Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the notes to those financial statements appearing elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements that involve significant risks and uncertainties. As a result of many factors, such as those set forth under “Risk Factors” in Item 1A of this Annual Report on Form 10-K, our actual results may differ materially from those anticipated in these forward-looking statements.
Overview
We are a biotechnology company developing and commercializing life-changing therapies for people living with gastrointestinal, or GI, and rare diseases. We are focused on the development and commercialization of innovative product opportunities in areas of significant unmet need, leveraging our demonstrated expertise and capabilities in GI and rare diseases.
LINZESS® (linaclotide), our commercial product, is the first product approved by the U.S. FDA, in a class of GI medicines called GC-C agonists and is indicated for the treatment of irritable bowel syndrome with constipation, or IBS-C, in adults and pediatric patients 7 years of age and older, chronic idiopathic constipation, or CIC, in adults, and functional constipation, or FC, in pediatric patients ages 6-17 years-old. LINZESS is also available for the treatment of adults with IBS-C or CIC in Mexico, adults with IBS-C or chronic constipation in Japan, and adults with IBS-C in China. Linaclotide is available under the trademarked name CONSTELLA® for the treatment of adults with IBS-C or CIC and pediatric patients ages 6-17 years old with FC in Canada, and to adults with IBS-C in certain European countries.
We have strategic partnerships with leading pharmaceutical companies to support the development and commercialization of linaclotide throughout the world, including with AbbVie in the U.S. and all countries worldwide other than China (including Hong Kong and Macau) and Japan, AstraZeneca in China (including Hong Kong and Macau), and Astellas in Japan.
Through the VectivBio Acquisition, we are advancing apraglutide, a next-generation, synthetic long-acting peptide analog of GLP-2 for SBS patients who are dependent on PS. In February 2024, we announced positive topline results from our pivotal Phase III clinical trial, STARS, which evaluated the efficacy and safety of once-weekly subcutaneous apraglutide in reducing parenteral support dependency in adult patients with SBS-IF. We are also conducting an open-label extension study, STARS Extend, to further assess the safety of apraglutide in adult patients with SBS-IF. In April 2025, we announced that, based on discussions with the U.S. FDA, a confirmatory Phase III clinical trial is needed to seek approval of a new drug application or NDA, for apraglutide for patients with SBS-IF who are dependent on PS. In the fourth quarter of 2025, we met with the U.S. FDA and aligned on key design elements of a confirmatory Phase III clinical trial, STARS-2, of apraglutide. Site initiations are expected to begin in the second quarter of 2026.
To date, we have dedicated a majority of our activities to the research, development and commercialization of linaclotide, as well as other research and development programs, including apraglutide. Prior to the year ended December 31, 2019, we incurred net losses in each year since inception. As of December 31, 2025, we had an accumulated deficit of approximately $1.7 billion. We are unable to predict the extent of any future losses or guarantee that our company will be able to generate and maintain positive cash flows.
We were incorporated in Delaware on January 5, 1998 as Microbia, Inc. On April 7, 2008, we changed our name to Ironwood Pharmaceuticals, Inc. We operate in one reportable business segment – human therapeutics.
Key 2025 Financial Highlights
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governmental and contractual rebates.
Financial Operations Overview
Revenues. Our revenues are generated primarily through our collaborative arrangements and license agreements related to research and development and commercialization of linaclotide.
The majority of our revenues are generated from the sales of LINZESS in the U.S. We record our share of the net profits and losses from the sales of LINZESS in the U.S. less commercial expenses on a net basis and present the settlement payments to and from AbbVie as collaboration expense or collaborative arrangements revenue, as applicable. Net profits or losses consist of net sales to third-party customers and sublicense income in the U.S. less the cost of goods sold as well as selling, general and administrative expenses. Although we expect net sales to increase over time, the settlement payments between AbbVie and us, resulting in collaborative arrangements revenue or collaboration expense, are subject to fluctuation based on the ratio of selling, general and administrative expenses incurred by each party. In addition, our collaborative arrangements revenue may fluctuate as a result of the timing and amount of license fees and clinical and commercial milestones received and recognized under our current and future strategic partnerships as well as timing and amount of royalties from the sales of linaclotide in the European, Canadian, Mexican, Japanese, or Chinese markets or any other markets where linaclotide receives approval and is commercialized.
Research and Development Expenses. The core of our research and development strategy is to leverage our demonstrated expertise and capabilities in GI and rare diseases to bring medicines to patients. Research and development expenses consist of expenses incurred in connection with the research into and development of products and product candidates. These expenses consist primarily of compensation, benefits and other employee-related expenses, research and development related facility costs, third-party contract costs relating to nonclinical study and clinical trial activities, development of manufacturing processes, regulatory registration of third-party manufacturing facilities, and licensing fees for our product candidates.
Research and development expenses include amounts owed to AbbVie on an ongoing basis under cost-sharing
provisions in our collaboration agreement for linaclotide. Reimbursements received for research and development activities under this agreement are netted against research and development expenses.
Linaclotide. Our commercial product, LINZESS, is commercially available in the U.S. for the treatment of IBS-C in adults and pediatric patients 7 years of age and older, CIC in adults and FC in pediatric patients ages 6-17 years-old. Linaclotide is also available to adults suffering from IBS-C or CIC in certain countries of the world, including China, Japan, and in a number of European countries.
We and AbbVie continue to explore ways to enhance the clinical profile of LINZESS by studying linaclotide in additional indications, populations and formulations to assess its potential to treat various conditions. In September 2020, based on the Phase IIIb data of linaclotide 290 mcg on the overall abdominal symptoms of bloating, pain and discomfort in adult patients with IBS-C, the U.S. FDA approved our sNDA to include a more comprehensive description of the effects of LINZESS in its approved label.
In addition, we and AbbVie have established a nonclinical and clinical post-marketing plan with the U.S. FDA to understand the safety and efficacy of LINZESS in pediatric patients. In August 2021, the U.S. FDA approved a revised label for LINZESS based on clinical safety data that had been generated thus far in pediatric studies. The updated label modified the boxed warning for risk of serious dehydration and contraindication against use in children to those less than two years of age. The boxed warning and contraindication previously applied to all children less than 18 years of age and less than 6 years of age, respectively. In June 2023, the U.S. FDA approved LINZESS as a once-daily
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treatment for pediatric patients ages 6-17 years-old with FC, making LINZESS the first and only U.S. FDA-approved prescription therapy for FC in this patient population. On October 15, 2025, the U.S. FDA granted us a pediatric exclusivity for studies conducted on linaclotide, and in November 2025, approved LINZESS for pediatric patients 7 years of age and older with IBS-C. Additional clinical pediatric programs in FC are ongoing.
Apraglutide for SBS-IF. In February 2024, we announced positive topline results from our pivotal Phase III clinical trial, STARS, which evaluated the efficacy and safety of once-weekly subcutaneous apraglutide in reducing PS dependency in adult patients with SBS-IF. SBS-IF, a rare and severe organ failure condition in which patients are dependent on PS, affects an estimated 18,000 adult patients in the U.S., Europe, and Japan. We are also conducting an open-label extension study, STARS Extend, to further assess the safety of apraglutide in adult patients with SBS-IF. In April 2025, we announced that, based on discussions with the U.S. FDA, a confirmatory Phase III clinical trial is needed to seek approval of an NDA for apraglutide for patients with SBS-IF who are dependent on PS. In the fourth quarter of 2025, we met with the U.S. FDA and aligned on key design elements of a confirmatory Phase III clinical trial, STARS-2, of apraglutide. Site initiations are expected to begin in the second quarter of 2026.
IW-3300. We were developing IW-3300, a GC-C agonist, for the potential treatment of visceral pain conditions, such as IC/BPS. In April 2025, based on analysis of the Phase II data, we decided to cease developing IW-3300 for IC/BPS.
CNP-104. Through a collaboration and license option agreement, or the COUR Collaboration Agreement, we and COUR Pharmaceutical Development Company, Inc., or COUR, were developing CNP-104 for the treatment of PBC, a rare autoimmune disease targeting the liver. In the third quarter of 2024, we received from COUR the topline data from COUR’s Phase II Clinical study for the treatment of PBC. In September 2024, we notified COUR of our decision not to exercise the option to acquire an exclusive license to CNP-104. As a result, the COUR Collaboration Agreement has terminated, and we retain no rights and have no obligations related to CNP-104.
Early research and development. Our early research and development efforts have been focused on supporting our development stage GI and rare diseases programs, including exploring strategic options for further development of certain of our internal programs, as well as evaluating external development-stage programs.
The following table sets forth our research and development expenses related to our product pipeline for the years ended December 31, 2025 and 2024, respectively. These expenses relate primarily to compensation, benefits and other employee-related expenses and external costs associated with nonclinical studies and clinical trial costs for our product candidates. We allocate costs related to facilities, depreciation, share-based compensation, research and development support services and certain other costs directly to programs.
Year Ended December 31,
Early research and development(2) 4,212 3,123
Total research and development expenses $ 95,136 $ 111,421
(1) Includes linaclotide in all indications, populations and formulations.
We and AbbVie are exploring development opportunities to enhance the clinical profile of LINZESS by studying linaclotide in additional indications, populations and formulations to assess its potential to treat various conditions. We cannot currently estimate with any degree of certainty the amount of time or money that we will be required to expend in the future on linaclotide for additional indications, populations or formulations.
The lengthy process of securing regulatory approvals for product candidates, including apraglutide, requires the expenditure of substantial resources. Any failure by us to obtain, or any delay in obtaining, regulatory approvals would materially adversely affect our product development efforts and our business overall. Given the inherent uncertainties
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that come with the development of pharmaceutical products, we cannot estimate with any degree of certainty how our programs will evolve, and therefore the amount of time or money that would be required to obtain regulatory approval to market them.
As a result of these uncertainties surrounding the timing and outcome of any approvals, we are currently unable to estimate precisely when, if ever, linaclotide’s utility will be expanded within its currently approved indications; if or when linaclotide will be developed outside of its current markets, indications, populations or formulations; or when, if ever, apraglutide or any of our other product candidates will generate revenues and cash flows.
We invest carefully in our pipeline, and the commitment of funding for each subsequent stage of our development programs is dependent upon the receipt of clear, supportive data. In addition, we intend to access externally discovered drug candidates that fit within our core strategy. In evaluating these potential assets, we apply the same investment criteria as those used for investments in internally discovered assets.
The successful development of our product candidates is highly uncertain and subject to a number of risks including, but not limited to:
As a result of the factors discussed above, including the factors discussed under “Risk Factors” in Item 1A of this Annual Report on Form 10-K, we are unable to determine the duration and costs to complete current or future nonclinical and clinical stages of our product candidates or when, or to what extent, we will generate revenues from the commercialization and sale of our product candidates. Development timelines, probability of success and development costs vary widely. We anticipate that we will make determinations as to which additional programs to pursue and how much funding to direct to each program on an ongoing basis in response to the data of each product candidate, the competitive landscape and ongoing assessments of such product candidate’s commercial potential.
We expect to invest in our development programs and incur substantial research and development expenses for the foreseeable future. We will continue to invest in linaclotide, including the investigation of ways to enhance the clinical profile within its currently approved indications, and the exploration of its potential utility in other indications, populations and formulations, and in apraglutide, as we advance it through clinical trials, in addition to funding research and development activities under our external collaboration and license agreements with respect to our products and product candidates.
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Selling, General and Administrative Expense. Selling, general and administrative expense consists primarily of compensation, benefits and other employee-related expenses for personnel in our administrative, finance, legal, information technology, business development, commercial, sales, marketing, communications and human resource functions. Other costs include legal costs of pursuing patent protection of our intellectual property, general and administrative related facility costs, insurance costs and professional fees for accounting, tax, consulting, legal and other services. As we continue to invest in the development and commercialization of LINZESS, apraglutide and other product candidates, we expect our selling, general and administrative expenses will be substantial for the foreseeable future.
We include AbbVie’s selling, general and administrative cost-sharing payments in the calculation of the net profits and net losses from the sale of LINZESS in the U.S. and present the net payment to or from AbbVie as collaboration expense or collaborative arrangements revenue, respectively.
Restructuring Expenses. Restructuring expenses pertain to a workforce reduction initiative in connection with the VectivBio Acquisition, as well as workforce reductions in January 2025 consisting primarily of field-based sales employees and August 2025 consisting of certain positions supporting apraglutide commercialization efforts. The workforce reduction and restructuring initiatives are more fully described in Note 15, Workforce Reductions and Restructuring, to our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K.
Interest Expense and Other Financing Costs. Interest expense consists primarily of cash and non-cash interest costs related to our convertible senior notes and our $550.0 million secured revolving credit facility, or the Revolving Credit Facility. Non-cash interest expense consists of amortization of debt issuance costs.
Interest and Investment Income. Interest and investment income consists of interest earned on our cash and cash equivalents, as well as significant financing components of payments due from collaboration partners.
Income Taxes. We prepare our income tax provision based on our interpretation of the income tax accounting rules and each jurisdiction’s enacted tax laws and regulations. For additional information refer to Note 13, Income Taxes, to our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K.
Critical Accounting Policies and Estimates
Our discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make certain estimates and assumptions that may affect the reported amounts of assets and liabilities, the disclosure of assets and liabilities at the date of the consolidated financial statements, and the amounts of revenues and expenses during the reported periods. We base our estimates on our historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ materially from our estimates under different assumptions or conditions. Changes in estimates are reflected in reported results in the period in which they become known.
We believe that our application of the following accounting policies, each of which require significant judgments and estimates on the part of management, are the most critical to aid in fully understanding and evaluating our reported financial results. Our significant accounting policies are more fully described in Note 2,Summary of Significant Accounting Policies, to our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K.
Revenue Recognition
Upon executing a revenue generating arrangement, we assess whether it is probable we will collect consideration in exchange for the good or service it transfers to the customer and perform the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) we satisfy the performance obligations. We must develop assumptions that require significant judgment to determine the standalone selling price for each performance obligation identified in the contract. The assumptions that are used to determine the standalone selling price may include forecasted revenues, development timelines, reimbursement rates for personnel costs, discount rates and probabilities of technical and regulatory success.
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Our revenues are generated primarily through collaborative arrangements and license agreements related to the development and commercialization of linaclotide. The terms of the collaborative arrangements and other agreements contain multiple performance obligations which may include (i) licenses, (ii) research and development activities, including participation on joint steering committees, (iii) the manufacture of finished drug product, API, or development materials for a partner, which are reimbursed at a contractually determined rate, and (iv) education or co-promotion activities by our clinical sales specialists. Non-refundable payments to us under these agreements may include (i) up-front license fees, (ii) payments for research and development activities, (iii) payments for the manufacture of finished drug product, API, or development materials, (iv) payments based upon the achievement of certain milestones, (v) payments for sales detailing, promotional support services and medical education initiatives, and (vi) royalties on product sales. Additionally, we receive our share of the net profits or bear our share of the net losses from the sale of linaclotide in the U.S. We have adopted a policy to recognize revenue net of tax withholdings, as applicable.
Collaboration, License, and Other Agreements
Upon licensing intellectual property, we determine if the license is distinct from the other performance obligations identified in the arrangement. We recognize revenues from the transaction price, including non-refundable, up-front fees allocated to the license when the license is transferred to the customer if the license has distinct benefit to the customer. For licenses that are combined with other promises, we assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time. For performance obligations that are satisfied over time, we evaluate the measure of progress each reporting period and, if necessary, adjust the measure of performance and related revenue recognition.
Our license and collaboration agreements include milestone payments, such as development and other milestones. We evaluate whether the milestones are considered probable of being reached and estimate the amount to be included in the transaction price using the most likely amount method at the inception of the agreement. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within our control, such as regulatory approvals, are not considered probable of being achieved until those approvals are received. The transaction price is then allocated to each performance obligation on a relative standalone selling price basis, for which we recognize revenue as or when the performance obligations under the contract are satisfied. We re-evaluate the probability of achievement of such milestones and any related constraint at each reporting period, and any adjustments are recorded on a cumulative catch-up basis.
Agreements that include the supply of API or drug product for either clinical development or commercial supply at the customer’s discretion are generally considered as options. We assess if these options provide a material right to our partner, and if so, they are accounted for as separate performance obligations. If we are entitled to additional payments when the customer exercises these options, any additional payments are recorded as revenue when the customer obtains control of the goods, which is typically upon shipment for sales of API and finished drug product.
For agreements that include sales-based royalties, including milestone payments based on the level of sales, and the license is deemed to be the predominant item to which the royalties relate, we recognize revenue when the related sales occur in accordance with the sales-based royalty exception.
Net Profit or Net Loss Sharing
In accordance with Accounting Standards Codification, or ASC, Topic 808, Collaborative Arrangements, or ASC 808, we considered the nature and contractual terms of the arrangement and the nature of our business operations to determine the classification of payments under our collaboration agreements. While ASC 808 provides guidance on classification, the standard is silent on matters of separation, initial measurement, and recognition. Therefore, we apply the separation, initial measurement, and recognition principles of ASC Topic 606, Revenue from Contracts with Customers, to our collaboration agreements.
Our collaborative arrangements revenue generated from sales of LINZESS in the U.S. are considered akin to sales-based royalties. We recognize our share of the pre-tax commercial net profit or net loss generated from the sales of LINZESS in the U.S. in the period the product sales are earned, as reported by AbbVie, and related cost of goods sold and selling, general and administrative expenses as incurred by us and our collaboration partner. These amounts are partially determined based on amounts provided by AbbVie and involve the use of estimates and judgments, such as product sales allowances and accruals related to prompt payment discounts, chargebacks, governmental and contractual rebates, wholesaler fees, product returns, and co-payment assistance costs, which could be adjusted based on actual results in the future. We are highly dependent on AbbVie for timely and accurate information regarding any net revenues
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realized from sales of LINZESS in the U.S. in accordance with ASC 808, and the related costs, in order to accurately report its results of operations. If we do not receive timely and accurate information or incorrectly estimate activity levels associated with the collaboration at a given point in time, we could be required to record adjustments in future periods.
We record revenue transactions as net product revenue in our consolidated statements of incomeif we are deemed the principal in the transaction, which includes being the primary obligor, retaining inventory risk, and control over pricing. Given that we are not the primary obligor and do not have the inventory risks in the collaboration agreement with AbbVie for North America, we record our share of the net profits or net losses from the sales of LINZESS in the U.S. on a net basis and present the settlement payments to and from AbbVie as collaboration expense or collaborative arrangements revenue, as applicable. We and AbbVie settle the cost sharing quarterly, such that our consolidated statements of incomereflect 50% of the pre-tax net profit or loss generated from sales of LINZESS in the U.S.
Deferred Revenue
Our deferred revenue balance consists of advance billings and payments received from customers in excess of revenue recognized.
Research and Development Expense
We have committed significant resources into the research and development of our product candidates and intend to continue to do so for the foreseeable future. Research and development expenses are generally expensed as incurred. We capitalize nonrefundable advance payments we make for research and development activities and defer expense recognition until the related goods are received or the related services are performed.
Research and development expenses are comprised of costs incurred in performing research and development activities, including salary, benefits, share-based compensation, and other employee-related expenses; laboratory supplies and other direct expenses; facilities expenses; overhead expenses; third-party contractual costs relating to nonclinical studies and clinical trial activities and related contract manufacturing expenses, development of manufacturing processes and regulatory registration of third-party manufacturing facilities; licensing fees for our product candidates; and other outside expenses.
Clinical trial expenses include expenses associated with CROs. The invoicing from CROs for services rendered can lag several months. We accrue the cost of services rendered in connection with CRO activities based on our estimate of site management, monitoring costs, project management costs, and investigator fees. We maintain regular communication with our CRO vendors to gauge the reasonableness of our estimates. Differences between actual clinical trial expenses and estimated clinical trial expenses recorded have not been material and are adjusted for in the period in which they become known. However, if we incorrectly estimate activity levels associated with the CRO services at a given point in time, we could be required to record material adjustments in future periods. Under our collaboration agreement with AbbVie for North America, we are reimbursed for certain research and development expenses and we net these reimbursements against our research and development expenses as incurred.
Research and development expenses also include up-front payment, non-contingent payment, and milestone payment obligations under certain collaboration arrangements. Recognition of expense for such payments requires judgment with respect to when the obligation is probable.
Share-Based Compensation Expense
We grant awards under our share-based compensation programs, including stock awards, restricted stock awards, or RSAs, restricted stock units, or RSUs (including performance-based RSUs, or PSUs), stock options, and shares issued under our employee stock purchase plan, or ESPP. Share-based compensation is recognized as expense in the consolidated statements of income based on the grant date fair value over the requisite service period, net of estimated forfeitures. We estimate forfeitures over the requisite service period using historical forfeiture activity and record share-based compensation expense only for those awards that are expected to vest.
We estimate the fair value of stock options on the date of grant using the Black-Scholes option-pricing model, which requires the use of subjective assumptions including volatility and expected term, among others. The fair value of
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stock awards, RSAs, and RSUs is based on the market value of our Class A Common Stock on the date of grant, with the exception of PSUs with market conditions, which are measured using the Monte Carlo simulation method. Discounted stock purchases under our ESPP are valued on the first date of the offering period using the Black-Scholes option-pricing model to compute the fair value of the lookback provision plus the purchase discount.
For awards that vest based on service conditions and market conditions, we use the straight-line method to recognize compensation expense over the respective service period. For awards that contain performance conditions, we determine the appropriate amount to expense based on the anticipated achievement of performance targets, which requires judgment, including forecasting the achievement of future specified targets. At the date performance conditions are determined to be probable of achievement, we record a cumulative expense catch-up, with remaining expense amortized over the remaining service period. Throughout the performance period, we re-assess the estimated performance and update the number of performance-based awards that we believe will ultimately vest. Discounted stock purchases under our ESPP are recognized over the offering period.
Compensation expense related to modified awards is measured based on the fair value for the awards as of the modification date. Any incremental compensation expense arising from the excess of the fair value of the awards on the modification date compared to the fair value of the awards immediately before the modification date is recognized at the modification date or ratably over the remaining service period, as appropriate.
While the assumptions used to calculate and account for share-based compensation awards represent management’s best estimates, these estimates involve inherent uncertainties and the application of management’s judgment. As a result, if revisions are made to our underlying assumptions and estimates, our share-based compensation expense could vary significantly from period to period.
Income Taxes
We use the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statement carrying amounts and tax basis of assets and liabilities using enacted tax rates in effect for years in which the temporary differences are expected to reverse.
At each quarterly reporting date, we reassess the valuation allowance on our deferred tax assets, weighing positive and negative evidence to assess the recoverability of the deferred tax assets. We provide a valuation allowance when it is more likely than not that deferred tax assets will not be realized. Our valuation allowance is comprised primarily of certain tax credits that are expected to expire prior to utilization.
Significant judgment is required in making these assessments to maintain or reverse our valuation allowances and, to the extent our future expectations change we would have to assess the recoverability of these deferred tax assets at that time. If we determine that our net deferred tax assets are not realizable in a future period, we would record material changes to income tax expense or benefit in that period.
We record uncertain tax positions on the basis of a two-step process. First, we determine whether it is more likely than not that the tax positions will be sustained based on the technical merits of the position. Second, for those tax positions that meet the more-likely-than-not recognition threshold, we recognize the largest amount of tax benefit that is greater than 50 percent likely to be realized upon ultimate settlement with the relevant tax authority. Significant judgment is required in evaluating whether our tax positions meet this two-step process. The nature of the uncertain tax positions is often complex and subject to change, and the amounts at issue can be substantial. We re-evaluate these uncertain tax positions on a quarterly basis based on a number of factors including, but not limited to, changes in facts or circumstances, changes in tax law, and effectively settled issues under audit and new audit activity. Any change in these factors could result in the recognition of a tax benefit or an additional charge to the tax provision.
Defined Benefit Pension Plan
Determining pension expense and obligations for our defined benefit pension plan uses actuarial estimates of participants’ age at retirement, life span, the long-term rate of return on assets and other factors. In addition, pension expense is sensitive to the discount rate used to value the pension obligation. As a sensitivity measure, an increase or decrease in our discount rate assumption of 1.00% would decrease and increase our pension benefit obligation by $2.0
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million and $2.6 million, respectively. These assumptions are subject to the risk of change, including macroeconomic conditions, as they require significant judgment and have inherent uncertainties that management or its actuaries may not control or anticipate. A detailed discussion of our defined benefit pension plan is contained in Note 14, Retirement Plans, to our consolidated financial statements, which appears in this Annual Report on Form 10-K.
Results of Operations
The following discussion summarizes the key factors our management believes are necessary for an understanding of our consolidated financial statements.
Year Ended December 31,
(in thousands)
Revenues:
Collaborative arrangements revenue $ 296,151 $ 351,410
Costs and expenses:
Other income (expense):
Interest expense and other financing costs (32,746) (33,034)
Interest and investment income 4,076 4,468
Year Ended December 31, 2025 Compared to Year Ended December 31, 2024
Revenues
Year Ended
December 31, Change
(in thousands)
Revenues:
Collaborative arrangements revenue. The decrease in collaborative arrangements revenue of $55.3 million for the year ended December 31, 2025 compared to the year ended December 31, 2024 was primarily related to a $51.1 million decrease in our share of net profits from the sale of LINZESS in the U.S., which was driven by decreased net price and inventory channel fluctuations, partially offset by increased prescription demand.
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Costs and Expenses
Year Ended
December 31, Change
(in thousands)
Costs and expenses:
Research and development. The decrease in research and development expenses of $16.3 million for the year ended December 31, 2025 compared to the year ended December 31, 2024 was primarily related to $9.6 million decrease in external apraglutide costs, a $5.9 million decrease in costs associated with the IW-3300 development program, a $2.8 million decrease in costs associated with the COUR Collaboration Agreement, and a $1.8 million decrease in external linaclotide costs, partially offset by a $4.8 million reduction to research and development expense recognized during the first quarter of 2024 in connection with the settlement of a license-related contract liability.
Selling, general and administrative. Selling, general and administrative expenses decreased by $62.0 million for the year ended December 31, 2025 compared to the year ended December 31, 2024, primarily due to a $47.8 million decrease in compensation, benefits, and other employee-related expenses, and a $13.5 million decrease in sales and marketing expenses, both resulting from the restructuring initiatives during 2025, as well as a decrease of $5.9 million in professional services expenses. The decrease was partially offset by a $12.5 million legal settlement incurred in 2025 which is more fully described in Note 4, Collaboration, License, and Other Agreements.
Restructuring expenses. The increase in restructuring expense of$17.7million for the year ended December 31, 2025 compared to the year ended December 31, 2024, is primarily related to the workforce reduction in January 2025. Workforce reduction and restructuring initiatives are more fully described in Note 15, Workforce Reduction and Restructuring.
Other Income (Expense), Net
Year Ended
December 31, Change
(in thousands)
Other income (expense):
Interest expense and other financing costs $ (32,746) $ (33,034) $ 288
Total other income (expense), net $ (28,477) $ (27,926) $ (551)
Interest expense and other financing costs. Interest expense decreased by $0.3 million for the year ended December 31, 2025 compared to the year ended December 31, 2024, primarily due to a decrease of $1.1 million in interest expense associated with the 2024 Convertible Notes, which were fully repaid upon maturity in June 2024, partially offset by a $0.7 million increase in other financing costs.
Interest and investment income. Interest and investment income decreased by $0.4 million for the year ended December 31, 2025 compared to the year ended December 31, 2024, primarily due to a decrease in interest rates.
Other. During the years ended December 31, 2025 and 2024, we recorded a gain of $0.2 million and $0.6 million, respectively, for pension-related activities.
Income taxes. During the year ended December 31, 2025, we recorded income tax expense of $46.0 million, comprised of non-cash tax expense of $40.9 million and cash tax expense of $5.1 million for state income taxes in certain states in which state taxable income exceeded available net operating losses. During the year ended December 31, 2024, we 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.
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Liquidity and Capital Resources
As of December 31, 2025, we had $215.5 million of cash and cash equivalents. Our cash equivalents include amounts held in money market funds, U.S. Treasury securities and commercial paper. We invest cash in excess of immediate requirements in accordance with our investment policy, which limits the amounts we may invest in certain types of investments and requires all investments held by us to be at least A- rated, with a remaining final maturity when purchased of less than twenty-four months, so as to primarily achieve liquidity and capital preservation objectives.
We anticipate our cash and cash equivalents balance, our expected net cash inflows from operations, our borrowing capacity on our Revolving Credit Facility, and/or additional capital sources to allow us to meet our short-term and long-term cash obligations, which are reflected in our consolidated balance sheets. Our most significant fixed obligations are debt obligations, supply purchase commitments, and lease commitments, for which annual payments are disclosed in Note 9, Debt, Note 10, Commitments and Contingencies, and Note 6, Leases, respectively, to our financial statements included elsewhere in this Annual Report on Form 10-K.
We may from time to time seek to retire, redeem or repurchase all or part of our outstanding debt through cash purchases and/or exchanges, in open market purchases, privately negotiated transactions, by tender offer or otherwise. Such repurchases, redemptions or exchanges, if any, of our debt will depend on prevailing market conditions, liquidity requirements, contractual restrictions and other factors, and the amounts involved may be material.
Sources of Liquidity
We have financed our operations to date primarily through both the private sale of our preferred stock and the public sale of our common stock, debt financings, and cash generated from our operations. As of December 31, 2025, our debt is comprised of $200.0 million aggregate principal amount of convertible notes, due in June 2026, and $385.0 million aggregate principal amount outstanding under our Revolving Credit Facility, which we entered into in May 2023 to partially finance the VectivBio Acquisition. The Revolving Credit Facility provides for $550.0 million of borrowing capacity and includes a $10.0 million letter of credit subfacility. Refer to Note 9, Debt, to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K, for information related to our debt obligations.
Summary of Cash Flows
The following table summarizes cash flows from operating, investing, and financing activities for the years ended December 31, 2025 and 2024:
Year Ended December 31,
(in thousands)
Net cash provided by (used in):
Investing activities (34) (142)
Effect of exchange rate changes on cash and cash equivalents (329) (32)
Net increase (decrease) in cash and cash equivalents $ 126,897 $ (3,595)
Cash Flows from Operating Activities
Net cash provided by operating activities is derived by adjusting net income (loss) for non-cash items and changes in operating assets and liabilities, which reflect timing differences between the receipt and payment of cash associated with transactions and when they are recognized in the results of operations.
Net cash inflows during the year ended December 31, 2025 and 2024 totaled $127.0 million and $103.5 million, respectively, and were derived primarily from collaboration arrangements revenue related to sales of LINZESS in the U.S., partially offset by research and development expenditures for apraglutide.
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Cash Flows from Investing Activities
Cash used in investing activities for the year ended December 31, 2025 and 2024 were insignificant and pertained to the purchase of property and equipment.
Cash Flows from Financing Activities
Cash provided by financing activities for the year ended December 31, 2025 was $0.2 million and was generated from employee stock purchases.
Cash used in financing activities for the year ended December 31, 2024 totaled $107.0 million was comprised primarily of the repayment of $200.0 million aggregate principal on the 2024 Convertible Notes upon their maturity in June 2024, partially offset by $85.0 million of net borrowings under the Revolving Credit Facility and $11.0 million from stock option exercises and employee stock purchases.
Funding Requirements
We began commercializing LINZESS in the U.S. with our collaboration partner, AbbVie, in the fourth quarter of 2012, and we currently derive a significant portion of our revenue from this collaboration. Our goal is to generate and maintain positive cash flows, driven by increased revenue generated through sales of LINZESS and other commercial activities and financial discipline, while continuing to invest in the development and commercialization of linaclotide, apraglutide, and other product candidates.
Under our collaboration with AbbVie for North America, total net sales of LINZESS in the U.S., as recorded by AbbVie, are reduced by commercial costs incurred by each party, and the resulting amount is shared equally between us and AbbVie. Additionally, we receive royalties from AbbVie based on sales of linaclotide in its licensed territories outside of the U.S. We believe revenues from our LINZESS partnership for the U.S. with AbbVie will continue to constitute a significant portion of our total revenue for the foreseeable future and we cannot be certain that such revenues, as well as the revenues from our other commercial activities, will continue to enable us to generate positive cash flows, or to do so in the timeframes we expect.
We also anticipate that we will continue to incur substantial expenses for the next several years as we further develop and commercialize linaclotide in the U.S., developand commercialize other product candidates, including apraglutide, and invest in building our pipeline through internal or external opportunities. We believe that our cash and cash equivalents on hand as of December 31, 2025, our expected cash inflows from operations, and our borrowing capacity on our Revolving Credit Facility will be sufficient to meet our projected operating needs at least through the next twelve months from the issuance of these financial statements. We have short-term and long-term debt obligations, including convertible notes that mature on June 15, 2026, which are disclosed in Note 9, Debt, to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K. There is no assurance we will have sufficient liquidity to meet our debt obligations when they become due.
Our forecast of the period of time through which our financial resources will be adequate to support our operations, including the underlying revenue expectations and estimates regarding the costs to continue to develop, obtain regulatory approval for, and commercialize linaclotide in the U.S., developand commercialize other product candidates, including apraglutide, and our goal to generate and maintain positive cash flows, are forward-looking statements that involve risks and uncertainties. Our actual results could vary materially and negatively from these and other forward-looking statements as a result of a number of factors, including the factors discussed in the “Risk Factors” section of this Annual Report on Form 10-K. We have based our estimates on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we currently expect.
Due to the numerous risks and uncertainties associated with the development and commercialization of our product candidates, we are unable to estimate precisely the amounts of capital outlays and operating expenditures necessary to develop, obtain regulatory approval for, and commercialize linaclotide, apraglutide and our other product candidates, in each case, for all of the markets, indications, populations and formulations for which we believe each is suited. Our funding requirements will depend on many factors, including, but not limited to, the following:
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● the success of our third-party manufacturing activities;
● the success of our research and development efforts;
● the emergence of competing or complementary products;
● the settlement method used for our outstanding convertible notes; and
Financing Strategy
We may, from time to time, consider additional funding through a combination of new collaborative arrangements, strategic alliances, and additional equity and debt financings or from other sources. We will continue to manage our capital structure and to consider all financing opportunities, whenever they may occur, that could strengthen our long-term liquidity profile. Any such capital transactions may or may not be similar to transactions in which we have engaged in the past. There can be no assurance that any such financing opportunities will also be available on acceptable terms, if at all.
Off-Balance Sheet Arrangements
We do not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, that would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As such, we are not exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in those types of relationships. We enter into guarantees in the ordinary course of business related to the guarantee of our own performance and the performance of our subsidiaries.
New Accounting Pronouncements
For a discussion of recent accounting pronouncements, refer to Note 2, Summary of Significant Accounting Policies, to our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K. We did not otherwise adopt any new accounting pronouncements during the fiscal year ended December 31, 2025 that had a material effect on our consolidated financial statements included in this report.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended, and are not required to provide the information otherwise required under this item.
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Item 8. Financial Statements and Supplementary Data
Our consolidated financial statements, together with the report of independent registered public accounting firms appear at pages F-1 through F-44, of this Annual Report on Form 10-K for the years ended December 31, 2025 and 2024.
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Limitations on Effectiveness of Controls and Procedures
In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.
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 were effective as of December 31, 2025, 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.
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over our financial reporting. Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act as the process designed by, or under the supervision of, our Chief Executive Officer and Chief Financial Officer, and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of our financial statements for external purposes in accordance with generally accepted accounting principles, and includes those policies and procedures that:
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, 2025.
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The effectiveness of our internal control over financial reporting as of December 31, 2025 has been audited by KPMG LLP, an independent registered public accounting firm, as stated in their report, which appears in this Annual Report on Form 10-K.
Remediation of Previously Identified Material Weaknesses
As previously described in described in “Part II, Item 9A – Controls and Procedures” of our Annual Report on Form 10-K for the year ended December 31, 2024, management identified material weaknesses in our internal control over financial reporting related to the design, implementation and/or operating effectiveness of entity-level controls, information technology, or IT, general controls, controls over the financial statements close process, IT application controls, and IT dependent manual controls.
During the year ended December 31, 2025, management took several steps to remediate the previously disclosed material weaknesses including the following:
As a result of these remediation activities, management has concluded that the controls were designed, implemented and operating effectively, such that the material weaknesses previously identified as of December 31, 2024 have been remediated as of December 31, 2025.
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, 2025 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
Based on management’s evaluation, and except with respect to changes in connection with our implementation of the remediation efforts as described above, our principal executive officer and principal financial officer concluded that no other changes during the quarter ended December 31, 2025 materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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Item 9B. Other Information
(b) Director and Officer Trading Arrangements
During the quarter ended December 31, 2025, 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 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
PART III
Item 10. Directors, Executive Officers and Corporate Governance
We have adopted a code of business conduct and ethics applicable to our directors, officers, employees, consultants and all their immediate family or other household members. 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 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 hereto. 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 2026 Annual Meeting of Stockholders.
Item 11. Executive Compensation
The information required by this item is incorporated by reference from our proxy statement for our 2026 Annual Meeting of Stockholders.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information relating to security ownership of certain beneficial owners of our common stock and information relating to the security ownership of our management required by this item is incorporated by reference from our proxy statement for our 2026 Annual Meeting of Stockholders.
The table below sets forth information with regard to securities authorized for issuance under our equity compensation plans as of December 31, 2025. As of December 31, 2025, we had four active equity compensation plans, each of which was approved by our stockholders:
● 2019 Equity Incentive Plan;
● Amended and Restated 2019 Equity Incentive Plan; and
● Amended and Restated 2010 Employee Stock Purchase Plan.
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(a) (b) (c)
Equity compensation plans not approved by security holders — — —
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this item is incorporated by reference from our proxy statement for our 2026 Annual Meeting of Stockholders.
Item 14. Principal Accountant Fees and Services
The information required by this item is incorporated by reference from our proxy statement for our 2026 Annual Meeting of Stockholders.
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PART IV
Item 15. Exhibits and Financial Statement Schedules
1. List of documents filed as part of this report
2. Consolidated Financial Statement Schedules
No schedules are submitted because they are not applicable, not required or because the information is included in the Consolidated Financial Statements or Notes to Consolidated Financial Statements.
3. Exhibits
Incorporated by reference herein
Number Description Form Date
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83
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84
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21.1* Subsidiaries of Ironwood Pharmaceuticals, Inc.
23.1* Consent of KPMG LLP, Independent Registered Public Accounting Firm
101.SCH* XBRL Taxonomy Extension Schema Document
101.CAL* XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB* XBRL Taxonomy Extension Label Linkbase Database
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101.PRE* XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF* XBRL Taxonomy Extension Definition Linkbase Document
* Filed herewith.
‡ Furnished herewith.
# Management contract or compensatory plan, contract, or arrangement.
Item 16. Form10-K Summary
None.
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SIGNATURES
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 26th day of February 2026.
Ironwood Pharmaceuticals, Inc.
By: /s/ Thomas McCourt
Thomas McCourt
Chief Executive Officer
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated.
Signature Title Date
Thomas McCourt
Gregory Martini
Ronald Silver
/s/ Julie H. McHugh Chair of the Board February 26, 2026
Julie H. McHugh
/s/ Mark Currie Director February 26, 2026
Mark Currie
/s/ Alexander Denner Director February 26, 2026
Alexander Denner
/s/ Jon Duane Director February 26, 2026
Jon Duane
/s/ Marla Kessler Director February 26, 2026
Marla Kessler
/s/ Catherine Moukheibir Director February 26, 2026
Catherine Moukheibir
/s/ Jay P. Shepard Director February 26, 2026
Jay P. Shepard
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Index to Consolidated Financial Statements of
Ironwood Pharmaceuticals, Inc.
Page
Report of Independent Registered Public Accounting Firm (PCAOB ID: 185) F-2
Report of Independent Registered Public Accounting Firm (PCAOB ID: 42) F-4
Consolidated Balance Sheets as of December 31, 2025 and 2024 F-5
Notes to Consolidated Financial Statements F-10
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Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors
Ironwood Pharmaceuticals, Inc.:
Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting
We have audited the accompanying consolidated balance sheet of Ironwood Pharmaceuticals, Inc. and subsidiaries (the Company) as of December 31, 2025, the related consolidated statements of income, comprehensive income, stockholders’ deficit, and cash flows for the year then ended, and the related notes (collectively, the consolidated financial statements). We also have audited the Company’s internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2025, and the results of its operations and its cash flows for the year then ended, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025 based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Basis for Opinions
The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audit of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. 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
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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.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a 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.
Measurement of the pension benefit obligation
As discussed in Notes 2 and 14 to the consolidated financial statements, the Company maintains a defined benefit plan for employees in Switzerland. As of December 31, 2025, the Company’s projected benefit obligation was $15.5 million. The measurement of the projected benefit obligation is based on actuarial assumptions that require judgment, which include the discount rate used in determining the projected benefit obligation.
We identified the evaluation of the projected benefit obligation as a critical audit matter. Subjective auditor judgment was required to evaluate the discount rate used in determining the projected benefit obligation because of the need to involve professionals with specialized skills and knowledge.
The following are the primary procedures we performed to address the critical audit matter. We evaluated the design and tested the operating effectiveness of certain controls over the Company’s projected benefit obligation measurement process, including a control related to the determination of the discount rate. We involved an actuarial professional with specialized skills and knowledge, who assisted in 1) understanding and assessing the actuarial method and assumptions used to measure the projected benefit obligation, and 2) evaluating changes in the discount rate from prior year against changes in published indices.
/s/ KPMG LLP
We have served as the Company’s auditor since 2025.
Boston, Massachusetts
February 26, 2026
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Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Ironwood Pharmaceuticals, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of Ironwood Pharmaceuticals, Inc. (the Company) as of December 31, 2024, the related consolidated statement of income, comprehensive income, stockholders' deficit, and cash flows for the year ended December 31, 2024, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2024, and the results of its operations and its cash flows for the year ended December 31, 2024, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Ernst & Young LLP
We have served as the Company’s auditor from 1998 to 2025.
Boston, Massachusetts
March 31, 2025
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Ironwood Pharmaceuticals, Inc.
Consolidated Balance Sheets
(In thousands, except share and per share amounts)
December 31, December 31,
ASSETS
Current assets:
Prepaid expenses and other current assets 11,977 11,923
Property and equipment, net 3,408 4,495
Operating lease right-of-use assets 9,340 11,028
Intangible assets, net 2,040 2,860
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accrued research and development costs 3,149 6,681
Accrued expenses and other current liabilities 33,239 26,849
Current portion of operating lease liabilities 3,252 3,189
Current portion of convertible senior notes 199,680 —
Operating lease obligations, net of current portion 9,870 12,304
Convertible senior notes, net of current portion — 198,988
Commitments and contingencies (Note 10)
Stockholders’ deficit:
Accumulated other comprehensive income (loss) (1,060) 923
Total liabilities and stockholders’ deficit $ 396,901 $ 350,908
The accompanying notes are an integral part of these consolidated financial statements.
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Ironwood Pharmaceuticals, Inc.
Consolidated Statements of Income
(In thousands, except per share amounts)
Years Ended December 31,
Revenues:
Costs and expenses:
Other income (expense):
Interest expense and other financing costs (32,746) (33,034)
Interest and investment income 4,076 4,468
Net income per share — basic and diluted $ 0.15 $ 0.01
The accompanying notes are an integral part of these consolidated financial statements.
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Ironwood Pharmaceuticals, Inc.
Consolidated Statements of Comprehensive Income
(In thousands, except per share amounts)
Years Ended December 31,
Other comprehensive income (loss), net of tax:
Currency translation adjustment (2,754) 2,901
Defined benefit pension plan 771 1,053
Total other comprehensive income (loss), net of tax (1,983) 3,954
The accompanying notes are an integral part of these consolidated financial statements.
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Ironwood Pharmaceuticals, Inc.
Consolidated Statements of Stockholders’ Deficit
(In thousands, except share amounts)
Accumulated
Class A Additional other Total
Common Stock paid-in Accumulated comprehensive stockholders’
Net income — — — 880 — 880
Other comprehensive income, net of tax — — — — 3,954 3,954
Net income — — — 24,017 — 24,017
The accompanying notes are an integral part of these consolidated financial statements.
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Ironwood Pharmaceuticals, Inc.
Consolidated Statements of Cash Flows
(In thousands)
Year Ended December 31,
Cash flows from operating activities:
Depreciation and amortization 1,881 2,011
Loss on disposal of property and equipment 89 75