Acquisitions

12 Months Ended

Dec. 31, 2024

Disclosure Text Block

Acquisitions

3. Acquisitions

In June 2023, the Company completed a tender offer to purchase 98% of the outstanding ordinary shares of VectivBio, a clinical-stage biotechnology company focused on the discovery and development of treatments for severe, rare GI conditions for which there is a significant unmet medical need, at a price per share of $17.00, net to the shareholders of VectivBio in cash, without interest and subject to any applicable withholding taxes (the “VectivBio Acquisition”). In December 2023, the Company completed a squeeze-out merger under Swiss law to acquire all remaining outstanding ordinary shares in cash at a price per share of $17.00, totaling $26.3 million, and VectivBio Holding AG was merged with and into Ironwood Pharmaceuticals GmbH, a wholly-owned subsidiary of Ironwood organized under the laws of Switzerland (the “Squeeze-out Merger”). The aggregate consideration paid by the Company to acquire the shares accepted for payment was approximately $1.2 billion. The Company financed the acquisition through proceeds from the borrowings under the Revolving Credit Agreement (as defined elsewhere below) and cash on hand. As of December 31, 2023, there was no remaining noncontrolling interest in VectivBio.

The total purchase consideration for VectivBio is as follows (in thousands):

Cash consideration paid to selling shareholders (1)	$	1,041,391
Cash consideration paid to settle VectivBio restricted stock units (“RSUs”) and stock options (2)		78,003
Cash consideration paid to settle VectivBio warrants (3)		3,720
Transaction costs		26,270

Fair value of noncontrolling interest (4)		26,218
Total purchase consideration	$	1,175,602

(1) The cash consideration paid to selling shareholders was determined based on the total number of the outstanding ordinary shares of VectivBio (the “VectivBio Shares”) tendered at closing of 61,258,315 at a per share price of $17.00.

(2) The cash consideration paid to settle VectivBio RSUs and stock options issued under VectivBio’s equity incentive plans was determined based on the total number of underlying VectivBio Shares of 8,904,171 at a per share price of $17.00, less the exercise price for stock options.

(3) The cash consideration paid to settle VectivBio warrants was determined based on the total number of VectivBio warrant shares outstanding at close of 324,190 at a per share price of $11.4757 calculated as the per share price of $17.00, less the exercise price of $5.5243 per share.

(4) The fair value of the noncontrolling interest was determined based on the total number of VectivBio Shares outstanding at closing of 1,547,723 at the closing date of the tender offer, using the VectivBio closing share price on June 28, 2023 of $16.94.

The VectivBio Acquisition was accounted for as an asset acquisition under Accounting Standards Codification (“ASC”) Topic 805, Business Combinations, because substantially all of the fair value of the gross assets acquired was concentrated in a single identifiable in-process research and development (“IPR&D”) asset, apraglutide, VectivBio’s lead investigational asset. Apraglutide is a next generation, long-acting synthetic GLP-2 analog being developed for SBS patients who are dependent on PS. The Company recognized the acquired assets and assumed liabilities based on the consideration paid, inclusive of transaction costs, on a relative fair value basis. In accordance with the accounting for asset acquisitions, an entity that acquires IPR&D assets in an asset acquisition follows the guidance in ASC Topic 730, Research and Development, which requires that both tangible and intangible identifiable research and development assets with no alternative future use be allocated a portion of the consideration transferred and recorded as research and development expense at the acquisition date. As a result, the Company recorded approximately $1.1 billion in acquired IPR&D expense related to the apraglutide IPR&D asset during the second quarter of 2023.

The following is the allocation of the purchase consideration based on the relative fair value of assets acquired and liabilities assumed by the Company (in thousands):

Assets acquired
Cash and cash equivalents	$	123,340
Prepaid expenses and other current assets		10,867
Property and equipment		126
Intangible assets		4,100
Acquired in-process research and development		1,095,449
Total assets acquired	$	1,233,882
Liabilities assumed
Current liabilities		42,377
Other liabilities		15,903
Total liabilities assumed	$	58,280
Net assets acquired	$	1,175,602

Acquisition-related expenses include direct and incremental costs incurred in connection with the transaction, including integration-related professional services and employee retention-related benefits. Acquisition-related expenses exclude transaction costs included in the computation of total consideration paid. The Company tracked and disclosed acquisition-related expenses incurred through the end of the second quarter of 2024. For the six months ended June 30, 2024, the Company incurred acquisition related expenses of $3.6 million, of which $1.1 million was included in selling, general, and administrative expenses and $2.5 million was included in restructuring expenses within the Company’s consolidated statement of income (loss). The Company incurred acquisition-related expenses of $55.6 million for the year ended December 31, 2023, of which $25.6 million was included in selling, general and administrative expenses, $15.1 million was included in research and development expense, and $14.9 million was included in restructuring expense within the Company’s consolidated statement of income (loss) for the year ended December 31, 2023.

Intangible assets are comprised of the assembled workforce and are amortized on a straight-line basis over an estimated useful life of five years. The Company recognized $0.8 million of amortization expense during the year ended December 31, 2024. The Company recognized $0.4 million of amortization expense during the period between acquisition date on June 29, 2023 through December 31, 2023. The net carrying value of the assembled workforce at December 31, 2024 is $2.9 million. Future annual amortization expense will be $0.8 million for each of the years ended December 31, 2025 through December 31, 2027 and $0.4 million for the year ending December 31, 2028.