a subfacility of the revolving credit agreement (Note 10) and no longer require cash collateral.

The Company’s headquarters office lease and vehicle leases require letters of credit totaling $ 1.2 million to secure the Company’s obligations under the lease agreements.

The letters of credit are maintained under a subfacility of the revolving credit agreement (Note 10).

Lease cost is recognized on a straight-line basis over the lease term.

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Summer Street Lease

In June 2019, the Company entered into a non-cancelable operating lease (the “Summer Street Lease”) for approximately 39,000 square feet of office space on the 23 rd floor of 100 Summer Street, Boston, Massachusetts, which began serving as the Company’s headquarters in October 2019.

In June 2019, the Company entered into a non-cancelable operating lease (the “Summer Street Lease”) for approximately 39,000 square feet of office space on the 23 rd floor of 100 Summer Street, Boston, Massachusetts, which has been the Company’s headquarters since October 2019.

The Summer Street Lease terminates on June 11, 2030 and includes a 2 % annual rent escalation, free rent periods, a tenant improvement allowance, and an option to extend the term of the lease for an additional five years at a market base rental rate.

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Accrued expenses and other current liabilities consisted of the following (in thousands):

December 31, 2024

December 31, 2023

Accrued compensation and benefits

Accrued interest

Deferred revenue

Accrued restructuring liabilities

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Total accrued expenses and other current liabilities

As of December 31, 2023, other accrued expenses of $ 8.8 million were comprised primarily of $ 6.1 million of uninvoiced vendor liabilities and $ 2.6 million of deferred revenue.

As of December 31, 2022, other accrued expenses of $ 3.6 million was comprised primarily of uninvoiced vendor liabilities.

As of December 31, 2024 and 2023, other accrued expenses were comprised primarily of $ 4.3 million and $ 6.1 million of uninvoiced vendor liabilities, respectively.

2.25 % Convertible Senior Notes due 2022

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0.75 % Convertible Senior Notes due 2024 and 1.50 % Convertible Senior Notes due 2026

In August 2019, the Company issued $ 200.0 million aggregate principal amount of the 2024 Convertible Notes and $ 200.0 million aggregate principal amount of the 2026 Convertible Notes.

In August 2019, the Company issued $ 200.0 million aggregate principal amount of the 2024 Convertible Notes and $ 200.0 million aggregate principal amount of the 2026 Convertible Notes, pursuant to separate indentures (each an

“Indenture” and together the “Indentures”), between the Company and U.S.

Bank National Association, as trustee (the

The Company received net proceeds of $ 391.0 million from the sale of the 2024 Convertible Notes and 2026 Convertible Notes, after deducting fees and expenses of $ 9.0 million.

The Company used $ 25.2 million of the net proceeds from the sale of the 2024 Convertible Notes and 2026 Convertible Notes to pay the cost of the Capped Calls, as described below.

For purposes of this section, “Notes” refer to the 2024 Convertible Notes and the 2026 Convertible Notes, collectively.

The 2024 Convertible Notes and 2026 Convertible Notes were issued by the Company on August 12, 2019, pursuant to separate Indentures, each dated as of such date (each an “Indenture” and together the “Indentures”), between the Company and the Trustee.

The 2024 Convertible Notes bear cash interest at the annual rate of 0.75 % and the 2026 Convertible Notes bear cash interest at the annual rate of 1.50 %, each payable on June 15 and December 15 of each year.

The 2024 Convertible Notes will mature on June 15, 2024 and the 2026 Convertible Notes will mature on June 15, 2026, unless earlier converted or repurchased.

The initial conversion rate for each of the 2024 Convertible Notes and the 2026 Convertible Notes is 74.6687 shares of Class A Common Stock (subject to adjustment as provided for in the applicable Indenture) per $ 1,000 principal amount of the 2024 Convertible Notes and 2026 Convertible Notes, which is equal to an initial conversion price of approximately $ 13.39 per share.

The Company held the option to determine the settlement method for conversions of the 2024 Convertible Notes through payment or delivery, as the case may be, of cash, shares of the Company’s Class A Common Stock, or a combination of cash and shares of Class A Common Stock (subject to, and in accordance with, the settlement provisions of the applicable Indenture).

The Company has elected to settle conversions of the 2024 Convertible Notes through cash payment equal to the principal value and shares of Class A Common Stock for the conversion premium, if any.

Holders of the 2024 Convertible Notes had the right to convert their 2024 Convertible Notes at their option at any time prior to the close of business on the business day immediately preceding December 15, 2023 upon the occurrence of certain circumstances and no such conversions occurred.

On or after December 15, 2023, until the close of business on the second scheduled trading day immediately preceding June 15, 2024, holders may convert their 2024 Convertible Notes, in multiples of $ 1,000 principal amount, at the option of the holder.

The Company will settle conversions of the 2026 Convertible Notes through payment or delivery, as the case may be, of cash, shares of the Company’s Class A Common Stock or a combination of cash and shares of Class A Common Stock, at the Company’s option (subject to, and in accordance with, the settlement provisions of the applicable Indenture).

In June 2024, the Company repaid the $ 200.0 million aggregate principal amount of the 2024 Convertible Notes upon maturity.

The 2024 Convertible Notes bore cash interest at the annual rate of 0.75 % payable on June 15 and December 15 of each year.

No conversions were exercised by holders of the 2024 Convertible Notes.

The 2026 Convertible Notes bear cash interest at the annual rate of 1.50 %, payable on June 15 and December 15 of each year.

The 2026 Convertible Notes will mature on June 15, 2026, unless earlier converted or repurchased.

The initial conversion rate for the 2026 Convertible Notes is 74.6687 shares of Class A Common Stock (subject to adjustment as provided for in the Indenture) per $ 1,000 principal amount of the 2026 Convertible Notes, which is equal to an initial conversion price of approximately $ 13.39 per share.

Holders of the 2026 Convertible Notes may convert their notes at their option at any time prior to the close of business on the business day immediately preceding December 15, 2025 in multiples of $ 1,000 principal amount, only under the following circumstances:

● during any calendar quarter commencing after the calendar quarter ending on December 31, 2019 (and only during such calendar quarter), if the last reported sale price of Class A Common Stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130 % of the conversion price for the Notes on each applicable trading day;

● during the five -business day period after any five consecutive trading day period (the “measurement period”) in which the “trading price” (as defined in each Indenture) per $ 1,000 principal amount of Notes for each trading day of the measurement period was less than 98 % of the product of the last reported sale price of Class A Common Stock and the conversion rate for the Notes on each such trading day;

● upon the occurrence of specified corporate events described in each Indenture.

On or after December 15, 2025 until the close of business on the second scheduled trading day immediately preceding the applicable June 15, 2026, the holders of the 2026 Convertible Notes may convert their Notes, in multiples of $ 1,000 principal amount, regardless of the foregoing conditions.

Upon the occurrence of fundamental changes, as described in the Indentures, prior to the maturity date of the respective Notes, holders of such Notes may require the Company to repurchase for cash all or a portion of their Notes at a repurchase price equal to 100 % of the principal amount of the Notes to be repurchased, plus accrued and unpaid interest.

If a make-whole fundamental change, as described in the Indentures, occurs and a holder elects to convert its Notes in connection with such make-whole fundamental change, such holder may be entitled to an increase in the conversion rate as described in the Indentures.

The Indentures do not contain any financial covenants or restrict the Company’s ability to repurchase the Company’s securities, pay dividends or make restricted payments in the event of a transaction that substantially increases the Company’s level of indebtedness.

The Indentures provide for customary events of default.

In the case of an event of default with respect to a series of Notes arising from specified events of bankruptcy or insolvency, all outstanding Notes of such series will become due and payable immediately without further action or notice.

If any other event of default with respect to a series of Notes under the relevant Indenture occurs or is continuing, the Trustee or

holders of at least 25 % in aggregate principal amount of the then outstanding Notes of such series may declare the principal amount of such Notes to be immediately due and payable.

The Company accounts for each convertible debt instrument as a single liability measured at amortized cost.

● during the five -business day period after any five consecutive trading day period (the “measurement period”) in which the “trading price” (as defined in each Indenture) per $ 1,000 principal amount of the 2026 Convertible Notes for each trading day of the measurement period was less than 98 % of the product of the last reported sale price of Class A Common Stock and the conversion rate for the 2026 Convertible Notes on each such trading day;

● upon the occurrence of specified corporate events described in the Indenture.

On or after December 15, 2025 until the close of business on the second scheduled trading day immediately preceding the applicable June 15, 2026, the holders of the 2026 Convertible Notes may convert their 2026 Convertible Notes, in multiples of $ 1,000 principal amount, regardless of the foregoing conditions.

Upon the occurrence of fundamental changes, as described in the Indenture, prior to the maturity date of the 2026 Convertible Notes, holders of such notes may require the Company to repurchase for cash all or a portion of their notes at a repurchase price equal to 100 % of the principal amount of the notes to be repurchased, plus accrued and unpaid interest.

If a make-whole fundamental change, as described in the Indenture, occurs and a holder elects to convert its notes in connection with such make-whole fundamental change, such holder may be entitled to an increase in the conversion rate as described in the Indenture.

The Indenture does not contain any financial covenants or restrict the Company’s ability to repurchase the Company’s securities, pay dividends or make restricted payments in the event of a transaction that substantially increases the Company’s level of indebtedness.

The Indenture provides for customary events of default.

In the case of an event of default arising from specified events of bankruptcy or insolvency, all outstanding notes will become due and payable immediately without further action or notice.

If any other event of default under the Indenture occurs or is continuing, the Trustee or holders of at least 25 % in aggregate principal amount of the then outstanding notes may declare the principal amount of such notes to be immediately due and payable.

The Company accounts for convertible debt instruments as a single liability measured at amortized cost.

The Company’s outstanding balances for the convertible senior notes consisted of the following (in thousands):

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The Company determined the expected life of the 2024 Convertible Notes and the 2026 Convertible Notes was equal to their approximately five and seven-year terms, respectively.

The effective annual interest rates of the 2024 Convertible Notes and the 2026 Convertible Notes for the period from the date of issuance through December 31, 2023 were 1.2 % and 1.8 % , respectively.

The effective annual interest rate of the 2024 Convertible Notes for the period from the date of issuance through maturity was 1.2 % .

The effective annual interest rate of the 2026 Convertible Notes for the period from the date of issuance through December 31, 2024 was 1.9 % .

The effective annual interest rate is computed using the contractual interest and the amortization of debt issuance costs.

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Amortization of debt issuance costs

Amortization of debt discount

Total interest expense

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Convertible senior notes balance

Convertible Note Hedge and Note Hedge Warrant Transactions with Respect to 2022 Convertible Notes

To minimize the impact of potential dilution to the Company's Class A common stockholders upon conversion of the 2022 Convertible Notes, the Company entered into the Convertible Note Hedges.

The Convertible Note Hedges had an exercise price of $ 14.51 per share and covered 23,135,435 shares.

If the 2022 Convertible Notes had been converted and the price of the Company’s Class A Common Stock was above the exercise price of the Convertible Note Hedges, the counterparties were obligated to deliver shares of the Company’s Class A Common Stock and/or cash with an aggregate value approximately equal to the difference between the price of the Company’s Class A Common Stock at the conversion date and the exercise price, multiplied by the number of shares of the Company’s Class A Common Stock

related to the Convertible Note Hedge being exercised.

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

Concurrently with entering into the Convertible Note Hedges, the Company sold Note Hedge Warrants to the Convertible Note Hedge counterparties to acquire shares of the Company’s Class A Common Stock.

An aggregate of 23,135,435 shares underlay the Note Hedge Warrants and each warrant had a strike price of $ 18.82 per share, subject to customary anti-dilution adjustments.

The Note Hedge Warrants were exercisable over the 150 -trading day period beginning on September 15, 2022.

In April 2023, the Note Hedge Warrants terminated unexercised upon expiry.

The Convertible Note Hedges and the Note Hedge Warrants were separate transactions entered into by the Company and were not part of the terms of the 2022 Convertible Notes.

The Company paid $ 91.9 million for the Convertible Note Hedges and received $ 70.8 million for the Note Hedge Warrants, resulting in a net cost to the Company of $ 21.1 million.

The Convertible Note Hedges and Note Hedge Warrants were accounted for as derivative assets and liabilities, respectively, in accordance with ASC 815, and remeasured to fair value at each reporting date (Note 6).

Capped Calls with Respect to 2024 Convertible Notes and 2026 Convertible Notes

To minimize the impact of potential dilution to the Company’s Class A common stockholders upon conversion of the 2024 Convertible Notes and the 2026 Convertible Notes, the Company entered into separate Capped Calls in connection with the issuance of the 2024 Convertible Notes and the 2026 Convertible Notes.

The Company paid the counterparties $ 25.2 million to enter into the Capped Calls.

The Capped Calls have an initial strike price of approximately $ 13.39 per share, which corresponds to the initial conversion price of the 2024 Convertible Notes and the 2026 Convertible Notes and is subject to anti-dilution adjustments generally similar to those applicable to the 2024 Convertible Notes and the 2026 Convertible Notes.

The Capped Calls have a cap price of approximately $ 17.05 per share, subject to certain adjustments.

The Capped Calls are expected generally to reduce the potential dilution to the Class A Common Stock upon conversion of the 2024 Convertible Notes and the 2026 Convertible Notes in the event that the market price per share of Class A Common Stock is greater than the strike price of the Capped Calls as adjusted pursuant to the anti-dilution adjustments.

If, however, the market price per share of Class A Common Stock exceeds the cap price of the Capped Calls, there would nevertheless be dilution upon conversion of the 2024 Convertible Notes and the 2026 Convertible Notes to the extent that such market price exceeds the cap price of the Capped Calls.

The Capped Calls are separate transactions entered into by and between the Company and the Capped Calls counterparties and are not part of the terms of the 2024 Convertible Notes or the 2026 Convertible Notes.

Holders of the 2024 Convertible Notes and the 2026 Convertible Notes do not have any rights with respect to the Capped Calls.

The Company recorded a reduction to additional paid-in capital of $ 25.0 million during the year ended December 31, 2019 related to the premium payments for the Capped Calls.

Additionally, the Company recorded a $ 0.2 million reduction to equity related to transaction costs incurred in connection with the Capped Calls during the year ended December 31, 2019.

To minimize the impact of potential dilution to the Company’s Class A common stockholders upon conversion of the 2024 Convertible Notes and the 2026 Convertible Notes, the Company separately entered into the capped call transactions in August 2019 (the “Capped Calls”) in connection with the issuance of the 2024 Convertible Notes and the 2026 Convertible Notes.

The Company paid the counterparties $ 25.2 million to enter into the Capped Calls, of which $ 25.0 million related to the premium payments and $ 0.2 million related to transaction costs.

These instruments meet the conditions outlined in ASC 815 to be classified in stockholders’ equity and are not subsequently remeasured as long as the conditions for equity classification continue to be met.

The Capped Calls in connection with the issuance of the 2024 Convertible Notes, which covered 14,933,740 shares of Class A Common Stock, terminated unexercised upon expiry in June 2024.

The Capped Calls in connection with the 2026 Convertible Notes have an initial strike price of approximately $ 13.39 per share, which corresponds to the initial conversion price of the 2026 Convertible Notes and is subject to anti-dilution adjustments generally similar to those applicable to the 2026 Convertible Notes.

The Capped Calls have a cap price of approximately $ 17.05 per share, subject to certain adjustments.

The Capped Calls cover 14,933,740 shares of Class A Common Stock (subject to anti-dilution and certain other adjustments), which is the same number of shares of Class A Common Stock that initially underlie the 2026 Convertible Notes.

Holders of the 2026 Convertible Notes do not have any rights with respect to the Capped Calls.

The Capped Calls are expected generally to reduce the potential dilution to the Class A Common Stock upon conversion of the 2026 Convertible Notes in the event that the market price per share of Class A Common Stock is greater than the strike price of the Capped Calls as adjusted pursuant to the anti-dilution adjustments.

If, however, the market price per share of Class A Common Stock exceeds the cap price of the Capped Calls, there would nevertheless be dilution upon conversion of the 2026 Convertible Notes to the extent that such market price exceeds the cap price of the Capped Calls.

Revolving Credit Facility

In May 2023, in connection with the VectivBio Acquisition, the Company entered into a credit agreement (the

“Revolving Credit Agreement”) with Wells Fargo Bank, N.A., as administrative agent, collateral agent, a letter of credit issuer and a lender, and the other agents, lenders and letter of credit issuers parties thereto.

The Revolving Credit Agreement provides for a four-year $ 500.0 million secured revolving credit facility (the

"Revolving Credit Facility”), which includes a $ 10.0 million letter of credit subfacility, and loans made thereunder will mature on the earliest to occur of (i) May 21, 2027 or (ii) the date that is 91 days prior to the stated maturity date of the

Company’s existing convertible notes then outstanding, unless, in the case of clause (ii), the Company’s minimum liquidity equals or exceeds certain agreed levels.

At the Company’s election, borrowings under the Revolving Credit Agreement will bear interest at a rate equal to (a) Adjusted Term Secured Overnight Financing Rate (“SOFR”) (as defined in Revolving Credit Agreement) plus the applicable rate (ranging from 1.75 % to 3.00 %) or (b) the highest of (1) the weighted average overnight Federal funds rate, as published by the Federal Reserve Bank of New York, plus one half of 1.0% , (2) the prime lending rate or (3) the one-month Adjusted Term SOFR plus 1.0 % in effect from time to time plus the applicable rate (ranging from 0.75 % to 2.00 %).

In May 2023, in connection with the VectivBio Acquisition, the Company entered into a credit agreement with Wells Fargo Bank, N.A., as administrative agent (in such capacity, the “Agent”), collateral agent, a letter of credit issuer and a lender, and the other agents, lenders and letter of credit issuers parties thereto (collectively, the “Lenders”).

In September 2024, the Company, the Agent and the Lenders entered into the first amendment to the revolving credit agreement (as amended from time to time, the “Revolving Credit Agreement”) to, among other things, increase the quantum of the Revolving Credit Facility from $ 500.0 million to $ 550.0 million, extend the maturity date, and increase the Company’s permitted maximum consolidated secured net leverage ratio.

The Revolving Credit Agreement provides for a $ 550.0 million secured revolving credit facility (the "Revolving Credit Facility”), which includes a $ 10.0 million letter of credit subfacility, and loans made thereunder will mature on the earliest to occur of (i) December 31, 2028 or (ii) the date that is 91 days prior to the stated maturity date of the Company’s existing convertible notes then outstanding, unless, in the case of clause (ii), the Company’s minimum liquidity equals or exceeds certain agreed levels.

At the Company’s election, borrowings under the Revolving Credit Agreement will bear interest at a rate equal to (a) Adjusted Term Secured Overnight Financing Rate (“Adjusted Term SOFR”) (as defined in Revolving Credit Agreement) plus the applicable rate (ranging from 1.75 % to 3.00 %) or (b) the highest of (1) the weighted average overnight Federal funds rate, as published by the Federal Reserve Bank of New York, plus one half of 1.0% , (2) the prime lending rate or (3) the one-month Adjusted Term SOFR plus 1.0 % in effect from time to time plus the applicable rate (ranging from 0.75 % to 2.00 %).

The applicable rates are based on the Company’s consolidated secured net leverage ratio (as defined under the Revolving Credit Facility) at the time of the applicable borrowing.

The Company pays a quarterly commitment fee of 0.30 % to 0.425 % on the daily amount by which the commitments under the Revolving Credit Agreement exceed the outstanding loans and letters of credit.

The loans and other obligations under the Revolving Credit Agreement are secured by substantially all of the

Company’s personal property, including a pledge of all the capital stock of subsidiaries held directly by the Company or any subsidiary that guarantees the Revolving Credit Agreement following the closing date (which pledge, in the case of any foreign subsidiary, is limited to 65 % of the voting stock), subject to certain customary exceptions and limitations.

The loans and other obligations under the Revolving Credit Agreement are secured by substantially all of the Company’s personal property, including a pledge of all the capital stock of subsidiaries held directly by the Company or

any subsidiary that guarantees the Revolving Credit Agreement following the closing date (which pledge, in the case of any foreign subsidiary, is limited to 65 % of the voting stock), subject to certain customary exceptions and limitations.

The Revolving Credit Agreement generally prohibits any other liens on the assets of the Company and its restricted subsidiaries, subject to certain exceptions as described in the Revolving Credit Agreement.

Under the terms of the Revolving Credit Agreement, the Company will be able to request an increase in the

commitments or the addition of a term loan secured by a pari passu lien on the collateral of up to an additional amount equal to the greater of $ 200.0 million and 100 % of the trailing twelve-month Consolidated Adjusted EBITDA (as defined in the Revolving Credit Agreement) upon satisfaction of customary conditions, including receipt of commitments from either new lenders or increased commitments from existing lenders.

The Revolving Credit Agreement contains certain customary covenants applicable to the Company and its Restricted Subsidiaries (as defined in the Revolving Credit Agreement), and commencing in the third quarter of 2023, the Company is required 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 the Company 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 it consummates an acquisition for consideration in excess of $ 50.0 million, subject to certain limitations on how often this election can be made.

As of December 31, 2023, the Company was in compliance with all covenants.

In connection with the Revolving Credit Agreement, the Company incurred $ 2.9 million of debt issuance costs, which primarily consisted of $ 2.0 million of lender fees and $ 0.9 million of legal and other professional fees.

The debt issuance costs are classified as other assets and are amortized on a straight-line basis over the four-year term of the Revolving Credit Agreement.

The Company had unamortized capitalized debt issuance costs of $ 2.4 million at December 31, 2023.

In June 2023, the Company borrowed $ 400.0 million to partially finance the VectivBio Acquisition (Note 3).

The Company repaid $ 100.0 million of the outstanding principal balance during the year ended December 31, 2023.

The outstanding principal balance on the revolving credit facility was $ 300.0 million as of December 31, 2023.

Under the terms of the Revolving Credit Agreement, the Company will be able to request an increase in the commitments or the addition of a term loan secured by a pari passu lien on the collateral of up to an additional amount equal to the greater of $ 200.0 million and 100 % of the trailing twelve-month Consolidated Adjusted EBITDA (as defined in the Revolving Credit Agreement) upon satisfaction of customary conditions, including receipt of commitments from either new lenders or increased commitments from existing lenders.

The Revolving Credit Agreement contains certain customary covenants applicable to the Company and its Restricted Subsidiaries (as defined in the Revolving Credit Agreement).

The Company is required to maintain a maximum consolidated secured net leverage ratio of 3.50 to 1.00 until the end of the final quarter of 2025 (the “Initial Period”), (ii) 3.25 to 1.00 until the end of the first quarter of 2026 (the “Interim Period”) and (iii) 3.00 to 1.00 thereafter, 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 the Company to elect to increase the permitted maximum consolidated secured net leverage ratio to (i) 4.00 to 1.00 during the Initial Period, (ii) 3.75 to 1.00 during the Interim Period and (iii) 3.50 to 1.00 thereafter, in each case for up to four fiscal quarters in the event it consummates an acquisition for consideration in excess of $ 50.0 million, subject to certain limitations on how often this election can be made.

As of December 31, 2024, the Company was in compliance with all covenants under the Revolving Credit Agreement.

In connection with the initial execution of the Revolving Credit Agreement during the second quarter of 2023 and the amendment executed in the third quarter of 2024, the Company incurred $ 2.9 million and $ 2.2 million of debt issuance costs, respectively, which consisted primarily of lender fees.

The debt issuance costs are classified as other assets and are amortized on a straight-line basis over the term of the Revolving Credit Agreement.

The Company had unamortized capitalized debt issuance costs of $ 3.9 million and $ 2.4 million at December 31, 2024 and 2023, respectively.

The outstanding principal balance on the revolving credit facility was $ 385.0 million and $ 300.0 million as of December 31, 2024 and 2023, respectively.

The following table sets forth total interest expense recognized related to Revolving Credit Agreement (in

December 31, 2023

Year Ended December 31,

Contractual interest expense

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While the outcome of these other claims cannot be predicted with certainty, management does not believe that the outcome of any of these ongoing legal matters, individually and in aggregate, will have a material adverse effect on the Company’s consolidated financial statements.

In May 2021, the Company and AbbVie entered into a settlement agreement with Teva, under which the Company and AbbVie will grant Teva a license to market a generic version of 72 mcg LINZESS beginning March 31, 2029 (subject to FDA approval), unless certain limited circumstances, customary for settlement agreements of this nature, occur.

With this settlement agreement, the Company and AbbVie have settled with the filers of all known ANDAs to date seeking approval to market generic versions of LINZESS.

Stockholders’ Equity

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Selling, general and administrative

Restructuring expenses

Restructuring

Total share-based compensation expense included in operating expenses

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( 1,886,372 )

( 1,210,714 )

Outstanding as of December 31, 2024

Amounts relating to time-based RSUs granted prior to the Separation of the Company’s soluble guanylate cycle business, and certain other assets and liabilities, into Cyclerion Therapeutics, Inc.

(the “Separation) on April 1, 2019 have not been adjusted to reflect the effect of the Separation on the Company’s stock price.

For additional information related to the Separation, refer to Item 5 elsewhere within this Annual Report on Form 10-K.

The weighted-average grant date fair value per share of time-based RSUs granted during the years ended December 31, 2024, 2023, and 2022 was $ 11.53 , $ 10.55 , and $ 11.08 , respectively.

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PSUs currently outstanding vest upon the achievement of specified performance criteria over a three-year performance period, generally subject to the executive remaining in continuous service with the Company through the applicable vesting dates.

The performance criteria applicable to the PSUs granted in 2022 and 2021 were realizing relative total shareholder return goals (the “Relative TSR PSUs”).

The performance criteria applicable to the PSUs granted in 2023 consisted of an equal weighting of (i) Relative TSR PSUs and (ii) achieving specified stock price targets (the “Absolute TSR PSUs”).

The performance criteria applicable to the PSUs granted in 2022 were realizing relative total shareholder return goals (the “Relative TSR PSUs”).

The performance criteria applicable to the PSUs granted in 2024 and 2023 consisted of an equal weighting of (i) Relative TSR PSUs and (ii) achieving specified stock price targets (the “Absolute TSR PSUs”).

The Relative TSR PSUs and Absolute TSR PSUs are valued using the Monte Carlo simulation method on the date of grant.

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The weighted-average grant date fair value per share of PSUs granted during the years ended December 31, 2024, 2023, and 2022 was $ 14.91 , $ 14.09 , and $ 14.30 , respectively.

The total fair value of PSUs that vested during the years ended December 31, 2023 and 2022 was $ 0.8 million and $ 1.7 million, respectively.

No PSUs vested during the year ended December 31, 2021.

The total fair value of PSUs that vested during the years ended December 31, 2024, 2023, and 2022 was $ 9.8 million, $ 0.8 million and $ 1.7 million, respectively.

Stock Options

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Exercisable at December 31, 2024

(1) Amounts relating to stock options granted prior to the Separation have not been adjusted to reflect the effect of the Separation on the Company’s stock price.

(1) Amounts relating to stock options granted prior to the separation of the Company’s soluble guanylate cycle business, and certain other assets and liabilities, into Cyclerion Therapeutics, Inc.

(the “Separation) on April 1, 2019 have not been adjusted to reflect the effect of the Separation on the Company’s stock price.

The total intrinsic value of options exercised during the years ended December 31, 2024, 2023, and 2022 was $ 2.0 million, $ 0.2 million, and $ 0.9 million, respectively.

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Type of award:

Stock options with time-based vesting

Restricted stock awards

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Total deferred taxes

Income tax expense (benefit)

Income tax expense

During the year ended December 31, 2024, the Company recorded income tax expense of $ 64.3 million, comprised of non-cash tax expense of $ 57.8 million and cash tax expense of $ 6.5 million for state income taxes in certain states in which state taxable income exceeded available net operating losses.

During the year ended December 31, 2023, the Company recorded income tax expense of $ 83.5 million, comprised of non-cash tax expense of $ 74.1 million and cash tax expense of $ 9.4 million for state income taxes in certain states in which state taxable income exceeded available net operating losses.

During the year ended December 31, 2022, the Company recorded income tax expense of $ 77.4 million, comprised of non-cash tax expense of $ 73.4 million and cash tax expense of $ 4.0 million for state income taxes in certain states in which state taxable income exceeded available net operating losses.

Due to the Company’s ability to utilize its net operating losses to offset federal taxable income and taxable income in many states, the majority of the Company’s tax provision is a non-cash tax expense until the Company’s net operating losses have been fully utilized.

During the year ended December 31, 2021, the Company recorded income tax benefit of $ 327.8 million, which primarily pertains to the income tax benefit of $ 333.3 million related to the release of the valuation allowance on the majority of the Company’s tax attributes and other deferred tax assets, partially offset by $ 5.5 million of state income taxes in certain states in which the Company is unable to utilize net operating losses to fully offset taxable income.

A reconciliation of income taxes computed using the U.S.

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Change in the valuation allowance

Income tax expense (benefit)

Income tax expense

The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities.

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On a periodic basis, the Company reassesses the valuation allowance on its deferred income tax assets weighing positive and negative evidence to assess the recoverability of the deferred tax assets.

As of December 31, 2024, the Company maintained a valuation allowance of $ 106.3 million on deferred tax assets not expected to be realized, related primarily to deferred tax assets acquired in the VectivBio Acquisition comprised primarily of net operating loss carryforwards in Switzerland, as well as certain state net operating losses and state tax credits that are expected to expire prior to utilization.

As of December 31, 2023, the Company maintained a valuation allowance of $ 85.6 million on deferred tax assets not expected to be realized, related primarily to deferred tax assets acquired in the VectivBio Acquisition comprised primarily of net operating loss carryforwards in Switzerland, as well as certain tax credits that are expected to expire prior to utilization.

As of December 31, 2022, the Company maintained a valuation allowance of $ 3.1 million on deferred tax assets not expected to be realized, related primarily to certain tax credits that are expected to expire prior to utilization.

The valuation allowance increased by $ 82.6 million during the year ended December 31, 2023 primarily to offset the acquired foreign net operating losses from the VectivBio Acquisition.

Additionally, in response to a state tax law change enacted in October 2023, the Company increased its valuation allowance on certain state tax credits that are

expected to expire prior to utilization.

The valuation allowance decreased by $ 1.2 million during the year ended December 31, 2022 primarily for certain tax credits that expired unused during 2022.

The valuation allowance increased by $ 20.6 million during the year ended December 31, 2024 primarily to offset the foreign net operating losses incurred in Switzerland, to offset certain state net operating losses that are expected to expire prior to utilization, and to offset certain US tax credits that are expected to expire prior to utilization.

The valuation allowance increased by $ 82.6 million during the year ended December 31, 2023 primarily to offset the acquired foreign net operating losses from the VectivBio Acquisition, as well as in response to a state tax law change enacted in October 2023, in which the Company increased its valuation allowance on certain state tax credits that are expected to expire prior to utilization.

Additionally, the Company increased its reserves for uncertain tax positions by $ 11.0 million in the second quarter of 2023 in connection with a liability assumed in the VectivBio Acquisition.

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These ownership changes may limit the amount of net operating loss carryforwards and research and development credit carryforwards that can be utilized annually to offset future taxable income and taxes, respectively.

In general, an ownership change, as defined by IRC Section 382, results from transactions increasing the ownership of certain stockholders or public groups in the stock of a corporation by more than 50 percentage points over a three-year period.

In general, an ownership change, as defined by IRC

Section 382, results from transactions increasing the ownership of certain stockholders or public groups in the stock of a corporation by more than 50 percentage points over a three-year period.

The following table summarizes the changes in the Company’s unrecognized income tax benefits for the years ended December 31, 2024, 2023, and 2022 (in thousands):

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The Company recognizes interest and penalties, if any, related to uncertain tax positions in income tax expense.

The Company recognized $ 1.0 million and an insignificant amount of interest and penalties related to uncertain tax positions during the years ended December 31, 2023 and 2022, respectively.

The Company did no t recognize any interest and penalties related to uncertain tax positions during the year ended December 31, 2021.

As of December 31, 2023 and 2022, $ 5.2 million and an insignificant amount of interest and penalties have been accrued, respectively.

The Company recognized $ 0.8 million, $ 1.0 million and an insignificant amount of interest and penalties related to uncertain tax positions during the years ended December 31, 2024, 2023, and 2022, respectively.

As of December 31, 2024 and 2023, $ 5.1 million and $ 5.2 million of interest and penalties have been accrued, respectively.

The statute of limitations for assessment by the Internal Revenue Service (“IRS”) and state tax authorities is open for tax years ended December 31, 2021 through the present, although net operating losses generated from years prior to 2021 could be subject to examination and adjustments to the extent utilized in future years.

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or (b) 75 % of the first $ 10,000 of employee contributions.

During each of the years ended December 31, 2023, 2022, and 2021, the Company recorded $ 2.2 million of expense related to its 401(k) company match.

During the years ended December 31, 2024, 2023, and 2022, the Company recorded $ 2.4 million, $ 2.2 million, and $ 2.2 million of expense, respectively, related to its 401(k) company match.

Defined Benefit Retirement Plans

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The employee has the option to withdraw the capital on demand.

During the post-acquisition period from June 29, 2023 through December 31, 2023, the Company recognized $ 1.8 million of expense and $ 0.9 million of other comprehensive loss related to its defined benefit plans.

Employer contributions and employee contributions during the post-acquisition period from June 29, 2023 through December 31, 2023 were $ 1.2 million and $ 13.7 million, respectively.

As of December 31, 2023 the total fair value of pension plan assets was $ 33.0 million and the fair values of projected benefit obligations was $ 37.6 million, resulting in a net liability status of $ 4.6 million recorded as other liabilities.

The Company updates the estimates used to measure employee benefit obligations in the fourth quarter and upon a remeasurement event to reflect the updated actuarial assumptions.

Defined benefit plans in Switzerland were comprised of a basic plan and management plan during the year ended December 31, 2023.

The participants in the management plan were terminated as of December 31, 2023 and plan assets were transferred to the participants during the year ended December 31, 2024.

The basic plan is the only defined benefit plan in Switzerland as of December 31, 2024.

The defined benefit plan in Belgium was maintained for one employee and has been terminated as of December 31, 2024.

The following table summarizes the components of net periodic benefit costs (income) for the year ended December 31, 2024 and the period between the acquisition date of June 29, 2023 and December 31, 2023 (in thousands):

Current service cost

Amortization prior service cost

Amortization of unrecognized actuarial gains/(losses)

Interest cost

Expected return on plan assets

Curtailment and other

Administration costs

The amounts recognized in other comprehensive income with respect to the defined benefit pension plans for the year ended December 31, 2024 and the period between the acquisition date of June 29, 2023 and December 31, 2023 (in thousands):

Amortization prior service cost

Prior service (cost)/credit arising during financial year

Amortization of unrecognized actuarial gains/(losses)

Remeasurement (gain)/loss

Actuarial (gains)/losses arising from plan experience

Actuarial (gains)/losses arising from demographic assumption

Actuarial (gains)/losses arising from financial assumptions

Return on plan assets excluding interest income

Expense (income) recognized in other comprehensive income

The amount included in the consolidated statements of financial position arising from the Company’s obligation in respect to its defined benefit plan as of December 31, 2024, and 2023 (in thousands):

Present value of defined benefit obligation

Fair value of plan assets

Net liability arising from defined benefit obligation

Movements in the present value of the defined benefit obligation for the year ended December 31, 2024, and period between the acquisition date of June 29, 2023 and December 31, 2023 (in thousands):

Beginning defined benefit obligation as of January 1, 2024/June 29, 2023

Current service cost

Contributions paid by employees

Interest expense on defined benefit obligation

Prior service (cost)/credit arising during financial year

Remeasurement (gain)/loss on defined benefit obligation

Benefits (paid)/deposited

Foreign currency exchange (gains)/loss

Ending defined benefit obligation as of December 31

Movements in the fair value of plan assets for the year ended December 31, 2024, and period between the acquisition date of June 29, 2023 and December 31, 2023 (in thousands):

Beginning fair value of plan assets as of January 1, 2024/June 29, 2023

Return on plan assets excluding interest income

Contributions paid by employer

Contributions paid by employees

Benefits (paid)/deposited

Actuarial gain/(loss) on plan assets

Administration expense

Foreign currency exchange gains/(losses)

Ending fair value of plan assets as of December 31

The allocation of the assets of the different asset classes in the Switzerland basic plan corresponds to (in thousands):

Ending fair value of plan assets as of December 31

Assets in the preceding table are predominantly Level 2 assets in the fair value hierarchy, except for certain mortgage-backed securities valued at $ 1.9 million and $ 2.6 million at December 31, 2024 and 2023, respectively, which are Level 3 assets in the fair value hierarchy.

The amounts reflected in the preceding table as of December 31, 2023 represent the allocation of assets for the Switzerland basic plan.

The allocation of assets for the Switzerland management plan as of December 31, 2023 were not made available to the Company, as investment decisions are made by plan participants.

Principal assumptions used for the purpose of the actuarial valuations were as follows:

Discount rate

Expected return on assets

Expected rate of salary increase

Expected rate of pension increase

Mortality rate

Future expected benefit payments based on the assumptions in the preceding table are as follows (in thousands):

2029 and thereafter

Workforce Reductions and Restructuring

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In June 2023, the Company commenced the elimination of certain positions in connection with the VectivBio

The majority of the eliminations were initiated in June 2023 and the remaining eliminations were substantially completed during the third quarter of 2023.

The Company recorded $ 14.9 million of restructuring expenses, which are primarily comprised of employee severance, benefits and related costs, during the year ended December 31, 2023.

The following table summarizes the accrued liabilities activity recorded in connection with the reductions in workforce and related restructuring activities during the year ended December 31, 2023 (in thousands):

The majority of the eliminations were substantively completed during the year ended December 31, 2023.

The Company recorded $ 2.6 million and $ 14.9 million of restructuring expenses, which are primarily comprised of employee severance, benefits and related costs, during the year ended December 31, 2024 and 2023, respectively.

December 31, 2023

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VectivBio Acquisition-related workforce reduction

December 31, 2022

December 31, 2023

Headquarters-based workforce reduction

VectivBio Acquisition-related workforce reduction

In January 2025, following an analysis of its strategy and core business needs, and in an effort to streamline focus and support the continued development of the Company’s pipeline, the Company commenced a reduction in the Company’s workforce of approximately 50 %, primarily consisting of field-based sales employees.

This reduction in workforce is expected to be substantially completed by the end of the first half of 2025.

The Company estimates that, in connection with this reduction in its workforce, it will incur aggregate charges of approximately $ 20.0 million to approximately $ 25.0 million, primarily comprised of one-time employee severance and benefit costs.

Of these charges, substantially all are expected to result in cash expenditures.

The Company may incur additional costs not currently contemplated due to events associated with or resulting from the workforce reduction.

The estimated charges that the Company expects to incur are subject to a number of assumptions, and actual results may differ materially from these estimates.

Segment Reporting

The Company operates in one reportable business segment—human therapeutics.

The human therapeutics segment revenues are generated primarily through collaborative arrangements and license agreements related to research and development and commercialization of linaclotide.

The accounting policies of the human therapeutics segment are the same as those described in the summary of significant accounting policies.

The Company has identified the Chief Executive Officer and the Chief Financial Officer as the chief operating decision-maker (“CODM”).

The CODM uses consolidated net income (loss) to understand and evaluate the Company’s operating performance and trends, to prepare and approve the annual budget, and to develop short-term and long-term operating plans.

Revenues, costs and expenses, and other income (expense) are provided to the CODM as presented in the statement of income (loss).

Total assets are not reviewed by the CODM when evaluating the segment’s performance.

Selected Quarterly Financial Data (Unaudited)

7 unchanged sentences

Net income (loss)

Comprehensive income (loss)

Net income (loss) per share—basic (1)

Net income (loss) per share—diluted (1)

(1) The summation of quarterly diluted net income per share does not equate to the calculation for the full fiscal year, as quarterly calculations are performed on a discrete basis.

(in thousands, except per share data)

Total revenues

Total cost and expenses

Other income (expense), net

Net income (loss)

( 1,089,478 )

( 1,031,559 )

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

Net income (loss) attributable to Ironwood

Pharmaceuticals, Inc.

( 1,062,187 )

3 unchanged sentences

( 1,005,207 )

Net income (loss) per share—basic (1)

Net income (loss) per share—diluted (1)

(1) The summation of quarterly diluted net income per share does not equate to the calculation for the full fiscal year, as quarterly calculations are performed on a discrete basis.

(in thousands, except per share data)

Total revenues

Total cost and expenses

Other expense, net

Net income and comprehensive income

Net income per share—basic (1)

Net income per share—diluted (1)

(1) Quarterly basic and diluted net income per share do not add to full fiscal year total due to rounding.

(1) The summation of quarterly diluted net income per share does not equate to the calculation for the full fiscal year, as quarterly calculations are performed on a discrete basis.

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 9A. Controls and Procedures