What changed in this filing

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Item 1. Financial Statements

2020-11-02 compared with 2020-08-03 · 52 added, 48 removed, 289 unchanged (26% of the section changed)

3 unchanged sentences

(in thousands, except share data)

September 30,

Current assets:

19 unchanged sentences

10,000,000 shares authorized;

no shares issued and outstanding at June 30, 2020 and December 31, 2019

no shares issued and outstanding at September 30, 2020 and December 31, 2019

Common stock, $ 0.001 par value:

120,000,000 shares authorized;

44,115,612 and 43,996,753 shares issued and outstanding at June 30, 2020 and December 31, 2019 , respectively

44,204,745 and 43,996,753 shares issued and outstanding at September 30, 2020 and December 31, 2019 , respectively

Additional paid-in capital

7 unchanged sentences

(in thousands, except share and per share data)

Three months ended June 30,

Six months ended June 30,

Three months ended September 30,

Nine months ended September 30,

Operating expenses:

9 unchanged sentences

Other comprehensive loss:

Unrealized gain on marketable securities

Unrealized (loss) gain on marketable securities

Comprehensive loss

15 unchanged sentences

Balance at June 30, 2020

Stock compensation expense

Issuance of common stock in connection with ESPP

Issuance of common stock in connection with exercise of stock options and vesting of restricted stock units

Unrealized loss on marketable securities

Balance at September 30, 2020

Balance at December 31, 2018

8 unchanged sentences

Balance at June 30, 2019

Stock compensation expense

Issuance of common stock in connection with ESPP

Issuance of common stock in connection with exercise of stock options

Unrealized loss on marketable securities

Balance at September 30, 2019

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

2 unchanged sentences

(in thousands)

Six months ended June 30,

Nine months ended September 30,

Operating activities

2 unchanged sentences

Depreciation and amortization

Non-cash rent expense

Deferred rent expense

Changes in operating assets and liabilities:

Prepaid expenses and other current assets

Tenant improvement allowance

Accounts payable, accrued expenses and other current liabilities

9 unchanged sentences

Net cash provided by financing activities

Net (decrease) increase in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash at beginning of year

Cash, cash equivalents and restricted cash at end of year

Net increase in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash at beginning of period

Cash, cash equivalents and restricted cash at end of period

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

28 unchanged sentences

The Company has incurred operating losses and negative cash flows from operations since inception.

As of June 30, 2020, the Company had an accumulated deficit of $ 390,612 .

As of September 30, 2020, the Company had an accumulated deficit of $ 424,430 .

The Company has primarily funded these losses through the proceeds from the sales of common and preferred stock as well as capital contributions received from the former parent company, Rhythm Holdings LLC.

To date, the Company has no product revenue and management expects

operating losses to continue for the foreseeable future.

To date, the Company has no product revenue and management

expects operating losses to continue for the foreseeable future.

The Company has devoted substantially all of its resources to its drug development efforts, comprising of research and development, manufacturing, conducting clinical trials for its product candidates, protecting its intellectual property, pre-commercialization activities and general and administrative functions relating to these operations.

The future success of the Company is dependent on its ability to develop its product candidates and ultimately upon its ability to attain profitable operations.

At June 30, 2020, the Company had $ 228,626 of cash and cash equivalents and short-term investments on hand.

At September 30, 2020, the Company had $ 201,784 of cash and cash equivalents and short-term investments on hand.

In the future, the Company will be dependent on obtaining funding from third parties, such as proceeds from the issuance of debt, sale of equity, and funded research and development programs, to maintain the Company's operations and meet the Company's obligations.

7 unchanged sentences

As permitted under these rules, certain footnotes or other financial information that are normally required by GAAP have been condensed or omitted.

The accompanying interim balance sheet as of June 30, 2020, the statements of operations and comprehensive loss for the three and six months ended June 30, 2020 and 2019, the statement of stockholders equity and the statement of cash flows for the six months ended June 30, 2020 and 2019 and the related footnote disclosures are unaudited.

The accompanying interim balance sheet as of September 30, 2020, the statements of operations and comprehensive loss for the three and nine months ended September 30, 2020 and 2019, the statement of stockholders equity and the statement of cash flows for the nine months ended September 30, 2020 and 2019 and the related footnote disclosures are unaudited.

In management's opinion, the unaudited interim financial statements have been prepared on the same basis as the audited financial statements as of and for the year ended December 31, 2019 and include all adjustments, which are all normal recurring adjustments, necessary for the fair presentation of the interim financial statements.

The results for the six months ended June 30, 2020 are not necessarily indicative of the results expected for the full fiscal year, any other interim periods, or any future year or period.

The results for the nine months ended September 30, 2020 are not necessarily indicative of the results expected for the full fiscal year, any other interim periods, or any future year or period.

The accompanying unaudited condensed consolidated financial statements reflect the application of certain significant accounting policies as described below and elsewhere in these notes to the unaudited condensed consolidated financial statements.

As of June 30, 2020, there have been no material changes in the Company's significant accounting policies from those that were disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

Certain amounts totaling $ 63 in the consolidated balance sheet as of March 31, 2020 and the consolidated statement of stockholders’ equity for the three months ended March 31, 2020, related to unrealized gains on marketable securities, have been reclassified from additional paid-in capital to accumulated other comprehensive income to conform to the current period presentation.

As of September 30, 2020, there have been no material changes in the Company's significant accounting policies from those that were disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

Certain amounts totaling $ 63 in the consolidated statement of stockholders’ equity for the three months ended March 31, 2020, related to unrealized gains on marketable securities, have been reclassified from additional paid-in capital to accumulated other comprehensive income to conform to the current period presentation.

This reclassification had no impact on the previously reported results of operations or cash flows for the three months ended March 31, 2020.

2 unchanged sentences

The Company bases its estimates on historical experience and other market-specific or other relevant assumptions that it believes to be reasonable under the circumstances.

assumptions do not turn out to be substantially accurate, even if such assumptions are reasonable when made.

Significant estimates relied upon in preparing these financial statements include accruals related to research and development expenses, assumptions used to record stock-based compensation expense, and the valuation allowance on the Company's deferred tax assets.

This process may result in actual results differing materially from those estimated amounts used in the preparation of the financial statements if these results differ from historical experience, or other assumptions do not turn out to be substantially accurate, even if such assumptions are reasonable when made.

estimates relied upon in preparing these financial statements include accruals related to research and development expenses, assumptions used to record stock-based compensation expense, and the valuation allowance on the Company's deferred tax assets.

Estimates are periodically reviewed in light of changes in circumstances, facts and experience.

22 unchanged sentences

Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The Company’s cash equivalents and marketable securities at June 30, 2020 and December 31, 2019 were carried at fair value, determined according to the fair value hierarchy.

The Company’s cash equivalents and marketable securities at September 30, 2020 and December 31, 2019 were carried at fair value, determined according to the fair value hierarchy.

See Note 4 for further discussion.

The carrying amounts reflected in the consolidated balance sheets for accounts payable and accrued expenses approximate their fair values due to their short-term maturities at June 30, 2020 and December 31, 2019, respectively.

Net Loss Per Share

5 unchanged sentences

The following table includes the potential common shares, presented based on amounts outstanding at each period end, that were excluded from the computation of diluted net loss per share due to their anti-dilutive effect, for the periods indicated:

September 30,

Stock options

40 unchanged sentences

Adoption of the standard requires certain changes to be made prospectively, with some changes to be made retrospectively.

The Company is currently assessing the impact of this standard on its financial condition and results of operations.

The Company does not expect the adoption of ASU 2019-12 to have a material impact on the Company’s financial position, results of operations and cash flows.

Accrued Expenses

Accrued expenses consisted of the following:

September 30,

Research and development costs

3 unchanged sentences

Fair Value of Financial Assets and Liabilities

As of June 30, 2020 and December 31, 2019, the carrying amount of cash and cash equivalents and short-term investments was $ 228,626 and $ 292,459 , respectively, which approximates fair value.

As of September 30, 2020 and December 31, 2019, the carrying amount of cash and cash equivalents and short-term investments was $ 201,784 and $ 292,459 , respectively, which approximates fair value.

Cash and cash equivalents and short-term investments includes investments in U.S.

5 unchanged sentences

Fair value Measurements as of

June 30, 2020 using:

September 30, 2020 using:

Cash Equivalents:

12 unchanged sentences

The following tables summarize the Company's marketable securities:

June 30, 2020

September 30, 2020

Corporate debt securities and commercial paper (due within 1 year)

6 unchanged sentences

The Company estimated the incremental borrowing rate for the leased asset based on a range of comparable interest rates the Company would incur to borrow an amount equal to the lease payments on a collateralized basis over a similar term in a similar economic environment.

As of June 30, 2020, the Company has not entered into any lease arrangements classified as a finance lease.

As of September 30, 2020, the Company has not entered into any lease arrangements classified as a finance lease.

Under ASC 842, the Company determines, at the inception of the contract, whether the contract is or contains a lease based on whether the contract provides the Company the right to control the use of a physically distinct asset or substantially all of the capacity of an asset.

16 unchanged sentences

As of January 1, 2019, the Company has not included the five-year renewal option to extend the lease in its measurement of the ROU asset or lease liability.

Rent expense, or operating lease costs, for the three and six months ended June 30, 2020 and 2019, was $ 138 , $ 177 , $ 276 and $ 353 , respectively.

Supplemental cash flow information related to the Company’s lease for the six months ended June 30, 2020, includes cash payments of $ 390 used in the measurement of its operating lease liability.

The following table presents the maturities of the Company’s operating lease liability related to office space as of June 30, 2020, all of which is under a non-cancellable operating lease:

Rent expense, or operating lease costs, for the three and nine months ended September 30, 2020 and 2019, was $ 138 , $ 138 , $ 414 and $ 491 , respectively.

Supplemental cash flow information related to the Company’s lease for the nine months ended September 30, 2020, includes cash payments of $ 587 used in the measurement of its operating lease liability.

The following table presents the maturities of the Company’s operating lease liability related to office space as of September 30, 2020, all of which is under a non-cancellable operating lease:

Operating Lease

5 unchanged sentences

The Company received net proceeds of $ 161,352 after deducting underwriting discounts, commissions and offering expenses.

On January 6, 2020, the Company announced that Keith Gottesdiener, M.D., the Company’s Chief Executive Officer and President, will step down from his roles with the Company.

On January 6, 2020, the Company announced that Keith Gottesdiener, M.D., the Company’s Chief Executive Officer and President, would step down from his roles with the Company.

Gottesdiener stepped down from his roles as CEO, President and member of the Board of Directors following the submission of the Company’s NDA filing on March 27, 2020.

6 unchanged sentences

In connection with this modification, the Company recorded an incremental compensation charge of $ 2,811 during the three months ended March 31, 2020.

As of June 30, 2020, an aggregate of 8,605,820 shares of common stock were reserved for future issuance under the Company’s stock plans, including outstanding stock options and restricted stock units to purchase 7,593,448 shares of common stock and 1,012,372 shares available for future grant under the Company’s 2017 Employee Stock Purchase Plan.

Related-Party Transactions

Expenses paid directly to consultants and vendors considered to be related parties amounted to $ 916 , $ 492 , $ 1,776 and $ 1,088 for the three and six months ended June 30, 2020 and 2019, respectively.

Outstanding payments due to these related parties as of June 30, 2020 and December 31, 2019 were $ 228 and $ 264 , respectively, and were included within accounts payable on the balance sheet.

Subsequent Events

Corden Amendment

On July 15, 2020, the Company entered into Amendment No.

2 to Development and Manufacturing Services Agreement, or the Amendment, with Corden Pharma Brussels S.A., or Corden, which amended the Development and Manufacturing and Services Agreement between the Company and Corden (formerly Peptisyntha S.A.), dated as of July 17, 2013.

Pursuant to the terms of the Amendment, Corden has agreed to manufacture setmelanotide for the Company and the Company has agreed to make certain milestone payments to Corden, under a revised milestone schedule, in connection with the completion of testing and validation of batches of setmelanotide and the delivery of those validated batches to the Company.

In addition, pursuant to the Amendment, the Company is no longer obligated to fund certain Corden employees to support Corden’s work in connection with the Agreement.

Chief Executive Officer Appointment

Effective July 20, 2020, the Board of Directors of the Company appointed David P.

On July 20, 2020, the Board of Directors of the Company appointed David P.

as the President and Chief Executive Officer of the Company.

In connection with his appointment as President and Chief Executive Officer, the Company and Dr.

Meeker entered into an offer letter.

The Board has granted Dr.

Meeker a stock option grant under its 2017 Equity Incentive Plan, or the Plan, to purchase 900,000 shares of the Company’s common stock, which will vest as to 25 % of the underlying shares on the first anniversary of Dr.

The Board granted Dr.

Meeker a stock option grant under the Company’s 2017 Equity Incentive Plan to purchase 900,000 shares of the Company’s common stock, which will vest as to 25 % of the underlying shares on the first anniversary of Dr.

Meeker commencing employment with the Company and as to the remaining 75 % of the underlying shares in 12 substantially equal installments upon Dr.

Meeker’s completion of each three full months of service to the Company thereafter.

As of September 30, 2020, an aggregate of 8,516,687 shares of common stock were reserved for future issuance under the Company’s stock plans, including outstanding stock options and restricted stock units to purchase 7,515,694 shares of common stock and 1,000,993 shares available for future grant under the Company’s 2017 Employee Stock Purchase Plan.

Related-Party Transactions

Expenses paid directly to consultants and vendors considered to be related parties amounted to $ 808 , $ 651 , $ 2,584 and $ 1,739 for the three and nine months ended September 30, 2020 and 2019, respectively.

Outstanding payments due to these related parties as of September 30, 2020 and December 31, 2019 were $ 107 and $ 264 , respectively, and were included within accounts payable on the balance sheet.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements