What changed in this filing

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Item 2. Management’s Discussion and Analysis

2020-11-02 compared with 2020-08-03 · 49 added, 43 removed, 216 unchanged (30% of the section changed)

48 unchanged sentences

SRC1 deficiency obesity, SH2B1 deficiency obesity, MC4R deficiency obesity and Smith-Magenis syndrome.

We reported preliminary results in MC4R pathway heterozygous deficiency obesity in March 2019 and expect to report additional data in this indication in 2020.

We also plan to report additional data from one or more of the other Basket Study indications in 2020.

As of June 30, 2020, an aggregate of approximately 465 obese subjects and patients have been treated with setmelanotide in previous and ongoing clinical trials in which setmelanotide demonstrated statistically significant weight loss with good tolerability.

We reported preliminary results in MC4R pathway heterozygous deficiency obesity in March 2019 and expect to report additional data in this indication in early 2021.

We also plan to report additional data from one or more of the other Basket Study indications in early 2021.

As of September 30, 2020, an aggregate of approximately 465 obese subjects and patients have been treated with setmelanotide in previous and ongoing clinical trials in which setmelanotide demonstrated statistically significant weight loss with good tolerability.

We have acquired exclusive, worldwide rights from Takeda Pharmaceutical Company Limited, or Takeda, to develop and commercialize T-3525770, now RM-853.

12 unchanged sentences

If we fail to raise capital or enter into such other arrangements as, and when, needed, we may have to significantly delay, scale back or discontinue the development or commercialization of setmelanotide.

As of June 30, 2020 we had an accumulated deficit of $390.6 million.

Our net losses were $31.1 million, $42.8 million, $65.3 million and $71.8 million for the three and six months ended June 30, 2020 and 2019, respectively.

As of September 30, 2020 we had an accumulated deficit of $424.4 million.

Our net losses were $33.8 million, $36.0 million, $99.1 million and $107.8 million for the three and nine months ended September 30, 2020 and 2019, respectively.

We expect to continue to incur significant expenses and increasing operating losses over the foreseeable future.

5 unchanged sentences

● continue to operate as a public company.

As of June 30, 2020, our existing cash and cash equivalents and short-term investments were approximately $228.6 million.

As of September 30, 2020, our existing cash and cash equivalents and short-term investments were approximately $201.8 million.

We expect that our existing cash and cash equivalents and short-term investments will enable us to fund our operating expenses through at least the end of 2021.

5 unchanged sentences

We are closely monitoring how the spread of COVID-19 is affecting our employees, business, preclinical studies and clinical trials.

In response to the COVID-19 pandemic, we have closed our executive offices with all employees continuing their work outside of our offices and travel has been restricted.

We currently continue to expect to meet disclosed timelines for reporting data from our pivotal Phase 3 trial in BBS and Alström syndrome and our Basket Study.

In response to the COVID-19 pandemic, we have limited access to our executive offices with most employees continuing their work outside of our offices and travel has been restricted.

We currently continue to expect to meet disclosed timelines for reporting data from our pivotal Phase 3 trial in BBS and Alström syndrome.

We have recently updated our timelines on the Basket Study but the changes were unreleated to COVID-19.

We are continuing our regular interactions with the FDA and EMA and based on current information, we do not anticipate COVID-19 to materially affect our regulatory timelines for POMC deficiency obesity or LEPR deficiency obesity.

20 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Research and development summary

21 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Selling, general and administrative summary

8 unchanged sentences

Actual results may differ from these estimates under different assumptions or conditions.

During the three months ended June 30, 2020, there were no significant changes to our critical accounting policies as reported in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019.

During the three months ended September 30, 2020, there were no significant changes to our critical accounting policies as reported in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019.

Results of Operations

Comparison of the three months ended June 30, 2020 and 2019

The following table summarizes our results of operations for the three months ended June 30, 2020 and 2019, together with the changes in those items in dollars and as a percentage:

Comparison of the three months ended September 30, 2020 and 2019

The following table summarizes our results of operations for the three months ended September 30, 2020 and 2019, together with the changes in those items in dollars and as a percentage:

Three Months Ended

September 30,

(in thousands)

10 unchanged sentences

● a decrease of $5.2 million related to our clinical trials associated with the GO-ID genotyping study and the once-weekly formulation study.

Thes studies are nearing or at completion and we have begun to gather and analyze the results from the studies;

These studies were nearing or at completion during the period and we had begun to gather and analyze the results from the studies;

● a decrease of $3.2 million related to translational research and genetic sequencing efforts, as the near-completion of the GO-ID study resulted in lower sequencing volume.

● a decrease of $3.4 million related to purchases of setmelanotide API in 2019 for clinical trials and commercial scale up.

The above decreases were partially offset by:

● an increase of $2.0 million related to a milestone expense associated with the license agreement with Ipsen on filing the NDA for setmelanotide for the treatment of POMC and LEPR deficiency obesities with the FDA;

● an increase of $1.7 million related to our Phase 2 Basket Study clinical trial, as we continue to expand patients and trial sites into this study.

● an increase of $3.6 million related to purchases of setmelanotide API for clinical trials and commercial scale up;

● an increase of $1.0 million related to a milestone expense associated with the license agreement with Ipsen on filing the MMA for setmelanotide for the treatment of POMC and LEPR deficiency obesities with the EMA.

Selling, general and administrative expense.

1 unchanged sentence

The increase was primarily due to the following:

● an increase of $0.5 million in various consulting and professional services related to legal and IT support costs for continued support of the growth in personnel and systems.

● an increase of $1.3 million related to stock compensation expense associated with a grant to our new Chief Executive Officer and other new hire grants during the period, and the modification of certain awards in connection our Chief Commercial Officer’s separation agreement.

The above increase was partially offset by:

● a decrease of $0.3 million related to consulting services associated with disease awareness and unbranded education about rare genetic causes of obesity.

● a decrease of $0.8 million related to consulting services associated with patient engagement, disease awareness and unbranded education about rare genetic causes of obesity.

Net loss decreased by $2.2 million to $33.8 million in 2020, from $36.0 million in 2019.

The decrease in net loss was primarily due to the decrease in research and development expense discussed above.

Comparison of the six months ended June 30, 2020 and 2019

The following table summarizes our results of operations for the six months ended June 30, 2020 and 2019, together with the changes in those items in dollars and as a percentage:

Six Months Ended

Comparison of the nine months ended September 30, 2020 and 2019

The following table summarizes our results of operations for the nine months ended September 30, 2020 and 2019, together with the changes in those items in dollars and as a percentage:

Nine Months Ended

September 30,

(in thousands)

9 unchanged sentences

The decrease was primarily due to the following:

● a decrease of $8.7 million related to our clinical trial associated with the GO-ID genotyping study.

This study is nearing its completion and we have begun to gather and analyze the results from the study;

● a decrease of $5.2 million related to translational research and genetic sequencing efforts, as the near-completion of the GO-ID study resulted in lower sequencing volume;

● a decrease of $2.5 million related to purchases of setmelanotide API in 2019 for clinical trials and commercial scale up.

● a decrease of $16.0 million related to our clinical trial associated with the GO-ID genotyping study, the POMC and LEPR clinical studies and the once-weekly formulation study.

These studies were nearing their completion during the period and we had begun to gather and analyze the results from the studies;

● a decrease of $7.5 million related to translational research, pathway validation and genetic sequencing efforts, as the near-completion of the GO-ID study resulted in lower sequencing volume.

The above decreases were partially offset by:

● an increase of $2.0 million related to a milestone expense associated with the license agreement with Ipsen on filing the NDA with the FDA;

● an increase of $3.0 million related to a milestone expense associated with the license agreement with Ipsen on filing the NDA with the FDA and filing the MAA with the EMA;

● an increase of $2.5 million related to our Phase 2 Basket Study clinical trial, as we continue to expand patients and trial sites into this study;

● an increase of $1.2 million related to purchases of setmelanotide API for clinical trials and commercial scale up.

Selling, general and administrative expense.

1 unchanged sentence

The increase was primarily due to the following:

● a charge of $3.5 million related to the separation agreement and modification of stock options for our former chief executive officer upon his departure on March 27, 2020;

● an increase of $0.8 million related to efforts to drive patient engagement and disease awareness about rare genetic causes of obesity and prepare for the potential commercialization of setmelanotide in the U.S;

● a charge of $4.0 million related to the separation agreements and modification of stock options for our former Chief Executive Officer and Chief Commercial Officer upon their departures;

● an increase of $1.0 million in various consulting and professional services related to legal and IT support costs for continued support of the growth in personnel and systems.

2 unchanged sentences

Liquidity and Capital Resources

As of June 30, 2020, our cash and cash equivalents and short-term investments were approximately $228.6 million.

The following table provides information regarding our cash flows for the six months ended June 30, 2020 and 2019:

Six Months Ended June 30,

As of September 30, 2020, our cash and cash equivalents and short-term investments were approximately $201.8 million.

The following table provides information regarding our cash flows for the nine months ended September 30, 2020 and 2019:

Nine Months Ended September 30,

(in thousands)

3 unchanged sentences

Financing activities

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

Net increase in cash, cash equivalents and restricted cash

Net cash used in operating activities

The use of cash in all periods resulted primarily from our net losses adjusted for non-cash charges and changes in components of working capital.

Net cash used in operating activities was $65.8 million for the six months ended June 30, 2020 and consisted primarily of a net loss of $56.6 million adjusted for non-cash items, which consisted of non-cash stock-based compensation, depreciation and amortization and rent expense.

The change in operating assets and liabilities reflected a total use of cash of approximately $9.3 million from an increase in prepaid expenses and decreases in accounts payables and accrued expenses associated with our CROs, CMOs and consultants due to the timing of payments.

Net cash used in operating activities was $56.9 million for the six months ended June 30, 2019 and consisted primarily of a net loss of $65.1 million adjusted for non-cash items, which consisted of non-cash stock-based compensation, depreciation and amortization and rent expense.

The change in operating assets and liabilities reflected a total use of cash of approximately $4.0 million for an increase in prepaid expenses associated with our CROs and timing of payments offset by an increase of $12.3 million in accounts payables and accrued expenses.

Net cash used in operating activities was $92.9 million for the nine months ended September 30, 2020 and consisted primarily of a net loss of $85.6 million adjusted for non-cash items, which consisted of non-cash stock-based compensation, depreciation and amortization and rent expense.

The change in operating assets and liabilities reflected a total use of cash of approximately $7.3 million from a decrease in prepaid expenses and accounts payables and accrued expenses associated with our CROs, CMOs and consultants due to the timing of payments.

Net cash used in operating activities was $90.5 million for the nine months ended September 30, 2019 and consisted primarily of a net loss of $97.9 million adjusted for non-cash items, which consisted of the non-cash stock-based compensation, depreciation and amortization and rent expense.

The change in operating assets and liabilities reflected a total use of cash of approximately $4.6 million for an increase in prepaid expenses associated with our CROs and CMOs due to the timing of payments offset by an increase of $11.0 million in accounts payables and accrued expenses.

We also received proceeds of $0.9 million from tenant improvement allowances related to our new office space.

Net cash provided by investing activities

Net cash provided by investing activities for the six months ended June 30, 2020 relates to the net maturities of short-term investments.

Net cash provided by investing activities for the six months ended June 30, 2019 relates to the net maturities of short-term investments of $72.8 million, partially offset by $3.1 million of cash used for tenant improvements and new furniture and fixtures related to our new office space.

Net cash provided by investing activities for the nine months ended September 30, 2020 relates to the net maturities of short-term investments.

Net cash provided by investing activities for the nine months ended September 30, 2019 relates to the net maturities of short-term investments of $114.5 million, partially offset by $3.4 million of cash used for tenant improvements and new furniture and fixtures related to our new office space.

Net cash provided by financing activities

Net cash provided by financing activities was $0.9 million for the six months ended June 30, 2020, which represents net proceeds from purchases made under our 2017 Employee Stock Purchase Plan and proceeds from the exercise of stock options.

Net cash provided by financing activities was $0.8 million for the six months ended June 30, 2019, which represents net proceeds from purchases made under our 2017 Employee Stock Purchase Plan and proceeds from the exercise of stock options.

Net cash provided by financing activities was $1.6 million for the nine months ended September 30, 2020, which represents net proceeds from purchases made under our 2017 Employee Stock Purchase Plan and proceeds from the exercise of stock options.

Net cash provided by financing activities was $1.5 million for the nine months ended September 30, 2019, which represents net proceeds from purchases made under our 2017 Employee Stock Purchase Plan and proceeds from the exercise of stock options.

Funding requirements

28 unchanged sentences

Contractual obligations

As of June 30, 2020, there were no material changes to our principal contractual obligations and commitments as reported in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019.

As of September 30, 2020, there were no material changes to our principal contractual obligations and commitments as reported in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019.

Off-Balance Sheet Arrangements

1 unchanged sentence

Quantitative and Qualitative Disclosures About Market Risk

As of June 30, 2020, there were no material changes to our quantitative and qualitative disclosures about market risks as reported in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019.

As of September 30, 2020, there were no material changes to our quantitative and qualitative disclosures about market risks as reported in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019.

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 2. Management’s Discussion and Analysis