Market Overview

Ironwood Pharmaceuticals Provides Second Quarter 2018 Investor Update

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– Second quarter revenue increased 25% year-over-year to $81 million,
driven primarily by LINZESS
® (linaclotide) U.S.
net sales of $192 million and commercial margin of 60% –

– Terminating licensing agreement with AstraZeneca for U.S. lesinurad
franchise –

– Initiated Phase III programs with IW-3718 and linaclotide and
advanced four Phase II trials with lead sGC stimulators, praliciguat and
olinciguat –

– On track to complete separation of Ironwood into two independent,
publicly traded companies in first half 2019 –

Ironwood
Pharmaceuticals, Inc.
(NASDAQ:IRWD), a commercial biotechnology
company, today provided an update on its second quarter 2018 results and
recent business activities.

"Ironwood's performance during the second quarter was driven by
year-over-year topline growth of approximately 25%, continued strong
LINZESS demand, initiation of Phase III programs for IW-3718 and
linaclotide, and further enrollment in Phase II trials for praliciguat
and olinciguat," said Peter Hecht, chief executive officer of Ironwood.
"In addition, during the second quarter we announced our intent to
separate into two independent, publicly traded companies, each with
focused missions and opportunities for significant growth. We have made
substantial progress and remain on track to complete the separation in
the first half of 2019."

Dr. Hecht continued, "After initiating the lesinurad market tests in
early 2018 and assessing the results in July, we have decided to
terminate our licensing agreement with AstraZeneca in its entirety. This
action is not taken lightly, but it is an important decision that we
believe enables us to allocate capital to the highest return
opportunities and drive growth. We are working to maintain appropriate
availability of lesinurad for patients and physicians during the
termination period."

Second Quarter 2018 and Recent Highlights

Irritable Bowel Syndrome with Constipation
(IBS-C) / Chronic Idiopathic Constipation (CIC)

  • U.S. LINZESS. U.S. net sales, as reported by Ironwood's U.S.
    collaboration partner Allergan plc, were $192 million in the second
    quarter of 2018, a 14% increase compared to the second quarter of
    2017. Ironwood and Allergan share equally in brand collaboration
    profits.
    • LINZESS commercial margin was 60% in the second quarter of 2018
      compared to 52% in the second quarter of 2017.
    • Net profit for the LINZESS U.S. brand collaboration, net of
      commercial and research and development (R&D) expenses, was $102
      million in the second quarter of 2018, a 41% increase compared to
      the second quarter of 2017.
    • Total LINZESS prescription volume in the second quarter of 2018
      included approximately 32 million LINZESS capsules, an
      approximately 14% increase in capsules compared to the second
      quarter of 2017, per IQVIA.
    • More than 800,000 total LINZESS prescriptions were filled in the
      second quarter of 2018, an approximately 7% increase compared to
      the second quarter of 2017, per IQVIA.
    • Since the launch of LINZESS in December 2012, greater than 2
      million unique patients have filled approximately 11 million
      prescriptions, per IQVIA.
  • In May 2018, Ironwood and Allergan announced that the companies had
    reached an agreement with Aurobindo Pharma Ltd., resolving patent
    litigation brought in response to Aurobindo Pharma's abbreviated new
    drug application (ANDA) seeking approval to market a generic version
    of LINZESS prior to the expiration of the companies' applicable
    patents. The settlement with Aurobindo is the second patent
    infringement settlement the companies have reached with respect to
    LINZESS. Pursuant to the terms of the settlement, Ironwood and
    Allergan will grant Aurobindo Pharma a license to market a generic
    version of LINZESS in the U.S. beginning on August 5, 2030 (subject to
    U.S. FDA approval), unless certain limited circumstances, customary
    for settlement agreements of this nature, occur. As a result of the
    settlement, all Hatch-Waxman litigation between the companies and
    Aurobindo Pharma regarding LINZESS patents has been dismissed.
  • Linaclotide Additional Abdominal Symptom Claims. In July 2018,
    Ironwood and Allergan initiated a single Phase IIIb clinical trial
    evaluating the efficacy and safety of linaclotide 290 mcg on multiple
    abdominal symptoms in addition to pain, including bloating and
    discomfort, in adult patients with IBS-C. As many as 13 million adults
    in the U.S. are estimated to suffer from IBS-C. According to survey
    data, as many as two thirds of IBS-C sufferers frequently experience
    symptoms such as abdominal bloating and discomfort, in addition to, or
    rather than, abdominal pain, which can lead to undertreatment. Topline
    data from this trial are expected in the second half of 2019.
  • Linaclotide Delayed Release. Ironwood and Allergan plan to
    advance a linaclotide delayed release formulation into a Phase IIb
    clinical trial. Linaclotide delayed release has the potential to be a
    visceral, non-opioid, pain-relieving agent for patients suffering from
    all subtypes of IBS, including IBS-C, IBS with diarrhea and IBS-mixed.
    The companies recently reached agreement with the U.S. FDA regarding
    trial design and endpoints and are currently finalizing the Phase IIb
    protocol.
  • LINZESS-Japan. Ironwood reported $8.8 million in sales of
    linaclotide active pharmaceutical ingredient (API) to its Japanese
    partner, Astellas Pharma Inc., in the second quarter of 2018.

Uncontrolled Gout

  • DUZALLO® (lesinurad and allopurinol) and ZURAMPIC®
    (lesinurad).
    In January 2018, Ironwood commenced an initiative to
    evaluate the optimal mix of investments for its lesinurad franchise by
    exploring a more comprehensive marketing mix in select test markets.
    In July 2018, Ironwood obtained and reviewed the results from these
    test markets. Data from the test markets did not meet expectations. As
    a result, Ironwood delivered to AstraZeneca notice of termination of
    the U.S. lesinurad license agreement, expected to be effective 180
    days from the notice. In connection with the analysis of the data and
    subsequent notice of termination of the agreement:
    • Ironwood expects to save approximately $75 million to $100 million
      in full year 2019 operating expenses, primarily within SG&A.
    • Ironwood plans to reduce its workforce by approximately 125
      employees, primarily consisting of field-based sales employees.
      Ironwood estimates that it will incur aggregate charges in
      connection with the reduction in its workforce of approximately
      $10 million to $13 million for one-time employee severance and
      benefit costs, termination fees, and other contract-related costs,
      primarily in 2018, nearly all of which are expected to result in
      cash expenditures. In connection with the implementation of the
      lesinurad test markets, Ironwood previously reduced its workforce
      in January 2018 by approximately 60 field-based sales
      representatives.
    • Ironwood reduced its projected revenue and net cash flow
      assumptions associated with its ZURAMPIC and DUZALLO intangible
      assets, as well as its contingent consideration liability.
      Accordingly, Ironwood anticipates recording a full intangible
      asset impairment of approximately $150 million and a gain on fair
      value remeasurement of contingent consideration of approximately
      $30 million during the third quarter 2018.
    • Ironwood wrote down approximately $2.2 million related to
      lesinurad inventory and purchase commitments during the second
      quarter 2018. Approximately $1.8 million of such adjustment was
      recorded as write-down of lesinurad commercial supply to net
      realizable value and loss on non-cancelable purchase commitments,
      and approximately $0.4 million was recorded as selling, general,
      and administrative (SG&A) expenses in Ironwood's condensed
      consolidated statement of operations.

Persistent Gastroesophageal Reflux Disease
(GERD)

  • IW-3718. Ironwood is currently enrolling patients in a Phase
    III program to evaluate IW-3718, its gastric retentive formulation of
    a bile acid sequestrant for the potential treatment of persistent
    GERD. Persistent GERD affects an estimated 10 million Americans who
    continue to suffer from heartburn and regurgitation despite receiving
    treatment with proton pump inhibitors (PPIs), the current standard of
    care.
    • The Phase III program comprises two identical randomized,
      double-blind, placebo-controlled, multicenter Phase III trials
      that target enrolling approximately 1,320 total patients (660 in
      each trial) with persistent GERD who demonstrate evidence of
      pathological acid reflux. Eligible patients will continue to take
      PPIs and be randomized to placebo or IW-3718 1500 mg twice a day
      for eight weeks.
    • The primary endpoint is an overall heartburn response, defined as
      a patient who experiences at least a 45% reduction from baseline
      in heartburn severity (an improvement determined to be clinically
      meaningful based on patient-reported outcomes in the Phase IIb
      trial) for at least four out of eight weeks, including at least
      one of the last two weeks. Secondary endpoints include change in
      weekly heartburn severity, change in weekly regurgitation
      frequency, the proportion of heartburn-free days and sleep
      disturbance.

Diabetic Nephropathy and Heart Failure with
Preserved Ejection Fraction (HFpEF)

  • Praliciguat (IW-1973). Ironwood is enrolling patients in Phase
    II trials to evaluate praliciguat, one of its lead soluble guanylate
    cyclase (sGC) stimulators, for the potential treatment of diabetic
    nephropathy and of HFpEF. Both diseases affect millions of patients
    around the world, including an estimated eight million Americans
    suffering from diabetic nephropathy and an estimated three million
    Americans suffering from HFpEF. Diabetic nephropathy is the leading
    cause of end-stage renal disease. There are few treatment options
    available to delay the steady decline of renal function leading to
    dialysis or kidney transplant. HFpEF is a highly symptomatic condition
    with high rates of morbidity and mortality, with no approved
    treatments available.
    • Diabetic nephropathy. Ironwood expects to enroll
      approximately 150 patients into a randomized, double-blind,
      placebo-controlled, dose-ranging Phase II trial designed to
      evaluate the safety and efficacy of praliciguat in patients with
      diabetic nephropathy. Topline data from this study are expected in
      the second half of 2019.
    • HFpEF. Ironwood continues to enroll patients into a
      randomized, double-blind, placebo-controlled Phase II trial
      designed to evaluate the safety and efficacy of praliciguat in
      patients with HFpEF. Ironwood modified the study protocol during
      the second quarter to focus on assessing the high dose arm and
      accelerate expected time to proof-of-concept. Enrollment of
      patients in the low and medium dose arms will cease. Estimated
      enrollment is now approximately 175 patients from an original
      projection of approximately 325 patients. Topline data from this
      study are expected in the second half of 2019.

Sickle Cell Disease and Achalasia

  • Olinciguat (IW-1701). Ironwood is enrolling patients in Phase II
    trials to evaluate olinciguat, another of its lead clinical sGC
    stimulators, for the potential treatment of sickle cell disease and of
    achalasia. Sickle cell disease is a rare, debilitating genetic
    disorder that affects approximately 100,000 Americans. It causes red
    blood cells to become sickle-shaped leading to reduced normal red
    blood cell numbers and blockage of blood vessels in the body. Patients
    with sickle cell disease experience serious complications, including
    severe pain attacks, organ damage and infections. Achalasia is a rare
    disease with a prevalence rate of 10/100,000 Americans in which the
    lower esophagus does not relax normally, causing dysphagia (swallowing
    problems), regurgitation, and chest pain.
    • Sickle Cell Disease. Ironwood expects to enroll approximately
      80 patients into a multicenter, randomized, double-blind,
      placebo-controlled, dose-ranging Phase II trial of olinciguat in
      patients with sickle cell disease. The Phase II trial is designed
      to evaluate the safety, tolerability, pharmacokinetics and
      pharmacodynamics of olinciguat in these patients. In June 2018,
      the FDA granted Orphan Drug Designation to olinciguat for the
      treatment of patients with sickle cell disease.
    • Achalasia. Ironwood recently closed enrollment of a
      randomized, double-blind, placebo-controlled, single-dose Phase
      IIa study of olinciguat in patients with achalasia. This
      proof-of-mechanism study is designed to evaluate the safety,
      tolerability, pharmacokinetics and pharmacodynamics of olinciguat
      in these patients. Data from this study are expected in 2018.

Global Collaborations and Partnerships

  • Ironwood's partner Astellas is commercializing LINZESS for adults with
    IBS-C in Japan. In September 2017, Astellas submitted a Supplemental
    New Drug Application with the Pharmaceuticals and Medical Devices
    Agency in Japan for approval to market linaclotide for the additional
    indication of chronic constipation.
  • Ironwood expects the China Food and Drug Administration to complete
    its review of the marketing application for linaclotide in China for
    adult IBS-C patients in 2018. Ironwood is partnered with AstraZeneca
    AB for the development and commercialization of linaclotide in China.

Corporate and Financial Matters

  • Intent to Separate
    • In May 2018, Ironwood announced an intent to separate into two
      independent, publicly traded companies (Ironwood and "R&D Co.").
      The separation is expected to be completed in the first half of
      2019 and is anticipated to be tax-free to Ironwood shareholders.
      • Following the separation, Ironwood anticipates being a
        profitable company leveraging its core expertise in GI
        diseases to advance a strong portfolio of in-market and
        development programs, including LINZESS, IW-3718 and
        linaclotide delayed release.
      • R&D Co. expects to harness its pioneering work in cyclic
        guanosine monophosphate (cGMP) pharmacology to advance an
        innovative sGC pipeline focused on the treatment of serious
        and orphan diseases, led by Phase II clinical compounds
        praliciguat and olinciguat and three tissue-targeted sGC
        programs, including IW-6463 for severe central nervous system
        diseases and discovery programs targeting severe liver and
        lung diseases.
      • Following completion of the separation, the plan is for the
        two companies to have separate, non-overlapping boards of
        directors and independent governance structures. It is also
        expected that there will be no ongoing funding between the two
        new companies following the separation, other than certain
        shorter-term transition and other services.
    • In June 2018, Ironwood announced certain planned future management
      changes and determined the initial organizational designs of the
      two new businesses, including employees' roles and
      responsibilities.
  • Total Revenues
    • Total revenues were $81.1 million in the second quarter of 2018
      compared to $65.1 million in the second quarter of 2017. Included
      in total revenues was $69.3 million associated with Ironwood's
      share of the net profits from the sales of LINZESS in the U.S.,
      $8.8 million in sales of linaclotide API to Astellas, $1.1 million
      in ZURAMPIC and DUZALLO product revenue, and $1.9 million in
      linaclotide royalties, co-promotion and other revenue.
  • Operating Expenses
    • Operating expenses were $121.0 million in the second quarter of
      2018, compared to $106.1 million in the second quarter of
      2017. Operating expenses in the second quarter of 2018 included
      $4.1 million in cost of revenues, $38.9 million in R&D expenses,
      $68.4 million in SG&A expenses, $3.5 million in acquired
      intangible assets amortization expenses, $2.4 million in
      restructuring expenses, $1.8 million in write-down of inventory to
      net realizable value and loss on non-cancellable purchase
      commitments, and a $1.9 million loss on fair value remeasurement
      of contingent consideration. Operating expenses in the second
      quarter of 2018 were higher year-over-year primarily due to costs
      associated with the company's planned separation.
    • Contingent consideration and amortization of acquired intangible
      assets relate to Ironwood's license agreement with AstraZeneca for
      the exclusive U.S. rights to all products containing lesinurad.
  • Other Expense
    • Interest Expense. Net interest expense was $8.7 million in
      the second quarter of 2018, primarily in connection with the $150
      million 8.375% Notes funded in January 2017 and the approximately
      $336 million convertible debt financing funded in June 2015.
      Interest expense recorded in the second quarter of 2018 includes
      $5.0 million in cash expense and $4.4 million in non-cash expense.
    • Loss on Derivatives. Ironwood recorded a loss on
      derivatives related to the change in fair value of the convertible
      note hedges and note hedge warrants issued in connection with the
      convertible debt financing funded in June 2015. A loss on
      derivatives of $0.8 million was recorded in the second quarter of
      2018.
  • Net Loss
    • GAAP net loss was $49.4 million, or $0.32 per share, in the second
      quarter of 2018, compared to a net loss of $44.2 million, or $0.30
      per share, in the second quarter of 2017.
    • Non-GAAP net loss was $43.1 million, or $0.28 per share, in the
      second quarter of 2018, compared to $42.2 million, or $0.28 per
      share, in the second quarter of 2017. Non-GAAP net loss excludes
      the impact of mark-to-market adjustments on the derivatives
      related to Ironwood's convertible debt, as well as the
      amortization of acquired intangible assets and the fair value
      remeasurement of contingent consideration related to Ironwood's
      U.S. lesinurad license. See Non-GAAP Financial Measures below.
  • Cash Position
    • Ironwood ended the second quarter of 2018 with approximately
      $181.2 million of cash, cash equivalents and available-for-sale
      securities. Ironwood used approximately $22.7 million of cash for
      operations during the second quarter of 2018.
  • 2018 Financial Guidance

Ironwood continues to expect in 2018:

  • SG&A expenses to be in the range of $230 million to $250 million;
  • R&D expenses to be in the range of $160 million to $180 million;
  • the combined Ironwood and Allergan total marketing and sales expenses
    for LINZESS to be in the range of $230 to $260 million; and,
  • net interest expense to be less than $40 million.

Ironwood now expects in 2018:

  • total restructuring costs to be in the range of $18 million to $21
    million, which include the workforce reductions announced in January
    and June and the anticipated workforce reduction announced today (new
    guidance).

Ironwood will review its cash used from operations guidance as it gains
more detailed financial information related to the lesinurad franchise
termination. Ironwood no longer expects to be cash flow positive in the
fourth quarter of 2018 due to restructuring costs.

Non-GAAP Financial Measures

The company presents non-GAAP net loss and non-GAAP net loss per share
to exclude the impact of net gains and losses on the derivatives related
to our convertible notes that are required to be marked-to-market, as
well as the amortization of acquired intangible assets and the fair
value remeasurement of contingent consideration associated with
Ironwood's U.S. license agreement with AstraZeneca for the
exclusive rights to all products containing lesinurad. The derivative
gains and losses 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. The acquired intangible
assets are valued as of the date of acquisition and are amortized over
their estimated economic useful life, and management believes excluding
the amortization of acquired intangible assets provides more consistency
with the treatment of internally developed intangible assets for which
research and development costs were previously expensed. The contingent
consideration balance is remeasured each reporting period, and the
resulting change in fair value impacts the company's reported results of
operations. The changes in the fair value remeasurement of contingent
consideration do not correlate to the company's actual cash payment
obligations in the relevant period. 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 these non-GAAP
financial measures to the most comparable GAAP measures, please refer to
the table at the end of this press release.

Conference Call Information

Ironwood will host a conference call and webcast at 8:30 a.m. Eastern
Time on Monday, August 6, 2018 to discuss its second quarter 2018
results and recent business activities. Individuals interested in
participating in the call should dial (877) 643-7155 (U.S. and
Canada) or (914) 495-8552 (international) using conference ID number
5795089. 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 August 6, 2018 running through 11:59 p.m. Eastern Time
on August 13, 2018. To listen to the replay, dial (855) 859-2056 (U.S.
and Canada) or (404) 537-3406 (international) using conference ID number
5795089. 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 commercial biotechnology
company focused on creating medicines that make a difference for
patients, building value for our fellow shareholders, and empowering our
passionate team. We are currently commercializing two innovative primary
care products: linaclotide, the U.S. branded prescription market leader
for adults with irritable bowel syndrome with constipation (IBS-C) or
chronic idiopathic constipation (CIC), and lesinurad, which is approved
to be taken with a xanthine oxidase inhibitor (XOI), or as a fixed-dose
combination with allopurinol, for the treatment of hyperuricemia
associated with gout. We are also advancing a pipeline of innovative
product candidates in areas of significant unmet need, including
persistent gastroesophageal reflux disease, diabetic nephropathy, heart
failure with preserved ejection fraction, achalasia and sickle cell
disease. Ironwood was founded in 1998 and is headquartered in Cambridge,
Mass. For more information, please visit www.ironwoodpharma.com
or www.twitter.com/ironwoodpharma;
information that may be important to investors will be routinely posted
in both these locations.

About LINZESS (linaclotide)

LINZESS® is the #1 prescribed brand for the treatment of adult patients
with irritable bowel syndrome with constipation (IBS-C) and chronic
idiopathic constipation (CIC), based on IQVIA data. Since its FDA
approval in August of 2012 and subsequent launch in December 2012,
greater than 2 million unique patients have filled approximately 11.1
million prescriptions for LINZESS, according to IQVIA.

LINZESS is a once-daily capsule that helps relieve the abdominal pain
and constipation 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 6 years of
age. The safety and effectiveness of LINZESS in pediatric patients less
than 18 years of age have not been established. In neonatal mice,
linaclotide increased fluid secretion as a consequence of GC-C agonism
resulting in mortality within the first 24 hours due to dehydration. Due
to increased intestinal expression of GC-C, patients less than 6 years
of age may be more likely than patients 6 years of age and older to
develop severe diarrhea and its potentially serious consequences. In
adults with IBS-C or CIC treated with LINZESS, the most commonly
reported adverse event was diarrhea.

LINZESS is not a laxative; it is the first medicine approved by the FDA
in a class called guanylate cyclase-C (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 Allergan plc co-develop and
co-commercialize LINZESS for the treatment of adults with IBS-C or CIC.
In Europe, Allergan 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. Ironwood also has
partnered with AstraZeneca for development and commercialization of
linaclotide in China, and with Allergan for development and
commercialization of linaclotide in all other territories worldwide.

About ZURAMPIC (lesinurad) 200mg tablets

ZURAMPIC (lesinurad) works in combination with xanthine oxidase
inhibitors (XOIs) to treat hyperuricemia associated with uncontrolled
gout. ZURAMPIC is not recommended for the treatment of asymptomatic
hyperuricemia and should not be used as monotherapy. XOIs reduce the
production of uric acid; ZURAMPIC increases the excretion of uric acid.
Together, the combination of ZURAMPIC and an XOI provides a dual
mechanism of action that both decreases production and increases
excretion of uric acid, thereby lowering serum uric acid (sUA) levels in
patients who have not achieved target serum uric acid levels with XOI
treatment alone. ZURAMPIC selectively inhibits the function of
transporter proteins uric acid transporter 1 (URAT1) and organic anion
transporter 4 (OAT4), involved in uric acid reabsorption in the kidney.
The safety and efficacy of ZURAMPIC was established in three Phase III
clinical trials that evaluated a once-daily dose of ZURAMPIC in
combination with the XOI allopurinol or febuxostat compared to XOI
alone. The boxed warning for ZURAMPIC states that acute renal failure
has occurred with ZURAMPIC and was more common when ZURAMPIC was given
alone and reinforces that ZURAMPIC should be used in combination with an
XOI.

About DUZALLO (lesinurad and allopurinol)

DUZALLO (lesinurad and allopurinol) is a once-daily oral therapy that
contains lesinurad 200 mg plus allopurinol 300 mg; it is also available
in a lesinurad 200 mg plus allopurinol 200 mg dosage. DUZALLO is
approved by the FDA as a once-daily oral treatment for hyperuricemia
associated with gout in patients who have not achieved target serum uric
acid (sUA) levels with a medically appropriate daily dose of allopurinol
alone. DUZALLO is not recommended for the treatment of asymptomatic
hyperuricemia. Allopurinol is an XOI whose action differs from that of
uricosuric agents such as lesinurad. Allopurinol reduces the production
of uric acid (UA); lesinurad increases renal excretion of UA by
selectively inhibiting the action of URAT1, the UA transporter
responsible for the majority of renal UA reabsorption. The
dual-mechanism combination of DUZALLO can address both inefficient
excretion and overproduction of UA, thereby lowering sUA levels.

DUZALLO should be taken in the morning with food and water, and patients
should be advised to stay well hydrated when taking DUZALLO (about 2
liters of liquid a day).

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

LINZESS is contraindicated in patients less than 6 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. Use of LINZESS should be avoided in
patients 6 years to less than 18 years of age. The safety and
effectiveness of LINZESS have not been established in patients
less than 18 years of age.

 

Contraindications

  • LINZESS is contraindicated in patients less than 6 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 6 years of age. The
    safety and effectiveness of LINZESS in patients less than 18 years of
    age have not been established. In neonatal mice, linaclotide increased
    fluid secretion as a consequence of GC-C agonism resulting in
    mortality within the first 24 hours due to dehydration. Due to
    increased intestinal expression of GC-C, patients less than 6 years of
    age may be more likely than patients 6 years of age and older to
    develop severe diarrhea and its potentially serious consequences.
  • Use of LINZESS should be avoided in pediatric patients 6 years to less
    than 18 years of age. Although there were no deaths in older juvenile
    mice, given the deaths in young juvenile mice and the lack of clinical
    safety and efficacy data in pediatric patients, use of LINZESS should
    be avoided in pediatric patients 6 years to less than 18 years of age.

Diarrhea

  • Diarrhea was the most common adverse reaction in LINZESS-treated
    patients in the pooled IBS-C and CIC double-blind placebo-controlled
    trials. The incidence of diarrhea was similar in the IBS-C and CIC
    populations. Severe diarrhea was reported in 2% of 145 mcg and 290 mcg
    LINZESS-treated patients, and in <1% of 72 mcg LINZESS-treated CIC
    patients. If severe diarrhea occurs, dosing should be suspended and
    the patient rehydrated.

Common Adverse Reactions (incidence ≥2% and greater than placebo)

  • In IBS-C clinical trials: diarrhea (20% vs 3% placebo), abdominal pain
    (7% vs 5%), flatulence (4% vs 2%), headache (4% vs 3%), viral
    gastroenteritis (3% vs 1%) and abdominal distension (2% vs 1%).
  • In CIC trials of a 145 mcg dose: diarrhea (16% vs 5% placebo),
    abdominal pain (7% vs 6%), flatulence (6% vs 5%), upper respiratory
    tract infection (5% vs 4%), sinusitis (3% vs 2%) and abdominal
    distension (3% vs 2%). In a CIC trial of a 72 mcg dose: diarrhea (19%
    vs 7% placebo) and abdominal distension (2% vs <1%).

Please see full Prescribing Information including Boxed Warning: http://www.allergan.com/assets/pdf/linzess_pi

 

ZURAMPIC Important Safety Information and Limitations of Use

WARNING: RISK OF ACUTE RENAL FAILURE MORE COMMON WHEN USED
WITHOUT A XANTHINE OXIDASE INHIBITOR (XOI)

 

  • Acute renal failure has occurred with ZURAMPIC and was more
    common when ZURAMPIC was given alone
  • ZURAMPIC should be used in combination with an XOI
 

Contraindications:

  • Severe renal impairment (eCLcr less than 30 mL/min), end-stage renal
    disease, kidney transplant recipients, or patients on dialysis
  • Tumor lysis syndrome or Lesch-Nyhan syndrome

Warnings and Precautions:

  • Renal events: Adverse reactions related to renal function have
    occurred after initiating ZURAMPIC. A higher incidence was observed at
    the 400-mg dose, with the highest incidence occurring with monotherapy
    use. Monitor renal function at initiation and during therapy with
    ZURAMPIC, particularly in patients with eCLcr below 60 mL/min or with
    serum creatinine elevations 1.5 to 2 times the pre-treatment value,
    and evaluate for signs and symptoms of acute uric acid nephropathy.
    Interrupt treatment with ZURAMPIC if serum creatinine is elevated to
    greater than 2 times the pre-treatment value or if there are symptoms
    that may indicate acute uric acid nephropathy. ZURAMPIC should not be
    restarted without another explanation for the serum creatinine
    abnormalities. ZURAMPIC should not be initiated in patients with an
    eCLcr less than 45 mL/min.
  • Cardiovascular events: In clinical trials, major adverse
    cardiovascular events (defined as cardiovascular deaths, non-fatal
    myocardial infarctions, or non-fatal strokes) were observed with
    ZURAMPIC. A causal relationship has not been established.

Adverse Reactions:

  • Most common adverse reactions with ZURAMPIC (in combination with an
    XOI and more frequently than on an XOI alone) were headache,
    influenza, blood creatinine increased, and gastroesophageal reflux
    disease

Indication and Limitations of Use for ZURAMPICZURAMPIC is a URAT1
inhibitor indicated in combination with an XOI for the treatment of
hyperuricemia associated with gout in patients who have not achieved
target serum uric acid levels with an XOI alone.

  • ZURAMPIC is not recommended for the treatment of asymptomatic
    hyperuricemia
  • ZURAMPIC should not be used as monotherapy

Please see full Prescribing Information, including Boxed Warning,
at: http://irwdpi.com/zurampic/ZURAMPIC_PI_and_Medguide_2017.pdf#page=1

 

DUZALLO Important Safety Information

WARNING: RISK OF ACUTE RENAL FAILURE

 

  • Acute renal failure has occurred with lesinurad, one of the
    components of DUZALLO
 

Contraindications:

  • Severe renal impairment (estimated creatinine clearance [eCLcr] < 30
    mL/min), end-stage renal disease, kidney transplant recipients, or
    patients on dialysis
  • Tumor lysis syndrome or Lesch-Nyhan syndrome
  • Known hypersensitivity to allopurinol, including previous occurrence
    of skin rash

Warnings and Precautions:

  • Renal events: Adverse reactions related to renal function,
    including acute renal failure, can occur after initiating DUZALLO.
    Renal function should be evaluated prior to initiation of DUZALLO and
    periodically thereafter, as clinically indicated. More frequent renal
    function monitoring is recommended in patients with eCLcr < 60 mL/min
    or with serum creatinine elevations 1.5 to 2 times the value when
    lesinurad treatment was initiated. DUZALLO should not be initiated in
    patients with an eCLcr < 45 mL/min. Interrupt treatment with DUZALLO
    if serum creatinine is elevated to > 2 times the pretreatment value or
    if there are symptoms that may indicate acute uric acid nephropathy,
    including flank pain, nausea, or vomiting. DUZALLO should not be
    restarted without another explanation for the serum creatinine
    abnormalities
  • Skin rash and hypersensitivity: Skin rash is a frequently
    reported adverse event in patients taking allopurinol. In some
    instances, a skin rash may be followed by more severe hypersensitivity
    reactions associated with exfoliation, fever, lymphadenopathy,
    arthralgia, and/or eosinophilia including Stevens-Johnson syndrome and
    toxic epidermal necrolysis. Associated vasculitis and tissue response
    may be manifested in various ways including hepatitis, renal
    impairment, seizures, and on rare occasions, death. Hypersensitivity
    reactions to allopurinol may be increased in patients with decreased
    renal function who are receiving thiazide diuretics and DUZALLO
    concurrently. DUZALLO should be discontinued immediately at the first
    appearance of skin rash or other signs that may indicate an allergic
    reaction, and additional medical care should be provided as needed
  • Hepatotoxicity: A few cases of reversible clinical
    hepatotoxicity have been reported in patients taking allopurinol and,
    in some patients, asymptomatic rises in serum alkaline phosphatase or
    serum transaminase have been observed. If anorexia, weight loss, or
    pruritus develops in patients taking DUZALLO, evaluation of liver
    function should be performed. In patients with preexisting liver
    disease, periodic liver function tests are recommended
  • Cardiovascular events: In clinical trials, major adverse
    cardiovascular events (defined as cardiovascular deaths, nonfatal
    myocardial infarctions, and nonfatal strokes) were observed with
    DUZALLO. A causal relationship has not been established
  • Bone marrow depression: Bone marrow depression has been
    reported in patients receiving allopurinol, most of whom received
    concomitant drugs with the potential for causing this reaction. This
    has occurred as early as 6 weeks to as long as 6 years after the
    initiation of allopurinol therapy. Rarely, a patient may develop
    varying degrees of bone marrow depression, affecting one or more cell
    lines, while receiving allopurinol alone. Patients taking allopurinol
    and mercaptopurine or azathioprine require a reduction in dose to
    approximately one-third to one-fourth of the usual dose of
    mercaptopurine or azathioprine
  • Increase in prothrombin time: It has been reported that
    allopurinol prolongs the half-life of dicumarol, a coumarin
    anticoagulant. The prothrombin time should be reassessed periodically
    in patients receiving coumarin anticoagulants (dicumarol, warfarin)
    concomitantly with DUZALLO
  • Drowsiness: Occasional occurrence of drowsiness was reported in
    patients taking allopurinol. Patients should be alerted to the need
    for caution when engaging in activities where alertness is mandatory

Adverse Reactions:

  • The most common adverse reactions in controlled studies (occurring in
    2% or more of patients on lesinurad in combination with allopurinol
    and at least 1% greater than observed in patients on allopurinol
    alone) were headache, influenza, blood creatinine increased, and
    gastroesophageal reflux disease
  • The most common adverse reactions identified during post-approval use
    of allopurinol are skin rash, nausea, and diarrhea

Indication and Limitations of Use:DUZALLO, a combination of
lesinurad, a URAT1 inhibitor, and allopurinol, a xanthine oxidase
inhibitor, is indicated for the treatment of hyperuricemia associated
with gout in patients who have not achieved target serum uric acid
levels with a medically appropriate daily dose of allopurinol alone.

  • DUZALLO is not recommended for the treatment of asymptomatic
    hyperuricemia

Please see full Prescribing Information, including Boxed, at https://www.irwdpi.com/duzallo/DuzalloPIandMedguide2017.pdf#page=1

LINZESS® and CONSTELLA® are registered trademarks of Ironwood
Pharmaceuticals, Inc., and ZURAMPIC® and DUZALLO® are
registered trademarks of AstraZeneca AB. Any other trademarks referred
to in this press release are the property of their respective owners.
All rights reserved.This press release contains forward-looking
statements. Investors are cautioned not to place undue reliance on these
forward-looking statements, including statements about the proposed
separation of our operations into two independent, publicly traded
companies, including the completion and timing of the separation; the
timing of effectiveness of the termination of the lesinurad license
agreement; the size, composition, financial impact and timing of a
workforce reduction associated with the separation and our termination
of the lesinurad license agreement; the maintenance of appropriate
availability of lesinurad during the termination period; the business
and operations of each company and any benefits or costs of the
separation, including the tax treatment; the financial profiles and
capital structures of the NewCos; ongoing funding between the NewCos;
the development, launch, commercial availability and commercial
potential of linaclotide, lesinurad, other product candidates and the
other products that we promote and the drivers, timing, impact and
results thereof; market size, commercial potential, prevalence, and the
growth in, and potential demand for, linaclotide, lesinurad and our
other product candidates, as well as their potential impact on
applicable markets; the potential indications for, and benefits of,
linaclotide, lesinurad and our other product candidates; the anticipated
timing of preclinical, clinical and regulatory developments and the
design, timing and results of clinical and preclinical studies; expected
periods of patent exclusivity, durability and life of the respective
patent portfolios for linaclotide, lesinurad and our other product
candidates; the strength of the intellectual property protection for
linaclotide, lesinurad and our other product candidates and our
intentions and efforts to protect such intellectual property; and our
financial performance and results, and guidance and expectations related
thereto (including the drivers and timing thereof), including
expectations related to the allocation of capital, positive cash flow
and positive cash flow from operations, LINZESS U.S. net sales,
ex-U.S. revenue (including API revenue), R&D, SG&A and marketing and
sales expenses, net interest expense, total restructuring costs and
plans to revise cash guidance.
Each forward-looking statement is
subject to risks and uncertainties that could cause actual results to
differ materially from those expressed or implied in such statement.
Applicable risks and uncertainties include those related to the
possibility that we may not complete the separation of our business on
the terms or timeline currently contemplated, if at all, achieve the
expected benefits of the separation, and that the separation could harm
our business, results of operations and financial condition; the risk
that the transaction might not be tax-free; the risk that we may be
unable to make, on a timely or cost-effective basis, the changes
necessary to operate as independent companies; R&D Co.'s lack of
independent operating history and the risk that its accounting and other
management systems may not be prepared to meet the financial reporting
and other requirements of operating as an independent public company;
the risk that a separation may adversely impact our ability to attract
or retain key personnel; the risk that we may experience difficulties in
implementing or negative effects from the reduction in workforce, such
as claims arising out of the reduction; risks related to the difficulty
of predicting the financial impact or timing of our reduction in
workforce; the effectiveness of development and commercialization
efforts by us and our partners; preclinical and clinical development,
manufacturing and formulation development; the risk that findings from
our completed nonclinical and clinical studies may not be replicated in
later studies; efficacy, safety and tolerability of linaclotide,
lesinurad and our other product candidates; decisions by regulatory and
judicial authorities; the risk that we are unable to successfully
commercialize lesinurad or realize the anticipated benefits of the
lesinurad transaction; the risk that we may never get sufficient patent
protection for linaclotide, lesinurad and our other product candidates
or that we are not able to successfully protect such patents; the
outcomes in legal proceedings to protect or enforce the patents relating
to our products and product candidates, including ANDA litigation;
developments in the intellectual property landscape; challenges from and
rights of competitors or potential competitors; the risk that our
planned investments do not have the anticipated effect on our company
revenues, linaclotide, lesinurad or our other product candidates; the
risk that we are unable to manage our operating expenses or cash use for
operations, or are unable to commercialize our products, within the
guided ranges or otherwise as expected; and the risks listed under the
heading "Risk Factors" and elsewhere in Ironwood's Quarterly Report on
Form 10-Q for the quarter ended March 31, 2018, and in our subsequent
SEC filings. These forward-looking statements (except as otherwise
noted) speak only as of the date of this press release, and Ironwood
undertakes no obligation to update these forward-looking statements.
Further, Ironwood considers the net profit for the U.S. LINZESS brand
collaboration with Allergan in assessing the product's performance and
calculates it based on inputs from both Ironwood and Allergan. This
figure should not be considered a substitute for Ironwood's GAAP
financial results. An explanation of our calculation of this figure is
provided in the U.S. LINZESS Brand Collaboration table and related
footnotes accompanying this press release.

       

Condensed Consolidated Balance Sheets

(In thousands)
(unaudited)
 
June 30,

2018

December 31,

2017

Assets
Cash, cash equivalents and available-for-sale securities $ 181,246 $ 221,416
Accounts receivable, net 80,519 82,157
Inventory, net 1,099 735
Prepaid expenses and other current assets 16,678   7,288
Total current assets 279,542 311,596
Restricted cash 8,306 7,056
Property and equipment, net 16,335 17,274
Convertible note hedges 159,526 108,188
Intangible assets, net 152,953 159,905
Goodwill 785 785
Other assets 771   870
Total assets $ 618,218   $ 605,674
Liabilities and Stockholders' (Deficit) Equity
Accounts payable, accrued expenses and other current liabilities $ 66,993 $ 61,508
Current portion of capital lease obligations 2,465 4,077
Current portion of deferred rent 242 195
Current portion of long- term debt 24,861 -
Current portion of contingent consideration 423   247
Total current liabilities 94,984 66,027
Deferred rent, net of current portion 6,058 5,449
Other liabilities 5,060 5,060
Contingent consideration, net of current portion 33,228 31,011
Note hedge warrants 143,019 92,188
Convertible notes 257,206 249,193
Long-term debt   122,614   146,898
Total stockholders' (deficit) equity   (43,951 ) 9,848
Total liabilities and stockholders' (deficit) equity   $ 618,218   $ 605,674
 
       
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
(unaudited)
 
Three Months Ended

June 30,

Six Months Ended

June 30,

2018   2017 2018   2017
Total revenues $ 81,106 $ 65,077 $ 150,261 $ 117,243
Cost and expenses:
Cost of revenues, excluding amortization of acquired intangible
assets
4,065 3,502 6,672 4,033
Write-down of inventory to net realizable value and loss on
non-cancellable purchase commitments
1,836 96 1,836 96
Research and development 38,932 37,344 75,437 71,046
Selling, general and administrative 68,363 57,792 127,864 113,369
Amortization of acquired intangible assets 3,476 421 6,952 841
Loss on fair value remeasurement of contingent consideration 1,962 6,933 2,474 8,547
Restructuring expenses   2,392   -     4,814     -  
Total cost and expenses   121,026   106,088     226,049     197,959  
Loss from operations (39,920 ) (41,011 ) (75,788 ) (80,716 )
Other (expense) income:
Interest expense, net (8,651 ) (8,550 ) (17,243 ) (17,138 )
Gain (loss) on derivatives (809 ) 5,337 507 3,138
Loss on extinguishment of debt   -   -     -     (2,009 )
Other expense, net   (9,460 ) (3,213 )   (16,736 )   (16,009 )
GAAP net loss $ (49,380 ) $ (44,244 )   (92,524 )   (96,725 )
 
GAAP net loss per share—basic and diluted $ (0.32 ) $ (0.30 ) $ (0.61 ) $ (0.65 )
 
Three Months Ended

June 30,

Six Months Ended

June 30,

2018       2017     2018     2017  
Non-GAAP net loss $ (43,133 ) $ (42,207 ) $ (83,605 ) $ (90,475 )
Non-GAAP net loss per share (basic and diluted) $ (0.28 ) $ (0.28 ) $ (0.55 ) $ (0.61 )
 

Weighted average number of common shares used in net loss per
share — basic and diluted

152,163

148,778

151,591

148,285

 

Reconciliation of GAAP Results to Non-GAAP Financial Measures
(In
thousands, except per share amounts)

(unaudited)

A reconciliation between net loss on a GAAP basis and on a non-GAAP
basis is as follows:

       
Three Months Ended

June 30,

Six Months Ended,

June 30,

2018   2017 2018   2017
GAAP net loss $ (49,380 ) $ (44,224 ) $ (92,524 ) $ (96,725 )
Adjustments:
Mark-to-market adjustments on the derivatives related to convertible
notes, net
809 (5,337 ) (507 ) (3,138 )
Amortization of intangible assets 3,476 421 6,952 841
Fair value remeasurement of contingent consideration   1,962     6,933     2,474     8,547  
Non-GAAP net loss $ (43,133 ) $ (42,207 ) $ (83,605 ) $ (90,475 )
 

A reconciliation between diluted net loss per share on a GAAP basis and
on a non-GAAP basis is as follows:

       
Three Months Ended

June 30,

Six Months Ended

June 30,

2018   2017 2018   2017
GAAP net loss per share – Basic and Diluted $ (0.32 ) $ (0.30 ) $ (0.61 ) $ (0.65 )
Adjustments to GAAP net loss per share (as detailed above)   0.04     0.01     0.06     0.04  

Non-GAAP net loss per share – basic and diluted1

$ (0.28 ) $ (0.28 ) $ (0.55 ) $ (0.61 )
 

_____________________________

1   Numbers may not add due to rounding
 
       

U.S. LINZESS Brand Collaboration1

Revenue/Expense Calculation
 
(In thousands)
(unaudited)
 
Three Months Ended

June 30,

Six Months Ended

June 30,

2018   2017 2018   2017
LINZESS U.S. net sales $ 191,826 $ 167,833 $ 351,160 $ 315,448

Commercial costs and expenses2

  76,726     80,211     135,616     151,140  
Commercial profit on sales of LINZESS $ 115,100   $ 87,622     215,544     164,308  

Commercial Margin3

60 % 52 % 61 % 52 %
 
Ironwood's share of net profit $ 57,550 $ 43,811 $ 107,772 $ 82,154

Ironwood's selling, general and administrative expenses4

  11,713     12,496     22,641     23,605  
Ironwood's collaborative arrangement revenue $ 69,263   $ 56,307   $ 130,413   $ 105,759  
 
 
 

_____________________________

1 Ironwood collaborates with Allergan on the
development and commercialization of linaclotide in North America.
Under the terms of the collaboration agreement, Ironwood receives
50% of the net profits and bears 50% of the net losses from the
commercial sale of LINZESS in the U.S. The purpose of this table
is to present calculations of Ironwood's share of net profit
(loss) generated from the sales of LINZESS in the U.S. and
Ironwood's collaboration revenue/expense; however, the table does
not present the research and development expenses related to
LINZESS in the U.S. that are shared equally between the parties
under the collaboration agreement. For the three months ended June
30, 2018, net profit for the U.S. LINZESS brand collaboration with
Allergan was $101.5 million, calculated by subtracting $76.7
million in commercial costs and expenses and $13.6 million in
research and development expenses, from LINZESS U.S. net sales of
$191.8 million.

2 Includes cost of goods sold incurred by Allergan as
well as selling, general and administrative expenses incurred by
Allergan and Ironwood that are attributable to the cost-sharing
arrangement between the parties.
3 Commercial margin is defined as commercial profit on
sales of LINZESS as a percent of total LINZESS U.S. net sales.
4 Includes Ironwood's selling, general and administrative
expenses attributable to the cost-sharing arrangement with Allergan.

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