What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-05-07 compared with 2023-11-08 · 150 added, 217 removed, 150 unchanged (71% of the section changed)

3 unchanged sentences

All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including without limitation statements regarding:

the promise or potential of any of our products or product candidates;

the marketing and commercialization of IMCIVREE (setmelanotide), and the timing of commercialization;

the success, cost and timing of our product development activities and clinical trials;

our financial performance, including our expectations regarding our existing cash, operating losses, expenses and sources of future financing;

the design, success, cost and timing of our product development activities and clinical trials for setmelanotide and our other product candidates;

our ability to obtain regulatory approval for setmelanotide in further indications, as well as for our other product candidates;

our financial performance, including

our expectations regarding our existing cash, operating losses, expenses and sources of future financing;

the sufficiency of our cash, cash equivalents and short-term investments to fund our operations;

6 unchanged sentences

expectations surrounding our manufacturing arrangements;

the potential financial impact, growth prospects and benefits of our

acquisition of Xinvento B.V.;

the potential financial impact, the ongoing integration process of Xinvento B.V.;

the impact of the current economic slowdown on our business and operations and our future financial results;

and other statements identified by words such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “intends,” “may,” “might,” “likely,” “plans,” “potential,” “predicts,” “projects,” “seeks,” “should,” “target,” “will,” “would,” or similar expressions and the negatives of those terms are forward-looking statements.

These forward-looking statements are neither promises nor guarantees of future performance, and are subject to a variety of known and unknown risks and uncertainties, many of which are beyond our control, and other important factors which could cause actual results to differ materially from those contemplated in such forward-looking statements.

These forward-looking statements are neither promises nor guarantees of future performance, and are subject to a variety of known and unknown risks, uncertainties, and other important factors, many of which are beyond our control, and which could cause actual results to differ materially from those contemplated in such forward-looking statements.

We discuss factors that we believe could cause or contribute to these differences below and elsewhere in this report, including but not limited to those set forth in Part II, Item 1A under the heading “Risk Factors” of this Quarterly Report on Form 10-Q.

1 unchanged sentence

We caution readers not to place undue reliance upon any such forward-looking statements, which speak only as of the date made .

We are a global, commercial-stage biopharmaceutical company dedicated to transforming the lives of patients and their families living with rare diseases.

We are focused on advancing our lead asset, IMCIVREE ® (setmelanotide), as a precision medicine designed to treat hyperphagia and severe obesity caused by rare melanocortin-4 receptor (MC4R) pathway diseases.

While obesity affects hundreds of millions of people worldwide, we are advancing IMCIVREE for a subset of individuals who have hyperphagia, a pathological hunger that leads to abnormal food-seeking behaviors, and severe obesity due to an impaired MC4R pathway, which may be caused by traumatic injury or genetic variants.

We are a global, commercial-stage biopharmaceutical company dedicated to transforming the lives of patients and their families living with rare neuroendocrine diseases.

We are focused on advancing our melanocortin-4 recptor (MC4R) agonists, including our lead asset, IMCIVREE® (setmelanotide), as a precision medicine designed to treat hyperphagia and severe obesity caused by rare MC4R pathway diseases.

While obesity affects hundreds of millions of people worldwide, we are advancing developing therapies for a subset of individuals who have hyperphagia, a pathological hunger that leads to abnormal food-seeking behaviors, and severe obesity due to an impaired MC4R pathway, which may be caused by traumatic injury or genetic variants.

The MC4R pathway is an endocrine pathway in the brain that is responsible for regulating hunger, caloric intake and energy expenditure, which consequently affect body weight.

IMCIVREE, an MC4R agonist for which we hold worldwide rights, is the first-ever therapy developed for patients with certain ultra-rare diseases that is approved or authorized in the United States, European Union (EU) and Great Britain.

IMCIVREE, an MC4R agonist for which we hold worldwide rights, is the first-ever therapy developed for patients with certain rare diseases that is approved or authorized in the United States, European Union (EU), Great Britain, Canada and other countries and regions.

IMCIVREE is approved by the U.S.

2 unchanged sentences

or (ii) Bardet-Biedl syndrome (BBS).

The European Commission (EC) Great Britain’s Medicines & Healthcare Products Regulatory Agency (MHRA) and Health Canada have authorized IMCIVREE 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.

We have achieved market access for IMCIVREE for BBS or POMC and LEPR deficiencies, or both, in ten countries in addition to the United States, and we continue to collaborate with authorities to achieve and or expand access in additional markets.

In addition to initial commercial efforts, we are advancing what we believe is the most comprehensive clinical research program ever initiated in MC4R pathway diseases, with multiple ongoing and planned Phase 2 and Phase 3 clinical trials evaluating setmelanotide.

The European Commission (EC) and Great Britain’s Medicines & Healthcare Products Regulatory Agency (MHRA) have authorized IMCIVREE 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.

In addition to the United States and Canada, we have achieved market access for IMCIVREE for BBS or POMC and LEPR deficiencies, or both, in 14 countries outside the United States, and we continue to collaborate with authorities to achieve access in additional markets.

Our MC4R pathway program is designed to expand the total number of patients who would benefit from setmelanotide therapy or our one of our new drug candidates, RM-718, which is designed to be a more selective MC4R agonist with weekly administration, or LB54640, an investigational oral small molecule MC4R agonist in Phase 2 clinical trials.

With setmelanotide, we have completed enrollment in our Phase 3 trial in patients with hypothalamic obesity.

Our Phase 3 EMANATE trial, comprised of four independent substudies evaluating setmelanotide in genetically caused MC4R pathway diseases, and our Phase 2 DAYBREAK trial evaluating setmelanotide in additional genetic indications, are ongoing.

With RM-718, in March 2024 we initiated a Phase 1 in-human trials, including a multiple-ascending dose study in patients with hypothalamic obesity.

In our recently completed Phase 3 pediatrics trial in 12 patients between the ages of 2 and younger than 6 with BBS or POMC or LEPR deficiency obesities, setmelanotide achieved the primary endpoint

with a 3.04 mean reduction in BMI-Z score (a measure of body mass index deviations from what is considered normal) and 18.4 percent mean reduction in BMI.

We are seeking regulatory approval in the United States and Europe to expand the label for IMCIVREE to treat patients as young as 2 years of age with these diseases based on these data.

We are leveraging what we believe is the largest known DNA database focused on obesity - with almost 80,000 sequencing samples as of December 31, 2023 - to improve the understanding, diagnosis and care of people living with severe obesity due to certain variants in genes associated with the MC4R pathway.

Our sequencing-based epidemiology estimates show that each of these genetically-defined MC4R pathway deficiencies are considered rare diseases, according to established definitions based on patient populations.

Our epidemiology estimates are approximately 4,600 to 7,500 for U.S.

patients in initial FDA-approved indications, including obesity due to biallelic POMC, PCSK1 or LEPR deficiencies,

We estimate the epidemiology for patients with hypothalamic obesity to be between 5,000 and 10,000 in the United States, based on our analysis of published literature.

Our epidemiology estimates for the indications being studied in our Phase 3 EMANATE trial suggest that approximately 53,000 U.S.

patients with one of these genetically driven obesities have the potential to respond well to setmelanotide.

Similarly, our epidemiology estimates for patients with genetic indications who demonstrated an initial response in our Phase 2 DAYBREAK trial is approximately 65,300.

We believe that all these patients face similar challenges as other patients with rare diseases, namely lack of awareness, resources, tests, tools and, especially, therapeutic options.

We are developing setmelanotide to address additional patients with acquired hypothalamic obesity.

In our Phase 2 trial evaluating setmelanotide as a treatment for hypothalamic obesity, as announced in November 2022, 16 of 18 patients achieved the primary endpoint with a body mass index (BMI) decrease greater than 5 percent on setmelanotide therapy, and we observed a 14.5 mean percent reduction in BMI across all patients.

Fourteen of these patients transitioned from this Phase 2 trial into our open-label, long-term extension trial and they remain on therapy, as of November .

Fourteen of these patients transitioned from this Phase 2 trial into our open-label, long-term extension trial and they remain on therapy, as of April 2024.

Twelve of these 14 patients had achieved a 25.5% reduction in mean BMI from baseline at one year on setmelanotide therapy.

On November 7, 2023, we provided an update on progress of our pivotal, Phase 3 clinical trial evaluating setmelanotide in patients with acquired hypothalamic obesity.

The Phase 3 clinical trial is designed to enroll 120 patients aged 4 years or older randomized 2:1 to setmelanotide therapy or placebo for a total of 60 weeks, including up to eight weeks for dose titration.

We completed enrollment in the pivotal 120-patient cohort in our Phase 3 clinical trial.

Patients with acquired hypothalamic obesity aged 4 years or older were randomized 2:1 to setmelanotide therapy or placebo for a total of 60 weeks, including up to eight weeks for dose titration.

The primary endpoint is the percent change in BMI after approximately 52 weeks on a therapeutic regimen of setmelanotide versus placebo.

the daily most hunger score in patients ≥12 years from baseline after approximately 52 weeks on a therapeutic regimen of setmelanotide versus placebo.

We anticipate completing enrollment in this trial during the fourth quarter of 2023.

In addition, our ongoing pivotal Phase 3 EMANATE and Phase 2 DAYBREAK trials are designed to evaluate setmelanotide in several distinct, genetically defined MC4R pathway diseases.

We also are conducting a Phase 3 pediatrics trial evaluating daily setmelanotide in patients between the ages of two and six and a Phase 3 switch trial evaluating a weekly formulation of setmelanotide.

We are leveraging what we believe is the largest known DNA database focused on obesity - with approximately 60,000 sequencing samples as of December 31, 2022 - to improve the understanding, diagnosis and care of people living with severe obesity due to certain variants in genes associated with the MC4R pathway.

Our sequencing-based epidemiology estimates show that each of these genetically defined MC4R pathway deficiencies number in the rare or ultra-rare category, according to established definitions of rare disease patient populations.

Our epidemiology estimates are approximately 4,600 to 7,500 for U.S.

patients in initial FDA-approved indications, including obesity due to biallelic POMC, PCSK1 or LEPR deficiencies, and BBS.

Epidemiology estimates for patients with hypothalamic obesity is between 5,000 and 10,000 in the United States, based on our analysis of published literature and our epidemiology estimates for the indications being studied in our Phase 3 EMANATE trial suggest that approximately 53,000 U.S.

patients with one of these genetically driven obesities have the potential to respond well to setmelanotide.

There are currently no effective or approved treatments for these rare MC4R pathway related diseases.

The FDA has acknowledged the importance of these results by giving setmelanotide Breakthrough Therapy designation for the treatment of obesity associated with genetic defects upstream of the MC4R in the leptin melanocortin pathways.

The Breakthrough Therapy designation currently covers indications for POMC deficiency obesity, LEPR deficiency obesity, BBS and, as of November 2022, hypothalamic obesity.

Key secondary endpoints include the proportion of patients who achieve ≥5% reduction in BMI from baseline in adults (≥18) or BMI Z-score reduction of ≥0.2 from baseline in pediatrics after approximately 52 weeks on a therapeutic regimen of compared with placebo, and mean change in the weekly average of the daily most hunger score in patients ≥12 years from baseline after approximately 52 weeks on a therapeutic regimen of setmelanotide versus placebo.

In collaboration with Camurus AB, or Camurus, we had been developing a once-weekly, long-acting formulation of setmelanotide using Camurus' FluidCrystal® technology.

As announced in December 2023, we have paused development in favor of advancing RM-718.

In March 2024, we communicated results from a Phase 3 switch study of weekly setmelanotide and daily setmelanotide formulations to Camurus.

The results showed that pharmacokinetic data were supportive of the feasibility of a weekly formulation of setmelanotide, and data showed that the weekly setmelanotide formulation had similar efficacy and safety profile as the approved formulation for daily injection.

Additional recent clinical, regulatory, corporate and commercial updates include:

On November 7, 2023, we announced that more than 100 international patients across 11 countries cumulatively have initiated reimbursed IMCIVREE therapy, as of October 27, 2023.

On November 7, 2023, we provided an update on progress of our pivotal, Phase 3 clinical trial evaluating setmelanotide in patients with acquired hypothalamic obesity.

Approximately two-thirds of planned patients have been screened with a very low screen-failure rate observed.

We also affirmed our expectation to complete enrollment in the fourth quarter of 2023.

This Phase 3 trial is designed to enroll 120 patients aged 4 years or older randomized 2:1 to setmelanotide therapy or placebo for a total of 60 weeks, including up to eight weeks for dose titration.

On November 2, 2023, we announced that the Canadian Agency for Drugs and Technologies in Health (CADTH) recommended IMCIVREE ® (setmelanotide) be reimbursed by CADTH-participating public drug plans for weight management in adult and pediatric patients 6 years of age and older with obesity due to BBS.

During The Obesity Society’s Annual Meeting at ObesityWeek ® October 14 - 17, 2023 in Dallas, we and our collaborators delivered a total of six presentations, including data showing that setmelanotide therapy resulted in sustained and deepened weight loss in patients with severe obesity caused by rare MC4R pathway diseases.

Long-term extension study data in patients with hypothalamic obesity (n=12) demonstrate a 25.5% reduction in mean BMI from baseline on setmelanotide therapy at one year.

We also presented data that showed intervention with setmelanotide may reduce the risk of future metabolic syndrome, cardiovascular disease (CVD) and type 2 diabetes mellitus (T2DM) in patients with obesity due BBS or due to POMC or LEPR deficiency obesity;

and research that showed severity of obesity was associated with increased prevalence of cardiac, endocrine/diabetes, and renal outcomes early in life based on an analysis of 318 pediatric patients with BBS enrolled in the Clinical Registry Investigating BBS (CRIBBS).

During the 61st Annual European Society for Paediatric Endocrinology (ESPE) meeting September 21-23, 2023 in The Hague, Netherlands, we delivered four oral presentations, including data presentations on the effects of setmelanotide on the metabolic syndrome severity score in pediatric patients with BBS and in pediatric patients with

POMC or LEPR deficiencies, as well as genetic testing results we believe deepen the understanding of the genetics of obesity from its Rare Obesity Advanced Diagnosis™ (ROAD) testing program.

On September 6, 2023, we announced that a new International Classification of Diseases, Tenth Revision (ICD-10) diagnosis code for BBS, as approved by the Centers for Disease Control and Prevention (CDC), was to take effect Oct.

This BBS-specific code may improve patient identification and yield data to improve understanding of disease progression, and diagnostic and treatment journey.

On September 19, 2023, we announced that the European Medicines Agency (EMA) issued a positive opinion on the Company’s orphan drug designation request for setmelanotide as a treatment for acquired hypothalamic obesity.

On August 7, 2023, we announced that the French National Agency for Medicines and Health Products Safety (ANSM) and French National Authority for Health (HAS) granted pre-marketing early access authorization AP1 (Autorisation d’Accès Précoce), for IMCIVREE ® (setmelanotide) for patients with lesional hypothalamic obesity.

Products included in the AP1 programs are fully covered by France’s National Health System and Rhythm can expect to be reimbursed for any patients receiving treatments through this program.

On May 7, 2024 we announced that approximately 100 new prescriptions for IMCIVREE for Bardet-Biedl syndrome (BBS) were written by U.S.

prescribers and we have received payor approval for reimbursement for approximately 70 prescriptions during the first quarter of 2024.

On May 3, 2024 we delivered one oral presentation and two posters at The Pediatric Endocrine Society’s (PES) Annual Meeting May 2-5, 2024 in Chicago, IL, which highlighted previously disclosed data that showed setmelanotide achieved clinically meaningful weight reduction in pediatric patients with hypothalamic obesity, BBS or POMC and LEPR deficiency obesities.

On April 29, 2024 we announced the publication of results from our Phase 2 study of setmelanotide for the treatment of hypothalamic obesity in the peer-reviewed journal The Lancet Diabetes & Endocrinology .

The publication

highlighted that setmelanotide achieved a mean percent reduction in BMI of 15% from baseline (N=18) at 16 weeks of therapy, and preliminary data from Rhythm’s long-term extension study showing patients with hypothalamic obesity (n=12) achieved mean BMI reduction of approximately 26% at one year on setmelanotide treatment.

On March 25, 2024 we announced that the first patients had been dosed in our Phase 1 clinical trial of RM-718, an investigational, weekly melanocortin-4 receptor (MC4R)-specific agonist designed to be MC1R-sparing and to potentially avoid hyperpigmentation.

We also expect to achieve the following near-term milestones:

● Complete patient enrollment in the pivotal Phase 3 clinical trial in hypothalamic obesity in the fourth quarter of 2023;

● Complete submission to the U.S.

Food and Drug Administration of an investigational new drug application for RM-718, a new, weekly, MC4R-specific agonist, by the end of 2023.

RM-718 is designed to be more targeted and potent than setmelanotide, and designed to be MC1R sparing, with the potential to not cause hyperpigmentation;

● Announce preliminary data from the open-label part of the Phase 2 DAYBREAK trial from approximately five genetically-defined cohorts in the fourth quarter of 2023;

● Announce topline data from the ongoing Phase 3, open-label pediatrics trial evaluating one year of setmelanotide therapy in patients with MC4R pathway deficiencies between the ages of 2 and 6 years old in the fourth quarter of 2023;

● Provide pharmacokinetic and tolerability data from the ongoing Phase 3 switch trial evaluating a weekly formulation of setmelanotide in the fourth quarter of 2023.

On November 7, 2023, we also announced plans to provide an update on our MC4R pathway programs during a breakfast event for investors and analysts on December 6, 2023 in Boston.

Our operations to date have been limited primarily to conducting research and development activities for setmelanotide.

To date, we have not generated sufficient cash flows from product sales and we have financed our operations primarily through the proceeds received from the sales of common and preferred stock, royalty interest financing, asset sales, collaboration and license agreements, as well as capital contributions from the former parent company, Rhythm Holdings LLC.

● Complete submission of a supplementary New Drug Application (sNDA) to the FDA seeking a label expansion to treat pediatric patients between 2 and younger than 6 years old in approved indications in the second quarter of 2024, and potentially receive EMEA approval in the fourth quarter of 2024;

● Begin dosing patients in the Japanese, 12-patient supplemental cohort of the Phase 3 trial evaluating setmelanotide in hypothalamic obesity in the second quarter of 2024;

● Announce data from stage 2 of the exploratory Phase 2 DAYBREAK study evaluating setmelanotide in certain genetically-caused MC4R pathway diseases in the third quarter of 2024;

● Begin dosing the first patients in the Phase 2 SIGNAL trial evaluating LB54640, an investigational oral small molecule MC4R agonist, in patients with hypothalamic obesity, in the third quarter of 2024.

The 28-patient SIGNAL trial is a randomized, placebo-controlled, double-blind study designed to evaluate three dose levels of LB54640.

The primary endpoint of the study is the change from baseline in body mass index after 14 weeks of treatment, and patients may continue on therapy for up to 52 weeks;

● Complete enrollment in two or more substudies in the Phase 3 EMANATE trial evaluating setmelanotide in genetically caused MC4R pathway diseases in the second half of 2024;

● Complete the Company’s Phase 1 clinical trial of RM-718, an investigational, weekly melanocortin-4 receptor (MC4R)-specific agonist, and announce data from this trial – including data from a planned cohort of patients with hypothalamic obesity - in the first half of 2024;

● Announce top-line data in the Phase 3 trial evaluating setmelanotide in hypothalamic obesity in the first half of 2025.

Up until recently, our operations have been limited primarily to conducting research and development activities for setmelanotide.

To date, we have not generated sufficient cash flow from product sales and have financed our operations primarily through the proceeds received from the sales of common and preferred stock, royalty interest financing, asset sales, as well as capital contributions from the former parent company, Rhythm Holdings LLC.

From August 2015 through August 2017, we raised aggregate net proceeds of $80.8 million through our issuance of series A preferred stock.

Since our initial public offering, or IPO, on October 10, 2017 and our underwritten follow-on and at-the-market offerings through September 2023, we have raised aggregate net proceeds of approximately $791.5 million through the issuance of our common stock after deducting underwriting discounts, commissions and offering related transaction costs.

We also received $100.0 million from an asset sale, specifically in connection with the sale of our Rare Pediatric Disease Priority Review Voucher, or PRV, to Alexion Pharmaceuticals, Inc.

Since our initial public offering, or IPO, on October 10, 2017 and our underwritten follow-on offerings through October 2022, we have raised aggregate net proceeds of approximately $791.5 million through the issuance of our common stock after deducting underwriting discounts, commissions and offering related transaction costs.

We also received $100.0 million from the sale of our Rare Pediatric Disease Priority Review Voucher, or PRV, to Alexion Pharmaceuticals, Inc.

in February 2021.

In December 2021, we entered into an Exclusive License Agreement with RareStone Group Ltd., and received $7.0 million in connection with the execution of that agreement.

In June 2022, we entered into the RIFA, with entities managed by HealthCare Royalty Partners, collectively referred to as the Investors, and through September 30, 2023 have received cumulative proceeds of $96.7 million, net of certain transaction costs.

In June 2022, we entered into the Revenue Interest Financing Agreement (“RIFA”), with entities managed by HealthCare Royalty Partners, collectively referred to as the Investors, and through December 31, 2023 have received cumulative proceeds of $96.7 million, net of certain transaction costs.

IMCIVREE became commercially available to patients 6 years of age and older with obesity due to POMC, PCSK1 or LEPR deficiency in the U.S.

in the first quarter of 2021 and patients 6 years of age and older with obesity due to BBS during June 2022.

Following marketing authorizations in the EU and Great Britain, we are pursuing a country-by-

country strategy to establish market access and reimbursement for IMCIVREE in several countries.

Following marketing authorizations in the EU and Great Britain, we are pursuing a country-by-country strategy to establish market access and reimbursement for IMCIVREE in several countries.

During March 2022, we treated the first patients with IMCIVREE in France under the paid early access program and we treated the first patients with IMCIVREE in Germany during June 2022.

We expect to continue to fund our operations through the sale of equity, debt financings or other sources.

We expect to continue to fund our operations through the sale of equity,

debt financings or other sources.

We have built our own marketing and commercial sales infrastructure in the United States and are in the process of building a similar infrastructure in several European markets and the United Kingdom.

2 unchanged sentences

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

As of September 30, 2023 we had an accumulated deficit of $853.1 million.

Our net loss was $44.2 million, $142.7 million, $40.9 million and $138.6 million, for the three and nine months ended September 30, 2023 and 2022, respectively.

As of March 31, 2024 we had an accumulated deficit of $1,036.1 million.

Our net loss was $141.4 million and $52.2 million for the three months ended March 31, 2024 and 2023, respectively.

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

Our expenses may increase in connection with our ongoing activities, as we:

● continue to conduct clinical trials for setmelanotide;

● continue to conduct clinical trials for setmelanotide and our other product candidates ;

● engage contract manufacturing organizations, or CMOs, for the manufacture of clinical and commercial-grade setmelanotide;

● seek regulatory approval for setmelanotide for additional indications;

● expand our clinical, regulatory, commercial and corporate infrastructure and expand operations globally;

● seek regulatory approval for setmelanotide for future indications, and for our other product candidates ;

● expand our clinical and financial operations and build a marketing and commercialization infrastructure ;

● engage in the sales and marketing efforts necessary to support the continued commercial efforts of IMCIVREE globally;

● take into account the levels, timing and collection of revenue earned from sales of IMCIVREE and other products approved in the future, if any;

● advance our pre-clinical development programs, including RM-718 and our CHI program;

● continue to operate as a public company.

As of September 30, 2023, our existing cash and cash equivalents and short-term investments were approximately $299.3 million.

We expect that our existing cash and cash equivalents and short-term investments will be sufficient to fund our operations into 2026.

As of March 31, 2024, our existing cash and cash equivalents and short-term investments were approximately $201.2 million.

On April 1, 2024, we entered into an Investment Agreement with certain investors resulting in the issuance of convertible preferred stock to the investors and proceeds to the Company of $150.0 million, as disclosed in Note 13, “Subsequent Events”, to the unaudited condensed consolidated financial statements included under Part I, Item 1 of this Quarterly Report on Form 10-Q.

We expect that our existing cash and cash equivalents and short-term investments as of March 31, 2024, combined with the proceeds received from the April 2024 issuance of convertible preferred stock, will be sufficient to fund our operations into 2026.

Corporate Background

1 unchanged sentence

Financial Operations Overview

To date, we have generated approximately $73.0 million of revenue from product sales.

To date, we have generated approximately $123.4 million in product revenue.

Our lead product candidate, IMCIVREE, was approved by the FDA in November 2020 for chronic weight management in adult and pediatric patients six years of age and older with obesity due to POMC, PCSK1 or LEPR deficiency confirmed by genetic testing.

IMCIVREE became commercially available in the United States in the first quarter of 2021.

We recorded our first sales of IMCIVREE in the United States in March 2021 and we made our first sales in France during March 2022 under the paid early access program.

IMCIVREE was approval by the FDA and the EC in adult and pediatric patients six years

of age and older with obesity due to BBS in June and September 2022, respectively.

We recorded our first sales of IMCIVREE in the United States in March 2021 and we made our first sales in France during March 2022 under the

paid early access program.

IMCIVREE was approval by the FDA and the EC in adult and pediatric patients six years of age and older with obesity due to BBS in June and September 2022, respectively.

Following these approvals for BBS, we expect our sales of IMCIVREE will continue to grow as we identify and treat more patients with this disease and obtain reimbursement throughout the international markets in which we operate.

2 unchanged sentences

Most of the manufacturing costs have been recorded as research and development expenses in prior periods.

Accordingly, the product cost component related to IMCIVREE included in cost of sales for the three and nine months ended September 30, 2022 was insignificant.

We expect cost of sales to continue to increase during the remainder of 2023 as we sell inventory that is produced after we began capitalizing manufacturing costs for IMCIVREE commercial inventory and experience increased enrollment in our patient assistance programs.

Accordingly, the product cost component related to IMCIVREE included in cost of sales for the three months ended March 31, 2024 and 2023 was insignificant.

We expect cost of sales to increase in 2024 as we continue to sell inventory that is produced after we began capitalizing manufacturing costs for IMCIVREE commercial inventory.

We expect cost of sales to increase in 2023 as we continue to sell inventory that is produced after we began capitalizing manufacturing costs for IMCIVREE commercial inventory.

Research and development expenses

5 unchanged sentences

● facilities, depreciation, and other expenses, which include rent and maintenance of facilities, insurance and other operating costs;

● Acquired in process research and development costs associated with the acquisition of Xinvento B.V., or Xinvento.

● acquired in process research and development costs associated with the acquisition of Xinvento B.V., or Xinvento in the three months ended March 31, 2023;

● acquired in process research and development costs associated with the acquisition of LG Chem’s proprietary compound LB54640 in the three months ended March 31, 2024.

We expense research and development costs to operations as incurred.

3 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

Research and development summary

1 unchanged sentence

We are unable to predict the duration and costs of the current or future clinical trials of our product candidates.

The duration, costs, and timing of clinical trials and development of setmelanotide will depend on a variety of factors, including:

The duration, costs, and timing of clinical trials and development of setmelanotide, RM-718, LB54640, and a potential therapeutic product candidate for CHI will depend on a variety of factors, including:

● the scope, rate of progress, and expense of our ongoing, as well as any additional, clinical trials and other research and development activities;

13 unchanged sentences

General and administrative expenses consist primarily of salaries and other related costs, including stock-based compensation, relating to our full-time employees not involved in R&D or commercial activities.

Other significant costs include rent, legal fees relating to patent and corporate matters and fees for accounting, tax and consulting services.

Other significant costs include rent, legal fees relating to patent and corporate matters and fees for accounting and consulting services.

The following table summarizes our current selling, general and administrative expenses:

Three Months Ended

Nine Months Ended

September 30,

Selling, general and administrative summary

1 unchanged sentence

We anticipate that our selling, general and administrative expenses will increase in the future to support our continued and expanding commercialization efforts for IMCIVREE in the United States and the European Union as well as increased costs of operating as a global commercial stage biopharmaceutical public company.

These increases will likely include increased costs related to the hiring of additional personnel and fees to outside consultants, lawyers and accountants, compliance with local rules and regulations in the United States and foreign jurisdictions, exchange listing and Securities and Exchange Commission (SEC) expenses, insurance and investor relations costs, among other expenses.

These increases will likely include increased costs related to the hiring of additional personnel and fees to outside consultants, lawyers and accountants, compliance with local rules and regulations in the United States and foreign jurisdictions, exchange listing and Securities and Exchange Commission, or SEC, expenses, insurance and investor relations costs, among other expenses.

Critical Accounting Policies and Estimates

2 unchanged sentences

These items are monitored and analyzed by us for changes in facts and circumstances on an ongoing basis, and material changes in these estimates could occur in the future.

We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the

carrying value of assets and liabilities that are not readily apparent from other sources.

We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.

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

1 unchanged sentence

Results of Operations

Comparison of the three months ended September 30, 2023 and 2022

The following table summarizes our results of operations for the three months ended September 30, 2023 and 2022, together with the changes in those items in dollars and as a percentage:

Comparison of the three months ended March 31, 2024 and 2023

The following table summarizes our results of operations for the three months ended March 31, 2024 and 2023, together with the changes in those items in dollars and as a percentage:

Three Months Ended

September 30,

(in thousands)

8 unchanged sentences

Other income (expense), net

(Loss) income before taxes

Loss before income taxes

Provision for income taxes

Product revenue, net .

Product revenue, net increased by $18.2 million to $22.5 million for the three months ended September 30, 2023 from $4.3 million for the three months ended September 30, 2022, an increase of 425%.

Product revenue, net increased by $14.5 million to $26.0 million for the three months ended March 31, 2024 from $11.5 million for the three months ended March 31, 2023, an increase of 126%.

We expect our sales of IMCIVREE to continue to increase following the FDA approval for the treatment of patients with BBS in the United States in June 2022 and ten other countries since then.

During the three months ended September 30, 2023 and 2022, a substantial amount of our product revenue, or 80% and 81%, respectively, has been generated in the United States.

Cost of sales.

Cost of sales increased by $1.9 million to $2.4 million for the three months ended September 30, 2023 from $0.5 million for the three months ended September 30, 2022, increase of 385%.

Most of the IMCIVREE manufacturing costs have been recorded as research and development expenses in prior periods.

Accordingly, the product cost component related to IMCIVREE included in our cost of sales for the three months ended September 30, 2022 was insignificant.

Cost of sales primarily reflects a royalty due to Ipsen Pharma S.A.S., or Ipsen, on our net product sales and the amortization of our capitalized sales-based milestone payment made to Ipsen, upon our first commercial sale in the U.S.

and EU, the cost of product, as well as costs associated with our patient assistance programs.

Specifically, the $1.9 million increase in cost of sales for the three months ended September 30, 2023 was due to $0.9 million of additional royalties due to our growth in sales, $0.9 million attributed to product cost primarily associated with higher sales volume and $0.1 million of amortization of our capitalized sales-based milestone payment.

We expect cost of sales as a percentage of product revenue, net to be in a range of 10% to 12% during 2023 and the foreseeable future.

Research and development expense.

Research and development expense increased by $12.5 million to $33.6 million for the three months ended September 30, 2023 from $21.1 million for the three months ended September 30, 2022, an increase of 59%.

The net increase was primarily due to the following:

● an increase of $5.3 million in our clinical trial costs associated with increased activity in our Phase 2 DAYBREAK and Phase 3 EMANATE trials as well as our Phase 3 hypothalamic obesity trial.

These costs were partially offset by reduced activity due to the completion and wind down of our Phase 2 hypothalamic obesity study, QTc trial, BBS trial, Phase 2 Basket trial, Phase 3 pediatrics trial, as well as our renal study and de novo and switch trials;

● an increase of $2.0 million due to increased preclinical research costs related to RM-718;

● an increase of $2.1 million due to increased gene sequencing costs to support our expanded clinical programs;

● an increase of $1.9 million in salaries, benefits and stock-based compensation related to the hiring of additional full-time employees in order to support the growth of our research and development programs;

● an increase of $1.1 million related to professional services and consulting costs associated with our expanding clinical and pre-clinical programs.

Selling, general and administrative expense.

Selling, general and administrative expense increased by $8.5 million to $30.5 million for the three months ended September 30, 2023 from $21.9 million for the three months ended September 30, 2022, an increase of 39%.

The increase was primarily due to the following:

● an increase of $4.5 million due to increased salaries, benefits and stock-based compensation related costs associated with additional headcount to support our expanding business operations as well as to build out our commercial operations in the United States and internationally ;

● an increase of $3.4 million related to professional services costs, including legal and tax services;

● an increase of $0.6 million related to costs associated with ongoing sales and marketing activities for IMCIVREE after receiving FDA approval in June 2022.

Other income (expense), net.

Other income (expense), net increased by $1.8 million to $0.2 million for the three months ended September 30, 2023 from ($1.6) million for the three months ended September 30, 2022.

The increase was primarily due to the following:

● an increase of interest income of $2.6 million earned on our short-term investments, based on a higher average investment balance from proceeds from our equity and debt offerings, as well as higher interest rates;

● an increase of other income from the change in fair value of our RIFA embedded derivative and net foreign currency gains of $0.2 million.

The above increases were partially offset by:

● an increase of $1.0 million of interest expense related to our RIFA with HealthCare Royalty Partners, based on a higher average deferred royalty obligation balance during the quarter ended September 30, 2023 as compared to the quarter ended September 30, 2022.

Net loss increased by $3.3 million to $44.2 million for the three months ended September 30, 2023,

from a net loss of $40.9 million for the three months ended September 30, 2022, an increase of 8%.

The increase in net loss was a result of higher current period operating costs and expenses, as noted above, partially offset by increased revenues.

Comparison of the nine months ended September 30, 2023 and 2022

Nine Months Ended

September 30,

(in thousands)

Statement of Operations Data:

Product revenue, net

License revenue

Total revenues

Costs and expenses:

Cost of sales

Research and development

Selling, general, and administrative

Total costs and expenses

Loss from operations

Other income (expense), net

Loss before taxes

Provision for income taxes

Product revenue, net .

Product revenue, net increased by $45.1 million to $53.2 million for the nine months ended September 30, 2023 from $8.1 million for the nine months ended September 30, 2022, an increase of 557%.

We expect our sales of IMCIVREE to continue to increase following the FDA approval for the treatment of patients with BBS in the United States in June 2022 and in ten other countries since then.

During the nine months ended September 30, 2023 and 2022, a substantial amount of our product revenue, or 84% and 86%, respectively, has been generated in the United States.

License revenue.

License revenue decreased by $6.8 million for the nine months ended September 30, 2023 to zero, or a decrease of 100%.

The license revenue recognized in 2022 was entirely related to the license we granted to RareStone in December 2021 to develop, manufacture, commercialize and otherwise exploit any pharmaceutical product that contains setmelanotide in the diagnosis, treatment or prevention of conditions and diseases in humans in China, including mainland China, Hong Kong and Macao.

We completed our activities required to transfer the license to RareStone during three month period ending June 30, 2022, which resulted in the recognition of the license revenue.

We do not expect to recognize additional license revenue related to the RareStone arrangement during 2023.

For the three months ended March 31, 2024 and 2023, a substantial amount of our product revenue, or 74% and 83%, respectively, was generated from sales of our product to patients in the United States.

Cost of sales.

Cost of sales increased by $5.0 million to $6.1 million for the nine months ended September 30, 2023 from $1.1 million for the nine months ended September 30, 2022, an increase of 449%.

Most of the IMCIVREE manufacturing costs have been recorded as research and development expenses in prior periods.

Accordingly, the product cost component related to IMCIVREE included in our cost of sales for the nine months ended September 30, 2022 was insignificant.

and EU, the cost of product as well as costs associated with our patient assistance programs.

Specifically, the $5.0 million increase in cost of sales for the nine months ended September 30, 2023 was due to $2.3 million of additional royalties due to our growth in sales, $2.1 million attributed to product cost primarily associated with higher sales volume and $0.6 million of amortization of our capitalized sales-based milestone payment.

We expect cost of sales as a percentage of product revenue, net to be in a range of 10% to 12% during 2023 and the foreseeable future.

Cost of sales increased by $1.4 million to $2.8 million for the three months ended March 31, 2024 from $1.4 million for the three months ended March 31, 2023, an increase of 98%, which was driven by a corresponding increase in revenue in the three months ended March 31, 2024 .

Cost of sales is composed of royalty expense due to Ipsen Pharma S.A.S., or Ipsen, on our net product revenue, amortization of our capitalized sales-based milestone payment made to Ipsen, upon our first commercial sale in the United States and European Union, the cost of product, as well as costs associated with our patient assistance programs.

Specifically, the $1.4 million increase in cost of sales in the three months ended March 31, 2024 from the same period in 2023 was due to $0.7 million of additional royalties due to our growth in

sales and $0.7 million attributed to increased product cost associated with higher sales volume.

We expect cost of sales as a percentage of product revenue, net to continue to be in a range of 10% to 12% in the foreseeable future.

Research and development expense.

Research and development expense increased by $20.0 million to $105.1 million for the nine months ended September 30 2023 from $85.1 million for the nine months ended September 30, 2022, an increase of 23%.

Research and development expense increased by $90.7 million to $128.7 million for the three months ended March 31, 2024 from $37.9 million for the three months ended March 31, 2023, an increase of 239%.

The net increase was primarily due to the following:

● an increase of $5.7 million in our research and development costs related to in process research and development assets acquired from Xinvento, BV;

● an increase of $6.6 million in salaries, benefits and stock-based compensation related to the hiring of additional full-time employees in order to support the growth of our research and development programs;

● an increase of $3.3 million due to increased gene sequencing costs to support our expanded clinical programs;

● an increase of $4.9 million in our clinical trial costs associated with increased activity in our Phase 2 DAYBREAK and Phase 3 EMANATE trials as well as our Phase 3 clinical trial in hypothalamic obesity.

These costs were partially offset by reduced activity due to the completion and wind down of our Phase 2 hypothalamic obesity study, QTc trial, BBS trial, and Phase 2 Basket trial, as well as our renal study and de novo and switch trials;

● an increase of $1.7 million in our next generation assets;

● acquired in process research and development costs associated with the acquisition of LG Chem’s proprietary compound LB54640 of $92.4 million in the three months ended March 31, 2024;

● an increase of $2.3 million in our clinical trial costs associated with increased activity in our Phase 3 hypothalamic obesity trial and our Phase 3 EMANATE trial, as well as clinical trial costs for the two clinical trials inherited from LGC in the three months ended March 31, 2024;

● an increase of $1.1 million due to increased preclinical research costs related to RM-718;

● an increase of $1.2 million in salaries, benefits and stock-based compensation related to the hiring of additional full-time employees in order to support the growth of our research and development program.

The above increases were partially offset by:

● a decrease of $2.8 million in costs associated with less manufacturing of clinical materials;

● the purchase of in-process research and development assets of $5.7 million from Xinvento, BV in the three months ended March 31, 2023, which did not recur in the three months ended March 31, 2024.

Selling, general and administrative expense.

Selling, general and administrative expense increased by $19.4 million to $85.2 million for the nine months ended September 30, 2023 from $65.7 million for the nine months ended September 30, 2022, an increase of 30%.

Selling, general and administrative expense increased by $9.7 million to $34.4 million for the three months ended March 31, 2024 from $24.6 million for the three months ended March 31, 2023, an increase of 40%.

The increase was primarily due to the following:

● an increase of $14.2 million due to increased salaries, benefits and stock-based compensation related costs associated with additional headcount to support our expanding business operations as well as to build out our commercial operations in the United States and internationally ;

● an increase of $6.8 million related to professional services and consulting costs;

● an increase of $0.9 million due to increased costs associated with information technology, international office space, sponsorships and general corporate travel related expenses for our expanding workforce.

The above increases were partially offset by:

● a decrease of $2.5 million related to costs associated with sales and marketing activities for IMCIVREE in preparation of BBS launch during the prior year.

● an increase of $5.2 million due to increased compensation and benefits related costs associated with additional headcount to support our expanding business operations as well as to establish commercial operations in international regions;

● an increase of $2.2 million related to professional services costs, including legal, consulting and tax services;

● an increase of $2.1 million related to costs associated with ongoing sales and marketing activities for IMCIVREE’s expansion in the US and international markets.

Other income (expense), net.

Other income (expense), net increased by $2.0 million to $0.4 million for the three months ended September 30, 2023 from ($1.6) million for the three months ended September 30, 2022.

The increase was primarily due to the following:

● an increase of interest income of $9.1 million earned on our short-term investments, based on a higher average investment balance from proceeds from our equity and debt offerings, as well as higher interest rates;

The above increase was partially offset by:

● an increase of $7.1 million of interest expense related to our RIFA with HealthCare Royalty Partners, based on a higher average deferred royalty obligation balance during the quarter ended September 30, 2023 as compared to the quarter ended September 30, 2022.

Net loss increased by $4.4 million to $143.0 million for the nine months ended September 30, 2023, from a net loss of $138.6 million for the nine months ended September 30, 2022, an increase of 3%.

The increase in net loss was a result of higher current period operating costs and expenses, as noted above, partially offset by increased revenues.

Other income (expense), net decreased by $1.6 million to ($1.2) million for the three months ended March 31, 2024 from $0.4 million for the three months ended March 31, 2023.

The decrease was primarily due to the following:

● a decrease of interest income of $0.4 million earned on our short-term investments, based on lower average investment balances;

● an increase in non-cash interest expense of $0.8 million related to amortization of debt discount and deferred financing fees associated with our higher deferred royalty obligation balance;

● recognition of $0.9 million of non-cash interest expense in the three months ended March 31, 2024 associated with accretion of the non-current liability payable to LGC in July, 2025.

The above amounts were partially offset by:

● an increase in other income from the change in fair value of our RIFA embedded derivative of $0.5 million.

Liquidity and Capital Resources

As of September 30, 2023, our cash and cash equivalents and short-term investments were approximately $299.3 million.

The following table provides information regarding our cash flows for the nine months ended September 30, 2023 and 2022:

Nine Months Ended September 30,

As of March 31, 2024, our cash and cash equivalents and short-term investments were approximately $201.2 million.

The following table provides information regarding our cash flows for the three months ended March 31, 2024 and 2023:

Three Months Ended March 31,

(in thousands)

6 unchanged sentences

Net cash used in operating activities

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

Net cash used in operating activities was $106.8 million for the nine months ended September 30, 2023 and consisted primarily of a net loss of $143.0 million adjusted for non-cash items of $34.7 million, which consisted of non-cash stock-based compensation, depreciation and amortization, rent expense and the change in the fair value of our embedded derivative liability.

Our net loss also includes $5.7 million of acquired In-Process Research and Development (IPR&D) assets, which are classified as investing activities.

The change in operating assets and liabilities used net cash of approximately $4.1 million, primarily driven by net increases in accounts receivable and inventory of $13.2 million from our increasing revenues and a net increase in prepaid expenses and other assets of $0.8 million, offset by a net increase in accounts payable and accrued expenses of $9.9 million due to the timing of vendor and employee bonus payments.

Net cash used in operating activities was $139.4 million for the nine months ended September 30, 2022 and consisted primarily of a net loss of $138.6 million adjusted for non-cash items of $18.8 million, which consisted of non-cash stock-based compensation, depreciation and amortization and rent expense.

The change in operating assets and liabilities reflected a total use of cash of approximately $19.6 million from a decrease in accounts payable, deferred revenue and accrued expenses and an increase in prepaid expenses and other current assets.

Net cash (used in) provided by investing activities

Net cash used in investing activities was $28.3 million for the nine months ended September 30, 2023 and relates to gross purchases of short-term investments of $314.2 million and cash used to purchase Xinvento’s IPR&D assets for $5.7 million in February 2023.

These cash uses were offset by maturities of short-term investments of $291.7 million.

Net cash provided by investing activities was $68.8 million for the nine months ended September 30, 2022 and relates to $224.6 million of maturities of short-term investments, partially offset by $151.5 million of purchases of short-term investments, a $4.0 million milestone obligation payment under our license agreement with Ipsen and $0.3 million related to the purchase of property plant and equipment.

Net cash provided by financing activities

Net cash provided by financing activities was $71.9 million for the nine months ended September 30, 2023, and consisted of net proceeds of $48.9 million from the issuance of common stock, net proceeds of $24.4 million from the final investment tranche of our deferred royalty obligation and proceeds of $3.5 million from the exercise of stock options, vesting of restricted stock units and the issuance of common stock from Employee Stock Purchase Plan.

These proceeds were offset by $4.8 million of repayments of our deferred royalty obligation.

Net cash provided by financing activities was $196.5 million for the nine months ended September 30, 2022, and consisted of net proceeds of $117.0 million from the issuance of common stock, proceeds of $75.0 million from our Revenue Interest Financing Agreement and proceeds of $4.5 million from the exercise of stock options, vesting of restricted stock units and the issuance of common stock from Employee Stock Purchase Plan.

The use of cash in all periods resulted primarily from our net loss adjusted for non-cash charges and changes in components of operating assets and liabilities.

Net cash used in operating activities was $40.7 million for the three months ended March 31, 2024 and consisted primarily of a net loss of $141.4 million adjusted for non-cash items of $102.8 million, which consisted of non-cash stock-based compensation, depreciation and amortization, rent expense and the change in the fair value of our embedded derivative liability, totaling $10.4 million.

Our net loss adjusted for non-cash items also includes $92.4 million of acquired IPR&D assets, which are classified as investing activities.

The change in operating assets and liabilities used net cash of approximately $2.2 million, primarily driven by net increases in prepaid expenses and other assets of $2.4 million and net decreases in accounts payable and accrued expenses of $1.3 million, offset by a net increase in long-term assets of $1.2 million and decreases in accounts receivable and inventory of $0.3 million.

Net cash used in operating activities was $36.4 million for the three months ended March 31, 2023 and consisted primarily of a net loss of $52.2 million adjusted for non-cash items of $15.3 million, which consisted of non-cash stock-based compensation, depreciation and amortization and rent expense, totaling $9.9 million.

Our net loss also included $5.4 million of acquired IPR&D assets, which are classified as investing activities.

The change in operating assets and liabilities reflected a total net source of cash of approximately $0.4 million from an increase in accounts payable and accrued expenses of $5.2 million, offset by increases to accounts receivable and inventory of $4.8 million.

Net cash provided by investing activities

Net cash provided by investing activities was $30.1 million for the three months ended March 31, 2024 and relates to gross maturities of short-term investments of $70.1 million, offset by cash used for the purchase of LGC’s proprietary compound LB54640 for $40.0 million in January 2024.

Net cash provided by investing activities was $18.5 million for the three months ended March 31, 2023 and relates to $92.7 million of maturities of short-term investments, partially offset by $69.6 million of purchases of short-term investments, and cash used in the acquisition of Xinvento, BV of $4.5 million.

Net cash provided by (used in) financing activities

Net cash provided by financing activities was $4.2 million for the three months ended March 31, 2024, and consisted of proceeds of $7.0 million from the exercise of stock options and the issuance of common stock from Employee Stock Purchase Plan.

These proceeds were offset by $2.8 million of repayments on our deferred royalty obligation.

Net cash used in financing activities was $0.1 million for the three months ended March 31, 2023, and consisted of $1.4 million of repayments on our deferred royalty obligation, offset by proceeds of $1.3 million from the exercise of stock options and the issuance of common stock under the Employee Stock Purchase Plan.

Funding requirements

We expect our expenses to increase in connection with our ongoing activities, particularly as we continue the clinical development of and seek marketing approval for setmelanotide for future indications and build out our global organization.

In addition, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution to the extent that such sales, marketing and distribution are not the responsibility of potential collaborators.

We also expect to incur additional costs associated with operating as a public company.

We expect that our existing cash and cash equivalents and short-term investments will be sufficient to fund our operations into 2026.

We expect that our existing cash and cash equivalents and short-term investments as of the end of March 31, 2024, combined with the proceeds received from the April 2024 issuance of convertible preferred stock, will be sufficient to fund our operations into 2026.

Our cash and cash equivalents are maintained at financial institutions in amounts that exceed federally-insured limits.

4 unchanged sentences

● the cost to continue to commercialize setmelanotide, by building an internal sales force or entering into collaborations with third parties and providing support services for patients;

● the scope, progress, results and costs of clinical trials for our setmelanotide program;

● the costs, timing and outcome of regulatory review of our setmelanotide program;

● the obligations owed to Ipsen, Camurus and Takeda Pharmaceutical Company Limited pursuant to our license agreements;

● the obligations owed to Xinvento pursuant to our purchase agreement

● the scope, progress, results and costs of clinical trials for our setmelanotide program as well as for RM-718 and LB54640, and in connection with a therapeutic product candidate for CHI ;

● the costs, timing and outcome of regulatory review of our setmelanotide program as well as for RM-718 and LB54640, and in connection with a therapeutic product candidate for CHI ;

● the costs related to the acquisition, integration, research and development and commercialization efforts related to the acquisition of Xinvento B.V.

and any related therapeutic product candidates;

● the obligations owed to Ipsen, Camurus and Takeda Pharmaceutical Company Limited, or Takeda, and LG Chem pursuant to our license agreements;

● the extent to which we acquire or in-license other product candidates and technologies;

1 unchanged sentence

● our ability to establish and maintain additional collaborations on favorable terms, if at all;

● the costs of operating as a public company, including those resulting from losing our emerging growth company status.

Although IMCIVREE has been approved by the FDA and authorized by the EC and Great Britain in certain indications, IMCIVREE may not achieve commercial success.

● the costs of operating as a public company

Although IMCIVREE has been approved by the FDA in certain indications, and became commercially available in the first quarter of 2021, IMCIVREE may not achieve commercial success.

In addition, developing our setmelanotide program is a time-consuming, expensive and uncertain process that may take years to complete, and we may never generate the necessary data or results required to obtain future marketing approvals and achieve product sales.

8 unchanged sentences

Debt financing, if available, involves agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.

If we raise funds through additional collaborations, strategic alliances or licensing arrangements with third parties or other means, we may have to relinquish valuable rights to our setmelanotide program on terms that may not be favorable to us.

If we are unable to raise additional funds through equity, debt financings or other means, when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market our setmelanotide program that we would otherwise prefer to develop and market ourselves.

Revenue Interest Financing Agreement

On June 16, 2022, we announced a non-dilutive Revenue Interest Financing Agreement, or RIFA, with HealthCare Royalty Partners, for a total investment amount of up to $100 million.

In exchange for the total investment amount to be received by Rhythm, HealthCare Royalty will receive a tiered royalty based on global net product sales generated by IMCIVREE.

For additional information, see Note 12, “Long-term Obligations” to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

November 2, 2021, we entered into a Sales Agreement with Cowen and Company, LLC, or Cowen, pursuant to which we may issue and sell shares of our common stock, having an aggregate offering price of up to $100.0 million, from time to time through an “at the market” equity offering program under which Cowen acts as sales agent, or the ATM Program.

During the three months ended September 30, 2023, we sold approximately two million shares of our common stock in the ATM Program for gross proceeds of approximately $50.0 million and net proceeds of approximately $48.9 million, after deducting sales agent fees.

If we raise funds through additional collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our setmelanotide program on terms that may not be favorable to us.

If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market our setmelanotide program that we would otherwise prefer to develop and market ourselves.

On November 2, 2021, we entered into a Sales Agreement with Cowen and Company, LLC (“Cowen”), pursuant to which we may issue and sell shares of its common stock, having an aggregate offering price of up to $100.0 million, from time to time through an “at the market” equity offering program under which Cowen acts as sales agent (the “ATM Program”).

Between August 10, 2023 and August 21, 2023, we sold approximately two million shares of our common stock in the ATM Program for net proceeds of approximately $48.9 million.

On February 29, 2024, the Company and Cowen entered into Amendment No.

1 to Sales Agreement (the “Amendment”) to increase the aggregate offering price of the shares of Common Stock that may be issued and sold pursuant to the Sales Agreement to $200,000,000 (excluding the aggregate offering price of shares of Common Stock issued and sold pursuant to the Sales Agreement prior to February 29, 2024).

In connection with the Amendment, on February 29, 2024, the Company filed with the SEC a prospectus supplement, dated February 29, 2024, which, combined with the Base Prospectus (together, the “New Prospectus”), amended the Prior Prospectus in its entirety.

The issuances and sales under the Sales Agreement, as amended by the Amendment, will be made pursuant to the Registration Statement and the New Prospectus.

On September 19, 2022, we completed a public offering of 4,800,000 shares of common stock at a price to the public of $26.00 per share.

We received $116.9 million in net proceeds after deducting underwriting discounts, commissions and offering expenses.

In addition, we granted the underwriters a 30-day option to purchase up to an additional 720,000 shares of its common stock at the price to the public, less underwriting discounts and commissions.

On October 18, 2022, we completed the sale of an additional 580,000 shares of common stock at a price to the public of $26.00 per share pursuant to the partial exercise of the underwriters’ option to purchase additional shares, for aggregate net proceeds of approximately $14.2 million after deducting underwriting discounts, commissions and offering expenses.

Contractual obligations

As of September 30, 2023, apart from additional contractual obligations under our acquisition of Xinvento as disclosed in Note 3, “Asset Acquisition”, to the unaudited condensed consolidated financial statements included under Part I, Item 1 of this Quarterly Report on Form 10-Q, there were no other material changes to our principal contractual obligations and commitments as reported in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.

As of March 31, 2024, apart from additional contractual obligations under our acquisition of Xinvento and LG Chem’s LB54640 as disclosed in Note 3, “Asset Acquisitions”, to the unaudited condensed consolidated financial statements included under Part I, Item 1 of this Quarterly Report on Form 10-Q, there were no other material changes to our principal contractual obligations and commitments as reported in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

Quantitative and Qualitative Disclosures About Market Risk

As of September 30, 2023, there were no material changes to our quantitative and qualitative disclosures about market risks as reported in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.

As of March 31, 2024, there were no material changes to our quantitative and qualitative disclosures about market risks as reported in Part II, Item 7A “Quantitative and Qualitative Disclosures About Market Risks” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis