What changed in this filing

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Item 1A. Risk Factors

2023-08-01 compared with 2023-05-02 · 115 added, 109 removed, 1333 unchanged (14% of the section changed)

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We were incorporated in February 2013.

Our operations to date have been primarily focused on developing and commercializing IMCIVREE® (setmelanotide) to treat patients living with hyperphagia and severe obesity caused by rare MC4R pathway diseases.

Our operations to date have been primarily focused on developing and commercializing IMCIVREE® (setmelanotide) to treat patients living with hyperphagia and severe obesity

caused by rare MC4R pathway diseases.

Our business activities have included acquiring rights to intellectual property, business planning, raising capital, developing our technology, identifying potential product candidates, undertaking preclinical studies and conducting research and development activities, including clinical trials, for setmelanotide.

To date we have generated less than $55.0 million of revenue from product sales.

In the United States, IMCIVREE is approved for chronic weight management in adult and pediatric patients 6 years of age and older with monogenic or syndromic

obesity due to pro-opiomelanocortin (POMC), proprotein convertase subtilisin/kexin type 1 (PCSK1) or leptin receptor (LEPR) deficiency as determined by a U.S.

In the United States, IMCIVREE is approved for chronic weight management in adult and pediatric patients 6 years of age and older with monogenic or syndromic obesity due to pro-opiomelanocortin (POMC), proprotein convertase subtilisin/kexin type 1 (PCSK1) or leptin receptor (LEPR) deficiency as determined by a U.S.

Food and Drug Administration (FDA)-approved test demonstrating variants in POMC, PCSK1 or LEPR genes that are interpreted as pathogenic, likely pathogenic, or of uncertain significance, or Bardet-Biedl syndrome (BBS).

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We have funded our operations to date primarily through the proceeds from the sales of common stock and preferred stock, asset sales, as well as capital contributions from our former parent, Rhythm Holdings LLC, and have incurred losses in each year since our inception.

Our net losses were $52.2 million and $52.8 million for the three months ended March 31, 2023 and 2022, respectively.

As of March 31, 2023, we had an accumulated deficit of $762.2 million.

Our net losses were $46.7 million, $98.9 million, $45.0 million and $97.8 million for the three and six months ended June 30, 2023 and 2022, respectively.

As of June 30, 2023, we had an accumulated deficit of $808.9 million.

Substantially all of our operating losses have resulted from costs incurred in connection with our development programs and from commercial and general and administrative costs associated with our operations.

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Absent our entering into collaboration or partnership agreements, we have and expect to continue to incur significant sales and marketing costs as we continue to commercialize setmelanotide.

Even though IMCIVREE is FDA approved and authorized by the EMA and MHRA for certain indications, and even if we successfully complete our pivotal and other clinical trials and setmelanotide is approved for commercial sale in additional indications, setmelanotide may not be a commercially successful drug.

Even though IMCIVREE is FDA approved and authorized by the EC and MHRA for certain indications, and even if we successfully complete our pivotal and other clinical trials and setmelanotide is approved for commercial sale in additional indications, setmelanotide may not be a commercially successful drug.

As of result of the acquisition of Xinvento B.V., we expect to devote substantial financial resources to the research and development and potential commercialization of a therapeutic product candidate for CHI.

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In June 2022, we entered into a Revenue Interest Financing Agreement, or RIFA, with HealthCare Royalty Partners for a total investment amount of up to $100.0 million, conditioned upon our achievement of certain clinical development and sales milestones.

As of March 31, 2023, we have received $72.3 million of aggregate proceeds, net of debt issuance costs, under the RIFA.

As of March 31, 2023, our cash and cash equivalents and short-term investments were approximately $294.6 million.

We expect that our existing cash and cash equivalents and short-term investments will be sufficient to fund our operations into 2025.

As of June 30, 2023, we have received $72.3 million of aggregate proceeds, net of debt issuance costs, under the RIFA.

As of June 30, 2023, our cash and cash equivalents and short-term investments were approximately $253.6 million.

We expect that our existing cash and cash equivalents and short-term investments, together with the anticipated $24.4 million net of debt issuance costs from HealthCare Royalty Partners, will be sufficient to fund our operations into 2025.

However, our operating plan may change as a result of many factors currently unknown to us, and we may need to seek additional funds sooner than planned, through public or private equity or debt financings, government or other third-party funding, marketing and distribution arrangements and other collaborations, strategic alliances and licensing arrangements, or a combination of these approaches.

We will also require additional capital to obtain additional regulatory approvals for, and to continue to commercialize, setmelanotide.

Raising funds in the current economic environment, particularly in light supply chain issues and labor shortages, rising inflation and interest rates and international turmoil, including due to the Russian invasion of Ukraine, may present additional challenges.

between Russia and Ukraine, may present additional challenges.

Even if we believe we have sufficient funds for our current or future operating plans, we may seek additional capital if market conditions are favorable or if we have specific strategic considerations.

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On June 16, 2022, we entered into the RIFA with entities managed by HealthCare Royalty Management, collectively referred to as the Investors.

Pursuant to the RIFA and subject to customary closing conditions, the Investors agreed to pay the Company an aggregate investment amount of up to $100.0 million, or the Investment Amount.

Pursuant to the RIFA and subject to customary closing conditions, the Investors agreed to pay us an aggregate investment amount of up to $100.0 million, or the Investment Amount.

Under the terms of the RIFA, we received $37.5 million on June 29, 2022 upon FDA approval of IMCIVREE in BBS, and an additional $37.5 million on September 29, 2022, following EC marketing authorization for BBS on September 6, 2022.

We are entitled to receive the remaining $25.0 million of the Investment Amount forty-five business days following achievement of a specified amount of cumulative net sales of IMCIVREE between July 1, 2022 and September 30, 2023.

We are entitled to receive the remaining $24.4 million of the Investment Amount, net of debt issuance costs forty-five business days following achievement of a specified amount of cumulative net sales of IMCIVREE between July 1, 2022 and September 30, 2023.

On July 28, 2023, we gave notice to the Investors that we achieved the cumulative net sales required for the disbursement of the remaining $24.4 million of the Investment Amount, net of debt issuance costs.

As consideration for the Investment Amount and pursuant to the RIFA, we agreed to pay the Investors a tiered royalty on our annual net revenues, or Revenue Interest, including worldwide net product sales and upfront payments and milestones.

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If the Investors have not received cumulative minimum payments equal to 60% of the amount funded by the Investors to date by March 31, 2027 or 120% of the amount funded by the Investors to date by March 31, 2029, we must make a cash payment immediately following each applicable date to the Investors sufficient to gross the Investors up to such minimum amounts after giving full consideration of the cumulative amounts paid by us to the Investors through each date.

The Investors’ rights to receive the Revenue Interests will terminate on the date on which the Investors have received payments equal to a certain percentage of the funded portion of the Investment Amount including the aggregate of all payments made to the Investors as of such date, each percentage tier referred to as the Hard Cap, unless the RIFA is earlier terminated.

earlier terminated.

The total Revenue Interests payable by us to the Investors is capped between 185% and 250% of the Investment Amount paid to us, dependent on the aggregate royalty paid between 2028 and 2032.

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and MC4R deficiency obesity.

For example, in April 2022 we enrolled the first patient our pivotal Phase 3 EMANATE clinical trial of setmelanotide.

The trial is a randomized, double-blind,

placebo-controlled study with four independent sub-studies evaluating setmelanotide in patients with:

Enrollment in our pivotal Phase 3 EMANATE clinical trial of setmelanotide is ongoing.

The trial is a randomized, double-blind, placebo-controlled study with four independent sub-studies evaluating setmelanotide in patients with:

heterozygous POMC/PCSK1 obesity;

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Further, disclosure of interim data by us or by our competitors could result in volatility in the price of our common stock.

Further, others, including regulatory agencies, may not accept or agree with our assumptions, estimates, calculations, conclusions or analyses or may interpret or weigh the importance of data differently, which could impact the value of the particular program, the approvability or commercialization of the particular product candidate or product and our company in general.

value of the particular program, the approvability or commercialization of the particular product candidate or product and our company in general.

In addition, the information we choose to publicly disclose regarding a particular study or clinical trial is based on what is typically extensive information, and you or others may not agree with what we determine is material or otherwise appropriate information to include in our disclosure.

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In addition, there are limited patient pools from which to draw for clinical studies.

characteristics that we can measure or to assure their disease is either severe enough or not too advanced to include them in a study.

In addition to the rarity of genetic diseases of obesity, the eligibility criteria of our clinical studies will further limit the pool of available study participants as we will require that patients have specific characteristics that we can measure or to assure their disease is either severe enough or not too advanced to include them in a study.

Patient enrollment for our current or any future clinical trials may be affected by other factors, including:

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In addition, many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of a regulatory approval for setmelanotide.

Any delays to our preclinical studies or clinical trials that occur as a result could shorten any period during which we may have the exclusive right to commercialize setmelanotide and our competitors may be able to bring products to market before we do, and the commercial viability of our product candidates could be significantly reduced.

Any delays to our preclinical studies or clinical trials that occur as a result could shorten any period during

which we may have the exclusive right to commercialize setmelanotide and our competitors may be able to bring products to market before we do, and the commercial viability of our product candidates could be significantly reduced.

Any of these occurrences may harm our business, financial condition and prospects significantly.

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The EU Clinical Trials Regulation (CTR) which was adopted in April 2014 and repeals the EU Clinical Trials Directive, became applicable on January 31, 2022.

While the EU Clinical Trials Directive required a separate clinical trial application (CTA) to be submitted in each member state, to both the competent national health

authority and an independent ethics committee, the EU CTR introduces a centralized process and only requires the submission of a single application to all member states concerned.

While the EU Clinical Trials Directive required a separate clinical trial application (CTA) to be submitted in each member state in which the clinical trial takes place, to both the competent national health authority and an independent ethics committee, the EU CTR introduces a centralized process and only requires the submission of a single application for multi-center trials.

The EU CTR allows sponsors to make a single submission to both the competent authority and an ethics committee in each member state, leading to a single decision per member state.

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The extent to which ongoing and new clinical trials will be governed by the EU CTR varies.

For clinical trials whose CTA was made under the EU Clinical Trials Directive before January 31, 2022, the EU Clinical Trials Directive will continue to apply on a transitional basis until January 31, 2025.

Clinical trials for which an application was submitted (i) prior to January 31, 2022 under the EU Clinical Trials Directive, or (ii) between January 31, 2022 and January 31, 2023 and for which the sponsor has opted for the application of the EU Clinical Trials Directive remain governed by said Directive until January 31, 2025.

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Compliance with the EU CTR requirements by us and our third-party service providers, such as CROs, may impact our developments plans.

It is currently unclear to what extent the United Kingdom (UK) will seek to align its regulations with the EU.

On January 17, 2022, the MHRA launched an eight-week consultation on reframing the UK legislation for clinical trials and which aimed to streamline clinical trials approvals, enable innovation, enhance clinical trials transparency, enable greater risk proportionality, and promote patient and public involvement in clinical trials.

The UK Government published its response to the consultation on March 21, 2023 confirming that it would bring forward changes to the legislation.

These resulting legislative amendments will determine how closely the UK regulations are aligned with the CTR.

A decision by the UK not to closely align its regulations with the new approach adopted in the EU may have an effect on the cost of conducting clinical trials in the UK as opposed to other countries.

If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies governing clinical trials, our development plans may be impacted.

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Other MC1 receptor mediated effects include darkening of skin blemishes, such as freckles and moles, and hair color change.

The cosmetic effects are not tolerated by all patients, as a small number of patients have withdrawn from

treatment due to skin darkening.

The cosmetic effects are not tolerated by all patients, as a small number of patients have withdrawn from treatment due to skin darkening.

These effects have generally been reversible in clinical trials after discontinuation of setmelanotide, but it is still unknown if they will be reversible with long term exposure.

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exemption from certain prescription drug user fees, tax credits for certain qualified clinical testing expenses, and waivers from the pediatric assessment requirements of the Pediatric Research Equity Act.

In the EU, orphan drug designation is granted by the EC based on a scientific opinion of the EMA’s Committee for Orphan Medicinal Products.

In the EU, orphan designation is granted by the EC based on a scientific opinion of the EMA’s Committee for Orphan Medicinal Products.

A medicinal product may be designated as orphan if its sponsor can establish that (i) the product is intended for the diagnosis, prevention or treatment of a life-threatening or chronically debilitating condition;

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Grant of orphan designation by the EC also entitles the holder of this designation to financial incentives such as reduction of fees or fee waivers, protocol assistance, and access to the centralized marketing authorization procedure.

Orphan drug designation must be requested before submitting an application for marketing authorization.

In addition to a range of other benefits during the development and regulatory review, orphan medicinal products are, upon grant of marketing authorization, entitled to ten years of exclusivity in all EU member states for the approved therapeutic indication, which means that the competent authorities cannot accept another marketing authorization application, grant a marketing authorization, or accept an application to extend a marketing authorization for a similar product for the same indication for a period of ten years.

Orphan designation must be requested before submitting an application for marketing authorization.

In addition to a range

of other benefits during the development and regulatory review, orphan medicinal products are, upon grant of marketing authorization, entitled to ten years of exclusivity in all EU member states for the approved therapeutic indication, which means that the competent authorities cannot accept another marketing authorization application, grant a marketing authorization, or accept an application to extend a marketing authorization for a similar product for the same indication for a period of ten years.

The period of market exclusivity is extended by two years for orphan medicinal products that have also complied with an agreed Pediatric Investigation Plan, or PIP.

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Additionally granting of an authorization for another similar orphan medicinal product where another product has market exclusivity can happen at any time:

(i) the second applicant can

establish that its product, although similar, is safer, more effective or otherwise clinically superior;

(i) the second applicant can establish that its product, although similar, is safer, more effective or otherwise clinically superior;

(ii) the applicant cannot supply enough orphan medicinal product or (iii) where the applicant consents to a second orphan medicinal product application.

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In addition, Breakthrough Therapy designation by the FDA or PRIME designation by the EMA may not lead to a faster development, regulatory review or approval process, and it does not increase the likelihood that setmelanotide will receive additional marketing approvals in the United States or additional marketing authorizations in the EU.

The FDA is authorized under the FDCA to give certain product candidates “Breakthrough Therapy designation.” A Breakthrough Therapy product candidate is defined as a product candidate that is intended, alone or in combination with one or more other drugs, to treat a serious or life threatening disease or condition and preliminary clinical evidence indicates that such product candidate may demonstrate substantial improvement on one or more clinically significant endpoints over existing therapies.

one or more other drugs, to treat a serious or life threatening disease or condition and preliminary clinical evidence indicates that such product candidate may demonstrate substantial improvement on one or more clinically significant endpoints over existing therapies.

The FDA will seek to ensure the sponsor of Breakthrough Therapy product candidate receives intensive guidance on an efficient drug development program, intensive involvement of senior managers and experienced staff on a proactive, collaborative and cross disciplinary review.

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The COVID-19 pandemic has impacted multiple countries and regions, including the United States, Canada, Europe, and China, where we have planned or ongoing preclinical studies and clinical trials.

If the COVID-19 pandemic and disruptions caused by government actions to limit its spread continue for a significant length of time, we may experience additional disruptions that could severely impact our business, preclinical studies, clinical trials and our commercialization prospects, including:

If the COVID-19 pandemic and disruptions caused by government actions to limit its spread continue for a significant length of time or are reenacted, we may experience additional disruptions that could severely impact our business, preclinical studies, clinical trials and our commercialization prospects, including:

● delays in receiving approval from local regulatory authorities to initiate or conduct our planned clinical trials;

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● delays in the receipt of marketing authorizations for our product candidates, which could materially affect our commercialization plans.

As the COVID-19 pandemic continues to evolve, the extent to which the pandemic may further impact our business, preclinical studies, clinical trials and our commercialization prospects will depend on future developments, which are highly uncertain and cannot be predicted with confidence.

As the COVID-19 pandemic and its impact continues to evolve, the extent to which the pandemic may further impact our business, preclinical studies, clinical trials and our commercialization prospects will depend on future developments, which are highly uncertain and cannot be predicted with confidence.

While the potential economic impact brought by and the duration of the COVID-19 pandemic may be difficult to assess or predict, the widespread pandemic has resulted in, and may continue to result in, significant disruption of global financial markets, reducing our ability to access capital, which could in the future negatively affect our liquidity.

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In order to market IMCIVREE, we must continue to build our sales, marketing, managerial and other non-technical capabilities or make arrangements with third parties to perform these services.

Although we have received FDA approval, EC and UK MHRA marketing authorization for certain indications, we are early in our commercialization efforts and have not yet established a full-scale commercial infrastructure.

Although we have received FDA approval, EC and MHRA marketing authorization for certain indications, we are early in our commercialization efforts and have not yet established a full-scale commercial infrastructure.

Therefore, you should not compare us to commercial-stage biotechnology companies, and you should not expect that we will generate substantial revenues or become profitable in the near term.

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On March 16, 2023, we provided written notice to RareStone reaffirming our position that RareStone has materially breached its obligations under the RareStone License and that we have terminated the RareStone License for cause, and also requested documentation supporting RareStone’s purported dispute notice objecting to the claims in the Notice.

RareStone may attempt to cure the alleged breaches, which we believe to be incurable, within the timeframe specified under the RareStone License.

There can be no assurance that we will be able to negotiate an appropriate cure to the alleged material breaches and, if required, we expect to seek appropriate relief under the terms of the RareStone License.

On May 10, 2023, RareStone provided written notice to the Company reaffirming its objections to the claims in our October 28, 2022 notice and March 16, 2023 notice, including to the Company’s termination of the RareStone License for cause.

There can be no assurance that we will be able to negotiate an appropriate cure to the alleged material breaches, which we believe are incurable, and, if required, we expect to seek appropriate relief under the terms of the RareStone License.

Termination of, or any possible litigation focused on, the RareStone License could cause significant delays in our product development and commercialization efforts for setmelanotide and could prevent us from commercializing IMCIVREE in the markets covered by the RareStone License without first expanding our internal capabilities or entering into another agreement with a third party.

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Other parties may develop and obtain patent protection for more effective technologies, designs or methods.

The laws of some foreign countries do not protect our proprietary

rights to the same extent as the laws of the United States, and we may encounter significant problems in protecting our proprietary rights in these countries.

The laws of some foreign countries do not protect our proprietary rights to the same extent as the laws of the United States, and we may encounter significant problems in protecting our proprietary rights in these countries.

If these developments were to occur, they could have a material adverse effect on our sales.

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Competitors may infringe our patents or the patents of our licensors.

To counter infringement or unauthorized use, we may be required to file infringement claims, which can be expensive and time consuming and divert the attention of our management and key personnel from our business operations.

To counter infringement or unauthorized use, we may be required to file infringement claims, which can be expensive and time consuming and divert the attention

of our management and key personnel from our business operations.

Even if we prevail in any lawsuits that we initiate, the damages or other remedies awarded may not be commercially meaningful.

In addition, in an infringement proceeding,

a court may decide that a patent of ours or our licensors is not valid, is unenforceable and/or is not infringed, or may refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover the technology in question.

In addition, in an infringement proceeding, a court may decide that a patent of ours or our licensors is not valid, is unenforceable and/or is not infringed, or may refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover the technology in question.

An adverse result in any litigation or defense proceedings could put one or more of our patents at risk of being invalidated or interpreted narrowly and could put our patent applications at risk of not issuing.

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The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents and other intellectual property protection, particularly those relating to biopharmaceuticals, which could make it difficult for us to stop the infringement of our patents or marketing of competing products in violation of our proprietary rights generally.

For example, an April 2017 report from the Office of the United States Trade Representative identified a number of countries, including India and China, where challenges to the procurement and enforcement of patent rights have been reported.

For example, an April 2017 report from the Office of the United States Trade

Representative identified a number of countries, including India and China, where challenges to the procurement and enforcement of patent rights have been reported.

Several countries, including India and China, have been listed in the report every year since 1989.

Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial

costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly, could put our patent applications at risk of not issuing and could provoke third parties to assert claims against us.

Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly, could put our patent applications at risk of not issuing and could provoke third parties to assert claims against us.

We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded, if any, may not be commercially meaningful.

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PTO for patent term extension.

However, we may not be granted an extension because of, for example, failure to apply within applicable deadlines, failure to apply prior to expiration of relevant patents or otherwise failure to satisfy applicable requirements.

However, we may not be granted an extension because of, for example, failure to apply within applicable deadlines, failure to apply prior to

expiration of relevant patents or otherwise failure to satisfy applicable requirements.

Moreover, the applicable time period or the scope of patent protection afforded could be less than we request.

If we are unable to obtain patent term extension

or restoration or the term of any such extension is less than we request, our competitors may obtain approval of competing products following our patent expiration, and our ability to generate revenues could be materially adversely affected.

If we are unable to obtain patent term extension or restoration or the term of any such extension is less than we request, our competitors may obtain approval of competing products following our patent expiration, and our ability to generate revenues could be materially adversely affected.

Because setmelanotide contains active ingredients that the FDA has determined to be a new chemical entity, it has been afforded five years of non-patent data exclusivity by the FDA.

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Risks Related to Regulatory Approval and Marketing of Setmelanotide and Other Legal Compliance Matters

Even if we complete the necessary clinical trials, the regulatory and marketing approval process is expensive, time consuming and uncertain and may prevent us from obtaining additional approvals for the commercialization of setmelanotide beyond FDA approval for obesity due to POMC, PCSK1 or LEPR deficiencies, or BBS in the United

States, for the treatment of obesity and the control of hunger associated with genetically confirmed BBS and confirmed loss-of-function biallelic POMC, including PCSK1, deficiency or biallelic LEPR deficiency in adults and children 6 years of age and above including patients with POMC or LEPR deficiency who have mild, moderate or severe renal impairment, and the MHRA marketing authorization for the treatment of obesity and the control of hunger associated with genetically confirmed BBS and confirmed loss-of-function biallelic POMC, including PCSK1, deficiency or biallelic LEPR deficiency in adults and children 6 years of age and above.

We depend primarily on the success of setmelanotide, and we cannot be certain that we will be able to obtain additional regulatory approvals for, or successfully commercialize, setmelanotide.

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The EC has authorized setmelanotide for the treatment of obesity and the control of hunger associated with genetically confirmed BBS or genetically confirmed loss-of-function biallelic POMC, including PCSK1, deficiency or biallelic LEPR deficiency in adults and children 6 years of age and above.

The UK’s MHRA authorized setmelanotide for the treatment of obesity and the control of hunger associated with genetically confirmed BBS or genetically confirmed loss-of-function biallelic POMC, including PCSK1, deficiency or biallelic LEPR deficiency in adults and children 6 years of age and above.

The MHRA authorized setmelanotide for the treatment of obesity and the control of hunger associated with genetically confirmed BBS or genetically confirmed loss-of-function biallelic POMC, including PCSK1, deficiency or biallelic LEPR deficiency in adults and children 6 years of age and above.

Setmelanotide will require substantial additional clinical development, testing and regulatory approval before we are permitted to commence commercialization in indications beyond those currently approved for IMCIVREE in the United States, the EU and Great Britain.

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● we may not be able to demonstrate to the satisfaction of the FDA, the EMA, or other equivalent competent authorities in foreign jurisdictions that setmelanotide is safe and effective in treating obesity caused by certain genetic deficiencies affecting the MC4R pathway;

● the results of our clinical trials may not be interpretable or meet the level of statistical or clinical significance required by the FDA, the EMA, or other equivalent competent authorities in foreign jurisdictions for

marketing approval.

For example, the potential unblinding of setmelanotide studies due to easily identifiable AEs may raise the concern that potential bias has affected the clinical trial results;

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The EU pharmaceutical legislation is currently undergoing a complete review process, in the context of the Pharmaceutical Strategy for Europe initiative, launched by the EC in November 2020.

A proposal for revision of several legislative instruments related to medicinal products (potentially revising the duration of regulatory exclusivity, eligibility for expedited pathways, etc.) is expected to be adopted by the EC during the first half of 2023.

The proposed revisions, once they are agreed and adopted by the European Parliament and European Council (not expected before the end of 2024 or early 2025), may have a significant impact on the pharmaceutical industry in the long term.

The EC’s proposal for a revision of several legislative instruments related to medicinal products (potentially reducing the duration of regulatory exclusivity, revising the eligibility for expedited pathways, etc.) was published on April 26, 2023.

The proposed revisions remain to be agreed and adopted by the European Parliament and European Council.

The proposals may be substantially revised before adoption, which is not anticipated before the end of 2024 or early 2025.

The revisions, may however have a significant impact on the pharmaceutical industry and our business in the long term.

Disruptions at the FDA and other government agencies caused by funding shortages or global health concerns could hinder their ability to hire, retain or deploy key leadership and other personnel, or otherwise prevent new or modified products from being developed, approved or commercialized in a timely manner or at all, which could negatively impact our business.

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The cumulative effects of the disruption to the regulatory framework may add considerably to the development lead time to marketing authorization and commercialization of setmelanotide, or any other product candidates in the EU and/or the UK.

Although we have obtained FDA approval and marketing authorization from the EC and the UK MHRA for setmelanotide, any delay in obtaining, or an inability to obtain, any marketing authorization, for any of our other product candidates, as a result of Brexit or otherwise, would prevent us from commercializing our product candidates in the UK and/or the EU and restrict our ability to generate revenue and achieve and sustain profitability.

Although we have obtained FDA approval and marketing authorization from the EC and the MHRA for setmelanotide, any delay in obtaining, or an inability to obtain, any marketing authorization, for any of our other product candidates, as a result of Brexit or otherwise, would prevent us from commercializing our product candidates in the UK and/or the EU and restrict our ability to generate revenue and achieve and sustain profitability.

If any of these outcomes occur, we may be forced to restrict or delay efforts to seek marketing authorization in the UK and/or EU for any of our other product candidates, which could significantly and materially harm our business.

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The IRA permits the Secretary of the Department of Health and Human Services (HHS) to implement many of these provisions through guidance, as opposed to regulation, for the initial years.

For that and other reasons, it is currently unclear how the IRA will be effectuated, and while the impact of the IRA on the pharmaceutical industry cannot yet be fully determined, it is likely to be significant.

We expect that these and other healthcare reform measures that may be adopted in the future may result in more rigorous coverage and payment criteria and in additional downward pressure on the price that we receive for any approved drug.

The impact of the IRA on the pharmaceutical industry cannot yet be fully determined but, is likely to be significant.

Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private payors.

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In addition, in March 2021, the American Rescue Plan Act of 2021 was signed into law, which, among other things, eliminated the statutory cap on drug manufacturers’ MDRP rebate liability, effective January 1, 2024.

Under current law enacted as part of the ACA, drug

manufacturers’ MDRP rebate liability is capped at 100% of the AMP for a covered outpatient drug.

Congress could enact additional legislation that further increases Medicaid drug rebates or other costs and charges associated with participating in the MDRP.

Under current law enacted as part of the ACA, drug manufacturers’ MDRP rebate liability is capped at 100% of the AMP for a covered outpatient drug.

Congress could enact additional legislation that further increases Medicaid drug rebates or other costs and charges associated with participating

Additional legislation or the issuance of regulations relating to the MDRP could have a material adverse effect on our results of operations.

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Failure to make necessary disclosures and/or to identify contract overcharges could result in allegations against us under the False Claims Act and other laws and regulations.

Unexpected refunds to the government, and responding to a government investigation or enforcement action,

would be expensive and time-consuming, and could have a material adverse effect on our business, financial condition, results of operations and growth prospects.

Unexpected refunds to the government, and responding to a government investigation or enforcement action, would be expensive and time-consuming, and could have a material adverse effect on our business, financial condition, results of operations and growth prospects.

Individual states continue to consider and have enacted legislation to limit the growth of healthcare costs, including the cost of prescription drugs and combination products.

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These “off-label” uses are common across medical specialties and may constitute an appropriate treatment for some patients in varied circumstances.

For example, we are actively evaluating IMCIVREE in subjects with other forms of obesity caused by defects in the MCR4 pathway.

For example, we are actively evaluating IMCIVREE in subjects with other forms of obesity caused by defects in the MC4R pathway.

We are not currently permitted to, and do not, market or promote setmelanotide for these uses.

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In the EU, the advertising and promotion of our products are subject to EU laws governing promotion of medicinal products, interactions with physicians, misleading and comparative advertising and unfair commercial practices.

In addition, other legislation adopted by individual EU member states may apply to the advertising and promotion of medicinal products.

addition, other legislation adopted by individual EU member states may apply to the advertising and promotion of medicinal products.

These laws require that promotional materials and advertising in relation to medicinal products comply with the product’s Summary of Product Characteristics, or SmPC, as approved by the competent authorities.

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Such private individuals may share in amounts paid by the entity to the government in recovery or settlement.

services which are used to set drug payment rates under government healthcare programs, and other interactions with prescribers and other customers including those that may have affected their billing or coding practices and submission to the federal government.

Many pharmaceutical manufacturers have been investigated and have reached substantial financial settlements with the federal government under the civil False Claims Act for a variety of alleged improper activities including causing false claims to be submitted as a result of the marketing of their products for unapproved and thus non-reimbursable uses, inflating prices reported to private price publication services which are used to set drug payment rates under government healthcare programs, and other interactions with prescribers and other customers including those that may have affected their billing or

coding practices and submission to the federal government.

The government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal civil False Claims Act.

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In addition, several states require pharmaceutical companies to implement compliance programs or marketing codes of conduct.

● Analogous foreign laws and regulations, including restrictions imposed on the promotion and marketing of medicinal products in the EU member states and other countries, restrictions on interactions with healthcare professionals and requirements for public disclosure of payments made to physicians.

professionals and requirements for public disclosure of payments made to physicians.

Laws (including those governing promotion, marketing and anti-kickback provisions), industry regulations and professional codes of conduct often are strictly enforced.

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Actual or perceived failure to comply with data protection, privacy and security laws, regulations could lead to government enforcement actions and significant penalties against us, and adversely impact our operating results.

The global data protection landscape is rapidly evolving, and we are or may become subject to numerous state, federal and foreign laws, requirements and regulations governing the collection, use, disclosure, retention, and security of

personal information.

Implementation standards and enforcement practices are likely to remain uncertain for the foreseeable future, and we cannot yet determine the impact future laws, regulations, standards, or perception of their requirements may have on our business.

requirements may have on our business.

This evolution may create uncertainty in our business, affect our ability to operate in certain jurisdictions or to collect, store, transfer use and share personal information, necessitate the acceptance of more onerous obligations in our contracts, result in liability or impose additional costs on us.

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Additional compliance investment and potential business process changes may also be required.

Similar laws have passed in Virginia, Utah, Iowa, Connecticut and Colorado, and have been proposed in other states and at the federal level, reflecting a trend toward more stringent privacy legislation in the United States.

Similar laws have passed in other states and are continuing to be proposed, at the state and federal level, reflecting a trend toward more stringent privacy legislation in the United States.

The enactment of such laws could have potentially conflicting requirements that would make compliance challenging.

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The GDPR became effective on May 25, 2018, and imposes strict requirements for the processing of the personal data of individuals within the European Economic Area, or EEA, or in the context of our activities in the EEA, including health data from clinical trials and AE reporting.

In particular, these requirements include certain obligations

concerning the consent of the individuals to whom the personal data relates, the information provided to the individuals, the transfer of personal data out of the EEA, security breach notifications, and security and confidentiality of the personal data, and violations of these requirements could result in substantial fines, up to the greater of 20 million Euros or 4% of total global annual turnover.

In particular, these requirements include certain obligations concerning the consent of the individuals to whom the personal data relates, the information provided to the individuals, the transfer of personal data out of the EEA, security breach notifications, and security and confidentiality of the personal

data, and violations of these requirements could result in substantial fines, up to the greater of 20 million Euros or 4% of total global annual turnover.

In addition to the foregoing, a breach of the GDPR could result in regulatory investigations, reputational damage, orders to cease/change our processing of our data, enforcement notices, and/or assessment notices for a compulsory audit.

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Among other requirements, the GDPR and UK GDPR also regulate transfers of personal data subject to the GDPR or UK GDPR to third countries that have not been found to provide adequate protection to such personal data, including the United States.

in July, 2020, the Court of Justice of the European Union, or the CJEU, invalidated the EU-US Privacy Shield Framework, or the Privacy Shield, under which personal data could be transferred from the EEA to US entities who had self-certified under the Privacy Shield scheme and imposed further restrictions on the use of the standard contractual clauses, or SCCs.

These restrictions include a requirement for companies to carry out a transfer impact assessment which, among other things, assesses the laws governing access to personal data in the recipient country and considers whether supplementary measures that provide privacy protections additional to those provided under SCCs will need to be implemented to ensure an essentially equivalent level of data protection to that afforded in the EEA.

In March 2022, the US and EU announced a new regulatory regime intended to replace the invalidated regulations;

however, this new EU-US Data Privacy Framework has not been implemented beyond an executive order signed by President Biden on October 7, 2022 on Enhancing Safeguards for United States Signals Intelligence Activities.

As supervisory authorities issue further guidance on personal data export mechanisms, including circumstances where the standard contractual clauses cannot be used, and/or start taking enforcement action, we could suffer additional costs, complaints and/or regulatory investigations or fines, and/or if we are otherwise unable to transfer personal data between and among countries and regions in which we operate, it could affect the manner in which we provide our services, the geographical location or segregation of our relevant systems and operations, and could adversely affect our financial results.

Case law from the Court of Justice of the European Union, or the CJEU, states that reliance on the standard contractual clauses - a standard form of contract approved by the European Commission as an adequate personal data transfer mechanism - alone may not necessarily be sufficient in all circumstances and that transfers must be assessed on a case-by-case basis.

We currently rely on the EU standard contractual clauses and the UK Addendum to the EU standard contractual clauses as relevant to transfer personal data outside the EEA and the UK, including to the United States, with respect to both intragroup and third party transfers.

Following a period of legal complexity and uncertainty regarding international personal data transfers, particularly to the United States, we expect the regulatory guidance and enforcement landscape to continue to develop, in relation to transfers to the United States and elsewhere.

As a result, we may have to make certain operational changes and implement revised standard contractual clauses and other relevant documentation for existing data transfers arrangements within required time frames.

Although we work to comply with applicable laws, regulations and standards, our contractual obligations and other legal obligations, these requirements are evolving and may be modified, interpreted and applied in an inconsistent manner from one jurisdiction to another, and may conflict with one another or other legal obligations with which we must comply.

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exchanges for violations of the FCPA’s accounting provisions.

The results of the United Kingdom’s departure from the EU may have a negative effect on global economic conditions, financial markets and our business.

Following a national referendum and enactment of legislation by the government of the UK, the UK formally withdrew from the EU on January 31, 2020.

Since the end of the Brexit transition period on January 1, 2021, the UK has operated under a separate regulatory regime to the EU.

EU laws regarding medicinal products only apply in respect of the UK to Northern Ireland (as set out in the Protocol on Ireland/Northern Ireland).

However, under the Retained EU Law (Revocation and Reform) Bill 2022, which is currently before the UK parliament, any retained EU law not expressly preserved and “assimilated” into domestic law or extended by ministerial regulations (to no later than June 23, 2026) will automatically expire and be revoked by December 31, 2023.

The EU laws that have been transposed into United Kingdom law through secondary legislation remain applicable.

While the UK has indicated a general intention that new laws regarding the development, manufacture and commercialization of medicinal products in the UK will align closely with EU law, there remain limited detailed proposals for future regulation of medicinal products.

The trade and cooperation agreement includes specific provisions concerning medicinal products, which include the mutual recognition of GMP, inspections of manufacturing facilities for medicinal products and GMP documents issued (such mutual recognition can be rejected by either party in certain circumstances), but does not foresee wholesale mutual recognition of UK and EU pharmaceutical regulations.

For example, despite the UK carrying out a public consultation on future changes to the clinical trials legislation, which ended on March 14, 2022, new UK legislation has not yet been published and so it is still somewhat uncertain as to whether the UK clinical trials requirements will align with the EU CTR which became applicable in the EU on January 31, 2022 and which significantly reforms the assessment and supervision processes for clinical trials throughout the EU.

Therefore, there remains political and economic uncertainty regarding to what extent the regulation of medicinal products will differ between the UK and the EU in the future.

Any divergences will increase the cost and complexity of running our business, including with respect to the conduct of clinical trials.

Brexit also materially impacted the regulatory regime with respect to the approval of our product candidates.

Great Britain is no longer covered by the EU’s procedures for the grant of marketing authorizations (Northern Ireland is covered by the centralized authorization procedure and can be covered under the decentralized or mutual recognition procedures).

As of January 1, 2021, all existing centralized marketing authorizations were automatically converted into UK marketing authorizations effective in Great Britain and issued with a UK marketing authorization number on January 1, 2021 (unless marketing authorization holders opted out of this scheme).

A separate marketing authorization is now required to market drugs in Great Britain.

It is currently unclear whether the regulator in the UK, the MHRA is sufficiently prepared to handle the increased volume of marketing authorization applications that it is likely to receive.

Any delay in obtaining, or an inability to obtain, any regulatory approvals, as a result of Brexit or otherwise, would prevent us from commercializing our product candidates in Great Britain and restrict our ability to generate revenue and achieve and sustain profitability.

The results of the United Kingdom’s departure from the EU may continue to have a negative effect on global economic conditions, financial markets and our business.

Since the end of the Brexit transition period on January 1, 2021, Great Britain (England, Scotland and Wales) has not been directly subject to EU law and has operated under a separate regulatory regime to the EU.

It is currently unclear to what extent the UK Government will seek to align its regulations with the EU.

EU law which has been transposed into

UK law through secondary legislation still remains applicable in Great Britain.

However, under the Retained EU Law (Revocation and Reform) Bill 2022, a targeted number of EU-derived laws will be revoked in 2023.

Under the terms of the Ireland/Northern Ireland Protocol, EU law still generally applies to Northern Ireland.

However, on February 27, 2023 the UK Government and the European Commission reached a political agreement in the “Windsor Framework” to address discrepancies in the Protocol’s operation.

The Windsor Framework proposes that Northern Ireland will be fully integrated under the regulatory authority of the MHRA and such proposed changes will be introduced by secondary legislation.

Consequently, there may be uncertainty in relation to the effects of such regulatory changes on our business.

New EU legislation such as the (EU) CTR is not applicable in Great Britain post-Brexit.

Whilst the EU-UK Trade and Cooperation Agreement (TCA) includes the mutual recognition of Good Manufacturing Practice (GMP) inspections of manufacturing facilities for medicinal products and GMP documents issued, it does not contain wholesale mutual recognition of UK and EU pharmaceutical regulations and product standards.

There may be divergent local requirements in Great Britain from the EU in the future, which may impact clinical and development activities that occur in the UK.

Similarly, clinical trial submissions in the UK will not be able to be bundled with those of EU Member States within the EMA Clinical Trial Information System (CTIS).

Any divergences may increase the cost and complexity of running our business, including with respect to the conduct of clinical trials.

Since a significant proportion of the regulatory framework in the UK applicable to our business and our product candidates is derived from EU directives and regulations, the withdrawal could continue to impact the regulatory regime with respect to the development, manufacture, importation, approval and commercialization of our product candidates in the UK.

Great Britain is no longer covered by the EU’s procedures for the grant of MA (Northern Ireland is covered by the centralized authorization procedure and can be covered under the decentralized or mutual recognition procedures).

A separate MA is required to market drugs in Great Britain.

Such changes could increase our costs and otherwise adversely affect our business.

Any delay in obtaining, or an inability to obtain regulatory approvals, as a result of Brexit or otherwise, may prevent us from commercializing our product candidates in Great Britain and restrict our ability to generate revenue and achieve or sustain profitability.

If any of these outcomes occur, we may be forced to restrict or delay efforts to seek regulatory approval in Great Britain for our product candidates, which could significantly and materially harm our business.

The UK’s withdrawal from the EU and the associated uncertainty has had and may continue to have a significant adverse effect on global economic conditions and the stability of global financial markets, and could significantly reduce global market liquidity and restrict the ability of key market participants to operate in certain financial markets.

Asset valuations, currency exchange rates and credit ratings may be especially subject to increased market volatility.

Any of these factors could have a significant adverse effect on our business, financial condition, results of operations and prospects.

Any further changes in relation to international trade, tariff and import/export regulations as a result of Brexit or otherwise may impose unexpected duty costs or other non-tariff barriers on us.

These developments, or the perception that any of them could occur, may reduce global trade and, in particular, trade between the impacted nations and the UK.

It is unclear what financial, regulatory and legal implications the withdrawal of the UK from the EU will have in the long-term and how such withdrawal will affect us, and the full extent to which our business could be adversely affected.

Risks Related to the Acquisition of Xinvento B.V.

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The Xinvento B.V.

intellectual property may not have the

scientific value and commercial potential which we envision.

intellectual property may not have the scientific value and commercial potential which we envision.

We may not be able to integrate the two businesses successfully, and we could assume unknown or contingent liabilities.

It is possible that the integration process could result in the diversion of our management’s attention, the disruption or interruption of, or the loss of momentum in, our ongoing business or inconsistencies in standards, controls, procedures and policies, any of which could adversely affect our ability to maintain relationships with third parties or the ability to achieve the anticipated benefits of the acquisition of Xinvento B.V., or could otherwise adversely affect our business and financial results.

It is possible that the integration process could result

in the diversion of our management’s attention, the disruption or interruption of, or the loss of momentum in, our ongoing business or inconsistencies in standards, controls, procedures and policies, any of which could adversely affect our ability to maintain relationships with third parties or the ability to achieve the anticipated benefits of the acquisition of Xinvento B.V., or could otherwise adversely affect our business and financial results.

We do not anticipate generating revenue from any Xinvento B.V.

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Accordingly, our business may become subject to economic, political, regulatory and other risks associated with international operations, such as compliance with tax, employment, immigration and labor laws for employees living or traveling abroad, workforce uncertainty in countries where labor unrest is more common than in the United States, as well as difficulties associated with staffing and managing international operations, including differing labor relations.

of these factors could materially affect our business, financial condition and results of operations.

Our future financial performance and our ability to commercialize setmelanotide, if approved, and compete effectively will depend, in part, on our ability to effectively manage the future development and expansion of our company.

Any of these factors could materially affect our business, financial condition and results of operations.

Our future financial

performance and our ability to commercialize setmelanotide, if approved, and compete effectively will depend, in part, on our ability to effectively manage the future development and expansion of our company.

Our information technology systems, or those of our third party CROs, CMOs or other contractors or consultants, may fail or suffer security breaches, which could result in a material disruption of setmelanotide development programs, regulatory investigations, enforcement actions and lawsuits.

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Further, attacks upon information technology systems are increasing in their frequency, levels of persistence, sophistication and intensity, and are being conducted by sophisticated and organized groups and individuals with a wide range of motives and expertise.

As a result of the COVID-19 pandemic, we may also face increased cybersecurity risks due to our reliance on internet technology and the number of our employees who are working remotely, which may create additional opportunities for cybercriminals to exploit vulnerabilities.

As a result of the COVID-19 pandemic and continued hybrid working environment, we may also face increased cybersecurity risks due to our reliance on internet technology and the number of our employees who are working remotely, which may create additional opportunities for cybercriminals to exploit vulnerabilities.

Because the techniques used to obtain unauthorized access to, or to sabotage, systems change frequently and often are not recognized until launched against a target, we may be unable to anticipate these techniques or implement adequate preventative measures.

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Our directors and executive officers and their affiliated entities own a significant percentage of our stock and, if they choose to act together, will be able to exert significant influence over matters subject to stockholder approval.

Our executive officers and directors and their respective affiliates, in the aggregate, hold shares representing approximately 5.5% of our outstanding voting stock as of March 31, 2023.

Our executive officers and directors and their respective affiliates, in the aggregate, hold shares representing approximately 5.5% of our outstanding voting stock as of June 30, 2023.

As a result, if these stockholders were to choose to act together, they would be able to significantly influence all matters submitted to our stockholders for approval, as well as our management and affairs.

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Sales of our common stock in the public market, or the perception that these sales could occur, could cause the market price of our common stock to decline significantly.

As of March 31, 2023, we had 56,852,404 shares of common stock outstanding.

The holders of an aggregate of approximately 3.1 million shares of our common stock, or approximately 5.5% of our total outstanding common stock as of March 31, 2023, are entitled to rights with respect to the registration of their shares under the Securities Act, subject to specified conditions, until such shares can otherwise be sold without restriction under Rule 144 or until the rights terminate pursuant to the terms of the investors’ rights agreement between us and such holders.

The holders of an aggregate of approximately 3.1 million shares of our common stock, or approximately 5.5% of our total outstanding common stock as of June 30, 2023, are entitled to rights with respect to the registration of their shares under the Securities Act, subject to specified conditions, until such shares can otherwise be sold without restriction under Rule 144 or until the rights terminate pursuant to the terms of the investors’ rights agreement between us and such holders.

We have also registered and intend to continue to register all shares of common stock that we may issue under our equity compensation plans.

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If we fail to comply with new laws, regulations or reporting requirements, our reputation and business could be adversely impacted.

Unregistered Sales of Equity Securities and Use of Proceeds

Unregistered Sales of Equity Securities

Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities

Use of Proceeds

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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 1A. Risk Factors