RHYTHM PHARMACEUTICALS, INC. 10-Q

Item 1. Financial Statements Rhythm Pharmaceuticals, Inc. Condensed Consolidated Balance Sheets (in thousands, except share data) (Unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, ​ December 31, ​ 2020 2019 ​ ​ ​ ​ ​ ​ ​ Assets ​ ​ ​ ​ ​ ​ Current assets: ​ ​ Cash and cash equivalents ​ $ 67,670 ​ $ 62,294 Short-term investments ​ 134,114 ​ 230,165 Prepaid expenses and other current assets ​ 8,130 ​ 9,945 Total current assets ​ 209,914 ​ 302,404 Property and equipment, net ​ 3,289 ​ 3,671 Right-of-use asset ​ ​ 1,871 ​ ​ 2,045 Restricted cash ​ 403 ​ 403 Total assets ​ $ 215,477 ​ $ 308,523 Liabilities and stockholders’ equity ​ ​ Current liabilities: ​ ​ Accounts payable ​ $ 3,793 ​ $ 10,415 Accrued expenses and other current liabilities ​ 11,536 ​ 13,530 Lease liability ​ 519 ​ 472 Total current liabilities ​ 15,848 ​ 24,417 Long-term liabilities: ​ ​ Lease liability ​ 2,692 ​ 3,086 Total liabilities ​ 18,540 ​ 27,503 Commitments and contingencies ​ ​ Stockholders’ equity: ​ ​ Preferred Stock, $ 0.001 par value: 10,000,000 shares authorized; no shares issued and outstanding at September 30, 2020 and December 31, 2019 ​ — ​ — Common stock, $ 0.001 par value: 120,000,000 shares authorized; 44,204,745 and 43,996,753 shares issued and outstanding at September 30, 2020 and December 31, 2019 , respectively ​ 44 ​ 44 Additional paid-in capital ​ ​ 621,085 ​ ​ 606,307 Accumulated other comprehensive income ​ ​ 238 ​ ​ — Accumulated deficit ​ ( 424,430 ) ​ ( 325,331 ) Total stockholders’ equity ​ 196,937 ​ 281,020 Total liabilities and stockholders’ equity ​ $ 215,477 ​ $ 308,523 The accompanying notes are an integral part of these condensed consolidated financial statements ​ 3 Table of Contents Rhythm Pharmaceuticals, Inc. Condensed Consolidated Statements of Operations and Comprehensive Loss (in thousands, except share and per share data) (Unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three months ended September 30, ​ Nine months ended September 30, ​ 2020 2019 2020 2019 Operating expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Research and development ​ ​ $ 22,995 ​ $ 26,572 ​ $ 68,496 ​ $ 84,641 Selling, general, and administrative ​ ​ 11,289 ​ 10,535 ​ 33,006 ​ 27,135 Total operating expenses ​ ​ 34,284 ​ 37,107 ​ 101,502 ​ 111,776 Loss from operations ​ ​ ( 34,284 ) ​ ( 37,107 ) ​ ( 101,502 ) ​ ( 111,776 ) Other income (expense): ​ ​ ​ ​ ​ Interest income, net ​ ​ 466 ​ 1,104 ​ 2,403 ​ 4,003 Total other income, net ​ ​ 466 ​ 1,104 ​ 2,403 ​ 4,003 Net loss ​ ​ $ ( 33,818 ) ​ $ ( 36,003 ) ​ $ ( 99,099 ) ​ $ ( 107,773 ) Net loss per share, basic and diluted ​ ​ $ ( 0.77 ) ​ $ ( 1.04 ) ​ $ ( 2.25 ) ​ $ ( 3.13 ) Weighted-average common shares outstanding, basic and diluted ​ ​ 44,142,334 ​ 34,541,765 ​ 44,097,178 ​ 34,470,995 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other comprehensive loss: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net loss ​ ​ $ ( 33,818 ) ​ $ ( 36,003 ) ​ $ ( 99,099 ) ​ $ ( 107,773 ) Unrealized (loss) gain on marketable securities ​ ​ ( 392 ) ​ — ​ 238 ​ — Comprehensive loss ​ ​ $ ( 34,210 ) ​ $ ( 36,003 ) ​ $ ( 98,861 ) ​ $ ( 107,773 ) The accompanying notes are an integral part of these condensed consolidated financial statements ​ ​ ​ ​ 4 Table of Contents Rhythm Pharmaceuticals, Inc. Condensed Consolidated Statements of Stockholders’ Equity (in thousands, except share data) (Unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ Other ​ ​ ​ ​ Total ​ ​ Common Stock ​ Paid-In ​ Comprehensive ​ Accumulated ​ Stockholders’ ​ Shares Amount Capital ​ Income ​ Deficit Equity ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance at December 31, 2019 43,996,753 ​ $ 44 $ 606,307 ​ $ — $ ( 325,331 ) $ 281,020 Stock compensation expense ​ — ​ — ​ 5,475 ​ ​ — ​ — ​ 5,475 Issuance of common stock in connection with ESPP ​ 18,673 ​ ​ — ​ ​ 324 ​ ​ — ​ ​ — ​ ​ 324 Issuance of common stock in connection with exercise of stock options ​ 72,964 ​ ​ — ​ ​ 383 ​ ​ — ​ ​ — ​ ​ 383 Unrealized gain on marketable securities — ​ — ​ — ​ ​ 63 ​ — ​ 63 Net loss — ​ — ​ — ​ ​ — ​ ( 34,164 ) ​ ( 34,164 ) Balance at March 31, 2020 ​ 44,088,390 ​ ​ 44 ​ ​ 612,489 ​ ​ 63 ​ ​ ( 359,495 ) ​ ​ 253,101 Stock compensation expense ​ — ​ ​ — ​ ​ 3,028 ​ ​ — ​ ​ — ​ ​ 3,028 Issuance of common stock in connection with exercise of stock options ​ 27,222 ​ ​ — ​ ​ 174 ​ ​ — ​ ​ — ​ ​ 174 Unrealized gain on marketable securities ​ — ​ ​ — ​ ​ — ​ ​ 567 ​ ​ — ​ ​ 567 Net loss ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 31,117 ) ​ ​ ( 31,117 ) Balance at June 30, 2020 ​ 44,115,612 ​ ​ 44 ​ ​ 615,691 ​ ​ 630 ​ ​ ( 390,612 ) ​ ​ 225,753 Stock compensation expense ​ — ​ — ​ 4,695 ​ ​ — ​ — ​ 4,695 Issuance of common stock in connection with ESPP ​ 11,379 ​ ​ — ​ ​ 198 ​ ​ — ​ ​ — ​ ​ 198 Issuance of common stock in connection with exercise of stock options and vesting of restricted stock units ​ 77,754 ​ ​ — ​ ​ 501 ​ ​ — ​ ​ — ​ ​ 501 Unrealized loss on marketable securities ​ — ​ — ​ — ​ ​ ( 392 ) ​ — ​ ( 392 ) Net loss ​ — ​ — ​ — ​ ​ — ​ ( 33,818 ) ​ ( 33,818 ) Balance at September 30, 2020 44,204,745 ​ $ 44 $ 621,085 ​ $ 238 $ ( 424,430 ) $ 196,937 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance at December 31, 2018 34,410,725 ​ $ 34 $ 430,824 ​ $ — $ ( 184,602 ) $ 246,256 Stock compensation expense ​ — ​ — ​ 2,644 ​ ​ — ​ — ​ 2,644 Issuance of common stock in connection with ESPP 12,105 ​ — ​ 295 ​ ​ — ​ — ​ 295 Issuance of common stock in connection with exercise of stock options 7,811 ​ — ​ 54 ​ ​ — ​ — ​ 54 Unrealized gain on marketable securities — ​ — ​ 214 ​ ​ — ​ — ​ 214 Net loss — ​ — ​ — ​ ​ — ​ ( 28,974 ) ​ ( 28,974 ) Balance at March 31, 2019 ​ 34,430,641 ​ ​ 34 ​ ​ 434,031 ​ ​ — ​ ​ ( 213,576 ) ​ ​ 220,489 Stock compensation expense ​ — ​ ​ — ​ ​ 3,272 ​ ​ — ​ ​ — ​ ​ 3,272 Issuance of common stock in connection with exercise of stock options ​ 66,901 ​ ​ — ​ ​ 465 ​ ​ — ​ ​ — ​ ​ 465 Unrealized gain on marketable securities ​ — ​ ​ — ​ ​ 37 ​ ​ — ​ ​ — ​ ​ 37 Net loss ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 42,796 ) ​ ​ ( 42,796 ) Balance at June 30, 2019 ​ 34,497,542 ​ ​ 34 ​ ​ 437,805 ​ ​ — ​ ​ ( 256,372 ) ​ ​ 181,467 Stock compensation expense ​ — ​ — ​ 3,035 ​ ​ — ​ — ​ 3,035 Issuance of common stock in connection with ESPP ​ 13,766 ​ ​ — ​ ​ 263 ​ ​ — ​ ​ — ​ ​ 263 Issuance of common stock in connection with exercise of stock options ​ 67,256 ​ 1 ​ 433 ​ ​ — ​ — ​ 434 Unrealized loss on marketable securities ​ — ​ — ​ ( 81 ) ​ ​ — ​ — ​ ( 81 ) Net loss ​ — ​ — ​ — ​ ​ — ​ ( 36,003 ) ​ ( 36,003 ) Balance at September 30, 2019 34,578,564 ​ $ 35 $ 441,455 ​ $ — $ ( 292,375 ) $ 149,115 ​ The accompanying notes are an integral part of these condensed consolidated financial statements 5 Table of Contents Rhythm Pharmaceuticals, Inc. Condensed Consolidated Statements of Cash Flows (in thousands) (Unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine months ended September 30, ​ 2020 2019 ​ ​ ​ ​ ​ ​ ​ Operating activities ​ ​ ​ ​ ​ ​ Net loss ​ $ ( 99,099 ) ​ $ ( 107,773 ) Adjustments to reconcile net loss to cash used in operating activities: ​ ​ Stock-based compensation expense ​ 13,198 ​ 8,951 Depreciation and amortization ​ 512 ​ 643 Deferred rent expense ​ ( 173 ) ​ 261 Changes in operating assets and liabilities: ​ ​ Prepaid expenses and other current assets ​ 1,092 ​ ( 4,592 ) Tenant improvement allowance ​ — ​ 938 Accounts payable, accrued expenses and other current liabilities ​ ( 8,387 ) ​ 11,043 Net cash used in operating activities ​ ( 92,857 ) ​ ( 90,529 ) Investing activities ​ ​ Purchases of short-term investments ​ ( 53,398 ) ​ ( 110,948 ) Maturities of short-term investments ​ 150,172 ​ 225,490 Purchases of property and equipment ​ ( 130 ) ​ ( 3,385 ) Net cash provided by investing activities ​ 96,644 ​ 111,157 Financing activities ​ ​ Proceeds from the exercise of stock options ​ 1,067 ​ 953 Proceeds from issuance of common stock from ESPP ​ 522 ​ 558 Net cash provided by financing activities ​ 1,589 ​ 1,511 Net increase in cash, cash equivalents and restricted cash ​ 5,376 ​ 22,139 Cash, cash equivalents and restricted cash at beginning of period ​ 62,697 ​ 49,943 Cash, cash equivalents and restricted cash at end of period ​ $ 68,073 ​ $ 72,082 The accompanying notes are an integral part of these condensed consolidated financial statements ​ 6 Table of Contents Rhythm Pharmaceuticals, Inc. Notes to Unaudited Condensed Consolidated Financial Statements (In thousands, except share and per share information) 1. Nature of Business Rhythm Pharmaceuticals, Inc., or the Company, is a late-stage biopharmaceutical company focused on the development and commercialization of therapeutics for the treatment of rare genetic disorders which are characterized by early-onset, severe obesity and an insatiable hunger or hyperphagia. The Company’s lead product candidate is setmelanotide, a potent melanocortin-4 receptor, or MC4R, agonist for the treatment of rare genetic disorders of obesity. The Company believes setmelanotide, for which it has exclusive worldwide rights, has the potential to restore dysfunctional MC4R signaling due to impaired MC4R pathway function. MC4R pathway deficiencies result in the disruption of satiety signals and energy homeostasis in the body, which, in turn, leads to intense feelings of hunger and to obesity. The Company’s development efforts are initially focused on obesity related to several single gene-related, or monogenic, MC4R pathway deficiencies: pro-opiomelanocortin, or POMC, deficiency obesity; leptin receptor, or LEPR, deficiency obesity; Bardet-Biedl syndrome, or BBS; Alström syndrome; POMC or LEPR heterozygous deficiency obesity; steroid receptor coactivator 1, or SRC1, deficiency obesity; SH2B adapter protein 1, or SH2B1, deficiency obesity; MC4R deficiency obesity and Smith-Magenis syndrome, as well as additional disorders as part of investigator-initiated protocols. Currently, there are no effective or approved treatments for these MC4R pathway-related disorders. The Company believes that the MC4R pathway is a compelling target for treating these genetic disorders because of its critical role in regulating appetite and weight by promoting satiety and weight control, and that peptide therapeutics are uniquely suited for activating this target. The Company has also acquired exclusive, worldwide rights from Takeda Pharmaceutical Company Limited, or Takeda, to develop and commercialize T-3525770, now RM-853. RM-853 is a potent, orally available ghrelin o-acyltransferase inhibitor currently in preclinical development. The Company is subject to risks and uncertainties common to late-stage companies in the biotechnology industry, including but not limited to, risks associated with completing preclinical studies and clinical trials, receiving regulatory approvals for product candidates, development by competitors of new biopharmaceutical products, dependence on key personnel, protection of proprietary technology, compliance with government regulations and the ability to secure additional capital to fund operations. Product candidates currently under development will require significant additional research and development efforts, including preclinical and clinical testing and regulatory approval, prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel and infrastructure and extensive compliance-reporting capabilities. Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will realize revenue from product sales. Corporate Reorganization The Company is a Delaware corporation organized in February 2013 under the name Rhythm Metabolic, Inc., and as of October 2015, under the name Rhythm Pharmaceuticals, Inc. Prior to its organization and a corporate reorganization, the Company was part of Rhythm Pharmaceuticals, Inc., a Delaware corporation which was organized in November 2008 and which commenced active operations in 2010. Liquidity The Company has incurred operating losses and negative cash flows from operations since inception. 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 7 Table of Contents 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 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. There is no guarantee that additional equity or other financings will be available to the Company on acceptable terms, or at all. If the Company fails to obtain additional funding when needed, the Company would be forced to scale back, terminate its operations or seek to merge with or be acquired by another company. Management believes that the Company's existing cash resources will be sufficient to fund the Company's operations through at least the end of 2021. 2. Summary of Significant Accounting Policies Basis of Presentation The Company's unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States, or GAAP, and the applicable rules and regulations of the Securities and Exchange Commission, or SEC, regarding interim financial reporting. Any reference in these notes to applicable guidance is meant to refer to the authoritative United States generally accepted accounting principles as found in the Accounting Standards Codification, or ASC, and Accounting Standards Updates, or ASU, of the Financial Accounting Standards Board, or FASB. 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 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 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 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. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. 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. 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. Significant 8 Table of Contents 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. Changes in estimates are recorded in the period in which they become known. Actual results could differ materially from those estimates. Principles of Consolidation The consolidated financial statements include the accounts of Rhythm Pharmaceuticals, Inc. and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. Off-Balance Sheet Risk and Concentrations of Credit Risk Financial instruments, which potentially subject the Company to significant concentration of credit risk, consist primarily of cash and cash equivalents and short-term investments, which are maintained at two federally insured financial institutions. The deposits held at these two institutions are in excess of federally insured limits. The Company has not experienced any losses in such accounts and management believes that the Company is not exposed to significant credit risk due to the financial position of the depository institutions in which those deposits are held. The Company has no off-balance sheet risk, such as foreign exchange contracts, option contracts, or other foreign hedging arrangements. Segment Information Operating segments are defined as components of an entity about which separate discrete information is available for evaluation by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The Company considers its chief executive officer, or CEO, as its chief operating decision maker. The Company and the CEO view the Company’s operations and manages its business in one operating segment operating exclusively in the United States. Fair Value Measurements Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Financial assets and liabilities carried at fair value are classified and disclosed in one of the following three categories: Level 1 — Quoted market prices in active markets for identical assets or liabilities. ​ Level 2 — Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. ​ 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 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 September 30, 2020 and December 31, 2019, respectively. Net Loss Per Share Basic net loss per share is computed by dividing the net loss by the weighted average number of common shares outstanding during the period, without consideration of potential dilutive securities. Diluted net loss per common share is 9 Table of Contents computed by adjusting the weighted average shares outstanding for the potential dilutive effects of common stock equivalents outstanding during the period calculated in accordance with the treasury stock method. For purposes of the diluted net loss per share calculation, stock options and restricted stock units are considered to be common stock equivalents but have been excluded from the calculation of diluted net loss per share, as their effect would be anti-dilutive for all periods presented. Therefore, basic and diluted net loss per share were the same for all periods presented. 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, ​ 2020 2019 Stock options ​ ​ ​ 5,096,252 ​ ​ 3,594,830 Restricted stock units ​ ​ 179,662 ​ — Potential common shares ​ ​ ​ 5,275,914 ​ ​ 3,594,830 ​ Subsequent Events The Company considers events or transactions that occur after the balance sheet date but prior to the issuance of the financial statements to provide additional evidence for certain estimates or to identify matters that require additional disclosure. Subsequent events have been evaluated as required. Emerging Growth Company Status The Company is an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act, or JOBS Act, and may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies. The Company may take advantage of these exemptions until the Company ceases to be an emerging growth company. The Company would cease to be an emerging growth company if it has more than $1.07 billion in annual revenue, at the end of its fiscal year when it had more than $700.0 million in market value of its stock held by non-affiliates as of the last business day of the its most recently completed second fiscal quarter (and it has been a public company for at least 12 months, and has filed one Annual Report on Form 10-K), or it issues more than $1.0 billion of non-convertible debt securities over a three-year period. Even after the Company no longer qualifies as an emerging growth company, the Company may still qualify as a “smaller reporting company” if the market value of its common stock held by non-affiliates is below $250 million (or below $700 million if its annual revenue is less than $100 million) as of the last business day of its second fiscal quarter in any given year, which would allow the Company to continue to take advantage of certain scaled disclosure requirements. Because the market value of the Company’s common stock held by non-affiliates exceeded $700.0 million as of June 30, 2020, the Company will have been public for more than one year and it has filed at least one Annual Report, the Company will cease to be an emerging growth company and would no longer qualify as a smaller reporting company as of December 31, 2020. As a result, beginning with the Company’s Annual Report on Form 10-K for the year ending December 31, 2020, the Company will be subject to certain requirements that apply to other public companies but did not previously apply to the Company due to its status as an emerging growth company, including the provisions of Section 404(b) of the Sarbanes-Oxley Act, which require that the Company’s independent registered public accounting firm provides an attestation report on the effectiveness of the Company’s internal control over financial reporting. Section 107 of the Jump-Start Our Business Startups Act, the JOBS Act, provides that an emerging growth company can take advantage of the extended transition period afforded by the JOBS Act for the implementation of new or revised accounting standards. The Company elected to not take advantage of the extended transition period afforded by the JOBS Act for the implementation of new or revised accounting standards, and as a result, will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. 10 Table of Contents Application of New or Revised Accounting Standards From time to time, new accounting pronouncements are issued by the FASB and adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on its financial position or results of operations upon adoption. In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses-Measurement of Credit Losses on Financial Instruments , which has been subsequently amended by ASU No. 2018-19, ASU No. 2019-04, ASU No. 2019-05, ASU No. 2019-10, ASU No. 2019-11 and ASU No. 2020-03, or ASU 2016-13. The provisions of ASU 2016-13 modify the impairment model to utilize an expected loss methodology in place of the currently used incurred loss methodology and require a consideration of a broader range of reasonable and supportable information to inform credit loss estimates. As a smaller reporting company, ASU 2016-13 was effective for the Company January 1, 2023. Since the Company will cease to be an emerging growth company and a smaller reporting company as of December 31, 2020, the Company is required to adopt the standard during the fourth quarter of 2020. The Company does not expect the adoption of ASU 2016-13 to have a material impact on the Company’s financial position, results of operations and cash flows. Effective January 1, 2019 the Company adopted FASB ASU 2016-02, Leases (Topic 842) , or ASU 2016-02. ASU 2016-02 requires lessees to recognize a right-of-use, or ROU, asset and lease liability for most lease arrangements. The new standard is effective for annual reporting periods beginning after December 15, 2018. The original guidance required application on a modified retrospective basis with the earliest period presented. In August 2018, the FASB issued ASU 2018-11, Targeted Improvements to ASC 842, which included an option to not restate comparative periods in transition and elect to use the effective date of ASC 842, as the date of initial application of transition, which the Company has elected. In addition, the Company elected the package of practical expedients permitted under the transition guidance within the new standard which allowed it to carry forward the historical lease classification. As a result of the adoption of ASC 842 on January 1, 2019, the Company recorded both an operating lease right-of-use asset of $ 3,265 and a lease liability of $ 3,636 . Additional information and disclosures required by this new standard are contained in Note 5, Right Of Use Asset and Lease Liability. In December 2019, the FASB issued ASU 2019-12, Income Taxes-Simplifying the Accounting for Income Taxes , or ASU 2019-12. ASU 2019-12 eliminates certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The new guidance also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. The standard is effective for annual periods beginning after December 15, 2020 and interim periods within, with early adoption permitted. Adoption of the standard requires certain changes to be made prospectively, with some changes to be made retrospectively. 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. 3. Accrued Expenses Accrued expenses consisted of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, ​ December 31, ​ 2020 2019 Research and development costs ​ $ 6,605 ​ $ 8,059 Professional fees ​ 1,085 ​ 1,439 Payroll related ​ 3,715 ​ 3,655 Other ​ 131 ​ 377 Accrued expenses ​ $ 11,536 ​ $ 13,530 ​ ​ 11 Table of Contents 4. Fair Value of Financial Assets and Liabilities 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. treasury securities and money market funds that invest in U.S. government securities that are valued using quoted market prices. Accordingly, money market funds and government funds are categorized as Level 1. The financial assets valued based on Level 2 inputs consist of corporate debt securities and commercial paper, which consist of investments in highly-rated investment-grade corporations. The following tables present information about the Company's financial assets measured at fair value on a recurring basis and indicate the level of the fair value hierarchy utilized to determine such fair values: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair value Measurements as of ​ ​ September 30, 2020 using: ​ Level 1 Level 2 Level 3 Total Assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash Equivalents: ​ ​ ​ ​ Corporate Debt Securities and Commercial Paper ​ $ — ​ $ 21,249 ​ $ — ​ $ 21,249 U.S. Treasury Securities and Money Market Funds ​ $ 39,657 ​ $ — ​ $ — ​ $ 39,657 Marketable Securities: ​ ​ ​ ​ Corporate Debt Securities and Commercial Paper ​ ​ — ​ ​ 134,114 ​ ​ — ​ ​ 134,114 Total ​ $ 39,657 ​ $ 155,363 ​ $ — ​ $ 195,020 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair value Measurements as of ​ ​ December 31, 2019 using: ​ Level 1 Level 2 Level 3 Total Assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash Equivalents: ​ ​ ​ ​ Corporate Debt Securities and Commercial Paper ​ $ — ​ $ 8,885 ​ $ — ​ $ 8,885 Money Market Funds ​ 53,014 ​ — ​ — ​ 53,014 Marketable Securities: ​ ​ ​ ​ Corporate Debt Securities and Commercial Paper ​ ​ — ​ ​ 230,165 ​ ​ — ​ ​ 230,165 Total ​ $ 53,014 ​ $ 239,050 ​ $ — ​ $ 292,064 ​ Marketable Securities The following tables summarize the Company's marketable securities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, 2020 ​ ​ ​ ​ ​ Gross ​ Gross ​ ​ ​ ​ ​ Amortized ​ Unrealized ​ Unrealized ​ Fair ​ Cost Gains Losses Value Assets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Corporate debt securities and commercial paper (due within 1 year) ​ $ 133,876 ​ $ 238 ​ $ — ​ $ 134,114 ​ ​ $ 133,876 ​ $ 238 ​ $ — ​ $ 134,114 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2019 ​ ​ ​ ​ ​ Gross ​ Gross ​ ​ ​ ​ ​ Amortized ​ Unrealized ​ Unrealized ​ Fair ​ Cost Gains Losses Value Assets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Corporate debt securities and commercial paper (due within 1 year) ​ $ 230,155 ​ $ 54 ​ $ ( 44 ) ​ $ 230,165 ​ ​ $ 230,155 ​ $ 54 ​ $ ( 44 ) ​ $ 230,165 ​ 12 Table of Contents ​ ​ ​ 5. Right Of Use Asset and Lease Liability The Company has a material operating lease for its head office facility and other immaterial operating leases for certain equipment. The Company’s office lease has a remaining lease term of 5 years . The Company measured the lease liability associated with the office lease using a discount rate of 10 % at inception. 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 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. Leases with an initial noncancelable term of twelve months or less that do not include an option to purchase the underlying asset that the Company is reasonably certain to exercise are classified as short-term leases. The Company has elected as an accounting policy to exclude from the consolidated balance sheets a right of use asset and lease liability for short-term leases. Upon adoption of ASC 842, the Company elected the transition relief package, permitted within the standard, pursuant to which the Company did not reassess the classification of existing leases, whether any expired or existing contracts contain a lease, and whether existing leases have any initial direct costs. The Company also elected the practical expedient of not separating lease components from non-lease components for all leases. There was no cumulative-effective adjustment to the opening balance of retained earnings. The Company reviews all material contracts for embedded leases to determine if they have a right-of-use asset. The Company recognizes rent expense on a straight-line basis over the lease period. The depreciable life of assets and leasehold improvement are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise. As a result of the adoption of ASC 842 on January 1, 2019, the Company recorded both an operating lease right-of-use asset of $ 3,265 and a lease liability of $ 3,636 . The standard did not materially impact the consolidated statement of cash flows and had no impact on the consolidated statement of operations. The Company’s office lease includes both lease and non-lease components. Non-lease components relate to real estate taxes, insurance, operating expenses and common area maintenance, which are usually billed at actual amounts incurred proportionate to the Company’s rented square feet of the building. These non-lease components are expensed by the Company as they are incurred and are not included in the measurement of the lease liability. The Company’s corporate headquarters is located in Boston, Massachusetts. This facility houses the Company’s research, clinical, regulatory, commercial and administrative personnel. The Company’s lease agreement commenced May 2019 and has a term of six years with a five-year renewal option to extend the lease. 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 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. ​ 13 Table of Contents 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 Remainder of 2020 ​ $ 199 2021 ​ 802 2022 ​ 818 2023 ​ ​ 834 2024 ​ ​ 851 Thereafter ​ 502 Total operating lease payments ​ ​ 4,006 Less: imputed interest ​ ​ 795 Total operating lease liability ​ $ 3,211 ​ ​ 6. Common Stock On October 18, 2019 the Company completed a public offering of 9,324,324 shares of common stock at an offering price of $ 18.50 per share, which included the exercise in full by the underwriters of their option to purchase up to 1,216,216 additional shares of common stock. 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, would step down from his roles with the Company. Dr. 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. In connection with the above announcement, the Company and Dr. Gottesdiener entered into a separation agreement which entitles Dr. Gottesdiener to certain severance payments and benefits as set forth therein. The Company modified certain equity awards held by Dr. Gottesdiener. The modification included the continuation of vesting of stock options through the end of December 31, 2020 and an extension of the post-termination exercise period for vested options from 90 days to up to two years . In connection with this modification, the Company recorded an incremental compensation charge of $ 2,811 during the three months ended March 31, 2020. On July 20, 2020, the Board of Directors of the Company appointed David P. Meeker, M.D. as the President and Chief Executive Officer of the Company. 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. ​ 7. 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. 14 Table of Contents