IRONWOOD PHARMACEUTICALS INC (Form: 10-Q, Received: 08/08/2016 17:29:14)

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2016

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-34620

IRONWOOD PHARMACEUTICALS, INC.

(Exact name of registrant as specified in its charter)

Delaware		04-3404176
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification Number)

301 Binney Street
Cambridge, Massachusetts		02142
(Address of Principal Executive Offices)		(Zip Code)

(617) 621-7722

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files): Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer x		Accelerated filer o

Non-accelerated filer o		Smaller reporting company o
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): o Yes x No

As of August 1, 2016, there were 129,933,366 shares of Class A common stock outstanding and 15,385,236 shares of Class B common stock outstanding.

Table of Contents

NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, including the sections titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors”, contains forward-looking statements. All statements contained in this Quarterly Report on Form 10-Q other than statements of historical fact are forward-looking statements. Forward-looking statements include statements regarding our future financial position, business strategy, budgets, projected costs, plans and objectives of management for future operations. The words “may,” “continue,” “estimate,” “intend,” “plan,” “will,” “believe,” “project,” “expect,” “seek,” “anticipate” and similar expressions may identify forward-looking statements, but the absence of these words does not necessarily mean that a statement is not forward-looking.

These forward-looking statements include, among other things, statements about:

· the demand and market potential for our products in the countries where they are approved for marketing, as well as the revenues therefrom;

· the timing, investment and associated activities involved in commercializing LINZESS by us and Allergan plc in the U.S. and ZURAMPIC by us in the U.S.;

· the timing and execution of the launches and commercialization of CONSTELLA in the E.U.;

· the timing, investment and associated activities involved in developing, obtaining regulatory approval for, launching, and commercializing linaclotide by us and our partners worldwide;

· our ability and the ability of our partners to secure and maintain adequate reimbursement for our products;

· the ability of our partners and third-party manufacturers to manufacture and distribute sufficient amounts of linaclotide and lesinurad active pharmaceutical ingredient, drug product and finished goods, as applicable, on a commercial scale;

· our expectations regarding U.S. and foreign regulatory requirements for our products and our product candidates, including our post-approval development and regulatory requirements;

· the ability of our product candidates to meet existing or future regulatory standards;

· the safety profile and related adverse events of our products and our product candidates;

· the therapeutic benefits and effectiveness of our products and our product candidates and the potential indications and market opportunities therefor;

· our and our partners’ ability to obtain and maintain intellectual property protection for our products and our product candidates and the strength thereof;

· our and our partners’ ability to perform our respective obligations under our collaboration, license and other agreements, and our ability to achieve milestone and other payments under such agreements;

· our plans with respect to the development, manufacture or sale of our product candidates and the associated timing thereof, including the design and results of pre-clinical and clinical studies;

· the in-licensing or acquisition of externally discovered businesses, products or technologies, including expectations relating to the completion of, or the realization of the expected benefits from, such transactions;

· our expectations as to future financial performance, revenues, expense levels, payments, cash flows, profitability, tax obligations, capital raising and liquidity sources, and real estate needs, as well as the timing and drivers thereof;

· our ability to repay our outstanding indebtedness when due, or redeem or repurchase all or a portion of such debt, as well as the potential benefits of the note hedge transactions described herein;

· inventory levels and write downs, or asset impairments, and the drivers thereof, and inventory purchase commitments;

· our expectations regarding amortization of intangible assets;

· our ability to compete with other companies that are or may be developing or selling products that are competitive with our products and product candidates;

Table of Contents

· the status of government regulation in the life sciences industry, particularly with respect to healthcare reform;

· trends and challenges in our potential markets;

· our ability to attract and motivate key personnel; and

· other factors discussed elsewhere in this Quarterly Report on Form 10-Q.

Any or all of our forward-looking statements in this Quarterly Report on Form 10-Q may turn out to be inaccurate. These forward-looking statements may be affected by inaccurate assumptions or by known or unknown risks and uncertainties, including the risks, uncertainties and assumptions identified under the heading “Risk Factors” in this Quarterly Report on Form 10-Q. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this Quarterly Report on Form 10-Q may not occur as contemplated, and actual results could differ materially from those anticipated or implied by the forward-looking statements.

You should not unduly rely on these forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q. Unless required by law, we undertake no obligation to publicly update or revise any forward-looking statements to reflect new information or future events or otherwise. You should, however, review the factors and risks we describe in the reports we will file from time to time with the U.S. Securities and Exchange Commission, or the SEC, after the date of this Quarterly Report on Form 10-Q.

NOTE REGARDING TRADEMARKS

LINZESS ® and CONSTELLA ® are trademarks of Ironwood Pharmaceuticals, Inc. ZURAMPIC ® is a trademark of AstraZeneca AB. Any other trademarks referred to in this Quarterly Report on Form 10-Q are the property of their respective owners. All rights reserved.

Table of Contents

IRONWOOD PHARMACEUTICALS, INC.

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTER ENDED JUNE 30, 2016

TABLE OF CONTENTS

		Page

	PART I — FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)
	Condensed Consolidated Balance Sheets as of June 30, 2016 and December 31, 2015	5
	Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2016 and 2015	6
	Condensed Consolidated Statements of Comprehensive Loss for the Three and Six Months Ended June 30, 2016 and 2015	7
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2016 and 2015	8
	Notes to Condensed Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	32
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	44
Item 4.	Controls and Procedures	45

	PART II — OTHER INFORMATION
Item 1A.	Risk Factors	46
Item 6.	Exhibits	69

	Signatures	70

Table of Contents

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

Ironwood Pharmaceuticals, Inc.

Condensed Consolidated Balance Sheets

(In thousands, except share and per share amounts)

(unaudited)

	June 30,			December 31,
	2016			2015
ASSETS
Current assets:
Cash and cash equivalents	$	277,332		$	261,287
Available-for-sale securities	48,041			178,107
Accounts receivable	1,272			2,884
Related party accounts receivable, net	51,875			51,634
Prepaid expenses and other current assets	7,622			6,293
Total current assets	386,142			500,205
Restricted cash	8,247			8,747
Property and equipment, net	17,939			21,075
Convertible note hedges	99,478			86,466
Intangible assets, net	185,935			—
Goodwill	649			—
Other assets	1,818			2,628
Total assets	$	700,208		$	619,121

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and related party accounts payable, net	$	8,999		$	8,589
Accrued research and development costs	6,653			4,245
Accrued expenses and other current liabilities	20,598			23,301
Current portion of capital lease obligations	2,451			2,631
Current portion of deferred rent	7,923			5,544
Current portion of deferred revenue	8,519			7,191
Current portion of PhaRMA notes payable	35,259			24,964
Current portion of contingent consideration	597			—
Total current liabilities	90,999			76,465
Capital lease obligations, net of current portion	198			306
Deferred rent, net of current portion	4,409			6,395
Deferred revenue, net of current portion	—			1,798
Contingent consideration, net of current portion	87,052			—
Note hedge warrants	86,838			75,328
Convertible senior notes	227,273			220,620
PhaRMA notes payable, net of current portion	111,938			132,964
Other liabilities	10,120			10,120
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.001 par value, 75,000,000 shares authorized, no shares issued and outstanding	—			—
Class A common stock, $0.001 par value, 500,000,000 shares authorized and 129,778,212 and 127,371,478 shares issued and outstanding at June 30, 2016 and December 31, 2015, respectively	130			127
Class B common stock, $0.001 par value, 100,000,000 shares authorized and 15,394,327 and 15,870,356 shares issued and outstanding at June 30, 2016 and December 31, 2015, respectively	15			16
Additional paid-in capital	1,226,311			1,205,183
Accumulated deficit	(1,145,114		)	(1,110,115		)
Accumulated other comprehensive income (loss)	39			(86		)
Total stockholders’ equity	81,381			95,125
Total liabilities and stockholders’ equity	$	700,208		$	619,121

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

Table of Contents

Ironwood Pharmaceuticals, Inc.

Condensed Consolidated Statements of Operations

(In thousands, except per share amounts)

(unaudited)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2016			2015			2016			2015
Collaborative arrangements revenue	$	54,350		$	27,744		$	120,392		$	56,676
Cost and expenses:
Cost of revenue, excluding amortization of acquired intangible asset	—			—			—			12
Write-down of inventory to net realizable value and loss on non-cancellable purchase commitments	—			8,150			—			8,150
Research and development	31,682			28,648			63,524			55,289
Selling, general and administrative	36,918			32,955			73,086			63,301
Amortization of acquired intangible asset	1,065			—			1,065			—
Total cost and expenses	69,665			69,753			137,675			126,752
Loss from operations	(15,315		)	(42,009		)	(17,283		)	(70,076		)
Other (expense) income:
Interest expense	(9,827		)	(5,874		)	(19,734		)	(11,094		)
Interest and investment income	295			71			516			136
Gain (loss) on derivatives	3,145			(208		)	1,502			(208		)
Other expense, net	(6,387		)	(6,011		)	(17,716		)	(11,166		)
Net loss	$	(21,702	)	$	(48,020	)	$	(34,999	)	$	(81,242	)

Net loss per share - basic and diluted	$	(0.15	)	$	(0.34	)	$	(0.24	)	$	(0.57	)

Weighted average number of common shares used in net loss per share — basic and diluted:	144,642			142,098			144,118			141,690

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

Table of Contents

Ironwood Pharmaceuticals, Inc.

Condensed Consolidated Statements of Comprehensive Loss

(In thousands)

(unaudited)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2016			2015			2016			2015
Net loss	$	(21,702	)	$	(48,020	)	$	(34,999	)	$	(81,242	)

Other comprehensive income:
Unrealized gains on available-for-sale securities	10			19			125			41
Total other comprehensive income	10			19			125			41
Comprehensive loss	$	(21,692	)	$	(48,001	)	$	(34,874	)	$	(81,201	)

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

Table of Contents

Ironwood Pharmaceuticals, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(unaudited)

	Six Months Ended
	June 30,
	2016			2015
Cash flows from operating activities:
Net loss	$	(34,999	)	$	(81,242	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	5,320			6,043
Amortization of acquired intangible asset	1,065			—
Share-based compensation expense	14,903			12,329
Change in fair value of note hedge warrants	11,510			(1,393		)
Change in fair value of convertible note hedges	(13,012		)	1,601
Write-down of inventory to net realizable value and loss on non-cancellable purchase commitments	—			8,150
Loss on facility subleases	3,480			—
Accretion of discount/premium on investment securities	457			298
Non-cash interest expense	7,221			1,170
Changes in assets and liabilities:
Accounts receivable and related party accounts receivable	1,371			(1,210		)
Restricted cash	500			—
Prepaid expenses and other current assets	(1,265		)	2,676
Other assets	810			(458		)
Accounts payable, related party accounts payable and accrued expenses	(2,314		)	(5,978		)
Accrued research and development costs	2,408			1,956
Deferred revenue	(470		)	(3,596		)
Deferred rent	(3,087		)	(1,684		)
Net cash used in operating activities	(6,102		)	(61,338		)
Cash flows from investing activities:
Purchases of available-for-sale securities	(52,629		)	(202,091		)
Sales and maturities of available-for-sale securities	182,363			139,006
Purchases of property and equipment	(1,623		)	(2,840		)
Payment for acquisition of lesinurad license	(100,000		)	—
Proceeds from sale of property and equipment	—			27
Net cash provided by (used in) investing activities	28,111			(65,898		)
Cash flows from financing activities:
Proceeds from issuance of convertible senior notes	—			335,699
Proceeds from issuance of note hedge warrants	—			70,849
Purchase of convertible note hedges	—			(91,915		)
Costs associated with issuance of convertible senior notes	—			(10,930		)
Proceeds from exercise of stock options and employee stock purchase plan	6,163			10,941
Payments on capital leases	(828		)	(561		)
Principal payments on PhaRMA notes	(11,299		)	(4,694		)
Net cash (used in) provided by financing activities	(5,964		)	309,389
Net increase in cash and cash equivalents	16,045			182,153
Cash and cash equivalents, beginning of period	261,287			74,297
Cash and cash equivalents, end of period	$	277,332		$	256,450

Supplemental cash flow disclosure:
Non-cash investing activities
Contingent consideration	$	87,649		—

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

Table of Contents

Ironwood Pharmaceuticals, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

1. Nature of Business

Overview

Ironwood Pharmaceuticals, Inc. (the “Company”) is a commercial biotechnology company leveraging its proven development and commercial capabilities as it seeks to bring multiple medicines to patients. The Company is advancing innovative product opportunities in areas of large unmet need, including irritable bowel syndrome with constipation (“IBS-C”) and chronic idiopathic constipation (“CIC”), hyperuricemia associated with uncontrolled gout, refractory gastroesophageal reflux disease (“rGERD”), and vascular and fibrotic diseases.

The Company’s first commercial product, linaclotide, is available to adult men and women suffering from IBS-C or CIC in the United States (“U.S.”) under the trademarked name LINZESS ® , and is available to adult men and women suffering from IBS-C in certain European countries under the trademarked name CONSTELLA ® . The Company and its U.S. partner Allergan plc (together with its affiliates, “Allergan”) began commercializing LINZESS in the U.S. in December 2012. Under the Company’s collaboration with Allergan for North America, total net sales of LINZESS in the U.S., as recorded by Allergan, are reduced by commercial costs incurred by each party, and the resulting amount is shared equally between the Company and Allergan. The Company’s former European partner, Almirall, S.A. (“Almirall”), began commercializing CONSTELLA in Europe for the symptomatic treatment of moderate to severe IBS-C in adults in the second quarter of 2013. In October 2015, Almirall transferred its exclusive license to develop and commercialize linaclotide in Europe to Allergan, and the Company and Allergan entered into an amendment to the European license agreement (Note 4). Currently, CONSTELLA is commercially available in certain European countries, including the United Kingdom, Italy and Spain.

Within the Company’s IBS-C/CIC franchise, the Company and Allergan are exploring development opportunities to enhance the clinical profile of LINZESS by seeking to expand its utility within IBS-C and CIC, as well as studying linaclotide in additional indications and populations to assess its potential to treat various gastrointestinal (“GI”) conditions. The Company and Allergan are also developing linaclotide colonic release, a targeted oral delivery formulation of linaclotide designed to potentially improve abdominal pain relief in adult IBS-C patients. The Company is also exploring linaclotide colonic release for use in additional GI disorders where lower abdominal pain is a predominant symptom such as IBS-mixed, ulcerative colitis and diverticulitis, among others. Linaclotide is also being developed and commercialized in other parts of the world by the Company’s partners.

In December 2013 and February 2014, linaclotide was approved in Canada and Mexico, respectively, as a treatment for adult men and women suffering from IBS-C or CIC. Allergan has exclusive rights to commercialize linaclotide in Canada as CONSTELLA and in Mexico as LINZESS. In May 2014, CONSTELLA became commercially available in Canada and in June 2014, LINZESS became commercially available in Mexico. Astellas Pharma Inc. (“Astellas”), the Company’s partner in Japan, is developing linaclotide for the treatment of patients with IBS-C and chronic constipation in its territory. In November 2015, the Company and Astellas reported positive top-line data from Astellas’ Phase III clinical trial of linaclotide in adult patients with IBS-C for Japan and in February 2016, Astellas filed a new drug application (“NDA”) seeking approval of linaclotide for the treatment of adults with IBS-C in Japan with the Japanese Ministry of Health, Labor and Welfare. In October 2012, the Company entered into a collaboration agreement with AstraZeneca AB (together with its affiliates, “AstraZeneca”), to co-develop and co-commercialize linaclotide in China, Hong Kong and Macau, with AstraZeneca having primary responsibility for the local operational execution. In December 2015, the Company and AstraZeneca filed for approval with the China Food and Drug Administration to market linaclotide in China. The Company continues to assess alternatives to bring linaclotide to IBS-C and CIC sufferers in the parts of the world outside of its partnered territories.

In June 2016, the Company closed a transaction with AstraZeneca pursuant to which the Company received an exclusive license to develop, manufacture, and commercialize products containing lesinurad as an active ingredient, including ZURAMPIC ® , in the U.S. Lesinurad 200mg tablets were approved as ZURAMPIC by the U.S. Food and Drug Administration (“FDA”) in December 2015 for use in combination with a xanthine oxidase inhibitor (“XOI”) for the treatment of hyperuricemia associated with uncontrolled gout. The Company is also developing a fixed-dose combination product (“FDC Product”) of lesinurad and allopurinol, an XOI, which is included under the license agreement.

The Company is advancing its rGERD franchise through the development of IW-3718, a gastric retentive formulation of a bile acid sequestrant.

Within the Company’s vascular and fibrotic franchise, it is leveraging its pharmacological expertise in guanylate cyclase pathways gained through the discovery and development of linaclotide to advance development programs targeting soluble guanylate cyclase (“sGC”). sGC is a validated mechanism with the potential for broad therapeutic utility and multiple opportunities for product development in vascular and fibrotic diseases, as well as other therapeutic areas. The Company is progressing two sGC development

Table of Contents

candidates, IW-1973 and IW-1701, which have distinct pharmacologic profiles that the Company believes may be differentiating and enable opportunities in multiple indications.

In April 2016, the Company announced the discontinuation of development of IW-9179 for gastroparesis, as top-line data from its exploratory Phase IIa clinical study indicated that IW-9179 did not meaningfully reduce the severity of symptoms in patients with diabetic gastroparesis. In July 2016, as part of its continued assessment and prioritization of resources, the Company discontinued assessing the potential of IW-9179 for the treatment of functional dyspepsia and is no longer advancing this program.

In March 2015, the Company and Exact Sciences Corp. (“Exact Sciences”) entered into an agreement to co-promote Cologuard ® , the first and only FDA-approved noninvasive stool DNA screening test for colorectal cancer, and in August 2015, the Company and Allergan entered into an agreement for the co-promotion of VIBERZI™ (eluxadoline) in the U.S., Allergan’s treatment for adults suffering from IBS with diarrhea (“IBS-D”).

These agreements are more fully described in Note 3, Business Combinations, and Note 4, Collaboration, License and Co-Promotion Agreements, to these condensed consolidated financial statements.

In June 2015, the Company issued approximately $335.7 million in aggregate principal amount of 2.25% Convertible Senior Notes due 2022 (the “2022 Notes”). The Company received net proceeds of approximately $324.0 million from the sale of the 2022 Notes, after deducting fees and expenses of approximately $11.7 million (Note 10).

Basis of Presentation

The accompanying condensed consolidated financial statements and the related disclosures are unaudited and have been prepared in accordance with accounting principles generally accepted in the U.S. Additionally, certain information and footnote disclosures normally included in the Company’s annual financial statements have been condensed or omitted. Accordingly, these interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015, which was filed with the Securities and Exchange Commission on February 19, 2016 (the “2015 Annual Report on Form 10-K”).

The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and, in the opinion of management, reflect all normal recurring adjustments considered necessary for a fair presentation of the Company’s financial position as of June 30, 2016, and the results of its operations for the three and six months ended June 30, 2016 and 2015 and its cash flows for the six months ended June 30, 2016 and 2015. The results of operations for the three and six months ended June 30, 2016 and 2015 are not necessarily indicative of the results that may be expected for the full year or any other subsequent interim period.

Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of Ironwood Pharmaceuticals, Inc. and its wholly owned subsidiaries, Ironwood Pharmaceuticals Securities Corporation and Ironwood Pharmaceuticals GmbH. All intercompany transactions and balances are eliminated in consolidation.

Use of Estimates

The preparation of condensed consolidated financial statements in accordance with U.S. generally accepted accounting principles requires the Company’s management to make estimates and judgments that may affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the amounts of revenues and expenses during the reported periods. On an ongoing basis, the Company’s management evaluates its estimates, judgments and methodologies. Significant estimates and assumptions in the condensed consolidated financial statements include those related to revenue recognition, available-for-sale securities, inventory valuation, and related reserves; impairment of long-lived assets; initial valuation procedures for the issuance of convertible notes; fair value of derivatives; balance sheet classification of notes payable and convertible notes; income taxes, including the valuation allowance for deferred tax assets; research and development expenses; goodwill; contingent consideration; acquired intangible assets; contingencies and share-based compensation. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ materially from these estimates under different assumptions or conditions. Changes in estimates are reflected in reported results in the period in which they become known.

Table of Contents

Summary of Significant Accounting Policies

The Company’s significant accounting policies are described in Note 2, “Summary of Significant Accounting Policies,” in the 2015 Annual Report on Form 10-K. During the three months ended June 30, 2016, the Company adopted the following additional significant accounting policies:

Business Combinations

The Company evaluates acquisitions of assets and other similar transactions to assess whether or not the transaction should be accounted for as a business combination by assessing whether or not the Company has acquired inputs and processes that have the ability to create outputs. If determined to be a business combination, the Company accounts for business acquisitions under the acquisition method of accounting as indicated in the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Codification (“ASC”) Topic 805, “Business Combinations”, (“ASC 805”) which requires the acquiring entity in a business combination to recognize the fair value of all assets acquired, liabilities assumed, and any non-controlling interest in the acquiree and establishes the acquisition date as the fair value measurement point. Accordingly, the Company recognizes assets acquired and liabilities assumed in business combinations, including contingent assets and liabilities, and non-controlling interest in the acquiree based on the fair value estimates as of the date of acquisition. In accordance with ASC 805, the Company recognizes and measures goodwill as of the acquisition date, as the excess of the fair value of the consideration paid over the fair value of the identified net assets acquired.

The consideration for the Company’s business acquisitions includes future payments that are contingent upon the occurrence of a particular event or events. The obligations for such contingent consideration payments are recorded at fair value on the acquisition date. The contingent consideration obligations are then evaluated each reporting period. Changes in the fair value of contingent consideration obligations, other than changes due to payments, are recognized as a (gain) loss on fair value remeasurement of contingent consideration in the condensed consolidated statements of operations.

Finite and Indefinite-Lived Intangible Assets

The Company records the fair value of purchased intangible assets with definite useful lives as of the transaction date of a business combination. Purchased intangible assets with definite useful lives are amortized to their estimated residual values over their estimated useful lives. The Company evaluates the finite-lived intangible assets for impairment whenever events or changes in circumstances indicate the reduction in the fair value below their respective carrying amounts. If the Company determines that an impairment has occurred, a write-down of the carrying value and an impairment charge to operating expenses in the period the determination is made is recorded. In addition, the Company would also reassess the remaining estimated useful life of the finite-lived intangible asset.

In accordance with ASC Topic 350, “Intangibles — Goodwill and Other” (“ASC 350”), during the period that an asset is considered indefinite-lived, such as in-process research and development (“IPR&D”), it will not be amortized. Acquired IPR&D represents the fair value assigned to research and development assets that have not reached technological feasibility. The value assigned to acquired IPR&D is determined by estimating the costs to develop the acquired technology into commercially viable products, estimating the resulting revenue from the projects, and discounting the net cash flows to present value. The revenue and costs projections used to value acquired IPR&D are, as applicable, reduced based on the probability of success of developing a new drug. Additionally, the projections consider the relevant market sizes and growth factors, expected trends in technology, and the nature and expected timing of new product introductions by the Company and its competitors. The rates utilized to discount the net cash flows to their present value are commensurate with the stage of development of the projects and uncertainties in the economic estimates used in the projections. Upon the acquisition of IPR&D, the Company completes an assessment of whether its acquisition constitutes the purchase of a single asset or a group of assets. Multiple factors are considered in this assessment, including the nature of the technology acquired, the presence or absence of separate cash flows, the development process and stage of completion, quantitative significance and the rationale for entering into the transaction. Indefinite-lived assets are maintained on the Company’s condensed consolidated balance sheet until either the project underlying it is completed or the asset becomes impaired. Indefinite-lived assets are tested for impairment on an annual basis, or whenever events or changes in circumstances indicate the reduction in the fair value of the IPR&D asset below its respective carrying amount. If the Company determines that an impairment has occurred, a write-down of the carrying value and an impairment charge to operating expenses in the period the determination is made is recorded. When development of an IPR&D asset is complete the associated asset would be deemed finite-lived and would then be amortized based on its respective estimated useful life at that point.

Table of Contents

Goodwill

Goodwill represents the difference between the purchase price and the fair value of the identifiable tangible and intangible net assets when accounted for using the purchase method of accounting. Goodwill is not amortized, but is reviewed for impairment. The Company tests its goodwill for impairment annually, or whenever events or changes in circumstances indicate an impairment may have occurred, by comparing its carrying value to its implied fair value in accordance with ASC 350. Impairment may result from, among other things, deterioration in the performance of the acquired asset, adverse market conditions, adverse changes in applicable laws or regulations and a variety of other circumstances. If the Company determines that an impairment has occurred, a write-down of the carrying value and an impairment charge to operating expenses in the period the determination is made is recorded. In evaluating the carrying value of goodwill, the Company must make assumptions regarding estimated future cash flows and other factors to determine the fair value of the acquired assets. Changes in strategy or market conditions could significantly impact those judgments in the future and require an adjustment to the recorded balances.

New Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies that are adopted by the Company as of the specified effective date.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), which supersedes the revenue recognition requirements in ASC Topic 605, Revenue Recognition , and most industry-specific guidance. The new standard requires that an entity recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. The update also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. ASU 2014-09 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017 and should be applied retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying this update recognized at the date of initial application. Early adoption is permitted beginning after December 15, 2016, including interim reporting periods within those years. In April 2016, the FASB issued ASU No. 2016-10, Revenue from Contracts with Customers: Identifying Performance Obligations and Licensing (“ASU 2016-10”), which clarifies certain aspects of identifying performance obligations and licensing implementation guidance. In May 2016, the FASB issued ASU No. 2016-12, Revenue from Contracts with Customers: Narrow-Scope Improvements and Practical Expedients (“ASU 2016-12”) , related to disclosures of remaining performance obligations, as well as other amendments to guidance on collectability, non-cash consideration and the presentation of sales and other similar taxes collected from customers. These standards have the same effective date and transition date as ASU 2014-09. The Company is evaluating the method of adoption and the potential impact that ASU 2014-09, ASU 2016-10 and ASU 2016-12 may have on its financial position and results of operations.

In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements — Going Concern: Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (“ASU 2014-15”). ASU 2014-15 is intended to define management’s responsibility to evaluate whether there is substantial doubt about an organization’s ability to continue as a going concern and to provide related footnote disclosures, if required. ASU 2014-15 is effective for annual reporting periods ending after December 15, 2016, and applies to annual and interim periods thereafter. The Company does not believe that the adoption of ASU 2014-15 will have a significant impact on the Company’s financial statement disclosures.

In April 2015, the FASB issued ASU No. 2015-05, Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement , which amends ASC 350. Under this standard, if a cloud computing arrangement includes a software license, the software license element of the arrangement should be accounted for consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the arrangement should be accounted for as a service contract. The amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2015 and may be applied on either a prospective or retrospective basis. The Company adopted this standard during the three months ended March 31, 2016. The adoption of this standard did not have a material impact on the Company’s financial position or results of operations.

In July 2015, the FASB issued ASU No. 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory (“ASU 2015-11”). ASU 2015-11 requires entities that measure inventory using the first-in, first-out method, to do so at the lower of cost and net realizable value. The standard defines net realizable value as the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. The standard is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016. Early adoption is permitted. The Company is evaluating the potential impact that adoption of ASU 2015-11 may have on the Company’s financial position or results of operations.

In February 2016, the FASB issued ASU No. 2016-02, Leases (“ASU 2016-02”), which supersedes the lease accounting requirements in ASC Topic 840, Leases , and most industry-specific guidance. ASU 2016-02 requires the identification of arrangements that should be accounted for as leases by lessees. In general, for lease arrangements exceeding a 12-month term, these arrangements must now be recognized as assets and liabilities on the balance sheet of the lessee. Under ASU 2016-02, a right-of-use asset and lease obligation will be recorded for all leases, whether operating or financing, while the income statement will reflect lease

Table of Contents

expense for operating leases and amortization and interest expense for financing leases. The balance sheet amount recorded for existing leases at the date of adoption of ASU 2016-02 must be calculated using the applicable incremental borrowing rate at the date of adoption. In addition, ASU 2016-02 requires the use of modified retrospective method, which will require adjustment to all comparative periods presented in the consolidated financial statements. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. The Company is evaluating the potential impact that ASU 2016-02 may have on the Company’s financial position or results of operations.

In March 2016, the FASB issued ASU No. 2016-09, Compensation — Stock Compensation , which amends ASC Topic 718, Compensation — Stock Compensation (“ASU 2016-09”) . ASU 2016-09 identifies areas for simplification involving several aspects of accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, an option to recognize gross stock compensation expense with actual forfeitures recognized as they occur, as well as certain classifications on the statement of cash flows. The amendments are effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Early adoption is permitted. The Company is evaluating the potential impact that ASU 2016-09 may have on the Company’s financial position, results of operations or statement of cash flows.

2. Net Loss Per Share

Basic and diluted net loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding during the period.

In June 2015, in connection with the issuance of approximately $335.7 million in aggregate principal amount of the 2022 Notes, the Company entered into convertible note hedge transactions (the “Convertible Note Hedges”). The Convertible Note Hedges are generally expected to reduce the potential dilution to the Company’s Class A common stockholders upon a conversion of the 2022 Notes, as conversion would result in fewer shares available for purchase in the market. The Convertible Note Hedges are also designed to offset any cash payments the Company is required to make in excess of the principal amount of converted 2022 Notes in the event that the market price per share of the Company’s Class A common stock, as measured under the terms of the Convertible Note Hedges, exceeds the conversion price of the 2022 Notes (Note 10). The Convertible Note Hedges are not considered for purposes of calculating the number of diluted weighted average shares outstanding, as their effect would be antidilutive.

Concurrently with entering into the Convertible Note Hedges, the Company also entered into certain warrant transactions in which it sold note hedge warrants (the “Note Hedge Warrants”) to the Convertible Note Hedge counterparties to acquire 20,249,665 shares of the Company’s Class A common stock, subject to customary anti-dilution adjustments. The Note Hedge Warrants could have a dilutive effect on the Company’s Class A common stock to the extent that the market price per share of the Class A common stock exceeds the applicable strike price of such warrants (Note 10). The Note Hedge Warrants are not considered for purposes of calculating the number of diluted weighted averages shares outstanding, as their effect would be antidilutive.

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

	Six Months Ended
	June 30,
	2016	2015
Options to purchase common stock	22,066	21,149
Shares subject to repurchase	192	149
Restricted stock units	1,256	492
Note hedge warrants	20,250	20,250
2022 Notes	20,250	20,250
	64,014	62,290

An insignificant number of shares issuable under the Company’s employee stock purchase plan were excluded from the calculation of diluted weighted average shares outstanding because their effects would be anti-dilutive.

3. Business Combinations

In April 2016, the Company and AstraZeneca entered into a license agreement (the “Lesinurad License Agreement”) pursuant to which the Company received, upon closing the transaction in June 2016, an exclusive license to develop, manufacture and commercialize products containing lesinurad as an active ingredient, including ZURAMPIC (the “Products”), in the U.S. (the

Table of Contents

“Lesinurad Transaction”). Subject to the terms of the Lesinurad License Agreement, AstraZeneca will conduct certain development activities on the Company’s behalf for (i) ZURAMPIC, including the post-marketing requirement activities currently required by the FDA, for which the Company will reimburse AstraZeneca up to $100.0 million over up to ten years, and (ii) the FDC Product, for which the Company will also reimburse AstraZeneca. In connection with the Lesinurad License Agreement, the Company and AstraZeneca entered into a commercial supply agreement (the “Lesinurad CSA”), pursuant to which the Company relies exclusively on AstraZeneca for the commercial manufacture and supply of ZURAMPIC and, if approved, the FDC Product, and a transitional services agreement (the “Lesinurad TSA”), pursuant to which AstraZeneca will provide certain support services, including development, regulatory and commercial services, to the Company for ZURAMPIC until such activities under the Lesinurad TSA are transferred to the Company. The Company may obtain production techniques from AstraZeneca via a manufacturing technology transfer available under the Lesinurad CSA upon provision of six-months’ notice. The Company is responsible for commercialization of the Products in the U.S., and any additional development of the Products for commercialization in the U.S. In addition, under the terms of the Lesinurad License Agreement, the Company will have the right of first negotiation and right of last refusal with AstraZeneca for the right to commercialize, develop and manufacture for commercialization in the U.S., products for the prevention or treatment of gout that include verinurad as at least one of its active ingredients.

The Company concluded that the Lesinurad Transaction included inputs and processes that have the ability to create outputs and accordingly accounted for the transaction as a business combination in accordance with ASC 805. As such, the assets acquired and liabilities assumed were recorded at fair value, with the remaining purchase price recorded as goodwill.

The purchase price consisted of the upfront payment to AstraZeneca of $100.0 million, which was made in June 2016, and the fair value of the contingent consideration of $87.6 million. The Company also paid approximately $1.6 million for transaction-related costs, including external consulting fees, which were expensed as incurred as selling, general and administrative expenses. Pursuant to the terms of the Lesinurad License Agreement, the Company will also pay a tiered royalty to AstraZeneca in the single-digits as a percentage of net sales of the Products in the U.S., as well as commercial and other milestones of up to $165.0 million over the duration of the agreement. The contingent consideration was valued as approximately $87.6 million, using a discounted cash flow estimate as of the acquisition date. The total fair value of consideration for the purchase was approximately $ 187.6 million.

The Company has preliminarily valued the acquired assets and liabilities based on their estimated fair value. These estimates are subject to change as additional information becomes available. The preliminary fair values included in the balance sheet as of June 30, 2016 are based on the best estimates of the Company. The completion of the valuation of the acquired assets and liabilities may result in adjustments to the carrying value of assets and liabilities, revision to the useful life of the finite intangible asset, the determination of any residual amount that will be allocated to goodwill and the related tax effects. The related amortization of acquired finite-lived intangible asset is also subject to revision based on the final valuation. Any adjustments to the preliminary fair values will be made as such information becomes available, but no later than June 1, 2017. The following table presents the preliminary allocation of the purchase consideration for the Lesinurad Transaction as of June 2, 2016 (the “Acquisition Date”), including the contingent consideration (in thousands):

As of the Acquisition Date:
Cash portion of consideration	$	100,000
Contingent consideration	87,649
Total purchase consideration	$	187,649

As of the Acquisition Date:
Developed technology — ZURAMPIC	$	167,900
IPR&D - FDC Product	19,100
Goodwill	649
Net assets acquired	$	187,649

The fair value of the FDC Product IPR&D was determined using a probability adjusted discounted cash flow approach, including assumptions of projected revenues, operating expenses and a discount rate of 16.0% applied to the projected cash flows. The remaining cost of development for this asset is approximately $13.9 million, with an expected completion date of no earlier than 2017.

The fair value of the ZURAMPIC intangible asset was determined using a probability adjusted discounted cash flow approach, including assumptions of projected revenues, operating expenses and a discount rate of 13.5% applied to the projected cash flows. The Company considers the ZURAMPIC intangible asset acquired to be developed technology, as it was approved by the FDA for commercialization as of the Acquisition Date. The Company believes the assumptions are representative of those a market

Table of Contents

participant would use in estimating fair value. The ZURAMPIC intangible asset is finite lived. The amount allocated to the ZURAMPIC intangible asset will be amortized on a straight-line basis to amortization of acquired intangible assets within the Company’s condensed consolidated statements of operations over its estimated useful life of 13 years, the period of estimated future cash flows. The Company believes that the straight-line method of amortization represents the pattern in which the economic benefits of the intangible asset are consumed. As of June 30, 2016, the Company recognized accumulated amortization of $1.1 million with respect to the ZURAMPIC intangible asset. The estimated future amortization of ZURAMPIC is expected to be as follows (in thousands):

	As of June 30, 2016
2016 (1)	$	6,420
2017	12,833
2018	12,833
2019	12,833
2020 and thereafter	121,916
Total	$	166,835

(1) For the six months ended December 31, 2016.

The amount allocated to the FDC Product IPR&D is considered to be indefinite-lived until the completion or abandonment of the associated research and development efforts. As of June 30, 2016, there was no impairment related to the FDC Product IPR&D or the ZURAMPIC intangible asset.

The Company allocated the excess of the purchase price over the identifiable intangible assets to goodwill. Such goodwill is not deductible for tax purposes and represents the value placed on entering new markets, expanding market share and operating synergies. As of June 30, 2016, there was no impairment of goodwill. All goodwill has been assigned to the Company’s single reporting unit, which is the single operating segment human therapeutics.

These fair value measurements were based on significant inputs not observable in the market and thus represent Level 3 fair value measurements (Note 5).

As of June 30, 2016, the estimated fair value of the Company’s contingent consideration liability did not change, compared to the Acquisition Date estimated fair value.

4. Collaboration, License and Co-Promotion Agreements

For the three and six months ended June 30, 2016, the Company had linaclotide collaboration agreements with Allergan for North America and AstraZeneca for China, Hong Kong and Macau, as well as linaclotide license agreements with Allergan for the European territory and Astellas for Japan. The Company also had a co-promotion agreement with Exact Sciences to co-promote Cologuard in the U.S. and a co-promotion agreement with Allergan to co-promote VIBERZI in the U.S. The following table provides amounts included in the Company’s condensed consolidated statements of operations as collaborative arrangements revenue attributable to transactions from these arrangements (in thousands):

	Collaborative Arrangements Revenue
	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2016		2015		2016		2015
Linaclotide Agreements:
Allergan (North America)	$	50,036	$	24,381	$	100,009	$	49,707
Allergan (Europe)	110		—		190		—
AstraZeneca (China, Hong Kong and Macau)	164		466		294		1,696
Almirall (Europe) (1)	—		116		3		217
Astellas (Japan)	2,334		1,805		17,014		4,080
Co-Promotion Agreements:
Exact Sciences (Cologuard)	1,159		976		1,878		976
Allergan (VIBERZI)	547		—		1,004		—
Total collaborative arrangements revenue	$	54,350	$	27,744	$	120,392	$	56,676

Table of Contents

(1) In October 2015, Almirall transferred its exclusive license to develop and commercialize linaclotide in Europe to Allergan.

Linaclotide Agreements

Collaboration Agreement for North America with Allergan

In September 2007, the Company entered into a collaboration agreement with Allergan to develop and commercialize linaclotide for the treatment of IBS-C, CIC and other GI conditions in North America. Under the terms of this collaboration agreement, the Company shares equally with Allergan all development costs as well as net profits or losses from the development and sale of linaclotide in the U.S. In addition, the Company receives royalties in the mid-teens percent based on net sales in Canada and Mexico. Allergan is solely responsible for the further development, regulatory approval and commercialization of linaclotide in Canada and Mexico and funding any costs. The collaboration agreement for North America also includes contingent milestone payments, as well as a contingent equity investment, based on the achievement of specific development and commercial milestones. As of June 30, 2016, approximately $205.0 million in license fees and all six development milestone payments had been received by the Company, as well as a $25.0 million equity investment in the Company’s capital stock (Note 13). The Company can also achieve up to $100.0 million in a sales-related milestone if certain conditions are met, which will be recognized as collaborative arrangements revenue as earned.

As a result of the research and development cost-sharing provisions of the collaboration for North America, the Company offset approximately $3.2 million and approximately $5.2 million against research and development costs during the three and six months ended June 30, 2016, respectively, and approximately $4.4 million and approximately $11.9 million during the three and six months ending June 30, 2015, respectively, to reflect the obligations of each party under the collaboration to bear half of the development costs incurred. In addition, in March 2015, the Company and Allergan agreed to share certain costs relating to the manufacturing of linaclotide active pharmaceutical ingredient (“API”) and certain other manufacturing activities for the North American territory. This arrangement resulted in net amounts received from Allergan of approximately $4.3 million for costs incurred in prior periods, which were recorded by the Company as a reduction in research and development expenses during the three months ended March 31, 2015.

The Company and Allergan began commercializing LINZESS in the U.S. in December 2012. The Company receives 50% of the net profits and bears 50% of the net losses from the commercial sale of LINZESS in the U.S.; provided, however, that if either party provides fewer calls on physicians in a particular year than it is contractually required to provide, such party’s share of the net profits will be adjusted as set forth in the collaboration agreement for North America. Certain of these adjustments to the share of the net profits may be reduced or eliminated in connection with the co-promotion activities under the Company’s agreement with Allergan to co-promote VIBERZI in the U.S., as described below in Co-Promotion Agreement with Allergan for VIBERZI . Net profits or net losses consist of net sales of LINZESS to third-party customers and sublicense income in the U.S. less the cost of goods sold as well as selling, general and administrative expenses. LINZESS net sales are calculated and recorded by Allergan and may include gross sales net of discounts, rebates, allowances, sales taxes, freight and insurance charges, and other applicable deductions. The Company records its share of the net profits or net losses from the sale of LINZESS on a net basis and presents the settlement payments to and from Allergan as collaboration expense or collaborative arrangements revenue, as applicable.

The Company recognized collaborative arrangements revenue from the Allergan collaboration agreement for North America during the three and six months ended June 30, 2016 and 2015 as follows (in thousands):

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2016		2015
Collaborative arrangements revenue related to sales of LINZESS in the U.S. (1) (2)	$	48,333	$	24,275	$	94,980	$	49,413
Royalty revenue	238		106		547		294
Sale of API	1,465		—		4,482		—
Total collaborative arrangements revenue	$	50,036	$	24,381	$	100,009	$	49,707

Table of Contents

The collaborative arrangements revenue recognized in the three and six months ended June 30, 2016 and 2015 primarily represents the Company’s share of the net profits and net losses on the sale of LINZESS in the U.S. In addition, during the three and six months ended June 30, 2016, the Company recorded collaboration revenue of approximately $1.5 million and approximately $4.5 million, respectively, related to the sale of API to Allergan under the terms of the collaboration for North America, and no such amounts were recorded during the three and six months ended June 30, 2015.

The following table presents the amounts recorded by the Company for commercial efforts related to LINZESS in the U.S. in the three and six months ended June 30, 2016 and 2015 (in thousands):

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2016			2015			2016			2015
Collaborative arrangements revenue related to sales of LINZESS in the U.S. (1) (2)	$	48,333		$	24,275		$	94,980		$	49,413
Selling, general and administrative costs incurred by the Company (1)	(8,879		)	(8,314		)	(18,032		)	(16,003		)
The Company’s share of net profit	$	39,454		$	15,961		$	76,948		$	33,410

(1) Includes only collaborative arrangement revenue or selling, general and administrative costs attributable to the cost-sharing arrangement with Allergan.

(2) Certain of the unfavorable adjustments to the Company’s share of the LINZESS net profits may be reduced or eliminated in connection with the co-promotion activities under the Company’s agreement with Allergan to co-promote VIBERZI in the U.S., as described below in Co-Promotion Agreement with Allergan for VIBERZI . During the three and six months ended June 30, 2016, in connection with these co-promotion activities, the net profit share adjustments payable to Allergan under the linaclotide collaboration agreement for North America were reduced by approximately $1.4 million and $2.6 million, respectively. The Company recorded approximately $1.2 million and $2.4 million of net profit share adjustments payable to Allergan during the three and six months ended June 30, 2015, respectively, as described above.

In May 2014, CONSTELLA became commercially available in Canada and in June 2014, LINZESS became commercially available in Mexico. The Company records royalties on sales of CONSTELLA in Canada and LINZESS in Mexico one quarter in arrears as it does not have access to the royalty reports from its partner or the ability to estimate the royalty revenue in the period earned. The Company recognized approximately $0.2 million and approximately $0.5 million of royalty revenues from Canada and Mexico during the three and six months ended June 30, 2016, respectively. The Company recognized an insignificant amount and approximately $0.3 million of royalty revenues from Canada and Mexico during the three and six months ended June 30, 2015, respectively.

License Agreement for the European Territory with Allergan (formerly with Almirall through October 2015)

In April 2009, the Company entered into a license agreement with Almirall (the “European License Agreement”) to develop and commercialize linaclotide in Europe (including the Commonwealth of Independent States and Turkey) for the treatment of IBS-C, CIC and other GI conditions. Under the terms of the European License Agreement, Almirall was responsible for the expenses associated with the development and commercialization of linaclotide in the European territory and the Company was required to participate on a joint development committee over linaclotide’s development period and a joint commercialization committee while the product was being commercialized.

Pursuant to the terms of the European License Agreement, the Company received approximately $38.0 million, net of foreign tax withholdings, as a non-refundable up-front payment from Almirall. In November 2009, the Company achieved a development milestone triggering an equity investment and received $15.0 million from Almirall for the purchase of 681,819 shares of convertible preferred stock (Note 13). In addition, the European License Agreement also included contingent milestone payments that could total up to $40.0 million upon achievement of specific development and commercial launch milestones. In November 2010, the Company achieved a development milestone, which resulted in an approximately $19.0 million payment, representing a $20.0 million milestone, net of foreign withholding taxes. This development milestone was recognized as collaborative arrangements revenue through September 2012. During the years ended December 31, 2013 and 2014, the Company achieved four commercial milestones under the European License Agreement for the first commercial launch in four out of five major European Union (“E.U.”) countries set forth in the agreement, aggregating to $4.0 million. In connection with the achievement of these milestones, the Company received approximately $3.9 million, net of foreign tax withholdings.

In October 2015, Almirall transferred its exclusive license to develop and commercialize linaclotide in Europe to Allergan. Additionally, in October 2015, the Company and Allergan separately entered into an amendment to the European License Agreement relating to the development and commercialization of linaclotide in Europe. Pursuant to the terms of the amendment, (i) the remaining

Table of Contents

sales-based milestones payable to the Company under the European License Agreement were modified to increase the total milestone payments such that, when aggregated with the remaining commercial launch milestones, they could total up to $42.5 million, (ii) the royalties payable to the Company during the term of the European License Agreement were modified such that the royalties based on sales volume in Europe begin in the mid-single digit percent and escalate to the upper-teens percent by calendar year 2019, and (iii) Allergan assumed responsibility for the manufacturing of linaclotide API for Europe from the Company, as well as the associated costs. Furthermore, with the Company no longer responsible for the manufacturing of linaclotide API for Europe, the royalties under the European License Agreement are no longer reduced by the transfer price paid for the API included in the product actually sold by Allergan in Europe in any given period. The Company concluded that these 2015 amendments to the European License Agreement were not a modification to the linaclotide collaboration agreement with Allergan for North America.

The commercial launch and sales-based milestones under the European License Agreement are recognized as revenue as earned. The Company recognized an insignificant amount and approximately $0.2 million of royalty revenue during the three and six months ended June 30, 2016 and 2015, respectively. The Company records royalties on sales of CONSTELLA one quarter in arrears as it does not have access to the royalty reports from Allergan or the ability to estimate the royalty revenue in the period earned.

License Agreement for Japan with Astellas

In November 2009, the Company entered into a license agreement with Astellas to develop and commercialize linaclotide for the treatment of IBS-C, CIC and other GI conditions in Japan. Astellas is responsible for all activities relating to development, regulatory approval and commercialization in Japan, as well as funding the associated costs, and the Company is required to participate on a joint development committee over linaclotide’s development period.

In 2009, Astellas paid the Company a non-refundable, up-front licensing fee of $30.0 million, which is being recognized as collaborative arrangements revenue on a straight-line basis over the Company’s estimate of the period over which linaclotide will be developed under the license agreement. In March 2013, the Company revised its estimate of the development period from 115 months to 85 months based on the Company’s assessment of regulatory approval timelines for Japan. During the three and six months ended June 30, 2016 and 2015, the Company recognized approximately $1.3 million and approximately $2.6 million, respectively, of revenue related to the up-front licensing fee, in each period, including approximately $0.5 million and approximately $1.0 million, respectively, of revenue in each period attributable to a revision to the estimated development period in March 2013. At June 30, 2016, approximately $3.8 million of the up-front license fee remained deferred.

The agreement also includes three development milestone payments that could total up to $45.0 million, none of which the Company considers substantive. The first milestone payment, consisting of $15.0 million upon enrollment of the first study subject in a Phase III study for linaclotide in Japan, was achieved in November 2014, and approximately $13.4 million was recognized as revenue through June 30, 2016, including approximately $0.5 million and approximately $1.1 million during each of the three and six months ended June 30, 2016 and 2015, respectively. The remaining approximately $1.6 million of this milestone payment will be recognized over the remaining development period. In February 2016, Astellas filed an NDA with the Japanese Ministry of Health, Labor and Welfare seeking approval of linaclotide for the treatment of adults with IBS-C in Japan. In connection with this filing, a second milestone payment, consisting of $15.0 million, was achieved and approximately $0.5 million and $13.4 million was recognized as revenue during the three and six months ended June 30, 2016, respectively. The remaining approximately $1.6 million of this milestone payment will be recognized over the remaining development period. The third development milestone payment consists of $15.0 million upon approval of NDA by the Japanese Ministry of Health, Labor and Welfare to market linaclotide in Japan. In addition, the Company will receive royalties which escalate based on sales volume, beginning in the low-twenties percent, less the transfer price paid for the API included in the product actually sold and other contractual deductions.

During the three and six months ended June 30, 2016, the Company recognized approximately $2.3 million and approximately $17.0 million, respectively, in collaborative arrangements revenue from the Astellas license agreement. During the three and six months ended June 30, 2015, the Company recognized approximately $1.8 million and approximately $4.1 million, respectively, in collaborative arrangements revenue from the Astellas license agreement, including an insignificant amount and approximately $0.5 million, respectively, from the sale of API to Astellas.

Collaboration Agreement for China, Hong Kong and Macau with AstraZeneca

In October 2012, the Company entered into a collaboration agreement with AstraZeneca (the “AstraZeneca Collaboration Agreement”) to co-develop and co-commercialize linaclotide in China, Hong Kong and Macau (the “License Territory”). The collaboration provides AstraZeneca with an exclusive nontransferable license to exploit the underlying technology in the License Territory. The parties share responsibility for continued development and commercialization of linaclotide under a joint development plan and a joint commercialization plan, respectively, with AstraZeneca having primary responsibility for the local operational execution.

The parties agreed to an Initial Development Plan (“IDP”) which includes the planned development of linaclotide in China, including the lead responsibility for each activity and the related internal and external costs. The IDP indicates that AstraZeneca is

Table of Contents

responsible for a multinational Phase III clinical trial (the “Phase III Trial”), the Company is responsible for nonclinical development and supplying clinical trial material and both parties are responsible for the regulatory submission process. The IDP indicates that the party specifically designated as being responsible for a particular development activity under the IDP shall implement and conduct such activities. The activities are governed by a Joint Development Committee (“JDC”), with equal representation from each party. The JDC is responsible for approving, by unanimous consent, the joint development plan and development budget, as well as approving protocols for clinical studies, reviewing and commenting on regulatory submissions, and providing an exchange of data and information.

The AstraZeneca Collaboration Agreement will continue until there is no longer a development plan or commercialization plan in place, however, it can be terminated by AstraZeneca at any time upon 180 days’ prior written notice. Under certain circumstances, either party may terminate the AstraZeneca Collaboration Agreement in the event of bankruptcy or an uncured material breach of the other party. Upon certain change in control scenarios of AstraZeneca, the Company may elect to terminate the AstraZeneca Collaboration Agreement and may re-acquire its product rights in a lump sum payment equal to the fair market value of such product rights.

In connection with the AstraZeneca Collaboration Agreement, the Company and AstraZeneca also executed a co-promotion agreement (the “Co-Promotion Agreement”), pursuant to which the Company utilized its existing sales force to co-promote NEXIUM ® (esomeprazole magnesium), one of AstraZeneca’s products, in the U.S. The Co-Promotion Agreement expired in May 2014.

There are no refund provisions in the AstraZeneca Collaboration Agreement and the Co-Promotion Agreement (together, the “AstraZeneca Agreements”).

Under the terms of the AstraZeneca Collaboration Agreement, the Company received a $25.0 million non-refundable upfront payment upon execution. The Company is also eligible for $125.0 million in additional commercial milestone payments contingent on the achievement of certain sales targets. The parties will also share in the net profits and losses associated with the development and commercialization of linaclotide in the License Territory, with AstraZeneca receiving 55% of the net profits or incurring 55% of the net losses until a certain specified commercial milestone is achieved, at which time profits and losses will be shared equally thereafter.

Activities under the AstraZeneca Agreements were evaluated in accordance with ASC Topic 605-25, Revenue Recognition—Multiple-Element Arrangements (“ASC 605-25”), to determine if they represented a multiple element revenue arrangement. The Company identified the following deliverables in the AstraZeneca Agreements:

· an exclusive license to develop and commercialize linaclotide in the License Territory (the “License Deliverable”),

· research, development and regulatory services pursuant to the IDP, as modified from time to time (the “R&D Services”),

· JDC services,

· obligation to supply clinical trial material, and

· co-promotion services for AstraZeneca’s product (the “Co-Promotion Deliverable”).

The License Deliverable is nontransferable and has certain sublicense restrictions. The Company determined that the License Deliverable had standalone value as a result of AstraZeneca’s internal product development and commercialization capabilities, which would enable it to use the License Deliverable for its intended purposes without the involvement of the Company. The remaining deliverables were deemed to have standalone value based on their nature and all deliverables met the criteria to be accounted for as separate units of accounting under ASC 605-25. Factors considered in this determination included, among other things, whether any other vendors sell the items separately and if the customer could use the delivered item for its intended purpose without the receipt of the remaining deliverables.

The Company identified the supply of linaclotide drug product for commercial requirements and commercialization services as contingent deliverables because these services are contingent upon the receipt of regulatory approval to commercialize linaclotide in the License Territory, and there were no binding commitments or firm purchase orders pending for commercial supply at the inception of the AstraZeneca Collaboration Agreement. As these deliverables are contingent, and are not at an incremental discount, they are not evaluated as deliverables at the inception of the arrangement. These contingent deliverables will be evaluated and accounted for separately as each related contingency is resolved. As of June 30, 2016, no contingent deliverables were provided by the Company under the AstraZeneca Agreements.

In August 2014, the Company and AstraZeneca, through the JDC, modified the IDP and development budget to include approximately $14.0 million in additional activities over the remaining development period, to be shared by the Company and

Table of Contents

AstraZeneca under the terms of the AstraZeneca Collaboration Agreement. These additional activities serve to support the continued development of linaclotide in the License Territory, including the Phase III Trial. Pursuant to the terms of the modified IDP and development budget, certain of the Company’s deliverables were modified, specifically the R&D Services and the obligation to supply clinical trial material. The modification did not, however, have a material impact on the Company’s condensed consolidated financial statements.

The total amount of the non-contingent consideration allocable to the AstraZeneca Agreements was approximately $34.0 million (“Arrangement Consideration”), consisting of the $25.0 million non-refundable up-front payment and approximately $9.0 million representing 55% of the estimated costs for clinical trial material supply services and research, development and regulatory activities allocated to the Company in the IDP or as approved by the JDC in subsequent periods. The Company allocated the Arrangement Consideration to the non-contingent deliverables based on management’s best estimated selling price (“BESP”) of each deliverable using the relative selling price method, as the Company did not have vendor-specific objective evidence or third-party evidence of selling price for such deliverables. Of the total Arrangement Consideration, approximately $29.7 million was allocated to the License Deliverable, approximately $1.8 million to the R&D Services, approximately $0.1 million to the JDC services, approximately $0.3 million to the clinical trial material supply services, and approximately $2.1 million to the Co-Promotion Deliverable in the relative selling price model, at the time of the material modification.

Because the Company shares development costs with AstraZeneca, payments from AstraZeneca with respect to both research and development and selling, general and administrative costs incurred by the Company prior to the commercialization of linaclotide in the License Territory are recorded as a reduction in expense, in accordance with the Company’s policy, which is consistent with the nature of the cost reimbursement. Development costs incurred by the Company that pertain to the joint development plan and subsequent amendments to the joint development plan, as approved by the JDC, are recorded as research and development expense as incurred. Payments to AstraZeneca are recorded as incremental research and development expense.

The Company completed its obligations related to the License Deliverable upon execution of the AstraZeneca Agreements; however, the revenue recognized in the statement of operations was limited to the non-contingent portion of the License Deliverable consideration in accordance with ASC 605-25. During the three and six months ended June 30, 2016 the Company recognized approximately $0.2 million and approximately $0.3 million, respectively, and during the three and six months ending June 30, 2015, the Company recognized approximately $0.4 million and approximately $1.6 million, respectively, in each case, in collaborative arrangements revenue related to the License Deliverable in connection with the modification to the IDP and development budget in August 2014, as these portions of the Arrangement Consideration were no longer contingent.

The Company also performs R&D Services and JDC services, and supplies clinical trial materials during the estimated development period. All Arrangement Consideration allocated to such services is being recognized as a reduction of research and development costs, using the proportional performance method, by which the amounts are recognized in proportion to the costs incurred. As a result of the cost-sharing arrangements under the collaboration, the Company recognized an insignificant amount in incremental research and development costs during the three and six months ended June 30, 2016, respectively, and recognized approximately $0.4 million and approximately $0.7 million in incremental research and development costs during the three and six months ended June 30, 2015, respectively.

The amount allocated to the Co-Promotion Deliverable was recognized as collaborative arrangements revenue using the proportional performance method, which approximates recognition on a straight-line basis beginning on the date that the Company began to co-promote AstraZeneca’s product through December 31, 2013 (the earliest cancellation date). As of December 31, 2013, the Company completed its obligation related to the Co-Promotion Deliverable; however, the revenue recognized in the statement of operations was limited to the non-contingent consideration in accordance with ASC 605-25. During each of the three and six months ended June 30, 2016 and 2015, the Company recognized an insignificant amount as collaborative arrangements revenue related to this deliverable, as this portion of the Arrangement Consideration was no longer contingent.

The Company reassesses the periods of performance for each deliverable at the end of each reporting period.

Milestone payments received from AstraZeneca upon the achievement of sales targets will be recognized as earned.

Co-Promotion Agreements

Co-Promotion Agreement with Exact Sciences Corp. for Cologuard

In March 2015, the Company and Exact Sciences entered into an agreement to co-promote Exact Sciences’ Cologuard, the first and only FDA-approved noninvasive stool DNA screening test for colorectal cancer (the “Exact Sciences Co-Promotion Agreement”). Under the terms of the non-exclusive Exact Sciences Co-Promotion Agreement, the Company’s sales team promotes and educates health care practitioners regarding Cologuard, with LINZESS remaining the Company’s first-position product. Exact Sciences maintains responsibility for all other aspects of the commercialization of Cologuard outside of the co-promotion. Under the terms of the Exact Sciences Co-Promotion Agreement, the Company is compensated primarily via royalties earned on the net sales of Cologuard generated from the healthcare practitioners on whom the Company calls with such royalties being payable during the term and for up to one year following the termination of the Company’s co-promotion efforts. Through June 30, 2016, the Company received approximately $3.4 million in connection with the Exact Sciences Co-Promotion Agreement. There are no refund provisions in the Exact Sciences Co-Promotion Agreement. Either party may terminate the agreement in the event of an uncured material breach by the other party, withdrawal of Cologuard from the U.S. market, restriction on the indications for Cologuard by the FDA, imposition of restrictive federal or state price controls, change of control of the other party, or bankruptcy or insolvency of the other party.

Table of Contents

Activities under the Exact Sciences Co-Promotion Agreement were evaluated in accordance with ASC 605-25, to determine if they represented a multiple element revenue arrangement. The Company identified the following deliverables in the Exact Sciences Co-Promotion Agreement through June 30, 2016: (i) second position sales detailing, (ii) promotional support services, and (iii) medical education services. Each of the deliverables was deemed to have standalone value based on their nature and all deliverables met the criteria to be accounted for as separate units of accounting under ASC 605-25. The Company determined that the BESP for each of the three deliverables approximated the value allocated to the deliverables under the agreement. The revenue related to each deliverable is recognized as collaborative arrangements revenue in the Company’s condensed consolidated statement of operations, in accordance with ASC 605-25, during the period earned. During the three and six months ended June 30, 2016, the Company recognized approximately $1.2 million and approximately $1.9 million, respectively, as collaborative arrangements revenue related to this arrangement, and approximately $1.0 million was recognized during the three and six months ended June 30, 2015.

Co-Promotion Agreement with Allergan for VIBERZI

In August 2015, the Company and Allergan entered into an agreement for the co-promotion of VIBERZI in the U.S., Allergan’s treatment for adults suffering from IBS-D (the “VIBERZI Co-Promotion Agreement”). Under the terms of the VIBERZI Co-Promotion Agreement, the Company’s clinical sales specialists are detailing VIBERZI to the approximately 25,000 health care practitioners to whom they detail LINZESS. Allergan is responsible for all costs and activities relating to the commercialization of VIBERZI outside of the co-promotion.

Under the terms of the VIBERZI Co-Promotion Agreement, the Company’s promotional efforts are compensated based on the volume of calls delivered by the Company’s sales force, with the terms of the agreement reducing or eliminating certain of the unfavorable adjustments to the Company’s share of net profits stipulated by the linaclotide collaboration agreement with Allergan for North America, provided that the Company provides a minimum number of VIBERZI calls on physicians. The Company has the potential to achieve milestone payments of up to $10.0 million based on the net sales of VIBERZI in each of 2017 and 2018, and is also compensated via reimbursements for medical education initiatives.

The Company’s promotional efforts under the non-exclusive co-promotion began when VIBERZI became commercially available in December 2015, and will continue until December 31, 2017, unless earlier terminated by either party pursuant to the provisions of the VIBERZI Co-Promotion Agreement. Either party may also terminate the VIBERZI Co-Promotion Agreement in the event of an uncured material breach by the other party, withdrawal of necessary approvals by the FDA, for convenience, or bankruptcy or insolvency of the other party. Allergan may terminate the VIBERZI Co-Promotion Agreement if the Company does not provide the minimum number of calls on physicians for VIBERZI. Activities under the VIBERZI Co-Promotion Agreement were evaluated in accordance with ASC 605-25 to determine if they represented a multiple element revenue arrangement. The Company concluded that the VIBERZI Co-Promotion Agreement does not represent a material modification to the linaclotide collaboration agreement with Allergan for North America, as it is not material to the total arrangement consideration under the collaboration agreement, does not significantly modify the existing deliverables, and does not significantly change the term of the agreement. The Company identified the following deliverables in the VIBERZI Co-Promotion Agreement: (i) second position sales detailing of VIBERZI, and (ii) medical education services. Each of the deliverables was deemed to have standalone value based on their nature and both deliverables met the criteria to be accounted for as separate units of accounting under ASC 605-25. The Company determined the BESP for each of the deliverables approximated the value allocated to the deliverables under the agreement. As consideration is earned over the term of the agreement, the revenue will be allocated to each deliverable based on the relative selling price, using management’s BESP, and recognized as collaborative arrangements revenue in the Company’s condensed consolidated statement of operations, in accordance with ASC 605-25, during the quarter earned. During the three and six months ended June 30, 2016, in connection with the Company’s VIBERZI co-promotion activities, the net profit share adjustments payable to Allergan under the linaclotide collaboration agreement for North America were reduced by approximately $1.4 million and approximately $2.6 million, respectively. During the three and six months ended June 30, 2016, the Company recognized approximately $0.5 million and $1.0 million, respectively, in collaboration revenue related to the VIBERZI Co-Promotion Agreement for the performance of medical education services.

Table of Contents

Other Collaboration and License Agreements

The Company has other collaboration and license agreements that are not individually significant to its business. Pursuant to the terms of one agreement, the Company may be required to pay $7.5 million for development milestones, of which approximately $2.5 million had been paid as of June 30, 2016, and $18.0 million for regulatory milestones, none of which had been paid as of June 30, 2016. In addition, pursuant to the terms of another agreement, the contingent milestones could total up to $114.5 million per product to one of the Company’s collaboration partners, including $21.5 million for development milestones, $58.0 million for regulatory milestones and $35.0 million for sales-based milestones. Further, under such agreements, the Company is also required to fund certain research activities and, if any product related to these collaborations is approved for marketing, to pay significant royalties on future sales. During the three and six months ended June 30, 2016 and 2015, the Company did not incur any research and development expense associated with the Company’s other collaboration and license agreements.

5. Fair Value of Financial Instruments

The tables below present information about the Company’s assets that are measured at fair value on a recurring basis as of June 30, 2016 and December 31, 2015 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, 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 Company’s investment portfolio includes mainly 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 may include benchmark yields, reported trades, broker-dealer quotes, issuer spreads and other relevant data. The Company validates the prices provided by its third party pricing services by obtaining market values from other pricing sources and analyzing pricing data in certain instances.

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

				Fair Value Measurements at Reporting Date Using
	June 30, 2016			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash and cash equivalents:
Money market funds	$	274,173		$	274,173	$	—	$	—
Available-for-sale securities:
U.S. Treasury securities	20,037			20,037		—		—
U.S. government-sponsored securities	28,004			—		28,004		—
Convertible Note Hedges	99,478			—		—		99,478
Total assets	421,692			294,210		28,004		99,478
Liabilities:
Note Hedge Warrants	(86,838		)	—		—		(86,838		)
Contingent Consideration	(87,649		)	—		—		(87,649		)
Total liabilities	$	(174,487	)	$	—	$	—	$	(174,487	)

				Fair Value Measurements at Reporting Date Using
	December 31, 2015			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash and cash equivalents:
Money market funds	$	254,903		$	254,903	$	—	$	—
U.S. government-sponsored securities	3,340			—		3,340		—
Available-for-sale securities:
U.S. Treasury securities	50,091			50,091		—		—
U.S. government-sponsored securities	128,016			—		128,016		—
Convertible Note Hedges	86,466			—		—		86,466
Total assets	$	522,816		$	304,994	$	131,356	$	86,466
Liabilities:
Note Hedge Warrants	$	(75,328	)	$	—	$	—	$	(75,328	)
Total liabilities	$	(75,328	)	$	—	$	—	$	(75,328	)

Table of Contents

There were no transfers between fair value measurement levels during the three or six months ended June 30, 2016 or 2015.

Cash equivalents, accounts receivable, related party accounts receivable, prepaid expenses and other current assets, accounts payable, related party accounts payable, accrued expenses and the current portion of capital lease obligations at June 30, 2016 and December 31, 2015 are carried at amounts that approximate fair value due to their short-term maturities.

The non-current portion of the capital lease obligations at June 30, 2016 and December 31, 2015 approximates fair value as it bears interest at a rate approximating a market interest rate.

Convertible Note Hedges and Note Hedge Warrants

The Company’s Convertible Note Hedges and the Note Hedge Warrants are recorded as derivative assets and liabilities, and are classified as Level 3 under the fair value hierarchy. These derivatives are not actively traded and are valued using the Black-Scholes option-pricing model which requires the use of subjective assumptions. Significant inputs used to determine the fair value as of June 30, 2016 included the price per share of the Company’s Class A common stock, time to maturity of the derivative instruments, the strike prices of the derivative instruments, the risk-free interest rate, and the volatility of the Company’s Class A common stock. The Company has not paid and does not anticipate paying cash dividends on its shares of common stock in the foreseeable future; therefore, the expected dividend yield is assumed to be zero. Changes to these inputs could materially affect the valuation of the Convertible Note Hedges and Note Hedge Warrants.

The following inputs were used in the fair market valuation of the Convertible Note Hedges and Note Hedge Warrants as of June 30, 2016:

	Convertible Note Hedges			Note Hedge Warrants
Risk-free interest rate (1)	1.2		%	1.2		%
Time to maturity	5.9			6.5
Stock price (2)	$	13.08		$	13.08
Strike price (3)	$	16.58		$	21.50
Common stock volatility (4)	45.8		%	45.8		%
Dividend yield	—		%	—		%

(1) Based on U.S. Treasury yield curve, with terms commensurate with the terms of the Convertible Note Hedges and the Note Hedge Warrants.

(2) The closing price of the Company’s Class A common stock on the last trading day of the quarter ended June 30, 2016.

(3) As per the respective agreements for the Convertible Note Hedges and Note Hedge Warrants.

(4) Selected volatility based on historical volatility of the Company’s Class A common stock.

The Convertible Note Hedges and the Note Hedge Warrants are recorded at fair value at each reporting period and changes in fair value are recorded in other expense, net within the Company’s condensed consolidated statements of operations. Gains and losses for these derivative financial instruments are presented separately in the Company’s condensed consolidated statements of cash flows.

The following table reflects the change in the Company’s Level 3 convertible note derivatives from December 31, 2015 through June 30, 2016 (in thousands):

	Convertible Note Hedges		Note Hedge Warrants
Balance at December 31, 2015	$	86,466	$	(75,328	)
Change in fair value, recorded as a component of gain (loss) on derivatives	13,012		(11,510		)
Balance at June 30, 2016	$	99,478	$	(86,838	)

Table of Contents

Contingent Consideration

In connection with the Lesinurad Transaction, the Company recorded a liability of $87.6 million, representing the fair value of the contingent consideration. This valuation was based on a Monte-Carlo simulation, which includes significant estimates related to probability weighted net cash outflow projections, discounted using a yield curve equivalent to the Company’s credit risk, which was the estimated cost of debt financing for market participants. This estimate represents the probability weighted analysis of expected future milestone and royalty payments based on net sales to be made to AstraZeneca. There were no changes in valuation techniques or in estimated fair value of the contingent consideration from the Acquisition Date through June 30, 2016. Changes to these inputs could materially affect the valuation of the contingent consideration.

The following table reflects the change in the Company’s Level 3 contingent consideration payable from December 31, 2015 through June 30, 2016 (in thousands):

	Contingent Consideration
Fair value at December 31, 2015	$	—
Additions	87,649
Changes in fair value	—
Payments	—
Balance at June 30, 2016	$	87,649

11% PhaRMA Notes

In January 2013, the Company closed a private placement of $175.0 million in aggregate principal amount of the PhaRMA Notes due on or before June 15, 2024. The estimated fair value of the PhaRMA Notes was approximately $153.6 million and approximately $166.8 million as of June 30, 2016 and December 31, 2015, respectively, and was determined using Level 3 inputs, including a quoted rate.

2.25% Convertible Senior Notes

In June 2015, the Company issued approximately $335.7 million of its 2022 Notes. The Company separately accounted for the liability and equity components of the 2022 Notes by allocating the proceeds between the liability component and equity component (Note 10). The fair value of the 2022 Notes, which differs from their carrying value, is influenced by interest rates, the price of the Company’s Class A common stock and the volatility thereof, and the prices for the 2022 Notes observed in market trading, which are Level 2 inputs. The estimated fair value of the 2022 Notes was approximately $ 346.2 million and approximately $311.6 million as of June 30, 2016 and December 31, 2015, respectively.

6. Available-for-Sale Securities

The following tables summarize the available-for-sale securities held at June 30, 2016 and December 31, 2015 (in thousands):

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
June 30, 2016
U.S. Treasury securities	$	20,010	$	27	$	—		$	20,037
U.S. government-sponsored securities	27,992		13		(1		)	28,004
Total	$	48,002	$	40	$	(1	)	$	48,041

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
December 31, 2015
U.S. Treasury securities	$	50,124	$	—	$	(33	)	$	50,091
U.S. government-sponsored securities	128,069		2		(55		)	128,016
Total	$	178,193	$	2	$	(88	)	$	178,107

Table of Contents

The contractual maturities of all securities held at June 30, 2016 are one year or less. There were 2 and 32 available-for-sale securities in an unrealized loss position at June 30, 2016 and December 31, 2015, respectively, none of which had been in an unrealized loss position for more than twelve months. The aggregate fair value of these securities at June 30, 2016 and December 31, 2015 was approximately $4.0 million and approximately $167.6 million, respectively. The Company reviews its investments for other-than-temporary impairment whenever the fair value of an investment is less than amortized cost and evidence indicates that an investment’s carrying amount is not recoverable within a reasonable period of time. To determine whether an impairment is other-than-temporary, the Company considers whether it has the ability and intent to hold the investment until a market price recovery and considers whether evidence indicating the cost of the investment is recoverable outweighs evidence to the contrary. The Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases, which may be maturity. The Company did not hold any securities with other-than-temporary impairment at June 30, 2016.

There were no sales of available-for-sale securities during the three or six months ended June 30, 2016 or 2015. Net unrealized holding gains or losses for the period that have been included in accumulated other comprehensive income were not material to the Company’s condensed consolidated results of operations.

7. Inventory

The Company’s inventory represents linaclotide API that is available for commercial sale. At June 30, 2016 and December 31, 2015, the Company did not hold any balances of such inventory.

The Company has entered into multiple commercial supply agreements for the purchase of linaclotide API, as the Company is responsible for supplying API to its collaboration partners outside of North America and Europe. Two of the Company’s API supply agreements contain minimum purchase commitments. As part of the Company’s net realizable value assessment of its inventory, the Company assesses whether it has any excess non-cancelable purchase commitments resulting from its minimum supply agreements with its suppliers of linaclotide API. As of June 30, 2016 and December 31, 2015, the Company had an accrual for excess purchase commitments of approximately $10.1 million, which is recorded in other liabilities in the Company’s condensed consolidated balance sheet. The Company has evaluated all remaining minimum purchase commitments under its linaclotide API supply agreements through 2023 and concluded that the minimum purchase commitments under such agreements are realizable based on the current forecasts received from the Company’s partners in these territories and the Company’s internal forecasts.

8. Property and Equipment

Property and equipment, net consisted of the following (in thousands):

	June 30, 2016			December 31, 2015
Manufacturing equipment	$	3,748		$	3,748
Laboratory equipment	14,110			13,681
Computer and office equipment	4,136			3,596
Furniture and fixtures	2,062			2,062
Software	13,316			12,715
Construction in process	228			375
Leased vehicles	2,749			3,039
Leasehold improvements	38,478			38,465
	78,827			77,681
Less accumulated depreciation and amortization	(60,888		)	(56,606		)
	$	17,939		$	21,075

9. Accrued Expenses and Other Current Liabilities

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

	June 30, 2016		December 31, 2015
Salaries and benefits	$	14,814	$	19,582
Professional fees	1,632		507
Accrued interest	1,047		1,103
Other	3,105		2,109
	$	20,598	$	23,301

Table of Contents

10. Notes Payable

2.25% Convertible Senior Notes due 2022

In June 2015, the Company issued approximately $335.7 million aggregate principal amount of the 2022 Notes. The Company received net proceeds of approximately $324.0 million from the sale of the 2022 Notes, after deducting fees and expenses of approximately $11.7 million. The Company used approximately $21.1 million of the net proceeds from the sale of the 2022 Notes to pay the net cost of the Convertible Note Hedges (after such cost was partially offset by the proceeds to the Company from the sale of the Note Hedge Warrants), as described below.

The 2022 Notes are governed by an indenture (the “Indenture”) between the Company and U.S. Bank National Association, as the trustee. The 2022 Notes are senior unsecured obligations and bear cash interest at the annual rate of 2.25%, payable on June 15 and December 15 of each year, which began on December 15, 2015. The 2022 Notes will mature on June 15, 2022, unless earlier converted or repurchased. The Company may settle conversions of the 2022 Notes through payment or delivery, as the case may be, of cash, shares of Class A common stock of the Company or a combination of cash and shares of Class A common stock, at the Company’s option (subject to, and in accordance with, the settlement provisions of the Indenture). The initial conversion rate for the 2022 Notes is 60.3209 shares of Class A common stock (subject to adjustment as provided for in the Indenture) per $1,000 principal amount of the 2022 Notes, which is equal to an initial conversion price of approximately $16.58 per share and 20,249,665 shares. Holders of the 2022 Notes may convert their 2022 Notes at their option at any time prior to the close of business on the business day immediately preceding December 15, 2021 in multiples of $1,000 principal amount, only under the following circumstances:

· during any calendar quarter commencing after the calendar quarter ending on September 30, 2015 (and only during such calendar quarter), if the last reported sale price of the Company’s Class A common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price for the 2022 Notes on each applicable trading day;

· during the five business day period after any five consecutive trading day period (the “measurement period”) in which the “trading price” (as defined in the Indenture) per $1,000 principal amount of the 2022 Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of the Company’s Class A common stock and the conversion rate for the 2022 Notes on each such trading day; or

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

On or after December 15, 2021, until the close of business on the second scheduled trading day immediately preceding June 15, 2022, holders may convert their 2022 Notes, in multiples of $1,000 principal amount, at the option of the holder regardless of the foregoing circumstances.

If a make-whole fundamental change, as described in the Indenture, occurs and a holder elects to convert its 2022 Notes in connection with such make-whole fundamental change, such holder may be entitled to an increase in the conversion rate as described in the Indenture. The Company may not redeem the 2022 Notes prior to the maturity date and no “sinking fund” is provided for by the 2022 Notes, which means that the Company is not required to periodically redeem or retire the 2022 Notes. Upon the occurrence of certain fundamental changes involving the Company, holders of the 2022 Notes may require the Company to repurchase for cash all or part of their 2022 Notes at a repurchase price equal to 100% of the principal amount of the 2022 Notes to be repurchased, plus accrued and unpaid interest.

The Indenture does not contain any financial covenants or restrict the Company’s ability to repurchase the Company’s securities, pay dividends or make restricted payments in the event of a transaction that substantially increases the Company’s level of indebtedness. The Indenture provides for customary events of default. In the case of an event of default with respect to the 2022 Notes arising from specified events of bankruptcy or insolvency, all outstanding 2022 Notes will become due and payable immediately without further action or notice. If any other event of default with respect to the 2022 Notes under the Indenture occurs or is continuing, the trustee or holders of at least 25% in aggregate principal amount of the then outstanding 2022 Notes may declare the principal amount of the 2022 Notes to be immediately due and payable. Notwithstanding the foregoing, the Indenture provides that, upon the Company’s election, and for up to 180 days, the sole remedy for an event of default relating to certain failures by the Company to comply with certain reporting covenants in the Indenture consists exclusively of the right to receive additional interest on the 2022 Notes.

Table of Contents

In accordance with accounting guidance for debt with conversion and other options, the Company separately accounted for the liability and equity components of the 2022 Notes by allocating the proceeds between the liability component and the embedded conversion option, or equity component, due to the Company’s ability to settle the 2022 Notes in cash, its Class A common stock, or a combination of cash and Class A common stock at the option of the Company. The carrying amount of the liability component was calculated by measuring the fair value of a similar liability that does not have an associated convertible feature. The allocation was performed in a manner that reflected the Company’s non-convertible debt borrowing rate for similar debt. The equity component of the 2022 Notes was recognized as a debt discount and represents the difference between the gross proceeds from the issuance of the 2022 Notes and the fair value of the liability of the 2022 Notes on their respective dates of issuance. The excess of the principal amount of the liability component over its carrying amount, or debt discount, is amortized to interest expense using the effective interest method over seven years, or the life of the 2022 Notes. The equity component is not remeasured as long as it continues to meet the conditions for equity classification.

The Company’s outstanding Convertible Note balances as of June 30, 2016 consisted of the following (in thousands):

Principal	$	335,699
Less: unamortized debt discount	(101,297		)
Less: unamortized debt issuance costs	(7,129		)
Net carrying amount	$	227,273
Equity component	$	114,199

In connection with the issuance of the 2022 Notes, the Company incurred approximately $11.7 million of debt issuance costs, which primarily consisted of initial purchasers’ discounts and legal and other professional fees. The Company allocated these costs to the liability and equity components based on the allocation of the proceeds. The portion of these costs allocated to the equity components totaling approximately $4.0 million were recorded as a reduction to additional paid-in capital. The portion of these costs allocated to the liability components totaling approximately $7.7 million were recorded as a reduction in the carrying value of the debt on the balance sheet and are amortized to interest expense using the effective interest method over the expected life of the 2022 Notes.

The Company determined the expected life of the 2022 Notes was equal to their seven-year term. The effective interest rate on the liability components of the 2022 Notes for the period from the date of issuance through June 30, 2016 was 9.34%. The following table sets forth total interest expense recognized related to the 2022 Notes during the three and six months ended June 30, 2016 (in thousands):

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2016		2015		2016		2015
Contractual interest expense	$	1,888	$	293	$	3,777	$	293
Amortization of debt issuance costs	161		22		314		22
Amortization of debt discount	3,204		495		6,339		495
Total interest expense	$	5,253	$	810	$	10,430	$	810

Convertible Note Hedge and Warrant Transactions with Respect to 2022 Notes

To minimize the impact of potential dilution to the Company’s Class A common stockholders upon conversion of the 2022 Notes, the Company entered into the Convertible Note Hedges covering 20,249,665 shares of the Company’s Class A common stock in connection with the issuance of the 2022 Notes. The Convertible Note Hedges have an exercise price of approximately $16.58 per share and are exercisable when and if the 2022 Notes are converted. If upon conversion of the 2022 Notes, the price of the Company’s Class A common stock is above the exercise price of the Convertible Note Hedges, the counterparties are obligated to deliver shares of the Company’s Class A common stock and/or cash with an aggregate value approximately equal to the difference between the price of the Company’s Class A common stock at the conversion date and the exercise price, multiplied by the number of shares of the Company’s Class A common stock related to the Convertible Note Hedge being exercised.

Concurrently with entering into the Convertible Note Hedges, the Company also sold Note Hedge Warrants to the Convertible Note Hedge counterparties to acquire 20,249,665 shares of the Company’s Class A common stock, subject to customary anti-dilution adjustments. The strike price of the Note Hedge Warrants is initially $21.50 per share, subject to adjustment, and such warrants are exercisable over the 150 trading day period beginning on September 15, 2022. The Note Hedge Warrants could have a

Table of Contents

dilutive effect on the Class A common stock to the extent that the market price per share of the Company’s Class A common stock exceeds the applicable strike price of such warrants.

The Convertible Note Hedges and the Note Hedge Warrants are separate transactions entered into by the Company and are not part of the terms of the 2022 Notes. Holders of the 2022 Notes and the Note Hedge Warrants do not have any rights with respect to the Convertible Note Hedges. The Company paid approximately $91.9 million for the Convertible Note Hedges and recorded this amount as a long-term asset on the condensed consolidated balance sheet. The Company received approximately $70.8 million for the Note Hedge Warrants and recorded this amount as a long-term liability, resulting in a net cost to the Company of approximately $21.1 million. The Convertible Note Hedges and Note Hedge Warrants are accounted for as derivative assets and liabilities, respectively, in accordance with ASC Topic 815, “Derivatives and Hedging” (“ASC 815”) (Note 5).

11% PhaRMA Notes due 2024

In January 2013, the Company closed a private placement of $175.0 million in aggregate principal amount of notes due on or before June 15, 2024. The PhaRMA Notes bear an annual interest rate of 11%, with interest payable March 15, June 15, September 15 and December 15 of each year (each a “Payment Date”) which began on June 15, 2013. On March 15, 2014, the Company began making quarterly payments on the PhaRMA Notes equal to the greater of (i) 7.5% of net sales of LINZESS in the U.S. for the preceding quarter (the “Synthetic Royalty Amount”) and (ii) accrued and unpaid interest on the PhaRMA Notes (the “Required Interest Amount”). Principal on the PhaRMA Notes will be repaid in an amount equal to the Synthetic Royalty Amount minus the Required Interest Amount, when this is a positive number, until the principal has been paid in full. Given the principal payments on the PhaRMA Notes are based on the Synthetic Royalty Amount, which will vary from quarter to quarter, the PhaRMA Notes may be repaid prior to June 15, 2024, the final legal maturity date. The Company made principal payments of approximately $25.2 million through June 30, 2016, and expects to pay approximately $35.3 million of the principal within twelve months following June 30, 2016.

The PhaRMA Notes are secured solely by a security interest in a segregated bank account established to receive the required quarterly payments. Up to the amount of the required quarterly payments under the PhaRMA Notes, Allergan will deposit its quarterly profit (loss) sharing payments due to the Company under the collaboration agreement for North America, if any, into the segregated bank account. If the funds deposited by Allergan into the segregated bank account are insufficient to make a required payment of interest or principal on a particular Payment Date, the Company is obligated to deposit such shortfall out of the Company’s general funds into the segregated bank account.

The PhaRMA Notes may be redeemed at any time prior to maturity, in whole or in part, at the option of the Company. The Company will pay a redemption price equal to the percentage of outstanding principal balance of the PhaRMA Notes being redeemed specified below for the period in which the redemption occurs (plus the accrued and unpaid interest to the redemption date on the PhaRMA Notes being redeemed):

Payment Dates	Redemption Percentage
From and including January 1, 2016 to and including December 31, 2016	102.75	%
From and including January 1, 2017 and thereafter	100.00	%

The PhaRMA Notes contain certain covenants related to the Company’s obligations with respect to the commercialization of LINZESS and the related collaboration agreement with Allergan for North America, as well as certain customary covenants, including covenants that limit or restrict the Company’s ability to incur certain liens, merge or consolidate or make dispositions of assets. The PhaRMA Notes also specify a number of events of default (some of which are subject to applicable cure periods), including, among other things, covenant defaults, other non-payment defaults, and bankruptcy and insolvency defaults. Upon the occurrence of an event of default, subject to cure periods in certain circumstances, all amounts outstanding may become immediately due and payable.

The upfront cash proceeds of $175.0 million, less a discount of approximately $0.4 million for payment of legal fees incurred on behalf of the noteholders, were recorded as notes payable at issuance. The Company also capitalized approximately $7.3 million of debt issuance costs in connection with the PhaRMA Notes, which are presented in the Company’s condensed consolidated Balance Sheet as a deduction from the associated debt liability. The PhaRMA Notes issuance costs and discount are being amortized over the estimated term of the obligation using the effective interest method. The repayment provisions represent embedded derivatives that are clearly and closely related to the PhaRMA Notes and as such do not require separate accounting treatment.

The accounting for the PhaRMA Notes requires the Company to make certain estimates and assumptions about the future net sales of LINZESS in the U.S. LINZESS has been marketed since December 2012 and the estimates of the magnitude and timing of LINZESS net sales are subject to significant variability and uncertainty. These estimates and assumptions are likely to change, which may result in future adjustments to the portion of the PhaRMA Notes that is classified as a current liability, the amortization of debt issuance costs and discounts as well as the accretion of the interest expense. Any such adjustments could be material to the Company’s condensed consolidated financial statements.

Table of Contents

11. Commitments and Contingencies

Lease Commitments

The Company leases its facility, offsite data storage location, vehicles and various equipment under leases that expire at varying dates through 2018. Certain of these leases contain renewal options, and require the Company to pay operating costs, including property taxes, insurance, maintenance and other operating expenses.

The Company rents office and laboratory space at its corporate headquarters in Cambridge, Massachusetts under a non-cancelable operating lease, entered into in January 2007, as amended (“2007 Lease Agreement”). The 2007 Lease Agreement contains various provisions for renewal at the Company’s option and, in certain cases, free rent periods and rent escalation tied to the Consumer Price Index and fair market rent. The rent expense, inclusive of the escalating rent payments and free rent periods, is estimated and recognized on a straight-line basis over the lease term through January 2018. In addition, during 2014, the Company entered into two arrangements, with the landlord’s consent, to sublease a portion of its corporate headquarters that it did not intend to use for its operations. Effective in February 2016, the Company’s obligations due to the landlord of its corporate headquarters increased in connection with a rent escalation tied to the Consumer Price Index and fair market rent, pursuant to the terms of the 2007 Lease Agreement, which resulted in a change in the accounting estimate of rent expense. This change in accounting estimate is recognized on a prospective, straight-line basis. Rent expenses related to the 2007 Lease Agreement, net of sublease income, recorded during the three months ended June 30, 2016 and 2015 were approximately $2.0 million and approximately $1.5 million, respectively, and during the six months ended June 30, 2016 and 2015 were approximately $7.5 million and approximately $3.0 million, respectively. In accordance with ASC Topic 420, Exit or Disposal Cost Obligations, the Company recorded all obligations to the landlord associated with sublet space, net of sublease income due to the Company under the subleases in the period in which the change occurred. As a result, the rent expense associated with the 2007 Lease Agreement for the six months ended June 30, 2016 includes approximately $3.5 million of estimated obligations to the landlord associated with the sublet space, net of sublease income due to the Company under the subleases.

At June 30, 2016, future minimum lease payments under all non-cancelable lease arrangements were as follows (in thousands):

	Operating		Lease Payments					Capital
	Lease		to be Received			Net Operating		Lease
	Payments		from Subleases			Lease Payments		Payments
2016 (1)	$	10,246	$	(3,219	)	$	7,027	$	1,548
2017	20,498		(5,665		)	14,833		1,112
2018	831		(476		)	355		86
Total future minimum lease payments	$	31,575	$	(9,360	)	$	22,215	$	2,746
Less: amounts representing interest								(97		)
Capital lease obligations at June 30, 2016								2,649
Less: current portion of capital lease obligations								(2,451		)
Capital lease obligations, net of current portion								$	198

(1) Amounts are for the six months ending December 31, 2016.

Commercial Supply Commitments

The Lesinurad CSA with AstraZeneca provides for commercial supply of ZURAMPIC, and, if approved by the FDA, the FDC Product. The Lesinurad CSA includes certain purchase obligations based on the Company’s forecasted demand. As of June 30, 2016, the Company had approximately $0.3 million in such commitments related to lesinurad commercial supply.

12. Employee Stock Benefit Plans

The Company has several share-based compensation plans under which stock options, restricted stock awards, restricted stock units (“RSUs”), and other share-based awards are available for grant to employees, directors and consultants of the Company.

Table of Contents

The following table summarizes share-based compensation expense reflected in the condensed consolidated statements of operations for the three and six months ended June 30, 2016 and 2015 (in thousands):

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2016		2015		2016		2015
Research and development	$	3,265	$	2,691	$	5,764	$	4,745
Selling, general and administrative	4,832		4,212		9,139		7,584
	$	8,097	$	6,903	$	14,903	$	12,329

A summary of stock option activity for the six months ended June 30, 2016 is as follows:

	Number of Shares		Weighted-Average Exercise Price
	(in thousands)
Outstanding at December 31, 2015	20,566		$	11.18
Granted	3,608		10.32
Exercised	(1,441	)	3.14
Cancelled	(667	)	13.04
Outstanding at June 30, 2016	22,066		$	11.50

The weighted-average assumptions used to estimate the fair value of the stock options using the Black-Scholes option-pricing model were as follows for the three and six months ended June 30, 2016 and 2015:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2016		2015		2016		2015
Expected volatility	45.9	%	46.8	%	46.0	%	46.1	%
Expected term (in years)	6.0		6.0		6.0		6.0
Risk-free interest rate	1.5	%	1.7	%	1.5	%	1.7	%
Expected dividend yield	—	%	—	%	—	%	—	%

In 2015, the Company began granting RSUs in addition to stock options as part of the equity compensation it provides to its employees, each RSU representing the right to receive one share of the Company’s Class A common stock pursuant to the terms of the applicable award agreement and granted pursuant to the terms of the Company’s 2010 Equity Plan. The RSUs generally vest 25% per year on the approximate anniversary of the date of grant until fully vested, provided the employee remains continuously employed with the Company through each vesting date. Shares of the Company’s Class A common stock are delivered to the employee upon vesting, subject to payment of applicable withholding taxes. The fair value of all RSUs is based on the market value of the Company’s Class A common stock on the date of grant. Compensation expense, including the effect of estimated forfeitures, is recognized over the applicable service period.

A summary of RSU activity for the six months ended June 30, 2016 is as follows:

	Number of Shares		Weighted-Average Fair Value
	(in thousands)
Unvested as of December 31, 2015	900		$	13.36
Granted	505		10.33
Vested	(116	)	15.54
Forfeited	(33	)	13.12
Unvested as of June 30, 2016	1,256		$	11.94

Table of Contents

13. Related Party Transactions

In September 2009, Allergan became a related party when the Company sold to Allergan 2,083,333 shares of the Company’s convertible preferred stock. In November 2009, Almirall became a related party when the Company sold to Almirall 681,819 shares of the Company’s convertible preferred stock (Note 4). These shares of preferred stock converted to the Company’s Class B common stock on a 1:1 basis upon the completion of the Company’s initial public offering in February 2010. Amounts due to and due from Allergan and Almirall are reflected as related party accounts payable and related party accounts receivable, respectively. These balances are reported net of any balances due to or from the related party. As of June 30, 2016, the Company had an insignificant amount in related party accounts receivable associated with Almirall and approximately $51.9 million in related party accounts receivable, net of related party accounts payable, associated with Allergan. As of December 31, 2015, the Company did not have any related party accounts receivable associated with Almirall and approximately $51.6 million in related party accounts receivable, net of related party accounts payable, associated with Allergan.

The Company has and currently obtains health insurance services for its employees from an insurance provider whose President and Chief Executive Officer became a member of the Company’s Board of Directors in April 2016. The Company paid approximately $1.9 million and $3.8 million in insurance premiums to this insurance provider during the three and six months ended June 30, 2016, respectively, and approximately $1.7 million and $3.5 million during the three and six months ending June 30, 2015, respectively. At June 30, 2016 and 2015, the Company had no accounts payable due to this related party.

Table of Contents

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Information

The following discussion of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and the notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q and the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K. This discussion contains forward-looking statements that involve significant risks and uncertainties. As a result of many factors, such as those set forth under “Risk Factors” in Item 1A of this Quarterly Report on Form 10-Q, our actual results may differ materially from those anticipated in these forward-looking statements.

Overview

We are a commercial biotechnology company leveraging our proven development and commercial capabilities as we seek to bring multiple medicines to patients. We are advancing innovative product opportunities in areas of large unmet need, including irritable bowel syndrome with constipation, or IBS-C, and chronic idiopathic constipation, or CIC, hyperuricemia associated with uncontrolled gout, refractory gastroesophageal reflux disease, or rGERD, and vascular and fibrotic diseases.

Our first commercial product, linaclotide, is available to adult men and women suffering from IBS-C or CIC in the United States, or the U.S., under the trademarked name LINZESS ® , and is available to adult men and women suffering from IBS-C in certain European countries under the trademarked name CONSTELLA ® . We and our U.S. partner Allergan plc (together with its affiliates), or Allergan, began commercializing LINZESS in the U.S. in December 2012. Under our collaboration with Allergan for North America, total net sales of LINZESS in the U.S., as recorded by Allergan, are reduced by commercial costs incurred by each party, and the resulting amount is shared equally between us and Allergan. Our former European partner, Almirall, S.A., or Almirall, began commercializing CONSTELLA in Europe for the symptomatic treatment of moderate to severe IBS-C in adults in the second quarter of 2013. In October 2015, Almirall transferred its exclusive license to develop and commercialize linaclotide in Europe to Allergan, and we and Allergan entered into an amendment to the European license agreement. Currently, CONSTELLA is commercially available in certain European countries, including the United Kingdom, Italy and Spain.

Within our IBS-C/CIC franchise, we and Allergan are exploring development opportunities to enhance the clinical profile of LINZESS by seeking to expand its utility within IBS-C and CIC, as well as studying linaclotide in additional indications and populations to assess its potential to treat various gastrointestinal, or GI, conditions. In June 2016, the U.S. Food and Drug Administration, or FDA, accepted for review the supplemental new drug application, or sNDA, for the 72 mcg dose of linaclotide in the U.S. If approved, we and Allergan anticipate launching the 72 mcg dose of linaclotide in the U.S. in 2017 to provide a broader range of treatment options to physicians and adult CIC patients in the U.S. We and Allergan are also developing linaclotide colonic release, a targeted oral delivery formulation of linaclotide designed to potentially improve abdominal pain relief in adult IBS-C patients. In addition to IBS-C, we are exploring linaclotide colonic release for use in additional GI disorders where lower abdominal pain is a predominant symptom, including IBS-mixed, or IBS-M, ulcerative colitis and diverticulitis, among others. Linaclotide is also being developed and commercialized in other parts of the world by our partners.

In December 2013 and February 2014, linaclotide was approved in Canada and Mexico, respectively, as a treatment for adult men and women suffering from IBS-C or CIC. Allergan has exclusive rights to commercialize linaclotide in Canada as CONSTELLA and in Mexico as LINZESS. In May 2014, CONSTELLA became commercially available in Canada and in June 2014, LINZESS became commercially available in Mexico. Astellas Pharma Inc., or Astellas, our partner in Japan, is developing linaclotide for the treatment of patients with IBS-C and chronic constipation in its territory. In November 2015, we and Astellas reported positive top-line data from Astellas’ Phase III clinical trial of linaclotide in adult patients with IBS-C for Japan and in February 2016, Astellas filed a new drug application seeking approval of linaclotide for the treatment of adults with IBS-C in Japan with the Japanese Ministry of Health, Labor and Welfare. In October 2012, we entered into a collaboration agreement with AstraZeneca AB (together with its affiliates), or AstraZeneca, to co-develop and co-commercialize linaclotide in China, Hong Kong and Macau, with AstraZeneca having primary responsibility for the local operational execution. In December 2015, we and AstraZeneca filed for approval with the China Food and Drug Administration, or CFDA, to market linaclotide in China. We continue to assess alternatives to bring linaclotide to IBS-C and CIC sufferers in the parts of the world outside of our partnered territories.

In June 2016, we closed a transaction with AstraZeneca, pursuant to which we received an exclusive license to develop, manufacture, and commercialize products containing lesinurad as an active ingredient, including ZURAMPIC ® , in the U.S., or the Lesinurad Transaction. Lesinurad 200mg tablets were approved as ZURAMPIC by the FDA in December 2015 for use in combination with a xanthine oxidase inhibitor, or XOI, for the treatment of hyperuricemia associated with uncontrolled gout. We are also developing a fixed-dose combination product of lesinurad and allopurinol, an XOI, which is included under the license agreement, or the FDC Product. We have accounted for the Lesinurad Transaction in accordance with Accounting Standards Codification, or ASC, Topic 805, “Business Combinations”, or ASC 805, as the Lesinurad Transaction meets the requirements of a business combination.

Table of Contents

The transaction is more fully described in Note 3, Business Combinations , to our condensed consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q.

We are advancing our rGERD franchise through the development of IW-3718, a gastric retentive formulation of a bile acid sequestrant.

Within our vascular and fibrotic franchise, we are leveraging our pharmacological expertise in guanylate cyclase, or GC, pathways gained through the discovery and development of linaclotide to advance development programs targeting soluble guanylate cyclase, or sGC. sGC is a validated mechanism with the potential for broad therapeutic utility and multiple opportunities for product development in vascular and fibrotic diseases, as well as other therapeutic areas. We are progressing two sGC development candidates, IW-1973 and IW-1701, which have distinct pharmacologic profiles that we believe may be differentiating and enable opportunities in multiple indications.

In April 2016, we announced the discontinuation of development of IW-9179 for gastroparesis, as top-line data from its exploratory Phase IIa clinical study indicated that IW-9179 did not meaningfully reduce the severity of symptoms in patients with diabetic gastroparesis. In July 2016, as part of our continued assessment and prioritization of resources, we discontinued assessing the potential of IW-9179 for the treatment of functional dyspepsia and are no longer advancing this program.

As part of our strategy, we have also established development and commercial capabilities that we plan to leverage as we seek to bring multiple medicines to patients. We intend to play an active role in the development and commercialization of our products in the U.S., and to establish a strong global brand by out-licensing commercialization rights in other territories to high-performing partners.

In March 2015, we and Exact Sciences Corp, or Exact Sciences, entered into an agreement to co-promote Cologuard ® , the first and only FDA-approved noninvasive stool DNA screening test for colorectal cancer. Under the terms of the agreement, our sales team promotes and educates health care practitioners regarding Cologuard. Exact Sciences maintains responsibility for all other aspects of the commercialization of Cologuard outside of the co-promotion. We are compensated primarily via royalties earned on the net sales of Cologuard generated from the healthcare practitioners on whom we call.

In August 2015, we and Allergan entered into an agreement for the co-promotion of VIBERZI™ (eluxadoline) in the U.S., Allergan’s treatment for adults suffering from IBS with diarrhea, or IBS-D. Under the terms of the agreement, our clinical sales specialists are detailing VIBERZI to the approximately 25,000 health care practitioners to whom they detail LINZESS. Allergan is responsible for all costs and activities relating to the commercialization of VIBERZI outside the co-promotion. Our promotional efforts are compensated based on the volume of calls delivered by our sales force, with the terms of the agreement reducing or eliminating certain of the unfavorable adjustments to the share of net profits stipulated by the linaclotide collaboration agreement with Allergan for North America, provided that we deliver a minimum number of VIBERZI calls on physicians. We are also compensated via reimbursement for medical education initiatives.

In June 2015, we issued approximately $335.7 million in aggregate principal amount of 2.25% Convertible Senior Notes due 2022, or the 2022 Notes. We received net proceeds of approximately $324.0 million from the sale of the 2022 Notes, after deducting fees and expenses of approximately $11.7 million. The net proceeds from these financings are being used to support the commercialization of LINZESS in the U.S. and to fund linaclotide and other development opportunities to advance our strategy to grow a leading commercial biotechnology company, in addition to other general corporate purposes.

We were incorporated in Delaware on January 5, 1998 as Microbia, Inc. On April 7, 2008, we changed our name to Ironwood Pharmaceuticals, Inc. We currently operate in one reportable business segment—human therapeutics.

To date, we have dedicated a majority of our activities to the research, development and commercialization of linaclotide, as well as to the research and development of our other product candidates. We have incurred significant operating losses since our inception in 1998. As of June 30, 2016, we had an accumulated deficit of approximately $1.1 billion. We are unable to predict the extent of any future losses or guarantee when, or if, our company will become cash flow positive.

Financial Overview

Revenue. Revenue to date has been generated primarily through our collaboration agreements for the development and commercialization of linaclotide with Allergan for North America and AstraZeneca for China, Hong Kong and Macau, our license agreements for the development and commercialization of linaclotide in Japan with Astellas and the development and commercialization of linaclotide in Europe with Allergan (formerly with Almirall), and our co-promotion agreements with Allergan

Table of Contents

for VIBERZI and Exact Sciences for Cologuard in the U.S. The terms of these agreements contain multiple deliverables which may include (i) licenses, (ii) research and development activities, (iii) the manufacture of finished drug product, active pharmaceutical ingredient, or API, or development materials for a partner which are reimbursed at a contractually determined rate, and (iv) co-promotion activities by our clinical sales specialists. Payments to us may include (i) up-front license fees, (ii) payments for research and development activities, (iii) payments for the manufacture of finished drug product, API or development materials, (iv) payments based upon the achievement of certain milestones, (v) payments for sales detailing, promotional support services and medical education initiatives and (vi) royalties on product sales. Additionally, we receive our share of the net profits or bear our share of the net losses from the sale of linaclotide in the U.S. and China. LINZESS launched in the U.S. in December 2012 and CONSTELLA became commercially available in certain European countries beginning in the second quarter of 2013. Linaclotide is also approved in a number of other countries.

We record our share of the net profits and losses from the sales of LINZESS in the U.S. on a net basis and present the settlement payments to and from Allergan as collaboration expense or collaborative arrangements revenue, as applicable. Net profits or losses consist of net sales to third-party customers and sublicense income in the U.S. less the cost of goods sold as well as selling, general and administrative expenses. Although we expect net sales to increase over time, the settlement payments between Allergan and us, resulting in collaborative arrangements revenue or collaboration expense, are subject to fluctuation based on the ratio of selling, general and administrative expenses incurred by each party. In addition, our collaborative arrangements revenue may fluctuate as a result of the timing and amount of license fees and clinical and commercial milestones received and recognized under our current and future strategic partnerships as well as timing and amount of royalties from the sales of linaclotide in the European, Canadian or Mexican markets or any other markets where linaclotide receives approval.

Cost of Revenue. Cost of revenue related to the sales of linaclotide API is recognized upon shipment of linaclotide API to certain of our partners outside of the U.S. Our cost of revenue consists of the internal and external costs of producing such API.

Write-down of Inventory to Net Realizable Value and Loss on Non-cancelable Purchase Commitments. During the six months ended June 30, 2015, we recorded expenses of approximately $8.2 million for the write-down of inventory and an accrual for excess non-cancelable inventory purchase commitments related to linaclotide API. These charges primarily related to a reduction in the near term demand forecast for CONSTELLA in the European territory by Almirall, our former European partner; and regulatory changes made by the CFDA to the marketing approval process in China.

Research and Development Expense. Research and development expense consists of expenses incurred in connection with the discovery and development of our product candidates. These expenses consist primarily of compensation, benefits and other employee-related expenses, research and development related facility costs, third-party contract costs relating to nonclinical study and clinical trial activities, development of manufacturing processes, regulatory registration of third-party manufacturing facilities, as well as licensing fees for our product candidates. We charge all research and development expenses to operations as incurred. Under our linaclotide collaboration agreements with Allergan for the U.S. and AstraZeneca for China, Hong Kong and Macau, we are reimbursed for certain research and development expenses, and we net these reimbursements against our research and development expenses as incurred. Payments to Allergan or AstraZeneca for such linaclotide territories are recorded as incremental research and development expense.

The core of our research and development strategy is to leverage our development capabilities, as well as our pharmacologic expertise, to bring multiple medicines to patients. We are advancing innovative product opportunities in areas of large unmet need, including IBS-C and CIC, hyperuricemia associated with uncontrolled gout, rGERD, and vascular and fibrotic diseases.

Linaclotide . Linaclotide represents the largest portion of our research and development expense for our product candidates. Linaclotide is the first and, to date, only FDA-approved guanylate cyclase type-C, or GC-C, agonist. Linaclotide is approved in the U.S. and in a number of E.U. and other countries.

We and Allergan are exploring development opportunities in the U.S. to enhance the clinical profile of LINZESS by seeking to expand its utility within IBS-C and CIC, as well as studying linaclotide in additional indications, populations and formulations to assess its potential to treat various GI conditions. In June 2016, the FDA accepted for review the sNDA for a 72 mcg dose of linaclotide. If approved, we and Allergan anticipate launching the 72 mcg dose of linaclotide in the U.S. in 2017 to provide a broader range of treatment options to physicians and adult CIC patients in the U.S.

Our linaclotide development opportunities also include linaclotide colonic release, a targeted oral delivery formulation of linaclotide designed to potentially improve abdominal pain relief in adult IBS-C patients, as well as in patients with additional GI disorders where lower abdominal pain is a predominant symptom, such as IBS-M, ulcerative colitis and diverticulitis, among others. Additionally, we and Allergan are evaluating the advancement of linaclotide as a potential treatment of the GI dysfunction associated with opioid-induced constipation, or OIC, in adult patients and have established a plan with the FDA for clinical pediatric studies with linaclotide, as described below.

Table of Contents

Lesinurad. The FDA has required a post-marketing clinical study to further evaluate the renal and cardiovascular safety of lesinurad, and has required that enrollment include patients with moderate renal impairment. AstraZeneca is conducting this trial on our behalf and we are obligated to reimburse AstraZeneca up to $100.0 million over up to ten years for completion of this post-marketing clinical study for lesinurad. We and AstraZeneca plan to submit the FDC Product containing lesinurad for FDA regulatory review during the second half of 2016. We and AstraZeneca, on our behalf, are undertaking additional development activities related to lesinurad.

Development Candidates. We are advancing our rGERD franchise through the development of IW-3718, a gastric retentive formulation of a bile acid sequestrant.

Within our vascular/fibrotic franchise, we are leveraging our pharmacological expertise in GC pathways gained through the discovery and development of linaclotide to advance development programs targeting sGC. We are currently progressing two sGC development candidates, IW-1973 and IW-1701, which have distinct pharmacologic profiles that we believe may be differentiating and enable opportunities in multiple indications. We have additional assets in early development that we continue to advance, and we are exploring strategic options for further development of these assets.

In April 2016, we announced the discontinuation of development of IW-9179 for gastroparesis, as top-line data from our exploratory Phase IIa clinical study indicated that IW-9179 did not meaningfully reduce the severity of symptoms in patients with diabetic gastroparesis. In July 2016, as part of our continued assessment and prioritization of resources, we discontinued assessing the potential of IW-9179 for the treatment of functional dyspepsia and are no longer advancing this program.

Discovery Research. Our discovery efforts are primarily focused on identifying novel clinical candidates that draw on our proprietary and expanding expertise in GI disorders and GC.

The following table sets forth our research and development expenses related to our product pipeline for the three and six months ended June 30, 2016 and 2015. These expenses relate primarily to external costs associated with nonclinical studies and clinical trial costs, costs incurred to develop manufacturing processes and register manufacturing facilities with the FDA and licensing fees for our product candidates. We allocate costs related to facilities, depreciation, share-based compensation, research and development support services, laboratory supplies and certain other costs directly to programs.

	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
	(in thousands)				(in thousands)
Linaclotide (1)	$	9,618	$	13,989	$	20,353	$	27,453
Lesinurad (2)	2,862		—		2,862		—
Development candidates:
GI disorders (three compounds)(3)	6,188		4,008		14,770		7,249
Vascular and fibrotic disorders (two compounds)(3)	7,063		5,750		13,550		10,758
Central nervous system disorders (one compound)(3)	142		264		707		452
Total development candidates	13,393		10,022		29,027		18,459
Discovery research	5,809		4,637		11,282		9,377
	$	31,682	$	28,648	$	63,524	$	55,289

(1) Includes linaclotide in all indications, populations and formulations.

(2) Includes lesinurad in all indications, populations and formulations.

(3) Number of compounds is for the six months ended June 30, 2016.

Since 2004, the date we began tracking costs by program, we have incurred approximately $376.0 million of research and development expenses related to linaclotide. The expenses for linaclotide include both our portion of the research and development costs incurred by Allergan for the U.S. and AstraZeneca for China, Hong Kong and Macau and invoiced to us under the cost-sharing provisions of our collaboration agreements, as well as the unreimbursed portion of research and development costs incurred by us under such cost-sharing provisions.

The lengthy process of securing regulatory approvals for new drugs requires the expenditure of substantial resources. Any failure by us to obtain, or any delay in obtaining, regulatory approvals would materially adversely affect our product development efforts and our business overall.

In August 2012, the FDA approved LINZESS as a once-daily treatment for adult men and women suffering from IBS-C or CIC. In connection with the FDA approval, we are required to conduct certain nonclinical and clinical studies, including those aimed

Table of Contents

at understanding: (a) whether orally administered linaclotide can be detected in breast milk, (b) the potential for antibodies to be developed to linaclotide, and if so, (c) whether antibodies specific for linaclotide could have any therapeutic or safety implications. In addition, we and Allergan established a nonclinical and clinical post-marketing plan with the FDA to understand the efficacy and safety of LINZESS in pediatric patients. The first step in this plan was to undertake certain additional nonclinical studies. We and Allergan have completed these nonclinical studies and have initiated two Phase II clinical pediatric studies in IBS-C patients age seven to 17 and functional constipation patients age six to 17. We and Allergan are also exploring development opportunities to enhance the clinical profile of LINZESS by seeking to expand its utility within IBS-C and CIC, as well as studying linaclotide in additional indications, populations and formulations to assess its potential to treat various GI conditions. In October 2012, we entered into a collaboration agreement with AstraZeneca to co-develop and co-commercialize linaclotide in China, Hong Kong and Macau, with AstraZeneca having primary responsibility for the local operational execution. We cannot currently estimate with any degree of certainty the amount of time or money that we will be required to expend in the future on linaclotide for other geographic markets within IBS-C and CIC, or in additional indications, populations or formulations.

In December 2015, the FDA approved ZURAMPIC for use in conjunction with a XOI for the treatment of hyperuricemia associated with uncontrolled gout. In connection with the FDA approval, the FDA has required a post-marketing clinical study to further evaluate the renal and cardiovascular safety of ZURAMPIC, and has required that enrollment include patients with moderate renal impairment. We are obligated to reimburse AstraZeneca up to $100.0 million over up to ten years for the completion of the post-marketing requirement activities currently required by the FDA. Furthermore, we and AstraZeneca, on our behalf, are undertaking additional development activities related to lesinurad.

We are also advancing development programs targeting diseases such as rGERD and uncontrolled gout, as well as development programs within our vascular/fibrotic franchise targeting sGC. Given the inherent uncertainties that come with the development of pharmaceutical products, we cannot estimate with any degree of certainty how our programs will evolve, and therefore the amount of time or money that would be required to obtain regulatory approval to market them.

As a result of these uncertainties surrounding the timing and outcome of any approvals, we are currently unable to estimate precisely when, if ever, linaclotide or lesinurad’s utility will be expanded within their currently approved indications; if or when linaclotide or lesinurad will be developed outside of their current markets, indications, populations or formulations; or when, if ever, any of our other product candidates will generate revenues and cash flows.

We invest carefully in our pipeline, and the commitment of funding for each subsequent stage of our development programs is dependent upon the receipt of clear, supportive data. In addition, we intend to access externally discovered drug candidates that fit within our core strategy. In evaluating these potential assets, we apply the same investment criteria as those used for investments in internally discovered assets.

The successful development of our product candidates is highly uncertain and subject to a number of risks including, but not limited to:

· The duration of clinical trials may vary substantially according to the type, complexity and novelty of the product candidate.

· The FDA and comparable agencies in foreign countries impose substantial and varying requirements on the introduction of therapeutic pharmaceutical products, typically requiring lengthy and detailed laboratory and clinical testing procedures, sampling activities and other costly and time-consuming procedures.

· Data obtained from nonclinical and clinical activities at any step in the testing process may be adverse and lead to discontinuation or redirection of development activity. Data obtained from these activities also are susceptible to varying interpretations, which could delay, limit or prevent regulatory approval.

· The duration and cost of discovery, nonclinical studies and clinical trials may vary significantly over the life of a product candidate and are difficult to predict.

· The costs, timing and outcome of regulatory review of a product candidate may not be favorable, and, even if approved, a product may face post-approval development and regulatory requirements.

· There may be substantial costs, delays and difficulties in successfully integrating externally developed product candidates into our business operations.

· The emergence of competing technologies and products and other adverse market developments may negatively impact us.

Table of Contents

As a result of the factors discussed above, including the factors discussed under “Risk Factors” in Item 1A of this Quarterly Report on Form 10-Q, we are unable to determine the duration and costs to complete current or future nonclinical and clinical stages of our product candidates or when, or to what extent, we will generate revenues from the commercialization and sale of our product candidates. Development timelines, probability of success and development costs vary widely. We anticipate that we will make determinations as to which additional programs to pursue and how much funding to direct to each program on an ongoing basis in response to the data of each product candidate, the competitive landscape and ongoing assessments of such product candidate’s commercial potential. As a result of the regulatory approvals beginning in 2012, linaclotide has been generating sales in connection with commercial launches in the U.S. and a number of E.U. and other countries.

We expect our research and development costs will be substantial for the foreseeable future. We will continue to invest in linaclotide and lesinurad, including the investigation of ways to enhance the clinical profile within their currently approved indications, and the exploration of their potential utility in other indications, populations and formulations. We will also invest in our other product candidates as we advance them through nonclinical studies and clinical trials, in addition to funding full-time equivalents for research and development activities under our external collaboration and license agreements.

Selling, General and Administrative Expense. Selling, general and administrative expense consists primarily of compensation, benefits and other employee-related expenses for personnel in our administrative, finance, legal, information technology, business development, commercial, sales, marketing, communications and human resource functions. Other costs include the legal costs of pursuing patent protection of our intellectual property, general and administrative related facility costs, insurance costs and professional fees for accounting and legal services. As we continue to invest in the commercialization of LINZESS and ZURAMPIC, we expect our selling, general and administrative expenses will be substantial for the foreseeable future. We charge all selling, general and administrative expenses to operations as incurred.

Under our AstraZeneca collaboration agreement for linaclotide, we are reimbursed for certain selling, general and administrative expenses and we net these reimbursements against our selling, general and administrative expenses as incurred. We include Allergan’s selling, general and administrative cost-sharing payments in the calculation of the net profits and net losses from the sale of LINZESS in the U.S. and present the net payment to or from Allergan as collaboration expense or collaborative arrangements revenue, respectively.

Amortization of Acquired Intangible Asset. Amortization expense is based on the economic consumption of intangible assets. Our amortization is related to the ZURAMPIC intangible asset, which is amortized on a straight-line basis over the estimated useful life.

Other (Expense) Income . Interest expense consists primarily of cash and non-cash interest costs related to our outstanding 11% PhaRMA Notes due 2024, or the PhaRMA Notes, and the 2022 Notes. Non-cash interest expense consists of amortization of the debt discount and associated debt issuance costs associated with the PhaRMA Notes and 2022 Notes. We amortize these costs using the effective interest rate method over the life of the respective note agreements as interest expense in our statements of operations.

Interest income consists of interest earned on our cash, cash equivalents and marketable securities.

In June 2015, in connection with the issuance of the 2022 Notes, we entered into convertible note hedge transactions, or the Convertible Note Hedges. Concurrently with entering into the Convertible Note Hedges, we also entered into certain warrant transactions in which we sold note hedge warrants, or the Note Hedge Warrants, to the Convertible Note Hedge counterparties to acquire 20,249,665 shares of our Class A common stock, subject to customary anti-dilution adjustments. Gain (loss) on derivatives consists of the change in fair value of the Convertible Note Hedges and Note Hedge Warrants, which are recorded as derivative assets and liabilities. The Convertible Note Hedges and the Note Hedge Warrants are recorded at fair value at each reporting period and changes in fair value are recorded in our condensed consolidated statements of operations.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations is based upon our condensed consolidated financial statements prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make certain estimates and assumptions that may affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the amounts of revenues and expenses during the reported periods. Significant estimates and assumptions in our condensed consolidated financial statements include those related to revenue recognition, available-for-sale securities, inventory valuation, and related reserves; impairment of long-lived assets; initial valuation procedures for the issuance of convertible notes; fair value of derivatives; balance sheet classification of notes payable and convertible notes; income taxes, including the valuation allowance for deferred tax assets; research and development expenses; goodwill; contingent consideration; acquired intangible assets; contingencies and share-based compensation. We base our estimates on our historical experience and on various other assumptions that are believed to be reasonable,

Table of Contents

the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ materially from our estimates under different assumptions or conditions. Changes in estimates are reflected in reported results in the period in which they become known.

During the three months ended June 30, 2016, we adopted the following significant accounting policies:

Business Combinations

We evaluate acquisitions of assets and other similar transactions to assess whether or not the transaction should be accounted for as a business combination by assessing whether or not we have acquired inputs and processes that have the ability to create outputs. If determined to be a business combination, we account for business acquisitions under the acquisition method of accounting as indicated in the Financial Accounting Standards Board, or FASB, issued ASC 805, which requires the acquiring entity in a business combination to recognize the fair value of all assets acquired, liabilities assumed, and any non-controlling interest in the acquiree and establishes the acquisition date as the fair value measurement point. Accordingly, we recognize assets acquired and liabilities assumed in business combinations, including contingent assets and liabilities, and non-controlling interest in the acquiree based on the fair value estimates as of the date of acquisition. In accordance with ASC 805, we recognize and measure goodwill as of the acquisition date, as the excess of the fair value of the consideration paid over the fair value of the identified net assets acquired.

The consideration for our business acquisitions include future payments that are contingent upon the occurrence of a particular event or events. The obligations for such contingent consideration payments are recorded at fair value on the acquisition date. The contingent consideration obligations are then evaluated each reporting period. Changes in the fair value of contingent consideration obligations, other than changes due to payments, are recognized as a (gain) loss on fair value remeasurement of contingent consideration in the condensed consolidated statements of operations.

Finite-Lived and Indefinite-Lived Intangible Assets

We record the fair value of purchased intangible assets with definite useful lives as of the transaction date of a business combination. Purchased intangible assets with definite useful lives are amortized to their estimated residual values over their estimated useful lives. We evaluate the finite-lived intangible assets for impairment whenever events or changes in circumstances indicate the reduction in the fair value below their respective carrying amounts. If we determine that an impairment has occurred, a write-down of the carrying value and an impairment charge to operating expenses in the period the determination is made is recorded. In addition, we would also reassess the remaining estimated useful life of the finite-lived intangible asset.

In accordance with ASC Topic 350, “Intangibles — Goodwill and Other”, ASC 350, during the period that an asset is considered indefinite-lived, such as in-process research and development, or IPR&D, it will not be amortized. Acquired IPR&D represents the fair value assigned to research and development assets that have not reached technological feasibility. The value assigned to acquired IPR&D is determined by estimating the costs to develop the acquired technology into commercially viable products, estimating the resulting revenue from the projects, and discounting the net cash flows to present value. The revenue and costs projections used to value acquired IPR&D are, as applicable, reduced based on the probability of success of developing a new drug. Additionally, the projections consider the relevant market sizes and growth factors, expected trends in technology, and the nature and expected timing of new product introductions by us and our competitors. The rates utilized to discount the net cash flows to their present value are commensurate with the stage of development of the projects and uncertainties in the economic estimates used in the projections. Upon the acquisition of IPR&D, we complete an assessment of whether our acquisition constitutes the purchase of a single asset or a group of assets. Multiple factors are considered in this assessment, including the nature of the technology acquired, the presence or absence of separate cash flows, the development process and stage of completion, quantitative significance and the rationale for entering into the transaction. Indefinite-lived assets are maintained on our condensed consolidated balance sheet until either the project underlying it is completed or the asset becomes impaired. Indefinite-lived asset are tested for impairment on an annual basis, or whenever events or changes in circumstances indicate the reduction in the fair value of the IPR&D asset below its respective carrying amount. If we determine that an impairment has occurred, a write-down of the carrying value and an impairment charge to operating expenses in the period the determination is made is recorded. When development of an IPR&D asset is complete, the associated asset would be deemed finite-lived and would then be amortized based on its respective estimated useful life at that point.

Goodwill

Table of Contents

other things, deterioration in the performance of the acquired asset, adverse market conditions, adverse changes in applicable laws or regulations and a variety of other circumstances. If we determine that an impairment has occurred, a write-down of the carrying value and an impairment charge to operating expenses in the period the determination is made is recorded. In evaluating the carrying value of goodwill, we must make assumptions regarding estimated future cash flows and other factors to determine the fair value of the acquired assets. Changes in strategy or market conditions could significantly impact those judgments in the future and require an adjustment to the recorded balances.

Other than as set forth above, during the six months ended June 30, 2016, there were no material changes to our critical accounting policies as reported in our Annual Report on Form 10-K for the year ended December 31, 2015, which was filed with the Securities and Exchange Commission, or SEC, on February 19, 2016, or the 2015 Annual Report on Form 10-K.

Table of Contents

Results of Operations

The following discussion summarizes the key factors our management believes are necessary for an understanding of our condensed consolidated financial statements.

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2016			2015			2016			2015
	(in thousands)						(in thousands)
Collaborative arrangements revenue:	$	54,350		$	27,744		$	120,392		$	56,676
Cost and expenses:
Cost of revenue, excluding amortization of acquired intangible asset	—			—			—			12
Write-down of inventory to net realizable value and loss on non-cancellable purchase commitments	—			8,150			—			8,150
Research and development	31,682			28,648			63,524			55,289
Selling, general and administrative	36,918			32,955			73,086			63,301
Amortization of acquired intangible asset	1,065			—			1,065			—
Total cost and expenses	69,665			69,753			137,675			126,752
Other (expense) income:
Interest expense	(9,827		)	(5,874		)	(19,734		)	(11,094		)
Interest and investment income	295			71			516			136
Gain (loss) on derivatives	3,145			(208		)	1,502			(208		)
Other expense, net	(6,387		)	(6,011		)	(17,716		)	(11,166		)
Net loss	$	(21,702	)	$	(48,020	)	$	(34,999	)	$	(81,242	)

Three and Six Months Ended June 30, 2016 Compared to Three and Six Months Ended June 30, 2015

Revenue

	June 30,				Change				June 30,				Change
	2016		2015		$		%		2016		2015		$		%
	(dollars in thousands)								(dollars in thousands)
Collaborative arrangements revenue	$	54,350	$	27,744	$	26,606	96	%	$	120,392	$	56,676	$	63,716	112	%

Collaborative Arrangements Revenue. The increase in revenue from collaborative arrangements of approximately $26.6 million for the three months ended June 30, 2016 compared to the three months ended June 30, 2015 was primarily related to an approximately $24.1 million increase in our share of the net profits from the sale of LINZESS in the U.S.; an approximately $1.5 million increase in revenue from the shipment of linaclotide API to one of our collaboration partners; an approximately $0.5 million increase due to the achievement of a development milestone under our license agreement with Astellas in February 2016; an approximately $0.5 million increase due to revenues from our co-promotion agreement with Allergan for VIBERZI in the U.S.; an approximately $0.2 million increase due to revenues from our co-promotion agreement with Exact Sciences for Cologuard in the U.S.; and an insignificant increase in royalty revenue based on sales of linaclotide in our partnered territories. The increases were partially offset by an approximately $0.3 million decrease in revenue recognized in connection with our collaboration agreement with AstraZeneca for linaclotide.

The increase in revenue from collaborative arrangements of approximately $63.7 million for the six months ended June 30, 2016 compared to the six months ended June 30, 2015 was primarily related to an approximately $45.6 million increase in our share of the net profits from the sale of LINZESS in the U.S.; an approximately $13.4 million increase due to the achievement of a development milestone under our license agreement with Astellas in February 2016; an approximately $4.0 million increase in revenue from the shipment of linaclotide API to one of our collaboration partners; an approximately $1.0 million increase due to revenues from our co-promotion agreement with Allergan for VIBERZI in the U.S.; an approximately $0.9 million increase due to

Table of Contents

revenues from our co-promotion arrangement with Exact Sciences for Cologuard in the U.S., and an approximately $0.2 million increase in royalty revenue based on sales of linaclotide in our partnered territories. The increases were partially offset by an approximately $1.4 million decrease in license revenue related to our collaboration agreement with AstraZeneca.

Cost and Expenses

	Three Months Ended									Six Months Ended
	June 30,				Change					June 30,				Change
	2016		2015		$			%		2016		2015		$			%
	(dollars in thousands)									(dollars in thousands)
Cost and expenses:
Cost of revenue, excluding amortization of acquired intangible asset	$	—	$	—	$	—		0	%	$	—	$	12	$	(12	)	(100	)%
Write-down of inventory to net realizable value and loss on non-cancellable purchase commitments	—		8,150		(8,150		)	(100	)%	—		8,150		(8,150		)	(100	)%
Research and development	31,682		28,648		3,034			11	%	63,524		55,289		8,235			15	%
Selling, general and administrative	36,918		32,955		3,963			12	%	73,086		63,301		9,785			15	%
Amortization of acquired intangible assets	1,065		—		1,065			100	%	1,065		—		1,065			100	%
Total cost and expenses	$	69,665	$	69,753	$	(88	)	(0	)%	$	137,675	$	126,752	$	10,923		9	%

Cost of Revenue. There was an insignificant decrease in cost of revenue for the three and six months ended June 30, 2016 compared to the three and six months ended June 30, 2015.

Write-Down of Inventory to Net Realizable Value and Loss on Non-Cancelable Purchase Commitments. The decrease in write-down of inventory and loss on non-cancelable purchase commitments of approximately $8.2 million for the three and six months ended June 30, 2016 compared to the three and six months ended June 30, 2015, was primarily related to an accrual for a loss on non-cancelable inventory purchase commitments recorded during the three months ended June 30, 2015.

Research and Development Expense. The increase in research and development expense of approximately $3.0 million for the three months ended June 30, 2016 compared to the three months ended June 30, 2015 was primarily related to an increase of approximately $2.7 million in research costs related to our early stage pipeline candidates; an approximately $2.0 million increase in costs associated with development activities and transitional support services related to lesinurad; an increase of approximately $1.3 million in compensation, benefits and other employee-related expenses primarily associated with increased headcount; and an increase of approximately $1.2 million in net costs related to the linaclotide collaboration with Allergan for North America. These increases were partially offset by a decrease of approximately $3.5 million in external costs related to the development of linaclotide; an approximately $0.3 million decrease in costs associated with the collaboration with AstraZeneca for linaclotide; a decrease of approximately $0.3 million in operating costs, including facility costs such as rent and amortization of leasehold improvements allocated to research and development; and an insignificant decrease related to the development of manufacturing processes and costs associated with linaclotide API.

The increase in research and development expense of approximately $8.2 million for the six months ended June 30, 2016 compared to the six months ended June 30, 2015 was primarily related to an increase of approximately $6.6 million in net costs related to the collaboration with Allergan for North America; an increase of approximately $6.4 million in research costs related to our early stage pipeline candidates; an approximately $2.0 million increase in costs associated with development activities and transitional support services related to lesinurad; an increase of approximately $1.9 million in operating costs, including facility costs such as rent and amortization of leasehold improvements allocated to research and development; and an increase of approximately $1.8 million in compensation, benefits and other employee-related expenses primarily associated with increased headcount. These increases were partially offset by a decrease of approximately $9.5 million in external costs related to the development of linaclotide; an approximately $0.6 million decrease in costs associated with the collaboration with AstraZeneca for linaclotide; and a decrease of approximately $0.4 million related to the development of manufacturing processes and costs associated with linaclotide API.

Selling, General and Administrative Expense. Selling, general and administrative expenses increased approximately $4.0 million for the three months ended June 30, 2016 compared to the three months ended June 30, 2015 primarily as a result of an

Table of Contents

approximately $1.9 million increase in external consulting costs and other service costs primarily associated with commercial support activities; an approximately $1.7 million increase in compensation, benefits and other employee-related expenses; and an approximately $0.7 million increase in costs associated with transitional support services related to the Lesinurad Transaction. These increases were partially offset by an approximately $0.2 million decrease in costs associated with selling expenses and marketing programs and an insignificant decrease in costs related to facilities and information technology infrastructure, including rent.

Selling, general and administrative expenses increased approximately $9.8 million for the six months ended June 30, 2016 compared to the six months ended June 30, 2015 primarily as a result of an approximately $4.6 million increase in compensation, benefits and other employee-related expenses; an approximately $2.1 million increase in costs related to facilities and information technology infrastructure, including rent; an approximately $1.9 million increase in external consulting costs and other service costs primarily associated with commercial support activities; an approximately $0.7 million increase in costs associated with transitional support services related to the Lesinurad Transaction and an approximately $0.5 million increase in costs associated with selling expenses, marketing research and speaker programs.

Amortization of Acquired Intangible Assets. The increase in amortization of acquired intangible assets expense of approximately $1.1 million for the three and six months ended June 30, 2016 compared to the three and six months ended June 30, 2015 was due to the Lesinurad Transaction that closed in June 2016, in which we acquired an exclusive license in the U.S. to, among other things, the approved product ZURAMPIC. The amount allocated to the ZURAMPIC intangible asset will be amortized on a straight-line basis over its estimated useful life of 13 years, the period of estimated future cash flows.

Other (Expense) Income, Net

	Three Months Ended											Six Months Ended
	June 30,						Change					June 30,						Change
	2016			2015			$			%		2016			2015			$			%
	(dollars in thousands)											(dollars in thousands)
Other (expense) income:
Interest expense	$	(9,827	)	$	(5,874	)	$	(3,953	)	67	%	$	(19,734	)	$	(11,094	)	$	(8,640	)	78	%
Interest and investment income	295			71			224			315	%	516			136			380			279	%
Gain (loss) on derivatives	3,145			(208		)	3,353			(1,612	)%	1,502			(208		)	1,710			(822	)%
Total other expense, net	$	(6,387	)	$	(6,011	)	$	(376	)	6	%	$	(17,716	)	$	(11,166	)	$	(6,550	)	59	%

Interest expense increased approximately $4.0 million and approximately $8.6 million for the three and six months ended June 30, 2016, respectively, compared to the three and six months ended June 30, 2015, mainly due to an increase in interest expense of approximately $4.4 million and $9.6 million associated with our 2022 Notes. These increases were partially offset by a decrease of approximately $0.4 million and $0.9 million in interest expense associated with the PhaRMA Notes for the three and six months ended June 30, 2016, respectively, and an insignificant decrease in interest expense on capital and operating leases for the three and six months ended June 30, 2016.

The approximately $3.4 million increase in the gain on derivatives for the three months ended June 30, 2016 compared to the three months ended June 30, 2015 is primarily due to an approximately $3.1 million net gain on derivatives, resulting from an approximately $21.8 million increase in the fair value of the Convertible Note Hedges and an approximately $18.7 million increase in the fair value of the Note Hedge Warrants recorded during the three months ended June 30, 2016. The approximately $1.7 million increase in the gain on derivatives for the six months ended June 30, 2016 compared to the six months ended June 30, 2015 was primarily due to an approximately $3.1 million gain on derivatives for the three months ended June 30, 2016, offset by an approximately $1.6 million loss on derivatives from the three months ended March 31, 2016.

Liquidity and Capital Resources

At June 30, 2016, we had approximately $325.4 million of unrestricted cash, cash equivalents and available-for-sale securities. Our cash equivalents include amounts held in money market funds. Our available-for-sale securities include amounts held in U.S. Treasury securities and U.S. government-sponsored securities. We invest cash in excess of immediate requirements in accordance with our investment policy, which limits the amounts we may invest in any one type of investment and requires all investments held by us to be at least A+ rated, with a remaining maturity when purchased of less than twelve months, so as to primarily achieve liquidity and capital preservation.

Table of Contents

During the six months ended June 30, 2016, our balances of cash, cash equivalents and available-for-sale securities decreased approximately $114.0 million. This decrease is primarily due to a $100.0 million upfront payment in connection with the Lesinurad Transaction, $11.3 million of principal payments made on our outstanding PhaRMA Notes, approximately $1.6 million in capital expenditures, and approximately $0.8 million of payments on capital lease obligations. In addition, cash of approximately $6.1 million was used to operate our business, including payments related to, among other things, research and development, and selling and administrative expenses as we continue to invest in our research pipeline and support the continued commercialization of our products. These cash outflows were partially offset by approximately $6.2 million in proceeds from the exercise of stock options.

We may from time to time seek to retire, redeem or repurchase all or part of our outstanding debt through cash purchases and/or exchanges, in open market purchases, privately negotiated transactions, by tender offer or otherwise. Such repurchases, redemptions or exchanges, if any, will depend on prevailing market conditions, liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.

Sources of Liquidity

We have incurred losses since our inception in 1998 and, as of June 30, 2016, we had an accumulated deficit of approximately $1.1 billion. We have financed our operations to date primarily through both the private sale of our preferred stock and the public sale of our common stock, including approximately $203.2 million of net proceeds from our initial public offering, or IPO, in February 2010, and approximately $413.4 million of net proceeds from our follow-on public offerings; payments received under our strategic collaborative arrangements, including upfront and milestone payments, royalties and our share of net profits, as well as reimbursement of certain expenses; and debt financings, including approximately $167.3 million of net proceeds from the private placement of our PhaRMA Notes in January 2013 and approximately $324.0 million of net proceeds from the private placement of our 2022 Notes in June 2015.

Funding Requirements

We began commercializing LINZESS in the U.S. with our collaboration partner, Allergan, in the fourth quarter of 2012, and we currently derive substantially all of our revenue from this collaboration. We are also deploying significant resources to advance product opportunities in IBS-C/CIC, uncontrolled gout, rGERD, and vascular and fibrotic diseases, and to launch and commercialize ZURAMPIC in the U.S. for the treatment of uncontrolled gout. Our goal is to become cash flow positive, driven by increased revenue generated through sales of LINZESS and ZURAMPIC, and financial discipline. However, we have not achieved positive cash flows from operations to date.

Under our collaboration with Allergan for North America, total net sales of LINZESS in the U.S., as recorded by Allergan, are reduced by commercial costs incurred by each party, and the resulting amount is shared equally between us and Allergan. Additionally, we receive royalties based on sales of linaclotide in the European territory, Canada, and Mexico from Allergan. We believe revenues from our LINZESS partnership for the U.S. with Allergan will continue to constitute a significant portion of our total revenue for the foreseeable future and we cannot be certain that such revenues, as well as the revenues from our other commercial activities, will enable us to become cash flow positive, or to do so in the timeframes we expect. We also anticipate that we will continue to incur substantial expenses for the next several years as we further develop and commercialize linaclotide in the U.S., China and other markets, develop and commercialize lesinurad in the U.S., and continue to invest in our pipeline and potentially other external opportunities. We believe that our cash on hand as of June 30, 2016 will be sufficient to meet our projected operating needs at least through the next twelve months.

Our forecast of the period of time through which our financial resources will be adequate to support our operations, including the underlying estimates regarding the costs to develop our product candidates and obtain regulatory approvals and the costs to commercialize linaclotide in the U.S., China and other markets, and commercialize lesinurad in the U.S., as well as our goal to become cash flow positive, are forward-looking statements that involve risks and uncertainties. Our actual results could vary materially and negatively from these and other forward-looking statements as a result of a number of factors, including the factors discussed in the “Risk Factors” section of this Quarterly Report on Form 10-Q. We have based our estimates on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we currently expect.

Due to the numerous risks and uncertainties associated with the development and commercialization of our product candidates, we are unable to estimate precisely the amounts of capital outlays and operating expenditures necessary to develop, obtain regulatory approval for, and commercialize linaclotide, lesinurad and our other product candidates, in each case, for all of the markets, indications, populations and formulations for which we believe each is suited. Our funding requirements will depend on many factors, including, but not limited to, the following:

· the revenue generated by sales of LINZESS, CONSTELLA, ZURAMPIC and any other products;

Table of Contents

· the rate of progress and cost of our commercialization activities, including the expense we incur in marketing and selling LINZESS, ZURAMPIC and any other products;

· the success of our third-party manufacturing activities;

· the time and costs involved in developing, and obtaining regulatory approvals for, our product candidates, as well as the timing and cost of any post-approved development and regulatory requirements;

· the success of our research and development efforts;

· the emergence of competing or complementary developments;

· the costs of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights;

· the terms and timing of any additional collaborative, licensing or other arrangements that we may establish, including royalties or other payments due or payable under such agreements; and

· the acquisition of businesses, products and technologies and the impact of other strategic transactions, as well as the cost and timing of integrating any such assets into our business operations.

Financing Strategy

We may, from time to time, consider additional funding through a combination of new collaborative arrangements, strategic alliances, and additional equity and debt financings or from other sources. We will continue to manage our capital structure and to consider all financing opportunities, whenever they may occur, that could strengthen our long-term liquidity profile. Any such capital transactions may or may not be similar to transactions in which we have engaged in the past. There can be no assurance that any such financing opportunities will also be available on acceptable terms, if at all.

Contractual Commitments and Obligations

The disclosure of our contractual obligations and commitments was reported in our 2015 Annual Report on Form 10-K. There have not been any material changes from the contractual commitments and obligations previously disclosed in our 2015 Annual Report on Form 10-K other than the license agreement and the commercial supply agreement with AstraZeneca entered into in April 2016 in connection with the Lesinurad Transaction, and a change in estimated obligations due to our landlord under the terms of our operating lease, entered into in January 2007, as amended, for our Cambridge, Massachusetts corporate headquarters as discussed in Note 3, Business Combinations , Note 6, Property and Equipment, and Note 7, Inventory , to our condensed consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q. As of June 30, 2016, we had purchase obligations to AstraZeneca under our commercial supply agreement for lesinurad of approximately $0.3 million related to lesinurad commercial supply.

Off-Balance Sheet Arrangements

We do not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, that would have been established for the purpose of facilitating off-balance sheet arrangements (as that term is defined in Item 303(a)(4)(ii) of Regulation S-K) or other contractually narrow or limited purposes. As such, we are not exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in those types of relationships. We enter into guarantees in the ordinary course of business related to the guarantee of our own performance and the performance of our subsidiaries.

New Accounting Pronouncements

For a discussion of recent accounting pronouncements please refer to Note 2, “ Summary of Significant Accounting Policies ,” in our 2015 Annual Report on Form 10-K and Note 1, “ Nature of Business ,” in this Quarterly Report on Form 10-Q. We did not otherwise adopt any new accounting pronouncements during the six months ended June 30, 2016 that had a material effect on our condensed consolidated financial statements included in this report.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Interest Rate Risk

We are exposed to market risk related to changes in interest rates. We invest our cash in a variety of financial instruments, principally securities issued by the U.S. government and its agencies and money market instruments. The goals of our investment policy are preservation of capital, fulfillment of liquidity needs and fiduciary control of cash and investments. We also seek to maximize income from our investments without assuming significant risk.

Our primary exposure to market risk is interest income sensitivity, which is affected by changes in the general level of interest rates, particularly because our investments are in short-term marketable securities. Due to the short-term duration of our

Table of Contents

investment portfolio and the low risk profile of our investments, an immediate 1% change in interest rates would not have a material effect on the fair market value of our portfolio. Accordingly, we would not expect our operating results or cash flows to be affected to any significant degree by the effect of a sudden change in market interest rates on our investment portfolio.

We do not believe our cash, cash equivalents and available-for-sale securities have significant risk of default or illiquidity. While we believe our cash, cash equivalents and available-for-sale securities do not contain excessive risk, we cannot provide absolute assurance that in the future our investments will not be subject to adverse changes in market value. In addition, we maintain significant amounts of cash, cash equivalents and available-for-sale securities at one or more financial institutions that are in excess of federally insured limits. Given the potential instability of financial institutions, we cannot provide assurance that we will not experience losses on these deposits.

Our capital lease obligations, PhaRMA Notes and 2022 Notes bear interest at a fixed rate and therefore have minimal exposure to changes in interest rates; however, because these interest rates are fixed, we may be paying a higher interest rate, relative to market, in the future if our credit rating improves or other circumstances change.

Equity Price Risk

2022 Notes

Our 2022 Notes include conversion and settlement provisions that are based on the price of our Class A common stock at conversion or at maturity of the 2022 Notes. The amount of cash we may be required to pay is determined by the price of our Class A common stock. The fair value of our 2022 Notes is dependent on the price and volatility of our Class A common stock and will generally increase or decrease as the market price of our Class A common stock changes.

The 2022 Notes are convertible into Class A common stock at an initial conversion rate of 60.3209 shares of Class A common stock (subject to adjustment as provided for in the Indenture) per $1,000 principal amount of the 2022 Notes, which is equal to an initial conversion price of approximately $16.58 per share. The 2022 Notes will mature on June 15, 2022 unless earlier converted or repurchased. The 2022 Notes bear cash interest at an annual rate of 2.25%, payable on June 15 and December 15 of each year, which began on December 15, 2015. As of June 30, 2016, the fair value of the 2022 Notes was estimated by us to be $346.2 million. The 2022 Notes are more fully described in Note 5, “ Fair Value of Financial Instruments ,” and Note 10, “ Notes Payable,” in the accompanying notes to our condensed consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q.

Convertible Note Hedge and Warrant Transactions with Respect to 2022 Notes

To minimize the impact of potential dilution to our common stock upon conversion of the 2022 Notes, we entered into Convertible Note Hedges. Concurrently with entering into the Convertible Note Hedges, we entered into warrant transactions whereby we sold Note Hedge Warrants to acquire, subject to customary adjustments, 20,249,665 shares of our Class A common stock at an initial strike price of approximately $21.50 per share, subject to adjustment. The Convertible Note Hedges and Note Hedge Warrants are more fully described in Note 10, “ Notes Payable, ” in the accompanying notes to our condensed consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q.

Foreign Currency Risk

We have no significant operations outside the U.S. and we do not expect to be impacted significantly by foreign currency fluctuations.

Effects of Inflation

We do not believe that inflation and changing prices over the three and six months ended June 30, 2016 and 2015 had a significant impact on our results of operations.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As required by Rule 13a-15(b) of the Securities Exchange Act of 1934, or the Exchange Act, our management, including our principal executive officer and our principal financial officer, conducted an evaluation as of the end of the period covered by this Quarterly Report on Form 10-Q of the effectiveness of the design and operation of our disclosure controls and procedures. Based on that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures are effective at the reasonable assurance level in ensuring that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s

Table of Contents

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

Changes in Internal Control

As required by Rule 13a-15(d) of the Exchange Act, our management, including our principal executive officer and our principal financial officer, conducted an evaluation of the internal control over financial reporting to determine whether any changes occurred during the period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

As discussed above, we completed the Lesinurad Transaction on June 2, 2016, which was accounted for as a business combination. The results of this transaction have been included in our financial results beginning on the date the Lesinurad Transaction closed. In connection with the Lesinurad Transaction, we have implemented internal controls over business combinations, goodwill, and intangibles.

Based on that evaluation, our principal executive officer and principal financial officer concluded no other changes during the period covered by this Quarterly Report on Form 10-Q materially affected, or were reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1A. Risk Factors

In addition to the other information in this Quarterly Report on Form 10-Q, any of the factors described below could significantly and negatively affect our business, financial condition, results of operations or prospects. The trading price of our Class A common stock may decline due to these risks.

Risks Related to Our Business and Industry

We are highly dependent on the commercial success of LINZESS in the U.S. for the foreseeable future and we will also be dependent on the commercial success of ZURAMPIC; we cannot guarantee when, or if, we will attain profitability or positive cash flows.

We and our partner, Allergan plc (together with its affiliates), or Allergan, began selling LINZESS in the U.S. during December 2012. In June 2016, we licensed exclusive rights to commercialize ZURAMPIC and other products containing lesinurad in the U.S. While we believe that the revenues from our LINZESS collaboration will continue to constitute a significant portion of our total revenue for the foreseeable future, we expect revenue from sales of ZURAMPIC will also be important to our financial success. The commercial success of LINZESS and ZURAMPIC depend on a number of factors, including:

· the effectiveness of LINZESS as a treatment for adult patients with IBS-C or CIC and the effectiveness of ZURAMPIC as a treatment for patients with hyperuricemia associated with uncontrolled gout;

· the size of the treatable patient populations;

· the effectiveness of the sales, managed markets and marketing efforts for LINZESS by us and Allergan and for ZURAMPIC by us;

· the adoption of LINZESS and ZURAMPIC by physicians, which depends on whether physicians view such products as safe and effective treatments for their approved patient populations and indications;

· our success in educating and activating potential patients to enable them to more effectively communicate their symptoms and treatment history to their physicians;

· our ability to both secure and maintain adequate reimbursement for, and optimize patient access to, LINZESS and ZURAMPIC by providing third party payers with a strong value proposition based on the existing burden of illness associated with IBS-C and CIC or hyperuricemia associated with uncontrolled gout, respectively, and the benefits of these products;

Table of Contents

· the effectiveness of Allergan’s distribution networks for LINZESS and the effectiveness of the distribution strategy and networks for ZURAMPIC;

· the occurrence of any side effects, adverse reactions or misuse, or any unfavorable publicity in these areas, associated with LINZESS or ZURAMPIC; and

· the development or commercialization of competing products or therapies for the treatment of IBS-C or CIC, or their associated symptoms, for LINZESS or for the treatment of hyperuricemia associated with uncontrolled gout, or its associated symptoms, for ZURAMPIC.

Our revenues from the commercialization of LINZESS and ZURAMPIC are subject to these factors, and therefore may be unpredictable from quarter-to-quarter. Ultimately, we may never generate sufficient revenues from LINZESS and ZURAMPIC to reach or maintain profitability for our company or to sustain our anticipated levels of operations.

Linaclotide and lesinurad may cause undesirable side effects or have other properties that could limit their commercial potential.

The most commonly reported adverse reaction since linaclotide became commercially available, as well as in the clinical trials for linaclotide in IBS-C and CIC, has been diarrhea. In the linaclotide Phase III IBS-C and CIC trials, severe diarrhea was reported in 2% or less of the linaclotide-treated patients and its incidence was similar between the IBS-C and CIC populations. Linaclotide has been prescribed to more than one million patients since its launch in the U.S. and other territories beginning in December 2012, and, as a result, it has been used in wider populations and in less rigorously controlled environments than in the clinical studies supporting its approval.

The most commonly reported adverse reactions in the clinical trials for ZURAMPIC (in combination with a xanthine oxidase inhibitor, or XOI) for the treatment of hyperuricemia associated with uncontrolled gout were headache, influenza, increased blood creatinine and gastroesophageal reflux disease. Additionally, because ZURAMPIC is approved for use in combination with an XOI for the treatment of hyperuricemia associated with uncontrolled gout, our patients may experience side effects and adverse reactions associated with the use of such XOIs. Notwithstanding its FDA-approved label, if ZURAMPIC is taken without an XOI, patients may experience new or increased risk of adverse reactions, including the heightened risk of acute renal failure.

Further, as we, our partners and, in the case of lesinurad, AstraZeneca’s other licensees, conduct clinical trials, including in new or existing territories, indications, populations or formulations, as well as explore potential combination products, the number of patients treated with our products within and outside of such products’ currently approved indications and patient populations has grown and continues to do so. As patient experience expands, we and others may identify previously unknown side effects, known side effects may be found to be more frequent or severe than in the past, and we and others may detect unexpected safety signals for our products or any products perceived to be similar to our products. The foregoing, or the perception of the foregoing, may have the following effects:

· sales of our products may be impaired;

· regulatory approvals for our products may be denied, restricted or withdrawn;

· we or our partners may decide to, or be required to, change the products’ label or send product warning letters or field alerts to physicians, pharmacists and hospitals;

· reformulation of the products, additional nonclinical or clinical studies, changes in labeling or changes to or reapprovals of manufacturing facilities may be required;

· we or our partners may be precluded from pursuing approval of linaclotide in new territories or from studying additional development opportunities to enhance our products’ clinical profiles, including within new or existing indications, populations and formulations, as well as in potential combination products;

· our or our products’ reputation in the marketplace may suffer; and

· government investigations or lawsuits, including class action suits, may be brought against us or our partners.

Any of the above occurrences would harm or prevent sales of our products, increase expenses and impair our and our partners’ ability to successfully commercialize linaclotide or our ability to successfully commercialize lesinurad.

Table of Contents

In addition, both LINZESS and ZURAMPIC contain a boxed warning about their use. The FDA-approved label for LINZESS contains a boxed warning about its use in pediatric patients. LINZESS is contraindicated in pediatric patients up to 6 years of age based on nonclinical data from studies in neonatal mice approximately equivalent to human pediatric patients less than 2 years of age. There is also a warning advising physicians to avoid the use of LINZESS in pediatric patients 6 through 17 years of age. This warning is based on data in young juvenile mice and the lack of clinical safety and efficacy data in pediatric patients of any age group. We and Allergan have established a nonclinical and clinical post-marketing plan with the FDA to understand the safety and efficacy of LINZESS in pediatric patients, which is discussed below.

The FDA-approved label for ZURAMPIC contains a boxed warning about the risk of acute renal failure with ZURAMPIC, which is more common when ZURAMPIC is used without an XOI. ZURAMPIC is contraindicated in patients with severe renal impairment or end-stage renal diseases, kidney transplant recipients, patients on dialysis or patients with tumor lysis syndrome or Lesch-Nyhan syndrome. The FDA has required that a post-marketing clinical study be conducted to further evaluate the renal and cardiovascular safety of ZURAMPIC, which AstraZeneca is conducting on our behalf, and which is discussed below.

We rely entirely on contract manufacturers and our partners to manufacture and distribute linaclotide and lesinurad. If they are unable to comply with applicable regulatory requirements, unable to source sufficient raw materials, experience manufacturing or distribution difficulties, or are otherwise unable to manufacture and distribute sufficient quantities to meet demand, our commercialization efforts may be materially harmed.

We have no internal manufacturing or distribution capabilities. Instead, we rely on a combination of contract manufacturers and our partners to manufacture API and final drug product, and to distribute that drug product to third party purchasers. With respect to linaclotide, we and certain of our partners have commercial supply agreements with independent third parties to manufacture the linaclotide API used to support all of our partnered and unpartnered territories. Each of Allergan and Astellas is responsible for linaclotide drug product and finished goods manufacturing (including bottling and packaging) for its respective territories, and distributing the finished goods to wholesalers. Among our linaclotide drug product manufacturers, only Allergan has manufactured linaclotide on a commercial scale. We have an agreement with an independent third party to serve as an additional source of drug product manufacturing of linaclotide for our partnered territories and we have worked with our partners to achieve sufficient redundancy in this component of the linaclotide supply chain. Under our collaboration with AstraZeneca for linaclotide, we are accountable for drug product and finished goods manufacturing for China, Hong Kong and Macau.

With respect to lesinurad, we have a commercial supply agreement with AstraZeneca to manufacture finished drug product and a transitional services agreement with AstraZeneca for certain services, such as distribution. We rely exclusively on AstraZeneca as our supplier of finished drug product for ZURAMPIC. If, for any reason, AstraZeneca is unable or unwilling to perform under our commercial supply agreement or if AstraZeneca performs poorly, our ability to timely deliver ZURAMPIC to our customers would be significantly impaired or we might not be able to supply ZURAMPIC to our customers at all. The sales of ZURAMPIC would be adversely affected and such failure to deliver finished drug product to our customers would negatively impact our reputation. If such event occurs, we would need to identify alternate manufacturers and we would expend time and effort to validate and obtain necessary regulatory approvals for such alternative manufacturers and there is no assurance that we would be able to identify alternative manufacturers that would be available to us on acceptable terms, if at all.

Each of our API and drug product manufacturers must comply with current good manufacturing practices, or GMP, and other stringent regulatory requirements enforced by the FDA and foreign regulatory authorities in other jurisdictions. These requirements include, among other things, quality control, quality assurance and the maintenance of records and documentation, which occur in addition to our own quality assurance releases. Manufacturers of our products may be unable to comply with these GMP requirements and with other regulatory requirements. We have little control over our manufacturers’ or partners’ compliance with these regulations and standards.

Our manufacturers may experience problems with their respective manufacturing and distribution operations and processes, including for example, quality issues, such as product specification and stability failures, procedural deviations, improper equipment installation or operation, utility failures, contamination and natural disasters. In addition, the raw materials necessary to make API for our products are acquired from a limited number of sources. Any delay or disruption in the availability of these raw materials or a change in raw material suppliers could result in production disruptions, delays or higher costs with consequent adverse effects on us.

The manufacture of pharmaceutical products requires significant expertise and capital investment, including the development of advanced manufacturing techniques and process controls. Manufacturers of pharmaceutical products often encounter difficulties in commercial production. These problems include difficulties with production costs and yields, quality control, including stability of the product and quality assurance testing, and shortages of qualified personnel, as well as compliance with federal, state and foreign regulations and the challenges associated with complex supply chain management. Even if our manufacturers or partners do not experience problems and commercial manufacturing is achieved, their maximum or available manufacturing capacities may be

Table of Contents

insufficient to meet commercial demand. Finding alternative manufacturers or adding additional manufacturers requires a significant amount of time and involves significant expense. New manufacturers would need to develop and implement the necessary production techniques and processes, which along with their facilities, would need to be inspected and approved by the regulatory authorities in each applicable territory.

If our API or drug product manufacturers fail to adhere to applicable GMP or other regulatory requirements, experience delays or disruptions in the availability of raw materials or experience manufacturing or distribution problems, we will suffer significant consequences, including product seizures or recalls, loss of product approval, fines and sanctions, reputational damage, shipment delays, inventory shortages, inventory write-offs and other product-related charges and increased manufacturing costs. If we experience any of these results, or if our manufacturers’ maximum or available capacities are insufficient to meet demand, we may not be able to successfully commercialize our products.

Expanding our commercial infrastructure to include ZURAMPIC and lesinurad is a significant undertaking that requires substantial financial and managerial resources, and we may encounter delays or may not be successful in our efforts.

While we are currently marketing and selling LINZESS in the U.S. with our partner Allergan, ZURAMPIC will be our first solely marketed product in the U.S and we have limited experience in acquiring and integrating additional products into our current commercial infrastructure. Unlike LINZESS, we will be solely responsible for the commercialization of ZURAMPIC and we do not have significant experience with all components of a commercial launch of this size without a partner. Establishing, maintaining and/or expanding the necessary capabilities are competitive and time-consuming and the launch of ZURAMPIC will require a significant expenditure of operating, financial and management resources. Even with those investments, we may not be able to maximize our sales of ZURAMPIC or we may incur more expenditures than anticipated in order to maximize our sales. We cannot guarantee that we will be able to establish, maintain and/or expand our sales, marketing, distribution and market access capabilities, and enter into and maintain any agreements necessary for commercialization with payers and third-party providers on acceptable terms, if at all. If we are unable to establish, maintain and/or expand such capabilities, either on our own or by entering into agreements with others, or are unable to do so in an efficient manner or on a timely basis, we will not be able to maximize our sales of ZURAMPIC, which would adversely affect our business, operating results and financial condition.

We also have no prior experience as a company developing or commercializing products in the field of uncontrolled gout. While we have significant experience, and have been successful, in marketing LINZESS to primary care physicians and other prescribers, our competitors in the field of uncontrolled gout have more experience marketing products in this indication and may more successfully market their products. Our competitors may also develop, manufacture and market products to treat hyperuricemia associated with uncontrolled gout that are more effective or less expensive than ours, or that have a better safety profile.

We will incur additional expenses to successfully integrate ZURAMPIC and, if developed, other lesinurad products with our business operations and such integration will be a complex and time-consuming process. We refer to ZURAMPIC and other potential lesinurad products as the Lesinurad Business. There may be substantial difficulties, costs and delays relating to establishing certain capabilities necessary to commercialize ZURAMPIC and transitioning certain activities from AstraZeneca. Such integration may result in the distraction of management and key functional areas from day-to-day operations and the diversion of financial resources that would otherwise be available for the ongoing development or commercialization of our other programs.

Even if the launch of ZURAMPIC and the integration of the Lesinurad Business is successful, we may fail to further our business strategy as anticipated or to achieve anticipated benefits and success. We have made assumptions relating to the impact of the Lesinurad Business on our financial results relating to numerous matters, including the amount of goodwill and intangible assets related to the Lesinurad Business, the cost of development and commercialization of ZURAMPIC and other potential lesinurad products, the likelihood of approval of the fixed dose combination product containing lesinurad and allopurinol, or the FDC Product, and the other financial and strategic risks related to the acquisition of the Lesinurad Business. We may incur higher than expected operating, transaction and integration costs, and we may encounter general economic and business conditions that adversely affect the Lesinurad Business. If one or more of these assumptions are incorrect, it could have an adverse effect on our business and operating results, and the benefits from the acquisition of the Lesinurad Business may not be realized or be of the magnitude expected.

Table of Contents

We rely on AstraZeneca to provide critical support services in our efforts to market and sell ZURAMPIC in the U.S. and to conduct certain development, regulatory and safety activities for lesinurad.

As part of our acquisition of the Lesinurad Business, AstraZeneca has agreed to provide us with critical transition services , including services related to market access and reimbursement, sales and distribution and certain finance and financial reporting services. AstraZeneca is also undertaking certain development, regulatory and safety activities relating to lesinurad, including conducting the post-marketing clinical trial for ZURAMPIC required by the FDA and the clinical and regulatory activities for the FDC Product. We will need to work collaboratively with AstraZeneca to ensure that such services are provided in an effective and timely manner. We have limited ability to control the amount or timing of resources that AstraZeneca devotes to such services. If AstraZeneca fails to devote sufficient time and resources to conducting such services, performs such services in a substandard manner, materially breaches its obligations to conduct such services or undergoes a change of control, it will delay or hinder our ability to successfully commercialize ZURAMPIC and will delay the potential submission or approval of a regulatory application for the FDC Product. Additionally, if AstraZeneca fails to conduct and complete the post-marketing clinical trial for ZURAMPIC in an effective, compliant and timely manner, the FDA may impose additional restrictions on the use of ZURAMPIC until the post-marketing clinical trial is completed and the further development of lesinurad may be delayed.

We also rely on AstraZeneca to provide us with information about ZURAMPIC and other potential lesinurad products that may be critical to the development and the commercial success of such products in the U.S. For example, as the holder of the global safety database for lesinurad, AstraZeneca is responsible for coordinating the safety surveillance and adverse event reporting efforts worldwide with respect to lesinurad. We, and AstraZeneca’s other licensees of lesinurad throughout the world, are required to submit safety data and information about adverse events related to ZURAMPIC and other potential lesinurad products to AstraZeneca. If AstraZeneca fails to maintain such database or if AstraZeneca’s other licensees do not report adverse events related to ZURAMPIC and, if developed, other lesinurad products, or fail to do so in a timely manner, we may not receive the information that we are required to report to the FDA regarding ZURAMPIC and lesinurad. The FDA may impose additional restrictions on the use of ZURAMPIC or other potential lesinurad products if a delay in reporting such adverse events occurs. In addition, AstraZeneca is responsible for notifying us of certain material intellectual property related to lesinurad that is developed by it or its other licensees of lesinurad. If AstraZeneca does not notify us of such intellectual property or AstraZeneca’s licensees fail to report such intellectual property to AstraZeneca, or, in each case, fail to provide such information on a timely basis, we may not be able to commercialize ZURAMPIC and other potential lesinurad products as effectively or efficiently.

If any of our linaclotide partners undergoes a change in control or in management, this may adversely affect our collaborative relationship or the success of the commercialization of LINZESS in the U.S. or the continued launches and commercialization of CONSTELLA in the E.U., or the ability to achieve regulatory approval, launch and commercialize linaclotide in our other partnered territories.

We work jointly and collaboratively with each of our partners on many aspects of the development, manufacturing and commercialization of linaclotide. In doing so, we have established relationships with several key members of the management teams of our linaclotide partners in functional areas such as development, quality, regulatory, drug safety and pharmacovigilance, operations, marketing, sales, field operations and medical science. Further, the success of our collaborations is highly dependent on the resources, efforts and skills of our partners and their key employees. As we and our partners commercialize LINZESS in the U.S., continue to launch and commercialize CONSTELLA in the E.U. and develop, launch and commercialize linaclotide in other parts of the world, the drug’s success becomes more dependent on us maintaining highly collaborative and well aligned partnerships. If any of our linaclotide partners undergo a change of control or in management in the future, we would need to reestablish many relationships and confirm continued alignment on our development and commercialization strategy for linaclotide. Further, in connection with any change of control or in management, there is inherent uncertainty and disruption in operations, which could result in distraction, inefficiencies, and misalignment of priorities. As a result, in the event of a change of control or in management at one of our linaclotide partners, we cannot be sure that we will be able to successfully execute on our development and commercialization strategy for linaclotide in an effective and efficient manner and without disruption or reduced performance. Finally, any change of control or in management may result in a reprioritization of linaclotide within a partner’s portfolio, or such partner may fail to maintain the financial or other resources necessary to continue supporting its portion of the development, manufacturing or commercialization of linaclotide.

If any of our linaclotide partners undergoes a change of control and the acquirer either is unable to perform such partner’s obligations under its collaboration or license agreement with us or has a product that competes with linaclotide that such acquirer does not divest, we have the right to terminate the collaboration or license agreement and reacquire that partner’s rights with respect to linaclotide. If we elect to exercise these rights in such circumstances, we will need to either establish the capability to develop, manufacture and commercialize linaclotide in that partnered territory on our own or we will need to establish a relationship with a new partner. We have assembled a team of specialists in manufacturing, quality, sales, marketing, payer, pricing and field operations, and specialized medical scientists, who represent the functional areas necessary for a successful commercial launch of a high potential, GI

Table of Contents

therapy and who support the commercialization of LINZESS in the U.S. If Allergan was subject to a change of control that allowed us to further commercialize LINZESS in the U.S. on our own, and we chose to do so, we would need to enhance each of these functional aspects to replace the capabilities that Allergan was previously providing to the collaboration. Any such transition might result in a period of reduced efficiency or performance by our operations and commercialization teams, which could adversely affect our ability to commercialize LINZESS.

Although many members of our global operations, commercial and medical affairs teams have strategic oversight of, and a certain level of involvement in, their functional areas globally, we do not have corresponding operational capabilities in these areas outside of the U.S. If Allergan, Astellas or AstraZeneca was subject to a change of control that allowed us to continue linaclotide’s development or commercialization anywhere outside of the U.S. on our own, and we chose to do so rather than establishing a relationship with a new partner, we would need to build operational capabilities in the relevant territory. In any of these situations, the timeline and likelihood of achieving regulatory approval and, ultimately, the commercialization of linaclotide could be negatively impacted.

We must work effectively and collaboratively with Allergan to market and sell LINZESS in the U.S. in order for it to achieve its maximum commercial potential.

We are working closely with Allergan to implement our joint commercialization plan for LINZESS. The commercialization plan includes an agreed upon marketing campaign that targets the physicians who see patients who could benefit from LINZESS treatment. Our marketing campaign also targets the adult men and women who suffer from IBS-C or CIC. Our commercialization plan also includes an integrated call plan for our sales forces to optimize the education of specific gastroenterologists and primary care physicians on whom our and Allergan’s sales representatives call, and the frequency with which the representatives meet with them.

In order to optimize the commercial potential of LINZESS, we and Allergan must execute upon this commercialization plan effectively and efficiently. In addition, we and Allergan must continually assess and modify our commercialization plan in a coordinated and integrated fashion in order to adapt to the promotional response. Further, we and Allergan must continue to focus and refine our marketing campaign to ensure a clear and understandable physician-patient dialogue around IBS-C, CIC and the potential for LINZESS as an appropriate therapy. In addition, we and Allergan must provide our sales forces with the highest quality support, guidance and oversight in order for them to continue to effectively promote LINZESS to gastroenterologists and primary care physicians. If we and Allergan fail to perform these commercial functions in the highest quality manner and in accordance with our joint commercialization plan and related agreements, LINZESS will not achieve its maximum commercial potential and we may suffer financial harm. Our efforts to further target and engage adult patients with IBS-C or CIC may not effectively increase appropriate patient awareness or patient/physician dialogue, and may not increase the revenues that we generate from LINZESS.

We are subject to uncertainty relating to pricing and reimbursement policies in the U.S. which, if not favorable for our products, could hinder or prevent our products’ commercial success.

Our and Allergan’s ability to commercialize LINZESS in the U.S. successfully depends, and our ability to commercialize ZURAMPIC in the U.S. successfully will depend, in part on the coverage and reimbursement levels set by governmental authorities, private health insurers and other third-party payers. In determining whether to approve reimbursement for our products and at what level, we expect that third-party payers will consider factors that include the efficacy, cost effectiveness and safety of our products, as well as the availability of other treatments including generic prescription drugs and over-the-counter alternatives. Further, in order to maintain acceptable reimbursement levels and access for patients at copay levels that are reasonable and customary, we may face increasing pressure to offer discounts or rebates from list prices or discounts to a greater number of third-party payers or other unfavorable pricing modifications. Obtaining and maintaining favorable reimbursement can be a time consuming and expensive process, and there is no guarantee that we or Allergan (with respect to LINZESS) will be able to negotiate or continue to negotiate pricing terms with third-party payers at levels that are profitable to us, or at all. Certain third-party payers also require prior authorization for, or even refuse to provide, reimbursement for LINZESS, and others may do so in the future. Similarly, third-party payers may also require prior authorization for, or refuse to provide, reimbursement for ZURAMPIC. Our business would be materially adversely affected if we and Allergan are not able to receive approval for reimbursement of LINZESS and we are not able to receive approval for reimbursement of ZURAMPIC, in each case, from third-party payers on a broad, timely or satisfactory basis; if reimbursement is subject to overly broad or restrictive prior authorization requirements; or if reimbursement is not maintained at satisfactory levels or becomes subject to prior authorization. In addition, our business could be adversely affected if private health insurers, including managed care organizations, the Medicare or Medicaid programs or other reimbursing bodies or payers limit or reduce the indications for or conditions under which our products may be reimbursed.

We expect to experience pricing pressures in connection with the sale of LINZESS and ZURAMPIC, and our future products due to the healthcare reforms discussed below, as well as the trend toward programs aimed at reducing healthcare costs, the increasing influence of managed care, the ongoing debates on reducing government spending and additional legislative proposals. These

Table of Contents

healthcare reform efforts or any future legislation or regulatory actions aimed at controlling and reducing healthcare costs, including through measures designed to limit reimbursement, restrict access or impose unfavorable pricing modifications on pharmaceutical products, could impact our and our partners’ ability to obtain or maintain reimbursement for our products at satisfactory levels, or at all, which could materially harm our business and financial results.

Our linaclotide partners are subject to uncertainty relating to pricing and reimbursement policies outside the U.S. which, if not favorable, could hinder or prevent linaclotide’s commercial success outside of the U.S., adversely affecting our royalty and other revenues.

In some foreign countries, particularly Canada and the countries of Europe, the pricing and payment of prescription pharmaceuticals is subject to governmental control. In these countries, pricing negotiations with governmental authorities can take six to 12 months or longer after the receipt of regulatory approval and product launch. Reimbursement sources are different in each country, and each country may include a combination of distinct potential payers, including private insurance and governmental payers. Some countries may restrict the range of medicinal products for which their national health insurance systems provide reimbursement and control the prices of medicinal products for human use. To obtain favorable reimbursement for the indications sought or pricing approval in some countries, we and our partners may be required to conduct a clinical trial that compares the cost and clinical effectiveness of our products, including linaclotide, to other available therapies. In addition, in countries in which linaclotide is the only approved therapy for a particular indication, such as CONSTELLA as the only product approved for the symptomatic treatment of moderate to severe IBS-C in adults in Europe, there may be disagreement as to what the most comparable product is, or if there even is one. Further, several European countries have implemented government measures to either freeze or reduce pricing of pharmaceutical products. Many third-party payers and governmental authorities also consider the price for which the same product is being sold in other countries to determine their own pricing and reimbursement strategy, so if linaclotide is priced low or gets limited reimbursement in a particular country, this could result in similarly low pricing and reimbursement in other countries. If reimbursement for linaclotide is unavailable in any country in which reimbursement is sought, limited in scope or amount, or if pricing is set at or reduced to unsatisfactory levels, our ability to successfully commercialize linaclotide in such country would be impacted negatively. Furthermore, if these measures prevent us or any of our partners from selling linaclotide on a profitable basis in a particular country, they could prevent the commercial launch or continued sale of linaclotide in that country.

In the second quarter of 2013, our former European partner Almirall began commercializing CONSTELLA in Europe for the symptomatic treatment of moderate to severe IBS-C in adults. In October 2015, Almirall transferred its exclusive license to develop and commercialize linaclotide in Europe to Allergan. Currently, CONSTELLA is commercially available in certain European countries, including the United Kingdom, Italy and Spain. The pricing and reimbursement strategy is a key component of Allergan’s commercialization plan for CONSTELLA in Europe. Our revenues may suffer if Allergan is unable to successfully and timely conclude reimbursement, price approval or funding processes and market CONSTELLA in key member states of the E.U., or if coverage and reimbursement for CONSTELLA is limited or reduced. If Allergan is not able to obtain coverage, pricing or reimbursement on acceptable terms or at all, or if such terms change in any countries in its territory, Allergan may not be able to, or may decide not to, sell CONSTELLA in such countries.

Because we work with partners to develop, manufacture and commercialize linaclotide, we are dependent upon third parties, and our relationships with those third parties, in our efforts to commercialize LINZESS and to obtain regulatory approval for, and to commercialize, linaclotide in our other partnered territories.

Allergan played a significant role in the conduct of the clinical trials for linaclotide and in the subsequent collection and analysis of data, and Allergan holds the new drug application, or NDA, for LINZESS. In addition, we are commercializing LINZESS in the U.S. with Allergan. Allergan is also responsible for the development, regulatory approval and commercialization of linaclotide in the European territory, as well as Canada and Mexico. Allergan is commercializing LINZESS in Mexico and CONSTELLA in Canada, as well as commercializing CONSTELLA in certain countries in Europe, with responsibility for obtaining regulatory approval of linaclotide in the other countries in its territory. Astellas, our partner in Japan, is responsible for completing the clinical programs and obtaining regulatory approval of linaclotide in its territory. Further, we are jointly overseeing the development, and will jointly oversee the commercialization, of linaclotide in China, Hong Kong and Macau through our collaboration with AstraZeneca, with AstraZeneca having primary responsibility for the local operational execution. Upon any approval, each of Astellas and AstraZeneca, as well as Allergan for the European region, is responsible for commercializing linaclotide in its respective territory, and each has agreed to use commercially reasonable efforts to do so. Each of our partners is responsible for reporting adverse event information from its territory to us. Finally, each of our partners, other than AstraZeneca, is responsible for drug product manufacturing of linaclotide and making it into finished goods (including bottling and packaging) for its respective territory. The integration of our efforts with our partners’ efforts is subject to the uncertainty of the markets for pharmaceutical products in each partner’s respective territories, and accordingly, these relationships must evolve to meet any new challenges that arise in those regions.

Table of Contents

These integrated functions may not be carried out effectively and efficiently if we fail to communicate and coordinate with our linaclotide partners, and vice versa. Our linaclotide partnering strategy imposes obligations, risks and operational requirements on us as the central node in our global network of partners. If we do not effectively communicate with each partner and ensure that the entire network is making integrated and cohesive decisions focused on the global brand for linaclotide, linaclotide will not achieve its maximum commercial potential. As the holder of the global safety database for linaclotide, we are responsible for coordinating the safety surveillance and adverse event reporting efforts worldwide. If we are unsuccessful in doing so due to poor process, execution, oversight, communication, adjudication or otherwise, then our and our partner’s ability to obtain and maintain regulatory approval of linaclotide will be at risk.

We have limited ability to control the amount or timing of resources that our partners devote to linaclotide. If any of our partners fails to devote sufficient time and resources to linaclotide, or if its performance is substandard, it will delay the potential submission or approval of regulatory applications for linaclotide, as well as the manufacturing and commercialization of linaclotide in the particular territory. A material breach by any of our partners of our collaboration or license agreement with such partner, or a significant disagreement between us and a partner, could also delay the regulatory approval and commercialization of linaclotide, potentially lead to costly litigation, and could have a material adverse impact on our financial condition. Moreover, although we have non-compete restrictions in place with each of our linaclotide partners, they may have relationships with other commercial entities, some of which may compete with us. If any of our partners assists our competitors, it could harm our competitive position.

Even though LINZESS is approved by the FDA for the treatment of adults with IBS-C or CIC and ZURAMPIC is approved by the FDA for the treatment of hyperuricemia associated with uncontrolled gout, LINZESS and ZURAMPIC face post-approval development and regulatory requirements, which present additional challenges.

In August 2012, the FDA approved LINZESS as a once-daily treatment for adult men and women suffering from IBS-C or CIC, and in December 2015, the FDA approved ZURAMPIC for use in combination with an XOI for the treatment of hyperuricemia associated with uncontrolled gout. Both LINZESS and ZURAMPIC are subject to ongoing FDA requirements governing the labeling, packaging, storage, advertising, promotion, recordkeeping and submission of safety and other post-market information.

LINZESS is contraindicated in pediatric patients up to 6 years of age based on nonclinical data from studies in neonatal mice approximately equivalent to human pediatric patients less than 2 years of age. There is also a boxed warning advising physicians to avoid the use of LINZESS in pediatric patients 6 through 17 years of age. This warning is based on data in young juvenile mice and the lack of clinical safety and efficacy data in pediatric patients of any age group. We and Allergan have established a nonclinical and clinical post-marketing plan with the FDA to understand the safety and efficacy of LINZESS in pediatric patients. The first step in this plan was to undertake additional nonclinical studies to further understand the results of the earlier neonatal mouse study and to understand the tolerability of LINZESS in older juvenile mice. We and Allergan have completed these nonclinical studies and have initiated two Phase II clinical pediatric studies in IBS-C patients age seven to 17 and functional constipation patients age six to 17. Our ability to conduct clinical studies in younger pediatric patients will depend, in part, on the safety and efficacy data from our clinical studies in older pediatric patients. Our ability to ever expand the indication for LINZESS to pediatrics will depend on, among other things, our successful completion of pediatric clinical studies. We and Allergan have also committed to certain nonclinical and clinical studies aimed at understanding: (a) whether orally administered linaclotide can be detected in breast milk, (b) the potential for antibodies to be developed to linaclotide, and if so, (c) whether antibodies specific for linaclotide could have any therapeutic or safety implications. We expect to complete these studies over the next two to four years.

ZURAMPIC is contraindicated in patients with severe renal impairment or end-stage renal diseases, kidney transplant recipients, patients on dialysis or patients with tumor lysis syndrome or Lesch-Nyhan syndrome. ZURAMPIC is approved for use in combination with an XOI for the treatment of hyperuricemia associated with uncontrolled gout, and there is a boxed warning about the risk of acute renal failure with ZURAMPIC, which is more common when ZURAMPIC is used without an XOI. The FDA has required a post-marketing clinical study to further evaluate the renal and cardiovascular safety of ZURAMPIC, and has required that enrollment include patients with moderate renal impairment.

These post-approval requirements impose burdens and costs on us, and we are obligated to reimburse AstraZeneca up to $100 million over up to ten years for completion of the post-marketing clinical study for ZURAMPIC. Additionally, as the holder of the approved NDA for ZURAMPIC, we are obligated to monitor and report adverse events and any failure of ZURAMPIC to meet the specifications in the NDA, to submit new or supplemental applications and to obtain FDA approval for certain changes to ZURAMPIC, including changes to its product labeling and manufacturing process. Failure to effectively and appropriately conduct and complete the required studies relating to LINZESS and ZURAMPIC, monitor and report adverse events and meet our other post-approval commitments would lead to negative regulatory action at the FDA, which could include withdrawal of regulatory approval of our products for their currently approved indications and patient populations.

Table of Contents

Manufacturers of drug products and their facilities are subject to continual review and periodic inspections by the FDA and other regulatory authorities for compliance with GMP regulations. If we or a regulatory agency discovers previously unknown problems with a product, such as adverse events of unanticipated severity or frequency, or problems with a facility where the product is manufactured, a regulatory agency may impose restrictions on that product or the manufacturer, including requiring implementation of a risk evaluation and mitigation strategy program, withdrawal of the product from the market or suspension of manufacturing. If we, our partners or the manufacturing facilities for our products fail to comply with applicable regulatory requirements, a regulatory agency may:

· issue warning letters or untitled letters;

· impose civil or criminal penalties;

· suspend or withdraw regulatory approval;

· suspend any ongoing clinical trials;

· refuse to approve pending applications or supplements to applications submitted by us;

· impose restrictions on operations, including costly new manufacturing requirements; or

· seize or detain products or require us to initiate a product recall.

If we fail to comply with our obligations under our license with AstraZeneca, we could lose rights to the Lesinurad Business.

We are a party to a license agreement with AstraZeneca for exclusive rights to ZURAMPIC and any other products containing lesinurad in the U.S. Our license agreement with AstraZeneca imposes various milestone payment, royalty, insurance and other obligations on us. If we fail to comply with our obligations, AstraZeneca may have the right to terminate the license agreement, in which event we would not be able to continue commercializing ZURAMPIC or developing any other lesinurad product that is covered by the license. Termination of the license agreement or reduction or elimination of our licensed rights may result in our having to negotiate new or reinstated licenses with less favorable terms, and, if we lose rights to the Lesinurad Business, ceasing development and commercial activities related to lesinurad, adversely affecting our business.

Even though linaclotide is approved for marketing in the U.S. as LINZESS and in the E.U. as CONSTELLA, and is approved for marketing in a number of other countries, we or our partners may never receive approval to commercialize linaclotide in additional parts of the world.

In order to market any products outside of the countries where linaclotide is approved, we or our partners must comply with numerous and varying regulatory requirements of other jurisdictions regarding safety and efficacy. Approval procedures vary among jurisdictions and can involve product testing and administrative review periods different from, and greater than, those in the U.S., the E.U. and the other countries where linaclotide is approved. Potential risks include that the regulatory authorities:

· may not deem linaclotide safe and effective;

· may not find the data from nonclinical studies and clinical trials sufficient to support approval;

· may not approve of manufacturing processes and facilities;

· may not approve linaclotide for any or all indications or patient populations for which approval is sought;

· may require significant warnings or restrictions on use to the product label for linaclotide; or

· may change their approval policies or adopt new regulations.

If any of the foregoing were to occur, our receipt of regulatory approval in the applicable jurisdiction could be delayed or we may never receive approval at all. Further, regulatory approval in one jurisdiction does not ensure regulatory approval in another, but a failure or delay in obtaining regulatory approval in one jurisdiction may have a negative effect on the regulatory processes in others. If linaclotide is not approved for all indications or patient populations or with the label requested, this would limit the uses of linaclotide and have an adverse effect on its commercial potential or require costly post-marketing studies.

Table of Contents

We face potential product liability exposure, and, if claims brought against us are successful, we could incur substantial liabilities.

The use of our product candidates in clinical trials and the sale of marketed products expose us to product liability claims. If we do not successfully defend ourselves against product liability claims, we could incur substantial liabilities. In addition, regardless of merit or eventual outcome, product liability claims may result in:

· decreased demand for approved products;

· impairment of our business reputation;

· withdrawal of clinical trial participants;

· initiation of investigations by regulators;

· litigation costs;

· distraction of management’s attention from our primary business;

· substantial monetary awards to patients or other claimants;

· loss of revenues; and

· the inability to commercialize our product candidates.

We currently have product liability insurance coverage for the commercial sale of linaclotide and lesinurad and for the clinical trials of our product candidates which is subject to industry-standard terms, conditions and exclusions. Our insurance coverage may not be sufficient to reimburse us for expenses or losses associated with claims. Moreover, insurance coverage is becoming increasingly expensive, and, in the future, we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses. On occasion, large judgments have been awarded in lawsuits based on drugs that had unanticipated side effects. A successful product liability claim or series of claims could cause our stock price to decline and, if judgments exceed our insurance coverage, could decrease our cash and adversely affect our business.

We face competition and new products may emerge that provide different or better alternatives for treatment of the conditions that our products are approved to treat.

The pharmaceutical industry and the markets in which we operate are intensely competitive. We compete in the marketing and sale of our products, the development of new products and the acquisition of rights to new products with commercial potential. Certain of our competitors have substantially greater financial, technical and human resources than us. Mergers and acquisitions in the pharmaceutical industry may result in even more resources being concentrated in our competitors. Competition may increase further as a result of advances made in the commercial applicability of technologies and greater availability of capital for investment in these fields. Additionally, new developments, including the development of other drug technologies and methods of preventing the incidence of disease, occur in the pharmaceutical and medical technology industries at a rapid pace. These developments may render our products obsolete or noncompetitive.

Our products compete with certain prescription therapies and over-the-counter products for the treatment of the indications for which they are approved, or their associated symptoms, and in many cases with products that have attained significant levels of market acceptance. The availability of prescription competitors and over-the-counter products for such conditions could limit the demand, and the price we are able to charge, for our products unless we are able to achieve market acceptance among the medical community and patients and differentiate our products on the basis of their actual or perceived benefits. Additionally, we believe other companies are developing products which could compete with our products, should they be approved by the FDA or foreign regulatory authorities. Currently, there are compounds in late stage development and other potential competitors are in earlier stages of development for the treatment of the indications for which our products are approved. If our potential competitors are successful in completing drug development for their drug candidates and obtain approval from the FDA or foreign regulatory authorities, they could limit the demand for our products.

Table of Contents

We will incur significant liability if it is determined that we are promoting any “off-label” uses of our products.

Physicians are permitted to prescribe drug products and medical devices for uses that are not described in the product’s labeling and that differ from those approved by the FDA or other applicable regulatory agencies. Such “off-label” uses are common across medical specialties. Although the FDA and other regulatory agencies do not regulate a physician’s choice of treatments, the FDA and other regulatory agencies do restrict communications on the subject of off-label use. Companies are not permitted to promote drugs or medical devices for off-label uses. Accordingly, we do not permit promotion of any approved product that we develop, license, commercialize, promote, co-promote or otherwise partner for any indication, population or use not described in such product’s label. The FDA and other regulatory and enforcement authorities actively enforce laws and regulations prohibiting promotion of off-label uses and the promotion of products for which marketing approval has not been obtained. A company that is found to have promoted off-label uses will be subject to significant liability, including civil and administrative remedies as well as criminal sanctions.

Notwithstanding the regulatory restrictions on off-label promotion, the FDA and other regulatory authorities allow companies to engage in truthful, non-misleading, and non-promotional scientific exchange concerning their products. We intend to engage in medical education activities and communicate with healthcare providers in compliance with all applicable laws, regulatory guidance and industry best practices. Although we believe we have put in place a robust compliance program, which is designed to ensure that all such activities are performed in a legal and compliant manner, we cannot be certain that our program will address all areas of potential exposure and the risks in this area cannot be entirely eliminated.

If we fail to comply with healthcare and other regulations, we could face substantial penalties and our business, operations and financial condition could be adversely affected.

The products that we promote are marketed in the U.S. and/or covered by federal healthcare programs, and, as a result, certain federal and state healthcare laws and regulations pertaining to product promotion and fraud and abuse are applicable to, and may affect, our business. These laws and regulations include:

· federal healthcare program anti-kickback laws, which prohibit, among other things, persons from soliciting, receiving or providing remuneration, directly or indirectly, to induce either the referral of an individual, for an item or service or the purchasing or ordering of a good or service, for which payment may be made under federal healthcare programs such as Medicare and Medicaid;

· federal false claims laws which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, information or claims for payment from Medicare, Medicaid, or other third-party payers that are false or fraudulent, and which may apply to us for reasons including providing coding and billing advice to customers;

· the federal Health Insurance Portability and Accountability Act of 1996, which prohibits executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters and which also imposes certain requirements relating to the privacy, security and transmission of individually identifiable health information;

· the Federal Food, Drug, and Cosmetic Act, which among other things, strictly regulates drug product and medical device marketing, prohibits manufacturers from marketing such products for off-label use and regulates the distribution of samples;

· federal laws that require pharmaceutical manufacturers to report certain calculated product prices to the government or provide certain discounts or rebates to government authorities or private entities, often as a condition of reimbursement under government healthcare programs;

· the so-called “federal sunshine” law, which requires pharmaceutical and medical device companies to monitor and report certain financial interactions with physicians and other healthcare professionals and healthcare organizations to the federal government for re-disclosure to the public; and

· state law equivalents of the above federal laws, such as anti-kickback and false claims laws which may apply to items or services reimbursed by any third-party payer, including commercial insurers, state transparency laws and state laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and often are not preempted by federal laws, thus complicating compliance efforts.

Table of Contents

Our global activities are subject to the U.S. Foreign Corrupt Practices Act which prohibits corporations and individuals from paying, offering to pay, or authorizing the payment of anything of value to any foreign government official, government staff member, political party, or political candidate in an attempt to obtain or retain business or to otherwise influence a person working in an official capacity. We are also subject to similar anti-bribery laws in the other countries in which we do business.

If our operations are found to be in violation of any of the laws described above or any other laws, rules or regulations that apply to us, we will be subject to penalties, including civil and criminal penalties, damages, fines and the curtailment or restructuring of our operations. Any penalties, damages, fines, curtailment or restructuring of our operations could adversely affect our ability to operate our business and our financial results. Although compliance programs can mitigate the risk of investigation and prosecution for violations of these laws, rules or regulations, we cannot be certain that our program will address all areas of potential exposure and the risks in this area cannot be entirely eliminated, particularly because the requirements and government interpretations of the requirements in this space are constantly evolving. Any action against us for violation of these laws, rules or regulations, even if we successfully defend against it, could cause us to incur significant legal expenses and divert our management’s attention from the operation of our business, as well as damage our business or reputation. Moreover, achieving and sustaining compliance with applicable federal and state privacy, security, fraud and reporting laws may prove costly.

Healthcare reform and other governmental and private payer initiatives may have an adverse effect upon, and could prevent, our products’ or product candidates’ commercial success.

The U.S. government and individual states are aggressively pursuing healthcare reform, as evidenced by the passing of the Patient Protection and Affordable Care Act, as modified by the Health Care and Education Reconciliation Act of 2010. These healthcare reform laws contain several cost containment measures that could adversely affect our future revenue, including, for example, increased drug rebates under Medicaid for brand name prescription drugs, extension of Medicaid rebates to Medicaid managed care plans, and extension of so-called 340B discounted pricing on pharmaceuticals sold to certain healthcare providers. Additional provisions of the healthcare reform laws that may negatively affect our future revenue and prospects for profitability include the assessment of an annual fee based on our proportionate share of sales of brand name prescription drugs to certain government programs, including Medicare and Medicaid, as well as mandatory discounts on pharmaceuticals sold to certain Medicare Part D beneficiaries. Other aspects of healthcare reform, such as expanded government enforcement authority and heightened standards that could increase compliance-related costs, could also affect our business.

In addition to governmental efforts in the U.S., foreign jurisdictions as well as private health insurers and managed care plans are likely to continue challenging manufacturers’ ability to obtain reimbursement, as well as the level of reimbursement, for pharmaceuticals and other healthcare-related products and services. These cost-control initiatives could significantly decrease the available coverage and the price we might establish for our products, which would have an adverse effect on our financial results.

The Food and Drug Administration Amendments Act of 2007 also provides the FDA enhanced post-marketing authority, including the authority to require post-marketing studies and clinical trials, labeling changes based on new safety information, and compliance with risk evaluations and mitigation strategies approved by the FDA. We and Allergan have established a nonclinical and clinical post-marketing plan with the FDA to understand the safety and efficacy of LINZESS in pediatrics and AstraZeneca is establishing a clinical post-marketing plan with the FDA to further evaluate the renal and cardiovascular safety of ZURAMPIC, each of which is discussed above. The FDA’s exercise of this authority has resulted (and is expected to continue to result) in increased development-related costs following the commercial launch of our products, and could result in potential restrictions on the sale and/or distribution of our products, even in such products’ approved indications and patient populations.

In pursuing our growth strategy, we will incur a variety of costs and may devote resources to potential opportunities that are never completed or for which we never receive the benefit. Our failure to successfully discover, acquire, develop and market additional product candidates or approved products would impair our ability to grow and adversely affect our business.

As part of our growth strategy, we intend to explore further linaclotide and lesinurad development opportunities. We and Allergan are exploring development opportunities to enhance the clinical profile of LINZESS by seeking to expand its utility in IBS-C and CIC, as well as studying linaclotide in additional indications, populations and formulations to assess its potential to treat various GI conditions. Additionally, we have rights to develop products containing lesinurad as an active ingredient in all indications, populations and formulations in the U.S. and we are currently evaluating such development opportunities, as well as opportunities within its approved indications, populations and formulations. These development efforts may fail or may not increase the revenues that we generate from our products. Furthermore, they may result in adverse events, or perceived adverse events, in certain patient populations that are then attributed to the currently approved patient population, which may result in adverse regulatory action at the FDA or, with respect to linaclotide, in other countries or harm our products’ reputation in the marketplace, each of which could materially harm our revenues from our products.

Table of Contents

We are also pursuing various other programs in our pipeline. We may spend several years and make significant investments in developing any current or future internal product candidate, and failure may occur at any point. Our product candidates are in various stages of development and must satisfy rigorous standards of safety and efficacy before they can be approved for sale by the FDA. To satisfy these standards, we must allocate resources among our various development programs and we must engage in costly and lengthy discovery and development efforts, which are subject to unanticipated delays and other significant uncertainties. Despite our efforts, our product candidates may not offer therapeutic or other improvement over existing competitive drugs, be proven safe and effective in clinical trials, or meet applicable regulatory standards. It is possible that none of the product candidates we are developing will be approved for commercial sale, which would impair our ability to grow.

We have ongoing or planned nonclinical and clinical trials for linaclotide, lesinurad and a number of our internal product candidates, and the strength of our company’s pipeline will depend in large part on the outcomes of these studies. Many companies in the pharmaceutical industry have suffered significant setbacks in clinical trials even after achieving promising results in earlier nonclinical or clinical trials. The findings from our completed nonclinical studies may not be replicated in later clinical trials, and our clinical trials may not be predictive of the results we may obtain in later-stage clinical trials or of the likelihood of regulatory approval. Results from our clinical trials and findings from our nonclinical studies could lead to abrupt changes in our development activities, including the possible limitation or cessation of development activities associated with a particular product candidate or program. Furthermore, our analysis of data obtained from nonclinical and clinical activities is subject to confirmation and interpretation by the FDA and other applicable regulatory authorities, which could delay, limit or prevent regulatory approval. Satisfaction of FDA or other applicable regulatory requirements is costly, time-consuming, uncertain and subject to unanticipated delays.

In addition, because our internal research capabilities are limited, we may be dependent upon pharmaceutical and biotechnology companies, academic scientists and other researchers to sell or license products or technology to us. The success of this strategy depends partly upon our ability to identify, select, discover and acquire promising pharmaceutical product candidates and products. The process of proposing, negotiating and implementing a license or acquisition of a product candidate or approved product is lengthy and complex. Other companies, including some with substantially greater financial, marketing and sales resources, may compete with us for the license or acquisition of product candidates and approved products. We have limited resources to identify and execute the acquisition or in-licensing of third-party products, businesses and technologies and integrate them into our current infrastructure. Moreover, we may devote resources to potential acquisitions or in-licensing opportunities that are never completed, or we may fail to realize the anticipated benefits of such efforts. We may not be able to acquire the rights to additional products or product candidates on terms that we find acceptable, or at all.

In addition, such acquisitions may entail numerous operational and financial risks, including:

· exposure to unknown liabilities;

· disruption of our business and diversion of our management’s time and attention to develop acquired products, product candidates or technologies;

· incurrence of substantial debt, dilutive issuances of securities or depletion of cash to pay for acquisitions;

· higher than expected acquisition and integration costs;

· difficulty in combining the operations and personnel of any acquired businesses with our operations and personnel;

· increased amortization expenses;

· impairment of relationships with key suppliers or customers of any acquired businesses due to changes in management and ownership; and

· inability to motivate key employees of any acquired businesses.

Furthermore, we may have little or no insight or control over the development and commercialization of any product that we have in-licensed outside the licensed territory. If other licensees do not effectively develop or commercialize any such product outside the licensed territory, our reputation or the reputation of any such product may be impacted. Also, any product candidate that we acquire may require additional development efforts prior to commercial sale, including extensive clinical testing and approval by the FDA and applicable foreign regulatory authorities. All product candidates are prone to risks of failure typical of pharmaceutical product development, including the possibility that a product candidate will not be shown to be sufficiently safe and effective for approval by regulatory authorities.

Table of Contents

Delays in the completion of clinical testing of any of our product candidates could result in increased costs and delay or limit our ability to generate revenues.

Delays in the completion of clinical testing could significantly affect our product development costs. We do not know whether planned clinical trials will be completed on schedule, if at all. The commencement and completion of clinical trials can be delayed for a number of reasons, including delays related to:

· obtaining regulatory approval to commence a clinical trial;

· reaching agreement on acceptable terms with prospective clinical research organizations, or CROs, and trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites;

· manufacturing sufficient quantities of a product candidate for use in clinical trials;

· obtaining institutional review board approval to conduct a clinical trial at a prospective site;

· recruiting and enrolling patients to participate in clinical trials for a variety of reasons, including competition from other clinical trial programs for the treatment of similar conditions; and

· maintaining patients who have initiated a clinical trial but may be prone to withdraw due to side effects from the therapy, lack of efficacy or personal issues, or who are lost to further follow-up.

Clinical trials may also be delayed as a result of ambiguous or negative interim results. In addition, a clinical trial may be suspended or terminated by us, an institutional review board overseeing the clinical trial at a clinical trial site (with respect to that site), the FDA, or other regulatory authorities due to a number of factors, including:

· failure to conduct the clinical trial in accordance with regulatory requirements or the study protocols;

· inspection of the clinical trial operations or trial sites by the FDA or other regulatory authorities resulting in the imposition of a clinical hold;

· unforeseen safety issues; or

· lack of adequate enrollment or funding to continue the clinical trial.

Additionally, changes in regulatory requirements and guidance may occur, and we may need to amend clinical trial protocols to reflect these changes. Each protocol amendment would require institutional review board review and approval, which may adversely impact the costs, timing or successful completion of the associated clinical trials. If we or, with respect to the clinical activities for the FDC Product, AstraZeneca terminate or experience delays in the completion of any clinical trials, the commercial prospects for our product candidates may be harmed, and our ability to generate product revenues will be delayed. In addition, many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of regulatory approval.

We may not be able to manage our business effectively if we lose any of our current management team or if we are unable to attract and motivate key personnel.

We may not be able to attract or motivate qualified management and scientific, clinical, operations and commercial personnel in the future due to the intense competition for qualified personnel among biotechnology, pharmaceutical and other businesses, particularly in the greater-Boston area. If we are not able to attract and motivate necessary personnel to accomplish our business objectives, we will experience constraints that will significantly impede the achievement of our objectives.

We are highly dependent on the drug discovery, development, regulatory, commercial, financial and other expertise of our management, particularly Peter M. Hecht, Ph.D., our chief executive officer; Mark G. Currie, Ph.D., our senior vice president, chief scientific officer and president of research and development; Tom Graney, our chief financial officer and senior vice president, finance and corporate strategy; Thomas A. McCourt, our senior vice president, marketing and sales and chief commercial officer; and Halley E. Gilbert, our senior vice president, chief legal officer, and secretary. Transitions in our senior management team may result in operational disruptions, and our business may be harmed as a result. In addition to the competition for personnel, the Boston area in particular is characterized by a high cost of living. As such, we could have difficulty attracting experienced personnel to our company and may be required to expend significant financial resources in our employee recruitment efforts.

Table of Contents

We also have scientific and clinical advisors who assist us in formulating our product development, clinical strategies and our global supply chain plans, as well as sales and marketing advisors who have assisted us in our commercialization strategy and brand plan for linaclotide and lesinurad. These advisors are not our employees and may have commitments to, or consulting or advisory contracts with, other entities that may limit their availability to us, or may have arrangements with other companies to assist in the development and commercialization of products that may compete with ours.

Security breaches and other disruptions could compromise our information and expose us to liability, which would cause our business and reputation to suffer.

In the ordinary course of our business, we collect and store sensitive data, including intellectual property, our proprietary business information and that of our suppliers and business partners, as well as personally identifiable information of our patients, clinical trial participants and employees. We also have outsourced elements of our information technology structure, and as a result, we are managing independent vendor relationships with third parties who may or could have access to our confidential information. Similarly, our business partners and other third party providers possess certain of our sensitive data. The secure maintenance of this information is critical to our operations and business strategy. Despite our security measures, our information technology and infrastructure may be vulnerable to attacks by hackers or breached due to employee error, malfeasance or other disruptions. We, our partners, vendors and other third party providers could be susceptible to third party attacks on our, and their, information security systems, which attacks are of ever-increasing levels of sophistication and are made by groups and individuals with a wide range of motives and expertise, including criminal groups. Any such breach could compromise our, and their, networks and the information stored there could be accessed, publicly disclosed, lost or stolen. Any such access, disclosure or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, disrupt our operations, and damage our reputation, any of which could adversely affect our business.

Our business involves the use of hazardous materials, and we must comply with environmental laws and regulations, which can be expensive and restrict how we do business.

Our activities involve the controlled storage, use and disposal of hazardous materials. We are subject to federal, state, city and local laws and regulations governing the use, manufacture, storage, handling and disposal of these hazardous materials. Although we believe that the safety procedures we use for handling and disposing of these materials comply with the standards prescribed by these laws and regulations, we cannot eliminate the risk of accidental contamination or injury from these materials. In the event of an accident, local, city, state or federal authorities may curtail the use of these materials and interrupt our business operations. We do not currently maintain hazardous materials insurance coverage.

Risks Related to Intellectual Property

Limitations on the patent rights relating to our products and our product candidates may limit our ability to prevent third parties from competing against us.

Our success depends on our ability to obtain and maintain patent protection for our products and product candidates, preserve our trade secrets, prevent third parties from infringing upon our proprietary rights and operate without infringing upon the proprietary rights of others.

The strength of patents in the pharmaceutical industry involves complex legal and scientific questions and can be uncertain. Patent applications in the U.S. and most other countries are confidential for a period of time until they are published, and publication of discoveries in scientific or patent literature typically lags actual discoveries by several months or more. As a result, we cannot be certain that we were the first to conceive inventions covered by our patents and pending patent applications or that we were the first to file patent applications for such inventions. In addition, we cannot be certain that our patent applications will be granted, that any issued patents will adequately protect our intellectual property, or that such patents will not be challenged, narrowed, invalidated or circumvented.

We have several issued patents and pending applications in the U.S. related to LINZESS, including a LINZESS composition of matter and methods of use patent (U.S. Patent 7,304,036) and two patents relating to our commercial, room temperature stable formulation of linaclotide and methods of using this formulation. We also have additional U.S. patents and applications covering processes for making LINZESS, formulations and dosing regimens thereof, and molecules related to LINZESS. Although none of these issued patents currently is subject to a patent reexamination or review, we cannot guarantee that they will not be subject to reexamination or review by the U.S. Patent and Trademark Office, or the USPTO, in the future. If any or all of our LINZESS-related patents were invalidated, we would still have at least five years of marketing exclusivity under the Hatch-Waxman Act from FDA approval of LINZESS. We believe that each of the patents in our linaclotide patent portfolio was rightfully issued and the portfolio gives us sufficient freedom to operate; however, if any of our present or future patents is invalidated, this could have an adverse effect

Table of Contents

on our business and financial results, particularly for the period beyond five years following marketing approval. In March 2013, an opposition to one of our granted patents covering linaclotide was filed in Europe. In April 2015, the patent was upheld in its entirety by the European Patent Office, affirming the strength of our intellectual property and our belief that the opposition was without merit. We believe that this patent was appropriately granted but we cannot be certain of this until the opposition proceedings, including the associated appeals process, are complete. While the opposition is ongoing, we will incur additional expense and be required to focus additional efforts on the proceedings. However, even if this patent were ultimately found to be invalid, we have other composition of matter- and use-related linaclotide patents that are granted and in force, and we believe these patents provide strong and sufficient patent protection in Europe.

We received an exclusive license from AstraZeneca for several issued patents and pending applications in the U.S. related to ZURAMPIC, including a ZURAMPIC composition of matter patent (U.S. Patent 8,003,681), several patents directed to a ZURAMPIC pharmaceutical composition and methods of use, and patents and applications relating to polymorphic forms of lesinurad and methods of manufacturing lesinurad. Although none of these issued patents currently is subject to a patent reexamination or review, we cannot guarantee that they will not be subject to reexamination or review by the USPTO in the future. If any or all of the ZURAMPIC-related patents were invalidated, we would still have at least five years of marketing exclusivity under the Hatch-Waxman Act from FDA approval of ZURAMPIC. We believe that each of the patents in AstraZeneca’s U.S. lesinurad patent portfolio was rightfully issued and the portfolio gives us sufficient freedom to operate; however, if any of AstraZeneca’s present or future lesinurad patents is invalidated, this could have an adverse effect on our business and financial results, particularly for the period beyond five years following marketing approval.

Furthermore, the America Invents Act, which was signed into law in 2011, has made several major changes in the U.S. patent statutes. These changes will permit third parties to challenge our patents more easily and will create uncertainty with respect to the interpretation and practice of U.S. patent law for the foreseeable future.

We also rely upon unpatented trade secrets, unpatented know-how and continuing technological innovation to develop and maintain our competitive position, which we seek to protect, in part, by confidentiality agreements with our employees and our partners and consultants. We also have agreements with our employees and selected consultants that obligate them to assign their inventions to us. It is possible, however, that technology relevant to our business will be independently developed by a person that is not a party to such an agreement. Furthermore, if the employees and consultants that are parties to these agreements breach or violate the terms of these agreements, we may not have adequate remedies, and we could lose our trade secrets through such breaches or violations. Additionally, our trade secrets could otherwise become known or be independently discovered by our competitors.

In addition, the laws of certain foreign countries do not protect proprietary rights to the same extent or in the same manner as the U.S., and, therefore, we may encounter problems in protecting and defending our intellectual property in certain foreign jurisdictions.

If we are sued for infringing intellectual property rights of third parties, it will be costly and time consuming, and an unfavorable outcome in such litigation could have a material adverse effect on our business.

Our commercial success depends on our ability, and the ability of our partners, to develop, manufacture, market and sell our products and use our proprietary technologies without infringing the proprietary rights of third parties. Numerous U.S. and foreign issued patents and pending patent applications, which are owned by third parties, exist in the fields in which we and our partners are developing products. As the biotechnology and pharmaceutical industry expands and more patents are issued, the risk increases that our potential products may give rise to claims of infringement of the patent rights of others. There may be issued patents of third parties of which we are currently unaware that may be infringed by linaclotide, lesinurad or our product candidates. Because patent applications can take many years to issue, there may be currently pending applications which may later result in issued patents that linaclotide, lesinurad or our product candidates may infringe.

We may be exposed to, or threatened with, litigation by third parties alleging that linaclotide, lesinurad or our product candidates infringe their intellectual property rights. If linaclotide, lesinurad or one of our product candidates is found to infringe the intellectual property rights of a third party, we or our partners could be enjoined by a court and required to pay damages and could be unable to develop or commercialize linaclotide, lesinurad or the applicable product candidate unless we obtain a license to the intellectual property rights. A license may not be available to us on acceptable terms, if at all. In addition, during litigation, the counter-party could obtain a preliminary injunction or other equitable relief which could prohibit us from making, using or selling our products, pending a trial on the merits, which may not occur for several years.

There is a substantial amount of litigation involving patent and other intellectual property rights in the biotechnology and pharmaceutical industries generally. If a third party claims that we or our partners infringe its intellectual property rights, we may face a number of issues, including, but not limited to:

Table of Contents

· infringement and other intellectual property claims which, regardless of merit, may be expensive and time-consuming to litigate and may divert our management’s attention from our core business;

· substantial damages for infringement, which we may have to pay if a court decides that the product at issue infringes on or violates the third party’s rights, and, if the court finds that the infringement was willful, we could be ordered to pay treble damages and the patent owner’s attorneys’ fees;

· a court prohibiting us from selling our product unless the third party licenses its rights to us, which it is not required to do;

· if a license is available from a third party, we may have to pay substantial royalties, fees or grant cross-licenses to our intellectual property rights; and

· redesigning our products so they do not infringe, which may not be possible or may require substantial monetary expenditures and time.

We may become involved in legal proceedings to protect or enforce the patents relating to our products and our product candidates, which could be expensive and time consuming, and unfavorable outcomes in such proceedings could have a material adverse effect on our business.

Competitors may infringe the patents relating to our products and our product candidates or may assert that such patents are invalid. To counter ongoing or potential infringement or unauthorized use, we may be required to file infringement claims, which can be expensive and time-consuming. Litigation with generic manufacturers has become increasingly common in the biotechnology and pharmaceutical industries. In addition, in an infringement or invalidity proceeding, a court or patent administrative body may determine that a patent of ours is not valid or is unenforceable, or may refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover the technology in question. One or more generic drug manufacturers may file abbreviated new drug applications, or ANDAs, with the FDA for generic versions of our products. Generic drug manufacturers will first be able to file ANDAs in August 2016 for LINZESS and in December 2019 for ZURAMPIC, but we may not become aware of these filings for several months after any such submission due to procedures specified under applicable FDA regulations. When filing an ANDA for one of our products, a generic drug manufacturer may choose to challenge one or more of the patents that cover such product. As such, we may need to protect our intellectual property rights by bringing legal proceedings against the generic drug manufacturer.

Additionally, the validity of the patents relating to our products and our product candidates may be challenged by third parties pursuant to administrative procedures introduced by the American Invents Act, specifically inter partes review, or IPR, and/or post grant review, or PGR, before the USPTO. Generic drug manufacturers may challenge our patents through IPRs or PGRs instead of or in addition to ANDA legal proceedings. Patent litigation, IPRs and PGRs involve complex legal and factual questions and we may need to devote significant resources to such legal proceedings. We can provide no assurance concerning the duration or the outcome of any such patent-related lawsuits or administrative proceedings. An adverse result in any litigation or defense proceedings could put one or more of the patents relating to our products and our product candidates at risk of being invalidated or interpreted narrowly and could put our patent applications at risk of not issuing, which would materially harm our business.

Interference or derivation proceedings brought by the USPTO may be necessary to determine the priority of inventions with respect to the patents relating to our products and our product candidates and patent applications or those of our partners. An unfavorable outcome could require us to cease using the technology or to attempt to license rights to it from the prevailing party. Our business could be harmed if a prevailing party does not offer us a license on terms that are acceptable to us. Litigation or interference proceedings may fail and, even if successful, may result in substantial costs and distraction of our management and other employees. In addition, we may not be able to prevent, alone or with our partners, misappropriation of our proprietary rights, particularly in countries where the laws may not protect those rights as fully as in the U.S.

Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, as well as the potential for public announcements of the results of hearings, motions or other interim proceeding or developments, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation.

Table of Contents

Risks Related to Our Finances and Capital Requirements

We have incurred significant losses since our inception and cannot guarantee when, if ever, we will become profitable.

In recent years, we have focused primarily on developing, manufacturing and commercializing linaclotide, as well as developing our other product candidates. We have financed our business to date primarily through the issuance of equity, our collaboration and license arrangements, our January 2013 issuance of our 11% PhaRMA Notes due 2024, or the PhaRMA Notes, related to the sales of LINZESS in the U.S. and our June 2015 issuance of our 2.25% Convertible Senior Notes due June 15, 2022, or the 2022 Notes, and we have incurred losses in each year since our inception in 1998. We currently derive substantially all of our revenue from our LINZESS collaboration with Allergan for the U.S. We believe that the revenues from the LINZESS collaboration will continue to constitute a significant portion of our total revenue for the foreseeable future. We incurred net losses of approximately $35.0 million and $81.2 million in the six months ended June 30, 2016 and 2015, respectively. As of June 30, 2016, we had an accumulated deficit of approximately $1.1 billion. We cannot be certain that sales of LINZESS and ZURAMPIC, and the revenue from our other commercial activities will not fall short of our projections or be delayed. Further, we expect to continue to incur substantial expenses in connection with our efforts to launch ZURAMPIC, commercialize linaclotide and lesinurad, and research and develop our product candidates. Because of the numerous risks and uncertainties associated with developing and commercializing pharmaceutical products, as well as those related to our expectations for LINZESS and ZURAMPIC and our other commercial activities, we are unable to predict the extent of any future losses or guarantee when, or if, our company will become profitable or cash flow positive. If we never achieve profitability or positive cash flows, or achieve either later than we anticipate, this will have an adverse effect on our stockholders’ equity and working capital.

We may need additional funding and may be unable to raise capital when needed, which could cause us to delay, reduce or eliminate our product development programs or commercialization efforts.

In June 2015, we issued approximately $335.7 million aggregate principal amount of our 2022 Notes and we have previously raised additional funds through other capital raising activities, including the sale of shares of our Class A common stock in public offerings and the issuance of our PhaRMA Notes in January 2013. However, marketing and selling primary care drugs, purchasing commercial quantities of pharmaceutical products, developing product candidates, conducting clinical trials and accessing externally developed products are expensive and uncertain. Circumstances, our strategic imperatives, or opportunities to create or acquire new programs, as well as maturities, redemptions or repurchases of our outstanding debt securities, could require us to, or we may choose to, seek to raise additional funds. The amount and timing of our future funding requirements will depend on many factors, including, but not limited to:

· the level of underlying demand for linaclotide by prescribers and patients in the U.S., the E.U. and the other countries where it is approved and for ZURAMPIC by prescribers and patients in the U.S.;

· the costs associated with commercializing LINZESS and ZURAMPIC in the U.S.;

· the costs of establishing, maintaining and/or expanding sales, marketing, distribution, and market access capabilities for linaclotide and lesinurad;

· the regulatory approval of linaclotide outside of the U.S., the E.U. and the other countries where it is approved, and the timing of commercial launches in those countries, as well as the associated development and commercial milestones and royalties;

· the rate of progress, the cost of our clinical trials and the other costs associated with our linaclotide product development programs, including our post-approval nonclinical and clinical studies of linaclotide in pediatrics and our investment to enhance the clinical profile of LINZESS within IBS-C and CIC, as well as to study linaclotide in additional indications, populations and formulations to assess its potential to treat various GI conditions;

· the rate of progress and the costs associated with development of lesinurad, including costs for which we are required to reimburse AstraZeneca for conducting the post-marketing study for ZURAMPIC required by the FDA and the clinical and regulatory activities for the FDC Product, as well as for providing transition services;

· the costs and timing of in-licensing additional products or product candidates or acquiring other complementary companies;

Table of Contents

· the achievement and timing of milestone payments and royalties due or payable under our collaboration and license agreements;

· the status, terms and timing of any collaboration, licensing, co-commercialization or other arrangements;

· the timing of any regulatory approvals of our product candidates;

· whether the holders of our 2022 Notes hold the notes to maturity without conversion into our Class A common stock and whether we are required to repurchase our 2022 Notes prior to maturity upon a fundamental change, as defined in the indenture governing the 2022 Notes; and

· whether we seek to redeem or repurchase all or part of our outstanding debt through cash purchases and/or exchanges, in open market purchases, privately negotiated transactions, by tender offer or otherwise.

Additional funding may not be available on acceptable terms or at all. If adequate funds are not available, we may be required to delay or reduce the scope of our commercialization efforts, delay, reduce or eliminate one or more of our development programs or delay or abandon potential strategic opportunities.

Our ability to pay principal of and interest on our outstanding debt securities will depend in part on the receipt of payments from Allergan under our collaboration agreement for North America.

In January 2013, we issued $175.0 million aggregate principal amount of our PhaRMA Notes bearing an annual interest rate of 11% and in June 2015, we issued approximately $335.7 million aggregate principal amount of our 2022 Notes bearing an annual interest rate of 2.25%. Quarterly interest payments on our PhaRMA Notes commenced on June 15, 2013 and semi-annual payments on our 2022 Notes commenced on December 15, 2015. In March 2014, we began making quarterly payments on the PhaRMA Notes equal to the greater of (i) 7.5% of net sales of LINZESS in the U.S. for the preceding quarter and (ii) the quarterly interest amount. Principal on the PhaRMA Notes is repaid in an amount equal to the difference between (i) and (ii) above, when this is a positive number, until the principal has been paid in full. We expect that for the next few years, at a minimum, the net quarterly payments from Allergan will be a significant source of cash flow from operations. If the cash flows derived from the net quarterly payments that we receive from Allergan under the collaboration agreement for North America are insufficient on any particular payment date to fund the interest payment on our outstanding indebtedness, at a minimum, we will be obligated to pay the amounts of such shortfall out of our general funds. The determination of whether Allergan will be obligated to make a net quarterly payment to us in respect of a particular quarterly period is a function of the revenue generated by LINZESS in the U.S. as well as the development, manufacturing and commercialization expenses incurred by each of us and Allergan under the collaboration agreement for North America. Accordingly, since we cannot guarantee when, or if, our company will become profitable or cash flow positive, we cannot provide assurances that (i) we will have the available funds to fund the interest payment on our outstanding indebtedness, at a minimum, in the event that there is a deficiency in the net quarterly payment received from Allergan, (ii) there will be a net quarterly payment from Allergan at all or (iii) we will not also be required to make a true-up payment to Allergan under the collaboration agreement for North America, in each case, in respect of a particular quarterly period.

Our indebtedness could adversely affect our financial condition or restrict our future operations.

As of June 30, 2016, we had total indebtedness of approximately $485.5 million and available cash, cash equivalents and available for sale securities of $325.4 million. We chose to issue our PhaRMA Notes and 2022 Notes based on the additional strategic optionality that they create for us, and the limited restrictions that these debt securities place on our ability to run our business compared to other potential available financing transactions. However, our indebtedness, combined with our other financial obligations and contractual commitments, could have other important consequences on our business, including:

· limiting our ability to obtain additional financing to fund future working capital, capital expenditures or other general corporate purposes, including product development, commercialization efforts, research and development activities, strategic arrangements, acquisitions and refinancing of our outstanding debt;

· requiring a substantial portion of our cash flow to be dedicated to debt service payments instead of other purposes, thereby reducing the amount of cash flow available for working capital, capital expenditures, corporate transactions and other general corporate purposes;

· increasing our vulnerability to adverse changes in general economic, industry and competitive conditions;

Table of Contents

· limiting our flexibility in planning for and reacting to changes in the industry in which we compete;

· placing us at a disadvantage compared to other, less leveraged competitors or competitors with comparable debt at more favorable interest rates; and

· increasing our cost of borrowing.

If we do not generate sufficient cash flow from operations or if future borrowings are not available to us in an amount sufficient to pay our indebtedness, including payments of principal when due on our outstanding indebtedness or, in the case of our 2022 Notes, in connection with a transaction involving us that constitutes a fundamental change under the indenture governing the 2022 Notes, or to fund our liquidity needs, we may be forced to refinance all or a portion of our indebtedness on or before the maturity dates thereof, sell assets, reduce or delay currently planned activities or curtail operations, seek to raise additional capital or take other actions. We may not be able to execute any of these actions on commercially reasonable terms or at all. This, together with any of the factors described above, could materially and adversely affect our business, financial condition and results of operations.

In addition, while our 2022 Notes do not include covenants restricting the operation of our business except in certain limited circumstances, in the event of a default under the 2022 Notes, the noteholders or the trustee under the indenture governing the 2022 Notes may accelerate our payment obligations under the 2022 Notes, which could have a material adverse effect on our business, financial condition and results of operations. We are also required to offer to repurchase the 2022 Notes upon the occurrence of a fundamental change, which could include, among other things, any acquisition of our company (other than an acquisition in which at least 90% of the consideration is common stock listed on The NASDAQ Global or Global Select Market or The New York Stock Exchange), subject to the terms of the 2022 Notes indenture. The repurchase price must be paid in cash, and this obligation may have the effect of discouraging, delaying or preventing an acquisition of our company that would otherwise be beneficial to our security holders.

Further, although we are not as restricted under our PhaRMA Notes as we might have been under a more traditional secured credit facility provided by a bank, the indenture governing our PhaRMA Notes contains a number of restrictive covenants that impose restrictions on us and may limit our ability to engage in certain acts, including restrictions on our ability to:

· amend our collaboration agreement with Allergan for North America in a way that would have a material adverse effect on the noteholders’ rights, or terminate this collaboration agreement with respect to the U.S.;

· transfer our rights to commercialize the product under our collaboration agreement with Allergan for North America; and

· incur certain liens.

Upon a breach of the covenants under our PhaRMA Notes indenture, or if certain other defaults thereunder occur, the holders of our PhaRMA Notes could elect to declare all amounts outstanding under our PhaRMA Notes to be immediately due and payable and we cannot be certain that we will have sufficient assets to repay them. If we are unable to repay those amounts, the holders of our PhaRMA Notes could proceed against the collateral granted to them to secure the debt securities and we could be forced into bankruptcy or liquidation. If we breach our covenants under our PhaRMA Notes indenture and seek a waiver, we may not be able to obtain a waiver from the required noteholders. If this occurs, we would be in default under our PhaRMA Notes indenture and the holders of our PhaRMA Notes could exercise their rights, as described above.

Each of our 2022 Notes and the PhaRMA Notes also include cross-default features providing that a default under the indenture governing either the 2022 Notes or the PhaRMA Notes would likely result in a default under the indenture governing the other indebtedness. In the event of such default, the trustee or noteholders could elect to declare all amounts outstanding to be immediately due and payable under the applicable indenture, which could have a material adverse effect on our business, financial condition and results of operations.

Convertible note hedge and warrant transactions entered into in connection with our 2022 Notes may affect the value of our Class A common stock.

In connection with our 2022 Notes, we entered into Convertible Note Hedges and separate Note Hedge Warrant transactions with certain financial institutions. These transactions are expected generally to reduce the potential dilution upon any conversion of our 2022 Notes or offset any cash payments we are required to make in excess of the principal amount of converted 2022 Notes, as the case may be.

Table of Contents

In connection with these transactions, the financial institutions purchased our Class A common stock in secondary market transactions and entered into various over-the-counter derivative transactions with respect to our Class A common stock. These entities or their affiliates are likely to modify their hedge positions from time to time prior to conversion or maturity of the 2022 Notes by purchasing and selling shares of our Class A common stock or other instruments they may wish to use in connection with such hedging. Any of these activities could adversely affect the value of our Class A common stock and, as a result, the number of shares and the value of the Class A common stock noteholders will receive upon conversion of the 2022 Notes. In addition, under certain circumstances the counterparties have the right to terminate the Convertible Note Hedges and settle the Note Hedge Warrants at fair value (as defined in the applicable confirmations), which may result in us not receiving all or any portion of the anticipated benefit of the Convertible Note Hedges. If the price of our Class A common stock increases such that the hedge transactions settle in our favor, we could also be exposed to credit risk related to the counterparties to the Convertible Note Hedges, which would limit or eliminate the benefit of such transactions to us.

Our quarterly and annual operating results may fluctuate significantly.

We expect our operating results to be subject to frequent fluctuations. Our net loss and other operating results will be affected by numerous factors, including:

· the level of underlying demand for linaclotide in the U.S., the E.U. and the other countries where it is approved and for ZURAMPIC in the U.S;

· wholesalers’ buying patterns with respect to LINZESS and ZURAMPIC;

· the costs associated with commercializing LINZESS and ZURAMPIC in the U.S.;

· the achievement and timing of milestone payments and royalties due or payable under our collaboration and license agreements;

· our execution of any collaboration, partnership, licensing or other strategic arrangements, and the timing of payments we may make or receive under these arrangements;

· any excess or obsolete inventory or impairments of assets, including in-process research and development and other intangible assets, and associated write-downs;

· any changes in the fair value of contingent consideration and the associated impact on our statement of operations;

· any variations in the level of expenses related to our development programs;

· addition or termination of clinical trials;

· regulatory developments affecting our products and product candidates; and

· any material lawsuit in which we may become involved.

If our operating results fall below the expectations of investors or securities analysts, the price of our Class A common stock could decline substantially. Furthermore, any quarterly or annual fluctuations in our operating results may, in turn, cause the price of our stock to fluctuate substantially.

Our ability to use net operating loss and tax credit carryforwards and certain built-in losses to reduce future tax payments is limited by provisions of the Internal Revenue Code, and it is possible that our net operating loss and tax credit carryforwards may expire before we generate sufficient taxable income to use such carryforwards, or that certain transactions or a combination of certain transactions may result in material additional limitations on our ability to use our net operating loss and tax credit carryforwards.

We have incurred significant net losses since our inception and cannot guarantee when, if ever, we will become profitable. To the extent that we continue to generate federal and state taxable losses, unused net operating loss and tax credit carryforwards will carry forward to offset future taxable income, if any, until such unused carryforwards expire. Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, contain rules that limit the ability of a company that undergoes an ownership change, which is generally any change in ownership of more than 50% of its stock over a three-year period, to utilize its net operating loss and tax

Table of Contents

credit carryforwards and certain built-in losses recognized in years after the ownership change. These rules generally operate by focusing on ownership changes involving stockholders owning directly or indirectly 5% or more of the stock of a company and any change in ownership arising from a new issuance of stock by the company. Generally, if an ownership change occurs, the yearly taxable income limitation on the use of net operating loss and tax credit carryforwards and certain built-in losses is equal to the product of the applicable long term tax exempt rate and the value of the company’s stock immediately before the ownership change.

If we do not generate sufficient taxable income prior to the expiration of the applicable carryforwards or if the carryforwards are subject to the limitations described above, we may be unable to offset our taxable income with losses, or our tax liability with credits, before such losses and credits expire and therefore would incur larger federal or state income tax liability. We have completed several financings since our inception which may have resulted in a change in control as defined by Section 382, or could result in a change in control in the future.

Risks Relating to Securities Markets and Investment in Our Stock

Anti-takeover provisions under our charter documents and Delaware law could delay or prevent a change of control which could negatively impact the market price of our Class A common stock.

Provisions in our certificate of incorporation and bylaws may have the effect of delaying or preventing a change of control. These provisions include the following:

· Our certificate of incorporation provides for a dual class common stock structure. As a result of this structure, holders of our Class B common stock have significant influence over certain matters requiring stockholder approval, including a merger involving Ironwood, a sale of substantially all Ironwood assets and a dissolution or liquidation of Ironwood. This concentrated control could discourage others from initiating a change of control transaction that other stockholders may view as beneficial.

· Our board of directors is divided into three classes serving staggered three-year terms, such that not all members of the board are elected at one time. This staggered board structure prevents stockholders from replacing the entire board at a single stockholders’ meeting.

· Our board of directors has the right to elect directors to fill a vacancy created by the expansion of the board of directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors.

· Our board of directors may issue, without stockholder approval, shares of preferred stock. The ability to authorize preferred stock makes it possible for our board of directors to issue preferred stock with voting or other rights or preferences that could impede the success of any attempt to acquire us.

· Stockholders must provide advance notice to nominate individuals for election to the board of directors or to propose matters that can be acted upon at a stockholders’ meeting. Furthermore, stockholders may only remove a member of our board of directors for cause. These provisions may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect such acquirer’s own slate of directors or otherwise attempting to obtain control of our company.

· Our stockholders may not act by written consent. As a result, a holder, or holders, controlling a majority of our capital stock are not able to take certain actions outside of a stockholders’ meeting.

· Special meetings of stockholders may be called only by the chairman of our board of directors, our chief executive officer or a majority of our board of directors. As a result, a holder, or holders, controlling a majority of our capital stock are not able to call a special meeting.

· A majority of the outstanding shares of Class B common stock are required to amend our certificate of incorporation and a super-majority (80%) of the outstanding shares of common stock are required to amend our bylaws, which make it more difficult to change the provisions described above.

In addition, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which may prohibit certain business combinations with stockholders owning 15% or more of our outstanding voting stock. These and other provisions in our certificate of incorporation and our bylaws and in the Delaware General Corporation Law could make it more difficult for

Table of Contents

stockholders or potential acquirers to obtain control of our board of directors or initiate actions that are opposed by the then-current board of directors.

The concentration of voting control on certain corporate matters with our pre-IPO stockholders will limit the ability of the holders of our Class A common stock to influence such matters.

Because of our dual class common stock structure, the holders of our Class B common stock, who consist of our pre-IPO investors (and their affiliates), founders, directors, executives and certain of our employees, are able to control certain corporate matters listed below if any such matter is submitted to our stockholders for approval even though such stockholders own less than 50% of the outstanding shares of our common stock. As of June 30, 2016, there were 129,778,212 and 15,394,327 shares of our Class A common stock and Class B common stock issued and outstanding, respectively, and an aggregate of 18,809,550 and 3,256,229 outstanding stock options (vested and unvested) and 1,255,826 and no unvested restricted stock units for shares of our Class A common stock and Class B common stock, respectively. As of June 30, 2016, the holders of our Class A common stock own approximately 89% and the holders of our Class B common stock own approximately 11% of the outstanding shares of Class A common stock and Class B common stock, combined. However, because of our dual class common stock structure these holders of our Class A common stock have approximately 46% and holders of our Class B common stock have approximately 54% of the total votes on each of the matters identified in the list below. This concentrated control of our Class B common stockholders limits the ability of the Class A common stockholders to influence those corporate matters and, as a result, we may take actions that many of our stockholders do not view as beneficial, which could adversely affect the market price of our Class A common stock.

Each share of Class A common stock and each share of Class B common stock has one vote per share on all matters except for the following matters, for which each share of our Class B common stock has ten votes per share and each share of our Class A common stock has one vote per share:

· adoption of a merger or consolidation agreement involving Ironwood;

· a sale of all or substantially all of Ironwood’s assets;

· a dissolution or liquidation of Ironwood; and

· every matter, if and when any individual, entity or “group” (as that term is used in Regulation 13D of the Exchange Act) has, or has publicly disclosed (through a press release or a filing with the SEC) an intent to have, beneficial ownership of 30% or more of the number of outstanding shares of Class A common stock and Class B common stock, combined.

If we identify a material weakness in our internal control over financial reporting, it could have an adverse effect on our business and financial results and our ability to meet our reporting obligations could be negatively affected, each of which could negatively affect the trading price of our Class A common stock.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. Accordingly, a material weakness increases the risk that the financial information we report contains material errors.

We regularly review and update our internal controls, disclosure controls and procedures, and corporate governance policies. In addition, we are required under the Sarbanes-Oxley Act of 2002 to report annually on our internal control over financial reporting. Our system of internal controls, however well-designed and operated, is based in part on certain assumptions and includes elements that rely on information from third parties, including our partners. Our system can provide only reasonable, not absolute, assurances that the objectives of the system are met. If we, or our independent registered public accounting firm, determine that our internal controls over financial reporting are not effective, or we discover areas that need improvement in the future, these shortcomings could have an adverse effect on our business and financial results, and the price of our Class A common stock could be negatively affected.

Further, we are dependent on our partners for information related to our results of operations. Our net profit or net loss generated from the sales of LINZESS in the U.S. is partially determined based on amounts provided by Allergan and involves the use of estimates and judgments, which could be modified in the future. We are highly dependent on our linaclotide partners for timely and accurate information regarding any revenues realized from sales of linaclotide in their respective territories, and in the case of Allergan for the U.S. and AstraZeneca for China, Hong Kong and Macau, the costs incurred in developing and commercializing it in order to accurately report our results of operations. We are also dependent on AstraZeneca for timely and accurate information regarding any lesinurad expenses for which we are required to reimburse AstraZeneca and for certain finance and financial reporting services, in each case, until we are able to establish such capabilities or such activities are completed. Our results of operations are

Table of Contents

also dependent on the timeliness and accuracy of information from any other licensing, collaboration or other partners we may have, as well as our and our partners’ use of estimates and judgments. If we do not receive timely and accurate information or if estimated activity levels associated with the relevant collaboration at a given point in time are incorrect, whether the result of a material weakness or not, we could be required to record adjustments in future periods. Such adjustments, if significant, could have an adverse effect on our financial results, which could lead to a decline in our Class A common stock price.

If we cannot conclude that we have effective internal control over our financial reporting, or if our independent registered public accounting firm is unable to provide an unqualified opinion regarding the effectiveness of our internal control over financial reporting, investors could lose confidence in the reliability of our financial statements, which could lead to a decline in our stock price. Failure to comply with reporting requirements could also subject us to sanctions and/or investigations by the SEC, The NASDAQ Stock Market or other regulatory authorities.

We expect that the price of our Class A common stock will fluctuate substantially.

The market price of our Class A common stock may be highly volatile due to many factors, including:

· the commercial performance of linaclotide in the U.S., the E.U. and the other countries where it is approved and the commercial performance of ZURAMPIC in the U.S., as well as the costs associated with such activities;

· any third-party coverage and reimbursement policies for our products;

· market conditions in the pharmaceutical and biotechnology sectors;

· developments, litigation or public concern about the safety of our products or our potential products;

· announcements of the introduction of new products by us or our competitors;

· announcements concerning product development results, including clinical trial results, or intellectual property rights of us or others;

· actual and anticipated fluctuations in our quarterly and annual operating results;

· deviations in our operating results from any guidance we may provide or the estimates of securities analysts;

· sales of additional shares of our common stock or sales of securities convertible into common stock or the perception that these sales might occur;

· additions or departures of key personnel;

· developments concerning current or future collaboration, partnership, licensing or other strategic arrangements; and

· discussion of us or our stock price in the financial or scientific press or in online investor communities.

The realization of any of the risks described in these “Risk Factors” could have a dramatic and material adverse impact on the market price of our Class A common stock. In addition, class action litigation has often been instituted against companies whose securities have experienced periods of volatility. Any such litigation brought against us could result in substantial costs and a diversion of management attention, which could hurt our business, operating results and financial condition.

Item 6. Exhibits

See the Exhibit Index following the signature page to this Quarterly Report on Form 10-Q.

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	Ironwood Pharmaceuticals, Inc.

Date: August 8, 2016	By:	/s/ PETER M. HECHT
		Peter M. Hecht
		Chief Executive Officer and Director
		(Principal Executive Officer)


Date: August 8, 2016	By:	/s/ GINA CONSYLMAN
		Gina Consylman
		Vice President, Finance and Chief Accounting Officer
		(Principal Accounting Officer)

Table of Contents

EXHIBIT INDEX

Exhibit No:		Description
3.1		Eleventh Amended and Restated Certificate of Incorporation. Incorporated by reference to Exhibit 3.1 of Ironwood Pharmaceuticals, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2009, filed with the SEC on March 30, 2010.

3.2		Fifth Amended and Restated Bylaws. Incorporated by reference to Exhibit 3.2 of Ironwood Pharmaceuticals, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2009, filed with the SEC on March 30, 2010.

10.1++*		License Agreement, dated as of April 26, 2016, by and between Ardea Biosciences, Inc. and Ironwood Pharmaceuticals, Inc.

10.2++*		Commercial Supply Agreement, dated as of April 26, 2016, by and between AstraZeneca Pharmaceuticals LP and Ironwood Pharmaceuticals, Inc.

31.1*		Certification of Chief Executive Officer pursuant to Rules 13a-14 or 15d-14 of the Exchange Act.

31.2*		Certification of Chief Financial Officer pursuant to Rules 13a-14 or 15d-14 of the Exchange Act.

32.1‡		Certification of Chief Executive Officer pursuant to Rules 13a-14(b) or 15d-14(b) of the Exchange Act and 18 U.S.C. Section 1350.

32.2‡		Certification of Chief Financial Officer pursuant to Rules 13a-14(b) or 15d-14(b) of the Exchange Act and 18 U.S.C. Section 1350.

101.INS*		XBRL Instance Document.

101.SCH*		XBRL Taxonomy Extension Schema Document.

101.CAL*		XBRL Taxonomy Extension Calculation Linkbase Document.

101.LAB*		XBRL Taxonomy Extension Label Linkbase Database.

101.PRE*		XBRL Taxonomy Extension Presentation Linkbase Document.

101.DEF*		XBRL Taxonomy Extension Definition Linkbase Document.

* Filed herewith.

‡ Furnished herewith.

++ Confidential treatment requested under 17 C.F.R. §§200.80(b)(4) and Rule 24b-2. The confidential portions of this exhibit have been omitted and are marked accordingly. The confidential portions have been provided separately to the SEC pursuant to the confidential treatment request.

Exhibit 10.1

CONFIDENTIAL

Execution Version

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

LICENSE AGREEMENT

by and between

IRONWOOD PHARMACEUTICALS, INC.

and

ARDEA BIOSCIENCES, INC.

April 26, 2016

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

TABLE OF CONTENTS

1.	DEFINITIONS		1

2.	LICENSE GRANT AND OTHER GRANTS OF RIGHTS		14

	2.1.	License to Ironwood	14

	2.2.	License to AstraZeneca	15

	2.3.	Joint Technology and Development Data	15

	2.4.	Rights of Reference	15

	2.5.	Use of Contractors	16

	2.6.	Sublicensing	17

	2.7.	Technology Transfer	17

	2.8.	Rights to Verinurad Products	18

	2.9.	[**] Restriction	19

	2.10.	Section 365(n)	19

	2.11.	No Other Rights	20

3.	DEVELOPMENT		20

	3.1.	Responsibility	20

	3.2.	Zurampic Product	20

	3.3.	Allopurinol Combination Product Development	23

	3.4.	Amendments to Development Plans and Development Budgets	23

	3.5.	Development Expenses	24

	3.6.	Reports of Development Activities	24

	3.7.	Additional Development Activities	24

4.	REGULATORY MATTERS		24

	4.1.	Ownership of Regulatory Submissions and Regulatory Approvals	24

	4.2.	Regulatory Responsibility	24

	4.3.	Clinical Trial Responsibilities	26

	4.4.	Global Safety Database	27

5.	ANCILLARY AGREEMENTS		27

	5.1.	Clinical Supply Agreement	27

	5.2.	Pharmacovigilance Agreement	27

6.	COMMERCIALIZATION; ADDITIONAL COVENANTS AND RESPONSIBILITIES		28

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

	6.1.	Commercialization	28

	6.2.	Executive Meetings	28

	6.3.	Publication	29

	6.4.	Clinical Study Results	29

	6.5.	Product Promotional Materials	29

	6.6.	Financial Statements Required by Rule 3-05 of Regulation S-X	29

	6.7.	[**] Agreements	29

7.	CONSIDERATION		30

	7.1.	Upfront Payment	30

	7.2.	Milestones	30

	7.3.	Royalties; Adjustment	31

	7.4.	Development Expenses	32

	7.5.	Expense Limitations	35

	7.6.	Records and Audits	36

	7.7.	Taxes and Withholding	37

	7.8.	Currency	38

	7.9.	Method of Payments	38

	7.10.	Confidentiality	38

	7.11.	Reconciliation	39

	7.12.	Interest	39

8.	COVENANTS		39

	8.1.	Confidentiality	39

	8.2.	Compliance with Law	43

	8.3.	Business Ethics	43

	8.4.	Export Restrictions	44

9.	REPRESENTATIONS AND WARRANTIES		45

	9.1.	Representations and Warranties of Each Party	45

	9.2.	Additional Representations, Warranties and Covenants of AstraZeneca	45

	9.3.	Additional Representations and Warranties of Ironwood	48

	9.4.	Representation by Legal Counsel	49

	9.5.	No Inconsistent Agreements	49

	9.6.	Disclaimer	49

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

10.	INTELLECTUAL PROPERTY		49

	10.1.	Disclosure	49

	10.2.	Ownership	49

	10.3.	Intellectual Property Working Group	50

	10.4.	Prosecution and Maintenance of Patent Rights	51

	10.5.	Trademarks and Domain Names	53

	10.6.	Enforcement and Defense of Technology Rights	58

	10.7.	Third Party Claims	60

	10.8.	Third Party Licenses	62

	10.9.	Patent Marking	63

	10.10.	Patent Certifications	63

	10.11.	Privileged Communications	63

11.	TERM AND TERMINATION		64

	11.1.	Term	64

	11.2.	Termination for Cause	64

	11.3.	Termination for Convenience	65

	11.4.	Termination for Failure of the Occurrence of the Effective Date	65

	11.5.	Competing Product	65

	11.6.	Effects of Termination and Expiration	66

	11.7.	Survival of Certain Obligations	67

12.	PRODUCT LIABILITY, INDEMNIFICATION, AND INSURANCE		68

	12.1.	Indemnification by AstraZeneca	68

	12.2.	Indemnification by Ironwood	69

	12.3.	Procedure	70

	12.4.	Insurance	70

	12.5.	Liability Limitations	70

13.	GUARANTEE		71

14.	MISCELLANEOUS		71

	14.1.	Governing Law; Jurisdiction; Dispute Resolution	71

	14.2.	Force Majeure	73

	14.3.	HSR Filings	73

	14.4.	Additional Approvals	74

iii

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

14.5.	Waiver and Non-Exclusion of Remedies	74

14.6.	Notices	74

14.7.	Entire Agreement	76

14.8.	Effectiveness	76

14.9.	Language	76

14.10.	Amendment	76

14.11.	Assignment	76

14.12.	No Benefit to Others	77

14.13.	Counterparts	77

14.14.	Severability	77

14.15.	Further Assurance	77

14.16.	Publicity	77

14.17.	Certain Conventions	77

14.18.	Relationship of the Parties	78

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

EXHIBITS

Exhibit A	Zurampic Development Plan
Exhibit B	Allopurinol Combination Product Development Plan
Exhibit C-1	Ironwood Press Release
Exhibit C-2	AstraZeneca Press Release

Schedules

Schedule 1.93	Licensed Compound
Schedule 1.137	[**] High Level Results
Schedule 1.151	[**] Interim High Level Results
Schedule 1.157	Verinurad
Schedule 3.7	Additional Development Activities
Schedule 5.1	Clinical Supply Agreement Exceptions
Schedule 6.1.2	Commercialization Plan
Schedule 9.2(a)	AstraZeneca Patent Rights
Schedule 10.5.1	Product Domain Names for the Zurampic Product and ZURAMPIC® Marks
Schedule 10.5.2	Possible Trademarks and Domain Names for Allopurinol Combination Product

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

LICENSE AGREEMENT

THIS LICENSE AGREEMENT (the “ Agreement ”) is entered into on this 26th day of April, 2016 (the “ Execution Date ”), by and among Ironwood Pharmaceuticals, Inc., a corporation organized under the laws of Delaware (“ Ironwood ”), Ardea Biosciences, Inc., a corporation organized under the laws of Delaware (“ AstraZeneca ”), and solely with respect to Section 13.1 , Zeneca Inc., a corporation organized under the laws of Delaware. Ironwood and AstraZeneca may be referred to in this Agreement individually as a “ Party ” and collectively as the “ Parties .”

RECITALS

A. AstraZeneca and/or its Affiliates are engaged in the development and manufacture of the Zurampic Product and the Allopurinol Combination Product.

B. Ironwood is engaged in the research, development, manufacture and commercialization of human pharmaceutical products.

C. AstraZeneca desires to grant to Ironwood and Ironwood desires to receive an exclusive license to develop and manufacture the Products throughout the world for marketing and distribution in the Territory and to market and develop the Products in the Territory, in each case on the terms and conditions set forth in this Agreement.

D. AstraZeneca desires to grant to Ironwood, and Ironwood desires to receive, an exclusive right of first negotiation and right of last refusal for an exclusive license agreement with respect to the Verinurad Products in the Verinurad Field in the Territory on the terms and conditions set forth in this Agreement.

AGREEMENT

NOW, THEREFORE, in consideration of the mutual promises and covenants set forth below and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties agree as follows:

1. DEFINITIONS

For purposes of this Agreement, the following terms, when used in this Agreement, have the meanings assigned to them in this Article 1 .

1.1 “[**]” is defined in Section 1.93 .

1.2 “ Accounting Standards ” means GAAP, International Financial Reporting Standards or such other similar national standards as a Party, Affiliate or its or their Sublicensee adopts, in each case, consistently applied.

1.3 “ Additional Development Activities ” is defined in Section 3.7 .

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

1.4 “ Additional Voluntary PMR Expenses ” is defined in Section 3.4 .

1.5 “ Affiliate ” means, with respect to a Person, any Person that controls, is controlled by, or is under common control with such first Person, including, with respect to AstraZeneca, AstraZeneca UK Limited and AstraZeneca AB. For purposes of this definition only, “control” means (a) to possess, directly or indirectly, the power to direct the management or policies of a Person, whether through ownership of voting securities or by contract relating to voting rights or corporate governance, or (b) to own, directly or indirectly, more than 50% of the outstanding voting securities or other ownership interests of such Person.

1.6 “ Agreement ” is defined in the Introduction.

1.7 “ Allopurinol Combination Product ” means the [**].

1.8 “ Allopurinol Combination Product Development Budget ” is defined in Section 3.3.1 .

1.9 “ Allopurinol Combination Product Development Plan ” is defined in Section 3.3.1 .

1.10 “ Ancillary Agreements ” means the Commercial Supply Agreement, the Clinical Supply Agreement, the Pharmacovigilance Agreement and the Transitional Services Agreement and any other agreement entered into after the Execution Date between the Parties or their respective Affiliates, which agreement is designated in writing as an “Ancillary Agreement” under this Agreement.

1.11 “ Anti-Corruption Laws ” is defined in Section 8.3.1 .

1.12 “ Applicable Law ” means all applicable statutes, ordinances, regulations, rules, or orders of any kind whatsoever of any governmental authority or Regulatory Authority in the Territory or otherwise having jurisdiction over any portion of the Parties’ activities under this Agreement, as amended from time to time.

1.13 “ Arbitrators ” is defined in Section 14.1.3(a) .

1.14 “ AstraZeneca ” is defined in the Introduction.

1.15 “ AstraZeneca House Marks ” means AstraZeneca’s and its Affiliates’ trade names, corporate names and corporate logos and any Trademark that consists of or incorporates any of the foregoing.

1.16 “ AstraZeneca Indemnified Party ” is defined in Section 12.2 .

1.17 “ AstraZeneca Know-How ” means [**]. The AstraZeneca Know-How defined in clause (a) of this Section 1.17 shall not include any [**].

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

1.18 “ AstraZeneca Patent Rights ” means [**]. For clarity, AstraZeneca Patent Rights include any Collaboration Patent Rights included in the AstraZeneca Patent Rights but do not include any Joint Patent Rights or Ironwood Collaboration Patent Rights.

1.19 “ AstraZeneca Technology ” means AstraZeneca’s and its Affiliates’ interest in (a) the AstraZeneca Know-How and (b) the AstraZeneca Patent Rights.

1.20 “ AstraZeneca TSA Know-How ” means Know-How that is [**].

1.21 “ AstraZeneca TSA Patent Rights ” means any Patent Rights [**].

1.22 “ Audited Party ” is defined in Section 7.6.2 .

1.23 “ Auditing Party ” is defined in Section 7.6.2 .

1.24 “ Authorized Recipients ” is defined in Section 8.1.1 .

1.25 “ Authorized Representatives ” is defined in Section 8.3.2 .

1.26 “ Bankruptcy ” is defined in Section 11.2.3 .

1.27 “ Business Day ” means a day other than Saturday or Sunday on which banking institutions in both New York, New York and London, England are open for business.

1.28 “ Calendar Quarter ” means each of the three consecutive month periods ending on March 31, June 30, September 30, and December 31.

1.29 “ C.F.R ” means the Code of Federal Regulations, as may be amended from time to time.

1.30 “ Change of Control ” means, with respect to a Person, any of the following: (a) the sale or disposition of all or substantially all of the assets of such Person to a Third Party, (b) the acquisition by a Third Party, directly or indirectly, other than an employee benefit plan (or related trust) sponsored or maintained by such Person or any of its Affiliates, of more than fifty percent (50%) of such Person’s outstanding shares of voting capital stock or similar equity (e.g., capital stock entitled to vote generally for the election of directors), (c) the appointment or election to the board of directors or other governing board of such Person of members constituting a majority of such board who were not appointed, approved or recommended for election by the board as constituted immediately prior to the appointment or election of such majority, (d) the merger or consolidation of such Person with or into another corporation or entity, or (e) a liquidation or dissolution of such Person or any direct or indirect parent of such Person, excluding, in the case of (b) or (d) above, an acquisition or a merger or consolidation of a Person in which holders of shares of such Person’s voting capital stock or similar equity immediately prior to the acquisition, merger or consolidation have more than fifty percent (50%) of the ownership of voting capital stock or similar equity of the acquiring Third Party or the surviving corporation or entity in such merger or consolidation, as the case may be, immediately after the merger or consolidation. Notwithstanding the foregoing, a Change of Control

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

will not be deemed to occur on account of a sale of assets, merger or other transaction effected exclusively for the purpose of changing the corporate domicile or legal form of such Person.

1.31 “ Claim ” is defined in Section 14.1.3(a) .

1.32 “ Clinical Supply Agreement ” is defined in Section 5.1 .

1.33 “ Clinical Trial Material ” means the Licensed Compound or any Existing Product in finished dosage form (or in such other form as determined in accordance with the Clinical Supply Agreement) that is used in clinical trials, but not for commercial sale.

1.34 “ Collaboration Development Data ” means any (a) pharmacology, toxicology and other biological data included in the Collaboration Technology that was created to support a Regulatory Submission in the Territory and (b) clinical data included in the Collaboration Technology, including any data from any trial detailed in a Development Plan. For clarity, Product Development Data does not include the Collaboration Development Data.

1.35 “ Collaboration Know-How ” means Know-How that is invented, conceived, or developed by or on behalf of either Party’s or both Parties’ (or their Affiliates’) employees or Third Parties acting on such Party’s or Parties’ (or their Affiliates’) behalf, in each case in the course of such Party’s or Parties’ (or their Affiliates’) performance of activities under a Development Plan. Collaboration Know-How shall not include Development Data.

1.36 “ Collaboration Patent Rights ” means Patent Rights claiming Collaboration Know-How.

1.37 “ Collaboration Technology ” means Collaboration Know-How and Collaboration Patent Rights, and all other intellectual property rights in any of the foregoing.

1.38 “ Combination Domain Name ” is defined in Section 10.5.2 .

1.39 “ Combination Product ” means a Product that contains a Licensed Compound in combination with one or more other products or active ingredients and the manufacture, use or sale of such other products or active ingredients are not Covered by a Patent Right Controlled by AstraZeneca.

1.40 “ Combination Trademark ” is defined in Section 10.5.2 .

1.41 “ Commercial Supply Agreement ” means the Commercial Supply Agreement by and between AstraZeneca Pharmaceuticals LP and Ironwood executed as of even date herewith.

1.42 “ Commercial Supply Price ” will have the same meaning set forth in the Commercial Supply Agreement as “Supply Price.”

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

1.43 “ Commercialization ” means any and all activities of importing, marketing, promoting, distributing, offering for sale, or selling a Product in the Territory, including for example pre-First Commercial Sale market development activities conducted in anticipation of Regulatory Approval of a Product, seeking pricing reimbursement approvals for Product, if applicable, preparing advertising and promotional materials and sales force training. Commercialization does not include Development or Manufacturing. When used as a verb, “ Commercialize ” means to engage in Commercialization.

1.44 “[**]” means, [**].

1.45 “ Competing Product ” means any pharmaceutical product, other than a Product, that is [**]

1.46 “ Confidential Information ” means, subject to Sections 8.1.2 and 8.1.3 , any and all data, results, Know-How (including the Ironwood Know-How and AstraZeneca Know-How) and business information, whether oral or in writing or in any other form, disclosed before, on or after the date of this Agreement by one Party to the other Party under this Agreement or any Ancillary Agreement or prior to the Effective Date. For the avoidance of doubt, information disclosed pursuant to Section 3.6 by one Party to the other Party regarding Product Development Activities shall be considered the Confidential Information of the disclosing Party.

1.47 “ Control ” or “ Controlled ” means, with respect to any intellectual property right or Know-How of a Party or any of its Affiliates or, as applicable, Future Acquirer, that the Party or its Affiliates or, as applicable, a Future Acquirer (a) owns, has an interest in, or, other than pursuant to this Agreement, has a license to such intellectual property right or Know-How and (b) has the ability to grant access, a license or a sublicense to such intellectual property right or Know-How to the other Party as provided in this Agreement without violating an agreement with or other rights of any Third Party, provided, however, that any intellectual property right or Know-How Controlled by a Future Acquirer of a Party will not be treated as “Controlled” by such Party for purposes of this Agreement except to the extent that such intellectual property right or Know-How is (i) developed, acquired or otherwise Controlled by such Future Acquirer of such Party prior to the time such Future Acquirer qualifies as such, pursuant to or in connection with a license or other agreement with such Party, whether owned by such Party or such Future Acquirer (for purposes of this definition, such intellectual property rights and Know-How, the “ Related IP ”) as of the effective date of the applicable Change of Control of the relevant Party, (ii) developed or acquired by such Future Acquirer following such Change of Control with the use of the such Party’s Know-How or any Related IP or (iii) used in the development, manufacture or commercialization of a Licensed Compound or Product after the effective date of the applicable Change of Control of such Party by the Future Acquirer.

1.48 “ Core PMR Expenses ” is defined in Section 7.4.1(d) .

1.49 “ Cover ”, “ Covering ” or “ Covered ” means, with respect to any Patent Right, that the manufacture, use, offer for sale, sale or import of any article or composition of matter,

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

or the practice of any process or method, infringes at least one (1) Valid Claim of such Patent Right (or, in the case of a Valid Claim that has not yet issued, would infringe such Valid Claim if it were to issue without modification).

1.50 “ Database Costs ” is defined in Section 4.4.2 .

1.51 “ Development ” means all activities performed by or on behalf of AstraZeneca in the performance of a Development Plan. Development will not include Manufacturing or Commercialization. When used as a verb, “ Develop ” means to engage in Development.

1.52 “ Development Budget ” means the Zurampic Development Budget or the Allopurinol Combination Product Development Budget.

1.53 “ Development Data ” means Collaboration Development Data and Product Development Data.

1.54 “ Development Expense ” means, subject to Section 7.4.2 , with respect to the [**] in accordance with Section 7.5 and [**].

1.55 “ Development Plan ” is defined in Section 3.4 .

1.56 “ Development Termination Event ” is defined in Section 3.2.2(b) .

1.57 “[**]” means the [**].

1.58 “ Disclosing Party ” is defined in Section 8.1.1 .

1.59 “ Effective Date ” means the later of (a) the date on which the Parties confirm in writing, pursuant to Section 14.3 , that no HSR Filing is required or (b) if an HSR Filing is required, the date on which all applicable waiting periods under the HSR Act with respect to the transactions contemplated under this Agreement have expired or have been terminated.

1.60 “ Execution Date ” is defined in the Introduction.

1.61 “ Existing Products ” means the Zurampic Product and the Allopurinol Combination Product.

1.62 “ Field ” means [**].

1.63 “ First Commercial Sale ” means, with respect to a Product, the first sale of such Product under this Agreement for use in the Field to a Third Party in the Territory, after the NDA for such Product has been approved for use in the Field by the competent Regulatory Authorities.

1.64 “ First Phase IIb Clinical Trial ” is defined in Section 2.8.2 .

1.65 “ Force Majeure ” is defined in Section 14.2 .

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

1.66 “ FTE Rate ” means the amount to be paid [**]. The FTE Rate will be [**]. The FTE Rate for a full-time equivalent for a Calendar Quarter shall equal [**] of the foregoing annual rate.

1.67 “[**]” is defined in Section 2.8.10 .

1.68 “ Future Acquirer ” means the Third Party to any Change of Control transaction and such Third Party’s Affiliates immediately prior to the Change of Control.

1.69 “ GAAP ” means United States generally accepted accounting principles, as in effect from time to time.

1.70 “ Generic Equivalent ” means, with respect to a Product, any pharmaceutical product that [**].

1.71 “ Good Clinical Practice ” or “ GCP ” means the standards of good clinical practice as are required by governmental agencies in countries in which the Products are intended to be sold under this Agreement.

1.72 “ HSR Act ” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder.

1.73 “ HSR Filing ” is defined in Section 14.3 .

1.74 “ ICC ” is defined in Section 14.1.3(a) .

1.75 “ Indemnified Party ” is defined in Section 12.3 .

1.76 “ Indemnifying Party ” is defined in Section 12.3 .

1.77 “ Indirect Taxes ” means VAT, sales taxes, consumption taxes and other similar taxes required by law to be disclosed on a Tax Invoice.

1.78 “ Infringement ” is defined in Section 10.6.1 .

1.79 “ IPWG ” is defined in Section 10.3 .

1.80 “ Ironwood ” is defined in the Introduction.

1.81 “ Ironwood Collaboration Patent Rights ” is defined in Section 10.4.1 .

1.82 “ Ironwood House Marks ” means Ironwood’s and its Affiliates’ trade names, corporate names and corporate logos and any Trademark that consists of or incorporates any of the foregoing.

1.83 “ Ironwood Indemnified Party ” is defined in Section 12.1 .

1.84 “ Ironwood Know-How ” means [**].

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

1.85 “ Ironwood Patent Right ” means any [**].

1.86 “ Ironwood Technology ” means Ironwood’s and its Affiliates’ interest in [**].

1.87 “ Joint Know-How ” means any Collaboration Know-How that is invented, conceived or developed jointly by one or more employees of Ironwood or its Affiliates (or any Third Party or Third Parties acting on any of their behalf) and one or more employees of AstraZeneca or its Affiliates (or any Third Party or Third Parties acting on any of their behalf).

1.88 “ Joint Patent Right ” means any Patent Right that claims Joint Know-How.

1.89 “ Joint Technology ” means Joint Know-How, Joint Patent Rights, and all other intellectual property rights therein.

1.90 “ Know-How ” means all inventions, discoveries, data (including Development Data), information (including scientific, technical or regulatory information), processes, methods, techniques, materials, technology, results, analyses, laboratory, non-clinical and clinical data, commercial materials or other know-how, whether or not patentable, including without limitation pharmacology, toxicology, drug stability, manufacturing and formulation methodologies and techniques, absorption, distribution, metabolism and excretion studies, clinical and non-clinical safety and efficacy studies, marketing studies and materials (including patient marketing materials), training materials and digital content from Product websites (including content from websites hosted on a Product Domain Name).

1.91 “ Knowledge ” means, with respect to AstraZeneca and its Affiliates: [**], and with respect to Ironwood, [**].

1.92 “ Liabilities ” means all losses, damages, liabilities, settlements, penalties, fines and expenses (including reasonable attorneys’ fees and expenses) arising from claims against the Parties or their respective Affiliates or any of their respective employees, officers, directors, agents or permitted Sublicensees by Third Parties (such claims, “ Third Party Claims ”).

1.93 “ Licensed Compound ” means the compound generally referred to as “lesinurad” and [**].

1.94 “ Major Markets ” means [**].

1.95 “ Manufacture ,” “ Manufactured ” or “ Manufacturing ” means all activities involved in the production, storing, handling, packaging, and labeling of any Licensed Compound or Product to be Developed or Commercialized under this Agreement.

1.96 “ Milestone Event ” is defined in Section 7.2.2 .

1.97 “ NBO ” is defined in Section 2.8.6(b) .

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

1.98 “ Net Sales ” means, with respect to any period, the gross amounts invoiced by Ironwood, its Affiliates or Sublicensees, as applicable (including any purchases of Licensed Compound from Ironwood, its Affiliates or Sublicensees), to Third Parties for sales of the Product in the Field in the Territory, less the following deductions to the extent included in the gross invoiced sales price for the Product or otherwise directly paid or incurred by Ironwood, its Affiliates or Sublicensees, with respect to the sale of the Product in the Territory: (a) trade, quantity or cash discounts credits, adjustments or allowances, including those granted on account of price adjustments, billing errors, rejected goods, or damaged goods; (b) rebates and chargebacks allowed, given or accrued (including, but not limited to, cash, governmental and managed care rebates, hospital or other buying group chargebacks, and governmental taxes in the nature of a rebate based on usage levels or sales of the Product); (c) sales, excise, turnover, inventory, and similar taxes (not offset or refunded, except in the case of value added taxes) assessed on the sale of the Product; (d) bad debts reserved for on the basis utilized by Ironwood in its branded pharmaceutical business generally or, if greater, bad debts actually written off, in each case which are attributable to sales of Product; (e) administrative fees paid to group purchasing organization, managed care entities or other similar types of organizations or networks participating in the distribution and/or sales of the Product; (f) amounts paid or credited to customers for inventory management services; (g) any other similar and customary deductions that are consistent with GAAP; and (h) an allowance for transportation costs, distribution expenses, special packaging and related insurance charges, freight and insurance charges, taken in accordance with Ironwood’s standard practices applicable to other of Ironwood’s products, which allowance will in no event exceed [**] of the amount arrived at after application of items (a) to (g) above. Net Sales will be determined in accordance with applicable Accounting Standards. Without limiting the generality of the foregoing, sales, transfers, or dispositions of Product for charitable, promotional (including samples), non-clinical, clinical, or regulatory purposes will be excluded from Net Sales, as will sales or transfers of Product among a Party and its Affiliates or Sublicensees.

Net Sales of Combination Products will be calculated by first determining Net Sales of such Combination Product (in its entirety) pursuant to the foregoing and then multiplying the Net Sales of the Combination Product by the fraction A/(A+B), where A is the gross invoice price of the relevant Licensed Compound if sold separately as a single agent Product in the Territory and B is the gross invoice price of the other active ingredient(s) sold as single agent product(s) included in the Combination Product if sold separately in the Territory. In the event no such separate sales are made by Ironwood, its Affiliates or Sublicensees, in the Territory, Net Sales of the Combination Product will be calculated by multiplying such Net Sales by a fraction fairly and reasonably reflecting the relative value contributed by the relevant Licensed Compound or Product to the total value of the Combination Product as determined by the Parties in good faith. Notwithstanding anything to the contrary herein, the Allopurinol Combination Product shall be considered a Product, but not a “Combination Product” for the purposes of this Section 1.98 .

1.99 “ New Data ” is defined in Section 2.8.8 .

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

1.100 “ New Drug Application ” or “ NDA ” means a new drug application filed with a Regulatory Authority (not including pricing and reimbursement approval), that is analogous to the new drug application with the United States Food and Drug Administration described in 21 C.F.R. § 314.

1.101 “[**] Agreements ” is defined in Section 1.57 .

1.102 “ Officials ” is defined in Section 8.3.2 .

1.103 “ Order ” is defined in Section 8.1.3(a)(i) .

1.104 “ Party ” and “ Parties ” is defined in the Introduction.

1.105 “ Patent Rights ” means any and all (a) U.S. or foreign patent applications, including all provisional applications, substitutions, continuations, continuations-in-part, divisions, renewals, and all patents granted thereon, (b) all U.S. or foreign patents, reissues, reexaminations and extensions or restorations by existing or future extension or restoration mechanisms, including supplementary protection certificates or the equivalent thereof, and (c) any other form of government-issued right substantially similar to any of the foregoing.

1.106 “ Payments ” is defined in Section 7.7.1 .

1.107 “ Person ” means any individual, corporation, company, limited liability company, partnership, limited liability partnership, trust, estate, proprietorship, joint venture, association, organization, or entity.

1.108 “ Pharmacovigilance Agreement ” is defined in Section 5.2.

1.109 “ Phase II ” in reference to a clinical trial means a trial defined in 21 C.F.R. § 312.21(b), as may be amended from time to time, or any foreign equivalent thereto.

1.110 “ Phase IIb ” in reference to a Phase II clinical trial means a trial, the principal purpose of which is a determination of efficacy and safety in the target population, at the intended clinical dose or doses or range of doses, on a sufficient number of subjects and for a sufficient period of time to confirm the optimal manner of use of a product prior to the initiation of a Phase III clinical trial.

1.111 “ Phase III ” in reference to a clinical trial means a trial defined in 21 C.F.R. § 312.21(c), as may be amended from time to time, or any foreign equivalent thereto.

1.112 “ PMR Budget ” is defined in Section 7.4.1(a) .

1.113 “ PMR End Date ” is defined in Section 7.4.1(b) .

1.114 “ PMR Expense Cap ” is defined in Section 7.4.1(e) .

1.115 “ PMR Planned End Date ” is defined in Section 7.4.1(a) .

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

1.116 “ PMR Trial ” means any post-marketing clinical study in the Territory required by the FDA related to safety of the Zurampic Product.

1.117 “ Product ” means any pharmaceutical product in finished form that contains a Licensed Compound as at least one of the active ingredients.

1.118 “ Product Development Activities ” is defined in Section 3.6 .

1.119 “ Product Development Data ” means any pharmacology, toxicology and other biological data (a) that is not Collaboration Development Data and (b) is developed or generated by or on behalf of one Party, its Affiliates or Sublicensees in the course of developing, Commercializing or Manufacturing the Licensed Compounds or Products.

1.120 “ Product Domain Name ” is defined in Section 10.5.1 .

1.121 “ Product Trademarks ” is defined in Section 10.5.1 .

1.122 “ Prohibited Payment ” is defined in Section 8.3.2 .

1.123 “ Quality Standards ” is defined in Section 10.5.3(b) .

1.124 “ Receiving Party ” is defined in Section 8.1.1 .

1.125 “ Referenced Regulatory Filings ” means all Regulatory Submissions Controlled by AstraZeneca or any of its Affiliates on the Effective Date and during the Term, including Regulatory Submissions to which AstraZeneca receives a transferable Right of Reference from other licensees of the Licensed Compounds or Products, that are necessary or useful to develop or Manufacture the Licensed Compounds or Products anywhere in the world or Commercialize the Licensed Compounds or Products in the Field in the Territory.

1.126 “ Regulatory Approval ” means the approval and authorization of a Regulatory Authority in a country necessary to develop, manufacture, distribute, sell, or market a Product in that country, including pricing and reimbursement approval.

1.127 “ Regulatory Authority ” means any government regulatory authority involved in granting approvals for the development, manufacturing, distribution, marketing, reimbursement or pricing of a Product.

1.128 “ Regulatory Submission ” means any application for Regulatory Approval, notification, and other submission made to or with a Regulatory Authority that is necessary or reasonably desirable to develop, manufacture, distribute or commercialize the Product in the Field in a particular country, whether obtained before or after a Regulatory Approval in the country. Regulatory Submissions include, without limitation, investigational new drug applications, clinical trial applications and NDAs or imported drug license (IDL) applications, and amendments, renewals and supplements to any of the foregoing and their foreign counterparts, applications for pricing and reimbursement approvals, and all proposed labels, labeling, package inserts, monographs, and packaging for the Product.

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

1.129 “ Related IP ” is defined in Section 1.47 .

1.130 “ Reporting Quarter ” is defined in Section 7.4.1(c) .

1.131 “ Right of Reference ” is defined in Section 2.4.1 .

1.132 “ ROFN End Date ” is defined in Section 2.8.7.

1.133 “ ROFN Period ” is defined in Section 2.8.6(b) .

1.134 “ Royalty Term ” means on a Product-by-Product basis, the period beginning with [**] and ending [**] following the later to occur of (a) [**] and (b) [**].

1.135 “ Safety Panel ” means a panel of [**]. In the event the Parties are required to select a Safety Panel, each Party will [**]. Each Party will [**]. The decision of [**] will be deemed the decision of the Safety Panel. The Parties will instruct the Safety Panel to reach its decision as promptly as practicable, but within [**].

1.136 “ Sarbanes-Oxley Act ” means the Sarbanes-Oxley Act of 2002, and the rules and regulations promulgated thereunder.

1.137 “[**] High Level Results ” means the results set forth on Schedule 1.137 .

1.138 “ Subject Technology ” is defined in Section 10.6.4 .

1.139 “ Sublicense ” means an agreement or arrangement pursuant to which a sublicense or distribution right has been granted.

1.140 “ Sublicensee ” means a Third Party that is granted a license, sublicense, covenant not to sue, or other grant of rights under this Agreement pursuant to the terms of this Agreement or otherwise granted rights with respect to any Licensed Compound or Product.

1.141 “ Sued Party ” is defined in Section 10.7.2 .

1.142 “ Tax ” or “ Taxation ” means any form of tax or taxation, levy, duty, charge, social security charge, contribution, or withholding of whatever nature (including any related fine, penalty, surcharge or interest) imposed by, or payable to, a Tax Authority. Notwithstanding the foregoing and for the avoidance of doubt, the term “Tax” for purposes of this Agreement shall not be construed to include industry fees described in Section 9008 of the Patient Protection and Affordable Care Act (as amended).

1.143 “ Tax Authority ” or “ Tax Authorities ” means any government, state or municipality, or any local, state, federal or other fiscal, revenue, customs, or excise authority, body or official anywhere in the world, authorized to levy tax.

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

1.144 “ Tax Invoice ” means an invoice including such particulars as are required by any law imposing Tax and such other information as required to claim any credit allowed under a law imposing Tax.

1.145 “ Technology ” means Know-How and Patent Rights.

1.146 “ Term ” is defined in Section 11.1 .

1.147 “ Territory ” means the United States of America, its territories and possessions (including Puerto Rico, irrespective of political status).

1.148 “ Third Party ” means any Person other than Ironwood, AstraZeneca and their respective Affiliates.

1.149 “ Third Party Claims ” is defined in Section 1.92 .

1.150 “ Third Party Obligations ” is defined in Section 10.8 .

1.151 “[**] Interim High Level Results ” means the results set forth on Schedule 1.151 .

1.152 “ Trademark ” means all trademarks, service marks, trade names, brand names, sub-brand names, trade dress rights, product configuration rights, certification marks, collective marks, logos, taglines, slogans, designs or business symbols and all words, names, symbols, colors, shapes, designations or any combination thereof that function as an identifier of source or origin or quality, whether or not registered, and all statutory and common law rights therein, and all registrations and applications therefor, together with all goodwill associated with, or symbolized by, any of the foregoing.

1.153 “ Transition Period ” shall have the meaning set forth in the Transitional Services Agreement.

1.154 “ Transitional Services Agreement ” means the Transitional Services Agreement by and between AstraZeneca Pharmaceuticals LP and Ironwood executed as of even date herewith.

1.155 “ U.S. Bankruptcy Code ” means Title 11, United States Code, as amended, or analogous provisions of Applicable Law outside the United States.

1.156 “ Valid Claim ” means, with respect to a Patent Right in a country, any claim of [**].

1.157 “ Verinurad ” means the compound generally referred to as “verinurad” and having the chemical structure set forth on Schedule 1.157 and any stereoisomers (e.g., enantiomers, diastereomers, atropisomers and cis-trans isomers), salts, esters, amides, metabolites, polymorphs and pro-drugs thereof.

1.158 “ Verinurad Data Package ” is defined in Section 2.8.4 .

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

1.159 “ Verinurad Field ” means [**].

1.160 “ Verinurad Last Refusal Right ” is defined in Section 2.8.3 .

1.161 “ Verinurad Product ” means any pharmaceutical product in finished form that contains Verinurad as at least one of the active ingredients.

1.162 “ Verinurad Rights ” is defined in Section 2.8.3 .

1.163 “ Verinurad Rights Period ” means the period commencing [**] and concluding on [**].

1.164 “ Verinurad ROFN ” is defined in Section 2.8.3 .

1.165 “ XOI ” means [**].

1.166 “ Year ” means each twelve (12) month period ending December 31st.

1.167 “ Zurampic Product ” means the Product that is the subject of NDA #207988 and, as of the Effective Date, has the brand name ZURAMPIC® in the Territory.

1.168 “ Zurampic Development Budget ” is defined in Section 3.2.1 .

1.169 “ Zurampic Development Plan ” is defined in Section 3.2.1 .

1.170 “ Zurampic Domain Names ” means those domain names set forth on Schedule 10.5.1 .

1.171 “ ZURAMPIC® Marks ” means those Trademarks set forth on Schedule 10.5.1 .

2. LICENSE GRANT AND OTHER GRANTS OF RIGHTS.

2.1. License to Ironwood . Subject to the terms and conditions of this Agreement, as of the Effective Date, AstraZeneca hereby grants to Ironwood, a perpetual (except as otherwise provided in Article 11 ), royalty-bearing (as set forth in Section 7.3 ), exclusive, nontransferable (except as set forth in Section 14.11 ) license, with the right to grant sublicenses as described in Section 2.6 , under the AstraZeneca Technology, AstraZeneca’s Product Development Data and AstraZeneca’s interest in the Joint Technology and Collaboration Development Data to (a) research, develop, make and have made, Licensed Compounds and Products in the Field inside or outside the Territory for purposes of development of the Products for or Commercialization of the Products in the Territory and (b) distribute, import, export, use, have used, sell, have sold, or offer for sale Licensed Compounds and Products in the Field in the Territory for purposes of development of the Products for or Commercialization of the Products in the Territory. Notwithstanding the foregoing, AstraZeneca reserves rights under the AstraZeneca Technology, AstraZeneca’s Product Development Data and AstraZeneca’s interest in the Joint Technology and the Collaboration Development Data (i) to the extent necessary to

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

perform its obligations or exercise its rights under this Agreement and the Ancillary Agreements, including (A) to conduct the Development activities for which it is responsible under the Development Plans and (B) to make and have made the Licensed Compounds or Products pursuant to the Commercial Supply Agreement and (ii) to research, develop, make and have made (A) compounds other than the Licensed Compounds inside or outside the Territory, (B) products other than Products inside or outside the Territory, and (C) the Licensed Compound and Products inside or outside the Territory for purposes of development of the Products for or Commercialization of Products outside the Territory.

2.2. License to AstraZeneca . Subject to the terms and conditions of this Agreement, Ironwood hereby grants to AstraZeneca (a) a perpetual, royalty-free, exclusive, nontransferable (except as set forth in Section 14.11 ) license, with the right to sublicense as described in Section 2.6 , under the Ironwood Technology, Ironwood’s Product Development Data and Ironwood’s interest in the Joint Technology and Collaboration Development Data (i) to commercialize the Licensed Compounds or Products outside of the Territory and (ii) to develop and manufacture the Licensed Compounds or Products inside or outside the Territory for purposes of development or commercialization of the Licensed Compounds or Products outside of the Territory and (b) a perpetual, royalty-free, non-exclusive, nontransferable (except as set forth in Section 2.6 and Section 14.11 ) license under the Ironwood Technology, Ironwood’s Product Development Data and Ironwood’s interest in the Joint Technology and Collaboration Development Data to the extent necessary to enable AstraZeneca to perform its obligations under and in accordance with this Agreement and the Ancillary Agreements. Notwithstanding the foregoing, Ironwood reserves rights under the Ironwood Technology, Ironwood’s Product Development Data and Ironwood’s interest in the Joint Technology and the Collaboration Development Data (i) to the extent necessary to perform its obligations or exercise its rights under this Agreement and the Ancillary Agreements and (ii) to research, develop, make and have made (A) compounds other than the Licensed Compounds inside or outside the Territory, (B) products other than Products inside or outside the Territory, and (C) the Licensed Compound and Products inside or outside the Territory for purposes of development of the Products for or Commercialization of Products inside the Territory.

2.3. Joint Technology and Development Data . Subject to the terms and conditions of this Agreement, each Party hereby grants the other Party a world-wide, non-exclusive, perpetual, royalty-free, fully paid up, freely sublicensable right and license under its interest in the Joint Technology and the Collaboration Development Data to exploit compounds other than Licensed Compounds and products other than the Products (a) anywhere in the world, and (b) without compensating or accounting to the other Party.

2.4. Rights of Reference .

2.4.1. To Ironwood . AstraZeneca hereby grants to Ironwood, its Affiliates and Sublicensees a “ Right of Reference ,” as that term is defined in 21

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

C.F.R. § 314.3(b) and any foreign counterpart to such regulation, to the Referenced Regulatory Filings (unless and until transferred to Ironwood hereunder) and the Development Data to the extent necessary or useful to (a) research, develop, make and have made Licensed Compounds and Products in the Field inside or outside of the Territory in support of seeking and obtaining Regulatory Approval for the Licensed Compounds and Products in the Territory or Commercialization of the Licensed Compounds and Products in the Territory and (b) distribute, import, export, distribute, use, have used, sell, have sold, or offer for sale Licensed Compounds and Products in the Field in the Territory, in each case of clauses (a) and (b) subject to and in accordance with any applicable terms and conditions of this Agreement. Any such Right of Reference is granted only with respect to information that either constitutes AstraZeneca Know-How, Joint Know-How or Development Data. AstraZeneca and its Affiliates shall require any Sublicensee, with respect to the Licensed Compounds or Products, to grant AstraZeneca or its Affiliate a transferable Right of Reference to all Regulatory Submissions of such Sublicensee so that such Regulatory Submissions are deemed Referenced Regulatory Filings under this Agreement.

2.4.2. To AstraZeneca . Ironwood hereby grants to AstraZeneca (and any current or future Sublicensee of AstraZeneca) such a Right of Reference to the Regulatory Submissions transferred to Ironwood pursuant to the Transitional Services Agreement, any other Regulatory Submissions filed by or on behalf of Ironwood, its Affiliates or Sublicensees and the Development Data to the extent necessary or useful to (a) subject to Section 4.3.3 , develop and manufacture the Licensed Compounds and Products inside or outside of the Territory in support of seeking and obtaining Regulatory Approval for Licensed Compounds and Products outside of the Territory or commercialization of the Licensed Compounds and Products outside of the Territory, (b) manufacture the Licensed Compounds and Products inside or outside the Territory for use outside of the Territory and (c) commercialize the Licensed Compounds and Products outside of the Territory, in each case of clauses (a) through (c) subject to and in accordance with any applicable terms and conditions of this Agreement. Any such Right of Reference is granted only with respect to information that constitutes Ironwood Know-How, Joint Know-How or Development Data.

2.4.3. Other Actions; Restrictions . Each Party will provide a signed statement to this effect, if requested by the other Party, in accordance with 21 C.F.R. § 314.50(g)(3) or any foreign counterpart to such regulation, in the case of a request by either Party, for the limited purpose described in this Section 2.4 . For the avoidance of doubt, neither Party may publish or otherwise publicly disclose any data of the other Party to which a Right of Reference is granted under this Section 2.4 except in accordance with this Agreement.

2.5. Use of Contractors . Subject to the terms of this Agreement and any Ancillary Agreement, either Party may perform any specific activities for which it is

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

responsible under the Development Plan through subcontracting to a Third Party contractor and may grant a Sublicense of the rights granted hereunder to any such Third Party contractor; provided that [**]. For clarity, except as set forth above in this Section 2.5 , [**].

2.6. Sublicensing . Each Party may only sublicense the rights granted to such Party under this Agreement as provided in Section 2.1 , Section 2.2 , Section 2.3 , Section 2.6 , Section 10.5.6 and Section 11.6.5 with the other Party’s prior written consent (such consent not to be unreasonably withheld) or otherwise in connection with engaging a Third Party contractor pursuant to Section 2.5 . Any Sublicenses granted by either Party pursuant to such Sections will be consistent with the terms of this Agreement. In addition, each Party will require any Sublicensee, with respect to the Licensed Compounds or Product whether within or outside the Territory, to cross-license or otherwise transfer or convey back to the granting Party all Technology which such Sublicensee may develop or acquire in connection with its activities with respect to the Licensed Compounds and Products that would constitute Ironwood Technology or AstraZeneca Technology if arising under Ironwood’s or AstraZeneca’s (or their respective Affiliates’) activities, respectively, so that any such Technology will be Controlled by the granting Party for purposes and to the extent of the licenses to the other Party provided by Sections 2.1 and 2.2 above. Notwithstanding the foregoing, [**].

2.7. Technology Transfer .

2.7.1. Within [**] following the Effective Date and, without limitation of any specific disclosure obligations of AstraZeneca and its Affiliates hereunder, AstraZeneca shall (and shall cause its Affiliates to) furnish to Ironwood copies of all material AstraZeneca Know-How (excluding AstraZeneca Know-How relating to Manufacturing of the Licensed Compounds or Products) that exists on the Effective Date in (a) its currently existing format or (b) in such other format as Ironwood may reasonably request [**]. AstraZeneca and its Affiliates’ obligations pursuant to this Section 2.7.1 are limited to that AstraZeneca Know-How not previously transferred to Ironwood pursuant to the Transitional Services Agreement.

2.7.2. During the Term, at the reasonable request of each Party (such request not to be made more than once per Calendar Quarter), the other Party shall (and shall cause its Affiliates to) provide to the requesting Party a written summary of all AstraZeneca Technology or Ironwood Technology, as applicable, and Joint Technology that is developed in whole or in part by such Party or otherwise comes into the Control of such Party or its Affiliates after the Effective Date (excluding AstraZeneca Technology or Ironwood Technology, as applicable, relating to Manufacturing of the Licensed Compounds or Products).

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

2.8. Rights to Verinurad Products .

2.8.1. Restrictions . Subject to the terms of this Agreement (including this Section 2.8 ), AstraZeneca shall not (and shall cause its Affiliates to not):

(a) during the Verinurad Rights Period, [** ] ;

(b) during the Verinurad Rights Period, [** ] ; or

For purposes of this Section 2.8.1 , in no event shall any Change of Control of the ultimate parent of AstraZeneca or any license, transfer, sale or granting of any Verinurad Rights in connection therewith be considered a violation of clause (a) or (b), but for clarity, notwithstanding such a Change of Control, Ironwood retains all of its rights with respect to the Verinurad Rights under this Section 2.8 following such a Change of Control.

2.8.2. Phase IIb Updates . AstraZeneca shall, [**]. AstraZeneca shall notify Ironwood in writing upon [**]. During the time period in which the First Phase IIb Clinical Trial is being conducted, AstraZeneca shall [**].

2.8.3. Scope of ROFN and Last Refusal Right . AstraZeneca hereby grants to Ironwood the exclusive right of first negotiation (“ Verinurad ROFN ”) and last refusal (“ Verinurad Last Refusal Right ”), as set forth in this Section 2.8 , with respect to the grant of exclusive rights to (a) develop and manufacture Verinurad Products in the Verinurad Field inside and outside of the Territory for development and commercialization in the Verinurad Field in the Territory and (b) commercialize Verinurad Products in the Verinurad Field in the Territory (such exclusive rights, the “ Verinurad Rights ”).

2.8.4. First Notice and Data Package . AstraZeneca shall notify Ironwood in writing upon the completion of the [**] Interim High Level Results for the first Phase IIb Clinical Trial conducted for a Verinurad Product in the Verinurad Field; provided that such notice shall and must be delivered within [**] of AstraZeneca’s receipt or generation of such [**] Interim High Level Results. This written notice shall be accompanied by a written report of any development activities undertaken by AstraZeneca or its Affiliates with respect to all Verinurad Products (including the Verinurad Product(s) subject to such Phase IIb Clinical Trial) in the Verinurad Field and a reasonably detailed summary of all results and data stemming from such development activities (including the [**] Interim High Level Results of the Phase IIb Clinical Trial, if applicable) (such information, the “ Verinurad Data Package ”).

2.8.5. Review Period . Upon Ironwood’s receipt of the Verinurad Data Package pursuant to Section 2.8.4 , Ironwood shall have [**] to review and assess the Verinurad Data Package and to determine whether it will exercise the Verinurad ROFN. During this review period, upon Ironwood’s reasonable request in connection with the evaluation of the Verinurad Data Package,

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

AstraZeneca shall promptly make available to Ironwood any other information Controlled by AstraZeneca or its Affiliates that (a) is related to the Verinurad Product(s), and (b) (i) is requested by Ironwood at least [**] prior to the end of such [**] period and (ii) [**].

2.8.6. Election .

(a) If Ironwood elects not to exercise the Verinurad ROFN, or [**].

(b) In order to exercise the Verinurad ROFN, Ironwood must [**].

2.8.7. Verinurad Last Refusal Right . Regardless of the outcome under Section 2.8.6 , if [** ].

(a) If AstraZeneca [**].

(b) If AstraZeneca [**].

2.8.8. The rights set forth above in this Section 2.8 shall apply [**] and, except for Section 2.8.1(c) , Section 2.8.9 and Section 2.8.11 , Ironwood shall have no further rights under this Section 2.8 and AstraZeneca shall have no further obligation under this Section 2.8 , unless during the Verinurad Rights Period [**]. In such a case, [**].

2.8.9. At no time during the Verinurad Rights Period shall AstraZeneca or its Affiliates [** ] .

2.8.10. During the Verinurad Rights Period, Ironwood will notify AstraZeneca in writing promptly upon the initiation of clinical development or commercialization of [**]. If at the time that AstraZeneca would be required to provide the [**] Interim High Level Results to Ironwood under this Section 2.8 , Ironwood or its Affiliates [**]. For so long as Ironwood or its Affiliates [**]. Thereafter, however, if Ironwood and its Affiliates [**].

2.8.11. During the Term, if AstraZeneca or its Affiliate desires to, directly or indirectly, license, transfer, sell or otherwise grant a Third Party any right to develop one or more Verinurad Products (a) in the Verinurad Field, provided that Ironwood does not have its rights under Sections 2.8.2 through 2.8.7 , or (b) for the [**], in each case (a) and (b) in any territory that includes the Territory, [**].

2.9. [**] Restriction . For [**] following the Effective Date, AstraZeneca shall not (and shall cause its Affiliates to not) during the Term, [**].

2.10. Section 365(n) . All rights and licenses granted under or pursuant to this Agreement by AstraZeneca or Ironwood are, and will otherwise be deemed to be, for purposes of Section 365(n) of the U.S. Bankruptcy Code, licenses of rights to “intellectual property” as defined under Section 101 of the U.S. Bankruptcy Code.

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

The Parties agree that the Parties, as licensees of such rights under this Agreement, will retain and may fully exercise all of their rights and elections under the U.S. Bankruptcy Code. The Parties further agree that, in the event of the commencement of a bankruptcy proceeding by or against either Party under the U.S. Bankruptcy Code, the Party hereto that is not a party to such proceeding will be entitled to a complete duplicate of (or complete access to, as appropriate) any such intellectual property and all embodiments of such intellectual property, and same, if not already in their possession, will be promptly delivered to them (a) upon any such commencement of a bankruptcy proceeding upon their written request therefor, unless the Party subject to such proceeding elects to continue to perform all of its obligations under this Agreement, or (b) if not delivered under (a) above, following the rejection of this Agreement by or on behalf of the Party subject to such proceeding upon written request therefor by the non-subject Party.

2.11. No Other Rights . Except as expressly set forth in this Agreement, no right or license (including under any Ironwood Technology or AstraZeneca Technology) is granted to either Party hereunder, and no additional rights will be deemed granted to either Party by implication, estoppel, or otherwise. All rights not expressly granted by either Party to the other hereunder are reserved, including, with respect to AstraZeneca, all rights relating to (a) the Licensed Compounds and Products outside the Territory and (b) products other than the Products in the Field in the Territory.

3. DEVELOPMENT

3.1. Responsibility . Subject to the terms of this Agreement, including Sections 3.2.2 and 3.3.2 , AstraZeneca will [**] to implement and conduct, at Ironwood’s direction, all activities set forth in the Development Plans and all activities reasonably necessary to achieve the goals of the Development Plans; provided that AstraZeneca’s obligation to pay Development expenses to the extent required by Section 7.4.2(b) shall not be a relevant factor that may be considered by AstraZeneca in determining the level of [**] required by AstraZeneca in satisfaction of its obligations as set forth in this sentence. AstraZeneca shall conduct all Development activities in accordance with the Development Plans, Applicable Law and GCP. Except as expressly set forth herein, any development of a Licensed Compound or Product for approval in the Field in the Territory other than the Development set forth under the Development Plans shall be conducted in Ironwood’s sole discretion and, subject to Sections 3.2.2 and 3.3.2 , as between AstraZeneca and Ironwood, at Ironwood’s expense, but for clarity, subject to Sections 2.1 and 2.2 , no other research or development activities by AstraZeneca shall be restricted.

3.2. Zurampic Product .

3.2.1. Zurampic Development Plan . The Development Plan for the Zurampic Product is attached to this Agreement as Exhibit A (as such may be amended as set forth herein, the “ Zurampic Development Plan ”). The Zurampic Development Plan shall include all material Development activities

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

anticipated to be necessary to complete the PMR Trial as required by the FDA, as well as timelines regarding such activities, including the plans and timelines for preparing any necessary Regulatory Submissions. The Zurampic Development Plan shall also contain a Development budget which shall set forth all of the estimated Development Expenses for the PMR Trial and activities under the Zurampic Development Plan (the “ Zurampic Development Budget ”).

3.2.2. Transition or Termination of PMR Trial .

(a) If, at any time during the performance of the PMR Trial under the Zurampic Development Plan, Ironwood submits written notice to AstraZeneca of its desire to take over the conduct of the PMR Trial, the Parties shall cooperate in good faith to transition the performance of the PMR Trial, to the extent possible under Applicable Law, to Ironwood from AstraZeneca. AstraZeneca shall use [**] to minimize all costs associated with the transition of activities. [**]. Unless otherwise agreed upon by the Parties, once the conduct of the PMR Trial is fully transitioned to Ironwood pursuant to this Section 3.2.2(a) (such date, the “ Transition End Date ”), AstraZeneca shall have no further obligation under this Agreement or the Zurampic Development Plan (and shall incur no additional Development Expenses) with respect to the PMR Trial. Without limiting any of the foregoing, in the event Ironwood desires to take over a portion of (but not all) of the activities related to the PMR Trial, it may notify AstraZeneca, and the Parties will discuss the terms of such transfer in good faith and if the Parties mutually agree to transfer such activity or activities to Ironwood, the Parties will amend the PMR Expense Cap and PMR Budget to reflect an adjustment of the PMR Expense Cap and PMR Budget to subtract the amounts allocated to such transferred activities.

(b) If, at any time during AstraZeneca’s or its designee’s conduct of the PMR Trial under the Zurampic Development Plan, a Regulatory Authority or safety data review board requires (a) termination or suspension of the PMR Trial or (b) the withdrawal of a Regulatory Approval for the Zurampic Product in the Territory (each event in clause (a) and (b), a “ Development Termination Event ”), AstraZeneca, in consultation with Ironwood, shall take all necessary steps in accordance with Applicable Laws and GCP to wind-down the PMR Trial and shall make [**] to mitigate all expenses associated with such wind-down. [**].

(c) If Ironwood makes an election under Section 3.2.2(a) to conduct the PMR Trial or a Development Termination Event occurs, then the Parties shall true up the Development Expenses incurred pursuant to this Agreement relating to the PMR Trial pursuant and subject to the provisions of Section 7.4.1(d) ; provided that, prior to any true-up pursuant to Section 7.4.1(d) , the Parties will amend the Zurampic Development

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

Budget to reflect an adjustment of the PMR Expense Cap and PMR Budget to subtract the amounts estimated for the remainder of the PMR Trial that has not yet been conducted as of the Transition End Date or the date of the Development Termination Event, as applicable.

3.2.3. Transition or Termination of Other Zurampic Development Activities .

(a) If, at any time during the performance of the Zurampic Development Plan, Ironwood submits written notice to AstraZeneca of its desire to take over any or all of the activities under the Zurampic Development Plan other than the PMR Trial, the Parties shall cooperate in good faith to transition the performance of such activities, to the extent possible under Applicable Law, to Ironwood from AstraZeneca. AstraZeneca shall use its [**] to minimize all costs associated with the transition of activities. [**]. Once Ironwood commences an activity transferred pursuant to this Section 3.2.3(a) , AstraZeneca shall have no further obligation under this Agreement or the Zurampic Product Development Plan (and shall incur no additional Development Expenses) with respect to such activity.

(b) If, at any time during AstraZeneca’s or its designee’s conduct of activities under the Zurampic Development Plan other than the PMR Trial, a Regulatory Authority or safety data review board requires (i) termination or suspension of such activity or activities or (ii) the withdrawal of a Regulatory Approval for the Zurampic Product in the Territory, AstraZeneca, in consultation with Ironwood, shall take all necessary steps in accordance with Applicable Laws and GCP to wind-down such activity and shall make [**] to mitigate all expenses associated with such wind-down. [**].

(c) If (i) Ironwood makes an election under Section 3.2.3(a) to conduct one or more activities under the Zurampic Development Plan or (ii) one or more activities under the Zurampic Development Plan are terminated pursuant to Section 3.2.3(b) , the Zurampic Development Budget shall be amended by the Parties to deduct the amounts estimated for the activities that have been assumed by Ironwood or terminated, as applicable. Ironwood shall have no obligation to pay any Development Expenses hereunder for such transferred or terminated activities unless such costs had been already incurred pursuant to this Agreement (including the applicable Development Plan) at the time of either Ironwood’s notice under this Section 3.2.3 was received by AstraZeneca or the date of the event described in clause (i) or (ii) of Section 3.2.3(b) , as applicable.

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

3.3. Allopurinol Combination Product Development .

3.3.1. Allopurinol Combination Product Development Plan . The Development Plan for the Allopurinol Combination Product is set forth in Exhibit B (the “ Allopurinol Combination Product Development Plan ”). The Allopurinol Combination Product Development Plan includes all material Development activities anticipated to be required to obtain Regulatory Approval for the Allopurinol Combination Product for the treatment of gout in the Territory, including success criteria for clinical trials in such Development Plan, as well as timelines regarding such activities, including the plans and timelines for clinical trials and preparing the necessary Regulatory Submissions. The Allopurinol Combination Product Development Plan shall also contain a Development Budget (the “ Allopurinol Combination Product Development Budget ”) which shall set forth the estimated Development Expenses for the activities set forth in the Allopurinol Combination Product Development Plan.

3.3.2. Transition of Allopurinol Combination Product Development Activities . If, at any time prior to Regulatory Approval of the Allopurinol Combination Product, Ironwood submits written notice to AstraZeneca of its desire to take over any or all of the activities under the Allopurinol Combination Product Development Plan, the Parties shall cooperate in good faith to transition the performance of such activities, to the extent possible under Applicable Law, to Ironwood from AstraZeneca. AstraZeneca shall use [**] to minimize all costs associated with the transition of activities. [**]. If Ironwood makes an election under this Section 3.3.2 to conduct one or more activities under the Allopurinol Combination Product Development Plan, (a) the Allopurinol Combination Product Development Budget shall be amended by the Parties to deduct the amounts estimated for the activities that have been assumed by Ironwood under this Section 3.3.2 and Ironwood shall have no obligation to pay any Development Expenses hereunder for such activities unless such costs had been already incurred pursuant to this Agreement (including the applicable Development Plan) at the time Ironwood’s notice under this Section 3.3.2 was received by AstraZeneca and (b) unless otherwise agreed by the Parties, once Ironwood commences such activity pursuant to this Agreement, AstraZeneca shall have no further obligation under this Agreement or the Allopurinol Combination Product Development Plan with respect to such activity.

3.4. Amendments to Development Plans and Development Budgets . During the Term, the Parties will review the Zurampic Development Plan and Allopurinol Combination Product Development Plan (each, a “ Development Plan ”) at least once per Year and will amend each Development Plan by mutual agreement on an ongoing basis as necessary. In the event the Parties do not agree on whether the applicable Development Plan should be amended or how the applicable Development Plan should be amended and such disagreement remains unresolved for more than [**], Ironwood shall have the authority to make the final decision regarding an amendment to a Development Plan; provided that in no event shall [**] have the authority to amend a Development Plan in a manner that (a) would require [**] or its Affiliates to [**]; or (b) would require [**] or its Affiliates to fail to

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

comply with Applicable Law or GCP . Any (i) additional Development Expenses due to any such amendment other than as a result of the FDA’s requirement for the PMR Trial, (ii) [** ] and (iii) [** ] , shall each constitute “ Additional Voluntary PMR Expenses .”

3.5. Development Expenses . The payment and reimbursement of Development Expenses under this Agreement is addressed in Section 7.4 .

3.6. Reports of Development Activities . Within [**] following the beginning of each Calendar Quarter, each Party will report on Development activities undertaken by it under the Development Plans during the previous Calendar Quarter (collectively, “ Product Development Activities ”) by providing a reasonably detailed summary of all results, data (including Collaboration Development Data), and material Collaboration Know-How generated from such activities. Each Party will, at its own expense, make appropriate scientific and regulatory personnel available to the other Party, either by telephone or in person as the Parties may mutually agree, as reasonably required to keep such other Party informed of Product Development Activities. Each Party will keep the other Party reasonably informed on material activities undertaken by such Party or its Sublicensees of the Product, relating to the development of the Licensed Compound and Product.

3.7. Additional Development Activities . Schedule 3.7 sets forth a list of development activities (such activities, the “ Additional Development Activities ”). AstraZeneca agrees to not to cease any Additional Development Activities prior to June 1, 2016.

4. REGULATORY MATTERS.

4.1. Ownership of Regulatory Submissions and Regulatory Approvals .

4.1.1. Prior to Transfer . Until such are transferred to Ironwood or its Affiliate pursuant to the Transitional Services Agreement, AstraZeneca shall continue to own all right, title and interest in all Regulatory Submissions and Regulatory Approvals (if any) for the Zurampic Product and the Allopurinol Combination Product in the Territory, and may transfer such Regulatory Submissions and Regulatory Approvals to an Affiliate of AstraZeneca for purposes of performing activities relating to obtaining and maintaining Regulatory Approvals with respect to the Products in the Field in the Territory.

4.2. Regulatory Responsibility .

4.2.1. Strategy . During the Transition Period, the regulatory strategy for the Products in the Territory will be jointly developed and approved by AstraZeneca and Ironwood with Ironwood having final decision-making authority. Following the Transition Period, Ironwood will solely develop the regulatory strategy for the Products in the Territory.

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

4.2.2. General Activities . During the Transition Period, (a) AstraZeneca or an Affiliate will conduct all activities relating to obtaining an NDA for the Allopurinol Combination Product and maintaining the INDs for the Zurampic Product and the Allopurinol Combination Product in the Territory, including preparing and submitting Regulatory Submissions with respect thereto in the Territory; provided Ironwood shall have the right to review and approve such Regulatory Submissions prior to their submission to such Regulatory Authority and (b) until the transfer of the NDA for Zurampic or the Allopurinol Combination Product, respectively, meetings with Regulatory Authorities in the Territory regarding each such Product respectively will be [**]. Otherwise, Ironwood will (i) conduct all activities relating to obtaining Regulatory Approval with respect to the Products in the Territory, including preparing and submitting Regulatory Submissions (except to the extent for activities under IND #102128, as to which AstraZeneca will conduct such activities until the completion of the PMR Trial) and (ii) shall [**] all meetings with Regulatory Authorities in the Territory with respect to a Product. The costs and expenses of AstraZeneca and its Affiliates associated with these activities will constitute Development Expenses except to the extent such activities are included within the scope of the Services under the Transitional Services Agreement. Promptly following the completion of the PMR Trial, AstraZeneca shall take all steps necessary to assign IND #102128 to Ironwood, including submitting to any applicable Regulatory Authority a letter or other necessary documentation (with a copy to Ironwood) notifying the Regulatory Authority of the assignment and the costs associated therewith shall constitute Development Expenses with respect to the PMR Trial.

4.2.3. Regulatory Reporting . Each Party will keep the other Party reasonably informed regarding the material regulatory activities relating to the obtaining, maintaining or expanding of any Regulatory Approval in the Territory. The costs and expenses of AstraZeneca and its Affiliates associated with these activities will constitute Development Expenses (except to the extent such activities are included within the scope of the Services under the Transitional Services Agreement).

4.2.4. Review of Regulatory Submissions . Nothing in this Agreement shall preclude AstraZeneca, its Affiliates and Sublicensees from submitting Regulatory Submissions in the Territory for the purposes of development of the Products for or Commercialization of the Products outside the Territory (e.g., drug master files or INDs). AstraZeneca shall (and shall cause its Affiliates and Sublicensees to) provide Ironwood with an opportunity to review and comment on all Regulatory Submissions (excluding drug master files and CMC data) to be submitted in the Territory reasonably in

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

advance of when AstraZeneca, its Affiliate or Sublicensee intends to submit such Regulatory Submissions to a Regulatory Authority. Ironwood shall (and shall cause its Affiliates and Sublicensees to) provide AstraZeneca with an opportunity to review and comment on all Regulatory Submissions (excluding drug master files and CMC data) to be submitted outside the Territory reasonably in advance of when Ironwood, its Affiliate or Sublicensee intends to submit such Regulatory Submissions to a Regulatory Authority. The reviewing Party shall provide its comments within [**], or such other period of time mutually agreed to by the Parties and the other Party shall (and shall cause its Affiliates and Sublicensees to) (a) [**] and (b) [**], provide the other Party with a copy, in electronic form, of all material Regulatory Submissions which is sent to a Regulatory Authority in the Territory (if such other Party is Ironwood) and outside the Territory (if such other Party is AstraZeneca).

4.3. Clinical Trial Responsibilities .

4.3.1. Clinical Trial Data . [**] shall, at its own expense, maintain a database of clinical trial data being developed under this Agreement to the extent associated with the Licensed Compounds or Products, which has been or is being developed by AstraZeneca, its Affiliate or by a Third Party under any agreement with AstraZeneca. [**]. Subject to the terms of this Agreement, each Party or its Affiliates or Sublicensees with respect to the Product shall have access to the database of clinical trial data described in this Section 4.3 to obtain data necessary or useful in connection with any Regulatory Submission made by such Party, its Affiliates or Sublicensees. [**] shall also have access to the database of clinical trial data described in this Section 4.3 to obtain data for any use outside the Field.

4.3.2. Clinical Trials . With respect to clinical trials of the Licensed Compounds or Products conducted by a Party, its Affiliates or Sublicensees, if so requested by the non-conducting Party, to enable such non-conducting Party to use study data in support of its Regulatory Submissions in support of, (a) with respect to AstraZeneca, commercialization of Products outside of the Territory and, (b) with respect to Ironwood, Commercialization of Products in the Territory, in each case (a) and (b) the conducting Party and its Sublicensees will permit, and will use [**] to require any clinical trial sites to permit, Regulatory Authorities from the applicable territory of the non-conducting Party’s (or its Affiliate’s or Sublicensee’s) commercialization to validate any such clinical trial data through on-site inspections to the extent any such on-site inspections do not materially interfere with the conducting Party’s (or its Affiliate’s or Sublicensee’s) or such clinical trial sites’, as applicable, day-to-day operations; provided that the non-conducting Party (or its Affiliate or Sublicensee) provides [**], and such inspections do not occur more than [**] in any given Year for a given site, unless required by Applicable Law.

4.3.3. Restriction . AstraZeneca will not conduct any clinical trials of any Product in the Field in and outside of the Territory without the prior written consent of Ironwood, such consent not to be unreasonably withheld, conditioned or delayed. Ironwood will not conduct any clinical trials of any Product outside the Territory without the prior written consent of AstraZeneca, such consent not to be unreasonably withheld, conditioned or delayed.

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

4.4. Global Safety Database .

4.4.1. Subject to this Section 4.4.1 , AstraZeneca shall be responsible for establishing and maintaining the global safety database of adverse events and relevant safety information for the Products (the “ Global Safety Database ”), which will be used for regulatory reporting, overall drug safety surveillance and responses to safety queries from Regulatory Authorities by the Parties, their Affiliates and Sublicensees. Each Party shall (and shall cause its Affiliates and Sublicensees) to submit any data related to Product safety or adverse events to AstraZeneca for inclusion in the Global Safety Database.

4.4.2. For so long as AstraZeneca maintains the Global Safety Database pursuant to Section 4.4.1 , Ironwood shall be responsible for [**] directly related to the maintenance of Global Safety Database (such costs in the aggregate, the “ Database Costs ”). AstraZeneca (or its Sublicensees) shall be responsible for [**] Database Costs.

4.4.3. At any time during the Term, if AstraZeneca is maintaining the Global Safety Database of adverse events and relevant safety information for the Products and either:

(a) Ironwood requests that AstraZeneca transfer responsibility of such database to Ironwood or its designee; or

(b) AstraZeneca desires to transfer responsibility for such database to a Sublicensee or another Third Party (in which case AstraZeneca shall so notify Ironwood) and Ironwood notifies AstraZeneca within [**] of receipt of such notice that it would like to take over responsibility of the Global Safety Database,

the Parties shall decide on and carry out a reasonable plan for the transition of the Global Safety Database (neither Party’s consent to such plan to be unreasonably withheld, delayed or conditioned) to Ironwood or its designee. In such event, Ironwood shall continue to be responsible for [**] and AstraZeneca shall be responsible for [**] to the extent AstraZeneca’s Sublicensees are not responsible for and pay to Ironwood such costs.

5. ANCILLARY AGREEMENTS

5.1. Clinical Supply Agreement . [**], and as requested by Ironwood, the Parties will enter into a clinical supply agreement (the “ Clinical Supply Agreement ”) pursuant to which, subject to the terms of the Clinical Supply Agreement, AstraZeneca will Manufacture and supply Clinical Trial Materials. The Clinical Supply Agreement will incorporate the terms of the Commercial Supply Agreement, subject to certain exceptions as provided in Schedule 5.1 .

5.2. Pharmacovigilance Agreement . The Parties will use [**] to enter into a pharmacovigilance agreement within [**] of the Effective Date and such will be

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

incorporated into this Agreement by reference (the “ Pharmacovigilance Agreement ”). The Parties will comply and cause their respective Affiliates to comply with the provisions of such agreement.

6. COMMERCIALIZATION; ADDITIONAL COVENANTS AND RESPONSIBILITIES.

6.1. Commercialization .

6.1.1. Responsibility . Subject to the terms of and except as otherwise provided in the Transitional Services Agreement, Ironwood will be responsible for, and will control, the Commercialization of all Products in the Territory and will book (directly itself or indirectly through any of its Affiliates and Sublicensees) all sales of Products and will have the sole responsibility for the sale, invoicing, promotion, and distribution of the Products in the Territory.

6.1.2. Diligence . Ironwood will use [**] to Commercialize the Product in the Territory after Regulatory Approval for Commercialization has been received for such Product. Without limiting the foregoing, Ironwood shall [**]. Notwithstanding anything to the contrary in this Agreement, Ironwood’s obligations pursuant to this Section 6.1.2 shall be relieved to the extent and for so long as any failure of Ironwood to satisfy its obligations under this Section 6.1.2 is due to AstraZeneca or its Affiliates’ failure to perform its obligations under this Agreement or the Transitional Services Agreement.

6.1.3. Domain Names and Website Content . Subject to the terms and conditions in this Agreement, Ironwood will be responsible for administering, managing, and maintaining the content of any website hosted at each Product Domain Name and each Combination Domain Name. All of the Product Domain Names and Combination Domain Names shall be registered and renewed [**]. [**] shall use (and, at [**]’s request from time to time, update and revise) the technical contact and server information designated by Ironwood in writing for each such Product Domain Name and each such Combination Domain Name. [**] may, from time to time, change the registrar with whom [**] has contracted to manage its domain name portfolio and [**] agrees to assist and cooperate with [**], the old registrar or the new registrar in any way necessary to effectuate such a change of registrar.

6.2. Executive Meetings . The Parties anticipate that the Chief Commercial Officer of Ironwood and AstraZeneca’s Global Medicine Leader for Lesinurad, as long as such position exists, and thereafter AstraZeneca’s Therapy Areas Vice President, Infection, Neuroscience, Gastrointestinal will meet periodically as necessary or appropriate during the Term (and in any event such executives will meet at least [**] or more frequently as agreed upon by the Parties) in order to review significant issues and developments in the Development, Manufacture and Commercialization of Products in the Field in the Territory.

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

6.3. Publication . Each Party shall ensure (and shall cause its Affiliates to ensure) that its Sublicensees shall provide the other Party the opportunity to review and provide comments on any scientific paper, data abstract or presentation with respect to any Product proposed for publication, presentation, or distribution. The reviewing Party will have no more than [**] to complete such review or such shorter period as may reasonably be required by applicable publication deadlines promptly communicated to such reviewing Party. Each Party shall (and shall cause its Affiliates and Sublicensees to) (a) not unreasonably reject comments furnished by the other Party, (b) comply with the other Party’s request to delete references to its Confidential Information in any such publication or presentation and (c) delay publication for such reasonable period requested by the other Party (or its Affiliate or Sublicensee) in order to permit the filing of patent applications concerning any AstraZeneca Technology, Ironwood Technology or Joint Technology, as applicable, that would be disclosed in such publication or presentation.

6.4. Clinical Study Results .

6.4.1. The Parties will coordinate the disclosure of the initiation and results of clinical studies performed pursuant to the Development Plan.

6.4.2. For any such clinical studies and any other clinical studies performed by either Party or its Affiliates or Sublicensees, all public disclosures, including publications, will be submitted for review and comment by the other Party and due regard will be given to the comments of such Party, the maintenance of confidentiality of Confidential Information of each Party and allowing time for intellectual property registrations as described in Section 6.3 . Nothing set forth in this Agreement will be deemed to limit or restrict either Party (or its Affiliates or Sublicensees) from disclosing the results of clinical trials (whether performed by the Parties or by Third Parties) to the extent required by Applicable Law or its internal policies and procedures.

6.5. Product Promotional Materials . Subject to Applicable Law and the Ancillary Agreements, all promotional materials that have been developed for the Commercialization of the Zurampic Product in the Territory that are in the possession of AstraZeneca or its Affiliates as of the Execution Date will be physically or electronically transferred, as appropriate, to Ironwood promptly following the Effective Date.

6.6. Financial Statements Required by Rule 3-05 of Regulation S-X . AstraZeneca will, at Ironwood’s reasonable request, generate and provide any audited and unaudited financial statements required to be filed by Ironwood pursuant to 17 C.F.R. §210.3-05 (Rule 3-05 of Regulation S-X) no later than [**] prior to the relevant filing date. Ironwood will [**] within [**] of AstraZeneca’s delivery of invoice to Ironwood.

6.7. [**] Agreements . During the Term of this Agreement, at Ironwood’s request, (a) in the event the [**] Agreements have not been assigned to Ironwood or

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

its Affiliate, AstraZeneca shall (and shall cause any assignee of AstraZeneca to) supply [**] to Ironwood [**] (as set forth in the Supply Agreement in the [**] Agreements) for commercial sale and distribution in the Territory, subject to Ironwood’s fulfillment of [**] and (b) AstraZeneca shall (and shall cause any Affiliate to if such Affiliate has been assigned a [**] Agreement) take all necessary action to allow Ironwood or its Affiliate to assume AstraZeneca’s or its Affiliate’s rights and obligations to the [**] under any [**] Agreements that are not then terminated or expired in accordance with its terms. In the event that, during the Term, the [**] Agreements have not been assigned to Ironwood or its Affiliate and either (i) Ironwood requests that AstraZeneca assign the [**] Agreements to Ironwood or its designee or (ii) AstraZeneca desires to assign one or both of the [**] Agreements to a Sublicensee or another Third Party (in which case AstraZeneca shall so notify Ironwood) and Ironwood notifies AstraZeneca within [**] of receipt of such notice that it would like to have the relevant [**] Agreement(s) assigned to it or its designee, AstraZeneca shall (and shall cause any Affiliate to if such Affiliate has been assigned the relevant [**] Agreement(s)) take all necessary action to assign the [**] Agreement(s) to Ironwood or its designee.

7. CONSIDERATION

7.1. Upfront Payment . Within ten (10) Business Days after the Effective Date, Ironwood will pay to AstraZeneca one hundred million U.S. dollars ($100,000,000) as an upfront, non-creditable, non-refundable fee.

7.2. Milestones .

7.2.1. Allopurinol Combination Product Milestone . As additional consideration for the rights granted to Ironwood pursuant to Section 2.1 , Ironwood will pay to AstraZeneca a milestone payment in the amount of fifteen million U.S. dollars ($15,000,000) after the NDA for the Allopurinol Combination Product is approved by the FDA. Following such occurrence, AstraZeneca shall invoice Ironwood for such amount and Ironwood shall pay such invoice within [**] after Ironwood’s receipt of such invoice.

7.2.2. Sales Milestones . As additional consideration for the rights granted to Ironwood pursuant to Section 2.1 , Ironwood will pay to AstraZeneca the following one-time milestone payments after the first occurrence of each of the following events (each, a “ Milestone Event ”):

Milestone Event		Milestone Payment
(a) First Year in which the Net Sales of all Products in a Year in the Territory exceed [**]		[**]
(b) First Year in which the Net Sales of all Products in a Year in the Territory exceed [**]		[**]
(c) First Year in which the Net Sales of all Products in a Year in the Territory exceed [**]		[**]

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

Ironwood shall notify AstraZeneca within [**] following the end of a Year in which one or more Milestone Events was achieved, and AstraZeneca shall provide an invoice to Ironwood regarding the applicable payment within [**] following receipt of such notice from Ironwood.

Once Ironwood has made any particular milestone payment under this Section 7.2.2 , Ironwood will not be obligated to make any payment with respect to the re-occurrence of the same Milestone Event. If the Milestone Event in two or more of rows (a) through (c) above occur in the same Year, the largest milestone payment will be due to AstraZeneca within [**] of Ironwood’s receipt of such invoice and any additional milestone payment(s) triggered in such Year will be payable within [**] of Ironwood’s receipt of a relevant invoice, such invoice to be issued no earlier than [**] following the date on which the highest milestone payment was invoiced to Ironwood. If only one Milestone Event occurs in a Year, within [**] of invoice from AstraZeneca, Ironwood shall pay to AstraZeneca the milestone payment payable pursuant to this Section 7.2.2.

7.3. Royalties; Adjustment . As further consideration for the rights granted to Ironwood hereunder, Ironwood shall pay to AstraZeneca royalties at the royalty rates on the [**] Net Sales of all Products in the Territory in accordance with the table below during the applicable Royalty Term:

		Royalty Rate
On the portion of [] Net Sales of all Products in Territory less than or equal to []		[**]
On the portion of [] Net Sales of all Products in the Territory more than []		[**]

Within [ **] following the end of each Calendar Quarter after the First Commercial Sale of a Product in the Territory, Ironwood shall provide AstraZeneca with a report containing the following information for the applicable Calendar Quarter for the Products: the amount of gross sales of the Products in the Territory, an itemized calculation of Net Sales in the Territory showing deductions, provided for in the definition of “Net Sales” and a calculation of the royalty payment due on such Net Sales. Ironwood shall pay all amounts due to AstraZeneca pursuant to this Section 7.3 with respect to Net Sales for such Calendar Quarter at the time of the submission of such quarterly report.

In the event Ironwood enters into a license with a Third Party pursuant to Section 10.8 , Ironwood shall be entitled to set-off against the royalties payable to AstraZeneca pursuant to this Section 7.3 [ **] of all amounts owed to a Third Party under such license in obtaining such license or arising out of the development,

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

Manufacture or Commercialization of the Existing Products, to the extent necessary for the Licensed Compound or the Existing Products; provided, however, that no such royalty due to AstraZeneca hereunder shall be reduced by more than [**] of the amount otherwise due; but provided, further, that any portion of such payments owed to a Third Party under any such license which remains uncredited due to the application of such floor may be carried forward to subsequent royalty payments.

Notwithstanding the foregoing, with respect to a Product, upon the availability on the market in the Territory of the [ **], commencing as of the Calendar Quarter in which such [**], as applicable, and each Calendar Quarter thereafter, the royalty rate set forth in this Section 7.3 shall be reduced by [**].

Notwithstanding anything to the contrary in this Agreement, in no event shall the royalty rate set forth in this Section 7.3 be reduced by more than [**] in any given Calendar Quarter.

7.4. Development Expenses .

7.4.1. For the PMR Trial .

(a) Following agreement by AstraZeneca with the FDA on the protocols for the PMR Trial, the Parties shall agree on the estimated Development Expenses to be incurred by AstraZeneca with respect to the PMR Trial (as may be amended under Section 3.2.2 or this Section 7.4.1 , the “ PMR Budget ”), the estimated Additional Voluntary PMR Expenses, if any, and the anticipated completion date of the PMR Trial (the “ PMR Planned End Date ”). If the Parties have not agreed on the PMR Budget within [**] of AstraZeneca’s agreement with the FDA on the PMR Trial protocols, each Party shall submit to the other Party its final proposal for the PMR Budget on such [**]. If the Parties fail to agree on the PMR Budget within [**] after such receipt of final proposals, the matter shall be settled pursuant to Section 14.1.3 ; provided that, notwithstanding anything to the contrary in Section 14.1.3 , the Arbitrators shall be limited to selecting one Party’s proposal for the PMR Budget and such decision shall be made within [**]. In no event shall the PMR Budget exceed the PMR Expense Cap, and [**] shall be responsible for any Development Expenses incurred relating to the PMR Trial in excess of the PMR Expense Cap, other than any Additional Voluntary PMR Expenses. [**] shall be responsible for any Additional Voluntary PMR Expenses.

(b) Within [**] after December 1 st of each Year, commencing with 2017 through the last December 1st preceding the PMR Planned End Date (or, if earlier, the date on which Development Expenses will no longer be incurred by AstraZeneca with respect to the PMR Trial (i.e., due to its termination, completion or transition to Ironwood under Section 3.2 , including any wind-down or transition activities)) (the “ PMR End Date ”), AstraZeneca shall submit to Ironwood an invoice in the amount of (a) [**],

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

divided by (b) [**]. For example, if the PMR Budget is [**], the estimated Additional Voluntary PMR Expenses is [**] and the PMR Planned End Date is [**], the number of years between December 1, 2016 and [**] is [**] years, and each invoice by AstraZeneca shall be [**]. Within [**] of receipt of any invoice from AstraZeneca pursuant to this Section 7.4.1 , Ironwood shall submit payment of such amount to AstraZeneca, as an estimate of the amount that Ironwood is required to reimburse for Development Expenses for the PMR Trial hereunder.

(c) Beginning with the first Reporting Quarter to end in 2017, AstraZeneca shall submit to Ironwood, within [**] after the end of the month following the last month in a Reporting Quarter in which Development Expenses were incurred by AstraZeneca with respect to the PMR Trial, a report setting forth the actual Development Expenses incurred by AstraZeneca during such Reporting Quarter with respect to the PMR Trial, separating out, if applicable, any Additional Voluntary PMR Expenses. For the purposes of this Section 7.4.1(c) , “ Reporting Quarter ” shall mean each of the three consecutive month periods ending on the last day of February, May, August and November. By way of illustration, pursuant to this Section 7.4.1(c) , AstraZeneca shall submit a report to Ironwood reflecting its actual Development Expenses for the three-month period ending May 31, 2017 by the [**].

(d) Within [**] after the PMR End Date, Development Termination Event or Transition End Date (as applicable), [**] (the “ Core PMR Expenses ”) and the actual Additional Voluntary PMR Expenses. For purposes of the following calculations, the Core PMR Expenses shall not exceed the PMR Expense Cap. The Core PMR Expenses and Additional Voluntary PMR Expenses shall be trued up as follows:

(i) If the Core PMR Expenses are [**] the PMR Budget, there shall be no payment or refund by either Party relating to the Core PMR Expenses;

(ii) if the Core PMR Expenses are [**] the PMR Budget but less than or equal to [**] of the PMR Budget, Ironwood shall pay AstraZeneca the difference between the PMR Budget and the Core PMR Expenses;

(iii) if the Core PMR Expenses are [**] the PMR Budget but greater than or equal to [**] of the PMR Budget, AstraZeneca shall refund Ironwood the difference between the Core PMR Expenses and the PMR Budget;

(iv) if the Core PMR Expenses are less than [**] of the PMR Budget, then AstraZeneca shall refund to Ironwood (A) [**] of the PMR

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

Budget and (B) [**] of the difference between (A) the Core PMR Expenses and (B) [**] of the PMR Budget;

(v) if the Core PMR Expenses exceed [**] of the PMR Budget, then Ironwood shall pay to AstraZeneca (i) [**] of the PMR Budget and (ii) [**] of the difference between (A) [**] of the PMR Budget and (B) the Core PMR Expenses;

(vi) if the actual Additional Voluntary PMR Expenses are [**] the estimated Additional Voluntary PMR Expenses, there shall be no payment or refund by either Party relating to the Additional Voluntary PMR Expenses;

(vii) if the actual Additional Voluntary PMR Expenses are [**] the estimated Additional Voluntary PMR Expenses, Ironwood shall pay to AstraZeneca the difference between the actual Additional Voluntary PMR Expenses and the estimated Additional Voluntary PMR Expenses;

(viii) if the actual Additional Voluntary PMR Expenses are [**] the estimated Additional Voluntary PMR Expenses, AstraZeneca shall refund to Ironwood the difference between the estimated Additional Voluntary PMR Expenses and the actual Additional Voluntary PMR Expenses;

(ix) All such payments by Ironwood or reimbursements by AstraZeneca under this Section 7.4.1(d) and any invoices not yet paid by Ironwood under Section 7.4.1(b) shall be made within [**] days of the paying Party’s receipt of invoice.

(e) The “ PMR Expense Cap ” shall equal one hundred million U.S. dollars ($100,000,000), as may be amended pursuant to Section 3.2.2 .

(f) Notwithstanding anything in this Agreement to the contrary, this Section 7.4.1 and all payment obligations hereunder shall survive termination of this Agreement for convenience under Section 11.3 .

7.4.2. For Other Zurampic Product Development and Allopurinol Combination Product Development . With respect to Development activities other than the PMR Trial, the following shall apply:

(a) Ironwood shall reimburse AstraZeneca for all Development Expenses (as such are determined pursuant to Section 7.5 ) for activities conducted under the applicable Development Plan in accordance with the applicable Development Budget; provided that notwithstanding anything to the contrary in this Agreement, Ironwood shall not be obligated to reimburse AstraZeneca for any Development Expenses incurred under the Allopurinol Combination Product Development Plan after [**] (but if

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

Ironwood does not agree to so reimburse, then AstraZeneca shall be correspondingly relieved of its obligation to perform the corresponding Development Activities after such date).

(b) Ironwood will reimburse AstraZeneca for up to [**] of any Development Expenses set forth in the applicable Development Budget for a Year to the extent such Development Expenses are incurred pursuant to this Agreement; provided that AstraZeneca shall provide to Ironwood an explanation for any excess costs and expenses. AstraZeneca will be solely responsible for any Development Expenses in excess of [**] of the Development Expenses set forth in the applicable Development Budget for a particular Year, and such amounts shall not be included in Development Expenses for the purposes of reimbursement by Ironwood under this Section 7.4.2(b).

(c) Within [**] after the end of each Calendar Quarter during which activities were conducted by AstraZeneca under the applicable Development Plan, AstraZeneca shall submit to Ironwood a written report of all Development Expenses (subject to Section 7.4.2(b) ) incurred by or on its behalf during such Calendar Quarter in performance of such activities in accordance with this Agreement. Within [**] following receipt of such invoice from AstraZeneca, Ironwood shall pay AstraZeneca an amount equal to the undisputed Development Expenses set forth on the invoice.

7.5. Expense Limitations . Efforts of AstraZeneca’s employees or its Affiliates in performing its activities hereunder related to Development of the Product in the Territory will be accrued and reported at the applicable FTE Rate then in effect; provided, however, that only those efforts that relate to the Development of the Product and are contemplated by the applicable Development Plan, will be so accrued and reported. All payments made by AstraZeneca (or its Affiliates) to a Third Party in connection with the Development of the Product in the Territory consistent with the applicable Development Plan will be accrued and reported at AstraZeneca’s (or its Affiliate’s) [**]. In no event may AstraZeneca structure its contractual arrangements with Third Parties in a manner designed to benefit countries outside the Territory over those within the Territory. Notwithstanding the foregoing, the costs to Ironwood for any Clinical Trial Material will be included in Development Expenses at [**] of the “Cost of Goods Sold” (as defined in the Commercial Supply Agreement) therefor. The “Cost of Goods Sold” for Clinical Trial Material shall be calculated in accordance with the definition set forth in the Commercial Supply Agreement but Ironwood acknowledges that the “Cost of Goods Sold” for Clinical Trial Material may differ from that for commercial Product due to a range of factors, including volumes and packaging for clinical use.

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

7.6. Records and Audits .

7.6.1. During the Term (and for [**] following the Term, or, in the case of books and records necessary to satisfy applicable tax requirements, [**] following the Term), each Party and its Affiliates will keep and maintain accurate and complete books and records showing all activities performed by or on behalf of either Party under this Agreement and the Ancillary Agreements during the [**] (or, in the case of books and records necessary to satisfy applicable tax requirements, the [**]), including in the case of Ironwood, all Net Sales made and, in the case of AstraZeneca, all Development Expenses. Such books and records will be sufficiently detailed such that Development Expenses and Net Sales and each Party’s satisfaction of its obligations under this Agreement and the Ancillary Agreements can accurately be determined and each Party’s financial reporting obligations, tax requirements, independent auditor requirements and obligations under the Sarbanes-Oxley Act can be satisfied.

7.6.2. Upon [**] prior written notice from a Party (the “ Auditing Party ”), the other Party (the “ Audited Party ”) will permit an independent certified public accounting firm of internationally recognized standing, selected by the Auditing Party and reasonably acceptable to the Audited Party, to examine the relevant books and records of the Audited Party and its Affiliates as may be reasonably necessary to verify Development Expenses reimbursed or Net Sales. An examination by a Party under this Section 7.6.2 will occur not more than [**] and will be limited to the pertinent books and records for any Year ending not more than [**] before the date of the request. The accounting firm will be provided access to such books and records at the Audited Party’s facility where such books and records are normally kept and such examination will be conducted during the Audited Party’s normal business hours. The Audited Party may require the accounting firm to sign a standard non-disclosure agreement before providing the accounting firm access to the Audited Party’s facilities or records. Upon completion of the audit, the accounting firm will provide both Ironwood and AstraZeneca a written report disclosing whether the reports submitted by the Audited Party are correct or incorrect and the specific details concerning any discrepancies. No other information will be provided to the Auditing Party. If the accountant determines that, based on errors in the reports so submitted, the amounts paid by one Party to the other Party under this Agreement were in error, any additional amount owed by one Party to the other will be paid within [**] after receipt of the accountant’s report, along with interest at the annual interest rate as provided in Section 7.12 , compounded [**] from the date of the audit report. If the accountant determines that AstraZeneca overstated or understated the Development Expenses by more than [**], AstraZeneca will reimburse Ironwood for the expenses incurred by Ironwood in conducting the audit and if the accountant determines that Ironwood overstated or understated Net Sales by more than [**], Ironwood will reimburse AstraZeneca for the expenses incurred by AstraZeneca in conducting the audit.

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

7.7. Taxes and Withholding .

7.7.1. Taxes . The royalties, milestones and other amounts payable by a Party to the other Party pursuant to this Agreement (“ Payments ”) shall not be reduced on account of any Taxes unless required by Applicable Law. The Party receiving Payments alone shall be responsible for paying any and all Taxes (other than withholding taxes required by Applicable Law to be paid by the paying Party) levied on account of, or measured in whole or in part by reference to, any Payments it receives.

7.7.2. Withholding . The paying Party shall deduct or withhold from the Payments any Taxes that it is required by Applicable Law to deduct or withhold. If a tax deduction is required by Applicable Law to be made by the paying Party, the amount of the payment due from the paying Party to the receiving Party shall be equal to: the payment which would have been due if no tax deduction had been required, less the tax deduction. Notwithstanding the foregoing, if the Party receiving Payments is entitled under any applicable treaty to a reduction of rate of, or the elimination of, applicable withholding tax, it may deliver to the paying Party or the appropriate Tax Authority (with the assistance of the paying Party to the extent that this is reasonably required and is expressly requested in writing) the prescribed forms necessary to reduce the applicable rate of withholding or to relieve the paying Party of its obligation to withhold Tax, and the paying Party shall apply the reduced rate of withholding, or dispense with withholding, as the case may be, to the extent it complies with the applicable treaty; provided that the paying Party has received evidence, in a form satisfactory to the paying Party, of the receiving Party’s delivery of all applicable forms (and, if necessary, its receipt of appropriate governmental authorization) at least [**] prior to the time that the Payments are due. If, in accordance with the foregoing, the paying Party withholds any amount, it shall pay to the receiving Party the balance when due, make timely payment to the proper Tax Authority of the withheld amount, and send to the receiving Party proof of such payment within [**] following that payment. If the paying Party undergoes a change in control, assigns this Agreement, acts through an Affiliate or Third Party (by subcontracting, assigning or otherwise) or change in jurisdiction of organization or residence (including for tax purposes) and, as a result of such a transaction, Payments made hereunder are subject to additional withholding Tax, the paying Party shall be responsible for the resulting additional withholding Taxes; therefore, Payments made to the receiving Party shall be increased to ensure the receiving Party receives the full amount that it would have received if such change in control, assignment, act through an Affiliate or Third Party or change in jurisdiction had not taken place. Neither Party shall be responsible for paying Taxes on the other Party’s income.

7.7.3. Indirect Taxes . All Payments are stated exclusive of Indirect Taxes. Except to the extent Indirect Taxes are chargeable as a result of the receiving Party undergoing a change in control, assigning this Agreement, acting through an Affiliate or Third Party (by subcontracting, assigning or otherwise) or change in jurisdiction of organization or residence (including for tax purposes), if any Indirect Taxes are chargeable in respect of any Payments,

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

the paying Party shall pay such Indirect Taxes at the applicable rate in respect of any such Payments following the receipt, where applicable, of an Indirect Taxes invoice in the appropriate form issued by the receiving Party in respect of such Payments, such Indirect Taxes to be payable on the due date of the payment of the Payments to which such Indirect Taxes relate. The receiving Party shall issue its invoices for all amounts payable under this Agreement consistent with Indirect Tax requirements and irrespective of whether the sums may be netted for settlement purposes. If such amounts of Indirect Taxes are refunded to the receiving Party by the applicable Tax Authority or other fiscal authority subsequent to payment, the receiving Party will transfer such amount to the paying Party within [**] of receipt.

7.7.4. Imports . For the avoidance of doubt, the Parties acknowledge and agree that none of the Payments under this Agreement are related to the license (or right) to import or any import of Products. The Parties shall cooperate to ensure that the Party responsible for shipping values clinical Product in accordance with Applicable Law and maximizes the full benefits of available duty free or savings programs such as free trade agreements or other special programs and minimizes where permissible any such duties and any related import taxes that are not reclaimable from the relevant authorities. The receiving Party shall be responsible for any import clearance, including payment of any import duties and similar charges, in connection with any Products transferred to such Party under this Agreement.

7.8. Currency . All amounts payable, expenses incurred and calculations hereunder will be in United States dollars. For the purpose of calculating any sums due under, or otherwise reimbursable pursuant to, this Agreement (including the calculation of Net Sales expressed in currencies other than U.S. dollars), each Party shall convert any amount expressed in a foreign currency into U.S. dollar equivalents using its, its Affiliate’s or Sublicensee’s, as applicable, standard conversion methodology consistent with GAAP.

7.9. Method of Payments . All amounts owed to a Party under this Agreement will be paid by the owing Party by ACH payment or wire transfer of immediately available funds to an account designated by the owed Party (which account may be updated by such owed Party from time to time in writing). All such payments made by Ironwood to AstraZeneca will be made to such bank account as AstraZeneca may from time to time designate by notice to Ironwood.

7.10. Confidentiality . All financial information of a Party which is subject to review under this Article 7 will be deemed to be Confidential Information subject to the provisions of Section 8.1 , and such Confidential Information will not be disclosed to any Third Party or used for any purpose other than verifying payments to be made by one Party to the other hereunder; provided, however, that such Confidential Information may be disclosed to Third Parties only to the extent necessary to enforce a Party’s rights under this Agreement.

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

7.11. Reconciliation . When providing financial information to Ironwood pursuant to its obligations under this Agreement or any Ancillary Agreement, AstraZeneca shall submit to Ironwood, with such information, a reconciliation of such information to GAAP to the extent such information is being provided under IFRS or a non-GAAP Accounting Standard. Costs of any such reconciliation shall be borne by [**].

7.12. Interest . Any payment under this Article 7 that is more than [**] past due will be subject to interest at an annual percentage rate of [**] plus [**] if a Party does not make payment within [**] of its receipt of notice that such amount is past due. Likewise, any overpayment that is not refunded within [**] after the date such overpayment was made will thereafter be subject to interest at an annual percentage rate of [**] plus [**]; provided, however, that if the overpayment is due to errors in reports provided by the overpaid Party, such interest will accrue from the date the overpayment was made. Notwithstanding the preceding, if a Party contests any amounts due hereunder in good faith and promptly notifies the other Party of such dispute, interest will not accrue as to amounts being so contested until [**] following the presentation of such notice to the other Party.

8. COVENANTS

8.1. Confidentiality .

8.1.1. Confidential Information . Except to the extent expressly permitted by this Agreement or an Ancillary Agreement and subject to the provisions of Sections 8.1.2 and 8.1.3 , at all times during the Term and for [**] following the expiration or termination of this Agreement, each Party (a “ Receiving Party ”) (a) will keep completely confidential and will not publish or otherwise disclose any Confidential Information furnished to it by the other Party (a “ Disclosing Party ”), except to those of the Receiving Party’s employees, Affiliates, consultants or representatives who have a need to know such information (collectively, “ Authorized Recipients ”) to perform such Party’s obligations hereunder or to potential Sublicensees under an obligation of confidentiality no less protective than the terms hereof, and (b) will not use Confidential Information of the Disclosing Party directly or indirectly for any purpose other than (to the extent licensed hereunder) exercising its rights and performing its obligations hereunder. The Receiving Party will be liable for any breach by any of its Authorized Recipients of the restrictions set forth in this Agreement. Each Party will be deemed the Receiving Party with respect to any Development Plan, Joint Know-How or Collaboration Development Data, regardless of which Party has disclosed such Confidential Information.

8.1.2. Exceptions to Confidentiality . The Receiving Party’s obligations set forth in this Agreement will not extend to any Confidential Information of the Disclosing Party:

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

(a) that is or hereafter becomes part of the public domain through no wrongful act, fault or negligence on the part of a Receiving Party or its Authorized Recipients;

(b) that is received from a Third Party without restriction and without breach of any agreement or fiduciary duty between such Third Party and the Disclosing Party;

(c) that the Receiving Party can demonstrate by competent evidence was already in its possession without any limitation or restriction on use or disclosure prior to its receipt from the Disclosing Party;

(d) that is generally made available to Third Parties by the Disclosing Party without any restriction imposed by the Disclosing Party on disclosure, whether such restriction is by contract, fiduciary duty or by operation of law; or

(e) that the Receiving Party can demonstrate by competent evidence was independently developed by the Receiving Party without any reference to Confidential Information.

8.1.3. Authorized Disclosure .

(a) Each Party and its Authorized Recipients may disclose Confidential Information received from the other Party to the extent that such disclosure is:

(i) made in response to a valid order, governmental inquiry, or request (each an “ Order ”) of a court of competent jurisdiction or other agency, as applicable; provided, however, that the Receiving Party must first have given notice to the Disclosing Party and given the Disclosing Party a reasonable opportunity to quash such Order or to obtain a protective order requiring that the Confidential Information or documents that are the subject of such Order be held in confidence by such court or agency or, if disclosed, be used only for the purposes for which the Order was issued; and provided further that if an Order is not quashed or a protective order is not obtained, the Confidential Information disclosed in response to such Order will be limited to that information that is legally required to be disclosed in such response to such Order;

(ii) made by a Party or its Affiliates or Sublicensees to a Regulatory Authority as may be necessary or useful in connection with any filing, application or request for a Regulatory Approval; provided, however, that reasonable measures shall be taken to assure confidential treatment of such information, to the extent such protection is available;

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

(iii) made by a Party to a patent authority as may be necessary or useful for purposes of obtaining or enforcing a Patent Right (consistent with the terms and conditions of Article 10); provided, however, that reasonable measures shall be taken to assure confidential treatment of such information, to the extent such protection is available;

(iv) otherwise required by law; provided, however, that if either Party is required to disclose Confidential Information of the other Party, the Party required to make the disclosure shall (A) provide to the other Party reasonable advance notice of and an opportunity to comment on any such required disclosure, (B) if requested by the other Party, seek confidential treatment with respect to any such disclosure to the extent available, and (C) use [**] to incorporate the comments of the other Party in any such disclosure or request for confidential treatment; or

(v) made by either Party to Third Parties under confidentiality obligations no less protective than the obligations set forth herein as may be necessary or useful in connection with the development, Commercialization, or Manufacture of the Licensed Compounds or Products as contemplated by this Agreement, including subcontracting or sublicensing transactions in connection therewith.

8.1.4. Notification . The Receiving Party will notify the Disclosing Party immediately, and cooperate with the Disclosing Party as the Disclosing Party may reasonably request, upon the Receiving Party’s discovery of any loss or compromise of the Disclosing Party’s Confidential Information.

8.1.5. Destruction of Confidential Information . Upon the expiration or earlier termination of this Agreement, except to the extent necessary or useful to exercise rights or perform obligations that continue after such expiration or termination, and except as otherwise provided in Section 11.6 , the Receiving Party will (a) destroy all tangible embodiments of Confidential Information of the Disclosing Party, including any and all copies thereof, and those portions of any documents, memoranda, notes, studies, and analyses prepared by the Receiving Party or its Authorized Recipients that contain, incorporate, or are derived from such Confidential Information and provide written certification of such destruction to the Disclosing Party in a form reasonably acceptable to the Disclosing Party, provided that the legal department of the Receiving Party will have the right to retain one copy of any such tangible embodiments for archival purposes, provided such copy will continue to be maintained on a confidential basis subject to the terms of this Agreement, and (b) immediately cease, and will cause its Authorized Recipients to cease, use of such Confidential Information as well as any information or materials that contain, incorporate, or are derived from such Confidential Information.

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

8.1.6. Use of Name and Disclosure of Terms . Except as permitted under Section 14.16 , each Party will and will cause its Affiliates to (a) keep the existence of, the terms of, and the transactions covered by this Agreement confidential and (b) not disclose such information to any other Third Party through a press release or otherwise, and, except as otherwise permitted hereunder, will not mention or otherwise use the name, insignia, symbol, trademark, trade name, or logotype of the other Party or its Affiliates in any manner without the prior written consent of the other Party in each instance (which will not be unreasonably withheld, conditioned or delayed). The restrictions imposed by this Section 8.1.6 will not prohibit either Party or its Affiliates from making any disclosure that is required by Applicable Law, rule, or regulation or the requirements of a national securities exchange or another similar regulatory body including disclosing such information in any clinical trial database maintained by or on behalf of a Party. In addition, in connection with a specific transaction or proposed transaction, either Party may disclose the terms of this Agreement to the counter party to such transaction if such counter party is a bona fide potential investor, underwriter, lender, licensee, sublicensee or acquirer; provided that (i) such disclosure shall be under provisions of confidentiality no less protective than the terms of this Agreement and (ii) the disclosure is reasonably necessary in light of the contemplated transaction. Further, the restrictions imposed on each Party under this Section 8.1.6 are not intended, and will not be construed, to prohibit a Party or is Affiliates from identifying the other Party or its Affiliates in its internal business communications, provided that any Confidential Information in such communications remains subject to this Section 8.1.6 . In the event that either Party is required by Applicable Law or the requirements of a national securities exchange or another similar regulatory body to disclose this Agreement, in whole or in part, the Parties will cooperate in preparing a redacted version of this Agreement and consider any comments received from the other Party with respect thereto in good faith, provided that the Party subject to such requirement shall have final decision-making authority with respect to the contents of such redacted version of this Agreement.

8.1.7. Remedies . The Parties acknowledge and agree that the restrictions set forth in this Section 8.1 are reasonable and necessary to protect the legitimate interests of the Parties and that neither Party would have entered into this Agreement in the absence of such restrictions, and that any breach or threatened breach of any provision of this Section 8.1 will result in irreparable injury to the other Party for which there will be no adequate remedy at law. Notwithstanding the dispute resolution mechanism agreed to by the Parties in Section 14.1 , in the event of a breach or threatened breach of any provision of Section 8.1 by a Party, the other Party will be authorized and entitled to obtain from any court of competent jurisdiction, applying the laws of that court, injunctive relief, whether preliminary or permanent, specific performance and an equitable accounting of all earnings, profits and other benefits arising from such breach, which rights will be cumulative and in addition to any other rights or remedies to which such Party may be entitled in law or equity. The

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

breaching Party agrees to waive any requirement that the non-breaching Party (a) post a bond or other security as a condition for obtaining any such relief and (b) show irreparable harm, balancing of harms, consideration of the public interest or inadequacy of monetary damages as a remedy. Nothing in this Section 8.1.7 is intended, or will be construed, to limit the Parties’ rights to equitable relief or any other remedy for a breach of any provision of this Agreement.

8.2. Compliance with Law . Each Party hereby covenants to comply with all Applicable Law and industry professional standards applicable to its activities connected with the development (including Development), manufacture (including Manufacture), and commercialization (including Commercialization) (as applicable) of Products. Without limiting the generality of the foregoing:

8.2.1. Patient Information . Each Party agrees to abide by all laws, rules, regulations, and orders of all applicable supranational, national, federal, state, provincial, and local governmental entities concerning the confidentiality or protection of patient identifiable information or patients’ protected health information, as defined by any other applicable legislation in the course of their performance under this Agreement.

8.2.2. Debarment . Each Party will not use in any capacity, in connection with the activities to be performed under this Agreement, any person who has been debarred pursuant to Section 306 of the United States Federal Food, Drug, and Cosmetic Act or analogous law, or who is the subject of a conviction described in such section or a corresponding section of any analogous law. Each Party will inform the other Party in writing immediately if it or any person who is performing or has performed activities hereunder or is conducting or has conducted any development of the Licensed Compounds or Product is debarred or is the subject of a conviction described in Section 306 or a corresponding section of any analogous law, or if any action, suit, claim, investigation or legal or administrative proceeding is pending relating to the debarment or conviction of such Party or any person performing services hereunder.

8.3. Business Ethics.

8.3.1. Each Party will conduct its business in accordance with Applicable Law. By signing this Agreement, each Party agrees to conduct its activities under this Agreement in a manner that is consistent with Applicable Law, including the U.S. Foreign Corrupt Practices Act and the UK Bribery Act 2010, each as amended, and any other applicable anti-corruption laws and laws for the prevention of fraud, racketeering, or money laundering (collectively, “ Anti-Corruption Laws ”).

8.3.2. Each Party will not, directly or indirectly, pay, offer or promise to pay, or authorize the payment of any money, or give, offer or promise to give,

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

or authorize the giving of anything of value (collectively, a “ Prohibited Payment ”) to any government or political party officials, officials of international public organizations, candidates for public office or representatives of other businesses or persons acting on behalf of any of the foregoing (collectively, “ Officials ”) with respect to the subject matter of this Agreement or any other aspect of the other Party’s business where such Prohibited Payment would constitute a violation of any Anti-Corruption Law. In addition, regardless of legality, each Party will make no Prohibited Payment, directly or indirectly, to any Official if such Prohibited Payment is for the purpose of influencing decisions or actions with respect to the subject matter of this Agreement or any other aspect of the other Party’s business. Each Party acknowledges and agrees that none of it, or any of its Affiliates or its or their respective officers, directors, employees, agents and representatives (collectively, “ Authorized Representatives ”) is authorized to waive compliance with the provisions of this Section 8.3.2 and that each Party will be solely responsible for its compliance with the provisions of this Section 8.3.2 and the Anti-Corruption Laws irrespective of any act or omission of the other Party or any of its Affiliates, Sublicensees or its or their respective Authorized Representatives. Each Party’s failure to abide by the provisions of this Section 8.3.2 shall be deemed a material breach of this Agreement and without prejudice to any other rights or remedies that may be available to the non-breaching Party under this Agreement or in law or equity.

8.4. Export Restrictions .

8.4.1. Except in connection with the development or Manufacture of the Licensed Compounds and Products permitted hereunder, Ironwood will not knowingly sell, export, or distribute, directly or indirectly, any Product to any location outside of the Territory or take any action that Ironwood reasonably believes will result in such export. Ironwood will not knowingly sell, export, or distribute, or permit any Third Party to do any of the foregoing, directly or indirectly, any Product or the Licensed Compounds to any location outside of the Territory that is intended to be the final location for sale, export or distribution of such Product or Licensed Compound or take any action that Ironwood reasonably believes would result in any of the foregoing (except in connection with the development or Manufacture of the Licensed Compounds and Products permitted hereunder).

8.4.2. Except in connection with the development or Manufacture of the Licensed Compounds and Products permitted hereunder (including outside the Field), AstraZeneca will not (and will cause its Affiliates and Sublicensees to not) knowingly sell, export, or distribute, directly or indirectly, any Product to any location in the Territory or take any action that AstraZeneca reasonably believes will result in such export. AstraZeneca will not (and will cause its Affiliates and Sublicensees to not) knowingly sell, export, or distribute, or permit any Third Party to do any of the foregoing, directly or indirectly, any Product or Licensed Compound to any location within the Territory that is

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

intended to be the final location for sale, export or distribution of such Product or Licensed Compound or take any action that Ironwood reasonably believes would result in any of the foregoing (except in connection with the development or Manufacture of the Licensed Compounds and Products permitted hereunder (including outside the Field)).

9. REPRESENTATIONS AND WARRANTIES

9.1. Representations and Warranties of Each Party . As of the Effective Date, each of AstraZeneca and Ironwood hereby represents and warrants to the other Party hereto as follows:

(a) it is a corporation or entity duly organized and validly existing under the laws of the state or other jurisdiction of its incorporation or formation;

(b) the execution, delivery and performance of this Agreement by such Party has been duly authorized by all requisite corporate action and does not require any shareholder action or approval;

(d) the execution, delivery and performance by such Party of this Agreement and its compliance with the terms and provisions do not and will not conflict with or result in a breach of any of the terms and provisions of or constitute a default under (i) any agreement to which it or its Affiliates is a party, (ii) the provisions of its charter or operative documents or bylaws or (iii) any order, writ, injunction or decree of any court or governmental authority entered against it or by which any of its property is bound;

(e) it has the full right, power and authority to grant all of the right, title and interest in the licenses granted to the other Party under this Agreement; and

(f) it and its Affiliates have not violated in any manner that is reasonably likely to affect the rights of the other Party hereunder or adversely affect the development, or Commercialization of any Product hereunder, any laws, rules, regulations, or any order of any applicable supranational, national, federal, state, provincial, and local governmental entities, in each case, concerning the confidentiality or protection of patient identifiable information or patients’ protected health information, as defined by any applicable legislation.

9.2. Additional Representations, Warranties and Covenants of AstraZeneca . Except as disclosed to Ironwood in a separate written document provided in

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

connection with the execution of this Agreement, AstraZeneca hereby represents, warrants and covenants to Ironwood that as of the Effective Date:

(a) AstraZeneca has, with respect to any Patent Right that has reached the nationalization stage as of the Effective Date and will have at the time of nationalization of any other Patent Right, in each case, in the Territory, the sole and exclusive right in the Territory in and to the AstraZeneca Patent Rights listed in Schedule 9.2(a) attached hereto and the ownership of such AstraZeneca Patent Rights is as set forth on such Schedule 9.2(a) . AstraZeneca has the sole and exclusive rights in the Territory with respect to all AstraZeneca Know-How that it purports to grant to Ironwood hereunder, in each case free of any encumbrance, lien, or claim of ownership by any Third Party.

(b) AstraZeneca is not subject to any agreement with a Third Party that includes a royalty or similar payment obligation to, or other restriction or limitation in favor of, such Third Party (including, for this purpose, to current or former officers, directors, employees, consultants or personnel of AstraZeneca or any predecessor) with respect to (i) its rights to practice the AstraZeneca Technology in the Territory or (ii) the development or Commercialization of any Licensed Compound or any Existing Product in the Territory.

(c) To AstraZeneca’s Knowledge, no Person is infringing or threatening to infringe or misappropriating or threatening to misappropriate the AstraZeneca Patent Rights or the AstraZeneca Know-How in the Territory.

(d) To AstraZeneca’s Knowledge, the conception, development, and reduction to practice of the AstraZeneca Patent Rights and AstraZeneca Know-How existing as of the Effective Date have not constituted or involved the misappropriation of trade secrets or other rights or property of any Person.

(e) No AstraZeneca Patent Rights are subject to, or were developed pursuant to any funding agreement with any government or government agency.

(f) AstraZeneca is not in material breach of any provisions of any agreements with Third Parties relating to the AstraZeneca Patent Rights or AstraZeneca Know-How, in a manner that is reasonably likely to affect the rights of Ironwood hereunder or adversely affect the development, or Commercialization of any Product hereunder.

(g) AstraZeneca has not received any written or oral claim of ownership, inventorship or patent infringement from any Third Party (including by current or former officers, directors, employees, consultants,

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

or personnel of AstraZeneca or any predecessor) with respect to the AstraZeneca Technology and AstraZeneca is not aware of any reasonable basis for any such claim.

(h) No claim or litigation has been brought or threatened by any Person alleging, and AstraZeneca is not aware, that any of the AstraZeneca Patent Rights or the AstraZeneca Know-How are invalid or unenforceable.

(i) To AstraZeneca’s Knowledge, the manufacture, use or sale of an Existing Product in the Territory in the Field will not infringe any issued claim of an issued patent right of any Third Party, other than Patent Rights that AstraZeneca Controls.

(j) AstraZeneca has made available to Ironwood all Regulatory Approvals and Regulatory Submissions, including the Referenced Regulatory Filings and AstraZeneca Know-How in its Control regarding or related to any Licensed Compound or Product and all such Regulatory Approvals, Regulatory Submissions, Referenced Regulatory Filings and Ironwood Know-How are true and complete. As of the Effective Date, AstraZeneca has prepared, maintained and retained all Regulatory Approvals and Regulatory Submissions pursuant to and in accordance with GCP and good laboratory practices, as applicable, and Applicable Law and all such information is and will be true and complete.

(k) Material trade secrets comprising the AstraZeneca Know-How have been kept confidential or have been disclosed to Third Parties only under terms of confidentiality. To AstraZeneca’s Knowledge, no breach of such confidentiality with respect to such Know-How has been committed by any Third Party.

(l) To AstraZeneca’s Knowledge, it has conducted any development and Commercialization activities in accordance with good laboratory and clinical practice and Applicable Law.

(m) To AstraZeneca’s Knowledge, neither AstraZeneca nor any of its Affiliates, nor any of its or their respective officers, employees, or agents has made an untrue statement of material fact or fraudulent statement to any Regulatory Authority with respect to the development of the Licensed Compounds or the Products, failed to disclose a material fact required to be disclosed to any Regulatory Authority with respect to the development of the Licensed Compounds or the Products, or committed an act, made a statement, or failed to make a statement with respect to the development of the Licensed Compounds or the Products that could reasonably be expected to provide a basis for the United States Food and Drug Administration to invoke its policy respecting “Fraud, Untrue Statements of Material Facts, Bribery, and Illegal Gratuities”, set forth in 56 Fed. Reg.

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

46191 (September 10, 1991) and any amendments thereto or any analogous laws or policies in the Territory.

(n) Neither AstraZeneca nor any of its Affiliates has been debarred or is subject to debarment and neither AstraZeneca nor any of its Affiliates has used in any capacity, in connection with the AstraZeneca Technology, the Licensed Compounds or the Products, any Person who has been debarred pursuant to Section 306 of the United States Federal Food, Drug, and Cosmetic Act, or who is the subject of a conviction described in such section.

(o) To AstraZeneca’s Knowledge, it and its Affiliates have not violated any material Anti-Corruption Laws with respect to the Territory except for such matters as has been disclosed to Ironwood prior to the Effective Date.

(p) AstraZeneca has made available to Ironwood for review in due diligence all material (i) clinical and pre-clinical data relating to the Product(s) existing as of the Effective Date that is contained in Regulatory Submissions for such Product(s) in the Field in the Territory in its or any of its Affiliates’ possession, and (ii) AstraZeneca Know-How that has been requested of AstraZeneca by Ironwood or, to AstraZeneca’s Knowledge, is material to the development or Commercialization of the Product(s) hereunder. To AstraZeneca’s Knowledge, all AstraZeneca Know-How that has been disclosed by AstraZeneca or its Affiliates to Ironwood under this Agreement or in connection with such due diligence or the negotiation of this Agreement is or will be true and correct in all material aspects. All adverse information with respect to the safety and efficacy of the Products known to AstraZeneca or its Affiliates as of the Effective Date has been disclosed by Ironwood to AstraZeneca through such due diligence review.

(q) Neither AstraZeneca nor its Affiliates Control any Know-How related to, or any Patent Right that Covers, a diagnostic medical device intended to measure or monitor serum uric acid levels.

9.3. Additional Representations and Warranties of Ironwood . Ironwood hereby represents, warrants and covenants to AstraZeneca that as of the Effective Date:

(a) To Ironwood’s Knowledge, Ironwood and its Affiliates have not materially violated any Anti-Corruption Laws with respect to the Territory except for such matters as has been disclosed to Ironwood prior to the Effective Date.

(b) Neither Ironwood nor any of its Affiliates has been debarred or is subject to debarment and neither Ironwood nor any of its Affiliates has

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

used in any capacity, in connection with the Ironwood Technology, any Person who has been debarred pursuant to Section 306 of the United States Federal Food, Drug, and Cosmetic Act, or who is the subject of a conviction described in such section.

9.4. Representation by Legal Counsel . Each Party hereto represents that it has been represented by legal counsel in connection with this Agreement and acknowledges that it has participated in the drafting. In interpreting and applying the terms and provisions of this Agreement, the Parties agree that no presumption will exist or be implied against the Party which drafted such terms and provisions.

9.5. No Inconsistent Agreements . Neither Party has in effect and after the Effective Date neither Party may enter into any oral or written agreement or arrangement that would be inconsistent with its obligations under this Agreement or limit the ability of either Party to grant the licenses set forth in Article 2 of this Agreement.

9.6. Disclaimer . THE FOREGOING WARRANTIES OF EACH PARTY ARE IN LIEU OF ANY OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION, ANY IMPLIED WARRANTIES OF NONINFRINGEMENT, ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR ANY IMPLIED WARRANTIES OF FITNESS FOR A PARTICULAR PURPOSE ALL OF WHICH ARE HEREBY SPECIFICALLY EXCLUDED AND DISCLAIMED. EACH PARTY HEREBY DISCLAIMS ANY REPRESENTATION OR WARRANTY THAT THE DEVELOPMENT, OR COMMERCIALIZATION OF ANY PRODUCT UNDER THIS AGREEMENT WILL BE SUCCESSFUL.

10. INTELLECTUAL PROPERTY

10.1. Disclosure . During the Term, the Parties will promptly disclose to one another all Collaboration Know-How (whether patentable or not).

10.2. Ownership .

10.2.1. Ownership of Technology . Except as set forth in Section 10.2.2 , determinations as to which Party has invented any Patent Right or Know-How will be made in accordance with the standards of inventorship under U.S. patent law. Subject to the license grants under Article 2, as between the Parties, Ironwood will own all Know-How, including any Product Development Data and Collaboration Know-How (other than Joint Know-How) that is invented, conceived or developed solely by employees of Ironwood or its Affiliates, or Third Parties acting on behalf of Ironwood or its Affiliates, and any Patent Rights claiming such Know-How, and AstraZeneca will own all AstraZeneca Technology including Product Development Data and Collaboration Know-How (other than Joint Know-How) that is invented, conceived, or developed solely by employees of AstraZeneca or its Affiliates, or Third Parties acting on

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

behalf of AstraZeneca or its Affiliates, and any Patent Rights claiming such Know-How. Each Party will own an undivided one-half interest in and to the Joint Technology. In the event inventorship and ownership of any Collaboration Technology cannot be resolved by the Parties with advice of their respective intellectual property counsel, such dispute will be resolved through arbitration pursuant to Section 14.1.3 , provided such arbitration panel will include at least a single arbitrator who is a specialist in U.S. chemical and pharmaceutical patent law and in chemical and pharmaceutical patents. Each Party shall make such assignments as are required to effect the ownership allocations set forth in this Section 10.2.1 . Subject to the licenses granted to the other Party under this Agreement and the other terms of this Agreement, each Party has a right to exploit its interest in the Joint Technology without the consent of and without accounting to the other Party except, neither Party may assign its right, title, or interest in the Joint Technology to any Person, except (a) in connection with a permitted transaction under Section 14.11 , or (b) to an Affiliate.

10.2.2. Collaboration Development Data . Each Party will own an undivided one-half interest in and to all Collaboration Development Data. Subject to the licenses granted to the other Party under this Agreement and the other terms of this Agreement, each Party has the right to exploit its interest in the Collaboration Development Data without consent of and without accounting to the other Party, except neither Party may assign its right, title, or interest in the Collaboration Development Data to any Person, except (a) in connection with a permitted transaction under Section 14.11 , or (b) to an Affiliate.

10.2.3. Employee Assignment . Each Party shall procure from each of its employees and permitted assignees and subcontractors who are conducting work under this Agreement, rights to any and all Ironwood Technology, AstraZeneca Technology, Development Data or Joint Technology, as applicable, such that each Party shall receive from the other Party, without payments beyond those contemplated by this Agreement, the rights granted to such Party to use such Ironwood Technology (in the case of Ironwood), AstraZeneca Technology (in the case of AstraZeneca), Development Data or Joint Technology, as applicable, pursuant to this Agreement. In the event such rights have not been secured or any original holder challenges such procurement, the Party responsible for procuring such rights [**].

10.3. Intellectual Property Working Group . The Parties will promptly establish an intellectual property working group (“ IPWG ”) comprised of at least one senior patent attorney and, as needed, one trademark attorney, from each Party, together with research and development personnel and such other representatives of the Parties as the Parties may determine to be appropriate from time to time, to manage and review the patent strategy for AstraZeneca Know-How and Collaboration Know-How to the extent such AstraZeneca Patent Rights and Collaboration Patent Rights are necessary or useful to develop, Manufacture or Commercialize the

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

Licensed Compounds or Products and perform such other activities as may be delegated to the IPWG pursuant to this Agreement or by the Parties from time to time during the Term by mutual written agreement. All decisions of the IPWG will be made by consensus, with each Party’s representatives on the IPWG having collectively one vote on all matters that are within the responsibility of the IPWG. In the event that the IPWG adopts a patent strategy, the Parties shall comply with such strategy in connection with the exercise of their rights under this Article 10 . If there is no such strategy, then the Party with the primary responsibility for an activity under this Article 10 will be responsible for developing and implementing the applicable strategy. AstraZeneca’s rights and obligations with respect to participation in the IPWG pursuant to this Section 10.3 may be exercised by AstraZeneca or any of its Affiliates or its or their designees.

10.4. Prosecution and Maintenance of Patent Rights.

10.4.1. Patent Prosecution and Maintenance . Ironwood will have the first right, but not the obligation, to prepare, file, prosecute and maintain the AstraZeneca Patent Rights in the Territory and the Collaboration Patent Rights included in the Ironwood Patent Rights (the “ Ironwood Collaboration Patent Rights ”) worldwide. Such activities shall be at [**]’s cost. For AstraZeneca Patent Rights and the Ironwood Collaboration Patent Rights, Ironwood will provide AstraZeneca with (i) advance copies of, and a reasonable opportunity to comment upon, proposed patent filings in the Territory, including any provisional, PCT or other patent applications from which patent filings in the Territory can claim priority and prosecution strategies and proposed correspondence with patent offices in the applicable jurisdiction undertaken pursuant to any such filings, and will consider comments received in good faith and will not unreasonably reject such comments; and (ii) subject to Section 10.6.4 , correspondence or other communications or actions which relate to the validity of AstraZeneca Patent Rights, Ironwood Patent Rights, and Collaboration Patent Rights, to the extent such Patent Rights are necessary or useful in the Territory to develop, Manufacture or Commercialize a Licensed Compound or Product in the Territory, which correspondence or other communications or actions that are to be made during the course of an action before a national patent office in the Territory (i.e., the United States Patent & Trademark Office) or national court in the Territory will require the mutual approval of both Parties. With respect to AstraZeneca Patent Rights outside of the Territory, AstraZeneca shall (and shall cause its Sublicensees to) provide Ironwood with advance copies of any substantive filings in response to office actions related to the AstraZeneca Patent Rights in the Major Markets or prosecuted in the European Patent Office undertaken pursuant to any such filings, and will consider comments received from Ironwood in good faith and will not unreasonably reject such comments. A Party providing comments in accordance with this Section 10.4.1 will provide such comments, if any, expeditiously and in any event in reasonably sufficient time to meet any filing deadline communicated to it by the other Party. The Party receiving any such patent application and correspondence will maintain such information in

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

confidence, except for patent applications that have been published and official correspondence that is publicly available.

10.4.2. Joint Patent Rights . Ironwood will have the first right, but not the obligation, for the preparation, filing, prosecution and maintenance of the Joint Patent Rights. Except as otherwise agreed by the Parties in writing, costs incurred under this Section 10.4.2 for Joint Patent Rights [**].

10.4.3. Second Rights . If a Party decides not to file, prosecute or maintain an AstraZeneca Patent Right, an Ironwood Collaboration Patent Right or a Joint Patent Right, to the extent such Patent Right Covers the development, Manufacture or Commercialization of the Licensed Compounds or Products, with respect to AstraZeneca Patent Rights within the Territory and with respect to the Ironwood Collaboration Patent Rights and Joint Patent Rights outside of the Territory, it will give the other Party reasonable notice to that effect sufficiently in advance of any deadline for any filing with respect to such Patent Right to permit the other Party to carry out such activity. After such notice, the other Party may, subject to the terms of any applicable license as a result of which a Party Controls such Patent Rights (i.e., other Third Party agreements), file, prosecute and maintain the Patent Right, and perform such acts as may be reasonably necessary for such other Party to file, prosecute or maintain such Patent Right, at its sole cost and expense, except [**]. If such other Party does so elect, then the Party which has elected not to pursue such filing, prosecution or maintenance will provide such cooperation to the other Party, including the execution and filing of appropriate instruments, as may reasonably be requested to facilitate the transition of such patent activities, and will assign all of its right, title and interest to such patent, other than its license rights thereto provided by this Agreement, to the Party electing to pursue such patent activities.

10.4.4. Patent Term Extensions . Regardless of which Party is filing, prosecuting and maintaining any Patent Right pursuant to this Article 10 , the Parties shall attempt to make all decisions by mutual consent regarding all patent term extensions with respect to (a) the AstraZeneca Patent Rights in the Territory for which an application for patent term extension has been submitted as of the Effective Date, (b) the Ironwood Collaboration Patent Rights in the Territory and (c) the Joint Patent Rights worldwide, including, if applicable, in the United States with respect to extensions pursuant to 35 U.S.C. § 156 et. seq. and in other jurisdictions pursuant to supplementary protection certificates, and in all jurisdictions with respect to any other extensions that are now or become available in the future, wherever applicable, for such Patent Rights. If, with respect to a Product and a country, the Parties cannot agree on which of such Patent Rights(s) as to which the term is to be extended in such country, then (i) with respect to such Patent Rights in the Territory, the Parties shall mutually agree on a Third Party patent lawyer (whose costs [**]) and shall give such lawyer instructions to resolve such disagreement in a manner designed to maximize the period of exclusivity for the applicable Product, and the decision

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

of such lawyer shall be binding on the Parties and (ii) AstraZeneca will have the right to make such decision outside the Territory for the Joint Patent Rights. Upon request by a Party controlling a decision under this Section 10.4.4 , the other Party shall reasonably cooperate in the implementation of such decision.

10.4.5. CREATE Act . Notwithstanding anything to the contrary in this Article 10 , neither Party shall have the right to make an election under the Cooperative Research and Technology Enhancement Act of 2004, (Public Law 108-453, 118 Stat. 3596 (2004)), as codified in 35 U.S.C. § 103(c)(2)-(c)(3) or 35 U.S.C. § 102(c), as applicable, when exercising its rights under this Article 10 without the prior written consent of the other Party. With respect to any such permitted election, the Parties shall use [**] to cooperate and coordinate their activities with respect to any submissions, filings or other activities in support thereof. The Parties acknowledge and agree that this Agreement is a “joint research agreement” as defined in 35 U.S.C. § 100(h).

10.5. Trademarks and Domain Names .

10.5.1. Zurampic Product . The Zurampic Product is to be Commercialized in the Territory under the ZURAMPIC® Marks and using the ZURAMPIC® Domain Names or under such other Trademarks and using such other domain names as the Parties may mutually agree, after good faith consultation with the Parties’ intellectual property counsel (the ZURAMPIC® Marks and each such other Trademark for the Zurampic Product, other than AstraZeneca House Marks or Ironwood House Marks, a “ Product Trademark, ” and the ZURAMPIC® Domain Names and each such other domain name for the Zurampic Product, other than those containing a AstraZeneca House Mark or Ironwood House Mark, a “ Product Domain Name ”). Notwithstanding anything to the contrary in this Agreement, the Product Trademark for the Zurampic Product shall be ZURAMPIC® unless otherwise mutually agreed upon by the Parties. After such time as the Parties determine that the launch by a Third Party of a Generic Equivalent of the Zurampic Product is imminent in the Territory, Ironwood may select any Trademark or domain name of its choosing for the Commercialization of any authorized generic version of the Zurampic Product in the Territory; provided that any such Trademark or domain name does not contain the term ZURAMPIC, any Product Trademark or any AstraZeneca House Mark or any other term or Trademark that is confusingly similar to, or a colorable imitation of, the term ZURAMPIC, any Product Trademark, any AstraZeneca House Mark or any other Trademark of AstraZeneca or any of its Affiliates.

10.5.2. Other Products . Ironwood may select any Trademark or domain name of its choosing for the Commercialization of the Allopurinol Combination Product in the Territory, including the Trademarks and domain names identified on Schedule 10.5.2 (each such Trademark for the Allopurinol Combination Product, other than AstraZeneca House Marks or Ironwood House Marks, a “ Combination Trademark, ” and each such domain name for the

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

Allopurinol Combination Product, other than those containing a AstraZeneca House Mark or Ironwood House Mark, a “ Combination Domain Name ”); provided any such Trademark does not contain the term ZURAMPIC, any AstraZeneca House Mark or any other term or Trademark that is confusingly similar to, or a colorable imitation of, any Product Trademark or any AstraZeneca House Mark; and provided further that any such domain name does not contain, in whole or in part, the term ZURAMPIC, any Product Trademark or any AstraZeneca House Mark or any term or terms confusingly similar to or a colorable imitation thereof, except as required by Applicable Law. Ironwood hereby acknowledges and agrees that AstraZeneca or one of its Affiliates will own all Combination Trademarks and all Combination Domain Names. After such time as the Parties determine that the launch by a Third Party of a Generic Equivalent of the Allopurinol Combination Product is imminent in the Territory, Ironwood may select any Trademark or domain name of its choosing for the Commercialization of any authorized generic version of the Allopurinol Combination Product in the Territory; provided that any such Trademark or domain name does not contain the terms [**], any Allopurinol Combination Trademark (in whole or in part) or any AstraZeneca House Mark or any other term or Trademark that is confusingly similar to, or a colorable imitation of, any Allopurinol Combination Trademark, any AstraZeneca House Mark or any other Trademark of AstraZeneca or any of its Affiliates.

10.5.3. Ownership; Quality Control; Restrictions; Registration .

(a) AstraZeneca or one of its Affiliates, as applicable, will own all Product Trademarks, Combination Trademarks, Product Domain Names and Combination Domain Names, subject to the license granted to Ironwood herein. Ironwood hereby acknowledges AstraZeneca’s and its Affiliates’ exclusive right, title and interest in and to the AstraZeneca House Marks, the Product Trademarks, the Combination Trademarks, the Product Domain Names and the Combination Domain Names, together with all goodwill associated therewith and all registrations and registration applications therefor, on a worldwide basis and acknowledges that nothing herein shall be construed to accord to Ironwood any rights in and to the AstraZeneca House Marks, the Product Trademarks, the Combination Trademarks, the Product Domain Names and the Combination Domain Names, except for the license rights expressly granted to Ironwood under Section 10.5.6 . Ironwood shall not, and shall cause its Affiliates and permitted Sublicensees not to, use in their respective businesses, any Trademark or domain name (except as otherwise expressly permitted in this Agreement) that is confusingly similar to or a colorable imitation of, misleading or deceptive with respect to or that dilutes any (or any part) of the AstraZeneca House Marks, the Product Trademarks, the Combination Trademarks, the Product Domain Names or the Combination Domain Names.

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

(b) Ironwood shall, and shall cause its Affiliates and permitted Sublicensees to (i) within [**] with respect to those Quality Standards specified after the Effective Date, comply with all Trademark usage guidelines, quality standards, business practices, methodology, policies and procedures and technical and operational specifications as may be reasonably specified by AstraZeneca in writing from time to time or as the Parties may otherwise mutually agree or as may be imposed by Applicable Law with respect to the nature and quality of the Zurampic Products and of the Allopurinol Combination Product and the manner of use of the AstraZeneca House Marks, the Product Trademarks and the Combination Marks licensed to Ironwood hereunder (collectively, “ Quality Standards ”) and (ii) within [**] with respect to those Quality Standards specified after the Effective Date, make any changes to any Zurampic Product or Allopurinol Combination Product labeling, packaging, inserts or any advertising, marketing, promotional or other materials bearing any of the AstraZeneca House Marks, the Product Trademarks or the Combination Trademarks as AstraZeneca may reasonably request to achieve compliance with clause (i); provided, however, that AstraZeneca will provide Ironwood a reasonable opportunity to comment upon such requested changes and will consider comments received from Ironwood in good faith and will not unreasonably reject such comments, and (iii) use [**] not to do any act that endangers, destroys or similarly affects, in any material respect, the Product Trademarks, the Combination Trademarks or the AstraZeneca House Marks or the value of the goodwill associated with any of the Product Trademarks, the Combination Trademarks or the AstraZeneca House Marks. Without limiting Ironwood’s obligations under this Section, from time to time at AstraZeneca’s request, Ironwood shall provide AstraZeneca with representative samples of such Zurampic Product or Allopurinol Combination Product label, packaging, insert, advertising, marketing, promotional or other materials, in each case, bearing a Product Trademark, a Combination Trademark or an AstraZeneca House Mark as AstraZeneca may request to permit AstraZeneca to evaluate Ironwood’s compliance with the Quality Standards. Notwithstanding any of the foregoing, in no event shall AstraZeneca specify any Quality Standard following the Effective Date that materially affects the scope of the rights licensed to Ironwood under this Agreement or Ironwood’s rights to enjoy the benefits of such licensed rights.

(c) Ironwood shall not, and shall cause its Affiliates and any permitted Sublicensees not to, (i) directly or indirectly, at any time challenge AstraZeneca’s or any of its Affiliates’ rights, title or interest in and to the AstraZeneca House Marks, the Product Trademarks, the Combination Trademarks, the Product Domain Names or the Combination Domain Names, or in and to any registration or registration application therefor in any jurisdiction, (ii) do or cause to be done or omit to do anything, the doing, causing or omitting of which would contest or in any way materially impair the rights of AstraZeneca or any of its Affiliates in and

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

to any of the AstraZeneca House Marks, the Product Trademarks, the Combination Trademarks, the Product Domain Names or the Combination Domain Names, or in and to any registrations or registration applications therefor in any jurisdiction, (iii) represent to any Third Party that it has, in any jurisdiction, any ownership rights in or to any of the AstraZeneca House Marks, the Product Trademarks, the Combination Trademarks, the Product Domain Names or the Combination Domain Names, or in or to any registration or registration application therefor or any other rights in any of the AstraZeneca House Marks, the Product Trademarks, the Combination Trademarks, the Product Domain Names or the Combination Domain Names, other than the specific license rights conferred by this Agreement, or (iv) register or attempt to register any of the AstraZeneca House Marks, the Product Trademarks, the Combination Marks, the Product Domain Names or the Combination Domain Names (except as otherwise expressly permitted under this Agreement) or any confusingly similar Trademark (including any translation or transliteration of any of the AstraZeneca House Marks, the Product Trademarks or the Combination Trademarks or any colorable imitation thereof) as a Trademark with any governmental authority in its own name or in the name of any of its Affiliate or any Third Party in any jurisdiction. Ironwood acknowledges and agrees that no ownership rights are vested or created in any of the AstraZeneca House Marks, the Product Trademarks, the Combination Trademarks, the Product Domain Names or the Combination Domain Names anywhere in the world by the licenses and other rights granted in this Agreement and that all use of the AstraZeneca House Marks, the Product Trademarks, the Combination Trademarks, the Product Domain Names and the Combination Domain Names by Ironwood and its Affiliates and permitted Sublicensees and all goodwill generated in connection therewith, shall inure solely for and to the benefit of AstraZeneca and its Affiliates.

10.5.4. Filing, Prosecution, Registration and Maintenance. AstraZeneca shall have primary responsibility for the filing, prosecution, registration and maintenance of the Product Trademarks and the Combination Trademarks and the registration and maintenance of the Product Domain Names and the Combination Domain Names, using counsel of its choice. If AstraZeneca decides not to file or continue to prosecute, register or maintain a Product Trademark or a Combination Trademark in the Territory or to obtain or maintain a Product Domain Name or a Combination Domain Name for use in the Territory, it will give Ironwood reasonable notice to that effect sufficiently in advance of any deadline for any filing with respect to such Product Trademark, Combination Trademark, Product Domain Name or Combination Domain Name in the Territory to permit Ironwood to carry out such activity. After such notice, Ironwood may undertake such activity on behalf of and in the name of AstraZeneca, using counsel acceptable to AstraZeneca. The expenses of the selection, filing, prosecution and maintenance of the Product Trademarks and the Combination Trademarks in the Territory and obtaining

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

and maintaining the Product Domain Name and the Combination Domain Names in the Territory will be borne by [**]. Each Party will keep the other Party regularly apprised of the status of its activities under this Section 10.5.4 and will notify the other Party, and shall consult with such other Party in good faith, with respect to any material, substantive issue or any opposition, cancellation, invalidity or other proceeding that may be raised or asserted against any application or registration for any Product Trademark or Product Domain Name in the Territory prior to taking any material action in response thereto.

10.5.5. Trademark and Domain Name Use . Ironwood will utilize the AstraZeneca House Marks, the Product Trademarks, the Combination Trademarks, the Product Domain Names and the Combination Domain Names within the Territory only in accordance with this Agreement and for no other product or purpose in the Territory. Ironwood shall have no right to use the AstraZeneca House Marks, the Product Trademarks or the Combination Trademarks outside of the Territory or outside of the Field or to direct any content hosted through any of the Product Domain Names or any of the Combination Domain Names to any consumers outside of the Territory.

10.5.6. Trademark and Domain Name License . To effectuate the purposes of this Agreement, subject to the terms and conditions of this Agreement, AstraZeneca hereby grants to, and shall cause its Affiliates, as applicable, to grant to, Ironwood an exclusive (even as to AstraZeneca and its Affiliates, except to the extent the right to use such Trademarks are necessary for AstraZeneca to perform its obligations under this Agreement), royalty-bearing (as set forth in Section 7.3 ), nontransferable (except as set forth in Section 14.11 ) license, with the right to grant sublicenses as described in Section 2.6 , to use and display (i) the Product Trademarks and the Product Domain Names in connection with the Commercialization of the Zurampic Product in accordance with this Section 10.5 solely in the Field in the Territory and (ii) the Combination Trademarks and the Combination Domain Names in connection with the Commercialization of the Allopurinol Combination Product in accordance with this Section 10.5 solely in the Field in the Territory. Subject to the terms and conditions of this Agreement, and solely if and to the extent such use is required by Applicable Law, AstraZeneca hereby grants to, and shall cause its Affiliates, as applicable, to grant to, Ironwood a limited, non-exclusive, royalty-bearing (as set forth in Section 7.3 ), nontransferable (except as set forth in Section 14.11 ) license, without the right to grant sublicenses, to use and display such AstraZeneca House Mark as AstraZeneca may designate in connection with the Commercialization of the Zurampic Product in accordance with this Section 10.5 , solely in the Field in the Territory. Notwithstanding the foregoing or anything to the contrary herein, Ironwood shall have the right to use the AstraZeneca House Marks only in connection with the sale of the Effective Time Inventory (as defined in the Transitional Services Agreement) until the date the Parties mutually agree that Ironwood will cease such use.

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

10.6. Enforcement and Defense of Technology Rights.

10.6.1. Notice . Each Party shall provide to the other Party prompt written notice (i) of any actual or threatened infringement or misappropriation (A) any Ironwood Technology, AstraZeneca Technology, Collaboration Technology (including Joint Technology), Development Data, Product Trademark, Combination Trademark, Product Domain Name or Combination Domain Name by a Third Party in the Territory in the Field, or (B) any Collaboration Technology that is included in AstraZeneca Technology by a Third Party outside the Territory, or (ii) if any Ironwood Technology, AstraZeneca Technology, Collaboration Technology (including Joint Technology), Development Data, Product Trademark, Combination Trademark, Product Domain Name or Combination Domain Name, or any Collaboration Technology that is included in AstraZeneca Technology is subject to an invalidation, cancellation, opposition or other similar action (including any administrative or judicial action whether or not there is current or anticipated infringement or misappropriation), or a declaratory judgment action arising from such infringement or misappropriation (any of the foregoing, being an “ Infringement ”).

10.6.2. Enforcement and Defense of Trademarks and Domain Names . AstraZeneca shall have the first right (but not the obligation) to take such action as AstraZeneca, after consultation with Ironwood, deems necessary to enforce or defend any Product Trademark or Product Domain Name or any Combination Trademark or Combination Domain Name, against an Infringement by a Third Party in the Territory at its sole cost and expense and using counsel of its own choice; provided that Ironwood shall have the right to provide input on the overall strategy for such action and AstraZeneca shall consider such input in good faith (and shall not unreasonably reject such input). If AstraZeneca exercises its right to enforce (and so defend) any Product Trademark or Product Domain Name or any Combination Trademark or Combination Domain Name pursuant to this Section 10.6.2 , Ironwood will reasonably cooperate with AstraZeneca with respect to such enforcement or defense, including by joining any lawsuit or proceeding as a party where such joinder is required under Applicable Law to enforce or so defend the Product Trademark or Product Domain Name or Combination Trademark or Combination Domain Name. In the event that AstraZeneca declines to enforce or so defend the Product Trademark or Product Domain Name or the Combination Trademark or Combination Domain Name against an Infringement within [**] (or such shorter period as may be required to comply with legal or regulatory deadlines which relate to such Infringement) of becoming aware thereof, Ironwood will have the right (but not the obligation) to so enforce or so defend such Product Trademark or Product Domain Name or such Combination Trademark or Combination Domain Name at its sole cost and expense and using counsel of its own choice; provided that AstraZeneca shall have the right to provide input on the overall strategy for such action and Ironwood shall consider such input in good faith (and shall not unreasonably reject such input). Irrespective of which Party controls an action pursuant to this Section 10.6.2 , the Parties will collaborate with respect to such action. In

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

furtherance of the foregoing, the Party responsible for any such action will keep the other Party reasonably informed, in person or by telephone, regarding the status and costs of such action or proceeding prior to and during any such enforcement or defense. Neither Party will settle any such action without the prior written consent of the other Party, such consent not to be unreasonably withheld, conditioned or delayed. Neither Party will incur any liability to the other as a consequence of such litigation or any unfavorable decision resulting therefrom, but for clarity, this sentence is without limitation of a Party’s other obligations hereunder, including Sections 12.1 and 12.2 .

10.6.3. Costs and Recoveries for Trademarks and Domain Names . The costs of any prosecution or defense of any Infringement of any Product Trademarks or Product Domain Names in the Territory or of any Combination Trademark or Combination Domain Name in the Territory will be borne by the enforcing Party. Costs will be reimbursed to the Parties by the proceeds of any awards, judgments or settlements obtained in connection with an Infringement in the Territory and, in the case of enforcement by Ironwood, the remainder of such proceeds [**].

10.6.4. Enforcement and Defense of Patent Rights . Ironwood has the first right (but not the obligation) to enforce or defend in connection with any such enforcement activity any AstraZeneca Technology or Product Development Data of AstraZeneca in the Territory, Ironwood Technology or Product Development Data of Ironwood worldwide (provided that it has the sole right, but not the obligation, with respect to Ironwood Technology that is not Collaboration Technology), Collaboration Development Data and Collaboration Technology that is not included in Ironwood Technology (including Joint Technology) in the Territory, to the extent either Party has the legal power to enforce or defend such Technology (“ Subject Technology ”), against an Infringement in the Territory. If Ironwood exercises its right to enforce (and so defend) any Subject Technology pursuant to this Section 10.6.4 , AstraZeneca will reasonably cooperate with Ironwood with respect to such enforcement or defense, including by joining any lawsuit or proceeding as a party where such joinder is required under Applicable Law to enforce or so defend the Subject Technology. In the event that Ironwood declines to enforce or so defend the Subject Technology (other than Ironwood Technology that is not Collaboration Technology) against an Infringement within [**] (or such shorter period as may be required to comply with legal or regulatory deadlines which relate to such Infringement) of becoming aware thereof, AstraZeneca will have the right to so enforce or so defend such Subject Technology against such Infringement. AstraZeneca has the first right (but not the obligation) to enforce and defend any Joint Technology against an Infringement outside the Territory. In the event that AstraZeneca declines to enforce or so defend such Technology against an Infringement within [**] (or such shorter period as may be required to comply with legal or regulatory deadlines which relate to such Infringement) of becoming aware thereof, Ironwood will have the right to so enforce or defend such Technology. Notwithstanding the foregoing, (a) Ironwood may not settle any action under this Section 10.6.4 (whether in the Territory or outside the Territory) (i) in a manner

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

that imposes any costs or liability on AstraZeneca or involves any admission of the invalidity or unenforceability of any AstraZeneca Technology or Joint Technology or (ii) without first consulting with AstraZeneca, allowing AstraZeneca an opportunity to provide comments, and incorporating AstraZeneca’s comments in good faith and (b) AstraZeneca may not settle any action under this Section 10.6.4 (whether in the Territory or outside the Territory) (i) in a manner that imposes any costs or liability on Ironwood or involves any admission of the invalidity or unenforceability of any Ironwood Technology or Joint Technology or (ii) without first consulting with Ironwood, allowing Ironwood an opportunity to provide comments, and incorporating Ironwood’s comments in good faith. Irrespective of which Party controls an action pursuant to this Section 10.6.4 , the Parties will collaborate with respect to such action and the comments of the other Party will not be unreasonably rejected with respect to strategic decisions and their implementation with respect to such action. In furtherance of the foregoing, the Party responsible for any such action will keep the other Party reasonably informed, in person or by telephone, regarding the status and costs of such action or proceeding prior to and during any such enforcement or defense. Neither Party will settle any such action without the written consent of the other Party, such consent not to be unreasonably withheld, conditioned or delayed. Neither Party will incur any liability to the other as a consequence of such litigation or any unfavorable decision resulting therefrom, including any decision holding any such Subject Technology invalid, not infringed, not misappropriated or unenforceable, but for clarity, this sentence is without limitation of a Party’s other obligations hereunder, including Sections 12.1 and 12.2 .

10.6.5. Costs and Recoveries for Defense of Patent Rights .

(a) In the Territory . The Parties agree that the costs of any prosecution or defense of any Infringement in the Territory will be borne by the enforcing Party. Such costs will be reimbursed to the Parties by the proceeds of any awards, judgments or settlements obtained in connection with an Infringement in the Territory, the remainder of such proceeds [**]; provided that only that portion of the profits allocable to the recovery of lost sales of Product [** ] .

(b) Outside the Territory . Costs of any prosecution or defense of any Infringement relating to Subject Technology outside the Territory [** ] and the proceeds of any awards, judgments, or settlements obtained in connection with any prosecution or defense against any such Infringement [**].

10.7. Third Party Claims .

10.7.1. Third Party Claims - Course of Action . If the development, Commercialization or Manufacture of a Product or the use of any Product Trademark, Combination Trademark, Combination Domain Name or Product

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

Domain Name, in each case, under this Agreement is alleged by a Third Party to infringe a Third Party’s Patent Right(s) or Trademark rights or misappropriate a Third Party’s trade secret, the Party becoming aware of such allegation will promptly notify the other Party thereof, in writing, reasonably detailing the claim.

10.7.2. Third Party Suit . Subject to Sections 12.1 through 12.3 , if a Third Party sues a Party (the “ Sued Party ”) alleging that the Sued Party’s or the Sued Party’s Affiliates’ or Sublicensees’, development or Manufacture inside or outside the Territory for Commercialization in the Territory or Commercialization of the Product in the Territory or use of any of the Product Trademarks or Product Domain Names or any of the Combination Trademarks or Combination Domain Names infringes or will infringe said Third Party’s Patent Right(s) or Trademark rights or misappropriates said Third Party’s trade secret, then upon the Sued Party’s request and in connection with the Sued Party’s defense of any such Third Party suit, the other Party will provide reasonable assistance to the Sued Party for such defense and will join such suit if deemed a necessary party; provided that for suits relating to any Product Trademark or Product Domain Name or any Combination Trademark or Combination Domain Name, AstraZeneca will have the first right (but not the obligation) and Ironwood will have the second right (but not the obligation) to assume the defense of any such suit; provided further that, with respect to any suit Ironwood elects to defend, AstraZeneca may select separate counsel of its own choosing at AstraZeneca’s expense. The Sued Party (or the controlling Party in the case of suits relating to any Product Trademark, Combination Trademark, Product Domain Name or Combination Domain Name) will keep the other Party, if such other Party has not joined in such suit, reasonably informed with respect to the status of such suit on a quarterly basis, in person or by telephone, prior to and during the pendency of any such suit. The Sued Party or the controlling Party, as applicable, will not admit the invalidity or unenforceability of any Patent Right within the Ironwood Patent Rights, the AstraZeneca Patent Rights, or Joint Patent Rights, nor settle any such suit, without written consent of the other Party, such consent not to be unreasonably withheld, conditioned or delayed (and AstraZeneca’s consent will not be required with respect to Ironwood Collaboration Patent Rights), and in the case of the Product Trademarks, Combination Trademarks, Product Domain Names and Combination Domain Names, neither Party will submit any argument or take any position in such Third Party suit which may in any way lessen, impair or undermine the Product Trademarks or the Combination Trademarks, as applicable, or settle any such suit, without the prior written consent of the other Party, such consent not to be unreasonably withheld, conditioned or delayed. Subject to the Parties’ respective indemnity obligations pursuant to Sections 12.1 and 12.2 , all litigation costs and expenses incurred with respect to a Third Party suit, including settlement costs, royalties paid in settlement of any such suit, and the payment of any damages to the Third Party, under this Section 10.7.2 will be shared by the Parties equally [**], and the proceeds of any awards, judgments or settlements obtained in connection with any such suit

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

[** ] after reimbursement of the Parties’ litigation costs and expenses (except for proceeds from any awards, judgments or settlements involving any Product Trademark, Combination Trademark, Product Domain Name or Combination Domain Name where AstraZeneca is the controlling Party, in such cases, AstraZeneca will be entitled to retain any such proceeds after reimbursement of the Parties’ litigation costs and expenses).

10.8. Third Party Licenses . If, either Party in good faith believes that, in order to avoid infringing or misappropriating any Third Party’s Patent Right, Know-How, Trademark or domain name, it is necessary to obtain a license to such Patent Right, Know-How, Trademark or domain name, from such Third Party in order to develop, Manufacture or Commercialize the Licensed Compound or the Existing Products in the Territory as contemplated herein, then such Party will deliver notice thereof to the other Party setting forth the basis for such belief. Except with respect to any AstraZeneca House Mark with respect to which AstraZeneca has the sole right (and sole discretion over whether or not) to seek, negotiate and obtain a license for any such Third Party, Ironwood will have the first right (but not the obligation) through counsel of its choosing, to negotiate and obtain a license from such Third Party, in which case Ironwood shall be responsible, subject to Section 7.3, for paying all amounts and other considerations payable or issuable to Third Parties pursuant to any such license agreement. If Ironwood elects not to obtain such license, AstraZeneca may, at its cost and expense and through counsel of its choosing, negotiate and obtain a sublicenseable license from such Third Party to develop, Manufacture and Commercialize the Existing Products to the extent of the rights granted to Ironwood hereunder. If AstraZeneca obtains a Third Party license pursuant to this Section 10.8 , then AstraZeneca shall notify Ironwood of all terms of such license that would be applicable to Ironwood as a sublicensee under such license, including payment obligations that would arise out of Ironwood’s use of such licensed rights in connection with the development, Manufacture and Commercialization of the Existing Products in the Territory (“ Third Party Obligations ”). Ironwood shall be responsible for paying all amounts and other considerations payable or issuable to Third Parties pursuant to any such license agreement (and for complying with related reporting requirements) that are reasonably allocable to Ironwood’s exploitation of the rights granted under any such license, taking into account the scope of products, field and territory included under such license obtained by AstraZeneca, as determined by mutual agreement of AstraZeneca and Ironwood, in sufficient time for AstraZeneca to comply with the applicable terms and conditions of the applicable Third Party license agreement, and Ironwood may treat any such payments as payments made to a Third Party entitling Ironwood to a set off against royalties payment to AstraZeneca in accordance with Section 7.3 ; provided that Ironwood shall not have such obligations in respect of any such Third Party license agreement in the event that Ironwood notifies AstraZeneca within [**] of the receipt of the applicable notice of Third Party Obligations that Ironwood desires not to receive the benefit of a sublicense under such Third Party license agreement, in which event the intellectual property licensed to AstraZeneca from such Third Party shall not be deemed “Controlled” by AstraZeneca for purposes of Section 1.47 (and the license granted to Ironwood in Section 2.1 shall

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

be deemed to exclude ab initio any sublicense under such Third Party license agreement) and Ironwood shall not be responsible pursuant to this Section 10.8 for any payments due to such Third Party pursuant to such agreement. Any sublicense granted to Ironwood with respect to such Third Party intellectual property shall be subject to the terms and conditions of the applicable Third Party license agreement. Notwithstanding anything to the contrary in this Agreement, in the event that Ironwood and AstraZeneca are not able to agree as to the Third Party Obligations to be allocated to Ironwood under a Third Party license agreement, such dispute shall be resolved pursuant to Section 14.1.2 and 14.1.3 and, during the time period of any such dispute, the [**] time period set forth in this Section 10.8 for Ironwood to reject the Third Party Obligations set forth in AstraZeneca’s notice shall be tolled. The above provisions of this Section 10.8 shall not apply to Third Party licenses of any Products other than the Existing Products, and Ironwood shall have the sole right and responsibility for any Third Party obligations arising out of the development, Manufacture or Commercialization of any Product which is not an Existing Product.

10.9. Patent Marking . Each Party agrees to mark or virtually mark and have its Affiliates and all Sublicensees mark or virtually mark all Products (or their containers or labels) sold pursuant to this Agreement in accordance with the applicable statutes or regulations in the country or countries of manufacture and sale thereof.

10.10. Patent Certifications . Each Party will immediately give written notice to the other of any certification of which it becomes aware has been filed pursuant to 21 U.S.C. § 355(b)(2)(A) or § 355(j)(2)(A)(vii) (or any amendment or successor statute thereto) claiming that the Ironwood Patent Rights, AstraZeneca Patent Rights, or Collaboration Patent Rights, in each case, in the Territory Covering the Product are invalid or that infringement will not arise from the manufacture, use or sale in the Territory of such Third Party product by a Third Party. Any response to such certification shall be governed by Section 10.6.4 , provided that if Ironwood decides not to respond to such certification, including by bringing infringement proceedings against such Third Party, Ironwood will give notice to AstraZeneca of its decision not to bring suit within ten Business Days after receipt of notice of such certification (or, if the time period permitted by law is less than [**] Business Days, within half of the time period permitted by law for AstraZeneca to commence such action) and AstraZeneca may then, but will not be obligated to, bring suit against the Third Party that filed the certification in accordance with its second rights as described in Section 10.6.4 . Each Party shall cooperate with the other Party, including joining any action, as described in Section 10.6.4 . The costs and recoveries of the Parties under this Section 10.10 shall be allocated as described in Section 10.6.5 . In the event of a conflict between this Section 10.10 and Section 10.6.4 , this Section 10.10 will control.

10.11. Privileged Communications . In furtherance of this Agreement, it is expected that AstraZeneca and Ironwood will, from time to time, disclose to one another privileged communications with counsel, including opinions, memoranda, letters and other written, electronic and verbal communications. Such disclosures

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

are made with the understanding that they will remain confidential, they will not be deemed to waive any applicable attorney-client privilege and that they are made in connection with the shared community of legal interests existing between Ironwood and AstraZeneca, including the community of legal interests in avoiding infringement of any valid, enforceable patents of Third Parties and maintaining the validity of Ironwood Patent Rights, AstraZeneca Patent Rights and Joint Patent Rights.

11. TERM AND TERMINATION

11.1. Term . The term of this Agreement (the “ Term ”) will commence on the Effective Date and will continue in full force and effect, unless earlier terminated as provided in this Article 11 , [**].

11.2. Termination for Cause .

11.2.1. Termination for [**]. This Agreement may be terminated effective immediately by written notice by either Party at any time during the Term if the other Party [**] this Agreement, which breach remains uncured for [**] measured from the date written notice of such breach is given to the breaching Party by the non-breaching Party, which notice will specify the nature of the breach and demand its cure; provided, however, that if such breach is not capable of being cured within the stated period and the breaching Party uses [**] to cure such breach during such period and [**] this Agreement will not terminate and the cure period [**]. Further, in the case of a dispute during the cure period with respect to whether a [**] has occurred, the non-breaching Party shall not have the right to terminate this Agreement until it complies with the applicable dispute resolution procedures hereunder, including those set forth in Section 14.1.2 , and the dispute has been resolved pursuant to such procedures and breach remains uncured [**] after the final resolution of the dispute through such dispute resolution procedures. Notwithstanding anything to the contrary set forth in this Agreement but subject to the limitations set forth in Section 12.5 , termination will not be deemed to relieve a defaulting party from any liability arising from such default.

11.2.2. Termination for Safety Reasons . In the event that Ironwood determines in good faith in accordance with its internal procedures that there is a material safety issue associated with an Existing Product which safety issue was not disclosed to Ironwood prior to the Execution Date, then Ironwood shall discuss the matter with AstraZeneca as promptly as practicable. Provided that Ironwood does not modify its decision following such discussion, Ironwood may terminate this Agreement effective upon written notice thereof to AstraZeneca.

11.2.3. Bankruptcy . If a Party files in any court or agency, pursuant to any statute or regulation of any state or country, a petition in bankruptcy or insolvency or for reorganization or for an arrangement or for the appointment

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

of a receiver or trustee of that Party or of its assets, or if a Party proposes a written agreement of composition or extension of its debts, or if the other Party is served with an involuntary petition against it, filed in any insolvency proceeding, and such petition is not dismissed within [**] after the filing thereof, or if a Party proposes or is a party to any dissolution or liquidation, or if a Party makes an assignment for the benefit of its creditors (each, a “ Bankruptcy ”), this Agreement may be terminated effective upon written notice by the other Party to such Party.

11.3. Termination for Convenience . Prior to its expiration, this Agreement may be terminated, [**] at any time by Ironwood effective upon at least [**] prior written notice to AstraZeneca for any reason.

11.4. Termination for Failure of the Occurrence of the Effective Date . If all applicable waiting periods under the HSR Act with respect to the transactions contemplated under this Agreement have not expired or been terminated within seventy five (75) days following the Execution Date, either Party may terminate this Agreement effective upon written notice thereof to the other Party.

11.5. Competing Product .

11.5.1. Notice . For [**] following the Effective Date, Ironwood will notify AstraZeneca in writing, referencing this Section 11.5.1 , promptly upon (a) the submission of an NDA by Ironwood or an Affiliate for a [**] for approval by the FDA, (b) any Change of Control of Ironwood whereby following such Change of Control Ironwood or any of its Affiliates owns an NDA approved by the FDA or submitted for approval by the FDA for a [**], (c) any in-license to Ironwood or its Affiliate of a [**] for which an NDA has been approved by the FDA or submitted for approval by the FDA and (d) any acquisition by Ironwood or its Affiliate of a [**] for which an NDA has been approved by the FDA or an NDA has been submitted for approval by the FDA.

11.5.2. Consequences of Commercializing a Competing Product . For [**] following the Effective Date, in the event that Ironwood or its Affiliate have made a sale of a Competing Product (for which an NDA has been approved by the FDA) for use in the Verinurad Field to a Third Party in the Territory, AstraZeneca may elect, in its sole discretion, within [**] of the date of such sale, to (a) continue this Agreement in accordance with its terms or (b) terminate this Agreement effective upon [**] written notice of termination (or any sooner date specified in such written notice) unless Ironwood and its Affiliates (i) intend to divest all commercial rights to such [**] in the Territory and (ii) promptly following receipt of such notice and within the [**] period specified above, divest the commercial rights to such [**] in the Territory.

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

11.6. Effects of Termination and Expiration .

11.6.1. Effects of Expiration . Upon expiration of this Agreement, [**]. The licenses granted [**].

11.6.2. Effects of Termination [**]. If this Agreement is terminated [** ] , then the following provisions will be effective upon such termination:

(a) All licenses granted [**], except to the extent required [**];

(b) All licenses granted [**];

(d) Ironwood will [**] (i) [**], and (ii) [**]. In addition, Ironwood will (A) [** ] or (B) [** ] . AstraZeneca will [**];

(e) Until termination is effective, Ironwood will [**];

(f) Sections 11.6.2(a) will be effective upon any such termination, and Sections 11.6.2(b) , 11.6.2(c) , 11.6.2(d), and 11.6.2(e ) will be effective upon such termination or, in the case of termination by Ironwood pursuant to Section 11.3 , upon AstraZeneca’s earlier election following a notice of termination. [** ] .

11.6.3. Effects of Termination by Ironwood for AstraZeneca Material Breach or Insolvency . If Ironwood terminates this Agreement pursuant to Section 11.2.1 or 11.2.3 , all licenses granted by (a) [**], and (b) [**]. AstraZeneca will [**].

11.6.4. Alternative to Termination . Without limitation of any other remedy that may be available to Ironwood hereunder, if Ironwood has the right under Section 11.2.1 or Section 11.2.3 to terminate this Agreement, but elects by written notice to AstraZeneca to not exercise such right and continue this Agreement, this Agreement shall continue in full force and effect, except that [**] to the extent such obligations accrue following the date of Ironwood’s notice.

11.6.5. Effects of Termination for Safety Reasons . If Ironwood terminates this Agreement for safety reasons pursuant to Section 11.2.2 , then the following provisions will be effective upon such termination:

(a) All licenses granted [**];

(b) Notwithstanding the survival provisions of Section 11.7 , [**];

(d) Ironwood will provide such documentation in its possession and control relating thereto and discuss such safety issue with AstraZeneca in good faith as reasonably requested by AstraZeneca for at least [**] after

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

the effective date of such termination to assist Ironwood and to identify, further characterize, and fully document such safety issue. Ironwood’s out-of-pocket costs for such assistance, if any, [**]. For clarity, Ironwood will not be required to generate any new information regarding such material safety issue or undertake any Development or Commercialization activities in the portion of the Territory to which any termination relates after providing notice of termination for a material safety issue under Section 11.2.2 ;

(e) If, within [**] after the effective date of a termination of this Agreement pursuant to Section 11.2.2 , either (i) AstraZeneca receives express authorization from a Regulatory Authority to recommence or continue the development and commercialization of the Product or (ii) a Safety Panel determines that it is reasonable for AstraZeneca to continue the development and commercialization of the Product, taking into account all safety issues with the Product, then AstraZeneca shall be afforded the more expanded reversion rights with respect to the Product as to which it would have been entitled had Ironwood terminated this Agreement pursuant to Section 11.3 ; provided, however, that AstraZeneca’s indemnification obligations with respect to the Product shall remain in effect and Ironwood shall no longer have any indemnification obligation to AstraZeneca or any AstraZeneca Indemnified Party with respect to any Product sold by or on behalf of AstraZeneca or its Affiliates or Sublicensees after the date of such termination. AstraZeneca will have the right to convene a Safety Panel during such [**] period upon written notice to Ironwood. Each Party will reasonably cooperate with and provide any reasonably requested information to such Safety Panel. In the event that a Safety Panel determines that, pursuant to this Section 11.6.5(e) , it is reasonable for AstraZeneca to continue the development and commercialization of the Product, the costs of such Safety Panel will be borne solely by [**] and otherwise, the costs of any Safety Panel will be borne solely by [**].

11.7. Survival of Certain Obligations . Expiration or termination of this Agreement will not relieve the Parties of any obligation accruing before such expiration or termination. The provisions of this Agreement that survive expiration or termination of this Agreement are: Articles 1 and 12 (excluding Section 12.4 ) and Sections 2.2, 2.3, 2.4.1 (upon expiration of this Agreement), 2.4.2 , 2.6 (with respect to any licenses that survive), 2.10 , 2.11, 3.2.2, 3.4, 3.5, 3.6 ( Sections 3.2.1 through 3.6 , to the extent the payment obligations in Section 7.4.1 survive termination), 4.4 (upon expiration of the Agreement) 6.6, 7.4.1 (in the event of a termination under Section 11.3 ), 7.5 , 7.6 , 7.7 , 7.8 , 7.9 , 7.10 , 7.11 , 7.12 , 8.1, 9.6 , 10.2 , 10.5.3(a) , 11.6 (excluding Section 11.6.4 ), 11.7 , 13.1 , 14.1 , 14.5 , 14.6 , 14.7 , 14.8, 14.9 , 14.10, 14.11, 14.12 , 14.14 , 14.17 and 14.18 . Any expiration or early termination of this Agreement will be without prejudice to the rights of either Party against the other accrued or accruing under this Agreement before termination. In no event will any

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

milestone payment be due hereunder after the date on which a notice of termination is provided hereunder.

12. PRODUCT LIABILITY, INDEMNIFICATION, AND INSURANC E

12.1. Indemnification by AstraZeneca . AstraZeneca shall indemnify, defend and hold harmless Ironwood, its Affiliates, and each of its and their respective employees, officers, directors agents and permitted Sublicensees (each, an “ Ironwood Indemnified Party ”) from and against any and all Liabilities arising out of Third Party Claims to the extent resulting from or arising out of:

(a) any intentional misconduct or negligence [**] on the part of AstraZeneca or any of its Affiliates or Sublicensees in performing any activity contemplated by this Agreement or any Ancillary Agreement;

(b) any representation or warranty by AstraZeneca set forth in this Agreement or any Ancillary Agreement being untrue;

(c) the development, manufacture or commercialization in the Field in the Territory of the Licensed Compounds or Products by or on behalf of AstraZeneca or any of its Affiliates, which claims are based on acts or omissions occurring or failing to occur, in whole or in part, prior to the Effective Date or are conducted during the Term in support of development or commercialization outside the Territory, including in each case (i) any violation of Applicable Law in connection with such development or commercialization and (ii) personal injury or similar claims arising from the use of any Products;

(d) the development, manufacture or commercialization of the Licensed Compounds or Products by or by a Third Party on behalf of AstraZeneca or any of its Affiliates or Sublicensees (i) after the end of the Term (including the use of any intellectual property or materials that revert to AstraZeneca following expiration or termination of this Agreement) or (ii) outside the Territory;

(e) the infringement or misappropriation of any Third Party intellectual property rights by the exercise by Ironwood, its Affiliates or its Sublicensees of the rights to AstraZeneca Technology granted to Ironwood under Section 2.1 with respect to the Existing Products;

(f) any breach [**] by AstraZeneca of any of its covenants or obligations hereunder or under any Ancillary Agreement;

(g) the exercise by AstraZeneca, its Affiliates or Sublicensees (excluding such exercise by Ironwood, its Affiliates, and Sublicensees as licensees of AstraZeneca and Sublicensees of Ironwood hereunder) of rights under Section 2.2 , including any exploitation of the Joint Technology or the Collaboration Development Data for purposes other

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

than exploitation of the Licensed Compounds and Products by AstraZeneca, its Affiliates, or its Sublicensees under this Agreement or any Ancillary Agreement; or

(h) any failure by AstraZeneca, its Affiliates or Sublicensees to maintain the global safety database with respect to the Products in accordance with Applicable Law or any failure to maintain, as required by Applicable Law, the adverse events and relevant safety information as submitted by Ironwood in accordance with AstraZeneca’s intake procedures;

except, in each case, to the extent Ironwood is obligated to indemnify AstraZeneca for such Liabilities pursuant to Section 12.2 .

12.2. Indemnification by Ironwood . Ironwood shall indemnify, defend and hold harmless AstraZeneca, its Affiliates, Sublicensees, distributors and each of its and their respective employees, officers, directors and agents (each, an “ AstraZeneca Indemnified Party ”) from and against any and all Liabilities arising out of Third Party Claims to the extent resulting from or arising out of:

(a) any intentional misconduct or negligence [**] on the part of Ironwood or any of its Affiliates or Sublicensees in performing any activity contemplated by this Agreement or any Ancillary Agreement;

(b) any representation or warranty by Ironwood set forth in this Agreement or any Ancillary Agreement being untrue;

(c) (i) the development or manufacture in the Field of the Licensed Compounds or Product in support of development in the Territory or Commercialization or (ii) the Commercialization in the Field of the Licensed Compounds or Products, in each case by or by a Third Party on behalf of Ironwood or any of its Affiliates, which claims are based on acts or omissions conducted during or after the Term, including in each case any violation of Applicable Law in connection with such development or Commercialization;

(d) any breach [**] by Ironwood of any of its covenants or obligations hereunder or under any Ancillary Agreement; or

(e) any exploitation of the Joint Technology or the Collaboration Development Data by Ironwood or its Affiliates or Sublicensees for purposes other than exploitation of the Licensed Compounds and Products;

(f) any use by Ironwood of or submission by Ironwood to the global safety database established and maintained by AstraZeneca pursuant to Section 4.4 ;

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

except, in each case, to the extent AstraZeneca is obligated to indemnify Ironwood for such Liabilities pursuant to Section 12.1 .

12.3. Procedure . Each Party will notify the other in the event it becomes aware of a claim for which indemnification may be sought hereunder or for which Liability is shared pursuant to this Article 12 . In case any proceeding (including any governmental investigation) is instituted involving any Party in respect of which indemnity may be sought pursuant to this Article 12 , such Party (the “ Indemnified Party ”) will promptly notify the other Party (the “ Indemnifying Party ”) in writing and the Indemnifying Party and Indemnified Party will meet to discuss how to respond to any claims that are the subject matter of such proceeding and shall cooperate with each other with respect to resolving such claims. The Indemnifying Party, upon request of the Indemnified Party, will retain counsel reasonably satisfactory to the Indemnified Party to represent the Indemnified Party and will pay the fees and expenses of such counsel related to such proceeding. In any such proceeding, the Indemnified Party will have the right to retain its own counsel, but the fees and expenses of such counsel will be at the expense of the Indemnified Party unless (i) the Indemnifying Party and the Indemnified Party will have mutually agreed to the retention of such counsel or (ii) the named parties to any such proceeding (including any impleaded parties) include both the Indemnifying Party and the Indemnified Party and representation of both Parties by the same counsel would be inappropriate due to actual or potential differing interests between them. All such fees and expenses incurred pursuant to Section 12.1 or 12.2 will be reimbursed as they are incurred. The Indemnifying Party will not be liable for any settlement of any proceeding unless effected with its written consent. The Indemnifying Party will not, without the written consent of the Indemnified Party, effect any settlement of any pending or threatened proceeding in respect of which the Indemnified Party is, or arising out of the same set of facts could have been, a party and indemnity could have been sought hereunder by the Indemnified Party, unless such settlement includes an unconditional release of the Indemnified Party from all liability on claims to which the indemnity relates that are the subject matter of such proceeding. Notwithstanding the foregoing, if there is a conflict between this Section 12.3 and Section 10.7 , the procedures in Article 10 will control.

12.4. Insurance . Both Parties agree to use [**] to obtain and maintain and mutually endorse each Party, during the Term of this Agreement, commercial general liability insurance coverage, including product liability insurance, with limits of not less than [**].

12.5. Liability Limitations .

12.5.1. NOTWITHSTANDING ANYTHING IN THIS AGREEMENT OR ANY ANCILLARY AGREEMENT TO THE CONTRARY, IN NO EVENT WILL EITHER PARTY BE LIABLE TO THE OTHER FOR ANY CONSEQUENTIAL, INCIDENTAL, INDIRECT, SPECIAL, PUNITIVE, OR EXEMPLARY DAMAGES, OR FOR LOST PROFITS, LOST MILESTONES, OR LOST ROYALTIES UNDER THIS AGREEMENT OR ANY

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

ANCILLARY AGREEMENT, WHETHER IN CONTRACT, WARRANTY, NEGLIGENCE, TORT, STRICT LIABILITY OR OTHERWISE, ARISING OUT OF (a) THE DEVELOPMENT, COMMERCIALIZATION, USE OR SALE OF ANY LICENSED COMPOUND OR PRODUCT DEVELOPED, OR COMMERCIALIZED HEREUNDER OR UNDER ANY ANCILLARY AGREEMENT, OR (b) ANY BREACH OF OR FAILURE TO PERFORM ANY OF THE PROVISIONS OF THIS AGREEMENT OR ANY ANCILLARY AGREEMENT. THE FOREGOING LIMITATIONS IN THIS SECTION 12.5.1 SHALL NOT APPLY TO (I) ANY LIABILITY OF EITHER PARTY ARISING FROM ITS OR ITS AFFILIATE’S OR SUBCONTRACTOR’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT, (II) ANY CLAIMS UNDER SECTIONS 12.1 OR 12.2 OR (III) ANY LIABILITY OF EITHER PARTY FOR A BREACH OF SECTION 8.1 .

13. GUARANTEE.

13.1. Zeneca Guarantee . Zeneca, Inc. hereby unconditionally and irrevocably guarantees the covenants, obligations and liabilities of AstraZeneca under this Agreement (as may be amended from time to time) and shall cause AstraZeneca to comply with the provisions of this Agreement in connection with any performance of its obligations hereunder, except to the extent such obligations are satisfactorily performed by AstraZeneca. This guaranty shall remain in full force and effect until the indefeasible satisfaction in full of the covenants, obligations and liabilities of AstraZeneca under this Agreement.

14. MISCELLANEOUS.

14.1. Governing Law; Jurisdiction; Dispute Resolution .

14.1.1. Governing Law . The interpretation and construction of this Agreement will be governed by the laws of the [**], excluding any conflicts or choice of law rule or principle that might otherwise refer construction or interpretation of this Agreement to the substantive law of another jurisdiction.

14.1.2. Dispute Resolution . In the event of a dispute arising out of or relating to this Agreement, either Party will provide written notice of the dispute to the other, in which event the dispute will be referred to the executive officers designated below or their successors, for attempted resolution by good faith negotiations within [**] after such notice is received. The designated officers are initially as follows:

For Ironwood: Its Chief Executive Officer or his designate

For AstraZeneca: Its Chief Executive Officer or his designate

[**].

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

14.1.3. Arbitration .

(a) Claims . Any claim, dispute, or controversy of whatever nature arising between the Parties out of or relating to this Agreement that is subject to but not resolved under Section 14.1.2 within the required thirty [**] time period, including any action or claim based on tort, contract, or statute (including any claims of breach or violation of statutory or common law protections from discrimination, harassment and hostile working environment), or concerning the interpretation, effect, termination, validity, performance or breach of this Agreement (“ Claim ”), will be resolved by final and binding arbitration before a panel of three experts with relevant industry experience (the “ Arbitrators ”). One Arbitrator will be chosen by Ironwood and one Arbitrator will be chosen by AstraZeneca within [**] from the notice of initiation of arbitration. The third Arbitrator will be chosen by mutual agreement of the Arbitrator chosen by Ironwood and the Arbitrator chosen by AstraZeneca within [**] of the date that the last of such Arbitrators were appointed. The Arbitrators will be administered by the International Chamber of Commerce (“ ICC ”) in accordance with its then existing arbitration rules or procedures regarding commercial or business disputes and such arbitration will take place in New York, New York. In each case, the Arbitrators will be instructed by the Parties to complete the arbitration within [**] after selection of the final Arbitrator.

(b) Arbitrators’ Award . The Arbitrators will, within [**] after the conclusion of the arbitration hearing, issue a written award and statement of decision describing the essential findings and conclusions on which the award is based, including the calculation of any damages awarded. The decision or award rendered by the Arbitrators will be final and non-appealable, and judgment may be entered upon it in accordance with Applicable Law in the [**] or any other court of competent jurisdiction. Any awards authorized by the Arbitrators will be subject to the limitations set forth in Section 12.5 . The Arbitrators will not be authorized to reform, modify or materially change this Agreement or any Ancillary Agreement. With respect to any arbitration hearing stemming from a dispute over the determination of the allocation of Third Party Obligations to Ironwood pursuant to Section 10.8 , notwithstanding anything to the contrary in this Section 14.1.3 , the Arbitrators’ decision will be limited to choosing either the allocation of Third Party Obligations submitted to the Arbitrators by Ironwood or by AstraZeneca.

(c) Costs . Each Party will bear its own attorney’s fees, costs, and disbursements arising out of the arbitration and the costs of the arbitrator selected by it, and will pay an equal share of the fees and costs of the third arbitrator; provided, however, the Arbitrators will be authorized to determine whether a party is the prevailing party, and if so, to award to that prevailing party reimbursement for its reasonable attorneys’ fees, costs and disbursements (including, for example, expert witness fees and

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

expenses, photocopy charges, travel expenses, etc.), or the fees and costs of the administrator of the arbitration and the Arbitrators.

(d) Compliance with this Agreement . Unless the Parties otherwise agree in writing, during the period of time that any arbitration proceeding is pending under this Agreement, the Parties will continue to comply with all those terms and provisions of this Agreement that are not the subject of the pending arbitration proceeding.

(e) Injunctive or Other Equity Relief . Nothing contained in this Agreement will deny any Party the right to seek injunctive or other equitable relief from a court of competent jurisdiction applying the laws of that court in the context of a bona fide emergency or prospective irreparable harm, and such an action may be filed and maintained notwithstanding any ongoing arbitration proceeding.

14.2. Force Majeure . No liability will result from, and no right to terminate will arise, in whole or in part, based upon any delay in performance or non-performance, in whole or in part, by either of the Parties to this Agreement to the extent that such delay or non-performance is caused by an event of Force Majeure. “ Force Majeure ” means an event that is beyond a non-performing Party’s reasonable control, including an act of God, act of the other Party, war, riot, civil commotion, strike, terrorist act, malicious damage, epidemic, quarantine, fire, flood, storm, natural disaster. The Force Majeure Party will within [**] of the occurrence of the Force Majeure event, give written notice to the other Party stating the nature of the Force Majeure event, its anticipated duration and any action being taken to avoid or minimize its effect. Any suspension of performance will be of no greater scope and of no longer duration than is reasonably required and the Force Majeure Party will use reasonable effort to remedy its inability to perform; provided, however, if the suspension of performance continues or is anticipated to continue for [**] after the date of the occurrence, the unaffected Party will have the right but not the obligation to perform on behalf of the Force Majeure Party for a period of such Force Majeure and such additional period as may be reasonably required to assure a smooth and uninterrupted transition of such activities. If such failure to perform would constitute a material breach of this Agreement in the absence of such event of Force Majeure, and continues for [**] from the date of the occurrence and the Parties are not able to agree on appropriate amendments within such period, such other Party will have the right, notwithstanding the first sentence of this Section 14.2 , to terminate this Agreement immediately by written notice to the Force Majeure Party. In the case of such a termination, [**]. Notwithstanding the foregoing, nothing in this Section 14.2 will excuse or suspend the obligation to make any payment due hereunder in the manner and at the time provided.

14.3. HSR Filings . Each of the Parties shall, within [**] after the Execution Date (or such other date as may be agreed by the Parties), file with the United States Federal Trade Commission and the Antitrust Division of the United States Department of Justice, any notification and report form required under the HSR Act

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

(an “ HSR Filing ”), with respect to the transactions contemplated hereby. The Parties will cooperate with one another to the extent necessary in the preparation of any such HSR Filing. Each Party shall be responsible for its own costs and expenses with respect to any such filing, and Ironwood shall be responsible for the filing fee. The Parties shall each use [**] to ensure that the applicable waiting period under the HSR Act expires or is terminated as soon as practicable. Notwithstanding the foregoing, nothing in this Section 14.3 shall require (a) either Party to disclose to the other Party any information that is subject to obligations of confidentiality owed to Third Parties (nor shall either Party be required to conduct joint meetings with any governmental authority in which such information might be shared with the other Party), or (b) either Party or any of its Affiliates to commit to any divestiture, license (in whole or in part) or any arrangement to hold separate (or any similar arrangement) with respect to any of its products or assets or defend any litigation brought by a governmental authority against consummation of the transactions contemplated hereby. If, within [**] after the Execution Date, the Parties jointly determine that no HSR Filing is required, the Parties shall confirm such agreement in writing, and the Parties shall not make an HSR Filing.

14.4. Additional Approvals . AstraZeneca and Ironwood will cooperate and use [**] to make all other registrations, filings and applications, to give all notices and to obtain as soon as practicable all governmental or other consents, transfers, approvals, orders, qualifications authorizations, permits and waivers, if any, and to do all other things necessary or desirable for the consummation of the transactions as contemplated hereby. Neither Party will be required, however, to divest or out-license products or assets or materially change its business if doing so is a condition of obtaining any governmental approvals of the transactions contemplated by this Agreement.

14.5. Waiver and Non-Exclusion of Remedies . A Party’s failure to enforce, at any time or for any period of time, any provision of this Agreement, or to exercise any right or remedy will not constitute a waiver of that provision, right or remedy or prevent such Party from enforcing any or all provisions of this Agreement and exercising any rights or remedies. To be effective any waiver must be in writing. The rights and remedies provided in this Agreement are cumulative and do not exclude any other right or remedy provided by law or otherwise available except as expressly set forth in this Agreement.

14.6. Notices .

14.6.1. Notice Requirements . Any notice, request, demand, waiver, consent, approval or other communication permitted or required under this Agreement must be in writing, must refer specifically to this Agreement and will be deemed given only if delivered by hand, sent by facsimile transmission (with transmission confirmed), by PDF e-mail attachment with digital return receipt, or by internationally recognized overnight delivery service that maintains records of delivery, addressed to the Parties at their respective addresses specified in Section 14.6.2 or to such other address as the Party to

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

whom notice is to be given may have provided to the other Party in accordance with this Section 14.6.1 . Such Notice will be deemed to have been given as of the date delivered by hand, transmitted by facsimile (with transmission confirmed) or by PDF e-mail attached with digital return receipt, or on the second Business Day (at the place of delivery) after deposit with an internationally recognized overnight delivery service. This Section 14.6.1 is not intended to govern the day-to-day business communications necessary between the Parties in performing their obligations under the terms of this Agreement.

14.6.2. Address for Notice .

For Ironwood:

Ironwood Pharmaceuticals, Inc.

301 Binney Street

Cambridge, MA 02142

United States of America

Attention: General Counsel

Fax: +1 [**]

E-mail: [**]

With a copy to:

Ropes & Gray LLP

Prudential Tower

800 Boylston Street

Boston, MA 02199-3600

United States of America

Attention: Marc A. Rubenstein, Esq.

Fax: +1 (617) 235-0706

E-mail: marc.rubenstein@ropesgray.com

For AstraZeneca:

Ardea Biosciences, Inc.

1800 Concord Pike

Wilmington, DE 19803

Attn: Richard J. Kenny, Esq.

Fax: + 1 [**]

E-mail: [**]

With a copy to:

Covington & Burling LLP

One Front Street

San Francisco, CA 94111-5356

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

Attention: Amy L. Toro, Esq.

Fax: +1 (415) 955-6586

E-mail: atoro@cov.com

14.7. Entire Agreement . This Agreement, the Commercial Supply Agreement and the Transitional Services Agreement constitute the entire agreement between the Parties with respect to the subject matter of this Agreement. This Agreement supersedes all prior agreements, whether written or oral, with respect to the subject matter of this Agreement, including, but only as of and subject to the occurrence of the Effective Date, that certain [**]. Each Party confirms that it is not relying on any representations, warranties or covenants of the other Party except as specifically set out in this Agreement. Nothing in this Agreement is intended to limit or exclude any liability for fraud. All Exhibits or Schedules referred to in this Agreement are intended to be and are hereby specifically incorporated into and made a part of this Agreement. In the event of any inconsistency between any such Exhibits or Schedules and this Agreement, the terms of this Agreement will govern.

14.8. Effectiveness . This Agreement will take effect automatically on the Effective Date and no provision of this Agreement shall be effective until the Effective Date, except for the following sections, which shall be effective as of the Execution Date: Sections 11.4, 14.3 , and 14.4 . Each Party will use [**] to cause this Agreement to become effective as soon as practicable following the Execution Date.

14.9. Language . All meetings between the Parties will be conducted in English. All documents prepared by one Party hereunder for the purpose of distribution to the other Party (or that are required to be provided to the other Party under this Agreement or any Ancillary Agreement) shall be written in English except as otherwise agreed by the Parties in writing or in any Ancillary Agreement. The Parties shall coordinate regarding any other translations required in order to conduct activities with respect to the Licensed Compounds and Products hereunder in order to avoid duplicative effort and expense. Notwithstanding the foregoing, in case of non-English language documents that were prepared by way of a certified translation of an English language document, provision of the original English language document (and upon request, the applicable certification) shall constitute a substitute for translation.

14.10. Amendment . Any amendment or modification of this Agreement must be in writing and signed by authorized representatives of both Parties.

14.11. Assignment . Neither Party may assign its rights or delegate its obligations under this Agreement, in whole or in part without the prior written consent of the other Party, except that, subject to the other terms of this Agreement, each Party will always have the right, without such consent, (a) [**], (b) [**], and (c) [**]. Notwithstanding anything in this Section 14.11 , [**]. Any attempted assignment or delegation in violation of this Section 14.11 will be void.

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

14.12. No Benefit to Others . The provisions of this Agreement are for the sole benefit of the Parties and their successors and permitted assigns, and they will not be construed as conferring any rights in any other persons except as otherwise expressly provided in this Agreement.

14.13. Counterparts . This Agreement may be executed in any number of counterparts, each of which will be deemed an original and all of which taken together will be deemed to constitute one and the same instrument. An executed signature page of this Agreement delivered by facsimile transmission, including signatures in a fixed electronic format such as a PDF, will be as effective as an original executed signature page.

14.14. Severability . To the fullest extent permitted by Applicable Law, the Parties waive any provision of law that would render any provision in this Agreement invalid, illegal or unenforceable in any respect. If any provision of this Agreement is held to be invalid, illegal or unenforceable, in any respect, then such provision will be given no effect by the Parties and will not form part of this Agreement. To the fullest extent permitted by Applicable Law and if the rights or obligations of any Party will not be materially and adversely affected, all other provisions of this Agreement will remain in full force and effect and the Parties will use [**] to negotiate a provision in replacement of the provision held invalid, illegal or unenforceable that is consistent with Applicable Law and achieves, as nearly as possible, the original intention of the Parties.

14.15. Further Assurance . Each Party will perform all further acts and things and execute and deliver such further documents as may be necessary or as the other Party may reasonably require to implement or give effect to this Agreement.

14.16. Publicity . Notwithstanding Section 8.1.6 , each Party will issue a press release in the form of Exhibit C-1 and Exhibit C-2 , respectively, following the Effective Date. The Parties will consult with each other reasonably and in good faith with respect to the text and timing of any subsequent press releases relating to this Agreement or the activity hereunder prior to the issuance thereof, provided that a Party may not unreasonably withhold consent to such releases, and that either Party may issue such press releases as it determines, based on advice of counsel, are reasonably necessary to comply with laws or regulations or for appropriate market disclosure or which are consistent with information disclosed in prior releases properly made hereunder.

14.17. Certain Conventions . Any reference in this Agreement to an Article, Section, subsection, paragraph, clause, Schedule or Exhibit will be deemed to be a reference to an Article, Section, subsection, paragraph, clause, Schedule or Exhibit, of or to, as the case may be, this Agreement, unless otherwise indicated. Unless the context of this Agreement otherwise requires, (a) all definitions set forth herein will be deemed applicable whether the words defined are used herein with initial capital letters in the singular or the plural, (b) the word “will” will be construed to have the same meaning and effect as the word “shall,” (c) any definition of or reference to

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

any agreement, instrument or other document herein will be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (d) any reference herein to any Person will be construed to include the Person’s successors and assigns, (e) the word “notice” will mean notice in writing (whether or not specifically stated) and will include notices, consents, approvals and other written communications contemplated under this Agreement, (f) provisions that require that a Party, the Parties or any committee hereunder “agree,” “consent” or “approve” or the like will require that such agreement, consent or approval be specific and in writing, whether by written agreement, letter, approved minutes or otherwise (but excluding e-mail and instant messaging), (g) references to any specific law, rule or regulation, or article, section or other division thereof, will be deemed to include the then-current amendments thereto or any replacement or successor law, rule or regulation thereof and (h) the term “or” will be interpreted in the inclusive sense commonly associated with the term “and/or”, (i) words of any gender include each other gender, (j) words such as “herein”, “hereof” and “hereunder” refer to this Agreement as a whole and not merely to the particular provision in which such words appear, (k) words using the singular will include the plural, and vice versa, (l) the words “include,” “includes” and “including” will be deemed to be followed by the phrase “but not limited to”, “without limitation”, “inter alia” or words of similar import and (m) unless “Business Days” is specified, “days” will mean “calendar days.”

14.18. Relationship of the Parties . The status of a Party under this Agreement will be that of an independent contractor. Nothing contained in this Agreement will be construed as creating a partnership, joint venture, or agency relationship between the Parties or, except as otherwise expressly provided in this Agreement, as granting either Party the authority to bind or contract any obligation in the name of or on the account of the other Party or to make any statements, representations, warranties, or commitments on behalf of the other Party. All Persons employed by a Party or any of its Affiliates are employees of such Party or its Affiliates and not of the other Party or such other Party’s Affiliates and all costs and obligations incurred by reason of any such employment will be for the account and expense of such Party or its Affiliates, as applicable.

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

IN WITNESS WHEREOF, duty authorized representatives of the Parties have duly executed this Agreement as of the Execution Date.

IRONWOOD PHARMACEUTICALS, INC.		ARDEA BIOSCIENCES, INC.

By:	/s/ Thomas Graney	By:	/s/ James Mackay

Name:	Thomas Graney	Name:	Dr. James Mackay

Title:	Chief Financial Officer	Title:	President & Chief Operating Officer


		ZENECA INC. (solely with respect to Section 13.1 )

		By:	/s/ Stephen Mohr

		Name:	Stephen Mohr

		Title:	Chairman, President & Secretary

SIGNATURE PAGE TO LICENSE AGREEMENT

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

Exhibit A

Zurampic Development Plan

[** ]

[ **]

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

Exhibit B

Allopurinol Combination Product Development Plan

[**]

[ **]

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

Exhibit C-1
Ironwood Press Release

Section 1.01 FOR IMMEDIATE RELEASE

Ironwood Pharmaceuticals Enters into U.S. Licensing Agreement with AstraZeneca for Lesinurad

- Includes FDA-approved ZURAMPIC® (lesinurad), expected to launch second half 2016 for hyperuricemia associated with uncontrolled gout, and lesinurad/allupironol fixed-dose combination -

- Leverages Ironwood’s proven commercial capabilities in symptomatic diseases with high unmet need; Ironwood expects at least five U.S. launches by 2020 across its portfolio -

- $100M up front paid with cash on hand; Ironwood expects <$70M cash use for operations in 2016 and cash flow positive during 2018 -

CAMBRIDGE, Mass., April 26, 2016 — Ironwood Pharmaceuticals, Inc. (NASDAQ: IRWD) announced today that it has entered into a licensing agreement with AstraZeneca plc for the exclusive U.S. rights to lesinurad. Lesinurad 200mg tablets were approved as ZURAMPIC ® by the U.S. Food and Drug Administration (FDA) in December 2015 for use in combination with a xanthine oxidase inhibitor (XOI) for the treatment of hyperuricemia associated with uncontrolled gout.

Gout is a serious, progressive and debilitating form of inflammatory arthritis . As many as two million patients in the U.S. on urate-lowering therapy remain inadequately controlled, as XOI treatment alone is not sufficient to achieve their treatment goals. ZURAMPIC is not recommended for the treatment of asymptomatic hyperuricemia and should not be used as monotherapy.

Under the terms of the agreement, Ironwood will make an up-front payment to AstraZeneca of $100 million to acquire exclusive U.S. rights to all products containing lesinurad, including the fixed-dose combination of lesinurad and allopurinol. AstraZeneca plans to submit the fixed-dose combination program for FDA regulatory review in the second half of 2016. Ironwood will pay AstraZeneca tiered single-digit royalties on product sales as well as sales-related and other

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

milestones of up to $165 million. AstraZeneca will manufacture and supply ZURAMPIC, provide certain product support services to Ironwood and complete the FDA post-approval commitment on Ironwood’s behalf.

“This transaction enables Ironwood to leverage our strong commercial capabilities to advance a durable franchise of innovative medicines addressing a significant unmet need in which patients are highly motivated and seeking relief — this is precisely the kind of opportunity the Ironwood team is successfully executing on in IBS-C and CIC,” said Tom McCourt, Chief Commercial Officer of Ironwood. “With focused investment into the gout franchise over time, we believe we can maximize cash flows and accelerate our progress as a top-performing commercial biotechnology company: following this transaction, we expect to execute on at least five new launches in the U.S. by 2020, beginning with ZURAMPIC in the second half of 2016 and continuing with, if approved, 72 mcg linaclotide in 2017 and a lesinurad-allopurinol fixed-dose combination in 2018.”

Luke Miels, Executive Vice President, Global Product and Portfolio Strategy, AstraZeneca, said, “We’re pleased to be entering into this agreement with Ironwood, a company with whom we already have a number of successful commercial partnerships. Our new agreement with Ironwood will ensure the successful launch of ZURAMPIC in the U.S., while allowing us to concentrate our resources on the innovative medicines in our main therapy areas.”

The development of AstraZeneca’s gout portfolio is led by Ardea Biosciences, a wholly-owned subsidiary. The transaction does not include the transfer of any AstraZeneca or Ardea employees or facilities. AstraZeneca also retains ownership of the rest of the Ardea portfolio, including RDEA3170, a Phase IIb-ready, potent, selective uric acid reabsorption inhibitor. Under the terms of the agreement, Ironwood will have certain rights to potentially access RDEA3170 in gout indications in the U.S. The licensing agreement is expected to close in the second quarter of 2016, subject to antitrust approval in the U.S.

Ironwood Financial Considerations

Ironwood expects to pay the $100 million up-front fee from cash on hand and does not anticipate requiring any financing to complete the transaction. Ironwood is updating its 2016 cash flow guidance: the company now expects to use less than $70 million in cash for operations in 2016, up from less than $60 million as previously guided, to incorporate ZURAMPIC integration and launch investments. Ironwood expects to provide updated guidance regarding total operating expenses for 2016 during its second quarter 2016 investor update. Initially, Ironwood expects less than $75 million in annual incremental commercial expenses associated with the gout franchise, with focused investment over time to maximize cash flow. The transaction is not expected to affect 2016 LINZESS marketing and sales expenses.

Ironwood expects the transaction to be cash flow accretive in 2019 and beyond and to add significant revenue, with annual U.S. sales estimated to exceed $300 million at peak and commercial margins expected to exceed 60% by 2022. ZURAMPIC and the lesinurad-allopurinol fixed-dose combination product have patent protection into at least 2028. Additionally, Ironwood expects to become cash flow positive during 2018 and believes that the

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

growing contribution from its commercial business and cash on hand are sufficient to fully fund its core business inclusive of the gout franchise without the need to raise additional capital.

Webcast Information: Conference Call Today at 8:00 a.m. ET

Ironwood will host a conference call and webcast at 8:00 a.m. Eastern Time on Tuesday, April 26, 2016. 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 98937375. 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 April 26, 2016, at approximately 11:00 a.m. Eastern Time, running through 11:00 a.m. Eastern Time on May 3, 2016. To listen to the replay, dial (855) 859-2056 (U.S. and Canada) or (404) 537-3406 (international) using conference ID number 98937375. The archived webcast will be available on Ironwood’s website for 14 days beginning approximately one hour after the call has completed.

About ZURAMPIC® (lesinurad) 200mg tablets

ZURAMPIC® (lesinurad) is the first Selective Uric Acid Reabsorption Inhibitor (SURI); it works selectively to complement xanthine oxidase inhibitors (XOIs) in the treatment of 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 urate transporter (URAT1) and organic anion transporter 4 (OAT4), involved in uric acid reabsorption in the kidney. In humans, it does not inhibit OAT1 and OAT3, which are drug transporters in the kidney associated with drug-drug interactions. 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.

Important Safety Information

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

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

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, and evaluate for signs and symptoms of acute uric acid nephropathy. ZURAMPIC should not be initiated in patients with an eCLcr less than 45 mL/min

· Cardiovascular events: Major adverse cardiovascular events 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 ZURAMPIC

ZURAMPIC 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://www.azpicentral.com/zurampic/zurampic.pdf.

About Hyperuricemia and Gout

Gout is a serious, progressive and debilitating form of inflammatory arthritis that affects more than 8 million people in the U.S., with approximately 4 million of those patients on treatment, creating a market estimated at $1 billion. Approximately 2 million gout patients suffer from uncontrolled gout, in which traditional first-line xanthine oxidase inhibitor (XOI) treatment alone is not sufficient to achieve target serum uric acid (sUA) levels. Among patients treated in clinical trials, less than 50% of patients on the XOI allopurinol 300mg reached sUA target levels <6.0mg/dL.

The underlying cause of gout is hyperuricemia (elevated sUA), which leads to the deposition of crystals primarily in the joints and also in other tissues. This can result in recurrent attacks of inflammatory arthritis and, if left uncontrolled, could lead to chronic, progressive arthritis and tophus (visible deposits of urate crystals) formation. The goal of sUA lowering treatment is to reduce sUA levels to the target level of <6.0mg/dL as recommended by both the American College of Rheumatology (ACR) and the European League Against Rheumatism (EULAR). For patients who cannot reach this target on an XOI alone, the current ACR and EULAR guidelines recommend adding an agent that increases uric acid excretion.

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

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

shareholders, and empowering our passionate team. We are advancing an innovative pipeline of medicines in multiple areas of significant unmet need, including irritable bowel syndrome with constipation (IBS-C)/chronic idiopathic constipation (CIC), vascular and fibrotic diseases, and refractory gastroesophageal reflux disease, among others. We discovered, developed and are commercializing linaclotide, the U.S. branded prescription market leader in the IBS-C/CIC category, and we are applying our proven R&D and commercial capabilities to advance multiple internally-developed and externally-accessed product opportunities. 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 AstraZeneca

AstraZeneca is a global, innovation-driven biopharmaceutical business that focuses on the discovery, development and commercialisation of prescription medicines, primarily for the treatment of diseases in three main therapy areas - respiratory, inflammation, autoimmune disease (RIA), cardiovascular and metabolic disease (CVMD) and oncology — as well as in infection and neuroscience. AstraZeneca operates in over 100 countries and its innovative medicines are used by millions of patients worldwide. For more information please visit: www.astrazeneca.com

This press release contains forward-looking statements. Investors are cautioned not to place undue reliance on these forward-looking statements, including, but not limited to, statements about the benefits anticipated from the addition of the gout franchise to Ironwood’s portfolio; the timing of the closing of the lesinurad transaction; development, launch and commercialization plans for lesinurad and our product candidates; market size, growth and opportunity, including peak sales, and potential demand for lesinurad, as well as its potential impact on applicable markets; the potential indications for, and benefits of, lesinurad; the anticipated timing of regulatory developments for the fixed-dose combination of lesinurad and allopurinol; the design, timing and results of clinical and preclinical studies; the timing of filings with regulatory authorities; expected periods of patent exclusivity; and our company’s financial performance and results, and guidance and expectations related thereto, including our projected cash needs and expectations regarding the need for future financings, expectations regarding the accretive nature of the transaction and the timing of such accretion, revenue from the transaction, commercial margin, cash flows, operating expenses, commercial expenses, the effect of the transaction on 2016 LINZESS marketing and sales expense, and the timing of providing updated guidance on total operating expenses following closing. 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, but are not limited to, the risk that the transaction does not close or is delayed; the risk that we are unable to successfully integrate lesinurad into our existing business or are unable to realize the anticipated benefits of the lesinurad transaction; those related to our growth strategy; decisions made by U.S. regulatory authorities, the U.S. Patent and Trademark Office and their foreign counterparts; intellectual property rights of competitors or potential competitors; efficacy, safety and tolerability of lesinuard, linaclotide and our product candidates; competition in disease

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

states; the commercial potential of lesinurad, linaclotide, our product candidates and the other products that we promote; and the risk that we are unable to manage our operating expenses and capital expenditures due to foreseeable or unforeseeable events or occurrences. Applicable risks also include those that are listed under the heading “Risk Factors” and elsewhere in Ironwood’s Annual Report on Form 10-K for the year ended December 31, 2015 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.

SOURCE: Ironwood Pharmaceuticals, Inc.

Ironwood Media Relations: Trista Morrison, 617-374-5095, tmorrison@ironwoodpharma.com

Ironwood Investor Relations: Mary T. Conway, 617-768-2628, maconway@ironwoodpharma.com

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

Exhibit C-2
AstraZeneca Press Release

ASTRAZENECA ENTERS INTO US LICENSING AGREEMENT WITH IRONWOOD PHARMACEUTICALS FOR LESINURAD

Agreement includes US rights to Zurampic and lesinurad/allopurinol fixed-dose combination in gout

25 April 2016

AstraZeneca today announced that it has entered into a licensing agreement with Ironwood Pharmaceuticals for the exclusive US rights to Zurampic ® (lesinurad). Zurampic was approved by the US Food and Drug Administration (FDA) in December 2015, in combination with a xanthine oxidase inhibitor (XOI), for the treatment of hyperuricemia associated with uncontrolled gout.

Under the terms of the agreement, Ironwood will acquire exclusive US rights to Zurampic . In addition, Ironwood will gain the exclusive US rights to the fixed-dose combination of lesinurad and allopurinol. AstraZeneca plans to submit the fixed-dose combination programme for regulatory review in the second half of 2016. Ironwood will pay AstraZeneca sales-related and other milestone payments of up to $265 million and tiered single-digit royalties on Product Sales. AstraZeneca will manufacture and supply Zurampic , provide certain support and services to Ironwood and undertake the FDA post-approval commitment on their behalf.

Luke Miels, Executive Vice President, Global Product and Portfolio Strategy, AstraZeneca, said: “We’re pleased to be entering into this agreement with Ironwood, a company with whom we already have a number of successful commercial partnerships. Our new agreement with Ironwood will ensure the successful launch of Zurampic in the US, while allowing us to concentrate our resources on the innovative medicines in our main therapy areas.”

Tom McCourt, Chief Commercial Officer of Ironwood, said: “This transaction enables Ironwood to leverage our strong commercial capabilities to advance a durable franchise of innovative medicines addressing a significant unmet need in which patients are highly motivated and seeking relief. With focused investment into the gout franchise over time, we believe we can maximize cash flows and accelerate our efforts to build a top-performing commercial biotechnology company.”

Gout is a serious, progressive and debilitating form of inflammatory arthritis . Approximately two million patients in the US on urate lowering therapy remain inadequately controlled, as XOI treatment alone is not sufficient to achieve their treatment goals.

The development of AstraZeneca’s gout portfolio is led by Ardea Biosciences, a wholly owned subsidiary. The transaction does not include the transfer of any AstraZeneca or Ardea employees

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

or facilities. AstraZeneca also retains the rights to the rest of the Ardea portfolio, including RDEA3170, a Phase IIb ready, potent selective uric acid reabsorption inhibitor. Under the terms of the agreement, Ironwood will have certain rights to potentially access RDEA3170 in gout indications in the US. The licensing agreement is expected to close in the second quarter of 2016, subject to antitrust approval in the US.

Financial considerations

Revenue from the licensing agreement will provide AstraZeneca with recurring Externalisation Revenue from any expected milestone payments and tiered single-digit royalty payments on Product Sales. The agreement does not impact AstraZeneca’s financial guidance for 2016.

— ENDS —

NOTES TO EDITORS

About Zurampic

ZURAMPIC® (lesinurad) is the first in a new class of medicines called Selective Uric Acid Reabsorption Inhibitors (SURI) that work selectively to complement xanthine oxidase inhibitors (XOIs) in the treatment of 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 acid levels with XOI treatment alone. ZURAMPIC selectively inhibits the function of transporter proteins urate transporter (URAT1) and organic anion transporter 4 (OAT4), involved in uric acid reabsorption in the kidney. In people, it does not inhibit OAT1 and OAT3, which are drug transporters in the kidney associated with drug-drug interactions. The 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.

About Ironwood

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 advancing an innovative pipeline of medicines in multiple areas of significant unmet need, including irritable bowel syndrome with constipation (IBS-C)/chronic idiopathic constipation (CIC), vascular and fibrotic diseases, and refractory gastroesophageal reflux disease, among others. We discovered, developed and are commercializing linaclotide, the U.S. branded prescription market leader in the IBS-C/CIC category, and we are applying our proven R&D and commercial capabilities to advance multiple internally-developed and externally-accessed product opportunities. 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.

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

About Ardea Biosciences

Ardea Biosciences is a member of the AstraZeneca Group, located in San Diego, California. Ardea is leading the development of AstraZeneca’s gout portfolio, including Zurampic and RDEA3170.

About AstraZeneca

CONTACTS

Media Enquiries

Neil Burrows	UK/Global	+44 20 7604 8032

Vanessa Rhodes	UK/Global	+44 20 7604 8037

Karen Birmingham	UK/Global	+44 20 7604 8120

Jacob Lund	Sweden	+46 8 553 260 20

Michele Meixell	US	+1 302 885 2677

Investor Enquiries

UK

Thomas Kudsk Larsen		+44 7818 524185

Eugenia Litz	RIA	+44 7884 735627

Nick Stone	CVMD	+44 7717 618834

Craig Marks	Finance	+44 7881 615764

Christer Gruvris	Consensus Forecasts	+44 7827 836825

US

Lindsey Trickett	Oncology, ING	+1 240 543 7970

Mitch Chan	Oncology	+1 240 477 3771

Dial / Toll-Free		+1 866 381 7277

Key: RIA - Respiratory, Inflammation and Autoimmunity, CVMD - Cardiovascular and Metabolic Disease,

ING - Infection, Neuroscience and Gastrointestinal

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

Schedule 1.93
Licensed Compound

[**]

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

Schedule 1.137
[ ** ] High Level Results

[**]

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

Schedule 1.151
[ ** ] Interim High Level Results

[**]

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

Schedule 1.157

Verinurad

[ ** ]

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

Schedule 3.7

Additional Development Activities

[**]

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

Schedule 5.1

Clinical Supply Agreement Exceptions

· “Finished Products”: To be adjusted to reflect needs for clinical supply but, in all cases, to include Existing Products in bulk form and Lesinurad unless otherwise mutually agreed by the Parties.

· “Term”: To be adjusted to reflect needs for clinical supply.

· Section 2.1: Purchase by Ironwood will be solely for research, development and manufacture, not sale or distribution.

· Articles 3 and 4 and Schedules 2 and 4: [**].

· Article 5: [**].

· Section 5.3: [**].

· Article 6: Delete.

· Section 7.1: Delete.

· Section 7.3: Delete.

· Section 9.1 and 10.1: [**].

· Article 11: Product warranties to be adjusted to reflect clinical context.

· Section 11.4: [**].

· Sections 12.6 and 12.7 and Schedule 3: Include only if relevant to the particular clinical supplies.

· Article 13: Delete if packaging is not desired by Ironwood.

· Article 14: Delete.

· Article 15.1: Amend existing Quality Assurance Agreement or enter into new agreement to cover clinical supply, as needed.

· Article 21: [**].

· Article 22: [**].

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

Schedule 6.1.2

Commercialization Plan

[ **]

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

Schedule 9.2(a)

AstraZeneca Patent Rights

Title

Jurisdiction

Application
No.

Patent
No.

Filing
Date

Issue
Date

Expiration
Date(1)

Status

2-(5-BROMO-4-(4-

CYCLOPROPYLNAPHTHALEN-1-YL)-4H-1,2,4-TRIAZOL-3-YLTHIO)ACETIC ACID AND METHYL ESTER

United States

PCT

United States

60/604.219

60/604,220

60/686,351

PCT/US05/30259

12/633,638

8,003,681

25-Aug-2004

31-May-2005

25-Aug 2005

08-Dec-2009

23-Aug-2011

25-Aug-2025

Expired

Granted

NOVEL COMPOSITIONS AND METHODS OF USING THEM

United States

United states

PCT

United States

[**]

60/990,574

61/094,388

61/118,386

PCT/US08/84988

12/324,764

13/174,522

13/174,568

13/174,594

13/954,730

[**]

8,084,483

8,283,369

8,357,713

8,546,437

27-Nov-2007

04-Sep-2008

26-Nov-2008

30-Jun-2011

30-Jul-2013

[**]

27-Dec-2011

09-Oct-2012

22-Jan-2013

01-Oct-2013

17-Aug-2029

26-Nov-2028

29-Apr-2029

Expired

Abandoned

Expired

Granted

Abandoned

[**]

METHODS FOR TREATING HYPERURICEMIA AND RELATED DISEASES

United States

PCT

United States

61/252,530

61/252,537

61/265,240

PCT/US10/52958

13/879,373

16-Oct-2009

30-Nov-2009

15-Oct-2010

01-May-2013

Expired

Pending

TREATMENT OF GOUT

United States

61/319,014

61/355,004

30-Mar-2010

15-Jun-2010

Expired

(1) Excluding any available patent term extension

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

Title

Jurisdiction

Application
No.

Patent
No.

Filing
Date

Issue
Date

Expiration
Date(1)

Status

United States

PCT

United States

61/411,449

61/430,522

61/468,797

61/489,420

PCT/US11/30364

PCT/US11/40398

13/637,343

13/704,192

14/939,963

9,216,179

08-Nov-2010

06-Jan-2011

29-Mar-2011

24-May-2011

29-Mar-2011

14-Jun-2011

24-Oct-2012

08-Mar-2013

12-Nov-2015

22-Dec-2015

01-Aug-2031

Expired

Allowed

Granted

Pending

HYPERTENSION AND HYPERURICEMIA

United States

61/489,597

PCT/US12/39011

14/119,599

24-May-2011

22-May-2012

04-Feb-2014

Expired

Pending

POLYMORPHIC FORMS OF 2-(5-BROMO-4-(4-CYCLOPROPYLNAPHTHALEN-1-YL)-4H-1,2,4-TRIAZOL-3-YLTHIO)ACETIC ACID AND USES THEREOF

United States

PCT

United States

61/428,660

PCT/US11/67657

13/339,283

13/967,255

14/577,129

8,546,436

30-Dec-2010

28-Dec-2011

01-Oct-2013

24-Feb-2032

Expired

Granted

Abandoned

Allowed

POLYMORPHIC, CRYSTALLINE AND MESOPHASE FORMS OF SODIUM 2-(5-BROMO-4-4-CYCLOPROPYLNAPHTHALEN-1-YL)-4H-1,2,4-TRIAZOL-3-YLTHIO)ACETATE, AND USES

United States

PCT

United States

61/293,602

PCT/US11/20233

13/375,607

13/954,736

8,524,754

08-Jan-2010

05-Jan-2011

09-Feb-2012

30-Jul-2013

03-Sep-2013

05-Jan-2031

Expired

Granted

Abandoned

MANUFACTURE OF 2-(5-BROMO-4-(4-CYCLOPROPYLNAPHTHALEN-1-YL)-4H-1,2,4-TRIAZOL-3-YLTHIO)ACETIC ACID

United States

PCT

United States

[**]

61/667,922

61/667,918

PCT/US13/49135

14/409,806

[**]

9,296,709

03-Jul-2012

02-Jul-2013

19-Dec-2014

[**]

29-Mar-2016

02-Jul-2033

Expired

Abandoned

Expired

Granted

[**]

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

Schedule 10.5.1

Product Domain Names for the Zurampic Product and ZURAMPIC® Marks

[** ]

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

ZURAMPIC® Marks

Country	Mark	App No App Date	Reg No Reg Date

US Federal		86488044 22-DEC-2014	4865620 08-DEC-2015
US Federal	ZURAMPIC	86338542 16-JUL-2014	4849004 10-NOV-2015

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

Schedule 10.5.2

Possible Trademarks and Domain Names for Allopurinol Combination Product

Possible Domain Names for the Allopurinol Combination Product

[**]

Possible Trademarks:

Country	Mark	App No App Date	Reg No Reg Date

US Federal	[**]	[**]	[**]
US Federal	[**]	[**]	[**]

Exhibit 10.2

CONFIDENTIAL

Execution Version

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

APRIL 26, 2016

AstraZeneca Pharmaceuticals LP

-and-

Ironwood Pharmaceuticals, Inc.

COMMERCIAL SUPPLY AGREEMENT

Zurampic Product and Allopurinol Combination Product

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

THIS COMMERCIAL SUPPLY AGREEMENT (this “ Commercial Supply Agreement ”) is dated as of April 26, 2016 (the “ Execution Date ”).

BETWEEN:

1. AstraZeneca Pharmaceuticals LP , a limited partnership organized under the laws of Delaware, whose principal place of business is at 1800 Concord Pike, Wilmington, Delaware 19803 (“ AstraZeneca ”); and

2. Ironwood Pharmaceuticals, Inc. , a company incorporated in the State of Delaware, whose principal place of business is at 301 Binney Street, Cambridge, Massachusetts 02142, United States of America (“ Ironwood ”); (each a “ Party ”, collectively the “ Parties ”).

BACKGROUND:

(A) Ironwood and an Affiliate of AstraZeneca are parties to that certain License Agreement entered into as of April 26, 2016 (the “ License Agreement ”), pursuant to which an Affiliate of AstraZeneca (on its own behalf and on behalf of its Affiliates) agreed to, among other things, license to Ironwood or its Affiliates Products for sale in the Territory.

(B) Subject to the terms of this Commercial Supply Agreement and the License Agreement, AstraZeneca will Supply the Zurampic Product and the Allopurinol Combination Product in the form of Finished Products to Ironwood.

(C) For the avoidance of doubt, this Commercial Supply Agreement is the Commercial Supply Agreement defined and referred to in the License Agreement, being separate from the Transitional Services Agreement pursuant to which AstraZeneca will provide, among other things, [**] during the “ Transition Period ” (as defined in the Transitional Services Agreement).

THE PARTIES AGREE THAT:

1. INTERPRETATION

1.1 Unless otherwise defined in this Commercial Supply Agreement, capitalized terms used in this Commercial Supply Agreement have the meanings ascribed to them in the License Agreement.

1.2 In this Commercial Supply Agreement, the following words and expressions shall have the following meanings:

“ Allopurinol Combination Product ” means the Product that is the subject of [**];

“[ **]” has the meaning set forth in Schedule 1 ;

“ Apparent Defects ” has the meaning set forth in Section 11.3 ;

“ Applicable Law ” means all applicable statutes, ordinances, regulations, rules, or orders of any kind whatsoever of any governmental authority or Regulatory Authority in the Territory or

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

otherwise having jurisdiction over any portion of the Parties’ activities under this Commercial Supply Agreement, as amended from time to time;

“ API ” means Lesinurad, and, in the case of the Allopurinol Combination Product, allopurinol;

“ Base Price ” has the meaning set forth in Schedule 1 ;

“ Binding Period ” has the meaning set forth in Section 3.1 ;

“ Bulk Product ” means the Existing Products in bulk form;

“ Business Continuity Plan ” has the meaning set forth in Section 7.4 ;

“ Business Day ” has the meaning set forth in the License Agreement;

“ Certificate of Analysis ” means the certificate of analysis to accompany all Finished Products delivered to Ironwood, which certifies, among other things, that the Finished Product has been Manufactured and tested in compliance with its Specification and which is in the form set out in the Quality Assurance Agreement;

“ cGMP ” means current good manufacturing practice according to Applicable Law in the Territory and the country of Manufacture ;

“[ **]” has the meaning set forth in the License Agreement;

“Cost of Goods Sold” has the meaning set forth in Schedule 1 ;

“ Delivery ” means delivery of the applicable Finished Product to Ironwood at the Delivery Location in accordance with Article 5 . “ Deliver ” and “ Delivered ” shall have corresponding meanings;

“ Delivery Location ” means [ **];

“ Design ” has the meaning set forth in Section 13.3 ;

“[ **]” has the meaning set forth in Section 12.7 ;

“ Effective Date ” means the Effective Date of the License Agreement;

“ Execution Date ” has the meaning set forth above;

“ Existing Products ” means the Zurampic Product and the Allopurinol Combination Product;

“ Existing Subcontractors ” has the meaning set forth in Section 2.3;

“ Finished Products ” means (a) the Existing Products in finished package form, and (b) the Existing Products in the sample trade dress;

“ Firm Order ” has the meaning set forth in Section 4.5 ;

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

“ First Commercial Sale ” has the meaning set forth in the License Agreement;

“ Force Majeure ” has the meaning set forth in Article 23 ;

“ Forecast ” has the meaning set forth in Section 3.1 ;

“ Independent Expert ” shall have the meaning set forth in Section 11.7 ;

“ Intellectual Property Rights ” means all patents, trademarks, copyrights, design rights, database rights, domain names, rights in inventions, confidential information, know-how, trade names, business names, get-up, logos and trade dress, and all other rights in the nature of intellectual property rights (whether registered or unregistered) and all applications and rights to apply for the above, anywhere in the world;

“ Inventory ” has the meaning set forth in Section 24.1 ;

“ Late Delivery ” has the meaning set forth in Section 5.3 ;

“ Lesinurad ” means the compound having the chemical structure set forth on Schedule 1.93 of the License Agreement;

“ Manufacture ,” “ Manufactured ” or “ Manufacturing ” means all activities involved in the production, storing, handling, packaging, and labelling of any Finished Product;

“ Minimum Lead Time ” has the meaning set forth in Section 4.1 ;

“ Minimum Order Size ” means the minimum size for any Order for Finished Product as set forth on Schedule 2 ;

“[ **]” has the meaning set forth in Schedule 3 ;

“ Non-Conforming Product ” means any Finished Product which, at the time of Delivery, does not conform with the requirements of Section 11.1 (and “ Non-Conformance ” shall have a corresponding meaning);

“ Order ” means a written purchase order with a unique number issued by Ironwood for such quantities of a Finished Product as Ironwood commits to purchase from AstraZeneca;

“ Payment ” has the meaning set forth in Section 10.3 ;

“ Product Materials ” has the meaning set forth in Section 12.1 ;

“ Quality Assurance Agreement ” or “ QAA ” means, for each Finished Product, the quality assurance agreements agreed between the Parties in relation to that Finished Product, as such agreement may be amended or replaced by agreement between the Parties in writing from time to time;

“ Quantity Shortfall ” has the meaning set forth in Section 11.4 ;

“ Required Change ” has the meaning set forth in Section 12.3 ;

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

“SKU ” means the applicable stock keeping unit;

“ Specification ” means the written specifications for the characteristics, quality, processing, testing, release and stability of a given Finished Product. The initial specifications for the Finished Product will be as set forth in the applicable Quality Assurance Agreement;

“ Supply ” means, with respect to a Finished Product, the Manufacturing and supplying of such Finished Product and the performance of related tests and analyses, including as set forth in the applicable QAA;

“Supply Executive Officers” means in the case of AstraZeneca, the EVP Operations or its designee, and in respect of Ironwood means the Head of Global Operations or its designee;

“ Supply Price ” means the amount payable by Ironwood for a Finished Product, which shall be determined in accordance with Article 9 ;

“ Tax ” has the meaning set forth in the License Agreement;

“ Tax Authority ” has the meaning set forth in the License Agreement;

“ Tax Invoice ” has the meaning set forth in the License Agreement;

“ Technology Transfer ” has the meaning set forth in Section 14.1 ;

“ Term ” has the meaning set forth in Section 23.1 ;

“ Territory ” means the United States of America, its territories and possessions (including Puerto Rico, irrespective of political status);

“ Third Party ” has the meaning set forth in the License Agreement;

“ Waste ” means waste material from AstraZeneca’s or its Affiliates’ or subcontractors’ Manufacture and Supply of Finished Products;

“ Year ” means each 12 month period ending December 31st; and

“ Zurampic Product ” means the Product that is the subject of NDA #207988 and, as of the Effective Date, has the brand name ZURAMPIC® in the Territory.

1.3 In this Commercial Supply Agreement the following rules of interpretation shall apply: Any reference in this Commercial Supply Agreement to an Article, Section, subsection, paragraph, clause, or Schedule will be deemed to be a reference to an Article, Section, subsection, paragraph, clause, or Schedule, of or to, as the case may be, this Commercial Supply Agreement, unless otherwise indicated. Unless the context of this Commercial Supply Agreement otherwise requires,

(a) all definitions set forth herein will be deemed applicable whether the words defined are used herein with initial capital letters in the singular or the plural,

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

(b) the word “will” will be construed to have the same meaning and effect as the word “shall,”

(c) any definition of or reference to any agreement, instrument or other document herein will be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein),

(d) any reference herein to any Person will be construed to include the Person’s successors and assigns,

(e) the word “notice” will mean notice in writing (whether or not specifically stated) and will include notices, consents, approvals and other written communications contemplated under this Commercial Supply Agreement,

(f) provisions that require that a Party, the Parties or any committee hereunder “agree,” “consent” or “approve” or the like will require that such agreement, consent or approval be specific and in writing, whether by written agreement, letter, approved minutes or otherwise (but excluding e-mail and instant messaging),

(g) references to any specific law, rule or regulation, or article, section or other division thereof, will be deemed to include the then-current amendments thereto or any replacement or successor law, rule or regulation thereof,

(h) the term “or” will be interpreted in the inclusive sense commonly associated with the term “and/or”,

(i) words of any gender include each other gender,

(j) words such as “herein”, “hereof” and “hereunder” refer to this Commercial Supply Agreement as a whole and not merely to the particular provision in which such words appear,

(k) words using the singular will include the plural, and vice versa,

(l) the words “include,” “includes” and “including” will be deemed to be followed by the phrase “but not limited to”, “without limitation”, “inter alia” or words of similar import,

(m) unless “Business Days” is specified, “days” will mean “calendar days”, and

(n) provisions that indicate that their subject matter are set forth in the License Agreement will be deemed to have restated such subject matter herein and the relevant provisions will be deemed a part hereof.

1.4 In case of a conflict between:

(a) the provisions of any Schedule and the provisions of the main body of this Commercial Supply Agreement, the provisions of the main body of this Commercial Supply Agreement shall prevail;

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

(b) the applicable Quality Assurance Agreement and this Commercial Supply Agreement, the terms of [**] shall control [**] and [**]; and

(c) the provisions of this Commercial Supply Agreement, the License Agreement or the Transitional Services Agreement, the relevant provisions will prevail in the following order of priority (highest priority first):

(i) [**];

(ii) [**]; and

(iii) [**].

1.5 This Commercial Supply Agreement does not relate to [**]. Therefore (but without prejudice to the rights assigned or granted to Ironwood under the License Agreement), [**].

2. SUPPLY OF PRODUCT

2.1 Subject to the terms of this Commercial Supply Agreement, (a) AstraZeneca or its Affiliates will Supply Ironwood and its Affiliates with Finished Products during the Term solely for use or sale under the License Agreement; and (b) Ironwood and its Affiliates shall purchase from AstraZeneca or its Affiliates any Finished Product ordered in Firm Orders and Delivered, in each case solely for sale or distribution in the Territory.

2.2 During the Term, Ironwood shall purchase [**].

2.3 AstraZeneca shall be entitled to subcontract to an Affiliate or Third Party [**] under this Commercial Supply Agreement [**] AstraZeneca must notify Ironwood at least [**] in advance of engaging a subcontractor (other than [**] (the “ Existing Subcontractors ”) with respect to [**]) under this Commercial Supply Agreement and [**]. AstraZeneca shall ensure that its subcontractors accept and comply with all of the terms and conditions of this Commercial Supply Agreement as if such subcontractor were a party to this Commercial Supply Agreement and AstraZeneca shall be responsible for its subcontractors’ performance under this Commercial Supply Agreement and be responsible for any breaches, acts or omissions of such subcontractors. To the extent that AstraZeneca utilizes a subcontractor for [**], AstraZeneca [**]. For clarity, AstraZeneca [**].

2.4 The Parties acknowledge that AstraZeneca has also agreed to provide during the Transition Period (as defined in the Transitional Services Agreement) certain [**] to Ironwood in relation to [**], on a transitional basis. The terms and conditions on which such services will be provided are set out in the Transitional Services Agreement.

3. FORECASTS

3.1 Beginning on or before [**] and by or before the [**] Business Day of each month during the Term, Ironwood will deliver to AstraZeneca a written forecast of the quantities of Finished Product, on a Finished Product-by-Finished Product basis (by SKU), which Ironwood reasonably anticipates it will require for the subsequent [**] calendar months on a month-by-month basis (each such forecast, a “ Forecast ”). With respect to each Forecast, month zero (0) is the month

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

in which the Forecast is submitted and month one (1) is the month after which the Forecast is submitted. Months [ **] through [**] of each Forecast shall be binding on Ironwood (each, a “ Binding Period ”).

3.2 In the event that AstraZeneca has not received an updated Forecast [**], the most recent Forecast shall be regarded as current. The most recent Forecast [**] shall mean the Forecast submitted by Ironwood [**], or, where one was not submitted, the Forecast that was regarded as current as of [**].

3.3 Other than the Binding Period, for which the amounts set forth in the Forecast shall be binding on Ironwood, the amounts set forth in the Forecasts [**] constitute a non-binding, good faith estimate of the Finished Product requirements of Ironwood and its Affiliates; provided, however , that the total quantity included in a Forecast with respect to a given SKU for (a) [**] of such Forecast shall not vary by more than [**] from the forecasted quantity for the applicable SKU indicated for that [**] (i.e., when it was [**] of a Forecast), (b) [**] of such Forecast shall not vary by more than [**] from the forecasted quantity for the applicable SKU indicated for [**] (i.e., when it was [**] in a Forecast), (c) [**] of such Forecast shall not vary by more than [**] from the forecasted quantity for the applicable SKU indicated for [**] (i.e., when it was [**] in a Forecast), and (d) each of [**] through [**] of such Forecast shall not vary by more than [**] from the forecasted quantity indicated for each of those same months in the immediately prior Forecast. An example of Forecasts and permitted variances is provided on Schedule 4 for illustrative purposes only.

3.4 Where the quantities for a Finished Product in the binding portion of a Forecast or in an Order vary [**] by more than the applicable permitted variance provided for in Section 3.3 , then AstraZeneca shall be entitled to charge Ironwood the costs of writing off any: (a) [**]; or (b) [**]; provided that (i) [**] and (ii) [**]; provided, further, however, [**] (as defined in the Transitional Services Agreement) unless such quantities were Ordered by Ironwood.

3.5 Where the quantities for a Finished Product in the binding portion of a Forecast or in an Order vary [**] by more than the applicable permitted variance provided for in Section 3.3 , [**]; provided that [**].

3.6 If the quantities for a Finished Product in the binding portion of a Forecast or Order vary [**] by more than the applicable permitted variance provided for in Section 3.3 for a given period, [**].

4. ORDERS

4.1 With each Forecast, Ironwood shall include a written, binding Order for the quantities of Finished Product specified in such Forecast for the newly-binding month of the Binding Period. All Orders shall be placed at least [**] days prior to the requested Delivery date (“ Minimum Lead Time ”) and specify the required quantity of each Finished Product being ordered.

4.2 All Orders for Finished Products must be for, or in excess of, the Minimum Order Size. Where Ironwood has issued an Order for less than the Minimum Order Size, [**].

4.3 The Parties will, in good faith, co-operate to manage production and deliveries in the most efficient manner [**]. Such co-operation shall reflect, among other things, any practices that AstraZeneca has itself employed [**].

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

4.4 All Orders must specify:

(a) the required quantity of each Finished Product being ordered; and

(b) the requested Delivery date, provided that the period from the Order date until the Delivery date is no less than the Minimum Lead Time.

4.5 Provided that an Order corresponds with the forecasted demand set out in the Forecast current at the time of the Order and is otherwise in accordance with the terms of this Commercial Supply Agreement, then AstraZeneca shall accept the Order. AstraZeneca shall communicate its acceptance of an Order by way of e-mail confirmation within [**] of receipt (or by such other written means as AstraZeneca may elect from time to time as notified to Ironwood). All accepted Orders shall be binding upon Ironwood and AstraZeneca (a “ Firm Order ”).

4.6 Each Order shall be the subject of a separate contract of sale between AstraZeneca and Ironwood. All contracts between the Parties for the Supply of any Finished Product shall be on the terms and conditions set out in this Commercial Supply Agreement and the Quality Assurance Agreement. All other terms and conditions (including any terms and conditions which Ironwood purports to apply under any purchase order, specification or other document attached to any order form) are hereby excluded.

4.7 AstraZeneca will inform Ironwood of any event that may prevent AstraZeneca from timely fulfilling Ironwood’s forecasted requirements for Finished Products or any confirmed Order [**]. If AstraZeneca is unable to fulfil the forecasted requirements or any Order, [**]. In the event that AstraZeneca notifies Ironwood of a potential inability to Supply Finished Products, [**]. If such circumstances continue or are forecasted to continue for more than [**].

5. DELIVERY

5.1 AstraZeneca shall Deliver Finished Product to Ironwood at the Delivery Location. All deliveries will be made [**] the Delivery Location.

5.2 AstraZeneca shall Deliver accepted Orders on (or within [**] either side of) the Delivery date set forth in the Order. Ironwood shall [**] on the Delivery date. If for any reason Ironwood fails to [**], AstraZeneca may at its option [**].

5.3 If all or part of an Order for Finished Product is Delivered more than [**] later than the Delivery date specified in an accepted Order (“ Late Delivery ”), Ironwood and AstraZeneca shall [**]. The following rebates on Supply Price in connection with Late Delivery shall apply:

(a) for a Delivery that is between [**] late, a [**] rebate shall apply to such Delivery;

(b) for a Delivery that is between [**] late, a [**] rebate shall apply to such Delivery; and

5.4 All Deliveries must be accompanied by the documentation specified in Schedule 5 unless otherwise agreed in writing.

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

6. ELECTRONIC INFORMATION EXCHANGE

6.1 Information Management . The Parties agree to [**] develop procedures and technical solutions for managing information in actual business processes relating to the Supply of Finished Products as set forth in Section 6.2 , which solution may include a technical platform to facilitate business information to be sent electronically between the Parties. All development and implementation should be based on a [**] as determined by between the Parties (with final decision by [**]). [**].

6.2 Logistics Interface . To the extent developed and implemented pursuant to Section 6.1 , the logistic interfaces shall include the following purposes and the management thereof with respect to Finished Products to the extent AstraZeneca is able to obtain such information:

(a) planning; including sharing information regarding Forecasts, work in process and Finished Product inventory, open Orders and goods in transit,

(b) Manufacturing; including sharing of information regarding production schedules and plans, material transactions and progress of Manufacturing, and

(c) Supply; including sharing information regarding distribution and shipping of the Finished Products from AstraZeneca or its Affiliates to Ironwood, its Affiliate or an Ironwood designated Third Party.

7. MANAGEMENT OF THE SUPPLY OF THE PRODUCT

7.1 Sales and Operation Planning Meetings . Sales and operation planning meetings shall be held monthly, unless otherwise agreed between the Parties, in person at locations mutually agreed upon by the Parties, or by teleconference or videoconference, as agreed. Agendas for such meetings shall be related to the subject matter of this Commercial Supply Agreement and shall include: [**]. Attendees of such meetings will include individuals from each Party of appropriate seniority and geographical responsibility from commercial, supply and finance groups to approve Supply and demand plans for the Finished Products.

7.2 Expenses . [**].

7.3 Minutes . The minutes of each sales and operation planning meeting will provide a description in reasonable detail of the discussions held at the meeting and a list of any actions, decisions or determinations approved during such meeting. Minutes of each such meeting will be approved or disapproved, and revised as necessary, at the next meeting. [**].

7.4 Business Continuity Plan . Within [**] of the Execution Date, both Parties shall cooperate to prepare a business continuity plan for if, as a result of Force Majeure or otherwise, AstraZeneca is unable to Supply the Finished Products or the volume of Finished Products as forecasted (the “ Business Continuity Plan ”). The Parties shall review the Business Continuity Plan on [**] basis [**]. The Business Continuity Plan is intended to be for planning purposes and is not intended to limit or otherwise modify the rights and obligations of the Parties hereunder. At Ironwood’s request, AstraZeneca shall establish reasonable plans for [**] for the Supply of Finished Products during the Term, and such plans shall be included in the Business Continuity Plan.

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

8. RISK AND TITLE

8.1 Unless otherwise expressly provided, title and risk of loss or damage to Finished Product shall [**]; provided that [**].

9. PRICE AND CHARGES

9.1 Subject to the other terms and conditions of this Commercial Supply Agreement, the “ Supply Price ” for each unit of Finished Products Supplied by AstraZeneca to Ironwood hereunder shall be [**].

9.2 AstraZeneca shall [**]. The Parties shall [**] to agree on whether, and how best, to pursue any improvement opportunity either (a) [**] or (b) [**], and in each case ((a) and (b)) [**].

9.3 During the Term, and [**] thereafter, AstraZeneca will keep and maintain accurate and complete records relating to the calculation of Supply Price during the [**], which books and records will be sufficiently detailed such that the Supply Price can accurately be determined and each Party’s financial reporting obligations, independent auditor requirements and obligations under the Sarbanes-Oxley Act can be satisfied. Upon [**] prior written notice from Ironwood, AstraZeneca will permit an independent certified public accounting firm of internationally recognized standing, selected by Ironwood and reasonably acceptable to AstraZeneca, to examine the relevant books and records of AstraZeneca and its Affiliates as may be reasonably necessary to verify the Supply Price. An examination by Ironwood under this Section 9.3 will [**] and will [**] request. The accounting firm will be provided access to such books and records at AstraZeneca’s facility where such books and records are normally kept and such examination will be conducted during AstraZeneca’s normal business hours. AstraZeneca may require the accounting firm to sign a standard non-disclosure agreement before providing the accounting firm access to its facilities or records. Upon completion of the audit, the accounting firm will provide both AstraZeneca and Ironwood a written report disclosing whether the reports submitted by AstraZeneca are correct or incorrect and the specific details concerning any discrepancies. [**]. If the accountant determines that, based on errors in the amounts charged, any additional amount owed by one Party to the other will be paid within [**] after receipt of the accountant’s report, along with [**]; provided, however, that [**]. If the accountant determines that the Supply Price submitted by AstraZeneca overstates the Cost of Goods Sold by [**], [**].

10. INVOICING AND PAYMENT

10.1 Upon [**], AstraZeneca shall invoice Ironwood for the Supply Price of such Finished Products, as applicable, under a Firm Order and Ironwood will pay the Supply Price associated therewith. Ironwood shall pay all invoices within [**] after the date of the invoice; provided that an invoice shall be dated no earlier than [**], as applicable, and dated the date sent to Ironwood.

10.2 All amounts payable under the Commercial Supply Agreement will be paid in U.S. Dollars by ACH or wire transfer in immediately available funds to an account designated by the applicable Party.

10.3 All amounts payable by a Party to the other Party pursuant to this Commercial Supply Agreement (each a “ Payment ”) :

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

(a) shall be made by the paying Party to the receiving Party by transfer to such bank account as the receiving Party may from time to time notify in writing to the paying Party; and

(b) subject to Section 10.6 and 10.7, shall be made in full and cleared funds, without any set off, deduction or withholding whatsoever, except for any deduction or withholding which must be made under Applicable Law.

10.4 Any Payment under this Commercial Supply Agreement that is more than [**] past due will be subject to interest at an annual percentage rate of the prime rate (as published in the “Money Rates” table of the Eastern Edition of The Wall Street Journal during the period such amount is overdue) [**] if a Party does not make payment within [**] of its receipt of notice that such amount is past due. Likewise, any overpayment that is not refunded within [**] after the date such overpayment was made will thereafter be subject to interest at an annual percentage rate of the prime rate (as published in the “Money Rates” table of the Eastern Edition of The Wall Street Journal during period such amount is overdue) [**]; provided, however, that if the overpayment is due to errors in reports provided by the overpaid Party, such interest will accrue [**]. Notwithstanding the preceding, if a Party contests any amounts due hereunder in good faith and promptly notifies the other Party of such dispute, interest will not accrue as to amounts being so contested until [**] following the presentation of such notice to the other Party.

10.5 Except as expressly provided herein, all activities of a Party hereunder shall be [**], and in no event shall there be any double-counting (e.g., a Party may not be paid for the same expense both hereunder and under another agreement, and AstraZeneca may not be paid twice for the same expense as a portion of the Supply Price or otherwise).

10.6 Payments shall not be reduced on account of any Taxes unless required by Applicable Law. The Party receiving Payments alone shall be responsible for paying any and all Taxes (other than withholding taxes required by Applicable Law to be paid by the paying Party) levied on account of, or measured in whole or in part by reference to, any Payments it receives. The paying Party shall deduct or withhold from the Payments any Taxes that it is required by Applicable Law to deduct or withhold. If a tax deduction is required by Applicable Law to be made by the paying Party, the amount of the payment due from the paying Party to the receiving Party shall be equal to the payment which would have been due if no tax deduction had been required, less the tax deduction. Notwithstanding the foregoing, if the Party receiving Payments is entitled under any applicable treaty to a reduction of rate of, or the elimination of, applicable withholding tax, it may deliver to the paying Party or the appropriate Tax Authority (with the assistance of the paying Party to the extent that this is reasonably required and is expressly requested in writing) the prescribed forms necessary to reduce the applicable rate of withholding or to relieve the paying Party of its obligation to withhold Tax, and the paying Party shall apply the reduced rate of withholding, or dispense with withholding, as the case may be, to the extent it complies with the applicable treaty; provided that the paying Party has received evidence, in a form satisfactory to the paying Party, of the receiving Party’s delivery of all applicable forms (and, if necessary, its receipt of appropriate governmental authorization) at least [**] prior to the time that the Payments are due. If, in accordance with the foregoing, the paying Party withholds any amount, it shall pay to the receiving Party the balance when due, make timely payment to the proper Tax Authority of the withheld amount, and send to the

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

receiving Party proof of such payment within [ **] following that payment. [**] and, as a result of [**], Payments made hereunder are subject to additional withholding Tax, the paying Party shall be responsible for the resulting additional withholding Taxes; therefore, Payments made to the receiving Party shall be increased to ensure the receiving Party receives the full amount that it would have received if [**] had not taken place. Neither Party shall be responsible for paying Taxes on the other Party’s income.

10.7 [**]. Except to the extent Indirect Taxes are chargeable as a result of [**], if any Indirect Taxes are chargeable in respect of any Payments, the paying Party shall pay such Indirect Taxes at the applicable rate in respect of any such Payments following the receipt, where applicable, of an Indirect Taxes invoice in the appropriate form issued by the receiving Party in respect of such Payments, such Indirect Taxes to be payable on the due date of the payment of the Payments to which such Indirect Taxes relate. The receiving Party shall issue its invoices for all amounts payable under this Agreement consistent with Indirect Tax requirements and irrespective of whether the sums may be netted for settlement purposes. If such amounts of Indirect Taxes are refunded to the receiving Party by the applicable Tax Authority or other fiscal authority subsequent to payment, the receiving Party will transfer such amount to the paying Party within [**] of receipt.

11. WARRANTY, NON-CONFORMING PRODUCT AND QUANTITY SHORTFALLS

11.1 AstraZeneca warrants to Ironwood that:

(a) at the time of their Delivery to Ironwood, the Finished Products will:

(i) have been Supplied in accordance with all Applicable Laws and cGMP;

(ii) have been Manufactured in accordance, and be in conformity, with the Specifications in effect at the time of release and the Quality Assurance Agreement, and will conform with the certificates provided pursuant to the Quality Assurance Agreement;

(iii) be transferred to Ironwood free and clear of any security interest, lien, or other encumbrance on the title thereto; and

(iv) will have been Manufactured in facilities that are approved by the applicable Regulatory Authorities in the Territory.

(b) AstraZeneca will:

(i) Supply all Finished Products to Ironwood with at least [**] of remaining shelf-life [**] or remaining shelf-life of at least [**] [**]; provided that [**] listed in Section 11.1(b)(i); and

(ii) use [**] listed in Section 11.1(b)(i).

11.2 [**], the Cost of Goods Sold set forth on Schedule 1 reflect AstraZeneca’s Cost of Goods Sold to Supply such Finished Products for [**] based on [**].

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

11.3 Ironwood shall promptly notify AstraZeneca of any Quantity Shortfall or Non-Conforming Product in any Delivery of Finished Products (as applicable), and shall provide AstraZeneca with a detailed written report of the alleged Quantity Shortfall or Non-Conformance (including a sample of the relevant Finished Product, where applicable), not later than:

(a) [**] after Ironwood’s receipt of the applicable Finished Products, for any Quantity Shortfall or for any Non-Conformance that could be discovered within this period by Ironwood exercising reasonable diligence or its responsibilities under the QAA (“ Apparent Defects ”); or

(b) [**] after the Non-Conformance has become known, but in any event no later than the actual date of expiration of the shelf-life of the Finished Product in question, for any Non-Conformance which is not an Apparent Defect.

11.4 Provided Ironwood has duly notified AstraZeneca of a Quantity Shortfall or a Non-Conforming Product in accordance with Section 11.3 :

(a) in the case of any Quantity Shortfall:

(i) If the Delivered quantity of a Firm Order for Finished Product is less than or equal to [**] of the quantity specified in a Firm Order, but at least [**] of such quantity, Ironwood shall accept the Delivery and, in the case of [**]; provided that if the Delivered quantity of a Firm Order for Finished Product is [**] of the quantity specified in a Firm Order (“ Quantity Shortfall ”), [**]. In the event the Delivered quantity of a Firm Order for Finished Product is [**].

(ii) The Parties agree that the following rebates in connection with a Quantity Shortfall shall apply:

(A) for a Delivery that is between [**] and [**] of the full volume of Finished Products required, a [**] rebate shall apply to such Delivery;

(B) for a Delivery that is between [**] and [**] of the full volume of Finished Product required, a [**] rebate shall apply to such Delivery; and

(C) for a Delivery that is less than [**] of the full volume of Finished Product required, a [**] rebate shall apply to such Delivery.

(iii) With respect to applicable shortage of Finished Product, inputs, or capacity that are usable [**] following the shortage.

(iv) With respect to applicable shortage of inputs or capacity that are used in connection with [**].

(b) in the case of any Non - Conforming Product, AstraZeneca shall at Ironwood’s option either:

(i) [**]; or

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

(ii) [**]; and

(iii) [**].

11.5 Ironwood shall, at [**].

11.6 The process set out in the relevant QAA shall be used to determine whether any Finished Product is a Non-Conforming Product.

11.7 If a dispute arises between the Parties as to whether or not a Finished Product is a Non-Conforming Product that cannot be resolved by the Parties within [**] of a claim being notified by Ironwood to AstraZeneca following the conclusion of the processes described in the QAA, either Party may require that the matter in dispute be referred to [**] or, [**] (the “ Independent Expert ”).

11.8 [**] shall be solely for the purpose of establishing whether or not there has been a Supply of Non-Conforming Product. Except in the case of fraud or manifest error [**] shall be final and binding upon the Parties. [**].

12. MANUFACTURING

12.1 Unless otherwise agreed upon by the Parties in writing, [**] (the “ Product Materials ”). All such materials used by AstraZeneca shall comply with the standards set out in the QAA and shall be inspected by AstraZeneca in accordance with the terms of the QAA.

Regulatory Matters

12.2 The Parties acknowledge that the License Agreement and the Transitional Services Agreement contain provisions setting out their respective roles and responsibilities in relation to the transfer of Regulatory Approvals to Ironwood (or its nominee) following the Effective Date. If a Regulatory Authority requires any labelling changes to be made to any Finished Products while AstraZeneca is still the holder of the relevant Regulatory Approval, [**]; provided, however, [**].

12.3 If any other changes to the Finished Products, Specifications or Manufacturing facility are required due to regulatory requirements in the Territory (each a “ Required Change ”), then: [**]. With regard to any one-time implementation costs associated with the Required Change, [**], taking into account (a) [**] and (b) [**], as applicable. If either Party receives notice, or is otherwise informed of, any Required Change, such Party shall deliver notice thereof to the other Party as promptly as practicable.

12.4 AstraZeneca shall provide Ironwood all reasonable documentation and support for any (x) change to Cost of Goods Sold or (y) one-time cost, in each case ((x) and (y)), arising from a Required Change. It is understood that there is no obligation on AstraZeneca to share its agreements with Third Parties in connection with providing such reasonable documentation and support. In the event that Ironwood disputes the change in Cost of Goods Sold resulting from such Required Change, such matter shall be handled [**].

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

12.5 If Ironwood requires stability tests (other than those already required or in effect as of the Effective Date) to be carried out or for new stability protocols to be set down for Finished Products then, [**]. If a Regulatory Authority in the Territory requires stability tests (other than those already required or in effect as of the Effective Date) to be carried out or for new stability protocols to be set down for Finished Products, then [**].

AstraZeneca Changes

12.6 Ironwood acknowledges that AstraZeneca as of the Effective Date has commenced or anticipates commencing the changes described in Schedule 3 and such changes are approved by Ironwood. With regard to the changes described in Schedule 3 , [**].

12.7 AstraZeneca has completed the validation activities for [**]. AstraZeneca shall [**] by [**].

12.8 AstraZeneca may amend, modify or supplement any Specifications or the Manufacturing process with respect to Finished Products Supplied hereunder upon [**] prior written notice to Ironwood [**] as mutually agreed by the Parties, consent of Ironwood not to be unreasonably withheld. The costs [**].

Ironwood Changes

12.9 AstraZeneca shall implement any changes to the Finished Products or the Manufacture thereof reasonably requested by Ironwood, provided that (a) [**]; (b) [**], and (c) [**] unless, in the case of (c), [**].

12.10 If Ironwood desires, AstraZeneca shall [**], with the understanding that the Cost of Goods Sold may need to be adjusted to account for [**].

12.11 AstraZeneca shall [**] in assisting Ironwood to obtain any Regulatory Approvals in the Territory necessary as a result of any such changes to the Finished Products, or the Specifications or Manufacture thereof.

12.12 Any Required Change or change requested by AstraZeneca or Ironwood shall be implemented in accordance with the provisions of the Quality Assurance Agreement (including the change control procedures therein) and shall be made in accordance Applicable Laws (including cGMPs).

13. PACKAGING AND ARTWORK

AstraZeneca Marks

13.1 The Parties acknowledge that the License Agreement contains provisions setting out the terms on which [**].

Package and Label Design

13.2 Ironwood shall be responsible for creating the artwork (other than the existing artwork as of the Effective Date) for the printed packaging associated with the Finished Products for commercial distribution and sale in the Territory. Responsibility for obtaining the Regulatory Approval of such packaging shall be governed by the License Agreement.

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

13.3 Subject to [**] Ironwood will have the right to specify, in accordance with the terms hereof, the design for the label, inserts and packaging, including all trademarks, trade names and packaging graphics to be used in connection with the Finished Product (the “ Design ”).

13.4 Subject to Ironwood’s providing artwork to AstraZeneca, AstraZeneca shall be responsible for the handling and implementation of artwork on the printed packaging; [**]. The work flow process for such artwork shall be agreed by the Parties in writing.

13.5 Ironwood shall [**] provide the Design to AstraZeneca at least [**] prior to the Delivery. The Parties agree and acknowledge that AstraZeneca’s obligations to Supply the Finished Products are subject to the timely provision of the Design. Ironwood shall [**], despite [**] by AstraZeneca to [**]; provided, however, Ironwood shall [**].

14. TECHNOLOGY TRANSFER

14.1 Subject to the terms of this Article 14 , Ironwood [**]. Ironwood shall have the right to conduct technology transfers (including for the manufacture of API or the manufacture, formulation or packaging of Existing Product) (a “ Technology Transfer ”); provided that Ironwood shall provide AstraZeneca at least six (6) months’ notice prior to the commencement of a Technology Transfer. Following receipt of the notice described in the immediately preceding sentence, the Parties [**]. Such Technology Transfer [**].

14.2 For clarity, in exercising its rights under this Article 14 , Ironwood [**] and AstraZeneca [**].

14.3 To the extent appropriate and applicable to a particular Technology Transfer and subject always to [**] the Technology Transfer shall include the following: (a) AstraZeneca [**]; and (b) AstraZeneca [**].

15. REGULATORY MATTERS

Quality Assurance Agreement

15.1 The Parties will use [**] to enter into the Quality Assurance Agreement no later than [**] after the Effective Date; provided that in all cases the Quality Assurance Agreement [**]. AstraZeneca and Ironwood shall perform their respective obligations and comply with all provisions of the Quality Assurance Agreement. In the event of a discrepancy between the Quality Assurance Agreement and this Commercial Supply Agreement, the terms of the Quality Assurance Agreement shall govern solely in relation to quality-related matters, and this Commercial Supply Agreement shall govern all other matters. The procedures governing quality audits will be set out in the Quality Assurance Agreement.

Records

15.2 AstraZeneca and its Affiliates shall maintain [**] records with respect to the Supply of Finished Products as are required by its standard operating procedures or Applicable Law. AstraZeneca and its Affiliates shall keep [**] these records for the period(s) as specified in the applicable Quality Assurance Agreement, or such longer period(s) as required by Applicable Law, and made available on reasonable written request to an authorized Ironwood representative.

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

Regulatory Inspections

15.3 If, during the Term, any Regulatory Authority visits or inspects any facilities of AstraZeneca or an AstraZeneca Affiliate in connection with the Manufacture of the Finished Product for, or the Supply of the Finished Products to, Ironwood, or if any Regulatory Authority carries out any visit or inspection which relates to the services which AstraZeneca agrees to provide to Ironwood under this Commercial Supply Agreement, then (to the extent permitted by Applicable Law) AstraZeneca [**]. AstraZeneca [**]; provided, however , that Ironwood [**].

15.4 During the Term, [**] AstraZeneca shall allow Ironwood or its authorised representatives to audit the records and inspect the premises of AstraZeneca and its Affiliates [**] during normal business hours and on reasonable advance notice for the purposes of verifying compliance with: (i) the Specifications of the Finished Products; (ii) Applicable Law (including verifying that Manufacture of the Finished Products complies with Applicable Laws); (iii) the requirements of any Regulatory Approvals in connection with this Commercial Supply Agreement; and (iv) AstraZeneca’s performance against the requirements in this Commercial Supply Agreement and the Quality Assurance Agreement; subject in each case to any reasonable conditions, rules and regulations of AstraZeneca and its Affiliates, including any confidentiality restrictions.

Product Recall

15.5 The procedures governing the recall or market withdrawal of any Finished Product Supplied to Ironwood under this Commercial Supply Agreement will be set out in the applicable Quality Assurance Agreement.

15.6 Ironwood [**], in which event AstraZeneca will be responsible for: (i) [**]; and (ii) [**].

Adverse Event Reporting

15.7 The reporting of adverse events in relation to any Finished Product Supplied to Ironwood under this Commercial Supply Agreement will be governed by the Pharmacovigilance Agreement.

16. COMPLIANCE

16.1 Compliance with Law . Each Party hereby covenants to comply with all Applicable Law and industry professional standards applicable to its activities connected with the Supply of Finished Product. Without limiting the generality of the foregoing, each Party will not use in any capacity, in connection with the activities to be performed under this Commercial Supply Agreement, any person who has been debarred pursuant to Section 306 of the United States Federal Food, Drug, and Cosmetic Act or analogous law, or who is the subject of a conviction described in such section or a corresponding section of any analogous law. Each Party will inform the other Party in writing immediately if it or any person who is performing or has performed activities hereunder or is conducting or has conducted any development of the Finished Products is debarred or is the subject of a conviction described in Section 306 or a corresponding section of any analogous law, or if any action, suit, claim, investigation or legal or administrative proceeding is pending relating to the debarment or conviction of such Party or any person performing services hereunder.

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

16.2 Business Ethics . Each Party acknowledges and agrees that it is subject to the “Business Ethics” provisions set forth in Section 8.3 of the License Agreement.

16.3 Professional Standards . AstraZeneca shall Supply Finished Product and ensure that the Manufacture of Finished Product for Supply hereunder are conducted using professional standards and according to this Commercial Supply Agreement, including by allocating (or causing to be allocated) equipment and skilled personnel with sufficient depth of knowledge and capability to solve independently processing, quality and analytical issues. AstraZeneca shall [**] manage its suppliers raw materials and API to minimize risks to the Supply of Finished Product, including with regard to audits, forecasts, stock management and contingency plans.

16.4 Waste . AstraZeneca shall and shall cause its Affiliates to, and shall [**] cause its contract manufacturers to (a) destroy Waste within a reasonable time (without jeopardizing Supply), including upon termination or expiration of this Commercial Supply Agreement; and (b) until destruction has taken place, store the Waste in a manner preventing unauthorized access and possible misuse. AstraZeneca shall, during the Term of this Commercial Supply Agreement (including any post-termination Waste relating to the wind-down of this Commercial Supply Agreement), keep or cause to be kept records relating to Waste arising from Manufacturing activities and destruction thereof, and maintain such records for a period of at least [**] or longer as required under the applicable Quality Assurance Agreement.

16.5 Security . AstraZeneca, its Affiliates and subcontractors that handle Finished Product shall [**] (a) abide by a standard operating procedure for the security and control of the Finished Product, including packaging, storage or other product security features; and (b) provide a copy of such procedures to Ironwood upon request. AstraZeneca shall Supply Finished Product in a secure manner appropriate to the transportation route and destination in accordance with any particular standards of transportation set forth in the Quality Assurance Agreement. In the event that AstraZeneca or any of its Affiliates or subcontractors fails to meet or maintain [**] product security measures or has reported incidents regarding product security, the Parties shall agree upon what measures should be taken by such Person(s) to improve performance. Any incident that constitutes, or any series of incidents that collectively constitute, a material breach of security with respect to the Finished Product, or the unauthorized disclosure of information pertaining to the security of the Finished Product in violation of this Commercial Supply Agreement shall be reported by the Party first having knowledge of such incident to the other Party. All reporting under this Section 16.5 shall take place within [**] of discovery or knowledge of such an incident (or series of incidents) by a Party. AstraZeneca and its Affiliates shall [**] provide reasonable assistance, and [**] provide reasonable assistance, to Ironwood in relation to reasonable investigations that Ironwood may initiate in any security incident that may affect the Supply of Finished Product covered by this Commercial Supply Agreement.

17. INTELLECTUAL PROPERTY

17.1 The Parties acknowledge that the License Agreement contains (a) the terms and conditions on which Ironwood is licensed to sell and otherwise exploit the Products; and (b) the licenses from Ironwood to AstraZeneca required for purposes of enabling AstraZeneca to Supply Finished Products under this Commercial Supply Agreement.

17.2 Subject to this Article 17 , [**].

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

18. CONFIDENTIALITY

18.1 Section 7.10 of the License Agreement is hereby incorporated by reference into this Commercial Supply Agreement, mutatis mutandis .

19. REPRESENTATIONS, WARRANTIES AND COVENANTS

19.1 As of the Effective Date, each of AstraZeneca and Ironwood hereby represents and warrants to the other Party hereto as follows:

(a) it is a corporation or entity duly organized and validly existing under the laws of the state or other jurisdiction of its incorporation or formation;

(b) the execution, delivery and performance of this Commercial Supply Agreement by such Party has been duly authorized by all requisite corporate action and does not require any shareholder action or approval;

(c) it has the power and authority to execute and deliver this Commercial Supply Agreement and to perform its obligations hereunder;

(d) the execution, delivery and performance by such Party of this Commercial Supply Agreement and its compliance with the terms and provisions do not and will not conflict with or result in a breach of any of the terms and provisions of or constitute a default under (i) any agreement to which it or its Affiliates is a party, (ii) the provisions of its charter or operative documents or bylaws or (iii) any order, writ, injunction or decree of any court or governmental authority entered against it or by which any of its property is bound; and

(e) it will comply with Applicable Law in respect of the Supply of Products at all times.

19.2 AstraZeneca shall inform Ironwood promptly in writing of any event, which in the reasonable judgment of AstraZeneca may adversely affect (a) AstraZeneca’s ability to Supply the Finished Products to Ironwood, or (b) the suitability of the Finished Product for Ironwood’s use.

20. INDEMNITIES AND LIABILITY

20.1 [**].

20.2 Notwithstanding anything in this Commercial Supply Agreement to the contrary, [**]; provided that the foregoing limitations in this Section 20.2 shall not apply to (x) [**], (y) [**] or (z) [**].

21. INSURANCE

Both Parties agree to use [ **] to obtain and maintain and mutually endorse each Party, during the Term of this Commercial Supply Agreement, commercial general liability insurance coverage, including product liability insurance, with limits of not less than [**].

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

22. FORCE MAJEURE

No liability will result from, and no right to terminate will arise, in whole or in part, based upon any delay in performance or non-performance, in whole or in part, by either of the Parties to this Commercial Supply Agreement to the extent that such delay or non-performance is caused by an event of Force Majeure. “ Force Majeure ” means an event that is beyond a non-performing Party’s reasonable control, including an act of God, act of the other Party, war, riot, civil commotion, strike, terrorist act, malicious damage, epidemic, quarantine, fire, flood, storm or natural disaster. The Force Majeure Party will within [ **] days of the occurrence of the Force Majeure event, give written notice to the other Party stating the nature of the Force Majeure event, its anticipated duration and any action being taken to avoid or minimize its effect. Any suspension of performance will be of no greater scope and of no longer duration than is reasonably required and the Force Majeure Party will use reasonable effort to remedy its inability to perform; provided, however, if the suspension of performance continues or is anticipated to continue for [**] after the date of the occurrence, the unaffected Party will have the right but not the obligation to perform on behalf of the Force Majeure Party for a period of such Force Majeure and such additional period as may be reasonably required to assure a smooth and uninterrupted transition of such activities. If such failure to perform would constitute a material breach of this Commercial Supply Agreement in the absence of such event of Force Majeure, and continues for [**] from the date of the occurrence and the Parties are not able to agree on appropriate amendments within such period, such other Party will have the right, notwithstanding the first sentence of this Article 22 , to terminate this Commercial Supply Agreement immediately by written notice to the Force Majeure Party. In the case of such a termination, [**]. Notwithstanding the foregoing, nothing in this Article 22 will excuse or suspend the obligation to make any payment due hereunder in the manner and at the time provided.

23. DURATION AND TERMINATION

23.1 The term of this Commercial Supply Agreement (the “ Term ”) commences and takes effect on the Effective Date and shall continue, unless earlier terminated in accordance with this Article 23 , for the term of the License Agreement as set forth in section 11.1 of the License Agreement; provided that upon expiration of the License Agreement, the Term [**].

23.2 Upon termination of the License Agreement, [**].

23.3 In addition to any other provision of this Commercial Supply Agreement expressly providing for termination of this Commercial Supply Agreement, this Commercial Supply Agreement may be terminated as follows:

(a) Termination [**]. This Commercial Supply Agreement may be terminated effective immediately by written notice by either Party at any time during the Term if the other Party [**] this Commercial Supply Agreement, which breach remains uncured for [**] measured from the date written notice of such breach is given to the breaching Party by the non-breaching Party, which notice will specify the nature of the breach and demand its cure; provided, however , that if such breach is not capable of being cured within the stated period and the breaching Party uses [**] to cure such breach during such period and [**], this Commercial Supply Agreement will not terminate and the cure period [**].

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

Further, in the case of a dispute during the cure period with respect to whether a [ **] has occurred, the non-breaching Party shall not have the right to terminate this Commercial Supply Agreement until it complies with the applicable dispute resolution procedures hereunder, including those set forth in Section 14.1 of the License Agreement, and the dispute has been resolved pursuant to such procedures and breach remains uncured [**] after the final resolution of the dispute through such dispute resolution procedures. Notwithstanding anything to the contrary set forth in this Commercial Supply Agreement, termination will not be deemed to relieve a defaulting Party from any liability arising from such default.

(b) Bankruptcy . If the other Party files in any court or agency, pursuant to any statute or regulation of any state or country, a petition in bankruptcy or insolvency or for reorganization or for an arrangement or for the appointment of a receiver or trustee of that Party or of its assets, or if the other Party proposes a written agreement of composition or extension of its debts, or if the other Party is served with an involuntary petition against it, filed in any insolvency proceeding, and such petition is not dismissed within [**] after the filing thereof, or if the other Party proposes or is a Party to any dissolution or liquidation, or if the other Party makes an assignment for the benefit of its creditors, this Commercial Supply Agreement may be terminated.

(i) If AstraZeneca [**], Ironwood may terminate this Commercial Supply Agreement upon [**] prior written notice to AstraZeneca.

(ii) Ironwood may terminate this Commercial Supply Agreement upon [**] prior written notice to AstraZeneca [**], which notice may not be given before [**].

24. CONSEQUENCES OF TERMINATION

24.1 If this Commercial Supply Agreement terminates as a result of termination of License Agreement by AstraZeneca as a result of Ironwood’s material breach or insolvency or the License Agreement is terminated by Ironwood for convenience or the License Agreement expires:

(a) AstraZeneca [**], and in such case, Ironwood [**]; and

(b) Ironwood shall [**]; provided that [**] and (ii) [**]. Ironwood [**].

24.2 If this Commercial Supply Agreement terminates as a result of termination of License Agreement by Ironwood as a result of AstraZeneca’s material breach or insolvency or due to a safety issue:

(a) AstraZeneca [**]; and

(b) At AstraZeneca’s [**].

24.3 If this Commercial Supply Agreement is terminated by AstraZeneca as a result of Ironwood’s material breach or insolvency but the License Agreement is still in effect:

(a) AstraZeneca [**];

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

(b) Ironwood [**]; provided that [**] (i) [**] and (ii) [**]. Ironwood [**]; and

(c) To the extent a technology transfer has not yet been completed, [**] in accordance with Section 14 [**]. In addition, with respect to [**] or those as to which [**] through Article 12 [**], if AstraZeneca [**], then AstraZeneca [**]. Ironwood may elect to either (i) [**] or (ii) [**]. In the event that [**] pursuant to this Section 24.3(c) , such matter shall be handled in accordance with [**].

24.4 If this Commercial Supply Agreement is terminated by Ironwood as a result of AstraZeneca’s material breach or insolvency but the License Agreement is still in effect:

(a) At Ironwood’s election, AstraZeneca [**];

(b) At Ironwood’s election, Ironwood [**]. Ironwood [**]; and

24.5 If this Commercial Supply Agreement is terminated by Ironwood pursuant to Section 23.3(c), but the License Agreement is still in effect:

(a) AstraZeneca [**], and in such case, Ironwood [**];

(b) If elected by AstraZeneca, Ironwood [**]; provided that [**] (i) [**] and (ii) [**]. Ironwood [**]; and

(c) To the extent a technology transfer has not yet been completed, [**]. In addition, with respect to [**] or those as to which [**] through Article 12 [**], if AstraZeneca [**], then AstraZeneca [**]. Ironwood may elect to either (i) [**] or (ii) [**]. In the event that [**] pursuant to this Section 24.5(c) , such matter shall be handled in accordance with [**].

24.6 In the event of a termination or expiration of this Commercial Supply Agreement, any provision of this Commercial Supply Agreement which expressly or by implication is intended to come into or continue in force shall remain in full force and effect, including Article 1, Section 8.1, Articles 9 and 10 (to the extent that payments to a Party are due or still owing), Article 11 (solely with respect to Finished Products Delivered during the Term), Sections 15.1, 15.2, 15.5, 15.6, 15.7, 16.4 and 17.2, Article 18, Article 20, Article 21, Article 24 [**], Article 25 and Article 26 shall remain in full force and effect.

24.7 Expiration or termination of this Commercial Supply Agreement for any reason shall be without prejudice to either Party’s other rights and remedies or to any accrued rights and liabilities as the date of such expiration or termination.

25. INDEPENDENT CONTRACTORS

The status of a Party under this Commercial Supply Agreement will be that of an independent contractor. Nothing contained in this Commercial Supply Agreement will be construed as creating a partnership, joint venture, or agency relationship between the Parties or, except as

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

otherwise expressly provided in this Commercial Supply Agreement, as granting either Party the authority to bind or contract any obligation in the name of or on the account of the other Party or to make any statements, representations, warranties, or commitments on behalf of the other Party. All Persons employed by a Party or any of its Affiliates are employees of such Party or its Affiliates and not of the other Party or such other Party’s Affiliates and all costs and obligations incurred by reason of any such employment will be for the account and expense of such Party or its Affiliates, as applicable.

26. MISCELLANEOUS

26.1 Governing Law. The interpretation and construction of this Commercial Supply Agreement will be governed by the laws of [**], excluding any conflicts or choice of law rule or principle that might otherwise refer construction or interpretation of this Commercial Supply Agreement to the substantive law of another jurisdiction.

26.2 Dispute Resolution . The Parties shall endeavour to reach consensus on all matters relating to Supply under this Commercial Supply Agreement and resolve disputes in accordance with this Section 26.2, other than disputes in relation to Quantity Shortfalls or Non-Conforming Product, which are governed by Article 11 or disputes related to Late Deliveries, which is governed by Section 5.3. [**].

26.3 Additional Approvals . The principles governing additional approvals, and related cooperation, are set forth in Section 14.4 of the License Agreement.

26.4 Waiver and Non-Exclusion of Remedies . A Party’s failure to enforce, at any time or for any period of time, any provision of this Commercial Supply Agreement, or to exercise any right or remedy will not constitute a waiver of that provision, right or remedy or prevent such Party from enforcing any or all provisions of this Commercial Supply Agreement and exercising any rights or remedies. To be effective any waiver must be in writing. The rights and remedies provided in this Commercial Supply Agreement are cumulative and do not exclude any other right or remedy provided by law or otherwise available except as expressly set forth in this Commercial Supply Agreement.

26.5 Notices .

(a) Notice Requirements . Any notice, request, demand, waiver, consent, approval or other communication permitted or required under this Commercial Supply Agreement must be in writing, must refer specifically to this Commercial Supply Agreement and will be deemed given only if delivered by hand, sent by facsimile transmission (with transmission confirmed), by PDF e-mail attachment with digital return receipt, or by internationally recognized overnight delivery service that maintains records of delivery, addressed to the Parties at their respective addresses specified in Section 26.5(b) or to such other address as the Party to whom notice is to be given may have provided to the other Party in accordance with this Section 26.5 . Such Notice will be deemed to have been given as of the date delivered by hand, transmitted by facsimile (with transmission confirmed) or by PDF e-mail attached with digital return receipt, or on the second Business Day (at the place of delivery) after deposit with an internationally recognized overnight delivery service. This Section 26.5 is not intended to govern the day-to-day

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

business communications necessary between the Parties in performing their obligations under the terms of this Commercial Supply Agreement.

(b) Address for Notice .

For Ironwood:

Ironwood Pharmaceuticals, Inc.

301 Binney Street

Cambridge, MA 02142

United States of America

Attention: Chief Legal Officer

Fax: +1 [ **]

E-mail: [ **]

With a copy to:

Morgan, Lewis & Bockius LLP

502 Carnegie Center

Princeton, NJ 08540

United States of America

Attention: David G. Glazer, Esq.

Fax: +1 (609) 919-6624

E-mail: david.glazer@morganlewis.com

For AstraZeneca:

AstraZeneca Pharmaceuticals L.P.

1800 Concord Pike

Wilmington, DE 19803

Attn: Richard J. Kenny, Esq.

Fax: + 1 [ **]

E-mail: [ **]

With a copy to:

Covington & Burling LLP

One Front Street

San Francisco, CA 94111-5356

Attention: Amy L. Toro, Esq.

Fax: +1 (415) 955-6586

E-mail: atoro@cov.com

26.6 Entire Agreement. This Commercial Supply Agreement, the License Agreement, and the Transitional Services Agreement constitute the entire agreement between the Parties with respect to the subject matter herein. This Commercial Supply Agreement supersedes all prior agreements, whether written or oral, with respect to the subject matter of this Commercial

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

Supply Agreement, including, but only as of and subject to the occurrence of the Effective Date, that certain [ **]. Each Party confirms that it is not relying on any representations, warranties or covenants of the other Party except as specifically set out in this Commercial Supply Agreement. Nothing in this Commercial Supply Agreement is intended to limit or exclude any liability for fraud. All Schedules referred to in this Commercial Supply Agreement are intended to be and are hereby specifically incorporated into and made a part of this Commercial Supply Agreement. In the event of any inconsistency between any such Schedules and this Commercial Supply Agreement, the terms of this Commercial Supply Agreement will govern.

26.7 Language. All meetings between the Parties will be conducted in English. All documents prepared by one Party hereunder for the purpose of distribution to the other Party (or that are required to be provided to the other Party under this Commercial Supply Agreement) shall be written in English except as otherwise agreed by the Parties in writing. The Parties shall coordinate regarding any other translations required in order to conduct activities with respect to the Finished Product hereunder in order to avoid duplicative effort and expense. Notwithstanding the foregoing, in case of non-English language documents that were prepared by way of a certified translation of an English language document, provision of the original English language document (and upon request, the applicable certification) shall constitute a substitute for translation.

26.8 Amendment . Any amendment or modification of this Commercial Supply Agreement must be in writing and signed by authorized representatives of both Parties.

26.9 Assignment . Neither Party may assign its rights or delegate its obligations under this Commercial Supply Agreement, in whole or in part without the prior written consent of the other Party, except that, subject to the other terms of this Commercial Supply Agreement, each Party will always have the right, without such consent, (a) [**], (b) [**], and (c) [**]. [**]. Notwithstanding anything in this Section 26.9 , [**]. Any attempted assignment or delegation in violation of this Section 26.9 will be void.

26.10 No Benefit to Others . The provisions of this Commercial Supply Agreement are for the sole benefit of the Parties and their successors and permitted assigns, and they will not be construed as conferring any rights in any other persons except as otherwise expressly provided in this Commercial Supply Agreement.

26.11 Counterparts . This Commercial Supply Agreement may be executed in any number of counterparts, each of which will be deemed an original and all of which taken together will be deemed to constitute one and the same instrument. An executed signature page of this Commercial Supply Agreement delivered by facsimile transmission, including signatures in a fixed electronic format such as a PDF, will be as effective as an original executed signature page.

26.12 Severability . To the fullest extent permitted by Applicable Law, the Parties waive any provision of law that would render any provision in this Commercial Supply Agreement invalid, illegal or unenforceable in any respect. If any provision of this Commercial Supply Agreement is held to be invalid, illegal or unenforceable, in any respect, then such provision will be given no effect by the Parties and will not form part of this Commercial Supply Agreement. To the fullest extent permitted by Applicable Law and if the rights or obligations of any Party will not be materially and adversely affected, all other provisions of this Commercial Supply Agreement will remain in

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

full force and effect and the Parties will use [ **] to negotiate a provision in replacement of the provision held invalid, illegal or unenforceable that is consistent with Applicable Law and achieves, as nearly as possible, the original intention of the Parties.

26.13 Further Assurance . Each Party will perform all further acts and things and execute and deliver such further documents as may be necessary or as the other Party may reasonably require to implement or give effect to this Commercial Supply Agreement.

26.14 Publicity . The Parties will consult with each other reasonably and in good faith with respect to the text and timing of any subsequent press releases relating to this Commercial Supply Agreement or the activity hereunder prior to the issuance thereof, provided that a Party may not unreasonably withhold consent to such releases, and that either Party may issue such press releases as it determines, based on advice of counsel, are reasonably necessary to comply with laws or regulations or for appropriate market disclosure or which are consistent with information disclosed in prior releases properly made hereunder.

26.15 [**]. [**].

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

IN WITNESS WHEREOF , the Parties have caused this Commercial Supply Agreement to be executed in two counterparts by their respective duly authorized representatives as of the Execution Date.

[ Signature pages follow ]

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

EXECUTION:

SIGNED for and on behalf of
AstraZeneca Pharmaceuticals LP

Signature:	/s/ Stephen Mohr

Name:	Stephen Mohr

Title:	Deputy General Counsel, North America

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

SIGNED for and on behalf of
IRONWOOD PHARMACEUTICALS, INC.

Signature:	/s/ Thomas Graney

Name:	Thomas Graney

Title:	Chief Financial Officer

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

SCHEDULE 1

COST OF GOODS SOLD

“ Cost of Goods Sold ” means, in respect of a Finished Product, as applicable, [ **]. Cost of Goods Sold shall be based on the quantities and presentations of Finished Product described in the Forecast submitted by Ironwood and in effect at the time AstraZeneca updates the Cost of Goods Sold pursuant to this Schedule 1 . The Cost of Goods Sold is subject to adjustment as otherwise set forth herein.

All of the foregoing costs and other amounts shall be determined and allocated in accordance with the applicable Accounting Standards. All amounts included in Cost of Goods Sold (i) may only be included once regardless of whether they fall into more than one of the foregoing categories and (ii) [ **]. It is understood that there is no obligation on AstraZeneca to share its agreements with Third Parties.

Notwithstanding the foregoing, the Cost of Goods Sold for the Finished Products for [ **] are as set forth in the table below. For any other Finished Products, including the Allopurinol Combination Product, the Cost of Goods Sold will be provided [**].

AstraZeneca shall provide Ironwood all reasonable documentation and support for the calculation of Cost of Goods Sold. It is understood that there is no obligation on AstraZeneca to share its agreements with Third Parties in connection with providing such reasonable documentation and support. In the event that Ironwood disputes the calculation in Cost of Goods Sold, such matter shall be handled in accordance with [ **].

[ **].

Base Price

1. Zurampic Product

Year in which Product is Delivered	Zurampic Commercial [(**)]	Zurampic Sample Pack [(**)]
[**]	[**]	[**]
[**]	[**]	[**]
[**]	[**]	[**]

2. Allopurinol Combination Product : [**]

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

SCHEDULE 2

MINIMUM ORDER REQUIREMENTS

1. [**]

2. [**]

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

SCHEDULE 3

PRE-APPROVED MANUFACTURING CHANGES

Ironwood acknowledges and agrees that the following changes, if implemented by AstraZeneca, are approved by Ironwood:

1. Use of [**].

[ **].

2. Use of [**]

[ **] in conjunction with AstraZeneca have embarked [**] will not exceed [**] which includes [**].

[ **]

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

SCHEDULE 4

Forecasting Example

For the sake of clarity, and by way of example only, if, on [ **], a Forecast with the following quantities is submitted for a given SKU:

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Forecast delivered on [**]

[**]

Then, with respect to the forecast delivered in the next month [**], the forecast could be as follows:

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Jan

Forecast delivered on [**]

[**

]

[**

](1)

[**

](1)

[**

](2)

[**

](3)

[**

](4)

[**

](5)

[**

](5)

[**

](5)

[**

](5)

[**

](5)

[**

](5)

[**

](6)

(1) = [**]

(2) = [**]

(3) = [**]

(4) = [**]

(5) = [**]

(6) = [**]

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

SCHEDULE 5

DOCUMENTATION TO ACCOMPANY DELIVERIES

· [**]

Or as otherwise specified in the Quality Assurance Agreement or as mutually agreed

EXHIBIT 31.1

CERTIFICATION PURSUANT

TO RULES 13a-14(a) OR 15d-14(a) UNDER

THE SECURITIES EXCHANGE ACT OF 1934

I, Peter M. Hecht, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Ironwood Pharmaceuticals, Inc. (the “registrant”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 8, 2016

/s/ PETER M. HECHT
Peter M. Hecht
Chief Executive Officer

EXHIBIT 31.2

CERTIFICATION PURSUANT

TO RULES 13a-14(a) OR 15d-14(a) UNDER

THE SECURITIES EXCHANGE ACT OF 1934

I, Thomas Graney, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Ironwood Pharmaceuticals, Inc. (the “registrant”);

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 8, 2016

/s/ THOMAS GRANEY
Thomas Graney
Chief Financial Officer

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Ironwood Pharmaceuticals, Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2016 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Peter M. Hecht, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to my knowledge that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ PETER M. HECHT
Peter M. Hecht
Chief Executive Officer
August 8, 2016

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EXHIBIT 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Ironwood Pharmaceuticals, Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2016 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Thomas Graney, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to my knowledge that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ THOMAS GRANEY
Thomas Graney
Chief Financial Officer
August 8, 2016