What changed in this filing

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Item 1. Financial Statements

2021-11-02 compared with 2021-08-03 · 68 added, 56 removed, 339 unchanged (27% of the section changed)

3 unchanged sentences

(in thousands, except share and per share data)

September 30,

Current assets:

7 unchanged sentences

Restricted cash

Other long-term assets

Liabilities and stockholders’ equity

12 unchanged sentences

10,000,000 shares authorized;

no shares issued and outstanding at June 30, 2021 and December 31, 2020

no shares issued and outstanding at September 30, 2021 and December 31, 2020

Common stock, $ 0.001 par value:

120,000,000 shares authorized;

50,226,739 and 44,235,903 shares issued and outstanding June 30, 2021 and December 31, 2020 , respectively

50,268,312 and 44,235,903 shares issued and outstanding September 30, 2021 and December 31, 2020 , respectively

Additional paid-in capital

5 unchanged sentences

Rhythm Pharmaceuticals, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

Condensed Consolidated Statements of Operations and Comprehensive Loss

(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,

Product revenue, net

5 unchanged sentences

Loss from operations

Other income (expense):

Other income:

Interest income, net

Total other income, net

Income (loss) before taxes

Loss before taxes

Provision for (benefit from) income taxes

Net income (loss)

Net income (loss) per share

Weighted-average common shares outstanding

Other comprehensive income (loss):

Net income (loss)

Net loss per share, basic and diluted

Weighted-average common shares outstanding, basic and diluted

Other comprehensive loss:

Unrealized (loss) gain on marketable securities

Comprehensive income (loss)

Comprehensive loss

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

16 unchanged sentences

Balance at June 30, 2021

Stock compensation expense

Issuance of common stock in connection with ESPP

Issuance of common stock in connection with exercise of stock options

Unrealized gain on marketable securities

Balance at September 30, 2021

Balance at December 31, 2019

8 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

Unrealized loss on marketable securities

Balance at September 30, 2020

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

2 unchanged sentences

(in thousands)

Six months ended June 30,

Nine months ended September 30,

Operating activities

Net income (loss)

Adjustments to reconcile net income (loss) to cash used in operating activities:

Adjustments to reconcile net loss to cash used in operating activities:

Stock-based compensation expense

5 unchanged sentences

Prepaid expenses and other current assets

Other long-term assets

Accounts payable, accrued expenses and other current liabilities

12 unchanged sentences

Net cash provided by financing activities

Net decrease in cash, cash equivalents and restricted cash

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

Cash, cash equivalents and restricted cash at beginning of period

13 unchanged sentences

IMCIVREE also has been approved by the European Commission for the treatment of obesity and the control of hunger associated with genetically confirmed loss-of-function biallelic POMC, including PCSK1, deficiency or biallelic LEPR deficiency in adults and children 6 years of age and above.

IMCIVREE is now commercially available in the United States, and we are pursuing an international strategy to establish access and reimbursement for IMCIVREE in the European Union, or EU.

IMCIVREE is now commercially available in the United States, and we are pursuing an international strategy to establish access and reimbursement for IMCIVREE in the European Union, or EU, and Great Britain.

We also have completed and submitted a supplemental New Drug Application, or sNDA, to the U.S.

Food and Drug Administration or FDA, and a Type II variation marketing authorization application, or MAA, to the EMA for IMCIVREE for the treatment of obesity and control of hunger in adult and pediatric patients 6 years of age and older with Bardet-Biedl syndrome, or BBS, or Alström syndrome.

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.

15 unchanged sentences

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

As of June 30, 2021, the Company had an accumulated deficit of $ 450,966 .

The Company has primarily funded these losses

through the proceeds from the sales of common and preferred stock, asset sales as well as capital contributions received from the former parent company, Rhythm Holdings LLC.

As of September 30, 2021, the Company had an accumulated deficit of $ 486,073 .

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

To date, the Company has minimal product revenue and management expects operating losses to continue for the foreseeable future.

3 unchanged sentences

As the PRV did not have a carrying value, the gain recognized within Other income (loss) was equal to the gross proceeds received, with costs related to the sale of the voucher recorded within selling, general and administrative expenses.

At June 30, 2021, the Company had $ 368,154 of cash and cash equivalents and short-term investments on hand.

At September 30, 2021, the Company had $ 328,354 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, product sales 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, 2021, the statements of operations and comprehensive income (loss) for the three and six months ended June 30, 2021 and 2020, the statements of stockholders equity for the three and six months ended June 30, 2021 and 2020 and the statements of cash flows for the six months ended June 30, 2021 and 2020 and the related footnote disclosures are unaudited.

The accompanying interim balance sheet as of September 30, 2021, the statements of operations and comprehensive income (loss) for the three and nine months ended September 30, 2021 and 2020, the statements of stockholders equity for the three and nine months ended September 30, 2021 and 2020 and the statements of cash flows for the nine months ended September 30, 2021 and 2020 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, 2020 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, 2021 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, 2021 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, 2021, 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, 2020.

As of September 30, 2021, 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, 2020.

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.

2 unchanged sentences

There are many uncertainties regarding the COVID-19 pandemic, and the Company is closely monitoring the impact of the pandemic on all aspects of its business, including how the pandemic will impact its patients, employees, suppliers, vendors, business partners and distribution channels.

While the pandemic did not materially affect the Company's financial results and business operations for the six months ended June 30, 2021, the Company is unable to predict the impact that COVID-19 will have on its financial position and operating results in future periods due to numerous uncertainties.

While the pandemic did not materially affect the Company's financial results and business operations for the nine months ended September 30, 2021, the Company is unable to predict the impact that COVID-19 will have on its financial position and operating results in future periods due to numerous uncertainties.

The Company will continue to assess the evolving impact of the COVID-19 pandemic and will make adjustments to its operations as necessary.

57 unchanged sentences

These reserves are recorded in the same period the related revenue is recognized, resulting in a reduction of product revenue and the establishment of a liability that is included in accrued expenses on our consolidated balance sheet.

For Medicare, we also

estimate the number of patients in the prescription drug coverage gap for whom we will owe an additional liability under the Medicare Part D program.

For Medicare, we also estimate the number of patients in the prescription drug coverage gap for whom we will owe an additional liability under the Medicare Part D program.

On a quarterly basis, we update our estimates and record any adjustments in the period that we identify the adjustments.

12 unchanged sentences

The estimate is recorded as a reduction of revenue in the same period the related revenue is recognized.

During the three and six months ended June 30, 2021, we recorded product revenue, net, of $ 274 and $ 309 .

The table that summarizes balances and activity in each of the product revenue allowance and reserve categories has not been included for the three and six months ended June 30, 2021 due to the immateriality of the revenue recognized during the period.

During the three and nine months ended September 30, 2021, we recorded product revenue, net, of $ 1,028 and $ 1,337 .

The table that summarizes balances and activity in each of the product revenue allowance and reserve categories has not been included for the three and nine months ended September 30, 2021 due to the immateriality of the revenue recognized during the periods.

Cost of Product Sales

1 unchanged sentence

Subsequent to receiving FDA approval in November 2020, the Company has capitalized a nominal amount of inventory related costs that were incurred subsequent to FDA approval.

At June 30, 2021, the Company had $ 28 of inventory recorded as a component of other current assets on the condensed consolidated balance sheet.

At September 30, 2021, the Company had $ 95 of inventory recorded as a component of other current assets on the condensed consolidated balance sheet.

Cost of product sales will consist of manufacturing costs, transportation and freight, amortization of capitalized intangibles, royalty payments and indirect overhead costs associated with the manufacturing and distribution of IMCIVREE.

5 unchanged sentences

The Company analyzes accounts that are past due for collectability, and periodically evaluates the creditworthiness of its customers.

As of June 30, 2021, we determined an allowance for doubtful accounts was not required based upon our review of contractual payment terms and individual customer circumstances.

As of September 30, 2021, we determined an allowance for doubtful accounts was not required based upon our review of contractual payment terms and individual customer circumstances.

Intangible Assets, Net

Definite-lived intangible assets related to capitalized milestones under license agreements are amortized on a straight-line basis over their remaining useful lives, which are estimated to be the remaining patent life.

If our estimate of

the product’s useful life is shorter than the remaining patent life, then a shorter period is used.

If our estimate of the product’s useful life is shorter than the remaining patent life, then a shorter period is used.

Amortization expense is recorded as a component of cost of sales on the consolidated statements of operations and comprehensive income (loss).

11 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, 2021 and December 31, 2020 were carried at fair value, determined according to the fair value hierarchy.

The Company’s cash equivalents and marketable securities at September 30, 2021 and December 31, 2020 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, 2021 and December 31, 2020, respectively.

Net Income (Loss) Per Share

Basic net income (loss) per share is computed by dividing the net income (loss) by the weighted-average number of common shares outstanding during the period, without consideration of potential dilutive securities.

Diluted net income (loss) per common share is 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 income (loss) per share calculation, 640,318 stock options and 73,259 restricted stock units were considered to be common stock equivalents for the three and six months ended June 30, 2021.

For the three and six months ended June 30, 2020, the common stock equivalents have been excluded from the calculation of diluted net income (loss) per share, as their effect would be anti-dilutive for the period presented due to the net losses incurred for such periods.

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 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 due to the net losses incurred.

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:

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Stock options

25 unchanged sentences

Accrued expenses consisted of the following:

September 30,

Research and development costs

3 unchanged sentences

Fair Value of Financial Assets

As of June 30, 2021 and December 31, 2020, the carrying amount of cash and cash equivalents and short-term investments was $ 368,154 and $ 172,792 , respectively, which approximates fair value.

As of September 30, 2021 and December 31, 2020, the carrying amount of cash and cash equivalents and short-term investments was $ 328,354 and $ 172,792 , 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, 2021 using:

September 30, 2021 using:

Cash Equivalents:

12 unchanged sentences

The following tables summarize the Company's marketable securities:

June 30, 2021

September 30, 2021

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, 2021, the Company has not entered into any lease arrangements classified as a finance lease.

As of September 30, 2021, the Company has not entered into any lease arrangements classified as a finance lease.

The Company’s corporate headquarters is located in Boston, Massachusetts.

2 unchanged sentences

The Company has not included the five-year renewal option to extend the lease in its measurement of the ROU asset or lease liability.

The following table presents the maturities of the Company’s operating lease liability related to office space as of June 30, 2021, all of which is under a non-cancellable operating lease:

The following table presents the maturities of the Company’s operating lease liability related to office space as of September 30, 2021, all of which is under a non-cancellable operating lease:

Operating Lease

4 unchanged sentences

Intangible Assets, Net

As of June 30, 2021, the Company’s finite-lived intangible assets, which totaled $ 4,886 , resulted from the capitalization of certain milestone payments made to Ipsen Pharma, S.A.S., or Ipsen, in accordance with the terms of the

As of September 30, 2021, the Company’s finite-lived intangible assets, which totaled $ 4,772 , resulted from the capitalization of certain milestone payments made to Ipsen Pharma, S.A.S., or Ipsen, in accordance with the terms of the

Company’s license agreement with Ipsen, in connection with the Company’s first commercial sale of IMCIVREE in the U.S.

1 unchanged sentence

The Company began amortizing its finite-lived intangible assets in April 2021 over an 11 year period based on IMCIVREE’s expected patent exclusivity period.

Amortization expense totaled $ 114 for the three and six months ended June 30, 2021.

Amortization expense totaled $ 114 and $ 228 for the three and nine months ended September 30, 2021.

Amortization expense will be included in cost of sales on the consolidated statements of operations and comprehensive loss.

The Company recorded a tax ( benefit) of ($ 5,022 ) for the three month period ended June 30, 2021.

The Company recorded a tax provision of $ 16,984 for the six month period ended June 30, 2021.

The sale of the PRV resulted in a tax provision of $ 22,006 recorded during the three month period ended March 31, 2021, which will be offset by ordinary losses generated by the Company over the remainder of current year.

The Company recorded a tax (benefit) of ($ 8,995 ) for the three month period ended September 30, 2021.

The Company recorded a tax provision of $ 7,989 for the nine months period ended September 30, 2021 primarily related to the sale of the PRV, offset by a tax benefit from ordinary losses generated by the Company over the remainder of current year.

The Company expects to have sufficient tax losses in the current year to offset the income from the sale and thus no current year liability is expected.

6 unchanged sentences

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 six months ended June 30, 2020.

As of June 30, 2021, an aggregate of 10,014,129 shares of common stock were reserved for future issuance under the Company’s stock plans, including outstanding stock options and restricted stock units that have been issued of 6,277,702 shares of common stock and 983,993 shares are available for future grants under the Company’s 2017 Employee Stock Purchase Plan.

In connection with this modification, the Company recorded an incremental compensation charge of $ 2,811 during the nine months ended September 30, 2020.

As of September 30, 2021, an aggregate of 9,972,556 shares of common stock were reserved for future issuance under the Company’s stock plans, including outstanding stock options and restricted stock units that have been issued of 6,406,621 shares of common stock and 962,942 shares are available for future grants 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 $ 487 , $ 916 , $ 1,097 , and $ 1,776 for the three and six months ended June 30, 2021 and 2020, respectively.

Outstanding payments due to these related parties as of June 30, 2021 and December 31, 2020 were $ 0 and $ 187 , respectively, and were included within accounts payable on the balance sheet.

Expenses paid directly to consultants and vendors considered to be related parties amounted to $ 450 , $ 808 , $ 1,547 , and $ 2,584 for the three and nine months ended September 30, 2021 and 2020, respectively.

Outstanding payments due to these related parties as of September 30, 2021 and December 31, 2020 were $ 0 and $ 187 , 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