Ironwood Pharmaceuticals Reports Fourth Quarter and Full Year 2021 Results; LINZESS® (linaclotide) Achieves Blockbuster Status as U.S. Net Sales Exceed $1 Billion in 2021

– 2021 total revenue of $414 million, driven primarily by $400 million in U.S. LINZESS collaboration revenue –

– 2021 GAAP net income of $528 million, includes a $338 million non-recurring income tax benefit related to the release of the valuation allowance against the majority of the company’s deferred tax assets in Q2 2021 –

– 2021 adjusted EBITDA of $234 million; ended 2021 with $620 million in cash and cash equivalents –

– Pursuing two areas of unmet medical need with initiation of clinical studies for IW-3300 for the treatment of visceral pain conditions, and CNP-104 for the treatment of primary biliary cholangitis (PBC) –

BOSTON–(BUSINESS WIRE)–Ironwood Pharmaceuticals, Inc. (Nasdaq: IRWD), a GI-focused healthcare company, today reported its fourth quarter and full year 2021 results.

“The tremendous progress we made against our strategic priorities last year puts Ironwood in a solid position as we begin a new year,” said Tom McCourt, chief executive officer of Ironwood. “I am proud to share that LINZESS has earned blockbuster brand status with more than $1 billion in U.S. net sales in 2021, an extraordinary accomplishment for our company. I am also excited about what’s to come in 2022, as we strive to continue to execute on our key priorities of maximizing LINZESS growth via commercial innovation and lifecycle management, while also seeking to strengthen our innovative GI pipeline and focusing on delivering sustained profits and generating cash flow.”

“Bringing new treatments to GI patients remains a key priority and our team has been working hard to advance our pipeline,” said Mike Shetzline, chief medical officer, senior vice president and head of research and drug development. “We are pleased to announce that we have initiated the IW-3300 clinical study, which will evaluate the safety and tolerability of this potentially first-in-class treatment for visceral pain conditions. Combined with the initiation of the CNP-104 clinical study by COUR for primary biliary cholangitis, we are energized about the progress of our pipeline.”

Fourth Quarter and Full Year 2021 Financial Highlights¹

(in thousands, except for per share amounts)

			4Q 2021		4Q 2020		FY 2021		FY 2020
Total revenues			$117,130		$116,680		$413,753		$389,523
Total costs and expenses			60,538		65,296		181,494		$246,583
GAAP net income			41,374		43,204		528,448		106,176
GAAP net income per share – basic			0.25		0.27		3.26		0.67
GAAP net income per share –diluted			0.25		0.27		3.21		0.66
Adjusted EBITDA			56,950		65,952		233,738		160,678
Non-GAAP net income			43,940		56,934		191,782		127,687
Non-GAAP net income per share – basic			0.27		0.36		1.18		0.80
Non-GAAP net income per share – diluted			0.27		0.36		1.16		0.79

1. Refer to the Reconciliation of GAAP Results to Non-GAAP Financial Measures table and to the Reconciliation of GAAP Net Income to Adjusted EBITDA table at the end of this press release. Refer to Non-GAAP Financial Measures for additional information.

Fourth Quarter and Full Year 2021 Corporate Highlights

U.S. LINZESS

• Prescription Demand: Total LINZESS prescription demand in the fourth quarter of 2021 was 42 million LINZESS capsules, a 10% increase compared to the fourth quarter of 2020, per IQVIA. Total prescription demand was 159 million LINZESS capsules for the full year 2021, a 12% increase compared to the full year 2020, per IQVIA.
• U.S. Brand Collaboration: LINZESS U.S. net sales are provided to Ironwood by its U.S. partner, AbbVie Inc. (“AbbVie”). LINZESS U.S. net sales were $278.6 million in the fourth quarter of 2021, a slight increase compared to $278.3 million in the fourth quarter of 2020, and $1,005.9 million for the full year 2021, an 8.0% increase compared to $931.2 million for the full year 2020.
  • Ironwood and AbbVie share equally in U.S. brand collaboration profits. See the LINZESS U.S. Commercial Collaboration table at the end of the press release.

– LINZESS commercial margin was 76% in the fourth quarter of 2021, compared to 65% in the fourth quarter of 2020. LINZESS commercial margin was 74% for the full year 2021 compared to 72% for the full year 2020. See the U.S. LINZESS Full Brand Collaboration table below and at the end of this press release.

– Net profit for the LINZESS U.S. brand collaboration, net of commercial and research and development (“R&D”) expenses, was $200.0 million in the fourth quarter of 2021, compared to $168.4 million in the fourth quarter of 2020. Net profit for the LINZESS U.S. brand collaboration, net of commercial and R&D expenses, was $701.3 million for the full year 2021, compared to $619.1 million for the full year 2020. See U.S. LINZESS Full Brand Collaboration table below and at the end of this press release.

• Collaboration Revenue to Ironwood: Ironwood recorded $113.7 million in collaboration revenue in the fourth quarter of 2021 related to sales of LINZESS in the U.S., a 2.7% increase compared to $110.7 million for the fourth quarter of 2020. Ironwood recorded $400.4 million in collaboration revenue for the full year 2021, a 9% increase compared to $368.6 million in 2020. See U.S. LINZESS Commercial Collaboration table at the end of the press release.

U.S. LINZESS Full Brand Collaboration (in thousands, except for percentages)	Three Months Ended December 31,		Twelve Months Ended December 31,
	2021	2020	2021	2020
LINZESS U.S. net sales as reported by AbbVie	$278,555	$278,320	$1,005,856	$931,211
AbbVie & Ironwood commercial costs, expenses and other discounts	67,510	97,992	265,118	260,825
Commercial margin	76%	65%	74%	72%
AbbVie & Ironwood R&D Expenses	11,107	11,889	39,417	51,295
Total net profit on sales of LINZESS	200,028	168,439	701,321	619,091
Full brand margin	72%	61%	70%	66%

IW-3300

• Ironwood is currently advancing IW-3300, a guanylate cyclase-C agonist being developed for the potential treatment of visceral pain conditions, such as interstitial cystitis / bladder pain syndrome (IC/BPS) and endometriosis.

– IC/BPS affects an estimated 4 to 12 million Americans, according to the Interstitial Cystitis Association. An estimated 4 million reproductive-age women in the U.S. have been diagnosed with endometriosis, according to a study published in Gynecologic and Obstetric Investigation. Both diseases have a limited number of treatment options available. Ironwood initiated a clinical study for its IW-3300 program in the first quarter of 2022 to evaluate the safety and tolerability of IW-3300 in healthy volunteers.

CNP-104

• In November 2021, Ironwood entered into a collaboration and license option agreement with COUR Pharmaceuticals Development Company, Inc. (“COUR”). This agreement gives Ironwood an option to acquire an exclusive license to research, develop, manufacture and commercialize, in the U.S., products containing CNP-104 Particle (“CNP-104”), a tolerizing immune modifying nanoparticle, for the treatment of primary biliary cholangitis (“PBC”), a rare autoimmune disease targeting the liver. If successful, CNP-104 has the potential to be the first approved PBC disease modifying therapy.

– In December 2021, the U.S. FDA granted Fast Track Designation to CNP-104.

– PBC affects an estimated 133,000 people in the U.S. There is currently no approved therapy that addresses the root cause of the autoimmune destruction of the bile ducts in PBC with medical care currently focused on disease management. COUR initiated a clinical study for CNP-104 in the first quarter of 2022 to evaluate the safety, tolerability, pharmacodynamic effects and efficacy of CNP-104 in PBC patients.

Leadership Changes

• In December 2021, Ironwood announced the appointment of Sravan K. Emany as Senior Vice President, Chief Financial Officer.

Fourth Quarter and Full Year 2021 Financial Results

• Total Revenues. Total revenues in the fourth quarter of 2021 were $117.1 million, compared to $116.7 million in the fourth quarter of 2020. Total revenues for the full year 2021 were $413.8 million, compared to $389.5 million for the full year 2020.

– Total revenues in the fourth quarter of 2021 consisted of $113.7 million associated with Ironwood’s share of the net profits from the sales of LINZESS in the U.S. and $3.4 million in royalties and other revenue. Total revenues in the fourth quarter of 2020 consisted of $110.7 million associated with Ironwood’s share of the net profits from the sales of LINZESS in the U.S., and $6.0 million in royalties and other revenue.

– Total revenues for the full year 2021 consisted of $400.4 million associated with Ironwood’s share of the net profits from the sales of LINZESS in the U.S., and $13.4 million in royalties and other revenue. Total revenues for the full year 2020 consisted of $368.6 million associated with Ironwood’s share of the net profits from the sales of LINZESS in the U.S., and $20.9 million in royalties and other revenue.

• Operating Expenses. Operating expenses in the fourth quarter of 2021 were $60.5 million, compared to $65.3 million in the fourth quarter of 2020. Operating expenses for the full year 2021 were $181.5 million, compared to $246.6 million for the full year 2020.

– Operating expenses in the fourth quarter of 2021 consisted primarily of $28.6 million in selling, general and administrative (“SG&A”) expenses, and $31.9 million in research and development (“R&D”) expenses. Operating expenses in the fourth quarter of 2020 consisted primarily of $34.0 million in SG&A expenses, $16.3 million in R&D expenses and $14.2 million in restructuring expenses related to a workforce reduction in 2020.

– Operating expenses for the full year 2021 consisted primarily of $111.1 million in SG&A expenses, and $70.4 million in R&D expenses. Operating expenses for the full year 2020 consisted primarily of $140.0 million in SG&A expenses, $88.1 million in R&D expenses and $15.4 million in restructuring expenses.

• Interest Expense, net of Interest and Investment Income. Net interest expense was $7.8 million in the fourth quarter of 2021 and $30.4 million for the full year 2021, primarily in connection with Ironwood’s convertible senior notes. Interest expense recorded in the fourth quarter of 2021 included $1.8 million in cash expense and $6.2 million in non-cash expense. Interest expense recorded for the full year 2021 included $7.2 million in cash expense and $23.9 million in non-cash expense.

– Net interest expense was $7.3 million in the fourth quarter of 2020 and $28.0 million for the full year 2020, primarily in connection with Ironwood’s convertible senior notes. Interest expense recorded in the fourth quarter of 2020 included $1.8 million in cash expense and $5.7 million in non-cash expense. Interest expense recorded for the full year 2020 included $7.2 million in cash expense and $22.3 million in non-cash expense.

• Gain (Loss) on Derivatives. Ironwood recorded a loss on derivatives of $2.6 million in the fourth quarter of 2021 as a result of the change in fair value of its convertible note hedges and note hedge warrants. For the full year 2021, Ironwood recorded a loss on derivatives of $1.2 million.

– Ironwood recorded a gain on derivatives of $0.4 million in the fourth quarter of 2020 as a result of the change in fair value of its convertible note hedges and note hedge warrants. For the full year 2020, Ironwood recorded a loss on derivatives of $6.1 million.

• Income Tax (Expense) Benefit. Ironwood recorded $4.9 million of income tax expense in the fourth quarter of 2021 and $327.8 million of income tax benefit for the full year 2021. The income tax benefit is primarily related to the release of the valuation allowance against the majority of deferred tax assets during the second quarter of 2021. Ironwood recorded $1.3 million in income tax expense in the fourth quarter of 2020 and $2.7 million for the full year 2020.

– GAAP Net Income. GAAP net income was $41.4 million, or $0.25 per share (basic and diluted), in the fourth quarter of 2021 compared to GAAP net income of $43.2 million, or $0.27 per share (basic and diluted), in the fourth quarter of 2020. GAAP net income for the full year 2021 was $528.4 million, or $3.26 per share (basic) and $3.21 per share (diluted), compared to GAAP net income of $106.2 million, or $0.67 per share (basic) and $0.66 per share (diluted), for the full year 2020.

– Non-GAAP Net Income. Non-GAAP net income was $43.9 million, or $0.27 per share (basic and diluted), in the fourth quarter of 2021, compared to non-GAAP net income of $56.9 million, or $0.36 per share (basic and diluted), in the fourth quarter of 2020. Non-GAAP net income for the full year 2021 was $191.8 million, or $1.18 per share (basic) and $1.16 per share (diluted), compared to non-GAAP net income of $127.7 million, or $0.80 per share (basic) and $0.79 per share (diluted), for the full year 2020.

– Non-GAAP net income excludes the impact of mark-to-market adjustments on the derivatives related to Ironwood’s 2022 Convertible Notes, restructuring expenses, and the income tax benefit related to the release of the valuation allowance against the majority of deferred tax assets in the second quarter of 2021. See Non-GAAP Financial Measures below.

• Adjusted EBITDA. Adjusted EBITDA was $57.0 million in the fourth quarter of 2021, compared to $66.0 million in the fourth quarter of 2020. For the full year 2021, adjusted EBITDA was $233.7 million, compared to $160.7 million for the full year 2020.

– Adjusted EBITDA is calculated by subtracting mark-to-market adjustments on derivatives related to Ironwood’s 2022 Convertible Notes, restructuring expenses, net interest expense, income taxes, depreciation and amortization from GAAP net income. See Non-GAAP Financial Measures below.

• Cash Flow Statement and Balance Sheet Highlights. Ironwood ended 2021 with $620.1 million of cash and cash equivalents, compared to $362.6 million of cash and cash equivalents at the end of 2020.

– Ironwood generated $64.6 million in cash from operations in the fourth quarter of 2021, compared to $51.5 million in cash from operations in the fourth quarter of 2020. Ironwood generated $261.9 million in cash from operations for the full year 2021, compared to $168.8 million for the full year 2020.

• Ironwood 2022 Financial Guidance. In 2022, Ironwood continues to expect:

	2022 Guidance
U.S. LINZESS Net Sales Growth	Low single digits %
Total Revenue	$420 to $430 million
Adjusted EBITDA1	>$250 million

¹ Adjusted EBITDA is calculated by subtracting mark-to-market adjustments on derivatives related to Ironwood’s 2022 Convertible Notes, restructuring expenses, net interest expense, income taxes, depreciation and amortization from GAAP net income. For purposes of this guidance, Ironwood has assumed that it will not incur material expenses related to business development activities in 2022.

Non-GAAP Financial Measures

Ironwood presents non-GAAP net income and non-GAAP net income per share to exclude the impact of net gains and losses on derivatives related to Ironwood’s 2022 Convertible Notes that are required to be marked-to-market, restructuring expenses, and the release of the company’s valuation allowance against the majority of deferred tax assets in the second quarter of 2021. Non-GAAP adjustments are further detailed below:

• The gains and losses on the derivatives related to Ironwood’s 2022 Convertible Notes may be highly variable, difficult to predict and of a size that could have a substantial impact on the company’s reported results of operations in any given period.
• Restructuring expenses are considered to be a non-recurring event as they are associated with distinct operational decisions. Included in restructuring expenses are costs associated with exit and disposal activities.
• The income tax benefit associated with the valuation allowance release in the second quarter of 2021 was a non-cash, non-recurring accounting recognition event, and does not affect the company’s ability to utilize its historical net operating losses and tax credit carryforwards to offset future taxable income.

Ironwood also presents adjusted EBITDA, a non-GAAP measure, as well as guidance on adjusted EBITDA. Adjusted EBITDA is calculated by subtracting mark-to-market adjustments on derivatives related to Ironwood’s 2022 Convertible Notes, restructuring expenses, net interest expense, income taxes, depreciation and amortization from GAAP net income. The adjustments are made on a similar basis as described above related to non-GAAP net income, as applicable.

Management believes this non-GAAP information is useful for investors, taken in conjunction with Ironwood’s GAAP financial statements, because it provides greater transparency and period-over-period comparability with respect to Ironwood’s operating performance. These measures are also used by management to assess the performance of the business. Investors should consider these non-GAAP measures only as a supplement to, not as a substitute for or as superior to, measures of financial performance prepared in accordance with GAAP. In addition, these non-GAAP financial measures are unlikely to be comparable with non-GAAP information provided by other companies. For a reconciliation of non-GAAP net income and non-GAAP net income per share to GAAP net income and GAAP net income per share, respectively, and for a reconciliation of adjusted EBITDA to GAAP net income, please refer to the tables at the end of this press release.

Ironwood does not provide guidance on GAAP net income or a reconciliation of expected adjusted EBITDA to expected GAAP net income because, without unreasonable efforts, it is unable to predict with reasonable certainty the non-GAAP adjustments used to calculate adjusted EBITDA. These adjustments are uncertain, depend on various factors and could have a material impact on GAAP net income for the guidance period.

Conference Call Information

Ironwood will host a conference call and webcast at 8:30 a.m. Eastern Time on Thursday, February 17, 2022 to discuss its fourth quarter and full year 2021 results and recent business activities. Individuals interested in participating in the call should dial (888) 330-2384 (U.S. and Canada) or (240) 789-2701 (international) using conference ID number and event passcode 4671230. To access the webcast, please visit the Investors section of Ironwood’s website at www.ironwoodpharma.com at least 15 minutes prior to the start of the call to ensure adequate time for any software downloads that may be required. The call will be available for replay via telephone starting at approximately 11:30 a.m. Eastern Time on February 17, 2022 running through 11:59 p.m. Eastern Time on March 3, 2022. To listen to the replay, dial (800) 770-2030 (U.S. and Canada) or (647) 362-9199 (international) using conference ID number 4671230. The archived webcast will be available on Ironwood’s website for 14 days beginning approximately one hour after the call has completed.

About Ironwood Pharmaceuticals

Ironwood Pharmaceuticals (Nasdaq: IRWD) is a leading gastrointestinal (GI) healthcare company on a mission to advance the treatment of GI diseases and redefine the standard of care for GI patients. We are pioneers in the development of LINZESS® (linaclotide), the U.S. branded prescription market leader for adults with irritable bowel syndrome with constipation (IBS-C) or chronic idiopathic constipation (CIC). Under the guidance of our seasoned industry leaders, we continue to build upon our history of GI innovation and challenge what has been done before to shape what the future holds. We keep patients at the heart of our R&D and commercialization efforts to reduce the burden of GI diseases and address significant unmet needs.

Founded in 1998, Ironwood Pharmaceuticals is headquartered in Boston, Massachusetts.

We routinely post information that may be important to investors on our website at www.ironwoodpharma.com. In addition, follow us on Twitter and on LinkedIn.

About LINZESS (linaclotide)

LINZESS® is the #1 prescribed brand in the U.S. for the treatment of adult patients with irritable bowel syndrome with constipation (“IBS-C”) or chronic idiopathic constipation (“CIC”), based on IQVIA data.

LINZESS is a once-daily capsule that helps relieve the abdominal pain, constipation, and overall abdominal symptoms of bloating, discomfort and pain associated with IBS-C, as well as the constipation, infrequent stools, hard stools, straining, and incomplete evacuation associated with CIC. The recommended dose is 290 mcg for IBS-C patients and 145 mcg for CIC patients, with a 72-mcg dose approved for use in CIC depending on individual patient presentation or tolerability. LINZESS should be taken at least 30 minutes before the first meal of the day.

LINZESS is contraindicated in pediatric patients less than 2 years of age. In neonatal mice, linaclotide increased fluid secretion as a consequence of age-dependent elevated GC-C agonism resulting in mortality within the first 24 hours due to dehydration. There was no age-dependent trend in GC-C intestinal expression in a clinical study of children 2 to less than 18 years of age; however, there are insufficient data available on GC-C intestinal expression in children less than 2 years of age to assess the risk of developing diarrhea and its potentially serious consequences in these patients. The safety and effectiveness of LINZESS in patients less than 18 years of age have not been established.

LINZESS is not a laxative; it is the first medicine approved by the FDA in a class called GC-C agonists. LINZESS contains a peptide called linaclotide that activates the GC-C receptor in the intestine. Activation of GC-C is thought to result in increased intestinal fluid secretion and accelerated transit and a decrease in the activity of pain-sensing nerves in the intestine. The clinical relevance of the effect on pain fibers, which is based on nonclinical studies, has not been established.

In the United States, Ironwood and AbbVie co-develop and co-commercialize LINZESS for the treatment of adults with IBS-C or CIC. In Europe, AbbVie markets linaclotide under the brand name CONSTELLA® for the treatment of adults with moderate to severe IBS-C. In Japan, Ironwood’s partner, Astellas, markets linaclotide under the brand name LINZESS for the treatment of adults with IBS-C or CIC. Ironwood also has partnered with AstraZeneca for development and commercialization of LINZESS in China, and with AbbVie for development and commercialization of linaclotide in all other territories worldwide.

LINZESS Important Safety Information

INDICATIONS AND USAGE

LINZESS (linaclotide) is indicated in adults for the treatment of both irritable bowel syndrome with constipation (IBS-C) and chronic idiopathic constipation (CIC).

IMPORTANT SAFETY INFORMATION

WARNING: RISK OF SERIOUS DEHYDRATION IN PEDIATRIC PATIENTS LESS THAN 2 YEARS OF AGE

LINZESS is contraindicated in patients less than 2 years of age. In nonclinical studies in neonatal mice, administration of a single, clinically relevant adult oral dose of linaclotide caused deaths due to dehydration.

Contraindications

• LINZESS is contraindicated in patients less than 2 years of age due to the risk of serious dehydration.
• LINZESS is contraindicated in patients with known or suspected mechanical gastrointestinal obstruction.

Warnings and Precautions

Pediatric Risk

• LINZESS is contraindicated in patients less than 2 years of age. In neonatal mice, linaclotide increased fluid secretion as a consequence of age-dependent elevated GC-C agonism resulting in mortality within the first 24 hours due to dehydration. There was no age-dependent trend in GC-C intestinal expression in a clinical study of children 2 to less than 18 years of age; however, there are insufficient data available on GC-C intestinal expression in children less than 2 years of age to assess the risk of developing diarrhea and its potentially serious consequences in these patients.

Contacts

Investors:

Matt Roache, 617-621-8395

[email protected]

Media:

Beth Calitri, 978-417-2031

[email protected]

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