Form 10-Q - Quarterly report [Sections 13 or 15(d)]

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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2024

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-38223

RHYTHM PHARMACEUTICALS, INC.

(Exact name of registrant as specified in its charter)


Delaware	46-2159271
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

222 Berkeley Street

12^th Floor

Boston, MA 02116

(Address of Principal Executive Offices)

(Zip Code)

(857) 264-4280

(Registrant’s Telephone Number, Including Area Code)

N/A

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.001 par value per share	RYTM	The Nasdaq Stock Market LLC (Nasdaq Global Market)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer ☒	Accelerated filer ☐

Non-accelerated filer ☐	Smaller reporting company ☐
	Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒.

The number of shares outstanding of the registrant’s Common Stock as of November 3, 2024 was 61,457,069.

Table of Contents

RHYTHM PHARMACEUTICALS, INC.

FORM 10-Q

INDEX


		Page No.
PART I	FINANCIAL INFORMATION

	Item 1. Condensed Consolidated Financial Statements (Unaudited)	3

	Condensed Consolidated Balance Sheets	3

	Condensed Consolidated Statements of Operations and Comprehensive Loss	4


	Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity	5


	Condensed Consolidated Statements of Cash Flows	6

	Notes to Unaudited Condensed Consolidated Financial Statements	7

	Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	28

	Item 3. Quantitative and Qualitative Disclosures About Market Risk	41

	Item 4. Controls and Procedures	41

PART II	OTHER INFORMATION

	Item 1. Legal Proceedings	43

	Item 1A. Risk Factors	43

	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	105

	Item 3. Defaults Upon Senior Securities	106

	Item 4. Mine Safety Disclosure	106

	Item 5. Other Information	106

	Item 6. Exhibits	106

SIGNATURES		107

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1.Financial Statements

Rhythm Pharmaceuticals, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except share and per share data)

(Unaudited)


	September 30,		December 31,
	2024		2023

Assets
Current assets:
Cash and cash equivalents	$	47,521	$	60,081
Short-term investments		250,869		215,765
Accounts receivable, net		19,306		14,867
Inventory		13,895		8,624
Prepaid expenses and other current assets		8,750		8,931
Total current assets		340,341		308,268
Property and equipment, net		801		1,341
Right-of-use asset		3,588		781
Intangible assets, net		6,388		7,028
Restricted cash		462		328
Other long-term assets		11,992		14,999
Total assets	$	363,572	$	332,745
Liabilities, Convertible Preferred Stock and Stockholders’ equity
Current liabilities:
Accounts payable	$	4,887	$	4,885
Accrued expenses and other current liabilities		54,797		48,262
Other current liability - LG Chem		36,635		—
Deferred revenue		1,286		1,286
Lease liability		—		770
Total current liabilities		97,605		55,203
Long-term liabilities:
Deferred royalty obligation		109,241		106,143
Lease liability, non-current		4,030		490
Derivative liability		—		1,150
Total liabilities		210,876		162,986
Commitments and contingencies (Note 15)
Series A convertible preferred stock, $0.001 par value: 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.		141,481		—
Stockholders’ equity:
Preferred stock, $0.001 par value: 10,000,000 shares authorized; no shares issued and outstanding at September 30, 2024 and December 31, 2023		—		—
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		61		59
Additional paid-in capital		1,123,768		1,064,302
Accumulated other comprehensive (loss) income		(604)		134
Accumulated deficit		(1,112,010)		(894,736)
Total stockholders’ equity		11,215		169,759
Total liabilities, convertible preferred stock and stockholders’ equity	$	363,572	$	332,745

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

Table of Contents

Rhythm Pharmaceuticals, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except share and per share data)

(Unaudited)



	Three months ended September 30,				Nine months ended September 30,
	2024		2023		2024		2023
Revenues:
Product revenue, net	$	33,251	$	22,504	$	88,296	$	53,194
Total revenues		33,251		22,504		88,296		53,194
Costs and expenses:
Cost of sales		3,828		2,412		9,581		6,069
Research and development		37,931		33,570		196,789		105,059
Selling, general, and administrative		35,377		30,475		106,174		85,158
Total costs and expenses		77,136		66,457		312,544		196,286
Loss from operations		(43,885)		(43,953)		(224,248)		(143,092)
Other income (expense):
Other income (expense), net		1,088		(159)		2,434		(369)
Gain on settlement of forward contract		—		—		8,900		—
Interest expense		(5,242)		(3,149)		(15,156)		(9,342)
Interest income		4,054		3,466		11,196		10,126
Total other income (expense), net		(100)		158		7,374		415
Loss before income taxes		(43,985)		(43,795)		(216,874)		(142,677)
Provision (benefit) for income taxes		(344)		368		436		368
Net loss	$	(43,641)	$	(44,163)	$	(217,310)	$	(143,045)
Accrued dividends on convertible preferred stock		(1,329)		—		(2,631)		—
Net loss attributable to common stockholders	$	(44,970)	$	(44,163)	$	(219,941)	$	(143,045)

Net loss per share attributable to common stockholders, basic and diluted	$	(0.73)	$	(0.76)	$	(3.62)	$	(2.50)

Weighted-average common shares outstanding, basic and diluted		61,219,918		57,874,960		60,793,329		57,154,803

Other comprehensive loss:
Net loss attributable to common stockholders	$	(44,970)	$	(44,163)	$	(219,941)	$	(143,045)
Foreign currency translation adjustment		(602)		76		(975)		49
Unrealized (loss) gain, net on marketable securities, net of tax		615		(175)		237		(70)
Comprehensive loss	$	(44,957)	$	(44,262)	$	(220,679)	$	(143,066)

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

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Rhythm Pharmaceuticals, Inc.

Condensed Consolidated Statements of Convertible Preferred Stock & Stockholders’ Equity

(in thousands, except share data)

(Unaudited)


									Accumulated
	Series A Convertible						Additional		Other				Total
	Preferred Stock			Common Stock			Paid-In		Comprehensive		Accumulated		Stockholders’
	Shares	Amount		Shares	Amount		Capital		Income (Loss)		Deficit		Equity
Balance at December 31, 2023	—		—	59,426,559	$	59	$	1,064,302	$	134	$	(894,736)	$	169,759
Stock-based compensation expense	—		—	—		—		7,767		—		—		7,767
Issuance of common stock in connection with ESPP	—		—	28,495		—		673		—		—		673
Issuance of common stock in connection with exercise of stock options and vesting of restricted stock units	—		—	1,077,271		1		6,352		—		—		6,353
Issuance of common stock as consideration for LGC license	—		—	432,143		—		18,716		—		—		18,716
Foreign currency translation adjustment	—		—	—		—		—		(71)		—		(71)
Unrealized loss on marketable securities	—		—	—		—		—		(244)		—		(244)
Net loss	—		—	—		—		—		—		(141,372)		(141,372)
Balance at March 31, 2024	—	$	—	60,964,468	$	60	$	1,097,810	$	(181)	$	(1,036,108)	$	61,581
Issuance of Series A Preferred Stock, net of $2,250 of issuance costs	150,000		138,850	—		—		—		—		—		—
Stock-based compensation expense	—		—	—		—		10,358		—		—		10,358
Issuance of common stock in connection with exercise of stock options and vesting of restricted stock units	—		—	131,481		—		1,403		—		—		1,403
Accretion of preferred stock dividends	—		1,302	—		—		(1,302)		—		—		(1,302)
Foreign currency translation adjustment	—		—	—		—		—		(302)		—		(302)
Unrealized loss on marketable securities	—		—	—		—		—		(134)		—		(134)
Net loss	—		—	—		—		—		—		(32,261)		(32,261)
Balance at June 30, 2024	150,000	$	140,152	61,095,949	$	60	$	1,108,269	$	(617)	$	(1,068,369)	$	39,343
Stock-based compensation expense				—		—		11,001		—		—		11,001
Issuance of common stock in connection with ESPP	—		—	16,059		—		597		—		—		597
Issuance of common stock in connection with exercise of stock options and vesting of restricted stock units	—		—	324,243		1		5,230		—		—		5,231
Accretion of preferred stock dividends	—		1,329	—		—		(1,329)		—		—		(1,329)
Foreign currency translation adjustment	—		—	—		—		—		(602)		—		(602)
Unrealized gain on marketable securities	—		—	—		—		—		615		—		615
Net loss	—		—	—		—		—		—		(43,641)		(43,641)
Balance at September 30, 2024	150,000	$	141,481	61,436,251	$	61	$	1,123,768	$	(604)	$	(1,112,010)	$	11,215

Balance at December 31, 2022	—		—	56,612,429		56		974,356		(92)		(710,058)		264,262
Stock-based compensation expense	—		—	—		—		6,376		—		—		6,376
Issuance of common stock in connection with ESPP	—		—	32,169		—		665		—		—		665
Issuance of common stock in connection with exercise of stock options and vesting of restricted stock units	—		—	207,806		—		553		—		—		553
Foreign currency translation adjustment	—		—	—		—		—		21		—		21
Net unrealized gains on short-term investments	—		—	—		—		—		65		—		65
Net loss	—		—	—		—		—		—		(52,179)		(52,179)
Balance at March 31, 2023	—	$	—	56,852,404	$	56	$	981,950	$	(6)	$	(762,237)	$	219,763
Stock-based compensation expense	—		—	—		—		8,891		—		—		8,891
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	—		—	43,664		1		341		—		—		342
Issuance of common stock upon completion of public offering, net of offering costs	—		—											—
Foreign currency translation adjustment	—		—	—		—		—		(48)		—		(48)
Net unrealized gains on short-term investments	—		—	—		—		—		40		—		40
Net loss	—		—	—		—		—		—		(46,703)		(46,703)
Balance at June 30, 2023	—	$	—	56,896,068	$	57	$	991,182	$	(14)	$	(808,940)	$	182,285
Stock-based compensation expense	—		—	—		—		8,612		—		—		8,612
Issuance of common stock in connection with ESPP	—		—	17,650		—		388		—		—		388
Issuance of common stock in connection with exercise of stock options and vesting of restricted stock units	—		—	156,389		—		1,576		—		—		1,576
Issuance of common stock upon completion of ATM equity offering, net of offering costs	—		—	2,019,245		2		48,873		—		—		48,875
Foreign currency translation adjustment	—		—	—		—		—		76		—		76
Net unrealized losses on short-term investments	—		—	—		—		—		(175)		—		(175)
Net loss	—		—	—		—		—		—		(44,163)		(44,163)
Balance at September 30, 2023	—	$	—	59,089,352	$	59	$	1,050,631	$	(113)	$	(853,103)	$	197,474

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

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Rhythm Pharmaceuticals, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)


	Nine months ended September 30,
	2024		2023
Operating activities
Net loss	$	(217,310)	$	(143,045)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense		29,126		23,879
Depreciation and amortization		1,180		1,341
Non-cash interest expense		12,190		9,342
Non-cash accretion & amortization of short-term investments		(6,027)		—
Non-cash accretion of other current liability		2,966		—
Non-cash rent expense		289		294
Change in fair value of embedded derivative liability		(1,300)		(150)
Gain on settlement of forward contract		(8,900)		—
Acquired IPR&D assets classified as investing activities		92,385		5,667
Changes in operating assets and liabilities:
Accounts receivable		(4,439)		(8,317)
Inventory		(5,271)		(4,845)
Prepaid expenses and other current assets		181		(2,367)
Deferred revenue		—		(148)
Other long-term assets, net		3,157		1,660
Accounts payable, accrued expenses and other liabilities		6,739		9,915
Net cash used in operating activities		(95,034)		(106,774)
Investing activities
Purchases of short-term investments		(201,935)		(314,265)
Maturities of short-term investments		173,105		291,675
Acquisition of IPR&D assets		(40,500)		(5,667)
Purchases of property and equipment		—		(48)
Net cash used in investing activities		(69,330)		(28,305)
Financing activities
Repayment of deferred royalty obligation		(9,092)		(4,824)
Proceeds from the exercise of stock options		12,986		2,471
Proceeds from issuance of common stock from ESPP		1,270		1,053
Net proceeds from issuance of common stock		—		48,875
Proceeds from royalty financing agreement, net of issuance costs		—		24,370
Gain on settlement of forward contract		8,900		—
Proceeds from Series A Preferred Stock, net of issuance costs		138,850		—
Net cash provided by (used in) financing activities		152,914		71,945
Effect of exchange rates on cash		(975)		50
Net increase (decrease) in cash, cash equivalents and restricted cash		(12,426)		(63,084)
Cash, cash equivalents and restricted cash at beginning of period		60,409		128,005
Cash, cash equivalents and restricted cash at end of period	$	47,983	$	64,921
Supplemental disclosure of non-cash investing and financing activities:
Non-current liability issued in exchange for the acquisition of IPR&D	$	33,669	$	—
Issuance of common stock in exchange for IPR&D	$	18,716	$	—
Accretion of preferred stock dividends	$	2,631	$	—

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

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Rhythm Pharmaceuticals, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

(In thousands, except share and per share information)

1. Nature of Business

Rhythm Pharmaceuticals, Inc. (the “Company” or “we”) is 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 (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. The MC4R pathway is an endocrine pathway in the brain that is responsible for regulating hunger, caloric intake and energy expenditure, which consequently affect body weight. IMCIVREE, an MC4R agonist for which we hold worldwide rights, is the first-ever therapy developed for patients with certain rare diseases that is approved or authorized in the United States, European Union, and Great Britain, Canada, and other countries and regions.

The Company is a Delaware corporation organized in February 2013 under the name Rhythm Metabolic, Inc., and as of October 2015, under the name Rhythm Pharmaceuticals, Inc. The Company has wholly owned subsidiaries in the US, Ireland, the United Kingdom, the Netherlands, France, Germany, Italy, Spain and Canada.

The Company is subject to risks and uncertainties common to commercial-stage companies in the biotechnology industry, including but not limited to, risks associated with the commercialization of approved products, completing preclinical studies and clinical trials, receiving regulatory approvals for product candidates, development by competitors of new biopharmaceutical products, dependence on key personnel, protection of proprietary technology, compliance with government regulations and the ability to secure additional capital to fund operations. Commercialization of approved products will require significant resources and in order to market IMCIVREE, the Company must continue to build its sales, marketing, managerial and other non-technical capabilities or make arrangements with third parties to perform these services. Product candidates currently under development will require significant additional research and development efforts, including preclinical and clinical testing and regulatory approval, prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel and infrastructure and extensive compliance-reporting capabilities. 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.

Liquidity

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. While the Company is generating product revenue, management expects operating losses to continue for the foreseeable future. The Company has devoted substantially all of its resources to its drug development efforts, comprised of research and development, the acquisition of in process research and development assets, manufacturing, conducting clinical trials for its product candidates, protecting its intellectual property, commercialization activities and general and administrative functions relating to these operations. 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”

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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. 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. Management believes that the Company's existing cash resources will be sufficient to fund the Company’s operations through at least the next twelve months from the filing of this Quarterly Report on Form 10-Q with the SEC.

2. Summary of Significant Accounting Policies

Basis of Presentation

The Company's unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States, or GAAP, and the applicable rules and regulations of the Securities and Exchange Commission, or SEC, regarding interim financial reporting. Any reference in these notes to applicable guidance is meant to refer to the authoritative United States generally accepted accounting principles as found in the Accounting Standards Codification, or ASC, and Accounting Standards Updates, or ASU, of the Financial Accounting Standards Board, or FASB. 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. 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, 2023 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 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.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. The Company bases its estimates on historical experience and other market-specific or other relevant assumptions that it believes to be reasonable under the circumstances. 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

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