What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-08-06 compared with 2024-05-07 · 142 added, 111 removed, 189 unchanged (57% of the section changed)

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

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;

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;

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ongoing activities under and our ability to negotiate our collaboration and license agreements, if needed, and the impact of termination;

our marketing, commercial sales, and revenue generation;

our marketing, commercial sales, revenue generation, and cost of revenue;

expectations surrounding our manufacturing arrangements;

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;

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

the impact of the current or future economic conditions 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, 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.

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.

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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.

We are focused on advancing our melanocortin-4 receptor (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 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 genetic variants or traumatic injury.

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.

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

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.

The European Commission (EC) has 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 2 years of age and above.

Great Britain’s Medicines & Healthcare Products Regulatory Agency (MHRA) has 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 or named patient sales of 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.

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 clinical trials.

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.

Our MC4R pathway program is designed to expand the total number of patients who would benefit from setmelanotide therapy or 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.

With RM-718, in March 2024 we initiated Phase 1 in-human trials, including a multiple-ascending dose study in patients with hypothalamic obesity, and in July 2024, we announced that we had dosed the first patients in our Phase 2 trial evaluating LB54640 in patients with hypothalamic obesity, and in July 2024, we announced that we had dosed the first patients in our Phase 2 trial evaluating LB54640 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 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 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.

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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 April 2024.

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

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.

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 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.

On August 6, 2024, we announced that approximately 100 new prescriptions for IMCIVREE for BBS were written by U.S.

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

On August 6, 2024, we announced that we dosed the first patients in the Japanese, 12-patient supplemental cohort of our global Phase 3 trial evaluating setmelanotide in hypothalamic obesity.

On August 6, 2024, we announced that we completed submission of our supplemental New Drug Application (sNDA) to the U.S.

FDA to expand the label of IMCIVREE® (setmelanotide) to treat pediatric patients between the ages of 2 and younger than 6 years old in approved indications.

On July 31, 2024, we announced that the EC expanded the marketing authorization for IMCIVREE to include children as young as 2 years old with obesity due to BBS or POMC, PCSK1, or LEPR deficiency.

On July 23, 2024, we announced that we dosed the first patients in our Phase 2 clinical trial evaluating LB54640 in hypothalamic obesity.

Effective July 1, 2024, we appointed Alastair “Al” Garfield, Ph.D.

to serve as Chief Scientific Officer.

On June 3, 2024, we presented the first patient and caregiver reported experiences from qualitative interviews following the completion of our Phase 2 trial that evaluated treatment with setmelanotide in hypothalamic obesity during the Endocrine Society Annual Meeting & Expo (ENDO 2024).

On May 22, 2024, the National Institute for Health and Care Excellence (NICE) in Great Britain issued guidance that recommends IMCIVREE as an option for treating obesity and the control of hunger (hyperphagia) in patients between 6 years old and younger than 18 with BBS.

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

● 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;

● Announce DAYBREAK Stage 2 data during a medical meeting in the second half of 2024;

● 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;

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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.

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 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.

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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, Great Britain and Canada, we are pursuing a country-by-country strategy to establish market access and reimbursement for IMCIVREE in several additional 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.

We may enter into collaborations with other parties for certain markets outside the United States.

We may enter into arrangements with other parties for certain markets outside the United States.

However, we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms, or at all.

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 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.

As of June 30, 2024 we had an accumulated deficit of $1,068.4 million.

Our net loss was $32.3 million and $173.6 million for the three and six months ended June 30, 2024 and 2023, respectively.

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

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● continue to operate as a public company.

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.

As of June 30, 2024, our existing cash and cash equivalents and short-term investments were approximately $319.1 million.

On April 15, 2024, we entered into an Investment Agreement with certain investors resulting in the issuance of convertible preferred stock to certain investors and proceeds to the Company of $150.0 million, as disclosed in Note 10, “Series A Preferred Stock”, 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 June 30, 2024 will be sufficient to fund our operations into 2026.

Corporate Background

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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.

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.

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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 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

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● 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.

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

We expense research and development costs to operations as incurred.

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Three Months Ended

Six Months Ended

Research and development summary

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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, RM-718, LB54640, and a potential therapeutic product candidate for CHI 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 congenital hyperinsulinism (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;

● the rate of enrollment in clinical trials;

● the safety and efficacy demonstrated by setmelanotide in future clinical trials;

● the safety and efficacy demonstrated by setmelanotide and other product candidates in future clinical trials;

● changes in regulatory requirements;

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Three Months Ended

Six Months Ended

Selling, general and administrative summary

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Results of Operations

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:

Comparison of the three months ended June 30, 2024 and 2023

The following table summarizes our results of operations for the three months ended June 30, 2024 and 2023, together with the changes in those items in dollars and as a percentage:

Three Months Ended

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Product revenue, net .

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.

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.

Product revenue, net increased by $9.9 million to $29.1 million for the three months ended June 30, 2024 from $19.2 million for the three months ended June 30, 2023, an increase of 51%.

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.

For the three months ended June 30, 2024 and 2023, a substantial amount of our product revenue, or 74% and 84%, respectively, was generated from sales of our product to patients in the United States.

Cost of sales.

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 increased by $0.7 million to $2.9 million for the three months ended June 30, 2024 from $2.2 million for the three months ended June 30, 2023, an increase of 32%, which was driven by a corresponding increase in revenue in the three months ended June 30, 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.

Specifically, the $0.7 million increase in cost of sales in the three months ended June 30, 2024 from the same period in 2023 was due to $0.5 million of additional royalties due to our growth in sales and $0.2 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 $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:

● 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;

Research and development expense decreased by $3.3 million to $30.2 million for the three months ended June 30, 2024 from $33.5 million for the three months ended June 30, 2023, a decrease of 10%.

The net decrease was primarily due to the following:

● a decrease in our clinical trial costs associated with decreased activity in our long-term extension trial for setmelanotide therapy of approximately $1.9 million, decreased activity in our weekly switch trial of $1.1 million, and decreased activity in our Pathway Phase II trial of $2.0 million;

● a decrease in our clinical trial costs associated with our Phase 3 EMANATE trial and our Phase 2 DAYBREAK trial, totaling $3.6 million.

The above decreases were partially offset by:

● an increase of $2.0 million in our clinical trial costs associated with increased activity in our Phase 3 hypothalamic obesity trial and $1.9 million associated with our RM-718 clinical trial;

● an increase of $1.1 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:

● 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 $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%.

Selling, general and administrative expense increased by $6.4 million to $36.4 million for the three months ended June 30, 2024 from $30.0 million for the three months ended June 30, 2023, an increase of 21%.

The increase was primarily due to the following:

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● an increase of $0.8 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 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.

Other income (expense), net increased by $8.8 million to $8.7 million for the three months ended June 30, 2024 from $0.1 million for the three months ended June 30, 2023.

The increase was primarily due to the following:

● a gain of $8.9 million recognized for the change in fair value of a forward contract recorded with the issuance of convertible preferred stock;

● an increase in interest income of $0.9 million earned on our short-term investments, based on lower higher investment balances from the proceeds of $150.0 million from the convertible preferred stock issuance.

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.

● recognition of $1.0 million of non-cash interest expense in the three months ended June 30, 2024 associated with accretion of the non-current liability payable to LGC in July, 2025;

● an increase in non-cash interest expense of $0.7 million related to amortization of debt discount and deferred financing fees associated with our higher deferred royalty obligation balance, based on the receipt of our final $25.0 million sales milestone in the three months ended September 30, 2023.

Comparison of the six months ended June 30, 2024 and 2023

Six Months Ended

(in thousands)

Statement of Operations Data:

Product revenue, net

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 income taxes

Provision for income taxes

Product revenue, net.

Product revenue, net increased by $24.3 million to $55.0 million for the six months ended June 30, 2024 from $30.7 million for the six months ended June 30, 2023, an increase of 80%.

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.

During the six months ended June 30, 2024 and 2023, a substantial amount of our product revenue, or 75% and 85%, respectively, has been generated in the United States.

Cost of sales.

Cost of sales increased by $2.1 million to $5.8 million for the six months ended June 30, 2024, an increase of 57%.

Cost of sales primarily reflects a royalty due to 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 $2.1 million increase in cost of sales for the six months ended June 30, 2024 was due to $1.2 million of additional royalties due to our growth in net product revenue and $0.9 million due to higher product costs from higher net product revenue.

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

Research and development expense .

Research and development expense increased by $87.4 million to $158.9 million for the six months ended June 30, 2024 from $71.5 million for the six months ended June 30, 2023, an increase of 122%.

The net increase was primarily due to the following:

● acquired in process research and development costs associated with the acquisition of LGC’s proprietary compound LB54640 of $92.4 million in the six months ended June 30, 2024;

● an increase of $2.3 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 $2.0 million in our clinical trial costs associated with increased activity in our Phase 3 hypothalamic obesity trial and $1.9 million associated with our RM-718 clinical trial;

● an increase of $1.3 million due to increased gene sequencing costs to support our expanded clinical programs.

The above increases were partially offset by:

● the purchase of in-process research and development assets of $5.7 million from Xinvento in the six months ended June 30, 2023, which did not recur in the six months ended June 30, 2024;

● a decrease in our clinical trial costs associated with our Phase 3 EMANATE trial and our Phase 2 DAYBREAK trial, totaling $3.6 million;

● a decrease of $0.9 million in costs associated with the manufacturing of clinical material.

Selling, general and administrative expense.

Selling, general and administrative expense increased by $16.1 million to $70.8 million for the six months ended June 30, 2024 from $54.7 million for the six months ended June 30, 2023, an increase of 29%.

The increase was primarily due to the following:

● an increase of $9.3 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 $3.0 million related to professional services costs;

● an increase of $2.5 million due to increased costs associated with marketing, data analytics, website and sponsorships;

● an increase of $1.2 million due to increased costs associated with information technology, international office space, and general corporate travel related expenses for our expanding workforce.

Other income (expense), net.

Other (income) expense, net was $7.5 million for the six months ended June 30, 2024 as compared to $0.2 million for the six months ended June 30, 2023.

The increase was primarily due to the following:

● a gain of $8.9 million recognized for the change in fair value of a forward contract recorded with the issuance of convertible preferred stock;

● a change in fair value of the embedded derivative in our debt royalty obligation of $0.7 million and realized foreign currency gains of $0.3 million;

● an increase in interest income of $0.5 million earned on our short-term investments, based on lower higher investment balances from the proceeds of $150.0 million from the convertible preferred stock issuance;

The above amounts were partially offset by:

● recognition of $1.9 million of non-cash interest expense in the six months ended June 30, 2024 associated with accretion of the non-current liability payable to LGC in July, 2025;

● an increase in non-cash interest expense of $1.5 million related to amortization of debt discount and deferred financing fees associated with our higher deferred royalty obligation balance, based on the receipt of our final $25.0 million sales milestone in the three months ended September 30, 2023.

Liquidity and Capital Resources

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,

As of June 30, 2024, our cash and cash equivalents and short-term investments were approximately $319.1 million.

The following table provides information regarding our cash flows for the six months ended June 30, 2024 and 2023:

Six Months Ended June 30,

(in thousands)

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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 used in operating activities was $69.8 million for the six months ended June 30, 2024 and consisted primarily of a net loss of $173.6 million adjusted for non-cash items of $108.1 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 $18.3 million.

Our net loss adjusted for non-cash items also includes $92.4 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 $4.3 million, primarily driven by net increases in accounts receivable and inventory of $6.1 million, net decreases in accounts payable and accrued expenses of $0.8 million, offset by net decreases in long-term assets of $2.2 million and net decreases in prepaid expenses of $0.3 million.

Net cash used in operating activities was $77.6 million for the six months ended June 30, 2023 and consisted primarily of a net loss of $98.9 million adjusted for non-cash items of $22.6 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 IPR&D assets, which are classified as investing activities.

The change in operating assets and liabilities used net cash of approximately $6.9 million, primarily driven by a net increase in accounts payable and accrued expenses of $5.8 million due to the timing of payments, offset by increases in accounts receivable and inventory of $10.9 million and a net increase in prepaid expenses and other assets of $1.9 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 investing activities was $21.5 million for the six months ended June 30, 2024 and relates to gross maturities of short-term investments of $127.8 million, offset by purchases of short term investments for $66.3 million and 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 $66.7 million for the six months ended June 30, 2023 and relates to $217.2 million of maturities of short-term investments, partially offset by $145.1 million of purchases of short-term investments.

We also used approximately $5.4 million to acquire Xinvento’s IPR&D assets and $0.1 million to the purchase of property plant and equipment.

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.

Net cash provided by financing activities was $150.4 million for the six months ended June 30, 2024, and consisted of net proceeds of $147.8 million from the issuance of Series A Preferred Stock as well as proceeds of $8.4 million from the exercise of stock options and the issuance of common stock from our Employee Stock Purchase Plan.

These proceeds were offset by $5.8 million of repayments of our deferred royalty obligation.

Net cash used in financing activities was $1.1 million for the six months ended June 30, 2023, which comprised of $2.7 million of repayments of our deferred royalty obligation, partially offset by $1.6 million of cash proceeds from the exercise of stock options and the issuance of common stock from our Employee Stock Purchase Plan.

Funding requirements

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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 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.

We expect that our existing cash and cash equivalents and short-term investments as of June 30, 2024, 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.

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Our future capital requirements will depend on many factors, including:

● 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 cost to continue to commercialize setmelanotide, by growing our 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 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 obligations owed to Ipsen, Camurus and Takeda Pharmaceutical Company Limited, or Takeda, and LGC pursuant to our license agreements;

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

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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”).

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 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 (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.

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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.

In connection with the Amendment, on February 29, 2024, the Company filed with the Securities Exchange Commission 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 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.

As of June 30, 2024, apart from additional contractual obligations under our acquisition of Xinvento and LGC’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 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.

As of June 30, 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