What changed in this filing

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Item 1. Financial Statements

2025-05-07 compared with 2024-11-06 · 207 added, 250 removed, 437 unchanged (51% of the section changed)

3 unchanged sentences

(in thousands, except share and per share data)

September 30,

Current assets:

14 unchanged sentences

Other current liability - LG Chem

Deferred revenue

Lease liability

Deferred revenue

Deferred royalty obligation, current

Total current liabilities

2 unchanged sentences

Lease liability, non-current

Derivative liability

Total liabilities

2 unchanged sentences

150,000 shares authorized;

150,000 and 0 shares issued and outstanding at September 30, 2024 and December 31, 2023, respectively.

Liquidation preference of $ 150,000 as of September 30, 2024.

150,000 and 150,000 shares issued and outstanding at March 31, 2025 and December 31, 2024, respectively.

Liquidation preference of $ 150,000 as of March 31, 2025.

Stockholders’ equity:

1 unchanged sentence

10,000,000 shares authorized;

no shares issued and outstanding at September 30, 2024 and December 31, 2023

no shares issued and outstanding at March 31, 2025 and December 31, 2024

Common stock, $ 0.001 par value:

120,000,000 shares authorized;

61,436,251 and 59,426,559 shares issued and outstanding at September 30, 2024 and December 31, 2023, respectively

63,494,892 and 62,390,654 shares issued and outstanding at March 31, 2025 and December 31, 2024, respectively

Additional paid-in capital

Accumulated other comprehensive (loss) income

Accumulated other comprehensive (loss)

Accumulated deficit

( 1,204,836 )

( 1,155,338 )

Total stockholders’ equity

4 unchanged sentences

(in thousands, except share and per share data)

Three months ended September 30,

Nine months ended September 30,

Three months ended March 31,

Product revenue, net

License revenue

Total revenues

7 unchanged sentences

Other income (expense), net

Gain on settlement of forward contract

Interest expense

Interest income

Total other income (expense), net

Total other (expense), net

Loss before income taxes

Provision (benefit) for income taxes

Provision for income taxes

Accrued dividends on convertible preferred stock

5 unchanged sentences

Foreign currency translation adjustment

Unrealized (loss) gain, net on marketable securities, net of tax

Unrealized (loss), net on marketable securities

Comprehensive loss

9 unchanged sentences

Balance at December 31, 2024

Stock-based compensation expense

Issuance of common stock in connection with ESPP

Issuance of common stock in connection with exercise of stock options and vesting of restricted stock units

Issuance of common stock as consideration for LGC license

Foreign currency translation adjustment

Unrealized loss on marketable securities

Balance at March 31, 2024

( 1,155,338 )

Issuance of Series A Preferred Stock, net of $ 2,250 of issuance costs

Stock-based compensation expense

Issuance of common stock in connection with exercise of stock options and vesting of restricted stock units

Accretion of preferred stock dividends

Foreign currency translation adjustment

Unrealized loss on marketable securities

Balance at June 30, 2024

( 1,068,369 )

Stock-based compensation expense

Stock compensation expense

Issuance of common stock in connection with ESPP

Issuance of common stock in connection with exercise of stock options and vesting of restricted stock units

Issuance of common stock upon completion of ATM equity offering, net of $ 739 offering costs

Accretion of preferred stock dividends

Foreign currency translation adjustment

Unrealized gain on marketable securities

Balance at September 30, 2024

Net unrealized loss on marketable securities

Balance at March 31, 2025

( 1,204,836 )

3 unchanged sentences

Issuance of common stock in connection with exercise of stock options and vesting of restricted stock units

Issuance of common stock as consideration for LGC license

Foreign currency translation adjustment

Net unrealized gains on short-term investments

Unrealized loss on marketable securities

Balance at March 31, 2024

Stock-based compensation expense

Issuance of common stock in connection with ESPP

Issuance of common stock in connection with exercise of stock options and vesting of restricted stock units

Issuance of common stock upon completion of public offering, net of offering costs

Foreign currency translation adjustment

Net unrealized gains on short-term investments

Balance at June 30, 2023

Stock-based compensation expense

Issuance of common stock in connection with ESPP

Issuance of common stock in connection with exercise of stock options and vesting of restricted stock units

Issuance of common stock upon completion of ATM equity offering, net of offering costs

Foreign currency translation adjustment

Net unrealized losses on short-term investments

Balance at September 30, 2023

( 1,036,108 )

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

2 unchanged sentences

(in thousands)

Nine months ended September 30,

Three months ended March 31,

Operating activities

4 unchanged sentences

Non-cash accretion & amortization of short-term investments

Non-cash accretion of other current liability

Non-cash rent expense

Change in fair value of embedded derivative liability

Gain on settlement of forward contract

Acquired IPR&D assets classified as investing activities

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Acquisition of IPR&D assets

Purchases of property and equipment

Net cash used in investing activities

Net cash (used in) provided by investing activities

Financing activities

2 unchanged sentences

Proceeds from issuance of common stock from ESPP

Net proceeds from issuance of common stock

Proceeds from royalty financing agreement, net of issuance costs

Gain on settlement of forward contract

Proceeds from Series A Preferred Stock, net of issuance costs

Net cash provided by (used in) financing activities

Proceeds from ATM equity offering

Net cash provided by financing activities

Effect of exchange rates on cash

14 unchanged sentences

We are focused on advancing our melanocortin-4 (MC4R) receptor 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 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 impaired MC4R pathway signaling, which may be caused by genetic variants or injury to the hypothalamic region.

While obesity affects hundreds of millions of people worldwide, we are developing therapies for a subset of individuals who have hyperphagia, a pathological insatiable hunger and impaired satiety accompanied by persistent and abnormal food-seeking behaviors, decreased energy expenditure and severe obesity due to diseases such as acquired or congenital hypothalamic obesity, Bardet-Biedl syndrome (BBS) or other diseases caused by impaired MC4R pathway signaling.

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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Even though the Company has an approved product, and even if the Company’s further product development efforts are successful, it is uncertain when, if ever, the Company will realize sufficient revenue from product sales to fund operations.

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

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

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

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

As of March 31, 2025, the Company had an accumulated deficit of $ 1.2 billion.

The Company has funded these losses primarily from the proceeds from the sales of common and preferred stock, product revenue, asset sales, royalty financing, out-license arrangements, as well as capital contributions received from the former parent company, Rhythm Holdings LLC.

While the Company is generating product revenue, management expects operating losses to continue for the foreseeable future.

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The future success of the Company is dependent on its ability to develop its product candidates and ultimately upon its ability to attain profitable operations.

At September 30, 2024, the Company had $ 298,390 of cash and cash equivalents and short-term investments on hand.

On April 1, 2024, the Company entered into an Investment Agreement (the “Investment Agreement”) with certain affiliates of Perceptive Advisors LLC (“Perceptive”) and a life sciences focused institutional investor (each, an “Investor”

and collectively, the “Investors”), relating to the issuance and sale of 150,000 shares of a new series of the Company’s Series A Convertible Preferred Stock, par value $ 0.001 per share, titled the “Series A Convertible Preferred Stock” (the “Convertible Preferred Stock”), for an aggregate purchase price of $ 147,750 , net of issuance costs of $ 2,250 , or $ 1,000 per share (the “Issuance”).

The Issuance closed on April 15, 2024.

In the future, the Company will be dependent on obtaining funding from third parties, such as proceeds from the issuance of debt, sale of equity, proceeds from out license arrangements, product sales and funded research and development programs to maintain the Company's operations and meet the Company's obligations.

There is no guarantee that additional equity or other financings will be available to the Company on acceptable terms, or at all.

As of March 31, 2025, the Company had $ 314,488 of cash and cash equivalents and short-term investments on hand.

In the future, the Company will be dependent on obtaining funding from third parties, such as proceeds from the

issuance of debt, sale of equity, proceeds from out license arrangements, product sales and funded research and development programs to maintain the Company's operations and meet the Company's obligations.

There is no guarantee that additional equity or other financing will be available to the Company on acceptable terms, or at all.

If the Company fails to obtain additional funding when needed, the Company would be forced to scale back, terminate its operations or seek to merge with or be acquired by another company.

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As permitted under these rules, certain footnotes or other financial information that are normally required by GAAP have been condensed or omitted.

The accompanying condensed consolidated balance sheet as of September 30, 2024, the condensed consolidated statements of operations and comprehensive loss for the three and nine months ended September 30, 2024 and 2023, the condensed consolidated statements of convertible preferred stock and stockholders’ equity for the three and nine months ended September 30, 2024 and 2023 and the condensed consolidated statements of cash flows for the nine months ended September 30, 2024 and 2023 and the related footnote disclosures are unaudited.

The accompanying condensed consolidated balance sheet as of March 31, 2025, the condensed consolidated statements of operations and comprehensive loss for the three months ended March 31, 2025 and 2024, the condensed consolidated statements of convertible preferred stock and stockholders’ equity for the three months ended March 31, 2025 and 2024 and the condensed consolidated statements of cash flows for the three months ended March 31, 2025 and 2024 and the related footnote disclosures are unaudited.

In management's opinion, the unaudited condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements as of and for the year ended December 31, 2024 and include all adjustments, which are all normal recurring adjustments, necessary for the fair presentation of the interim financial statements.

The results for the nine months ended September 30, 2024 are not necessarily indicative of the results expected for the full fiscal year, any other interim periods, or any future year or period.

The results for the three months ended March 31, 2025 are not necessarily indicative of the results expected for the full fiscal year, any other interim periods, or any future year or period.

The accompanying unaudited condensed consolidated financial statements reflect the application of certain significant accounting policies as described below and elsewhere in these notes to the unaudited condensed consolidated financial statements.

As of September 30, 2024, there have been no material changes in the Company's significant accounting policies from those that were disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

As of March 31, 2025, there have been no material changes in the Company's significant accounting policies from those that were disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.

Use of Estimates

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This process may result in actual results differing materially from those estimated amounts used in the preparation of the financial statements if these results differ from historical experience, or other assumptions do not turn out to be substantially accurate, even if such assumptions are reasonable when made.

Significant estimates relied upon in preparing these financial statements include estimates related to determining our net product revenue, accruals related to research and development expenses, assumptions used to record stock-based compensation

expense, interest expense on our deferred royalty obligation, and the valuation allowance on the Company's deferred tax assets.

Significant estimates relied upon in preparing these financial statements include estimates related to determining our net product revenue and accruals related to research and development expenses.

Estimates are periodically reviewed in light of changes in circumstances, facts and experience.

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The Company and the chief executive officer view the Company’s operations and manage its business as one operating segment.

Geographic Data

The Company allocates, for the purpose of geographic data reporting, its revenue based upon the location of its customers.

Total revenue by geographic area was as follows:

Three Months Ended September 30

Nine Months Ended September 30

Total revenues

As of September 30, 2024 and December 31, 2023, long-lived assets at locations outside the United States was not material.

In November 2023, the FASB issued ASU 2023-07 – Segment Reporting (Topic 280) – Improvements to Reportable Segment Disclosures, which improves segment disclosure requirements, primarily through enhanced disclosure requirements for significant segment expenses.

The improved disclosure requirements apply to all public entities that are required to report segment information, including those with only one reportable segment.

The Company adopted the guidance in the fiscal year beginning January 1, 2024.

There was no impact on the Company’s reportable segments identified and additional required disclosures have been included in Note 15.

Off-Balance Sheet Risk and Concentrations of Credit Risk

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The Company does not require collateral to secure amounts due from its customers.

For the three months ended September 30, 2024 and 2023, approximately 68 % and 80 % of all of the Company’s revenue was generated from a single customer in the United States.

For the nine months ended September 30, 2024 and 2023, approximately 73 % and 84 % of all of the Company’s revenue was generated from a single customer in the United States.

As of September 30, 2024 and December 31, 2023, approximately 65 % and 73 %, respectively, of the Company’s accounts receivable was outstanding from a single customer in the United States.

For the three months ended March 31, 2025 and 2024, approximately 65 % and 74 % of all of the Company’s revenue was generated from a single customer in the United States.

As of March 31, 2025 and December 31, 2024, approximately 61 % and 67 %, respectively, of the Company’s accounts receivable was outstanding from a single customer in the United States.

The Company relies on third-party manufacturers and suppliers for the manufacture and supply of its product.

4 unchanged sentences

A change in the relationship with the genetic testing service providers, or an adverse change in their business, could materially impact future operating results.

Cash and Cash Equivalents

The Company considers all highly liquid investments with remaining maturity from the date of purchase of three months or less to be cash equivalents.

Cash and cash equivalents includes bank demand deposits, U.S.

treasury bills and money market funds that invest primarily in U.S.

government treasuries.

Short-Term Investments

Short-term investments consist of investments with maturities greater than 90 days, as of the date of purchase.

The Company has classified its investments with maturities beyond one year as short term, based on their highly liquid nature and because such marketable securities represent the investment of cash that is available for current operations.

Company considers its investment portfolio available-for-sale.

Accordingly, these investments are recorded at fair value, which is based on quoted market prices.

Unrealized gains and losses are reported as a component of accumulated other comprehensive income (loss) in stockholders’ equity.

To the extent the amortized cost basis of the available-for-sale debt securities exceeds the fair value, management assesses the debt securities for credit loss;

however, management considers the risk of credit loss to be minimized by the Company's policy of investing in financial instruments issued by highly-rated financial institutions.

When assessing the risk of credit loss, management considers factors such as the severity and the reason for the decline in value (i.e., any changes to the rating of the security by a rating agency or other adverse conditions specifically related to the security) and management's intended holding period and time horizon for selling.

During the three months ended March 31, 2025 and 2024, the Company did no t recognize any credit losses related to its available-for-sale debt securities.

Further, as of March 31, 2025 and December 31, 2024, the Company did no t record an allowance for credit losses related to its available-for-sale debt securities.

Accounts Receivable, net

4 unchanged sentences

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

As of September 30, 2024 and December 31, 2023, the Company determined an allowance for doubtful accounts was not required based upon our review of contractual payments and our customers’ circumstances.

As of March 31, 2025 and December 31, 2024, the Company determined an allowance for doubtful accounts was not required based upon our review of contractual payments and our customers’ circumstances.

Revenue Recognition

25 unchanged sentences

The following are the components of variable consideration related to product revenue:

The Company estimates obligations resulting from contractual commitments with the government and other entities to sell products to qualified healthcare providers and patients at prices lower than the list prices charged to our customers.

The government and other entities charge us for the difference between what they pay for the product and the selling price to our customers.

Government rebates:

The Company is subject to discount obligations under government programs, including Medicaid programs, Medicare and Tricare in the United States as well as certain government rebates and pricing adjustments in certain international markets that we operate.

We estimate Medicaid, Medicare and Tricare rebates based upon a range of possible outcomes that are probability-weighted for the estimated payer mix.

We estimate these rebates based upon a range of possible outcomes that are probability-weighted for the estimated payer mix.

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

1 unchanged sentence

Trade discounts and allowances:

The Company provides customary invoice discounts on IMCIVREE sales to certain of our customers for prompt payment that are recorded as a reduction of revenue in the period the related product revenue is recognized.

The Company provides customary invoice discounts on IMCIVREE sales to certain of our customers for prompt payment.

These are recorded as a reduction of revenue in the period the related product revenue is recognized.

In addition, we receive and pay for various distribution services from our customers in the distribution channel.

3 unchanged sentences

The Company estimates the amount of product sales that may be returned and records the estimate as a reduction of revenue and a refund liability in the period the related product revenue is recognized.

Based on the distribution model for IMCIVREE, the Company believes there will be minimal returns.

Based on the distribution model for IMCIVREE, the Company believes there will be minimal returns and these reserves have not been material to date.

Other incentives:

2 unchanged sentences

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

Provisions for trade discounts, chargebacks and allowances are recorded as reductions to accounts receivable, and returns, government rebates, and other incentives are recorded as a component of accrued expenses.

Provisions for trade discounts, and allowances are recorded as reductions to accounts receivable, and returns, government rebates, and other incentives are recorded as a component of accrued expenses.

License Agreements

In January 2024, we entered into a license agreement and share issuance agreement with LG Chem, Ltd.

Under the terms of the license agreement, we obtained worldwide rights to develop LGC’s proprietary compound bivamelagon (LB54640) and assumed sponsorship of two ongoing LGC Phase 2 studies designed to evaluate safety, tolerability, pharmacokinetics and weight loss efficacy of bivamelagon (LB54640).

The SIGNAL trial is a randomized, placebo-controlled, double-blind study designed to enroll and evaluate approximately 28 patients with acquired hypothalamic obesity.

On July 23, 2024, the Company announced that the first patients have been dosed and participants in the SIGNAL trial will receive one of three doses of bivamelagon (LB54640) or placebo by oral administration once daily for 14 weeks (patients may continue on open-label therapy for up to 52 weeks), and the primary endpoint of the study is the change from baseline in body mass index after 14 weeks of treatment.

The open-label, single-arm, 16 -week ROUTE trial is designed to enroll five patients with POMC or LEPR deficiency obesity.

We paid LGC $ 40.0 million in cash and issued shares of our common stock with an aggregate fair value of $ 18.7 million.

The shares were issued at a per share price equal to the ten-day volume weighted-average closing price for our common stock, calculated as of the trading day immediately prior to January 4, 2024.

We also agreed to make an additional $ 40.0 million payment in cash 18 months after the effective date of the license agreement.

This payment has been recorded in research and development expense at its present value and reflected in other long-term liabilities on our unaudited condensed consolidated balance sheet.

In addition, under the terms of the license agreement, we agreed to pay LGC up to $ 205 million in cash upon achieving various regulatory and sales milestones based on net sales of bivamelagon (LB54640).

Subject to the completion of Phase 2 development of bivamelagon (LB54640), the Company also has agreed to pay LGC royalties of between low-to-mid single digit percent of net revenues from its MC4R portfolio, including bivamelagon (LB54640), commencing in 2029 and dependent upon achievement of various regulatory and indication approvals, and subject to customary deductions and anti-stacking.

Royalties may further increase to a low double digit percent royalty, though such royalty would only be applicable on net sales of bivamelagon (LB54640) in a region if bivamelagon (LB54640) is covered by a composition of matter or method of use patent controlled by LGC in such region and the Company’s MC4R portfolio is not covered by any composition of matter or method of use patents controlled by the Company in such region.

Such increased rate would only apply on net sales of bivamelagon (LB54640) for the limited remainder of the royalty term in the relevant region.

RareStone Group Ltd.

In December 2021, the Company entered into an Exclusive License Agreement with RareStone Group Ltd., or the RareStone License.

Pursuant to the RareStone License, we granted to RareStone an exclusive, sublicensable, royalty-bearing license under certain patent rights and know-how to develop, manufacture, commercialize and otherwise exploit any pharmaceutical product that contains setmelanotide in the diagnosis, treatment or prevention of conditions and diseases in humans in China, including mainland China, Hong Kong and Macao.

RareStone has a right of first negotiation in the event that the Company chooses to grant a license to develop or commercialize the licensed product in Taiwan.

The arrangement includes a license and an additional performance obligation to supply product upon the request of RareStone.

According to the terms of the RareStone License , RareStone has agreed to seek local approvals to commercialize IMCIVREE for the treatment of obesity and hyperphagia due to biallelic POMC, PCSK1 or LEPR deficiency, as well as Bardet-Biedl and Alström syndromes.

Additionally, RareStone has agreed to fund efforts to identify and enroll patients from China in the Company’s global EMANATE trial, a Phase 3, randomized, double-blind, placebo-controlled trial to evaluate setmelanotide in four independent sub-studies in patients with obesity due to a heterozygous variant of POMC/PCSK1 or LEPR;

certain variants of the SRCI gene, and certain variants of the SH2B1 gene.

In accordance with the terms of the RareStone License , RareStone made an upfront payment to Rhythm of $ 7,000 and issued Rhythm 1,077,586 ordinary shares.

The Company is eligible to receive development and commercialization milestones of up to $ 62,500 , as well as tiered royalty payments on annual net sales of IMCIVREE.

The Company initially estimated the fair value of the RareStone equity to be $ 2,440 based on a preliminary valuation during the first quarter of 2022.

Upon completion of the valuation procedures during the second quarter of 2022, the Company concluded the initial fair value of the RareStone equity to be $ 1,040 .

During the third quarter of 2022, the Company estimated the fair value of the RareStone equity to be de minimis based upon the results of an updated valuation and recorded an other-than-temporary impairment of $ 1,040 related to the decline in fair value as a component of other expense in our consolidated statements of operations and other comprehensive loss for the year ended December 31, 2022.

The other-than-temporary impairment of $ 1,040 included the reclassification of a $ 300 unrealized loss previously recorded as a component of accumulated other comprehensive income (loss) in our condensed consolidated statement of stockholders’ equity during the second quarter of 2022.

The Company received total upfront consideration of $ 8,040 comprised of an upfront payment of $ 7,000 , and the estimated fair value of the RareStone equity of $ 1,040 .

The Company determined that the RareStone License contains two performance obligations, the delivery of the license and the supply of clinical and commercial product.

The Company further determined the supply of commercial product to RareStone contains a significant future discount and estimates the discount to be $ 1,286 , which is recorded as a component of deferred revenue on the consolidated balance sheet at September 30, 2024 and December 31, 2023.

No license revenue was recognized during three and six months ended September 30, 2024 and 2023, respectively.

On October 28, 2022, we delivered written notice, or the October Notice, to RareStone that we have terminated the RareStone License for cause.

In accordance with the Notice, we maintain that RareStone has materially breached its obligations under the RareStone License to fund, perform or seek certain key clinical studies and waivers, including with respect to our global EMANATE trial, among other obligations.

On December 21, 2022, RareStone provided written notice to us that it objects to the claims in the Notice, including our termination of the RareStone License for cause.

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

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

On November 29, 2023, RareStone wrote to us seeking to negotiate and execute a commercial supply agreement as contemplated under the Exclusive License Agreement, and on January 19, 2024, we responded in writing again reaffirming our position that RareStone has materially breached its obligations under the RareStone License and that we have terminated the RareStone License for cause.

We generate revenue from license or similar agreements with pharmaceutical companies for the development and commercialization of certain of our products and product candidates.

Such agreements may include the transfer of intellectual property rights in the form of licenses, transfer of technological know-how, delivery of drug substances, research and development services, and participation on certain committees with the counterparty.

Payments made by the customers may include non-refundable upfront fees, payments upon the exercise of customer options, payments

based upon the achievement of defined milestones, and royalties on sales of products and product candidates if they are approved and commercialized.

If a license to our intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, we recognize the transaction price allocated to the license as revenue upon transfer of control of the license.

We evaluate all other promised goods or services in the agreement to determine if they are distinct.

If they are not distinct, they are combined with other promised goods or services to create a bundle of promised goods or services that is distinct.

Optional future services where any additional consideration paid to us reflects their standalone selling prices do not provide the customer with a material right and, therefore, are not considered performance obligations.

If optional future services are priced in a manner which provides the customer with a significant or incremental discount, they are material rights, and are accounted for as separate performance obligations.

We utilize judgment to determine the transaction price.

In connection therewith, we evaluate contingent milestones at contract inception to estimate the amount which is not probable of a material reversal to include in the transaction price using the most likely amount method.

Milestone payments that are not within our control, such as regulatory approvals, are not considered probable of being achieved until those approvals are received and therefore the variable consideration is constrained.

The transaction price is then allocated to each performance obligation on a relative stand-alone selling price basis, for which we recognize revenue as or when the performance obligations under the contract are satisfied.

At the end of each reporting period, we re-evaluate the probability of achieving development milestone payments that may not be subject to a material reversal and, if necessary, adjust our estimate of the overall transaction price.

Any such adjustments are recorded on a cumulative catch-up basis, which would affect license and other revenue, as well as earnings, in the period of adjustment.

We then determine whether the performance obligations or combined performance obligations are satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue from non-refundable, upfront fees.

We evaluate the measure of progress, as applicable, for each reporting period and, if necessary, adjust the measure of performance and related revenue recognition.

When consideration is received, or such consideration is unconditionally due, from a customer prior to transferring goods or services to the customer under the terms of a contract, a contract liability is recorded within deferred revenue.

Contract liabilities within deferred revenue are recognized as revenue after control of the goods or services is transferred to the customer and all revenue recognition criteria have been met.

For arrangements that include sales-based royalties, including sales-based milestone payments, and a license of intellectual property that is deemed to be the predominant item to which the royalties relate, we recognize revenue at the later of when the related sales occur or when the performance obligation to which some or all of the royalties have been allocated has been satisfied (or partially satisfied).

See Note 12 – Significant Agreements for discussion related to the Company’s accounting for the RareStone Group, Ltd.

Deferred Royalty Obligation

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If such assets are considered to be impaired, the Company measures the impairment to be recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset, less the cost to sell.

No events or changes in circumstances existed to require an impairment assessment during the three and nine months ended September 30, 2024 and 2023, respectively.

No events or changes in circumstances existed to require an impairment assessment during the three months ended March 31, 2025 and 2024, respectively.

Acquired IPR&D and Milestone Expenses

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Foreign Currency Translation

The majority of the Company’s operations occurs in subsidiaries that have the U.S.

dollar denominated as its functional currency.

The assets and liabilities of the Company’s subsidiaries with functional currencies other than the U.S.

3 unchanged sentences

Changes resulting from foreign currency translation are included in accumulated other comprehensive income (loss) on the Company’s consolidated statement of stockholders’ equity.

Net foreign currency exchange transaction gains (losses), which are included in other (expense) income, net on our consolidated statements of operations, were immaterial for the three and nine months ended September 30, 2024 and 2023.

Fair Value Measurements

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Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The Company’s cash equivalents and marketable securities and derivative liability at September 30, 2024 and December 31, 2023 were carried at fair value, determined according to the fair value hierarchy.

The Company’s cash equivalents and marketable securities and derivative asset as of March 31, 2025 and December 31, 2024 were carried at fair value, determined according to the fair value hierarchy.

See Note 6 for further discussion.

The carrying amounts reflected in the condensed consolidated balance sheets for accounts payable and accrued expenses and other current liabilities approximate their fair values due to their short-term maturities at September 30, 2024 and December 31, 2023, respectively.

The carrying amounts reflected in the condensed consolidated balance sheets for accounts payable and accrued expenses and other current liabilities approximate their fair values due to their short-term maturities as of March 31, 2025 and December 31, 2024, respectively.

Net Loss Per Share

Basic net loss per share is computed by dividing the net loss attributable to common shareholders by the weighted average number of common shares outstanding during the period, without consideration of potential dilutive securities.

Diluted net loss per common share is computed by adjusting the weighted average shares outstanding for the potential dilutive effects of common stock equivalents outstanding during the period calculated in accordance with the treasury stock method.

For purposes of the diluted net loss per share calculation, stock options, performance stock units and restricted stock units are considered to be common stock equivalents but have been excluded from the calculation of diluted net loss per share, as their effect would be anti-dilutive for all periods presented.

2 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

Stock options

9 unchanged sentences

Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on its financial position or results of operations upon adoption.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures , or ASU 2023-09.

The new guidance requires that an entity, on an annual basis, disclose additional income tax information, primarily related to the rate reconciliation and income taxes paid.

The amendments in the ASU are intended to enhance the transparency and decision usefulness of income tax disclosures.

The amendments in this update are effective for us beginning in fiscal year ending December 31, 2025.

We are currently evaluating the impact of the new standard on our consolidated financial statements which is expected to result in enhanced disclosures, however, we do not otherwise expect the adoption of the new guidance to have a material impact on our financial condition or results of operations.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):

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ASU 2023-07 becomes effective for the annual period starting on January 1, 2024, and for interim periods starting on January 1, 2025.

Early adoption is permitted.

The Company is currently evaluating the disclosure requirements related to the new standard but does not anticipate a material impact to its net financial position.

The company adopted this standard in the year ending December 31, 2024.

Asset Acquisitions

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On January 4, 2024, the Company entered into a license agreement and share issuance agreement with LG Chem, Ltd.

Under the terms of the license agreement, the Company obtained worldwide rights to LGC’s proprietary compound bivamelagon (LB54640) and assumed sponsorship of two ongoing LGC Phase 2 studies designed to evaluate safety, tolerability, pharmacokinetics and weight loss efficacy of bivamelagon (LB54640).

Under the terms of the license agreement, the Company obtained worldwide rights to LGC’s proprietary compound bivamelagon and assumed sponsorship of two ongoing LGC Phase 2 studies designed to evaluate safety, tolerability, pharmacokinetics and weight loss efficacy of bivamelagon.

The total purchase consideration of $ 92.4 million was composed of $ 40.0 million of cash paid at closing and issued shares of the Company’s common stock with an aggregate value of $ 20.0 million.

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The total purchase consideration also includes an additional $ 40.0 million license fee payable in 18 months , whose present value at closing was $ 33.7 million, and $ 0.8 million of transaction costs which are recorded as selling, general and administrative expenses.

The carrying value of the license fee payable is $ 36.6 million as of September 30, 2024.

In addition and subject to the completion of Phase 2 development of bivamelagon (LB54640), the Company has agreed to pay LGC royalties of between low-to-mid single digit percent of net revenues from its MC4R portfolio, including bivamelagon (LB54640), commencing in 2029 and dependent upon achievement of various regulatory and indication approvals, and subject to customary deductions and anti-stacking.

Such increased rate would only apply on net sales of bivamelagon (LB54640) for the limited remainder of the royalty term in the relevant region.

The carrying value of the license fee payable is $ 38.8 million as of March 31, 2025 and is reflected in current liabilities on our condensed consolidated balance sheet.

In addition, under the terms of the license agreement, we agreed to pay LGC up to $ 205 million in cash upon achieving various regulatory and sales milestones based on net sales of bivamelagon.

In addition, and subject to the completion of Phase 2 development of bivamelagon, the Company has agreed to pay LGC royalties of between low-to-mid single digit percent of net revenues from its MC4R portfolio, including bivamelagon, commencing in 2029 and dependent upon achievement of various regulatory and indication approvals, and subject to customary deductions and anti-stacking.

Royalties may further increase to a low double digit percent royalty, though such royalty would only be applicable on net sales of bivamelagon in a region if bivamelagon is covered by a composition of matter or method of use patent controlled by LGC in such region and the Company’s MC4R portfolio is not covered by any composition of matter or method of use patents controlled by the Company in such region.

Such increased rate would only apply on net sales of bivamelagon for the limited remainder of the royalty term in the relevant region.

The assets acquired were In-Process Research and Development (“IPR&D”) assets.

However, since the IPR&D assets were determined to have no alternative future use, the Company recognized the $ 92.4 million of purchase consideration as research and development expense in the nine months ended September 30, 2024.

The Company determined that the additional contingent consideration did not meet the definition of a derivative as of the acquisition date.

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The Company will recognize any future contingent consideration payments related to the LGC transaction in the period in which the achievement of the underlying milestones becomes probable.

Xinvento B.V.

On February 27, 2023, the Company, through its wholly-owned Dutch subsidiary, Rhythm Pharmaceuticals Netherlands B.V., a Dutch private limited liability company (“Rhythm BV”), entered into a Share Purchase Agreement (the “Purchase Agreement”) with Xinvento B.V., a Dutch private limited liability company based in the Netherlands (“Xinvento”), and the other parties named therein, pursuant to which, and concurrently with the execution thereof, Rhythm BV acquired all of the issued and outstanding shares of Xinvento.

The aggregate consideration at closing was approximately $ 5,667 , inclusive of transaction costs, as adjusted pursuant to the terms of the Purchase Agreement and subject to the distribution and payment terms set forth therein (the “Closing Purchase Price”).

In addition to the Closing Purchase Price, the Purchase Agreement provides for the payment of additional contingent consideration totaling up to $ 206,000 upon achievement of certain development, regulatory and commercial milestones by Xinvento, as follows:

(i) up to an aggregate of $ 6,000 in clinical development milestones;

(ii) up to an aggregate of $ 125,000 in regulatory approval and commercial milestones;

and (iii) up to an aggregate of $ 75,000 in sales milestones in the event a second molecule is selected, developed and approved.

The total purchase consideration of $ 5,667 was composed of $ 4,520 of cash paid at closing, a $ 500 holdback, paid in the three months ended March 31, 2024, and $ 647 of acquisition-related costs.

The Company determined that substantially all of the value as of acquisition date related to Xinvento’s IPR&D.

As a result, the Company determined this transaction should be accounted for as an asset acquisition.

The assets acquired were IPR&D assets.

However, since the IPR&D assets were determined to have no alternative future use, the Company recognized the $ 5,667 of purchase consideration as research and development expense in the year ended December 31, 2023.

The Company determined that the additional contingent consideration did not meet the definition of a derivative as of the acquisition date.

Therefore, the Company did not record a contingent consideration liability on the acquisition date.

The Company will recognize any future contingent consideration payments related to the Xinvento transaction in the period in which the achievement of the underlying milestones becomes probable.

Inventory consists of the following:

September 30,

Raw Materials

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Accrued expenses and other current liabilities consisted of the following:

September 30,

Research and development costs

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Fair Value of Financial Assets and Liabilities

As of September 30, 2024 and December 31, 2023, the carrying amount of cash and cash equivalents and short-term investments was $ 298,390 and $ 275,846 respectively, which approximates fair value.

As of March 31, 2025 and December 31, 2024, the carrying amount of cash and cash equivalents and short-term investments was $ 314,488 and $ 320,565 respectively, which approximates fair value.

Cash and cash equivalents and short-term investments includes investments in U.S.

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Fair Value Measurements as of

September 30, 2024 using:

March 31, 2025 using:

Cash equivalents:

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Cash equivalents:

Commercial Paper

Money market funds

Marketable securities:

US treasury securities

Corporate debt securities and commercial paper

Derivative liability

The estimated fair value of the derivative liability relates to our Royalty Interest Financing Agreement (RIFA) with HealthCare Royalty Partners was determined using Level 3 inputs.

The fair value measurement of the derivative liability is sensitive to changes in the unobservable inputs used to value the financial instrument.

Derivative asset

The estimated fair value of the derivative asset relates to our Royalty Interest Financing Agreement (RIFA) with HealthCare Royalty Partners was determined using Level 3 inputs.

The fair value measurement of the derivative asset is sensitive to changes in the unobservable inputs used to value the financial instrument.

Changes in the inputs could result in changes to the fair value of each financial instrument.

The embedded derivative liability associated with our deferred royalty obligation, as discussed further in Note 13, “Long-Term Obligations”, is measured at fair value using an option pricing Monte Carlo simulation model and is included as a component of the deferred royalty obligation on the condensed consolidated balance sheets.

The embedded derivative liability is subject to remeasurement at the end of each reporting period, with changes in fair value recognized as a component of other (expense) income, net.

The embedded derivative asset associated with our deferred royalty obligation, as discussed further in Note 13, “Long-Term Obligations”, is measured at fair value using an option pricing Monte Carlo simulation model and is included as a component of the deferred royalty obligation on the condensed consolidated balance sheets.

The embedded derivative asset is subject to remeasurement at the end of each reporting period, with changes in fair value recognized as a component of other (expense) income, net.

The assumptions used in the option pricing Monte Carlo simulation model include:

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and (6) the probability of a change in control occurring during the term of the instrument.

The forward contract associated with our Series A Convertible Preferred Stock, as discussed further in Note 10, “Series A Preferred Stock”, is measured at fair value.

In order to value the forward contract, a binomial lattice model was used to determine the fair value of the Series A Preferred Stock.

The fair value of the forward contract was measured as the difference between the consideration payable of $ 150,000 and the fair value of the Series A Preferred Stock.

The fair value of the forward contract was determined to be $ 0 at initial issuance and the change in the fair value from initial issuance to settlement of $ 8,900 was recognized as other income in the condensed consolidated statements of operation for the nine months ended September 30, 2024.

The assumptions used in the binomial lattice model include:

(1) the Company’s common stock price on the issuance and settlement dates;

(2) the Conversion Price as of $ 48.00 as per the Agreement;

(3) a 20-year term to maturity;

(4) an estimate of the Company’s credit risk-adjusted discount rate;

and (5) volatility.

Nine months ended

September 30,

Beginning aggregate estimated fair value of Level 3 liabilities (assets)

The following tables set forth a summary of the changes in the estimated fair value of our embedded derivative liability (asset) (in thousands):

Three months ended

Beginning aggregate estimated fair value of Level 3 liability (asset)

Change in fair value of embedded derivative

Fair value of forward contract - Series A Convertible Preferred Stock

Settlement of forward contract

Ending aggregate estimated fair value of Level 3 liabilities (assets)

Ending aggregate estimated fair value of Level 3 liability (asset)

Marketable Securities

The following tables summarize the Company's marketable securities:

September 30, 2024

March 31, 2025

Corporate debt securities and commercial paper (due within 1 year)

Treasury Securities (due within 1 year)

Treasury Securities

December 31, 2024

Corporate debt securities and commercial paper (due within 1 year)

Right of Use Asset and Lease Liability

The Company has a material operating lease for its head office facility located in Boston, Massachusetts and other immaterial operating leases for certain equipment.

On May 2, 2024, the Company entered into an agreement to amend the current operating lease agreement for its head office facility.

Under the amendment, the current lease was extended for five years through July 31, 2030, with $ 5.7 million committed to future lease payments.

The Company acquired Right of Use Assets of $ 3.1 million under the amended operating lease.

The Company measured the lease liability associated with the office lease modification using an incremental borrowing rate (“IBR”) of 13 %.

The Company estimated the IBR for the leased asset based on a range of comparable interest rates the Company would incur to borrow an amount equal to the lease payments on a collateralized basis over a similar term in a similar economic environment.

As of September 30, 2024, the Company has not entered into any lease arrangements classified as a finance lease.

Rent expense, or operating lease costs, was $ 302 , $ 908 , $ 280 and $ 867 , for the three and nine month periods ended September 30, 2024 and 2023.

Supplemental cash flow information related to the Company’s lease for the nine months ended September 30, 2024 and 2023, includes cash payments of $ 636 and $ 623 , respectively, used in the measurement of its operating lease liability.

As of September 30, 2024, the Company’s operating lease liability has a weighted average remaining lease term of approximately five years .

The following table presents the maturities of the Company’s operating lease liability related to office space as of September 30, 2024, all of which is under a non-cancellable operating lease:

Operating Lease

Total operating lease payments

imputed interest

Total operating lease liability

Treasury Securities

Intangible Assets

As of September 30, 2024

As of March 31, 2025

As of December 31, 2024

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Capitalized Milestones

As of September 30, 2024, the Company’s finite-lived net intangible assets, which totaled $ 6,388 resulted from the capitalization of certain milestone payments made to Ipsen Pharma, S.A.S., or Ipsen, in accordance with the terms of the Company’s license agreement with Ipsen, in connection with the Company’s first commercial sale of IMCIVREE in the U.S.

As of March 31, 2025, the Company’s finite-lived net intangible assets, which totaled $ 5,960 , resulted from the capitalization of certain milestone payments made to Ipsen Pharma, S.A.S., or Ipsen, in accordance with the terms of the Company’s license agreement with Ipsen, in connection with the Company’s first commercial sale of IMCIVREE in the U.S.

in March 2021 and in France in March 2022.

As of September 30, 2024, amortization expense for the next five years and beyond is summarized as follows:

Amortization expense totaled $ 214 , $ 641 , $ 214 , and $ 641 for the three and nine months ended September 30, 2024 and 2023, respectively.

As of March 31, 2025, amortization expense for the next five years and beyond is summarized as follows:

Amortization expense totaled $ 214 and $ 214 for the three months ended March 31, 2025 and 2024, respectively.

Amortization expense is included in cost of sales in the condensed consolidated statements of operations and comprehensive loss.

The Company recorded an income tax (benefit) provision of approximately ($ 344 ), $ 436 , $ 368 , and $ 368 for the three and nine months ended September 30, 2024 and 2023, respectively.

The Company recorded an income tax provision of approximately $ 80 and $ 300 for the three months ended March 31, 2025 and 2024, respectively.

The income tax provision is a result of taxable income from the Company’s foreign jurisdictions.

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The Company determined the obligation to issue 150,000 shares of Convertible Preferred Stock to Perceptive and Investors in the future at a set price represented a forward contract which was required to be accounted for at fair value.

The fair value of the forward contract was measured as the difference between the fair value of the Series A Preferred Stock, as determined using a binomial lattice valuation model, and the consideration payable to the Company.

The fair value of the forward contract was measured as the difference between the fair value of the Convertible Preferred Stock, as determined using a binomial lattice valuation model, and the consideration payable to the Company.

The assumptions used in the binomial lattice model include:

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Upon closing, the value of the forward contract was determined to be $ 8,900 and the fair value of the Convertible Preferred Stock was determined to be $ 141,100 .

The Convertible Preferred Stock was recorded at its fair value on the Issuance and the change in fair value of the forward contract was recorded as other income in its consolidated statement of operations for the nine months ended September 30, 2024.

Issuance costs of $ 2,250 were incurred and recorded as a reduction in the carrying value of the Convertible Preferred Stock in the three months ended June 30, 2024.

The Company classifies its Series A Convertible Preferred Stock outside of stockholders’ equity as the redemption of such shares is outside the Company’s control.

The Company did not adjust the carrying values of the Series A Convertible Preferred Stock to redemption value as the shares are not probable of becoming redeemable as of September 30, 2024.

The Company classifies its Convertible Preferred Stock outside of stockholders’ equity as the redemption of such shares is outside the Company’s control.

The Company did not adjust the carrying values of the Convertible Preferred Stock to redemption value as the shares are not probable of becoming redeemable as of March 31, 2025.

The Convertible Preferred Stock has the following rights and privileges:

The Series A Preferred Stock will rank senior to the Company’s common stock with respect to the distribution of assets upon the Company’s liquidation, dissolution or winding up.

Upon any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary (“Liquidation”), each holder of Convertible Preferred Stock shall be entitled to receive payment for the greater of (i) 1.75 multiplied by the sum of the Liquidation Preference (i.e., Initial Liquidation Preference of $ 1,000 per share plus Paid-in-Kind (“PIK”) Dividends) plus unpaid Regular Dividends (to the extent such accumulated and unpaid Regular Dividends are not included in such Liquidation Preference) or (ii) the amount such holder would have received if the Series A Preferred Stock were fully converted to common stock.

The Convertible Preferred Stock will rank senior to the Company’s common stock with respect to the distribution of assets upon the Company’s liquidation, dissolution or winding up.

Upon any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary (“Liquidation”), each holder of Convertible Preferred Stock shall be entitled to receive payment for the greater of (i) 1.75 multiplied by the sum of the Liquidation Preference (i.e., Initial Liquidation Preference of $ 1,000 per share plus Paid-in-Kind (“PIK”) Dividends) plus unpaid Regular Dividends (to the extent such accumulated and unpaid Regular Dividends are not included in such Liquidation Preference) or (ii) the amount such holder would have received if the Convertible Preferred Stock were fully converted to common stock.

If the assets available for distribution are not sufficient to pay the holders of the Convertible Preferred Stock pursuant to the preceding sentence, the assets will be distributed ratably to the holders of the Convertible Preferred Stock.

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The holders of the Convertible Preferred Stock shall also have certain protective voting rights.

Specifically, as long as the Series A Preferred Stock are outstanding, each of the following events require at least a two thirds affirmative

vote of the Series A Preferred Stock holders:

Specifically, as long as the Convertible Preferred Stock are outstanding, each of the following events require at least a two thirds affirmative vote of the Convertible Preferred Stock holders:

(a) any amendment or modification of the Certificate of Incorporation to authorize or create, or to increase the authorized number of shares of, any class or series of Dividend Parity Stock, Liquidation Parity Stock, Dividend Senior Stock or Liquidation Senior Stock, (b) any amendment, modification, repeal or waiver of any provision of the Certificate of Incorporation or the Amended and Restated Certificate of Designations that adversely affects the rights, preferences, privileges or powers of the Convertible Preferred Stock, (c) increase or decrease the number of authorized shares of Convertible Preferred Stock or issue additional shares of Convertible Preferred Stock, (d) the Company’s consolidation or combination with, or merger with or into, another Person, or any binding or statutory share exchange or involving the Convertible Preferred Stock, in each case unless:

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The Company has the right to redeem all Convertible Preferred Stock after the Redemption Trigger Date, which is the fifth anniversary of the Initial Issue Date of April 15, 2024.

The amount payable on the redemption date is equal to the Liquidation Preference (i.e., Initial Liquidation Preference of $ 1,000 per share plus PIK Dividends) plus any unpaid Regular Dividends (to the extent such accumulated and unpaid Regular Dividends are not included in such Liquidation Preference).

If a change of control occurs, each holder shall have the right to require the Company to repurchase all, or any whole number of shares that is less than all, of the holder’s Series A Preferred Stock at an amount equal to 1.75 multiplied by the sum of the Liquidation Preference (i.e., Initial Liquidation Preference of $ 1,000 per share plus PIK Dividends) plus any unpaid Regular Dividends (to the extent such accumulated and unpaid Regular Dividends are not included in such Liquidation Preference).

As of September 30, 2024, the Company did not adjust the carrying value of the Series A Preferred Stock to its redemption value, since a change of control was determined to not be probable.

The amount payable on the redemption date is equal to the Liquidation Preference (i.e., Initial Liquidation Preference of $ 1,000 per share plus PIK Dividends) plus any unpaid

Regular Dividends (to the extent such accumulated and unpaid Regular Dividends are not included in such Liquidation Preference).

If a change of control occurs, each holder shall have the right to require the Company to repurchase all, or any whole number of shares that is less than all, of the holder’s Convertible Preferred Stock at an amount equal to 1.75 multiplied by the sum of the Liquidation Preference (i.e., Initial Liquidation Preference of $ 1,000 per share plus PIK Dividends) plus any unpaid Regular Dividends (to the extent such accumulated and unpaid Regular Dividends are not included in such Liquidation Preference).

As of March 31, 2025, the Company did not adjust the carrying value of the Convertible Preferred Stock to its redemption value, since a change of control was determined to not be probable.

After the second anniversary, dividends on the Convertible Preferred Stock accrue quarterly, at a 6 % annual rate, and if not paid out in cash before the quarter end, will become PIK Dividends and added to the liquidation preference, or original issue price plus PIK Dividends.

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Accordingly, the Company accretes the dividends, using the effective interest method, from Issuance to the first contractual call date, April 15, 2029.

The Company accrued dividends of $ 1,329 for the three months ended September 30, 2024, as a reduction to Additional Paid-In Capital and an increase to the carrying value of Convertible Preferred Stock.

The carrying value of Convertible Preferred Stock as of September 30, 2024 is $ 141,481 .

The Company accrued dividends of $ 1,322 for the three months ended March 31, 2025, as a reduction to Additional Paid-In Capital and an increase to the carrying value of Convertible Preferred Stock.

The carrying value of Convertible Preferred Stock as of March 31, 2025 is $ 144,142 .

Holders of Convertible Preferred Stock have the option to convert any number of whole shares at any time.

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Upon conversion, cash will be paid in lieu of any fractional share of common stock.

However, based on certain restrictions on the conversion of the Convertible Preferred Stock specified in

the Amended and Restated Certificate of Designations, a holder of Convertible Preferred Stock is not entitled to effect a conversion of any portion of its shares of Convertible Preferred Stock, or to vote in its capacity as a holder of shares of Convertible Preferred Stock with respect to matters submitted to holders of the common stock if, after giving effect to such conversion, that holder would beneficially own in excess of 4.99 %, in the case of one holder, or 9.99 %, in the case of the other holder, of the number of shares of common stock outstanding immediately after giving effect to such exercise.

However, based on certain restrictions on the conversion of the Convertible Preferred Stock specified in the Amended and Restated Certificate of Designations, a holder of Convertible Preferred Stock is not entitled to effect a conversion of any portion of its shares of Convertible Preferred Stock, or to vote in its capacity as a holder of shares of Convertible Preferred Stock with respect to matters submitted to holders of the common stock if, after giving effect to such conversion, that holder would beneficially own in excess of 4.99 %, in the case of one holder, or 9.99 %, in the case of the other holder, of the number of shares of common stock outstanding immediately after giving effect to such exercise.

On May 7, 2024, the Company filed an Amended and Restated Certificate of Designations in respect of the Convertible Preferred Stock containing certain technical amendments to the terms of the Convertible Preferred Stock.

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On July 10, 2024, the Company filed with the Securities Exchange Commission (the “SEC”) a prospectus supplement to the prospectus included in the Company’s registration statement on Form S-3ASR filed with the SEC on March 2, 2023, covering the resale from time to time by the Investors of up to an aggregate of 3,124,995 shares of common stock, to satisfy registration rights that the Company granted to such stockholders in connection with the Issuance.

As of September 30, 2024, an aggregate of 15,407,579 shares of common stock were reserved for issuance under the Company’s stock plans, which number includes stock options, restricted stock units, and performance stock units that have been granted covering 8,844,685 shares of common stock, 150,000 shares of Convertible Preferred Stock potentially convertible into 3,125,000 shares of common stock, and 1,872,738 shares of common stock that remain available for future grants under the Company’s 2017 Equity Incentive Plan (the “2017 Plan”), 2017 Employee Stock Purchase Plan and 2022 Employment Inducement Plan (the “Inducement Plan”).

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

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

The Company intends to use the net proceeds from the ATM Program to support its global commercialization efforts for IMCIVREE clinical development programs in hypothalamic obesity and other rare MC4R pathway diseases.

As of March 31, 2025, an aggregate of 14,096,737 shares of common stock were reserved for issuance under the Company’s stock plans, which includes stock options, restricted stock units, and performance stock units that have been

granted covering 10,112,090 shares of common stock, 150,000 shares of Convertible Preferred Stock potentially convertible into 3,125,000 shares of common stock, and 1,256,597 shares of common stock that remain available for future grants under the Company’s 2017 Equity Incentive Plan (the “2017 Plan”), 2017 Employee Stock Purchase Plan and 2022 Employment Inducement Plan (the “Inducement Plan”).

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

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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 January 4, 2024, the Company issued 432,143 shares of common stock as partial consideration for its acquisition of the worldwide rights to LGC’s proprietary compound bivamelagon (LB54640).

Between December 10, 2024 and December 31, 2024, the Company sold 744,595 shares of common stock in the ATM Program for net proceeds of $ 41.2 million.

Between January 1, 2025 and January 21, 2025, the Company sold an additional 587,510 shares of common stock in the ATM Program for net proceeds of approximately $ 32.1 million.

On January 4, 2024, the Company issued 432,143 shares of common stock as partial consideration for its acquisition of the worldwide rights to LGC’s proprietary compound bivamelagon.

On February 9, 2022, the Company’s board of directors adopted the Inducement Plan, without stockholder approval pursuant to Rule 5635(c)(4) of the Nasdaq Stock Market LLC listing rules or Rule 5635(c)(4).

fide period of non-employment by the Company or a subsidiary, as a material inducement to the employee’s entering into employment with the Company or its subsidiary.

In accordance with Rule 5635(c)(4), awards under the Inducement Plan may only be made to a newly hired employee who has not previously been a member of the Company’s board of directors, or an employee who is being rehired following a bona fide period of non-employment by the Company or a subsidiary, as a material inducement to the employee’s entering into employment with the Company or its subsidiary.

An aggregate of 1,000,000 shares of the Company’s common stock have been reserved for issuance under the Inducement Plan.

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Stock options granted under the Inducement Plan expire no more than 10 years from the date of grant.

As of September 30, 2024, 570,603 stock option awards and 386,535 restricted stock unit awards have been granted under the Inducement Plan.

As of September 30, 2024, 42,862 shares of common stock are available for future grant under the Inducement Plan.

As of March 31, 2025, 556,100 stock option awards and 422,934 restricted stock unit awards have been granted under the Inducement Plan.

As of March 31, 2025, 20,966 shares of common stock are available for future grant under the Inducement Plan.

Related-Party Transactions

Expenses paid directly to related parties for the three and nine months ended September 30, 2024 and 2023, were immaterial.

Outstanding payments due to related parties as of September 30, 2024 and December 31, 2023 were immaterial.

Expenses paid directly to related parties for the three months ended March 31, 2025 and 2024, were immaterial.

Outstanding payments due to related parties as of March 31, 2025 and December 31, 2024 were also immaterial.

Significant Agreements

RareStone Group Ltd.

On March 14, 2025, we entered into a termination agreement (the “Termination Agreement”) with RareStone Group Ltd.

(“RareStone”) and RareStone Medicine (Shenzhen) Co., Ltd.

(“RareStone Shenzhen”), pursuant to which the Company, RareStone and RareStone Shenzhen have mutually agreed to terminate (i) the Exclusive License Agreement between the Company and RareStone, dated December 3, 2021 (the “License Agreement”);

and (ii) the Share Purchase Agreement between the Company and RareStone, dated December 3, 2021 (the “Share Purchase Agreement”, and with the License Agreement the “RareStone Agreements”).

Under the Termination Agreement, the Company agreed to pay $ 6.3 million as a repayment of a portion of the upfront payment made pursuant to Section 7.1 of the License Agreement.

In connection with the Termination Agreement, the Company and RareStone also entered into a Share Repurchase Agreement dated March 14, 2025, pursuant to which the Company has agreed to convey all of the shares acquired under the original Share Purchase Agreement back to RareStone, for no additional consideration.

The Company had previously written off the value of the shares in the year ended December 31, 2022.

Prior to executing the termination agreement, the Company had recorded $ 1.3 million of deferred revenue related to this arrangement for unsatisfied performance obligations.

As a result of the Termination Agreement, the Company recognized the $ 6.3 million paid to RareStone as a reduction in previously-recognized license revenue as it represented consideration paid to a customer, and recognized all existing deferred revenue resulting in a net reduction in license revenue of $ 5.0 million.

Pursuant to the Termination Agreement, the RareStone Agreements were terminated and all rights and obligations under such agreements ceased.

In addition, each party to the Termination Agreement discharged and released the other parties, subsidiaries, divisions, affiliates, predecessors, successors, and each of their past and present officers, directors, employees, attorneys, agents, affiliates, assigns, and representatives of and from any and all claims, demands, actions, or causes of action, known or unknown, contingent or non-contingent, which the parties may or might have against them, by reason of any general, special, or consequential damages, losses, or potential losses, arising out of and/or relating to the RareStone Agreements.

Long-Term Obligations

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As the repayment of the funded amount is contingent upon worldwide net product sales and upfront payments, milestones, and royalties, the repayment term may be shortened or extended depending on actual worldwide net product sales and upfront payments, milestones, and royalties.

We made repayments of $ 9,092 in the nine months ended September 30, 2024.

As of September 30, 2024 we have made cumulative payments of $ 16,622 .

We made repayments of $ 4,615 in the three months ended March 31, 2025.

As of March 31, 2025 we have made cumulative payments of $ 25,045 .

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

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The repayment period commenced on July 8, 2022 for the Initial Investment Amount, and expires on the earlier of (i) the date at which the Investors received cash payments totaling an aggregate of a Hard Cap ranging from 185 % to 250 % of the Initial Investment Amount or (ii) the legal maturity date of July 8, 2034.

If the Investors have not received

payments equal to 250 % of the Investment Amount by the twelve-year anniversary of the initial closing date, we will be required to pay an amount equal to the Investment Amount plus a specific annual rate of return less payments previously received by Investors.

If the Investors have not received payments equal to 250 % of the Investment Amount by the twelve-year anniversary of the initial closing date, we will be

required to pay an amount equal to the Investment Amount plus a specific annual rate of return less payments previously received by Investors.

In the event of a change of control, we are obligated to pay Investors an amount equal to the Hard Cap in effect at the time, ranging from 185 % to 250 % plus any Under Performance Payment of the Investment Amount less payments previously received by Investors.

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We determined the fair value of the derivative using an option pricing Monte Carlo simulation model taking into account the probability of change of control occurring and potential repayment amounts and timing of such payments that would result under various scenarios, as further described in Note 2, “Summary of Significant Accounting Policies” to our condensed consolidated financial statements.

The aggregate fair value of the embedded derivative asset (liability) was $ 150 and ($ 1,150 ) as of September 30, 2024 and December 31, 2023, respectively.

The aggregate fair value of the embedded derivative asset (liability) was $ 190 and $ 270 as of March 31, 2025 and December 31, 2024, respectively.

We will remeasure the embedded derivative to fair value each reporting period until the time the features lapse and/or termination of the deferred royalty obligation.

For the three and nine months ended September 30, 2024 and 2023, we recognized other income of $ 510 , $ 1,300 , $ 130 and $ 150 , respectively, due to the remeasurement of the embedded derivative liability.

The carrying value of the deferred royalty obligation as of September 30, 2024 was $ 109,241 based on $ 100,000 of proceeds, net of the fair value of the bifurcated embedded derivative liability upon execution of the RIFA, and debt issuance costs incurred.

The carrying value of the deferred royalty obligation approximated fair value as of September 30, 2024 and December 31, 2023.

The effective interest rate as of September 30, 2024 was 15.47 %.

For the three months ended March 31, 2025 and 2024, we recognized other income of ($ 80 ) and $ 490 , respectively, due to the remeasurement of the embedded derivative liability.

The carrying value of the deferred royalty obligation as of March 31, 2025 was $ 109,524 based on $ 100,000 of proceeds, net of the fair value of the bifurcated embedded derivative liability upon execution of the RIFA, and debt issuance costs incurred.

The carrying value is classified as $ 1,590 within current liabilities and $ 107,934 within long-term liabilities on the consolidated balance sheet as of March 31, 2025.

The carrying value of the deferred royalty obligation approximated fair value as of March 31, 2025 and December 31, 2024.

The effective interest rate as of March 31, 2025 was 15.99 %.

In connection with the deferred royalty obligation, we incurred debt issuance costs totaling $ 3,287 .

1 unchanged sentence

The assumptions used in determining the expected repayment term of the debt and amortization period of the issuance costs requires that we make estimates that could impact the short and long-term classification of these costs, as well as the period over which these costs will be amortized.

Subsequent Events

The Company considers events or transactions that occur after the balance sheet date but prior to the issuance of the financial statements to provide additional evidence for certain estimates or to identify matters that require additional disclosure.

Subsequent events have been evaluated as required.

No events or transactions occurred subsequent to the balance sheet date that require disclosure.

Commitments and Contingencies

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The Company is party to various agreements, principally relating to licensed technology, that require future payments relating to milestones whose achievement may become probable in subsequent periods, or royalties on future sales of specified products.

Additionally, the Company is party to various contracts with CROs and CMOs that generally provide for termination on notice, with the exact amounts in the event of termination to be based on the timing of the termination and the terms of the agreement.

Based on the Company’s current development plans as of September 30, 2024, the Company does not expect to make milestone payments due to third parties during the next 12 months from the filing of this Form 10-Q, in connection with our license agreements.

Additionally, the Company is party to various contracts with CROs and CMOs that

generally provide for termination on notice, with the exact amounts in the event of termination to be based on the timing of the termination and the terms of the agreement.

Based on the Company’s current development plans as of March 31, 2025, the Company does not expect to make milestone payments due to third parties during the next 12 months from the filing of this Form 10-Q, in connection with our license agreements.

These milestones are generally recognized in the period in which the achievement of the underlying milestones becomes probable.

When the achievement of these milestones or sales have not occurred, such contingencies are not recorded in the Company’s consolidated financial statements.

Segment and Geographic Information

Operating segments are defined as components of an entity about which separate discrete information is available for evaluation by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance.

The Company currently operates in two business segments, which are U.S.

and international segments for the development and commercialization of therapies for patients with rare diseases.

A single management team that reports to the Chief Executive Officer comprehensively manages the entire business.

The Company meets the aggregation criteria of ASC 280 and therefore has one reportable segment for the year ended March 31, 2025.

The table below is a summary of the segment profit or loss, including significant segment expenses (in thousands):

Three months ended March 31,

Net product revenue - U.S.

Net product revenue - International

Total net product revenue

License revenue

Total net revenue

Cost of sales

Global headcount expense

Preclinical, clinical and development expense

Commercial & medical affairs

Corporate, general & administrative

Other segment expenses

Other (income) expense, net

Interest (income) expense, net

Other segment expenses is composed of acquired in-process research and development costs associated with the acquisition of LGC’s proprietary compound bivamelagon in the three months ended March 31, 2024.

Geographic Data

The Company allocates, for the purpose of geographic data reporting, its revenue based upon the location of its customers.

Total product revenue, net, by geographic area was as follows:

Three months ended March 31,

International

Total product revenue, net

As of March 31, 2025 and December 31, 2024, long-lived assets at locations outside the United States were not material.

Subsequent Events

Subsequent events have been evaluated as required.

No events or transactions occurred subsequent to the balance sheet date that require disclosure.

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

What changed 10-Q

Item 1. Financial Statements