RHYTHM PHARMACEUTICALS, INC. 10-Q

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q. In addition to historical information, some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and is subject to the “safe harbor” created by those sections. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including without limitation statements regarding: the promise or potential of any of our products or product candidates; the marketing, 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, and our other product candidates; our ability to obtain regulatory approval for setmelanotide in further indications, as well as for RM-718, bivamelagon, and our other product candidates; our financial performance, including our expectations regarding our existing cash, operating losses, expenses and sources of future financing; the sufficiency of our cash, cash equivalents and short-term investments to fund our operations; our ability to hire and retain necessary personnel; patient enrollments and the timing thereof; the timing of announcements regarding results of clinical trials; our ability to protect our intellectual property; ongoing activities under and our ability to negotiate our collaboration and license agreements, if needed, and the impact of termination; our marketing, commercial sales, revenue generation, and cost of revenue; expectations surrounding our manufacturing arrangements; the impact of the current or future economic conditions on our business and operations and our future financial results; and other statements identified by words such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “intends,” “may,” “might,” “likely,” “plans,” “potential,” “predicts,” “projects,” “seeks,” “should,” “target,” “will,” “would,” or similar expressions and the negatives of those terms are forward-looking statements. These forward-looking statements are neither promises nor guarantees of future performance, and are subject to a variety of known and unknown risks, uncertainties, and other important factors, many of which are beyond our control, and which could cause actual results to differ materially from those contemplated in such forward-looking statements. 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. Except as may be required by law, we have no plans to update our forward-looking statements to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q . We caution readers not to place undue reliance upon any such forward-looking statements, which speak only as of the date made . 26 Table of Contents Overview 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 precision medicines designed to treat hyperphagia and severe obesity caused by 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, 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-Biedel syndrome (BBS) or other diseases caused by impaired MC4R pathway signaling. The MC4R pathway is a neuro-endocrine pathway in the brain that is responsible for regulating hunger, caloric intake and energy expenditure, which consequently affect body weight. IMCIVREE, an MC4R agonist for which we hold worldwide rights, is the first-ever therapy developed for patients with certain rare diseases that is approved or authorized in the United States, European Union (EU), United Kingdom, Canada and other countries and regions. IMCIVREE is approved by the U.S. Food and Drug Administration (FDA) to reduce excess body weight and maintain weight reduction long term in adult and pediatric patients aged 2 years and older with syndromic or monogenic obesity due to Bardet-Biedl syndrome (BBS) or pro-opiomelanocortin (POMC), proprotein convertase subtilisin/kexin type 1 (PCSK1), or leptin receptor (LEPR) deficiency as determined by an FDA-approved test demonstrating variants in POMC, PCSK1, or LEPR genes that are interpreted as pathogenic, likely pathogenic, or of uncertain significance (VUS). The European Commission (EC) and the United Kingdom’s Medicines & Healthcare Products Regulatory Agency (MHRA) have authorized IMCIVREE for the treatment of obesity and the control of hunger associated with genetically confirmed BBS or loss-of-function biallelic POMC, including PCSK1, deficiency or biallelic LEPR deficiency in adults and children 2 years of age and above. In addition to the United States, 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. We anticipate submitting applications to seek regulatory approval for setmelanotide as a treatment for acquired hypothalamic obesity in multiple geographies in the near term. Acquired hypothalamic obesity is a rare form of obesity that occurs following damage to the hypothalamic region of the brain. This disease most frequently follows the growth or surgical removal of craniopharyngioma, astrocytoma or other rare brain tumors. Additional causes of injury may include traumatic brain injury, stroke, or inflammation due to infection. Patients experience accelerated weight gain, a reduction in energy expenditure, and hyperphagia (a chronic pathological condition characterized by insatiable hunger, impaired satiety, and persistent abnormal food-seeking behaviors) leading to severe obesity within six to 12 months following tumor resection or other injury. On April 7, 2025, we announced positive topline results from the pivotal Phase 3 TRANSCEND trial evaluating setmelanotide for the treatment of acquired hypothalamic obesity. The global trial, which we believe is the largest and longest placebo-controlled trial to evaluate a therapy for patients with acquired hypothalamic obesity, met its primary endpoint with a statistically significant and highly clinically meaningful reduction in body mass index (BMI) with setmelanotide in both adult and pediatric patients versus placebo. No new safety signals with setmelanotide were observed, in line with setmelanotide’s well-established and well-understood safety profile. Given these compelling new efficacy data with setmelanotide, we are preparing to submit a supplemental New Drug Application to the FDA and a Type II variation request to the European Medicines Agency in the third quarter of 2025. We anticipate reading out data from a 12-patient cohort in Japan in the first quarter of 2026 which we believe, if successful, could support registration of setmelanotide in Japan for this disease. With these planned submissions, we believe setmelanotide has the potential to become the first-ever approved therapy for patients with acquired hypothalamic obesity. We estimate there are 5,000 to 10,000 people living with hypothalamic obesity in the U.S., 5,000 to 8,000 people living with hypothalamic obesity in Japan, and 3,500 to 10,000 people living with hypothalamic obesity in the E.U. In addition to our commercial efforts and inclusive of late-stage development efforts, we are advancing what we believe is the most comprehensive clinical research and development 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 we believe would benefit from setmelanotide therapy or from one of our new drug candidates, RM-718, 27 Table of Contents which is designed to be a more selective MC4R agonist with weekly administration, or bivamelagon, an investigational oral small molecule MC4R agonist in Phase 2 clinical trials. As mentioned above, our Phase 3 trial of setmelanotide in patients with acquired hypothalamic obesity met the primary and key secondary endpoints, and we have initiated an additional, independent substudy in patients with congenital hypothalamic obesity as part of that trial. We are advancing next-generation MC4R agonists in clinical trials. We anticipate reading out topline data from our Phase 2 trial evaluating bivamelagon in patients with acquired hypothalamic obesity in the third quarter of 2025, and we anticipate completing enrollment in Part C of the Phase 1 trial evaluating the weekly RM-718 in patients with acquired hypothalamic obesity. In addition, 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. We are leveraging what we believe is the largest known DNA database focused on obesity - with approximately 100,000 sequencing samples as of December 31, 2024 - to improve the understanding, diagnosis and care of people living with severe obesity due to certain variants in genes associated with the MC4R pathway. Our sequencing-based epidemiology estimates show that each of these genetically-defined MC4R pathway deficiencies are considered rare diseases, according to established definitions based on patient populations. Our epidemiology estimates are approximately 4,600 to 7,500 for U.S. patients in initial FDA-approved indications, including obesity due to biallelic POMC, PCSK1 or LEPR deficiencies, and BBS. Our epidemiology estimates for the two more prevalent indications being studied in our Phase 3 EMANATE trial (SH2B1 and POMC/PCSK1) suggest that approximately 29,000 U.S. patients with one of these genetically driven obesities have the potential to respond well to setmelanotide. Similarly, our epidemiology estimates for patients with genetic indications who demonstrated an initial response following stage 1 of our Phase 2 DAYBREAK trial is approximately 65,300. We believe that all these patients face similar challenges as other patients with rare diseases, namely lack of awareness, resources, tests, tools and, especially, therapeutic options. Additional recent clinical, regulatory, corporate and commercial updates include: On May 7, 2025, we announced: ● revenue from global sales of IMCIVREE was $37.7 million for the first quarter of 2025. The number of patients on reimbursed therapy increased 14% in the first quarter of 2025 compared to the fourth quarter of 2024, as patient demand for IMCIVREE remained strong. Revenue of $24.5 million, or 65% of product revenue, was generated in the United States. The number of patients on reimbursed therapy in the United States continued to increase during the quarter. U.S. revenue was affected by an $8.3 million decrease in inventory at the specialty pharmacy that dispenses IMCIVREE to patients and a $1.1 million increase in product dispensed to patients, resulting in a net decrease in product revenue of $7.2 million in the first quarter of 2025 compared to the fourth quarter of 2024. Revenue of $13.2 million, or 35% of product revenue, was generated outside the United States, an increase of $3.2 million quarter over quarter. On April 7, 2025, we announced the pivotal Phase 3 TRANSCEND trial met its primary endpoint with a -19.8% placebo-adjusted body mass index (BMI) reduction with setmelanotide in patients (N=120) with acquired HO. Highlights included: ● Patients with acquired HO on setmelanotide therapy (n=81) achieved mean BMI change of -16.5% compared with +3.3% for placebo (n=39) at 52 weeks (p<0.0001); ● -19.2% placebo-adjusted BMI reduction achieved in adult patients 18 years old and older (n=49) at 52 weeks; ● -20.2% placebo-adjusted BMI reduction achieved in patients younger than 18 years old (n=71) at 52 weeks; ● 80% of patients on setmelanotide achieved BMI reduction of 5% or greater at 52 weeks; and 28 Table of Contents ● No new safety signals with setmelanotide were observed, in line with setmelanotide’s well-established and well-understood safety profile. Today, we announced new data from the Phase 3 TRANSCEND trial that demonstrated a consistent and statistically significant mean BMI reduction across three stratified age groups: ​ ● -19.5% placebo-adjusted BMI reduction achieved in pediatric patients ages 4 to younger than 12 years old (n=31: 20 setmelanotide, 11 placebo) at 52 weeks (p<0.0001); ● -21.0% placebo-adjusted BMI reduction achieved in adolescent patients ages 12 to younger than 18 years old (n=40: 28 setmelanotide, 12 placebo) at 52 weeks (p<0.0001); and ● -19.2% placebo-adjusted BMI reduction achieved in adult patients ages 18 and older (n=49: 33 setmelanotide, 16 placebo) at 52 weeks (p<0.0001). Additionally, on April 7, 2025, we announced that we dosed the first patients with Prader-Willi syndrome in a 26-week, open-label Phase 2 trial of setmelanotide. The trial will assess the safety and efficacy of a daily dose of subcutaneous setmelanotide in approximately 20 patients for up to 26 weeks. On March 20, 2025, we announced that we reacquired the rights to IMCIVREE® (setmelanotide) in China, including mainland China, Hong Kong and Macau, as we terminated our 2021 licensing agreement with RareStone Group Ltd. On March 19, 2025, we announced that we received orphan drug designation from Japan’s Ministry of Health, Labour and Welfare (MHLW) for setmelanotide as a treatment for acquired hypothalamic obesity. On March 18, 2025, we announced a new research collaboration with the Raymond A. Wood Foundation, a patient advocacy organization for survivors of craniopharyngioma and hypothalamic-pituitary brain tumors, to study the impact of fatigue on persons with craniopharyngioma. We currently expect to achieve the following, near-term milestones: ● Submit a supplemental New Drug Application to the FDA and a Type II variation request to the European Medicines Agency for setmelanotide for the treatment of acquired HO in the third quarter of 2025; ● Announce topline data from the bivamelagon Phase 2 trial in acquired HO in the third quarter of 2025; ● Complete enrollment in the setmelanotide Phase 2 trial in Prader-Willi syndrome (PWS) in the third quarter of 2025; ● Complete enrollment in the Phase 1, Part C trial evaluating the weekly, MC4R agonist RM-718 in patients with acquired hypothalamic obesity and provide an update from the trial on efficacy, safety and tolerability results in the second half of 2025; ● Complete enrollment in the setmelanotide Phase 3 trial substudy in congenital hypothalamic obesity in the second half of 2025; ● Announce topline data in the 12-patient Japanese cohort of the setmelanotide Phase 3 trial in acquired HO in the first quarter of 2026; and ● Announce topline data in the Phase 3 EMANATE trial evaluating setmelanotide in genetically caused MC4R pathway diseases in the first quarter of 2026. 29 Table of Contents IMCIVREE first became commercially available to patients 6 years of age and older with obesity due to POMC, PCSK1 or LEPR deficiency in the U.S. in the first quarter of 2021 and patients 6 years of age and older with obesity due to BBS during June 2022. Following marketing authorizations in the EU, Great Britain and Canada, as well as expanded labels in the U.S., the EU and Great Britain and 2024 to make IMCIVREE available to patients as young as 2 years of age, we are continuing to pursue a country-by-country strategy to establish market access and reimbursement for IMCIVREE in additional countries. We expect to continue to fund our operations through the sale of equity, debt financings or other sources. We have built our own marketing and commercial sales infrastructure in the United States and are in the process of building a similar infrastructure in several European markets and the United Kingdom. We may enter into arrangements with other parties for certain markets outside the United States. However, we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms, or at all. If we fail to raise capital or enter into such other arrangements as, and when, needed, we may have to significantly delay, scale back or discontinue the development or commercialization of setmelanotide. ​ 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 Convertible Preferred Stock. Since our initial public offering, or IPO, on October 10, 2017, through our underwritten follow-on offerings and through our ATM program through March 31, 2025, we have raised aggregate net proceeds of approximately $864.8 million through the issuance of our common stock after deducting underwriting discounts, commissions and offering related transaction costs. We also received $100.0 million from the sale of our Rare Pediatric Disease Priority Review Voucher (“PRV”), to Alexion Pharmaceuticals, Inc. in February 2021. 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 March 31, 2025 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 affiliates of Perceptive Advisors LLC, or Perceptive, and certain other 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”, or the Convertible Preferred Stock, for an aggregate purchase price of $150.0 million, or $1,000 per share (as disclosed in Note 9, “Series A Preferred Stock”). We received $147.8 million in net proceeds under the Investment Agreement. We expect to continue to fund our operations through the sale of equity, debt financings or other sources. We have built our own marketing and commercial sales infrastructure in the United States and are in the process of building a similar infrastructure in several European markets and the United Kingdom. We may enter into collaborations with other parties for certain markets outside the United States. However, we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms, or at all. If we fail to raise capital or enter into such other arrangements as, and when, needed, we may have to significantly delay, scale back or discontinue the development or commercialization of setmelanotide. As of March 31, 2025 we had an accumulated deficit of $1.2 billion. Our net loss was $49.5 million and $141.4 million for the three months ended March 31, 2025 and March 31, 2024, respectively. We expect to continue to incur significant expenses and operating losses for the foreseeable future. Our expenses may increase in connection with our ongoing activities, as we: ● continue to conduct clinical trials for setmelanotide and our other product candidates ; ● engage contract manufacturing organizations, or CMOs, for the manufacture of clinical and commercial-grade setmelanotide; ● seek regulatory approval for setmelanotide for future indications, and for our other product candidates ; ● expand our clinical and financial operations and build a marketing and commercialization infrastructure ; 30 Table of Contents ● engage in the sales and marketing efforts necessary to support the continued commercial efforts of IMCIVREE globally; ● take into account the levels, timing and collection of revenue earned from sales of IMCIVREE and other products approved in the future, if any; and ● continue to operate as a public company. As of March 31, 2025, our existing cash and cash equivalents and short-term investments were approximately $314.5 million. We expect that our existing cash and cash equivalents and short-term investments will be sufficient to fund our operations into 2027. Financial Operations Overview Product revenue, net 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 $265.3 million in product revenue. Our lead product candidate, IMCIVREE, was approved by the FDA in November 2020 for chronic weight management in adult and pediatric patients six years of age and older with obesity due to POMC, PCSK1 or LEPR deficiency confirmed by genetic testing. IMCIVREE became commercially available in the United States in the first quarter of 2021. We recorded our first sales of IMCIVREE in the United States in March 2021 and we made our first sales in France during March 2022 under the paid early access program. IMCIVREE was approved by the FDA and the EC in adult and pediatric patients six years of age and older with obesity due to BBS in June and September 2022, respectively. In 2024, IMCIVREE was approved by the FDA to reduce excess body weight and maintain weight reduction long term in adult and pediatric patients aged 2 years and older with syndromic or monogenic obesity due to BBS or POMC, PCSK1, or LEPR deficiency as determined by an FDA-approved test demonstrating variants in POMC, PCSK1 , or LEPR genes that are interpreted as pathogenic, likely pathogenic, or of uncertain significance (VUS). Also in 2024, the EC and MHRA authorized IMCIVREE for the treatment of obesity and the control of hunger associated with genetically confirmed BBS or loss-of-function biallelic POMC, including PCSK1, deficiency or biallelic LEPR deficiency in adults and children 2 years of age and above. Following these approvals, we expect our sales of IMCIVREE will continue to grow as we identify and treat more patients with this disease and obtain reimbursement throughout the international markets in which we operate. License revenue For the three months ended March 31, 2025, we recognized a reduction of previously-recognized license revenue of $5.0 million in connection with the termination of our exclusive license agreement with RareStone. See Note 12, “Significant Agreements” to the unaudited condensed consolidated financial statements included under Part I, Item 1 of this Quarterly Report on Form 10-Q. Cost of sales All of our inventory of IMCIVREE produced prior to FDA approval is available for commercial or clinical use. Most of the manufacturing costs have been recorded as research and development expenses in prior periods. We expect cost of sales to increase in 2025 as we continue to sell inventory that is produced after we began capitalizing manufacturing costs for IMCIVREE commercial inventory. 31 Table of Contents Research and development expenses Research and development expenses consist primarily of costs incurred for our research activities, including our drug discovery and genetic sequencing efforts, and the clinical development of setmelanotide, which include: ● expenses incurred under agreements with third parties, including CROs that conduct research and development and preclinical activities on our behalf, and the cost of consultants and CMOs that manufacture drug products for use in our preclinical studies and clinical trials; ● employee-related expenses including salaries, benefits and stock-based compensation expense; ● the cost of lab supplies and acquiring, developing and manufacturing preclinical and clinical study materials; ● the cost of genetic sequencing of potential patients in clinical studies; ● facilities, depreciation, and other expenses, which include rent and maintenance of facilities, insurance and other operating costs; and ● acquired in process research and development costs associated with the acquisition of LG Chem, Ltd.’s, or LGC’s proprietary compound bivamelagon in the three months ended March 31, 2024. We expense research and development costs to operations as incurred. Nonrefundable advance payments for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses. The capitalized amounts are expensed as the related goods are delivered or the services are performed. The following table summarizes our current research and development expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ ​ March 31, Research and development summary 2025 2024 Research and development expense ​ $ 36,973 ​ $ 128,665 ​ 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, bivamelagon, and a potential therapeutic product candidate for congenital hyperinsulinism (CHI) will depend on a variety of factors, including: ● the scope, rate of progress, and expense of our ongoing, as well as any additional, clinical trials and other research and development activities; ● the rate of enrollment in clinical trials; ● the safety and efficacy demonstrated by setmelanotide and other product candidates in future clinical trials; ● changes in regulatory requirements; ● changes in clinical trial design; and ● the timing and receipt of any regulatory approvals. A change in the outcome of any of these variables with respect to the development of our product candidates would significantly change the costs and timing associated with its development and potential commercialization. 32 Table of Contents Research and development activities are central to our business model. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We expect research and development costs to increase significantly for the foreseeable future as our setmelanotide and other development programs progress. However, we do not believe that it is possible at this time to accurately project total program-specific expenses to commercialization and there can be no guarantee that we can meet the funding needs associated with these expenses. Selling, general and administrative expenses Selling expenses consist of professional fees related to preparation for the commercialization of setmelanotide, as well as salaries and related benefits for commercial employees, including stock-based compensation. As we further implement and execute our commercialization plans to market setmelanotide in new territories and as we explore new collaborations to develop and commercialize setmelanotide, we anticipate that these expenses will materially increase. General and administrative expenses consist primarily of salaries and other related costs, including stock-based compensation, relating to our full-time employees not involved in R&D or commercial activities. Other significant costs include rent, legal fees relating to patent and corporate matters and fees for accounting and consulting services. The following table summarizes our current selling, general and administrative expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ ​ March 31, Selling, general and administrative summary 2025 2024 Selling, general and administrative expense ​ $ 39,087 ​ $ 34,382 ​ We anticipate that our selling, general and administrative expenses will increase in the future to support our continued and expanding commercialization efforts for IMCIVREE in the United States and the European Union as well as increased costs of operating as a global commercial stage biopharmaceutical public company. These increases will likely include increased costs related to the hiring of additional personnel and fees to outside consultants, lawyers and accountants, compliance with local rules and regulations in the United States and foreign jurisdictions, exchange listing and Securities and Exchange Commission, or SEC, expenses, insurance and investor relations costs, among other expenses. Critical Accounting Policies and Estimates Our management’s discussion and analysis of our financial condition and results of operations are based on our financial statements, which we have prepared in accordance with accounting principles generally accepted in the United States, or GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting periods. These items are monitored and analyzed by us for changes in facts and circumstances on an ongoing basis, and material changes in these estimates could occur in the future. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. There were no significant changes to our critical accounting policies as reported in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024. 33 Table of Contents Results of Operations Comparison of the three months ended March 31, 2025 and 2024 The following table summarizes our results of operations for the three months ended March 31, 2025 and 2024, together with the changes in those items in dollars and as a percentage: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ ​ ​ ​ ​ ​ ​ March 31, ​ Change ​ 2025 2024 $ % ​ ​ (in thousands) Statement of Operations Data: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Product revenue, net $ 37,718 $ 25,967 ​ $ 11,751 ​ 45 % License revenue ​ ​ (5,014) ​ ​ — ​ ​ (5,014) ​ (100) % Costs and expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cost of sales ​ ​ 3,648 ​ ​ 2,807 ​ ​ 841 ​ 30 % Research and development ​ ​ 36,973 ​ ​ 128,665 ​ ​ (91,692) ​ (71) % Selling, general, and administrative ​ 39,087 ​ 34,382 ​ 4,705 ​ 14 % Total costs and expenses ​ 79,708 ​ 165,854 ​ (86,146) ​ (52) % Loss from operations ​ (47,004) ​ (139,887) ​ 92,883 ​ (66) % Other income (expense), net ​ (2,414) ​ (1,185) ​ (1,229) ​ 104 % Loss before income taxes ​ ​ (49,418) ​ ​ (141,072) ​ ​ 91,654 ​ (65) % Provision for income taxes ​ ​ 80 ​ ​ 300 ​ ​ (220) ​ (73) % Net loss ​ $ (49,498) ​ $ (141,372) ​ $ 91,874 ​ (65) % ​ Product revenue, net . Product revenue, net increased by $11.8 million to $37.7 million for the three months ended March 31, 2025 from $26.0 million for the three months ended March 31, 2024, an increase of 45%. We expect our sales of IMCIVREE to continue to increase. We have achieved market access for 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. For the three months ended March 31, 2025 and 2024, a substantial amount of our product revenue, or 65% and 74%, respectively, was generated from sales of our product to patients in the United States. License revenue . For the three months ended March 31, 2025, we recognized a reduction of previously-recognized license revenue of $5.0 million in connection with the termination of our exclusive license agreement with RareStone. See Note 12, “Significant Agreements” to the unaudited condensed consolidated financial statements included under Part I, Item 1 of this Quarterly Report on Form 10-Q. Cost of sales. Cost of sales increased by $0.8 million to $3.6 million for the three months ended March 31, 2025 from $2.8 million for the three months ended March 31, 2024, an increase of 30%, which was driven by a corresponding increase in revenue in the three months ended March 31, 2025 . 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 $0.8 million increase in cost of sales in the three months ended March 31, 2025 from the same period in 2024 was due to $0.6 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 revenue to continue to be in a range of 10% to 12% in the foreseeable future. 34 Table of Contents Research and development expense. Research and development expense decreased by $91.7 million to $37.0 million for the three months ended March 31, 2025 from $128.7 million for the three months ended March 31, 2024, a decrease of 71%. The net decrease was primarily due to the following: ● a decrease of $92.5 million related to acquired In-Process Research and Development (“IPR&D”) costs associated with the acquisition of LGC’s proprietary compound bivamelagon in the three months ended March 31, 2024, which did not recur in 2025; and ● a net decrease of $4.7 million in our clinical trial costs due to the completion and wind down of our long-term extension trial, Phase 2 Basket trial, Phase 3 pediatrics trial, and switch trial, as well as decreased genetic sequencing costs. The above decreases were partially offset by: ● an increase of $2.9 million in salaries, benefits and stock-based compensation related to the hiring of additional full-time employees in order to support the growth of our research and development programs; and ● an increase of $2.1 million associated with chemistry, manufacturing, and controls (CMC) costs for drug formulation to support our ongoing Phase 1 clinical trial of RM-718 and the Phase 2 bivamelagon trial acquired from LGC. Selling, general and administrative expense. Selling, general and administrative expense increased by $4.7 million to $39.1 million for the three months ended March 31, 2025 from $34.4 million for the three months ended March 31, 2024, an increase of 14%. The increase was primarily due to the following: ● an increase of $5.9 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; and ● an increase of $1.3 million related to increased marketing and promotion costs to support continued revenue growth. The above increases were partially offset by: ● a decrease of $2.0 million related to professional services costs, including legal, consulting and tax services; and ● a decrease of $0.8 million related to CMC costs. Other income (expense), net. Other (expense), net increased by $1.2 million to $2.4 million for the three months ended March 31, 2025 from $1.2 million for the three months ended March 31, 2024. The increase was primarily due to the following: ● recognition of $1.1 million of non-cash interest expense in the three months ended March 31, 2025 associated with accretion of the non-current liability payable to LGC in July 2025; and ● a net increase of $0.6 million recognized for the net change in fair value of the embedded derivatives in our debt royalty obligation, as well as realized foreign currency losses. The above amount was partially offset by: ​ 35 Table of Contents ● 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 and proceeds of $75.0 million received from our ATM equity financing. Liquidity and Capital Resources As of March 31, 2025, our cash and cash equivalents and short-term investments were approximately $314.5 million. Cash flows The following table provides information regarding our cash flows for the three months ended March 31, 2025 and 2024: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended March 31, ​ 2025 2024 ​ (in thousands) Net cash (used in) provided by: ​ ​ ​ ​ ​ Operating activities $ (40,351) ​ $ (40,743) Investing activities 24,812 ​ 30,050 Financing activities 32,499 ​ 4,243 Effect of exchange rates on cash ​ (2) ​ ​ (71) Net increase (decrease) in cash, cash equivalents and restricted cash $ 16,958 ​ (6,521) ​ Net cash used in operating activities The use of cash in all periods resulted primarily from our net loss adjusted for non-cash charges and changes in components of operating assets and liabilities. Net cash used in operating activities was $40.4 million for the three months ended March 31, 2025 and consisted primarily of a net loss of $49.5 million adjusted for non-cash items of $17.1 million, which consisted of stock-based compensation, non-cash interest expense, non-cash accretion and amortization of short-term investments, depreciation and amortization, rent expense and the change in the fair value of our embedded derivative asset. The change in operating assets and liabilities used net cash of approximately $7.9 million and was primarily driven by net decreases in accounts payable and accrued expenses of $3.6 million, the change in deferred revenue of $1.3 million, and net increases in prepaids and other current assets of $3.2 million. These net uses of cash were offset by net increases in other long-term assets of $0.1 million and net increases in accounts receivable and inventory of $0.1 million. Net cash used in operating activities was $40.7 million for the three months ended March 31, 2024 and consisted primarily of a net loss of $141.4 million adjusted for non-cash items of $102.8 million, which consisted of stock-based compensation, depreciation and amortization, and the change in the fair value of our embedded derivative liability, totaling $10.4 million. Our net loss adjusted for non-cash items also includes $92.4 million of acquired IPR&D assets, which are classified as investing activities. The change in operating assets and liabilities used net cash of approximately $2.2 million, primarily driven by net increases in prepaid expenses and other assets of $2.4 million and net decreases in accounts payable and accrued expenses of $1.3 million, offset by a net increase in long-term assets of $1.2 million and decreases in accounts receivable and inventory of $0.3 million. ​ Net cash provided by investing activities Net cash provided by investing activities was $24.8 million for the three months ended March 31, 2025 and relates to gross maturities of short-term investments of $58.3 million, offset by purchases of short-term investments for $33.5 million. 36 Table of Contents Net cash provided by investing activities was $30.1 million for the three months ended March 31, 2024 and relates to gross maturities of short-term investments of $70.1 million, offset by cash used for the purchase of LGC’s proprietary compound bivamelagon for $40.0 million in January 2024. Net cash provided by financing activities Net cash provided by financing activities was $32.5 million for the three months ended March 31, 2025, and consisted of net proceeds of $34.0 million from our ATM equity offering, as well as proceeds of $3.1 million from the exercise of stock options and the issuance of common stock from our Employee Stock Purchase Plan. These proceeds were offset by $4.6 million of repayments of our deferred royalty obligation. Net cash provided by financing activities was $4.2 million for the three months ended March 31, 2024, and consisted of proceeds of $7.0 million from the exercise of stock options and the issuance of common stock from our Employee Stock Purchase Plan. These proceeds were offset by $2.8 million of repayments on our deferred royalty obligation. ​ Funding requirements We expect our expenses to increase in connection with our ongoing activities, particularly as we continue the clinical development of and seek marketing approval for setmelanotide for future indications, continue the clinical development of our other product candidates and build out our global organization. In addition, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution to the extent that such sales, marketing and distribution are not the responsibility of potential collaborators. We also expect to incur additional costs associated with operating as a public company. We expect that our existing cash and cash equivalents and short-term investments as of March 31, 2025, will be sufficient to fund our operations into 2027. Our cash and cash equivalents are maintained at financial institutions in amounts that exceed federally-insured limits. In the event of failure of any of the financial institutions where we maintain our cash and cash equivalents, there can be no assurance that we will be able to access uninsured funds in a timely manner or at all. We may need to obtain substantial additional funding in connection with our research and development activities and any continuing operations thereafter. If we are unable to raise capital when needed or on favorable terms, we would be forced to delay, reduce or eliminate our research and development programs or future commercialization efforts. Our future capital requirements will depend on many factors, including: ● 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 bivamelagon, 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, and in connection with a therapeutic product candidate for CHI ; ● the obligations owed to Ipsen, Camurus AB, and LGC pursuant to our license agreements; ● the extent to which we acquire or in-license other product candidates and technologies; ● the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims; 37 Table of Contents ● our ability to establish and maintain additional collaborations on favorable terms, if at all; and ● the costs of operating as a public company Although IMCIVREE has been approved by the FDA in certain indications, and became commercially available in the first quarter of 2021, IMCIVREE may not achieve commercial success. In addition, developing our setmelanotide program is a time-consuming, expensive and uncertain process that may take years to complete, and we may never generate the necessary data or results required to obtain future marketing approvals and achieve product sales. Accordingly, we will need to continue to rely on additional financing to achieve our business objectives. Adequate additional financing may not be available to us on acceptable terms, or at all. Further, the global economy, including credit and financial markets, has recently experienced extreme volatility and disruptions, including severely diminished liquidity and credit availability, rising interest and inflation rates, declines in consumer confidence, declines in economic growth, increases in unemployment rates and uncertainty about economic stability. All of these factors could impact our liquidity and future funding requirements, including but not limited to our ability to raise additional capital when needed on acceptable terms, if at all. The duration of this economic slowdown is uncertain and the impact on our business is difficult to predict. See “Risk Factors— Unfavorable global political or economic conditions could adversely affect our business, financial condition or results of operations.” Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances and licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Debt financing, if available, involves agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise funds through additional collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our setmelanotide program on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market our setmelanotide program that we would otherwise prefer to develop and market ourselves. ATM Program ​ On November 2, 2021, we entered into a Sales Agreement with Cowen and Company, LLC (“Cowen”), pursuant to which we may issue and sell shares of our common stock, having an aggregate offering price of up to $100.0 million, from time to time through an “at the market” equity offering program under which Cowen acts as sales agent (the “ATM Program”). Between August 10, 2023 and August 21, 2023, we sold approximately two million shares of our common stock in the ATM Program for net proceeds of approximately $48.9 million. On February 29, 2024, the Company and Cowen entered into Amendment No. 1 to Sales Agreement (the “Amendment”) to increase the aggregate offering price of the shares of common stock that may be issued and sold pursuant to the Sales Agreement to $200,000,000 (excluding the aggregate offering price of shares of common stock issued and sold pursuant to the Sales Agreement prior to February 29, 2024). In connection with the Amendment, on February 29, 2024, we filed with the SEC a prospectus supplement, dated February 29, 2024, which, combined with the Base Prospectus (together, the “New Prospectus”), amended the Prior Prospectus in its entirety. The issuances and sales under the Sales Agreement, as amended by the Amendment, will be made pursuant to the Registration Statement and the New Prospectus. From December 10, 2024 to December 31, 2024, the Company sold 744,595 shares of common stock in the ATM Program for net proceeds of $41.2 million as of December 31, 2024. The Company sold an additional 587,510 shares of common stock in the ATM Program from January 1, 2025 through January 21, 2025 for net proceeds of approximately $32.1 million in the quarter ending March 31, 2025. 38 Table of Contents Contractual obligations As of March 31, 2025, 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, 2024. Item 3. Quantitative and Qualitative Disclosures About Market Risk As of March 31, 2025, 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, 2024.