Financial Analysis

"9. Debt 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, pursuant to separate indentures (each an Indenture and together the Indentures), between the Company and U.S. Bank National Association, as trustee (the Trustee). 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. 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, …

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Year Ended December 31, Collaborative Arrangements Revenue 2025 2024 Linaclotide Collaboration and License Agreements: AbbVie (North America) $ 292,356 $ 343,154 AbbVie (Europe and other) 3,633 3,236 AstraZeneca (China, including Hong Kong and Macau) 321 364 Astellas (Japan) 1,685 1,673 Other Agreements: Asahi Kasei Pharma Corporation (apraglutide) (1,931) 2,249 Other 87 734 Total collaborative arrangements revenue $ 296,151 $ 351,410 …

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12. Employee Stock Benefit Plans The Company has several share-based compensation plans under which stock options, RSAs, RSUs, and other share-based awards are available for grant to employees, officers, directors and consultants of the Company. The following table summarizes share-based compensation expense by award type (in thousands): Year Ended December 31, 2025 2024 Time-based RSUs $ 13,486 $ 21,425 Performance-based RSUs 2,767 6,422 Restricted stock awards 654 1,492 Employee stock purchase plan 184 451 Stock options 99 Stock awards 60 60 Total share-based compensation expense $ 17,250 $ 29,850 The following table summarizes the share-based compensation expense reflected in the consolidated statements of income (in thousands): Year Ended December 31, 2025 2024 Share-based compensation expense: Research and development $ 5,447 $ 7,552 Selling, general and administrative 11,704 22,298 Restructuring 99 Total share-based compensation expense included in operating expenses 17,250 29,850 Income tax expense 2,519 3,414 Total share-based compensation expense, net of tax $ 14,731 $ 26,436 Restructuring expenses include modifications to share-based awards held by employees impacted by certain workforce reductions (Note 15). Stock Benefit Plans As of December 31, 2025, the Company has the following active stock benefit plans pursuant to which awards are currently outstanding: the Amended and Restated 2019 Equity Incentive Plan (the A&R 2019 Equity Plan), the 2019 Equity Incenti …

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5. Fair Value of Financial Instruments The tables below present information about the Companys assets and liabilities that are measured at fair value on a recurring basis as of December 31, 2025 and 2024 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. Fair values determined by Level 2 inputs utilize data points that are either directly or indirectly observable, such as quoted prices for similar instruments in active markets, interest rates and yield curves. Fair values determined by Level 3 inputs utilize unobservable data points in which there is little or no market data, which require the Company to develop its own assumptions for the asset or liability. The Companys investment portfolio may include fixed income securities that do not always trade on a daily basis. As a result, the pricing services used by the Company apply other available information as applicable through processes such as benchmark yields, benchmarking of like securities, sector groupings and matrix pricing to prepare valuations. In addition, model processes are used to assess interest rate impact and develop prepayment scenarios. These models take into consideration relevant credit information, perceived market movements, sector news and economic events. The inputs into these models …

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13. Income Taxes The Company is subject to U.S. federal, state, and foreign income taxes. The components of income before income taxes during the years ended on December 31, 2025 and 2024 consisted of the following (in thousands): Year Ended December 31, 2025 2024 United States $ 161,155 $ 167,091 Foreign (91,130) (101,893) Income before income taxes $ 70,025 $ 65,198 The components of the provision for (benefit from) income taxes during the years ended December 31, 2025 and 2024 consisted of the following (in thousands): Year Ended December 31, 2025 2024 Current taxes: Federal $ $ State 4,374 (4,487) Foreign 833 754 Total current taxes 5,207 (3,733) Deferred taxes: Federal 39,071 32,584 State 1,730 35,467 Foreign Total deferred taxes 40,801 68,051 Income tax expense $ 46,008 $ 64,318 During the year ended December 31, 2025, the Company 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, primarily for state income taxes in certain states in which state taxable income exceeded available net operating losses. 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. Due to the Companys ability to utilize its net operating losses to offset federal taxable incom …

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6. Leases The Companys lease portfolio for the year ended December 31, 2025 included: an office lease for its current headquarters location and other locations, vehicle leases, and leases for computer and office equipment. The Companys headquarters office lease and vehicle leases require letters of credit totaling $0.6 million to secure the Companys obligations under the lease agreements. The letters of credit are maintained under a subfacility of the revolving credit agreement (Note 9). Lease cost is recognized on a straight-line basis over the lease term. The components of lease cost for the years ended December 31, 2025 and 2024 are as follows (in thousands): Year Ended December 31, 2025 2024 Operating lease cost $ 2,507 $ 2,507 Short-term lease cost 354 1,520 Total lease cost $ 2,861 $ 4,027 Supplemental information related to leases for the periods reported is as follows: Year Ended December 31, 2025 2024 Cash paid for amounts included in the measurement of lease liabilities (in thousands) $ 3,189 $ 3,126 Weighted-average remaining lease term of operating leases (in years) 4.4 5.4 Weighted-average discount rate of operating leases 5.8 % 5.8 % 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 has been the Companys headquarters since October 2019. The Summer Street Lease terminates on …

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New Accounting Pronouncements From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (the FASB) or other standard setting bodies that are adopted by the Company as of the specified effective date. Except as set forth below, the Company did not adopt any new accounting pronouncements during the year ended December 31, 2025 that had a material effect on its consolidated financial statements. In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (ASU 2023-09). 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 adopted ASU 2023-09 during the year ended December 31, 2025, on a prospective basis. The expanded disclosures are included in the consolidated financial statements (Note 13). 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 effec …

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14. Retirement Plans Defined Contribution Retirement Plans The Ironwood Pharmaceuticals, Inc. 401(k) Savings Plan is a defined contribution plan in the form of a qualified 401(k) plan in which substantially all employees are eligible to participate upon employment. Subject to certain IRS limits, eligible employees may elect to contribute from 1% to 100% of their compensation. Company contributions to the plan are at the sole discretion of the Company. During the years ended December 31, 2025 and 2024, the Company provided a matching contribution equal to the greater of: (a) 100% of employee contributions on the first 3% of eligible compensation and 50% of employee contributions on the next 3% of eligible compensation; or (b) 75% of the first $10,000 of employee contributions. During the years ended December 31, 2025 and 2024, the Company recorded $1.2 million and $2.4 million of expense, respectively, related to its 401(k) company match. Defined Benefit Retirement Plans The Company maintains a defined benefit plan for employees in Switzerland, as required by local laws. The pension plan provides employees retirement benefits and risk insurance for death and disability. The contributions of employers and employees in general are defined in percentages of the insureds salary. The retirement pension is calculated based on the old-age credit balance on retirement multiplied by the fixed conversion rate. The employee has the option to withdraw the capital on demand. As is customar …

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15. Workforce Reductions and Restructuring In June 2023, the Company commenced the elimination of certain positions in connection with the VectivBio Acquisition. The majority of the eliminations were substantially completed during the year ended December 31, 2023. The Company recorded $0.2 million and $2.6 million of restructuring expenses, which are primarily comprised of employee severance, benefits and related costs, during the year ended December 31, 2025 and 2024, respectively. 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 Companys pipeline, the Company commenced a reduction in the Companys workforce of approximately 50%, primarily consisting of field-based sales employees. The reduction in workforce was substantially completed during the first quarter of 2025. During the year ended December 31, 2025, the Company recorded $17.6 million of restructuring expenses, primarily comprised of severance, benefits, and related costs. In August 2025, the Company eliminated certain positions supporting apraglutide commercialization efforts, in consideration of delays in development timelines. The reduction in workforce was comprised of 10 positions and was completed during the third quarter of 2025. During the year ended December 31, 2025, the Company recorded $2.4 million of restructuring expenses, primarily comprised of severance, benefits, and related costs. The fol …

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16. Segment Reporting The Company operates in one reportable business segmenthuman 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 Companys 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, other income (expense), and income tax 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 segments performance. …

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11. Stockholders Equity Preferred Stock The Companys preferred stock may be issued from time to time in one or more series, with each such series to consist of such number of shares and to have such terms as adopted by the board of directors. Authority is given to the board of directors to determine and fix such voting powers, full or limited, or no voting powers, and such designations, preferences and relative participating, optional or other special rights, and qualifications, limitation or restrictions thereof, including without limitation, dividend rights, conversion rights, redemption privileges and liquidation preferences. Common Stock The Company has one class of common stock (Class A Common Stock). Class A Common Stock is entitled to one vote per share. The Company has reserved, out of its authorized but unissued shares of Class A Common Stock, sufficient shares to effect the conversion of the 2026 Convertible Notes pursuant to the terms thereof (Note 9). The Companys stockholders are entitled to dividends if and when declared by the board of directors. …

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