What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-11-06 compared with 2024-08-06 · 114 added, 103 removed, 228 unchanged (49% of the section changed)

4 unchanged sentences

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

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;

the marketing, commercialization, and sales of IMCIVREE (setmelanotide), the design, success, cost and timing of our product development activities and clinical trials for setmelanotide, RM-718, bivamelagon (LB54640), and our other product candidates;

our ability to obtain regulatory approval for setmelanotide in further indications, as well as for RM-718, bivamelagon (LB54640), and our other product candidates;

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

10 unchanged sentences

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.

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 neuroendocrine diseases.

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

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.

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 impaired MC4R pathway signaling, which may be caused by genetic variants or injury to the hypothalamic region.

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.

5 unchanged sentences

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.

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 more than 15 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 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 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.

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 bivamelagon (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 acquired hypothalamic obesity.

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

With RM-718, in March 2024 we initiated Phase 1 in-human trials, including a multiple-ascending dose study in patients with acquired hypothalamic obesity and expect to begin dosing patients in Part C of this Phase 1 trial in the first quarter of 2025, following completion and final analysis of non-clinical toxicology studies to support long-term dosing and the submission to applicable regulatory authorities of our amendment to the protocol to enable longer term dosing of these patients.

In July 2024, we announced that we had dosed the first patients in our Phase 2 trial evaluating bivamelagon (LB54640) in patients with acquired 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.

1 unchanged sentence

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.

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.

We estimate the epidemiology for patients with acquired 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.

3 unchanged sentences

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

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:

● 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;

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

On November 5, 2024, we reported that revenue from global sales of IMCIVREE was $33.3 million for the third quarter of 2024, an increase of 14% percent on a sequential basis from the second quarter of 2024, primarily driven by sales for BBS.

In the third quarter of 2024, revenue of $23.3 million, or 70% of product revenue, was generated in the United States, an increase of 8% on a sequential basis;

revenue of $10.0 million, or 30% of product revenue, was generated outside the United States, an increase of 35% on a sequential basis.

On November 5, 2024, during the Obesity Society’s ObesityWeek® conference in San Antonio, we and our collaborators delivered several presentations, including:

● Real-world data from patients participating in an early-access program in France that showed eight adult patients with acquired hypothalamic obesity achieved a mean BMI reduction of 12.8% at three months on setmelanotide therapy;

three of these patients reached six months on therapy and achieved a mean

BMI reduction of 15.4%.

These results demonstrate the clinical benefit of setmelanotide in adult patients who had lived with hypothalamic obesity for an average of 12.1 years;

● Data from the extension phase of our Phase 2 trial of setmelanotide showed that patients with acquired hypothalamic obesity who were on therapy for more than one year (n=11) achieved a mean overall percent reduction in fat mass of 29.6%, versus a reduction in lean muscle mass of 7.7% (these same patients had achieved mean BMI reduction of 25.5%);

and four male patients between 11 and 14 years old at baseline exhibited an increase in muscle mass;

● Encouraging data from the our exploratory Phase 2 DAYBREAK study showing that 27 of 32 patients on setmelanotide, or 84% of patients, achieved or maintained >5% BMI reduction from baseline through stage 2 for a total of 40 weeks, compared to 5 of 17 patients, or 29.4% of patients, who transitioned to placebo for 24 weeks during stage 2;

also in DAYBREAK, a 12.4% mean percent BMI reduction was observed for all patients on continuous setmelanotide therapy over 40 weeks (n=32).

On October, 24, 2024, we announced a joint research collaboration with Axovia Pharmaceuticals, led by Professor Philip Beales, CEO and Co-founder, in order to better understand the global epidemiology of BBS, how various symptoms impact patients and their families’ lives, the underlying genetics of this disease, and the need for improved diagnosis and additional treatment options.

On August 26, 2024, we announced that the FDA accepted with Priority Review our supplemental New Drug Application (sNDA) for IMCIVREE to treat children as young as 2 years old in its approved indications.

The FDA assigned a Prescription Drug User Fee Act (PDUFA) goal date of December 26, 2024.

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

● Complete enrollment in the supplemental, 12-patient Japanese cohort of our global Phase 3 trial evaluating setmelanotide in acquired hypothalamic obesity by the end of 2024;

● Complete enrollment in two substudies in the Phase 3 EMANATE trial evaluating setmelanotide in genetically caused MC4R pathway diseases by the end of 2024;

● Complete enrollment in our Phase 2 trial evaluating oral MC4R agonist bivamelagon (LB54640) in acquired hypothalamic obesity in the first quarter of 2025;

● Begin dosing patients with acquired hypothalamic obesity in Part C of the Phase 1 trial evaluating the weekly, MC4R agonist RM-718 in the first quarter of 2025;

● Announce top-line data in the Phase 3 trial evaluating setmelanotide in acquired 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.

To date, we have not generated sufficient cash flow from product sales and have financed our operations primarily through the proceeds received from our 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 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.

2 unchanged sentences

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.

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 10, “Series A Preferred Stock”.

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.

7 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 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.

As of September 30, 2024 we had an accumulated deficit of $1.1 billion.

Our net loss was $43.6 million, $217.3 million, $44.2 million and $143 million for the three and nine months ended September 30, 2024 and 2023, respectively.

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

7 unchanged sentences

● continue to operate as a public company.

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.

As of September 30, 2024, our existing cash and cash equivalents and short-term investments were approximately $298.4 million.

We expect that our existing cash and cash equivalents and short-term investments as of September 30, 2024 will be sufficient to fund our operations into 2026.

Corporate Background

1 unchanged sentence

Financial Operations Overview

Revenues from product sales are recorded at the net sales price, or the transaction price, which includes estimates of variable consideration for which reserves are established and which result from discounts, rebates, and co-pay assistance that are offered within contracts between us and our customers, health care providers and other indirect customers relating to the sale of IMCIVREE.

To date, we have generated approximately $185.8 million in product revenue.

16 unchanged sentences

● 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, Ltd.’s, or LGC’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 bivamelagon (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

Six 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, RM-718, LB54640, and a potential therapeutic product candidate for congenital hyperinsulinism (CHI) will depend on a variety of factors, including:

The duration, costs, and timing of clinical trials and development of setmelanotide, RM-718, bivamelagon (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;

16 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Selling, general and administrative summary

10 unchanged sentences

Results of Operations

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:

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

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

Three Months Ended

September 30,

(in thousands)

11 unchanged sentences

Product revenue, net .

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%.

Product revenue, net increased by $10.7 million to $33.3 million for the three months ended September 30, 2024 from $22.5 million for the three months ended September 30, 2023, an increase of 48%.

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.

For the three months ended September 30, 2024 and 2023, a substantial amount of our product revenue, or 68% and 80%, respectively, was generated from sales of our product to patients in the United States.

Cost of sales.

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 increased by $1.4 million to $3.8 million for the three months ended September 30, 2024 from $2.4 million for the three months ended September 30, 2023, an increase of 59%, which was driven by a corresponding increase in revenue in the three months ended September 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 $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.

Specifically, the $1.4 million increase in cost of sales in the three months ended September 30, 2024 from the same period in 2023 was due to $0.5 million of additional royalties due to our growth in sales and $0.9 million attributed to increased product cost associated with higher sales volume.

We expect cost of sales to continue to increase 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 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;

Research and development expense increased by $4.4 million to $37.9 million for the three months ended September 30, 2024 from $33.6 million for the three months ended September 30, 2023, an increase of 13%.

The net increase was primarily due to the following:

● an increase of $2.1 million for ongoing manufacturing development costs for bivamelagon (LB54640).

● an increase of $1.5 million in our clinical trial costs associated with increased activity in our Phase 3 acquired hypothalamic obesity trial, our Phase 1 clinical trial of RM-718 and the Phase 2 trial of bivamelagon (LB54640);

● an increase of $1.4 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 in our clinical trial costs associated with decreased activity in our Phase 2 DAYBREAK trial and pediatrics trial for setmelanotide therapy of approximately $1.3 million.

Selling, general and administrative expense.

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%.

Selling, general and administrative expense increased by $4.9 million to $35.4 million for the three months ended September 30, 2024 from $30.5 million for the three months ended September 30, 2023, an increase of 16%.

The increase was primarily due to the following:

● an increase of $5.4 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 $2.9 million due to increased compensation and benefits related costs, including stock-based compensation, associated with additional headcount to support our expanding business operations as well as to establish commercial operations in international regions;

● an increase of $1.5 million related to increased marketing and promotion costs to support continued revenue growth;

● an increase of $0.7 million related to professional services costs, including legal, consulting and tax services.

Other income (expense), net.

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.

Other income (expense), net decreased by $0.3 million to ($0.1) million for the three months ended September 30, 2024 from $0.2 million for the three months ended September 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:

● 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;

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

● an increase in non-cash interest expense of $1.0 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

The above amounts were partially offset by:

● a net increase $1.2 million recognized for the net change in fair value of the embedded derivatives in our debt royalty obligation, as well as realized foreign currency gains;

● an increase in interest income of $0.6 million earned on our short-term investments, based on higher investment balances from the proceeds of $150.0 million from the convertible preferred stock issuance.

Comparison of the nine months ended September 30, 2024 and 2023

Nine Months Ended

September 30,

(in thousands)

12 unchanged sentences

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%.

Product revenue, net increased by $35.1 million to $88.3 million for the nine months ended September 30, 2024 from $53.2 million for the nine months ended September 30, 2023, an increase of 66%.

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.

During the nine months ended September 30, 2024 and 2023, a substantial amount of our product revenue, or 73% and 84%, 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 increased by $3.5 million to $9.6 million for the nine months ended September 30, 2024, an increase of 58%.

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.

Specifically, the $3.5 million increase in cost of sales for the nine months ended September 30, 2024 was due to $1.8 million of additional royalties due to our growth in net product revenue and $1.7 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%.

Research and development expense increased by $91.7 million to $196.8 million for the nine months ended September 30, 2024 from $105.1 million for the nine months ended September 30, 2023, an increase of 87%.

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;

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

● an increase of $4.3 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.

● an increase of $0.9 million in our clinical trial costs associated with increased activity in our Phase 3 hypothalamic obesity trial, our RM-718 clinical trial and the Phase 2 bivamelagon (LB54640) trial acquired from LG Chem;

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.

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

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%.

Selling, general and administrative expense increased by $21.0 million to $106.2 million for the nine months ended September 30, 2024 from $85.2 million for the nine months ended September 30, 2023, an increase of 25%.

The increase was primarily due to the following:

4 unchanged sentences

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.

Other income (expense), net was $7.4 million for the nine months ended September 30, 2024 as compared to $0.4 million for the nine months ended September 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;

● a change in fair value of the embedded derivative in our debt royalty obligation of $1.2 million and realized foreign currency gains of $1.3 million and other income of $0.4 million;

● an increase in interest income of $1.1 million earned on our short-term investments, based on 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;

● recognition of $3.0 million of non-cash interest expense in the nine months ended September 30, 2024 associated with accretion of the non-current liability payable to LGC in July, 2025;

● an increase in non-cash interest expense of $2.7 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.

Liquidity and Capital Resources

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,

As of September 30, 2024, our cash and cash equivalents and short-term investments were approximately $298.4 million.

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

Nine Months Ended September 30,

(in thousands)

7 unchanged sentences

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 $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.

Net cash used in operating activities was $95.0 million for the nine months ended September 30, 2024 and consisted primarily of a net loss of $217.3 million adjusted for non-cash items of $121.9 million, which consisted of non-cash stock-based compensation, non-cash interest expense, non-cash accretion and amortization of short-term investments, non-cash accretion of other current liability, gain on settlement of forward contract, depreciation and amortization, rent expense and the change in the fair value of our embedded derivative liability, totaling $29.5 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 $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 $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.

The change in operating assets and liabilities used net cash of approximately $0.3 million, primarily driven by net increases in accounts receivable and inventory of $9.7 million, offset by net decreases in accounts payable and accrued expenses of $6.7 million and net decreases in long-term assets of $3.2 million.

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 noncash 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 investing activities

Net cash used in investing activities was $69.3 million for the nine months ended September 30, 2024 and relates to purchases of short term investments for $201.9 million and cash used for the purchase of LGC’s proprietary compound bivamelagon (LB54640) for $40.0 million in January 2024, offset by gross maturities of short-term investments of $173.1 million.

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 financing activities

Net cash provided by financing activities was $152.9 million for the nine months ended September 30, 2024, and consisted of net proceeds of $147.8 million from the issuance of Series A Preferred Stock as well as proceeds of $14.3 million from the exercise of stock options and the issuance of common stock from our Employee Stock Purchase Plan.

These proceeds were offset by $9.1 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.

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, 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.

Funding requirements

2 unchanged sentences

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

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 10, “Series A Preferred Stock”.

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.

We expect that our existing cash and cash equivalents and short-term investments as of September 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.

4 unchanged sentences

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

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

23 unchanged sentences

Contractual obligations

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.

As of September 30, 2024, apart from additional contractual obligations under our acquisition of Xinvento and LGC’s bivamelagon ( 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 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.

As of September 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