0001558370-23-002613 | 10-K | XBRL Viewer | Rhythm Pharmaceuticals INC

Long-Term Obligations	12 Months Ended
Dec. 31, 2022
Long-Term Obligations
Long-Term Obligations	10. Long-Term Obligations On June 16, 2022, we entered into a RIFA with entities managed by HealthCare Royalty Management, LLC, collectively referred to as the Investors. Pursuant to the RIFA and subject to customary closing conditions, the Investors have agreed to pay the Company an aggregate investment amount of up to $100,000, or the Investment Amount. Under the terms of the RIFA, we received $37,500 on June 29, 2022 upon FDA approval of IMCIVREE in BBS, referred to as the Initial Investment Amount, and we received an additional $37,500 on September 29, 2022 of the Investment Amount upon EMA approval for BBS. We are entitled to receive the remaining $25,000 of the Investment Amount forty-five business days following achievement of a specified amount of cumulative net sales of IMCIVREE between July 1, 2022 and September 30, 2023. As consideration for the Investment Amount and pursuant to the RIFA, we agreed to pay the Investors a tiered royalty on our annual net revenues, or Revenue Interest, including worldwide net product sales and upfront payments and milestones. The applicable tiered percentage will initially be 11.5% on annual net revenues up to $125,000, 7.5% on annual net revenues of between $125,000 and $300,000 and 2.5% on annual net revenues exceeding $300,000. If the Investors have not received cumulative minimum payments equal to 60% of the amount funded by the Investors to date by March 31, 2027, or 120% of the amount funded by the Investors to date by March 31, 2029, we must make a cash payment immediately following each applicable date to the Investors sufficient to gross the Investors up to such minimum amounts after giving full consideration of the cumulative amounts paid by us to the Investors through each date, referred to as the Under Performance Payment. 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. As of December 31, 2022 we have made $132 of payments. 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. The total Revenue Interests payable by us to the Investors is capped between 185% and 250% of the Investment Amount paid, dependent on the aggregate royalty paid between 2028 and 2032. If a change of control of occurs, the Investors may accelerate payments due under the RIFA up to the Hard Cap plus any other obligations payable under the RIFA. 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. 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. In addition, upon the occurrence of an event of default, including, among others, our failure to pay any amounts due to Investors under the deferred royalty obligation, insolvency, our failure to pay indebtedness when due, the revocation of regulatory approval of IMCIVREE in the U.S. or our breach of any covenant contained in the RIFA and our failure to cure the breach within the prescribed time frame, we are obligated to pay Investors an amount equal to the Hard Cap in effect at the time of default ranging from 185% to 250% plus any Under Performance Payment of the Investment Amount less payments previously received by Investors. In addition, upon an event of default, Investors may exercise all other rights and remedies available under the RIFA, including foreclosing on the collateral that was pledged to Investors, which consists of all of our present and future assets relating to IMCIVREE. We have evaluated the terms of the RIFA and concluded that the features are similar to those of a debt instrument. Accordingly, we have accounted for the transaction as long-term debt and presented it as a deferred royalty obligation on our consolidated balance sheets. We have further evaluated the terms of the RIFA and determined that the repayment of the Hard Cap in effect at the time which ranges from 185% to 250% of the Investment Amount, less any payments made to date, upon a change of control is an embedded derivative that requires bifurcation from the debt instrument and fair value recognition. 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 4, “Fair Value of Financial Instruments” to our consolidated financial statements. During the second quarter of 2022, the Company recorded $1,590 for the initial fair value of the embedded derivative liability. The fair value of the embedded derivative liability was $1,340 as of December 31, 2022. 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 year ended December 31, 2022 we recognized other income in the amount of $250, due to the remeasurement of the embedded derivative liability. The carrying value of the deferred royalty obligation at December 31, 2022 was $75,810 based on $75,000 of proceeds, net of the initial 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 at December 31, 2022. The effective interest rate as of December 31, 2022 was 16.22%. In connection with the deferred royalty obligation, we incurred debt issuance costs totaling $2,662. Debt issuance costs have been netted against the debt and are being amortized over the estimated term of the debt using the effective interest method, adjusted on a prospective basis for changes in the underlying assumptions and inputs. 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 classification of these costs, as well as the period over which these costs will be amortized.

Long-Term Obligations

12 Months Ended

Dec. 31, 2022

10. Long-Term Obligations

On June 16, 2022, we entered into a RIFA with entities managed by HealthCare Royalty Management, LLC, collectively referred to as the Investors. Pursuant to the RIFA and subject to customary closing conditions, the Investors have agreed to pay the Company an aggregate investment amount of up to $100,000, or the Investment Amount. Under the terms of the RIFA, we received $37,500 on June 29, 2022 upon FDA approval of IMCIVREE in BBS, referred to as the Initial Investment Amount, and we received an additional $37,500 on September 29, 2022 of the Investment Amount upon EMA approval for BBS. We are entitled to receive the remaining $25,000 of the Investment Amount forty-five business days following achievement of a specified amount of cumulative net sales of IMCIVREE between July 1, 2022 and September 30, 2023.

As consideration for the Investment Amount and pursuant to the RIFA, we agreed to pay the Investors a tiered royalty on our annual net revenues, or Revenue Interest, including worldwide net product sales and upfront payments and milestones. The applicable tiered percentage will initially be 11.5% on annual net revenues up to $125,000, 7.5% on annual net revenues of between $125,000 and $300,000 and 2.5% on annual net revenues exceeding $300,000. If the Investors have not received cumulative minimum payments equal to 60% of the amount funded by the Investors to date by March 31, 2027, or 120% of the amount funded by the Investors to date by March 31, 2029, we must make a cash payment immediately following each applicable date to the Investors sufficient to gross the Investors up to such minimum amounts after giving full consideration of the cumulative amounts paid by us to the Investors through each date, referred to as the Under Performance Payment. 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. As of December 31, 2022 we have made $132 of payments.

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. The total Revenue Interests payable by us to the Investors is capped between 185% and 250% of the Investment Amount paid, dependent on the aggregate royalty paid between 2028 and 2032. If a change of control of occurs, the Investors may accelerate payments due under the RIFA up to the Hard Cap plus any other obligations payable under the RIFA.

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. 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. In addition, upon the occurrence of an event of default, including, among others, our failure to pay any amounts due to Investors under the deferred royalty obligation, insolvency, our failure to pay indebtedness when due, the revocation of regulatory approval of IMCIVREE in the U.S. or our breach of any covenant contained in the RIFA and our failure to cure the breach within the prescribed time frame, we are obligated to pay Investors an amount equal to the Hard Cap in effect at the time of default ranging from 185% to 250% plus any Under Performance Payment of the Investment Amount less payments previously received by Investors. In addition, upon an event of default, Investors may exercise all other rights and remedies available under the RIFA, including foreclosing on the collateral that was pledged to Investors, which consists of all of our present and future assets relating to IMCIVREE.

We have evaluated the terms of the RIFA and concluded that the features are similar to those of a debt instrument. Accordingly, we have accounted for the transaction as long-term debt and presented it as a deferred royalty obligation on our consolidated balance sheets. We have further evaluated the terms of the RIFA and determined that the repayment of the Hard Cap in effect at the time which ranges from 185% to 250% of the Investment Amount, less any payments made to date, upon a change of control is an embedded derivative that requires bifurcation from the debt instrument and fair value recognition. 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 4, “Fair Value of Financial Instruments” to our consolidated financial statements. During the second quarter of 2022, the Company recorded $1,590 for the initial fair value of the embedded derivative liability. The fair value of the embedded derivative liability was $1,340 as of December 31, 2022. 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 year ended December 31, 2022 we recognized other income in the amount of $250, due to the remeasurement of the embedded derivative liability. The carrying value of the deferred royalty obligation at December 31, 2022 was $75,810 based on $75,000 of proceeds, net of the initial 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 at December 31, 2022. The effective interest rate as of December 31, 2022 was 16.22%. In connection with the deferred royalty obligation, we incurred debt issuance costs totaling $2,662. Debt issuance costs have been netted against the debt and are being amortized over the estimated term of the debt using the effective interest method, adjusted on a prospective basis for changes in the underlying assumptions and inputs. 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 classification of these costs, as well as the period over which these costs will be amortized.

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

+ References

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Reference 4: http://www.xbrl.org/2003/role/disclosureRef
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Reference 6: http://www.xbrl.org/2003/role/disclosureRef
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Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
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-Publisher FASB
-Name Accounting Standards Codification
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+ Details

Fair Value of Financial Assets (Tables)

12 Months Ended

Dec. 31, 2022

Fair Value of Financial Assets

Schedule of financial assets and liabilities measured at fair value on a recurring basis


	Fair value Measurements as of
	December 31, 2022 using:
	Level 1		Level 2		Level 3		Total
Assets:
Cash Equivalents:
Commercial Paper	$	—	$	8,484	$	—	$	8,484
Money Market Funds		99,962		—		—		99,962
Marketable Securities:
Corporate Debt Securities and Commercial Paper		—		205,611		—		205,611
Total	$	99,962	$	214,095	$	—	$	314,057
Liabilities:
Derivative liability	$	—	$	—	$	1,340	$	1,340
Total	$	—	$	—	$	1,340	$	1,340


	Fair value Measurements as of
	December 31, 2021 using:
	Level 1		Level 2		Level 3		Total
Assets:
Cash Equivalents:
Corporate Debt Securities and Commercial Paper	$	—	$	—	$	—	$	—
Money Market Funds		48,297		—		—		48,297
Marketable Securities:
Corporate Debt Securities and Commercial Paper		—		235,607		—		235,607
Total	$	48,297	$	235,607	$	—	$	283,904

Schedule of estimated fair value of embedded derivative liability

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


	Embedded Derivative
Balance as of December 31, 2021	$	—
Initial recording of embedded derivative		1,590
Change in fair value of derivative		(250)
Balance as of December 31, 2022	$	1,340

Schedule of changes in the estimated fair value of Level 3 securities

The following table sets forth a summary of the changes in the estimated fair value of our the RareStone equity (in thousands):


	Year ended
	December 31,
	2022		2021
Beginning aggregate estimated fair value of Level 3 securities	$	—	$	—
Initial recording of RareStone equity		1,040		—
Total realized and unrealized losses
Realized loss included in other expense		(1,040)		—
Ending aggregate estimated fair value of Level 3 securities	$	—	$	—

Schedule of marketable securities


	December 31, 2022
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
Assets
Corporate debt securities and commercial paper (due within 1 year)	$	205,702	$	—	$	(91)	$	205,611
	$	205,702	$	—	$	(91)	$	205,611


	December 31, 2021
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
Assets
Corporate debt securities and commercial paper (due within 1 year)	$	235,608	$	50	$	(51)	$	235,607
	$	235,608	$	50	$	(51)	$	235,607

Significant Agreements	12 Months Ended
Dec. 31, 2022
Significant Agreements
Significant Agreements	9. Significant Agreements License Agreements 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 December 31, 2022. Based on a relative fair-value allocation between the license and the manufacture of clinical and commercial product, the Company recognized $6,754 of license revenue in the consolidated statements of operations and comprehensive loss during the year ended December 31, 2022. The discount related to commercial manufacturing supply will be deferred and recognized over the commercial supply period or upon termination of the agreement. On October 28, 2022, the Company delivered a written 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 the Company’s global EMANATE trial, among other obligations. On December 21, 2022, RareStone provided written notice to the Company that it objects to the claims in our October 28, 2022 notice, including the Company’s termination of the RareStone License for cause. RareStone may attempt to cure the alleged breaches, which the Company believe to be incurable, within the timeframe specified under the RareStone License. Ipsen Pharma S.A.S. Pursuant to a license agreement with Ipsen Pharma, S.A.S., or Ipsen, the Company has an exclusive, sublicensable, worldwide license to certain patents and other intellectual property rights to research, develop, and commercialize compounds that were discovered or researched by Ipsen in the course of conducting its MC4R program or that otherwise were covered by the licensed patents. Under the terms of the setmelanotide Ipsen license agreement, assuming that setmelanotide is successfully developed, receives regulatory approval and is commercialized, Ipsen may receive aggregate payments of up to $40,000 upon the achievement of certain development and commercial milestones and royalties on future product sales in the mid-single digits. Substantially all of such aggregate payments of up to $40,000 are for milestones that may be achieved no earlier than first commercial sale of setmelanotide. In the event that the Company executes a sublicense agreement, it shall make payments to Ipsen, depending on the date of such sublicense agreement, ranging from 10% to 20% of all revenues actually received under such sublicense agreement. The Company capitalized a $5,000 and $4,000 commercial milestone as a finite-lived intangible asset, as a result of the first commercial sale of IMCIVREE in the U.S. and Europe during March 2021 and March 2022, respectively. The Company recorded development milestone expenses related to this license agreement of $3,000 during the year ended December 31, 2020. The expenses were recorded as research and development expenses when the milestone criteria were met in full during 2020. There are no research and development expenses related to milestones recorded in 2022 or 2021. Camurus In January 2016, the Company entered into a license agreement with Camurus AB, or Camurus, for the use of Camurus' drug delivery technology. The contract includes a non-refundable and non-creditable signing fee of $500. The Camurus agreement also includes up to $7,750 in one-time, non-refundable development milestones achievable upon certain regulatory successes. The Company is also required to pay to Camurus, mid to mid-high single digit royalties, on a product-by-product and country-by-country basis of annual net sales, until the later of (i) 10 years after the date of first commercial sale of such product in such country; or (ii) the expiration of the last to expire valid claim of all licensed patent rights in such country covering such product. The Company is also required to pay one-time, non-refundable, non-creditable sales milestones upon the achievement of certain sales levels for such product that cannot be in excess of $57,000. The Company recorded development milestone expenses related to this license agreement of $1,000 during the year ended December 31, 2022. The expenses were recorded as research and development expenses when the milestone criteria were met in full during 2022. There are no research and development expenses related to milestones recorded in 2021 or 2020. Takeda In March 2018, the Company entered into a license agreement with Takeda, for the rights of a program that includes the clinical candidate RM-853, which is a GOAT inhibitor, which is currently in preclinical development for PWS. Pursuant to the license agreement the Company was required to pay a non-refundable and non-creditable signing fee, which the Company settled by issuing on April 3, 2018, 223,544 shares of common stock valued at $4,448. Under the terms of the license agreement, assuming that RM-853 is successfully developed, receives regulatory approval and is commercialized, the Company is also required to pay up to $70,000 in one-time, non-refundable development milestone payments upon the achievement of certain clinical and regulatory milestones. The Company is also required to pay up to $70,000 in one-time, non-refundable, non-creditable sales milestone payments upon the achievement of certain sales levels. The Company is also required to pay to Takeda, mid to mid-high single digit royalties (subject to certain potential reductions over time), on a product-by-product and country-by-country basis of annual net sales, of each product in such country, beginning on the first commercial sale of a product in such country, and continuing until the latest of (i) 10 years after the date of first commercial sale of such product in such country; or (ii) the expiration of the last to expire valid claim of a Takeda patents covering the composition or use of such product in such country; or (iii) the expiration of all regulatory exclusivity for such product in such country. The Company recorded the fair value of the common stock to be issued to the licensors as research and development expense, as the license does not have a future alternative use, in accordance with ASC Topic 730, Research and Development. There were no milestone expenses related to this license for the years ended December 31, 2022, 2021 and 2020, respectively. We have notified Takeda that the Company has halted development activities related to RM-853.

Significant Agreements

12 Months Ended

Dec. 31, 2022

Significant Agreements

Significant Agreements

9. Significant Agreements

License Agreements

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 December 31, 2022.

Based on a relative fair-value allocation between the license and the manufacture of clinical and commercial product, the Company recognized $6,754 of license revenue in the consolidated statements of operations and comprehensive loss during the year ended December 31, 2022. The discount related to commercial manufacturing supply will be deferred and recognized over the commercial supply period or upon termination of the agreement.

On October 28, 2022, the Company delivered a written 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 the Company’s global EMANATE trial, among other obligations. On December 21, 2022, RareStone provided written notice to the Company that it objects to the claims in our October 28, 2022 notice, including the Company’s termination of the RareStone License for cause. RareStone may attempt to cure the alleged breaches, which the Company believe to be incurable, within the timeframe specified under the RareStone License.

Ipsen Pharma S.A.S.

Pursuant to a license agreement with Ipsen Pharma, S.A.S., or Ipsen, the Company has an exclusive, sublicensable, worldwide license to certain patents and other intellectual property rights to research, develop, and commercialize compounds that were discovered or researched by Ipsen in the course of conducting its MC4R program or that otherwise were covered by the licensed patents. Under the terms of the setmelanotide Ipsen license agreement, assuming that setmelanotide is successfully developed, receives regulatory approval and is commercialized, Ipsen may receive aggregate payments of up to $40,000 upon the achievement of certain development and commercial milestones and royalties on future product sales in the mid-single digits. Substantially all of such aggregate payments of up to $40,000 are for milestones that may be achieved no earlier than first commercial sale of setmelanotide. In the event that the Company executes a sublicense agreement, it shall make payments to Ipsen, depending on the date of such sublicense agreement, ranging from 10% to 20% of all revenues actually received under such sublicense agreement.

The Company capitalized a $5,000 and $4,000 commercial milestone as a finite-lived intangible asset, as a result of the first commercial sale of IMCIVREE in the U.S. and Europe during March 2021 and March 2022, respectively. The Company recorded development milestone expenses related to this license agreement of $3,000 during the year ended December 31, 2020. The expenses were recorded as research and development expenses when the milestone criteria were met in full during 2020. There are no research and development expenses related to milestones recorded in 2022 or 2021.

Camurus

In January 2016, the Company entered into a license agreement with Camurus AB, or Camurus, for the use of Camurus' drug delivery technology. The contract includes a non-refundable and non-creditable signing fee of $500. The Camurus agreement also includes up to $7,750 in one-time, non-refundable development milestones achievable upon certain regulatory successes. The Company is also required to pay to Camurus, mid to mid-high single digit royalties, on a product-by-product and country-by-country basis of annual net sales, until the later of (i) 10 years after the date of first commercial sale of such product in such country; or (ii) the expiration of the last to expire valid claim of all licensed patent

rights in such country covering such product. The Company is also required to pay one-time, non-refundable, non-creditable sales milestones upon the achievement of certain sales levels for such product that cannot be in excess of $57,000. The Company recorded development milestone expenses related to this license agreement of $1,000 during the year ended December 31, 2022. The expenses were recorded as research and development expenses when the milestone criteria were met in full during 2022. There are no research and development expenses related to milestones recorded in 2021 or 2020.

Takeda

In March 2018, the Company entered into a license agreement with Takeda, for the rights of a program that includes the clinical candidate RM-853, which is a GOAT inhibitor, which is currently in preclinical development for PWS. Pursuant to the license agreement the Company was required to pay a non-refundable and non-creditable signing fee, which the Company settled by issuing on April 3, 2018, 223,544 shares of common stock valued at $4,448. Under the terms of the license agreement, assuming that RM-853 is successfully developed, receives regulatory approval and is commercialized, the Company is also required to pay up to $70,000 in one-time, non-refundable development milestone payments upon the achievement of certain clinical and regulatory milestones. The Company is also required to pay up to $70,000 in one-time, non-refundable, non-creditable sales milestone payments upon the achievement of certain sales levels. The Company is also required to pay to Takeda, mid to mid-high single digit royalties (subject to certain potential reductions over time), on a product-by-product and country-by-country basis of annual net sales, of each product in such country, beginning on the first commercial sale of a product in such country, and continuing until the latest of (i) 10 years after the date of first commercial sale of such product in such country; or (ii) the expiration of the last to expire valid claim of a Takeda patents covering the composition or use of such product in such country; or (iii) the expiration of all regulatory exclusivity for such product in such country. The Company recorded the fair value of the common stock to be issued to the licensors as research and development expense, as the license does not have a future alternative use, in accordance with ASC Topic 730, Research and Development. There were no milestone expenses related to this license for the years ended December 31, 2022, 2021 and 2020, respectively. We have notified Takeda that the Company has halted development activities related to RM-853.

Right of Use Asset and Lease Liability

12 Months Ended

Dec. 31, 2022

Right Of Use Asset and Lease Liability

Right Of Use Asset and Lease Liability

5. Right Of Use Asset and Lease Liability

The Company has a material operating lease for its head office facility and other immaterial operating leases for certain equipment. The Company’s office lease has a remaining lease term of 2.6 years. The Company measured the lease liability associated with the office lease using a discount rate of 10% at inception. The Company estimated the incremental borrowing rate 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 December 31, 2022, the Company has not entered into any lease arrangements classified as a finance lease.

Under FASB ASC Topic 842, Leases, the Company determines, at the inception of the contract, whether the contract is or contains a lease based on whether the contract provides the Company the right to control the use of a physically distinct asset or substantially all of the capacity of an asset. Leases with an initial noncancelable term of twelve months or less that do not include an option to purchase the underlying asset that the Company is reasonably certain to exercise are classified as short-term leases. The Company has elected as an accounting policy to exclude from the consolidated balance sheets a right of use asset and lease liability for short-term leases.

Upon adoption of ASC 842, the Company elected the transition relief package, permitted within the standard, pursuant to which the Company did not reassess the classification of existing leases, whether any expired or existing contracts contain a lease, and whether existing leases have any initial direct costs. The Company also elected the practical expedient of not separating lease components from non-lease components for all leases. There was no cumulative-effective adjustment to the opening balance of retained earnings. The Company reviews all material contracts for embedded leases to determine if they have a right-of-use asset.

The Company recognizes rent expense on a straight-line basis over the lease period. The depreciable life of assets and leasehold improvement are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise.

The Company’s office lease includes both lease and non-lease components. Non-lease components relate to real estate taxes, insurance, operating expenses and common area maintenance, which are usually billed at actual amounts incurred proportionate to the Company’s rented square feet of the building. These non-lease components are expensed by the Company as they are incurred and are not included in the measurement of the lease liability.

The Company’s corporate headquarters is located in Boston, Massachusetts. This facility houses the Company’s research, clinical, regulatory, commercial and administrative personnel. The Company’s lease agreement commenced May 2019 and has a term of six years with a five-year renewal option to extend the lease. As of January 1, 2019, the Company did not included the five-year renewal option to extend the lease in its measurement of the ROU asset or lease liability. Rent expense, or operating lease costs, for the years ended December 31, 2022, 2021 and 2020 were $551, $551 and $551, respectively.

Supplemental cash flow information related to the Company’s lease for the years ended December 31, 2022, 2021 and 2020, includes cash payments of $818, $802 and $786, respectively used in the measurement of its operating lease liability.

The following table presents the maturities of the Company’s operating lease liability related to office space as of December 31, 2022, all of which is under a non-cancellable operating lease:


	Operating Lease
2023	$	834
2024		851
2025		502
Thereafter		—
Total operating lease payments		2,187
Less: imputed interest		243
Total operating lease liability	$	1,944

Common Stock	12 Months Ended
Dec. 31, 2022
Common Stock.
Common Stock	7. Common Stock Common Stock On September 19, 2022, the Company completed a public offering of 4,800,000 shares of common stock at a price to the public of $26.00 per share. The Company received $116,887 in net proceeds after deducting underwriting discounts, commissions and offering expenses. In addition, the Company granted the underwriters a 30-day option to purchase up to an additional 720,000 shares of its common stock at the price to the public, less underwriting discounts and commissions. On October 18, 2022, the Company completed the sale of an additional 580,000 shares of common stock at a price to the public of $26.00 per share pursuant to the partial exercise of the underwriters’ option to purchase additional shares, for aggregate net proceeds of approximately $14,175, after deducting underwriting discounts, commissions and offering expenses. On November 2, 2021, we entered into a sales agreement, or the Sales Agreement, with Cowen and Company LLC, or Cowen, as sales agent, pursuant to which we may, from time to time, issue and sell common stock with an aggregate value of up to $100 million in "at-the-market" offerings, or the ATM, under our Registration Statement on Form S-3 (File No. 333-260689) filed with the SEC on November 2, 2021. Sales of common stock, if any, pursuant to the Sales Agreement, may be made in sales deemed to be an “at the market offering” as defined in Rule 415(a) of the Securities Act, including sales made directly through The Nasdaq Global Market or on any other existing trading market for our common stock. During the year ended December 31, 2022, the Company did not sell any shares of common stock under the Sales Agreement. As of December 31, 2022, there was $100.0 million of common stock remaining available for sale under the ATM. On February 9, 2021 the Company completed a public offering of 5,750,000 shares of common stock at an offering price of $30.00 per share, which included the exercise in full by the underwriters of their option to purchase up to 750,000 additional shares of common stock. The Company received approximately $161,550 in net proceeds after deducting underwriting discounts, commissions and estimated offering expenses.

Common Stock

12 Months Ended

Dec. 31, 2022

Common Stock.

Common Stock

7. Common Stock

Common Stock

On September 19, 2022, the Company completed a public offering of 4,800,000 shares of common stock at a price to the public of $26.00 per share. The Company received $116,887 in net proceeds after deducting underwriting discounts, commissions and offering expenses. In addition, the Company granted the underwriters a 30-day option to purchase up to an additional 720,000 shares of its common stock at the price to the public, less underwriting discounts and commissions. On October 18, 2022, the Company completed the sale of an additional 580,000 shares of common stock at a price to the public of $26.00 per share pursuant to the partial exercise of the underwriters’ option to purchase additional shares, for aggregate net proceeds of approximately $14,175, after deducting underwriting discounts, commissions and offering expenses.

On November 2, 2021, we entered into a sales agreement, or the Sales Agreement, with Cowen and Company LLC, or Cowen, as sales agent, pursuant to which we may, from time to time, issue and sell common stock with an aggregate value of up to $100 million in "at-the-market" offerings, or the ATM, under our Registration Statement on Form S-3 (File No. 333-260689) filed with the SEC on November 2, 2021. Sales of common stock, if any, pursuant to the Sales

Agreement, may be made in sales deemed to be an “at the market offering” as defined in Rule 415(a) of the Securities Act, including sales made directly through The Nasdaq Global Market or on any other existing trading market for our common stock. During the year ended December 31, 2022, the Company did not sell any shares of common stock under the Sales Agreement. As of December 31, 2022, there was $100.0 million of common stock remaining available for sale under the ATM.

On February 9, 2021 the Company completed a public offering of 5,750,000 shares of common stock at an offering price of $30.00 per share, which included the exercise in full by the underwriters of their option to purchase up to 750,000 additional shares of common stock. The Company received approximately $161,550 in net proceeds after deducting underwriting discounts, commissions and estimated offering expenses.

- Definition

The entire disclosure for shareholders' equity comprised of portions attributable to the parent entity and noncontrolling interest, including other comprehensive income. Includes, but is not limited to, balances of common stock, preferred stock, additional paid-in capital, other capital and retained earnings, accumulated balance for each classification of other comprehensive income and amount of comprehensive income.

+ References

Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef
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-Name Accounting Standards Codification
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Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
-Paragraph 13
-Subparagraph (b)
-URI https://asc.fasb.org/extlink&oid=126973232&loc=SL123496158-112644

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
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-SubTopic 10
-Section 50
-Paragraph 13
-URI https://asc.fasb.org/extlink&oid=126973232&loc=SL123496158-112644

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
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-Topic 505
-SubTopic 10
-Section 50
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-Subparagraph (c)
-URI https://asc.fasb.org/extlink&oid=126973232&loc=SL123496171-112644

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
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-Section 50
-Paragraph 14
-Subparagraph (b)
-URI https://asc.fasb.org/extlink&oid=126973232&loc=SL123496171-112644

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section S99
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-Subparagraph (SX 210.3-04)
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Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
-Paragraph 18
-Subparagraph (d)
-URI https://asc.fasb.org/extlink&oid=126973232&loc=SL123496189-112644

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
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-Subparagraph (g)
-URI https://asc.fasb.org/extlink&oid=126973232&loc=SL123496158-112644

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
-Paragraph 18
-Subparagraph (a)
-URI https://asc.fasb.org/extlink&oid=126973232&loc=SL123496189-112644

Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
-Paragraph 13
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-URI https://asc.fasb.org/extlink&oid=126973232&loc=SL123496158-112644

Reference 11: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
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-Section 50
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Reference 12: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
-Paragraph 18
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-URI https://asc.fasb.org/extlink&oid=126973232&loc=SL123496189-112644

Reference 13: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
-Paragraph 16
-Subparagraph (b)
-URI https://asc.fasb.org/extlink&oid=126973232&loc=SL123496180-112644

Reference 14: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
-Paragraph 13
-Subparagraph (i)
-URI https://asc.fasb.org/extlink&oid=126973232&loc=SL123496158-112644

Reference 15: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
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-Paragraph 1
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Reference 16: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
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-Section 50
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-Subparagraph (a)
-URI https://asc.fasb.org/extlink&oid=126731327&loc=SL126733271-114008

+ Details

Long-Term Obligations (Details) - USD ($) $ in Thousands		12 Months Ended	15 Months Ended
Long-Term Obligations (Details) - USD ($) $ in Thousands	Jun. 16, 2022	Dec. 31, 2022	Sep. 30, 2023	Sep. 29, 2022	Jun. 30, 2022	Jun. 29, 2022
Long-Term Obligations
Deferred royalty obligation		$ 75,810
Revenue Interest Financing Agreement
Long-Term Obligations
Initial investment amount received under Revenue Interest Financing Agreement ("RIFA")				$ 37,500		$ 37,500
Debt repayment		132
Revenue interest payment period	12 years
Fair value of embedded derivative liability		1,340			$ 1,590
Change in fair value of derivative		250
Deferred royalty obligation		75,810
Revenue Interest Financing Agreement ("RIFA")		$ 75,000
Effective interest rate		16.22%
Debt issuance costs		$ 2,662
Revenue Interest Financing Agreement \| 45 business days after achievement
Long-Term Obligations
Initial investment amount received under Revenue Interest Financing Agreement ("RIFA")			$ 25,000
Business days			45 days
Revenue Interest Financing Agreement \| Annual net revenues up to 125 million
Long-Term Obligations
Royalty interest (as a percent)	11.50%
Threshold annual net revenues	$ 125,000
Revenue Interest Financing Agreement \| Annual net revenues between 125 million and 300 million
Long-Term Obligations
Royalty interest (as a percent)	7.50%
Revenue Interest Financing Agreement \| Annual net revenues exceeding 300 million
Long-Term Obligations
Royalty interest (as a percent)	2.50%
Threshold annual net revenues	$ 300,000
Revenue Interest Financing Agreement \| March 31, 2027
Long-Term Obligations
Threshold cumulative minimum payments (as a percent)	60.00%
Revenue Interest Financing Agreement \| March 31, 2029
Long-Term Obligations
Threshold cumulative minimum payments (as a percent)	120.00%
Revenue Interest Financing Agreement \| Minimum
Long-Term Obligations
Revenue interest cap (as a percent)	185.00%
Revenue Interest Financing Agreement \| Minimum \| Annual net revenues between 125 million and 300 million
Long-Term Obligations
Threshold annual net revenues	$ 125,000
Revenue Interest Financing Agreement \| Maximum
Long-Term Obligations
Aggregate investment amount	$ 100,000
Revenue interest cap (as a percent)	250.00%
Revenue Interest Financing Agreement \| Maximum \| Annual net revenues between 125 million and 300 million
Long-Term Obligations
Threshold annual net revenues	$ 300,000

Right of Use Asset and Lease Liability (Tables)

12 Months Ended

Dec. 31, 2022

Right Of Use Asset and Lease Liability

Schedule of operating lease maturities


	Operating Lease
2023	$	834
2024		851
2025		502
Thereafter		—
Total operating lease payments		2,187
Less: imputed interest		243
Total operating lease liability	$	1,944

Stock-based Compensation - 2017 Equity Incentive Plan (Details) - 2017 Equity Incentive Plan - shares				12 Months Ended
	Jan. 01, 2023	Jan. 01, 2022	Jan. 01, 2021	Dec. 31, 2022
Stock-based Compensation
Percentage increase in authorized shares under the plan				4.00%
Number of additional shares added	2,264,497	2,011,343	1,769,436
Authorized shares				10,149,772
Shares available for future grant				2,726,180
Common stock reserved for issuance				7,443,592
Exercise Price Not Less Than 100% Of Fair Market Value
Stock-based Compensation
Exercise price of incentive stock options over fair market value of the common stock				100.00%
Voting power of stock				10.00%
Exercise Price Not Less Than 110% Of Fair Market Value
Stock-based Compensation
Exercise price of incentive stock options over fair market value of the common stock				110.00%
Voting power of stock				10.00%

Subsequent Events

12 Months Ended

Dec. 31, 2022

Subsequent Events

Subsequent Events

15. 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. The Company has evaluated all subsequent events and determined that there are no material recognized or unrecognized subsequent events requiring disclosure, other than as disclosed within the above notes to these consolidated financial statements, and except as described below.

Business Combination

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 for aggregate consideration at closing of $5,000, 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 consideration totaling up to $206.0 million upon achievement of certain development, regulatory and commercial milestones by Xinvento, as follows: (i) up to an aggregate of $6.0 million 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.

Upon completion of the acquisition, Xinvento became a wholly owned subsidiary of Rhythm BV.

The Purchase Agreement contains customary representations, warranties and covenants, including covenants by Sellers (as defined in the Purchase Agreement) to indemnify Rhythm BV and certain related parties for breaches of certain representations, warranties and covenants in the Purchase Agreement, subject to customary exclusions and caps.

The business combination is intended to expand our pipeline into congenital hyperinsulinism (CHI), a rare disease that is well aligned with our corporate strategy and our focus on rare endocrinology indications. During the year ended December 31, 2022, the Company incurred total acquisition-related costs of $62 related to the transaction. As the transaction occurred subsequent to period-end, the Company is still evaluating the purchase price allocation of the transaction but expects the primary assets acquired to be intangible assets and goodwill. Acquired tangible assets and assumed liabilities are expected to be immaterial. The allocation is expected to be finalized during the first half of 2023.

CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Operating activities
Net loss	$ (181,119)	$ (69,612)	$ (133,996)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense	19,831	20,804	17,455
Gain on sale of priority review voucher		(100,000)
Depreciation and amortization	1,672	1,158	690
Non-cash interest expense and amortization of debt issuance costs	5,389
Non-cash rent expense	(267)	(250)	(234)
Loss on RareStone equity investment	1,040
Change in fair value of embedded derivative liability	(250)
Changes in operating assets and liabilities:
Accounts receivable	(5,199)	(1,250)
Inventory	(2,806)	(11)
Prepaid expenses and other current assets	(1,816)	(3,339)	551
Deferred revenue	(6,606)
Other long-term assets	(4,840)	(11,815)
Accounts payable, accrued expenses and other current liabilities	1,543	18,312	(6,446)
Net cash used in operating activities	(173,428)	(146,003)	(121,980)
Investing activities
Purchases of short-term investments	(251,937)	(524,972)	(86,869)
Maturities of short-term investments	284,247	361,247	245,614
Proceeds from sale of priority review voucher		100,000
Proceeds from out-license agreement		7,000
Payment of milestone obligation under license agreement	(4,000)	(5,000)
Purchases of property and equipment	(281)	(434)	(214)
Net cash provided by (used in) investing activities	28,029	(62,159)	158,531
Financing activities
Net proceeds from issuance of common stock	131,112	161,726
Proceeds from the exercise of stock options	9,752	4,134	1,487
Proceeds from issuance of common stock from ESPP	626	621	522
Proceeds from royalty financing agreement, net of issuance costs	72,338
Net cash provided by financing activities	213,828	166,481	2,009
Net increase (decrease) in cash, cash equivalents and restricted cash	68,429	(41,681)	38,560
Cash, cash equivalents and restricted cash at beginning of period	59,576	101,257	62,697
Cash, cash equivalents and restricted cash at end of period	$ 128,005	$ 59,576	$ 101,257

Summary of Significant Accounting Policies (Tables)

12 Months Ended

Dec. 31, 2022

Summary of Significant Accounting Policies

Schedule of product revenue allowance and reserve categories



	Provision for Cash Discounts		Fees, Rebates and Other Incentives		Total
Beginning Balance at December 31, 2020	$	—	$	—	$	—
Provision related to sales in the current year		74		495		569
Credit and payments made		(53)		(42)		(95)
Ending balance December 31, 2021	$	21	$	453	$	474
Provision related to sales in the current year		367		3,299		3,666
Credit and payments made		(289)		(1,042)		(1,331)
Ending balance December 31, 2022	$	99	$	2,710	$	2,809

Schedule of inventory


	December 31,		December 31,
	2022		2021
Raw Materials	$	2,722	$	—
WIP		—		—
Finished Goods		195		111
Total Inventory	$	2,917	$	111

Schedule of prepaid expenses and other current assets


	December 31,
	2022		2021
Prepaid research and development costs	$	4,392	$	8,404
Other current assets		7,415		3,992
Prepaid expenses and other current assets	$	11,807	$	12,396

Schedule of property, plant and equipment


	Useful	December 31,
	Life	2022		2021
Leasehold improvements	*	$	2,705	$	2,705
Office equipment	5 years		107		107
Computers and software	3 years		1,291		1,010
Furniture, fixtures and equipment	5 years		1,249		1,249
			5,352		5,071
Less accumulated depreciation and amortization			(3,155)		(2,258)
Property and equipment, net		$	2,197	$	2,813

*Shorter of asset life or lease term.

Schedule of potential common shares, presented based on amounts outstanding at each period end, excluded from computation of diluted net loss per share attributable to common stockholders


	Year Ended
	December 31,
	2022		2021		2020
Stock options		6,354,544		5,737,599		5,199,235
Restricted stock units		774,166		435,589		176,537
Performance stock units		804,797		956,145		—
Potential common shares		7,933,507		7,129,333		5,375,772

Common Stock (Details) - USD ($) $ / shares in Units, $ in Thousands					12 Months Ended
	Oct. 18, 2022	Sep. 19, 2022	Nov. 02, 2021	Feb. 09, 2021	Dec. 31, 2022	Dec. 31, 2021
Common Stock
Issuance of stock (in shares)	580,000	4,800,000		5,750,000
Price per share	$ 26.00	$ 26.00		$ 30.00
Net proceeds from issuance of common stock	$ 14,175	$ 116,887		$ 161,550	$ 131,112	$ 161,726
Period for option to purchase additional shares by underwriter		30 days
Underwriter option to purchase
Common Stock
Issuance of stock (in shares)		720,000		750,000
At-the-market offerings
Common Stock
Aggregate proceeds					$ 100,000
Maximum \| At-the-market offerings
Common Stock
Aggregate proceeds			$ 100,000

Summary of Significant Accounting Policies - Product revenue allowance and reserve categories (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021
Product revenue allowance and reserve categories
Beginning Balance	$ 474
Provision related to sales in the current year	3,666	$ 569
Credit and payments made	(1,331)	(95)
Ending balance	2,809	474
Provision for Cash Discounts
Product revenue allowance and reserve categories
Beginning Balance	21
Provision related to sales in the current year	367	74
Credit and payments made	(289)	(53)
Ending balance	99	21
Fees, Rebates and Other Incentives
Product revenue allowance and reserve categories
Beginning Balance	453
Provision related to sales in the current year	3,299	495
Credit and payments made	(1,042)	(42)
Ending balance	$ 2,710	$ 453

Summary of Significant Accounting Policies - Net loss per share (Details) - shares	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Shares excluded from the computation of diluted net loss per share
Potential common shares	7,933,507	7,129,333	5,375,772
Stock options
Shares excluded from the computation of diluted net loss per share
Potential common shares	6,354,544	5,737,599	5,199,235
Restricted stock units
Shares excluded from the computation of diluted net loss per share
Potential common shares	774,166	435,589	176,537
Performance stock units
Shares excluded from the computation of diluted net loss per share
Potential common shares	804,797	956,145

Fair Value of Financial Assets (Details) - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021
Fair Value of Financial Assets
Carrying amount of cash and cash equivalents and short term investments	$ 333,288	$ 294,855
Fair value of financial assets and liabilities
Marketable Securities	205,611	235,607
Derivative liability	1,340
Corporate Debt Securities and Commercial Paper
Fair value of financial assets and liabilities
Marketable Securities	205,611	235,607
Recurring \| Estimated fair value
Fair value of financial assets and liabilities
Fair value of assets	314,057	283,904
Derivative liability	1,340
Recurring \| Commercial Paper \| Estimated fair value
Fair value of financial assets and liabilities
Cash Equivalents	8,484
Recurring \| Corporate Debt Securities and Commercial Paper \| Estimated fair value
Fair value of financial assets and liabilities
Marketable Securities	205,611	235,607
Recurring \| Money Market Funds \| Estimated fair value
Fair value of financial assets and liabilities
Cash Equivalents	99,962	48,297
Recurring \| Level 1 \| Estimated fair value
Fair value of financial assets and liabilities
Fair value of assets	99,962	48,297
Recurring \| Level 1 \| Money Market Funds \| Estimated fair value
Fair value of financial assets and liabilities
Cash Equivalents	99,962	48,297
Recurring \| Level 2 \| Estimated fair value
Fair value of financial assets and liabilities
Fair value of assets	214,095	235,607
Recurring \| Level 2 \| Commercial Paper \| Estimated fair value
Fair value of financial assets and liabilities
Cash Equivalents	8,484
Recurring \| Level 2 \| Corporate Debt Securities and Commercial Paper \| Estimated fair value
Fair value of financial assets and liabilities
Marketable Securities	205,611	$ 235,607
Recurring \| Level 3 \| Estimated fair value
Fair value of financial assets and liabilities
Derivative liability	$ 1,340

Related-Party Transactions

12 Months Ended

Dec. 31, 2022

Related-Party Transactions

Related-Party Transactions

12. Related-Party Transactions

Amounts paid directly to consultants and vendors considered to be related parties amounted to $1,868, $1,961 and $3,221, for the years ended December 31, 2022, 2021 and 2020, respectively. Outstanding payments due to these related parties as of December 31, 2022 and 2021 were $13 and $50, respectively, and were included within accounts payable on the consolidated balance sheets.

Fair Value of Financial Assets

12 Months Ended

Dec. 31, 2022

Fair Value of Financial Assets

Fair Value of Financial Assets

4. Fair Value of Financial Assets

The following tables present information about the Company's financial assets and liabilities measured at fair value on a recurring basis and indicate the level of the fair value hierarchy utilized to determine such fair values:


	Fair value Measurements as of
	December 31, 2022 using:
	Level 1		Level 2		Level 3		Total
Assets:
Cash Equivalents:
Commercial Paper	$	—	$	8,484	$	—	$	8,484
Money Market Funds		99,962		—		—		99,962
Marketable Securities:
Corporate Debt Securities and Commercial Paper		—		205,611		—		205,611
Total	$	99,962	$	214,095	$	—	$	314,057
Liabilities:
Derivative liability	$	—	$	—	$	1,340	$	1,340
Total	$	—	$	—	$	1,340	$	1,340


	Fair value Measurements as of
	December 31, 2021 using:
	Level 1		Level 2		Level 3		Total
Assets:
Cash Equivalents:
Corporate Debt Securities and Commercial Paper	$	—	$	—	$	—	$	—
Money Market Funds		48,297		—		—		48,297
Marketable Securities:
Corporate Debt Securities and Commercial Paper		—		235,607		—		235,607
Total	$	48,297	$	235,607	$	—	$	283,904

As of December 31, 2022 and 2021, the carrying amount of cash and cash equivalents and short-term investments was $333,288 and $294,855, respectively, which approximates fair value. Cash and cash equivalents and short-term investments includes investments in U.S. treasury securities and money market funds that invest in U.S. government securities that are valued using quoted market prices. Accordingly, money market funds and government funds are categorized as Level 1. The financial assets valued based on Level 2 inputs consist of corporate debt securities and commercial paper, which consist of investments in highly-rated investment-grade corporations.

The embedded derivative liability associated with our deferred royalty obligation, as discussed further in Note 10, “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. 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 assumptions used in the option pricing Monte Carlo simulation model include: (1) our estimates of the probability and timing of related events; (2) the probability-weighted net sales of IMCIVREE, including worldwide net product sales, upfront payments, milestones and royalties; (3) our risk-adjusted discount rate that includes a company specific risk premium; (4) our cost of debt; (5) volatility; and (6) the probability of a change in control occurring during the term of the instrument.

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


	Embedded Derivative
Balance as of December 31, 2021	$	—
Initial recording of embedded derivative		1,590
Change in fair value of derivative		(250)
Balance as of December 31, 2022	$	1,340

The estimated fair value of the shares of RareStone equity as of our initial recording date and September 30, 2022, as well as the estimated fair value of the derivative liability related to our Royalty Interest Financing Agreement (RIFA) with HealthCare Royalty was determined using Level 3 inputs. The fair value measurement of the RareStone equity as well as the derivative liability are 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 RareStone equity was valued at a de minimis amount and as such written-off during the third quarter of 2022. The Company determined the estimated fair values using a discounted cash flow model under the income approach and an option pricing allocation model. Inherent in discounted cash flow and option pricing allocation models are assumptions related to the equity value of the entity, expected equity volatility, holding period, risk-free interest rate and discount for lack of marketability. The Company estimated equity volatility based on historical volatility of guideline public companies. The risk-free interest rate was based on the U.S. Treasury rates for a maturity similar to the expected holding period.

The following table sets forth a summary of the changes in the estimated fair value of our the RareStone equity (in thousands):


	Year ended
	December 31,
	2022		2021
Beginning aggregate estimated fair value of Level 3 securities	$	—	$	—
Initial recording of RareStone equity		1,040		—
Total realized and unrealized losses
Realized loss included in other expense		(1,040)		—
Ending aggregate estimated fair value of Level 3 securities	$	—	$	—

Marketable Securities

The following tables summarize the Company's marketable securities:


	December 31, 2022
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
Assets
Corporate debt securities and commercial paper (due within 1 year)	$	205,702	$	—	$	(91)	$	205,611
	$	205,702	$	—	$	(91)	$	205,611


	December 31, 2021
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
Assets
Corporate debt securities and commercial paper (due within 1 year)	$	235,608	$	50	$	(51)	$	235,607
	$	235,608	$	50	$	(51)	$	235,607

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details

Commitments and Contingencies

12 Months Ended

Dec. 31, 2022

Commitments and Contingencies

Commitments and Contingencies

11. Commitments and Contingencies

Legal Proceedings

The Company, from time to time, may be party to various litigation arising in the ordinary course of business. The Company is not presently subject to any pending or threatened litigation that it believes, if determined adversely to the Company, individually, or taken together, would reasonably be expected to have a material adverse effect on its business or financial results.

Other

The Company is party to various agreements, principally relating to licensed technology, that require future payments relating to milestones that may be met in subsequent periods, or royalties on future sales of specified products. See Note 9 for discussion of these arrangements. 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 December 31, 2022, the Company does not expect to make milestone payments due to third parties during the next 12 months from the filing of this Annual Report on Form 10-K, in connection with our license agreements. These milestones generally become due and payable upon achievement of such milestones or sales and achievement of development milestones. When the achievement of these milestones or sales have not occurred, such contingencies are not recorded in the Company’s consolidated financial statements.

Income Tax - Deferred tax assets and liabilities (Details) - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021
Deferred tax assets:
Net operating loss carryforwards	$ 135,470	$ 113,098
Research and development credits	14,380	13,477
Orphan drug credit	19,281	15,385
Capitalized license fee	2,776	2,651
Stock-based compensation	11,074	9,150
Capitalized research and development costs	29,663
Deferred revenue	438	1,901
Accrued expenses & other	4,536	2,976
Total deferred tax assets	217,618	158,638
Valuation allowance	(217,257)	(158,211)
Net deferred tax assets	361	427
Deferred tax liabilities:
Operating lease right-of-use asset and other	(361)	(427)
Total deferred tax liabilities:	$ (361)	$ (427)

Summary of Significant Accounting Policies - Inventory (Details) - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021
Summary of Significant Accounting Policies
Raw Materials	$ 2,722
Finished Goods	195	$ 111
Total Inventory	$ 2,917	$ 111

Summary of Significant Accounting Policies - Property and equipment (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Property and equipment
Property and equipment, gross	$ 5,352	$ 5,071
Less accumulated depreciation and amortization	(3,155)	(2,258)
Property and equipment, net	2,197	2,813
Depreciation and amortization expense	896	816	$ 690
Leasehold improvements
Property and equipment
Property and equipment, gross	$ 2,705	2,705
Office equipment
Property and equipment
Useful Life	5 years
Property and equipment, gross	$ 107	107
Computers and software
Property and equipment
Useful Life	3 years
Property and equipment, gross	$ 1,291	1,010
Furniture, fixtures and equipment
Property and equipment
Useful Life	5 years
Property and equipment, gross	$ 1,249	$ 1,249

Nature of Business - Liquidity (Details) - USD ($) $ / shares in Units, $ in Thousands					12 Months Ended
	Oct. 18, 2022	Sep. 19, 2022	Nov. 02, 2021	Feb. 09, 2021	Dec. 31, 2022	Dec. 31, 2021
Liquidity
Accumulated deficit					$ 710,058	$ 528,939
Issuance of stock (in shares)	580,000	4,800,000		5,750,000
Price per share	$ 26.00	$ 26.00		$ 30.00
Net proceeds from issuance of common stock	$ 14,175	$ 116,887		$ 161,550	131,112	161,726
Period for option to purchase additional shares by underwriter		30 days
Carrying amount of cash and cash equivalents and short term investments					333,288	$ 294,855
Underwriter option to purchase
Liquidity
Issuance of stock (in shares)		720,000		750,000
At-the-market offerings
Liquidity
Aggregate proceeds					$ 100,000
Maximum \| At-the-market offerings
Liquidity
Aggregate proceeds			$ 100,000

Stock-based Compensation - Compensation expense in Consolidated Statements of Operations and Comprehensive Loss (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Stock-based Compensation
Stock based compensation expense	$ 19,831	$ 20,804	$ 17,455
Research and development
Stock-based Compensation
Stock based compensation expense	5,814	7,687	6,055
Selling, general and administrative
Stock-based Compensation
Stock based compensation expense	14,017	13,117	11,400
Employee
Stock-based Compensation
Unrecognized compensation expense related to non-vested portion of awards	$ 3,083
Weighted average period for recognition of unrecognized compensation expense	3 years 7 months 28 days
2022 Employment Inducement Plan \| Employee
Stock-based Compensation
Unrecognized compensation expense related to non-vested portion of awards	$ 4,182
Weighted average period for recognition of unrecognized compensation expense	3 years 7 months 6 days
Stock options.
Stock-based Compensation
Stock based compensation expense	$ 15,477	17,988	15,915
Restricted stock units
Stock-based Compensation
Stock based compensation expense	$ 2,918	$ 1,924	$ 1,360

Intangible Assets, Net

12 Months Ended

Dec. 31, 2022

Intangible Assets, Net

Intangible Assets, Net

6. Intangible Assets, Net

As of December 31, 2022, the Company’s definite-lived intangible assets, which totaled $7,883, 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.

As of December 31, 2022, amortization expense for the next five years and beyond is summarized as follows:


2023	$	855
2024		855
2025		855
2026		855
2027		855
Thereafter		3,608
Total	$	7,883

The Company began amortizing its finite-lived intangible assets in April 2021 over an 11 year period based on IMCIVREE’s expected patent exclusivity period. Amortization expense totaled $774 and $342 for the years ended

December 31, 2022 and 2021, respectively. Amortization expense is recorded as a component of cost of sales on the consolidated statements of operations and comprehensive loss.

Nature of Business

12 Months Ended

Dec. 31, 2022

Nature of Business

Nature of Business

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 and their families living with rare diseases. We are focused on advancing our lead asset, IMCIVREE^® (setmelanotide), as a precision medicine designed to treat hyperphagia and severe obesity caused by rare melanocortin-4 receptor (MC4R) pathway diseases. While obesity affects hundreds of millions of people worldwide, we are advancing IMCIVREE^® (setmelanotide) for a subset of individuals who have hyperphagia, a pathological hunger, and severe obesity due to an impaired MC4R pathway, which may be caused by traumatic injury or genetic variants. 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 ultra-rare diseases that is approved or authorized in the United States, European Union (EU) and Great Britain.

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 late-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.

There are many uncertainties regarding the COVID-19 pandemic, and the Company is closely monitoring the impact of the pandemic on all aspects of its business, including how the pandemic will impact its patients, employees, suppliers, vendors, business partners and distribution channels. While the pandemic did not materially affect the Company's financial results and business operations for the year ended December 31, 2022, the Company is unable to predict the impact that COVID-19 will have on its financial position and operating results in future periods due to numerous uncertainties. The Company will continue to assess the evolving impact of the COVID-19 pandemic and will make adjustments to its operations as necessary.

Liquidity

The Company has incurred operating losses and negative cash flows from operations since inception. As of December 31, 2022, the Company had an accumulated deficit of $710,058. The Company has primarily funded these losses through the proceeds from the sales of common and preferred stock, royalty financing, asset sales, outlicensing the rights to IMCIVREE in certain markets, as well as capital contributions received from the former parent company, Rhythm Holdings LLC. To date, the Company has minimal product revenue and management expects operating losses to continue for the foreseeable future. The Company has devoted substantially all of its resources to its drug development efforts, comprising of research and development, 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 December 31, 2022, the Company had $333,288 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 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 Annual Report on Form 10-K with the SEC.

Accrued Expenses (Details) - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021
Accrued Expenses
Research and development costs	$ 11,379	$ 17,480
Professional fees	4,502	2,163
Payroll related	11,444	8,371
Royalties	440	791
Inventory	403	26
Sales Allowances	2,710	453
Other	2,016	800
Accrued expenses and other current liabilities	$ 32,894	$ 30,084

CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Dec. 31, 2022	Dec. 31, 2021
CONSOLIDATED BALANCE SHEETS
Preferred stock par value per share	$ 0.001	$ 0.001
Preferred stock, authorized	10,000,000	10,000,000
Preferred stock, issued	0	0
Preferred stock, outstanding	0	0
Common stock, par value per share	$ 0.001	$ 0.001
Common stock, authorized	120,000,000	120,000,000
Common stock, issued	56,612,429	50,283,574
Common stock, outstanding	56,612,429	50,283,574

Summary of Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2022

Summary of Significant Accounting Policies

Basis of Presentation

The Company's consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States (“GAAP”). 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 (“ASC”) and Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board (“FASB”).

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, license revenue, accruals related to research and development expenses, assumptions used to record stock-based compensation expense, interest expense on our deferred royalty obligation, assumptions used to value the embedded derivative in our deferred royalty obligation, assumptions used to value the common stock received from RareStone Group Ltd., or RareStone, and the valuation allowance on the Company's deferred tax assets. Estimates are periodically reviewed in light of changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known. Actual results could differ materially from those estimates.

Principles of Consolidation

The consolidated financial statements include the accounts of Rhythm Pharmaceuticals, Inc. and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

Reclassification of Prior Year Balances

Certain prior year amounts have been reclassified to conform to the current period presentation. These reclassifications had no effect on the reported results of operations or cash flows. Specifically, in the consolidated balance sheet as of December 31, 2021, the Company has reclassified $111 which was previously recorded within prepaid expenses and other current assets to inventory. Additionally, in the consolidated statement of cash flows for the year ended December 31, 2021, the Company has reclassified $1,025 and $111 due to the effects of changes in the accounts receivable and

inventory, respectively, from changes in prepaid expenses and other current assets to changes in accounts receivable of and inventory, respectively.

Segment 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 one business segment, which is 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 does not operate separate lines of business with respect to its product or product candidates. Accordingly, the Company has one reportable segment.

Off-Balance Sheet Risk and Concentrations of Credit Risk

Financial instruments, which potentially subject the Company to significant concentration of credit risk, consist primarily of cash and cash equivalents and short-term investments, which are maintained at two federally insured financial institutions. The deposits held at these two institutions are in excess of federally insured limits. The Company has not experienced any losses in such accounts and management believes that the Company is not exposed to significant credit risk due to the financial position of the depository institutions in which those deposits are held. The Company has no off-balance sheet risk, such as foreign exchange contracts, option contracts, or other foreign hedging arrangements.

The Company is exposed to risks associated with extending credit to customers related to the sale of products. The Company does not require collateral to secure amounts due from its customers. For the year ended December 31, 2022, approximately 85% of all of the Company’s revenue was generated from a single customer in the United States. For the year ended December 31, 2021, all of the Company’s revenue was generated from a single customer in the United States.

The Company relies on third-party manufacturers and suppliers for manufacturing and supply of its product. The inability of the suppliers or manufacturers to fulfill supply requirements of the Company could materially impact future operating results. A change in the relationship with the suppliers or manufacturer, or an adverse change in their business, could materially impact future operating results.

The Company relies on separate third-parties to perform genetic testing in the United States and Europe, respectively. The inability of the vendor to fulfill testing services for the Company could materially impact future operating results and adversely impact our ability to further develop setmelanotide. 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. The 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 of 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 years ended December 31, 2022, 2021, and 2020, the Company did not recognize any credit losses related to its available-for-sale debt securities. Further, as of December 31, 2022 and 2021, the Company did not record an allowance for credit losses related to its available-for-sale debt securities.

Restricted Cash

Restricted cash consists of security deposits in the form of letters of credit placed in separate restricted bank accounts as required under the terms of the Company’s lease arrangement for its corporate office in Boston, Massachusetts and the Company’s corporate travel credit card.

Accounts Receivable, net

Accounts receivable consists of amounts due from customers, net of customer allowances for cash discounts and any estimated expected credit losses. The Company's measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. To date, the Company has not experienced any credit losses. The Company's contracts with its customers have customary payment terms that generally require payment within 90 days. The Company analyzes amounts that are past due for collectability, and periodically evaluates the creditworthiness of its customer. At December 31, 2022 and 2021, the Company determined an allowance for doubtful account was not required based upon our review of contractual payments and our customer circumstances.

Revenue Recognition

The Company recognizes revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers, or ASC 606. Under ASC 606, an entity recognizes revenue when its customer obtains control of promised goods or services in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services.

Product Revenue, Net

In the United States (the “U.S.”), which accounts for the largest portion of our total revenues, the Company sells its product to a limited number of specialty pharmacies. The product is distributed through third-party logistics, or 3PL, distribution agent that does not take title to the product. Once the product is delivered to the Company’s specialty pharmacy provider, our customer in the U.S., the customer (or “wholesaler”) takes title to the product. The wholesaler then distributes the product to patients. In our distribution agreement with the 3PL company, the Company acts as principal because we retain control of the product. Internationally, we make sales primarily to specialty distributors and retail pharmacy chains, as well as hospitals, many of which are government-owned or supported. The Company generally does not offer returns of product sold to the customer.

Revenue from product sales is recognized when the customer obtains control of our product, which occurs at a point in time, upon transfer of title to the customer because at that point in time we have no ongoing obligations to the customer. There are no other performance obligations besides the sale of product. We classify payments to our customers or other parties in the distribution channel for services that are distinct and priced at fair value as selling, general and administrative expenses in our consolidated statements of operations and comprehensive (loss) income. Otherwise, payments to a customer or other parties in the distribution channel that do not meet those criteria are classified as a reduction of revenue, as discussed further below. Taxes collected from the customer relating to product sales and remitted to governmental authorities are excluded from revenue. Because our payment terms are generally ninety days or less, the Company concluded there is not a significant financing component because the period between the transfer of a promised good or service to the customer and when the customer pays for that good or service will be one year or less. The Company expenses incremental costs of obtaining a contract as and when incurred since the expected amortization period of the asset that we would have recognized is one year or less.

Reserves for Variable Consideration

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, returns, chargebacks, rebates, co-pay assistance and other allowances that are offered within contracts between us and our customers, health care providers and other indirect customers relating to the sale of IMCIVREE. These reserves are based on the amounts earned or to be claimed on the related sales and are classified as reductions of accounts receivable (if the amount is payable to the customer) or a current liability (if the amount is payable to a party other than a customer). Where appropriate, these estimates take into consideration a range of possible outcomes that are probability-weighted for relevant factors such as our historical experience, current contractual and statutory requirements, specific known market events and trends, industry data and forecasted customer buying and payment patterns. Overall, these reserves reflect our best estimates of the amount of consideration to which we are entitled based on the terms of the contract. The amount of variable consideration that is included in the transaction price may be constrained and is included in the net sales price only to the extent that it is considered probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period. Actual amounts of consideration ultimately received may differ from our estimates. If actual results in the future vary from our estimates, we will adjust these estimates, which would affect net product revenue and earnings in the period such variances become known.

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

Chargebacks: 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. The Company records reserves for these chargebacks related to product sold to our customers during the reporting period, as well as our estimate of product that remains in the distribution channel at the end of the reporting period that we expect will be sold to qualified healthcare providers and patients in future periods.

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. 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 consolidated balance sheets. For Medicare, we also estimate the number of patients in the prescription drug coverage gap for whom we will owe an additional liability under the Medicare Part D program. On a quarterly basis, we update our estimates and record any adjustments in the period that we identify the adjustments.

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. In addition, we receive and pay for various distribution services from our customers in the distribution channel. For services that are either not distinct from the sale of our product or for which we cannot reasonably estimate the fair value, such fees are classified as a reduction of product revenue.

Product returns: Our customers have limited return rights related to the product’s damage or defect. 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 and the price of IMCIVREE, the Company believes there will be minimal returns.

Other incentives: Other incentives include co-payment assistance the Company provides to patients with commercial insurance that have coverage and reside in states that allow co-payment assistance. The calculation of the accrual for co-pay assistance is based on an estimate of claims and the cost per claim that we expect to receive associated with product that has been recognized as revenue. The estimate is recorded as a reduction of revenue in the same period the related revenue is recognized.

The table below summarizes balances and activity in each of the product revenue allowance and reserve categories as follows:



	Provision for Cash Discounts		Fees, Rebates and Other Incentives		Total
Beginning Balance at December 31, 2020	$	—	$	—	$	—
Provision related to sales in the current year		74		495		569
Credit and payments made		(53)		(42)		(95)
Ending balance December 31, 2021	$	21	$	453	$	474
Provision related to sales in the current year		367		3,299		3,666
Credit and payments made		(289)		(1,042)		(1,331)
Ending balance December 31, 2022	$	99	$	2,710	$	2,809

Provision for cash discounts are recorded as reductions of accounts receivable, and fees, rebates, and other incentives are recorded as a component of accrued expenses.

License Agreements

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). Refer to Note 9 “Significant Agreements”, for discussion related to the Company’s accounting for the RareStone Group, Ltd. agreement.

Deferred Royalty Obligation

We treat the debt obligation to HealthCare Royalty Management, LLC as discussed further in Note 10, “Long-term Obligations”, as a deferred royalty obligation, amortized using the effective interest rate method over the estimated life of the revenue streams. We recognize interest expense thereon using the effective rate, which is based on our current estimates of future revenues over the life of the arrangement. In connection therewith, we periodically assess our expected revenues using internal projections, impute interest on the carrying value of the deferred royalty obligation, and record interest expense using the imputed effective interest rate. To the extent our estimates of future revenues are greater or less than previous estimates or the estimated timing of such payments is materially different than previous estimates, we will account for any such changes by adjusting the effective interest rate on a prospective basis, with a corresponding impact to the reclassification of our deferred royalty obligation. The assumptions used in determining the expected repayment term of the deferred royalty obligation and amortization period of the issuance costs requires that we make estimates that could impact the classification of such costs, as well as the period over which such costs will be amortized.

Inventory

Prior to receiving approval from the FDA in November 2020 to sell IMCIVREE in the United States, the Company expensed all costs incurred related to the manufacture of IMCIVREE as research and development expense because of the inherent risks associated with the development of a drug candidate, the uncertainty about the regulatory approval process and the lack of history for the Company of regulatory approval of drug candidates. Subsequent to receiving FDA approval in November 2020, the Company has capitalized a nominal amount of inventory related costs that were incurred subsequent to FDA approval. In connection therewith, the Company values inventories at the lower of cost or estimated net realizable value. The Company determines the cost of inventories, which includes amounts related to materials and manufacturing overhead, on a first-in, first-out basis. Raw materials and work in process includes all inventory costs prior to packaging and labelling, including raw materials, active pharmaceutical ingredient, and drug product. Finished goods include packaged and labelled products. Raw materials and work in process that may be used for either research and development or commercial sale are classified as inventory until the material is consumed or otherwise allocated for research and development. If the material is intended to be used for research and development, it is expensed as research and development once that determination is made.

Inventory consists of the following:


	December 31,		December 31,
	2022		2021
Raw Materials	$	2,722	$	—
WIP		—		—
Finished Goods		195		111
Total Inventory	$	2,917	$	111

Cost of Product Sales

Cost of product sales consists of manufacturing costs, transportation and freight, amortization of capitalized intangibles, royalty payments and indirect overhead costs associated with the manufacturing and distribution of IMCIVREE. Cost of product sales may also include periodic costs related to certain manufacturing services and inventory

adjustment charges. Finally, cost of sales may also include costs related to excess or obsolete inventory adjustment charges, abnormal costs, unabsorbed manufacturing and overhead costs, and manufacturing variances.

Intangible Assets, net

Definite-lived intangible assets related to capitalized milestones under license agreements are amortized on a straight-line basis over their remaining useful lives, which are estimated to be the remaining patent life. If our estimate of the product’s useful life is shorter than the remaining patent life, then a shorter period is used. Amortization expense is recorded as a component of cost of sales on the consolidated statements of operations and comprehensive loss.

Impairment of Long-Lived Assets

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consist primarily of costs incurred in advance of services being received, including services related to clinical trial programs. Prepaid expenses and other current assets consists of the following:


	December 31,
	2022		2021
Prepaid research and development costs	$	4,392	$	8,404
Other current assets		7,415		3,992
Prepaid expenses and other current assets	$	11,807	$	12,396

Property and Equipment

Property and equipment consists of the following:


	Useful	December 31,
	Life	2022		2021
Leasehold improvements	*	$	2,705	$	2,705
Office equipment	5 years		107		107
Computers and software	3 years		1,291		1,010
Furniture, fixtures and equipment	5 years		1,249		1,249
			5,352		5,071
Less accumulated depreciation and amortization			(3,155)		(2,258)
Property and equipment, net		$	2,197	$	2,813

*Shorter of asset life or lease term.

Depreciation and amortization expense related to property and equipment for the years ended December 31, 2022, 2021 and 2020 was $896, $816, and $690, respectively.

Property and equipment are recorded at cost. Depreciation and amortization is calculated using the straight-line method over the estimated useful lives of the assets. Upon disposal, retirement or sale, the cost of assets disposed of and the related accumulated depreciation are removed from the accounts and any resulting gain or loss is included in the results of operations. Expenditures for repairs and maintenance that do not improve or extend the lives of the respective assets are charged to expense as incurred.

Fair Value Measurements

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Financial assets and liabilities carried at fair value are classified and disclosed in one of the following three categories:

Level 1 — Quoted market prices in active markets for identical assets or liabilities.

Level 2 — Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

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 December 31, 2022 and 2021 were carried at fair value, determined according to the fair value hierarchy. See Note 4 for further discussion.

The carrying amounts reflected in the consolidated balance sheets for accounts payable and accrued expenses approximate their fair values due to their short-term maturities at December 31, 2022 and 2021, respectively.

Research and Development Expenses

Costs incurred in the research and development of the Company’s products are expensed to operations as incurred. Research and development expenses consist of costs incurred in performing research and development activities, including salaries and benefits, facilities costs, overhead costs, contract services and other outside costs. The value of goods and services received from contract research organizations, or CROs, or contract manufacturing organizations, or CMOs, in the reporting period are estimated based on the level of services performed and progress in the period for which the Company has not yet received an invoice from the supplier. When evaluating the adequacy of the accrued liabilities, the Company analyzes progress of the studies or clinical trials, including the phase or completion of events, invoices received and contracted costs. Significant judgments and estimates are made in determining the accrued balances at the end of any reporting period. Actual results could differ from the Company’s estimates. The Company’s historical accrual estimates have not been materially different from the actual costs.

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, and expensed as the related goods are delivered or the services are performed.

Income Taxes

The Company is taxed as a C corporation for federal income tax purposes. Income taxes for the Company are recorded in accordance with FASB ASC Topic 740, Income Taxes (“ASC 740”), which provides for deferred taxes using an asset and liability approach. Income taxes have been calculated on a separate tax return basis.

The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, the Company determines deferred tax assets and liabilities on the basis of the differences between the financial statement and tax bases of assets and liabilities by using enacted tax rates in effect for the year in

which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. The Company recognizes deferred tax assets to the extent that it believes that these assets are more likely than not to be realized. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. If the Company determines that it would be able to realize its deferred tax assets in the future in excess of their net recorded amount, it would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes.

The Company records uncertain tax positions in accordance with ASC 740 on the basis of a two-step process in which (1) it determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, the Company recognizes the largest amount of tax benefit that is more than 50% likely to be realized upon ultimate settlement with the related tax authority.

The Company recognizes interest and penalties related to unrecognized tax benefits on the income tax expense line in the accompanying consolidated statements of operations. As of December 31, 2022 and 2021, no accrued interest or penalties are included on the related tax liability line in the consolidated balance sheets.

Net Loss Per Share

Basic net loss per share is computed by dividing net loss by the weighted-average number of common shares outstanding during the period, without consideration of potential dilutive securities. Diluted net loss per 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, restricted stock units and performance 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. Therefore, basic and diluted net loss per share were the same for all periods presented.

The following table includes the potential common shares, presented based on amounts outstanding at each period end, that were excluded from the computation of diluted net loss per share due to their anti-dilutive effect, for the periods indicated:


	Year Ended
	December 31,
	2022		2021		2020
Stock options		6,354,544		5,737,599		5,199,235
Restricted stock units		774,166		435,589		176,537
Performance stock units		804,797		956,145		—
Potential common shares		7,933,507		7,129,333		5,375,772

Comprehensive Loss

Comprehensive loss represents the net change in stockholders’ equity during a period from sources other than transactions with shareholders. As reflected in the accompanying consolidated statements of operations and comprehensive loss, our comprehensive loss is comprised of net losses and unrealized gains and losses on marketable debt securities. These changes in equity are reflected net of tax.

Patent Costs

Costs to secure and defend patents are expensed as incurred and are classified as general and administrative expenses. Patent costs were $406, $332 and $524 for the years ended December 31, 2022, 2021 and 2020, respectively.

Subsequent Events

Application of New or Revised Accounting Standards

From time to time, new accounting pronouncements are issued by the FASB and adopted by the Company as of the specified effective date. 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.

We have not been required to adopt any accounting standards that had a significant impact on our consolidated financial statements in the three years ended December 31, 2022. We do not expect any recently issued accounting standards to have a significant impact on our consolidated financial statements.

Fair Value of Financial Assets - Marketable Securities (Details) - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021
Fair Value of Financial Assets
Amortized Cost	$ 205,702	$ 235,608
Gross Unrealized Gains		50
Gross Unrealized Losses	(91)	(51)
Fair Value	205,611	235,607
Corporate debt securities and commercial paper
Fair Value of Financial Assets
Amortized Cost	205,702	235,608
Gross Unrealized Gains		50
Gross Unrealized Losses	(91)	(51)
Fair Value	$ 205,611	$ 235,607

Accrued Expenses

12 Months Ended

Dec. 31, 2022

Accrued Expenses

Accrued Expenses

3. Accrued Expenses

Accrued expenses consists of the following:


	December 31,		December 31,
	2022		2021
Research and development costs	$	11,379	$	17,480
Professional fees		4,502		2,163
Payroll related		11,444		8,371
Royalties		440		791
Inventory		403		26
Sales Allowances		2,710		453
Other		2,016		800
Accrued expenses and other current liabilities	$	32,894	$	30,084

Stock-based Compensation - Black Scholes option pricing (Details)	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Weighted average assumptions
Risk-free interest rate	2.19%	0.79%	0.76%
Expected term (in years)	6 years 1 month 9 days	6 years 1 month 9 days	6 years 29 days
Expected volatility	69.16%	69.80%	70.67%

Document and Entity Information - USD ($) $ in Millions	12 Months Ended
Document and Entity Information - USD ($) $ in Millions	Dec. 31, 2022	Feb. 22, 2023	Jun. 30, 2022
Document and Entity Information
Document Type	10-K
Document Annual Report	true
Document Transition Report	false
Document Period End Date	Dec. 31, 2022
Entity File Number	001-38223
Entity Registrant Name	RHYTHM PHARMACEUTICALS, INC.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	46-2159271
Entity Address, Address Line One	222 Berkeley Street
Entity Address, Address Line Two	12th Floor
Entity Address, City or Town	Boston
Entity Address, State or Province	MA
Entity Address, Postal Zip Code	02116
City Area Code	857
Local Phone Number	264-4280
Title of 12(b) Security	Common Stock, $0.001 par value per share
Trading Symbol	RYTM
Security Exchange Name	NASDAQ
Entity Well-known Seasoned Issuer	Yes
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
ICFR Auditor Attestation Flag	false
Entity Shell Company	false
Entity Public Float			$ 188.4
Entity Common Stock, Shares Outstanding		56,747,577
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2022
Document Fiscal Period Focus	FY
Entity Central Index Key	0001649904
Amendment Flag	false
Auditor Firm ID	42
Auditor Name	Ernst & Young LLP
Auditor Location	Boston, Massachusetts

Significant Agreements (Details)		1 Months Ended		3 Months Ended		12 Months Ended
Significant Agreements (Details)	Apr. 03, 2018 USD ($) shares	Dec. 31, 2021 USD ($) item	Jan. 31, 2016 USD ($)	Sep. 30, 2022 USD ($)	Jun. 30, 2022 USD ($)	Dec. 31, 2022 USD ($)	Dec. 31, 2021 USD ($) item	Dec. 31, 2020 USD ($)	Mar. 31, 2022 USD ($)	Mar. 31, 2021 USD ($)	Feb. 26, 2010 USD ($)
Significant Agreements
One-time non-refundable non-creditable sales milestone payment	$ 70,000,000
Rare Stone Group Ltd.
Significant Agreements
Number of independent sub studies in patients \| item							4
Upfront payment		$ 7,000,000
Equity issued in conjunction with license agreement		1,077,586
Aggregate payment upon achievement of development and commercial milestones		62,500,000					$ 62,500,000
Equity recorded at fair value		$ 1,040,000			$ 1,040,000		1,040,000		$ 2,440,000
Realized loss on RareStone equity				$ 1,040,000
Loss on RareStone equity investment					$ 300,000
Upfront consideration							8,040,000
Number of performance obligations \| item		2
License agreement commercial manufacturing supply discount						$ 1,286,000
Contract with customer liability revenue recognized						6,754,000
Ipsen
Significant Agreements
Milestone expenses						0	0
Ipsen \| License agreement
Significant Agreements
Amount of commercial milestone capitalized									$ 4,000,000	$ 5,000,000
Milestone expenses								$ 3,000,000
Ipsen \| License agreement \| Maximum
Significant Agreements
Aggregate payment upon achievement of development and commercial milestones											$ 40,000,000
Ipsen \| Sublicense agreement \| Minimum
Significant Agreements
Payment based on revenue received, as percentage											10.00%
Ipsen \| Sublicense agreement \| Maximum
Significant Agreements
Payment based on revenue received, as percentage											20.00%
Camurus \| License agreement
Significant Agreements
Milestone expenses						1,000,000	0	0
Non-refundable and non-creditable signing fee			$ 500,000
Royalty payment period			10 years
Camurus \| License agreement \| Maximum
Significant Agreements
One-time non-refundable development milestone payment			$ 7,750,000
One-time non-refundable non-creditable sales milestone payment			$ 57,000,000
Takeda
Significant Agreements
Equity issued in conjunction with license agreement	4,448,000
Milestone expenses						$ 0	$ 0	$ 0
One-time non-refundable development milestone payment	$ 70,000,000
Shares issued for license agreement (in shares) \| shares	223,544
Period after date of first commercial sale (in years)	10 years

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($) $ in Thousands	Common Stock	Additional Paid-In Capital	Accumulated Other Comprehensive Income (Loss)	Accumulated Deficit	Total
Beginning balance at Dec. 31, 2019	$ 44	$ 606,307		$ (325,331)	$ 281,020
Beginning balance (in shares) at Dec. 31, 2019	43,996,753
Increase (Decrease) in Stockholders' Equity
Stock-based compensation expense		17,455			17,455
Issuance of common stock in connection with ESPP		522			522
Issuance of common stock in connection with ESPP (in shares)	30,052
Issuance of common stock in connection with exercise of stock options		1,478			1,478
Issuance of common stock in connection with exercise of stock options (in shares)	209,098
Change in unrealized gain (loss) on marketable securities			$ 49		49
Net loss				(133,996)	(133,996)
Ending balance at Dec. 31, 2020	$ 44	625,762	49	(459,327)	166,528
Ending balance (in shares) at Dec. 31, 2020	44,235,903
Increase (Decrease) in Stockholders' Equity
Stock-based compensation expense		20,804			20,804
Issuance of common stock in connection with ESPP		621			621
Issuance of common stock in connection with ESPP (in shares)	38,051
Issuance of common stock in connection with exercise of stock options and vesting of restricted stock units		4,134			4,134
Issuance of common stock in connection with exercise of stock options and vesting of restricted stock units (in shares)	259,620
Issuance of common stock upon completion of public offering, net of offering costs	$ 6	161,720			161,726
Issuance of common stock upon completion of public offering, net of offering costs (in shares)	5,750,000
Change in unrealized gain (loss) on marketable securities			(50)		(50)
Net loss				(69,612)	(69,612)
Ending balance at Dec. 31, 2021	$ 50	813,041	(1)	(528,939)	284,151
Ending balance (in shares) at Dec. 31, 2021	50,283,574
Increase (Decrease) in Stockholders' Equity
Stock-based compensation expense		19,831			19,831
Issuance of common stock in connection with ESPP		626			626
Issuance of common stock in connection with ESPP (in shares)	92,932
Issuance of common stock in connection with exercise of stock options and vesting of restricted stock units	$ 1	9,751			$ 9,752
Issuance of common stock in connection with exercise of stock options and vesting of restricted stock units (in shares)	855,923
Issuance of common stock in connection with exercise of stock options (in shares)					697,377
Issuance of common stock upon completion of public offering, net of offering costs	$ 5	131,107			$ 131,112
Issuance of common stock upon completion of public offering, net of offering costs (in shares)	5,380,000
Change in unrealized gain (loss) on marketable securities			(91)		(91)
Net loss				(181,119)	(181,119)
Ending balance at Dec. 31, 2022	$ 56	$ 974,356	$ (92)	$ (710,058)	$ 264,262
Ending balance (in shares) at Dec. 31, 2022	56,612,429

Intangible Assets, Net (Details) - USD ($) $ in Thousands	12 Months Ended
Intangible Assets, Net (Details) - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021
Definite-lived intangible assets
2023	$ 855
2024	855
2025	855
2026	855
2027	855
Thereafter	3,608
Total	$ 7,883	$ 4,658
Amortization period (in years)	11 years
Amortization expense	$ 774	$ 342

Accrued Expenses (Tables)

12 Months Ended

Dec. 31, 2022

Accrued Expenses

Schedule of accrued expenses


	December 31,		December 31,
	2022		2021
Research and development costs	$	11,379	$	17,480
Professional fees		4,502		2,163
Payroll related		11,444		8,371
Royalties		440		791
Inventory		403		26
Sales Allowances		2,710		453
Other		2,016		800
Accrued expenses and other current liabilities	$	32,894	$	30,084

Stock-based Compensation - Compensation expense by award type (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Stock-based Compensation
Stock based compensation expense	$ 19,831	$ 20,804	$ 17,455
Research and development
Stock-based Compensation
Stock based compensation expense	5,814	7,687	6,055
Selling, general and administrative
Stock-based Compensation
Stock based compensation expense	14,017	13,117	11,400
Nonemployees
Stock-based Compensation
Incremental expenses	0	141	2,880
Employee
Stock-based Compensation
Unrecognized compensation expense related to non-vested portion of awards	$ 3,083
Weighted average period for recognition of unrecognized compensation expense	3 years 7 months 28 days
2017 Equity Incentive Plan \| Employee
Stock-based Compensation
Unrecognized compensation expense related to non-vested portion of awards	$ 7,036
Weighted average period for recognition of unrecognized compensation expense	1 year 9 months 25 days
2017 Equity Incentive Plan \| Employees, directors and nonemployees
Stock-based Compensation
Unrecognized compensation expense related to non-vested portion of awards	$ 24,752
Weighted average period for recognition of unrecognized compensation expense	2 years 3 months 10 days
2022 Employment Inducement Plan \| Employee
Stock-based Compensation
Unrecognized compensation expense related to non-vested portion of awards	$ 4,182
Weighted average period for recognition of unrecognized compensation expense	3 years 7 months 6 days
Stock options.
Stock-based Compensation
Stock based compensation expense	$ 15,477	17,988	15,915
Employees stock purchase plan
Stock-based Compensation
Stock based compensation expense	408	310	180
Restricted stock units
Stock-based Compensation
Stock based compensation expense	2,918	1,924	$ 1,360
Performance stock units
Stock-based Compensation
Stock based compensation expense	$ 1,028	$ 582

Income Tax - Reconciliation of income tax rate (Details)	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Reconciliation of the income tax benefit
Statutory tax rate	21.00%	21.00%	21.00%
State tax, net of federal benefit	9.83%	7.45%	6.32%
Research and development credit	0.78%	2.94%	1.46%
Orphan drug credit	2.15%	7.58%	2.40%
Stock compensation	(0.29%)	(1.05%)	(0.53%)
Other	(0.04%)	(0.47%)	(0.30%)
Change in valuation allowance	(33.44%)	(37.45%)	(30.35%)

Retirement Plan (Details) - USD ($) $ in Thousands	12 Months Ended
Retirement Plan (Details) - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Retirement Plan
Percentage Company matches of eligible employee contributions	100.00%
Percentage of employee contributions matched by company	4.00%
Company contributions to retirement plan	$ 1,195	$ 886	$ 321

Related-Party Transactions (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Accounts payable
Related-Party Transactions
Outstanding payments due to consultants	$ 13	$ 50
Consultant
Related-Party Transactions
Net costs	$ 1,868	$ 1,961	$ 3,221

- Definition

Carrying amount as of the balance sheet date of obligations due all related parties.

+ References

Reference 1: http://www.xbrl.org/2009/role/commonPracticeRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 235
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SX 210.4-08(k)(1))
-URI https://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-SubTopic 10
-Section S99
-Paragraph 1B
-Subparagraph (SX 210.13-02(a)(4)(iii)(C))
-URI https://asc.fasb.org/extlink&oid=126975872&loc=SL124442552-122756

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-SubTopic 10
-Section S99
-Paragraph 1B
-Subparagraph (SX 210.13-02(a)(5))
-URI https://asc.fasb.org/extlink&oid=126975872&loc=SL124442552-122756

Reference 4: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 944
-SubTopic 210
-Section S99
-Paragraph 1
-Subparagraph (SX 210.7-03.17)
-URI https://asc.fasb.org/extlink&oid=126734703&loc=d3e572229-122910

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-SubTopic 10
-Section S99
-Paragraph 1A
-Subparagraph (SX 210.13-01(a)(4)(iv))
-URI https://asc.fasb.org/extlink&oid=126975872&loc=SL124442526-122756

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-SubTopic 10
-Section S99
-Paragraph 1A
-Subparagraph (SX 210.13-01(a)(4)(iii)(B))
-URI https://asc.fasb.org/extlink&oid=126975872&loc=SL124442526-122756

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-SubTopic 10
-Section S99
-Paragraph 1A
-Subparagraph (SX 210.13-01(a)(5))
-URI https://asc.fasb.org/extlink&oid=126975872&loc=SL124442526-122756

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-SubTopic 10
-Section S99
-Paragraph 1B
-Subparagraph (SX 210.13-02(a)(4)(iv))
-URI https://asc.fasb.org/extlink&oid=126975872&loc=SL124442552-122756

Reference 9: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 942
-SubTopic 210
-Section S99
-Paragraph 1
-Subparagraph (SX 210.9-03.15(3),(4))
-URI https://asc.fasb.org/extlink&oid=126897435&loc=d3e534808-122878

Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 850
-SubTopic 10
-Section 50
-Paragraph 1
-Subparagraph (d)
-URI https://asc.fasb.org/extlink&oid=6457730&loc=d3e39549-107864

+ Details

Right of Use Asset and Lease Liability - Operating Lease Maturities (Details) $ in Thousands	Dec. 31, 2022 USD ($)
Right Of Use Asset and Lease Liability
2023	$ 834
2024	851
2025	502
Total operating lease payments	2,187
Less: imputed interest	243
Total operating lease liability	$ 1,944
Operating Lease, Liability, Statement of Financial Position [Extensible Enumeration]	Operating Lease, Liability, Current, Capital Lease Obligations, Noncurrent

Summary of Significant Accounting Policies - Prepaid expenses and other current assets (Details) - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021
Summary of Significant Accounting Policies
Prepaid research and development costs	$ 4,392	$ 8,404
Other current assets	7,415	3,992
Prepaid expenses and other current assets	$ 11,807	$ 12,396

Stock-based Compensation

12 Months Ended

Dec. 31, 2022

Stock-based Compensation

Stock-based Compensation

8. Stock-based Compensation

2017 Equity Incentive Plan

The Rhythm Pharmaceuticals, Inc. 2017 Equity Incentive Plan (the “2017 Plan”) provides for the grant of incentive stock options, non-qualified stock options, stock appreciation rights, performance units, restricted stock awards, restricted stock units and stock grants to employees, consultants, advisors and directors of us or our affiliates, as determined by the board of directors. The number of shares authorized under the 2017 Plan increases on the first day of each calendar year, commencing on January 1, 2018 and ending on (and including) January 1, 2027, by an amount equal to 4% of the outstanding shares of stock outstanding as of the end of the immediately preceding fiscal year. On January 1, 2023, 2022 and 2021, 2,264,497, 2,011,343 and 1,769,436 shares, respectively, were added to the 2017 Plan. Notwithstanding the foregoing, the board of directors may act prior to January 1 for a given year to provide that there will be no such January 1 increase in the number of shares authorized under the 2017 Plan for such year, or that the increase in the number of shares authorized under the 2017 Plan for such year will be a lesser number than would otherwise occur pursuant to the preceding sentence. Shares of common stock issued upon the exercise of stock options are generally issued from new shares of the Company. The 2017 Plan provides that the exercise price of incentive stock options cannot be less than 100% of the fair market value of the common stock on the date of the award for participants who own less than 10% of the total combined voting power of stock of the Company, and not less than 110% for participants who own more than 10% of the Company's voting power. Awards granted under the 2017 Plan will vest over periods as determined by the Company's board of directors. For options granted to date, the exercise price equaled the fair value of the common stock as determined by the board of directors on the date of grant.

As of December 31, 2022, an aggregate of 10,149,772 shares of common stock were authorized for issuance under the 2017 Plan, of which a total of approximately 2,726,180 shares of common stock remained available for future awards. In addition, a total of 7,443,592 shares of common stock reserved for issuance were subject to currently outstanding stock options, performance share units and restricted stock units granted under the Plan.

2022 Inducement Plan

On February 9, 2022, the Company’s board of directors adopted the Rhythm Pharmaceuticals, Inc. 2022 Employment Inducement Plan (the “2022 Inducement Plan”), which became effective on such date without stockholder approval pursuant to Rule 5635(c)(4) of the Nasdaq Stock Market LLC listing rules (“Rule 5635(c)(4)”). The 2022 Inducement Plan provides for the grant of non-qualified stock options, stock appreciation rights, performance units, restricted stock awards, restricted stock units and stock grants. In accordance with Rule 5635(c)(4), awards under the 2022 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 2022 Inducement Plan.

The exercise price of stock options granted under the 2022 Inducement Plan will not be less than the fair market value of a share of the Company’s common stock on the grant date. Other terms of awards, including vesting requirements, are

determined by the Company’s board of directors and are subject to the provisions of the 2022 Inducement Plan. Stock options granted to employees generally vest over a four-year period but may be granted with different vesting terms. Certain options may provide for accelerated vesting in the event of a change in control. Stock options granted under the 2022 Inducement Plan expire no more than 10 years from the date of grant. As of December 31, 2022, there were 336,780 stock option awards outstanding, 173,135 restricted stock unit awards outstanding and 490,085 shares of common stock available for future grant under the 2022 Inducement Plan.

2017 Employee Stock Purchase Plan

The Company maintains the Rhythm Pharmaceuticals, Inc. 2017 Employee Stock Purchase Plan, (the “2017 ESPP”), which became effective in connection with the completion of the Company’s IPO in October 2017. As of December 31, 2022, a total of 962,942 shares of common stock were reserved for issuance under the 2017 ESPP. In addition, the number of shares authorized under the 2017 ESPP increases on the first day of each calendar year, commencing on January 1, 2019 and ending on (and including) January 1, 2027, by an amount equal to the lesser of 1% of outstanding shares as of the end of the immediately preceding fiscal year. On January 1, 2022, 2021 and 2020, 502,835, 0 and 439,968 shares, respectively, were added to the 2017 ESPP. Notwithstanding the foregoing, the board of directors may act prior to January 1 of a given year to provide that there will be no such January 1 increase in the number of shares authorized under the 2017 ESPP for such year, or that the increase in the number of shares authorized under the 2017 ESPP for such year will be a lesser number than would otherwise occur pursuant to the preceding sentence. The board of directors elected not to increase the number of shares available under the 2017 ESPP on January 1, 2023 and 2021. During the year ended December 31, 2022, 38,051 shares were issued under the 2017 ESPP.

The purchase price of common stock under our ESPP is equal to 85.0% of the lower of (i) the market value per share of the common stock on the first business day of an offering period or (ii) the market value per share of the common stock on the purchase date. The fair value of the discounted purchases made under our ESPP is calculated using the Black-Scholes model. The fair value of the look-back provision plus the 15.0% discount is recognized as compensation expense over the 6 month purchase period.

Stock Options

The Company estimates the fair value of stock option awards to employees and non-employees using the Black-Scholes option-pricing model, which requires the input of subjective assumptions, including (a) the expected volatility of the underlying common stock, (b) the expected term of the award, (c) the risk-free interest rate, and (d) expected dividends. The Company bases its estimate of expected volatility using a blend of its stock price history for the length of time it has market data for its stock and using the historical volatility of a group of companies in the pharmaceutical and biotechnology industries in a similar stage of development as the Company that are publicly traded. For these analyses, the Company selected companies with comparable characteristics to its own including enterprise value, risk profiles and with historical share price information sufficient to meet the expected life of the stock-based awards. The Company computes the historical volatility data using the daily closing prices for the selected companies' shares during the equivalent period of the calculated expected term of its stock-based awards. The Company will continue to apply this process until a sufficient amount of historical information regarding the volatility of its own stock price becomes available.

The Company estimated the expected life of its employee stock options using the “simplified” method, whereby, the expected life equals the average of the vesting term and the original contractual term of the option. The risk-free interest rates for periods within the expected life of the option are based on the U.S. Treasury yield curve in effect during the period the options were granted. We have elected to account for forfeitures as they occur.

The grant date fair value of awards subject to service-based vesting is recognized ratably over the requisite service period, which is generally the vesting period of the respective awards. The Company's stock option awards typically vest over a service period that ranges from one to four years and includes awards with one year cliff vesting followed by ratable monthly and quarterly vesting thereafter and ratable monthly and quarterly vesting beginning on the grant date.

During the years ended December 31, 2022, 2021 and 2020, the Company granted 1,929,345, 1,678,230 and 2,546,075 stock option awards pursuant to the 2017 Plan to certain directors, employees and non-employees, respectively.

Using the Black-Scholes option pricing model, the weighted-average grant date fair value relating to outstanding stock options granted under the 2017 Plan during the years ended December 31, 2022, 2021 and 2020 was $4.14, $15.69 and $13.25, respectively. The total intrinsic value of stock options exercised during the years ended December 31, 2022, 2021 and 2020 was $4,205, $2,688 and $2,661, respectively.

During the years ended December 31, 2022, 2021 and 2020, the Company granted 347,985, 0 and 0 stock option awards pursuant to the 2022 Inducement Plan. Using the Black-Scholes option pricing model, the weighted-average grant date fair value relating to outstanding stock options granted under the Company’s stock option plan during the years ended December 31, 2022, 2021 and 2020 was $13.05, $0 and $0, respectively. The total intrinsic value of stock options exercised was zero during the years ended December 31, 2022, 2021 and 2020.

The fair value of stock options granted to employees and directors was estimated at the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions:


	Year ended
	December 31,
	2022		2021		2020
Risk‑free interest rate	2.19	%	0.79	%	0.76	%
Expected term (in years)	6.11		6.11		6.08
Expected volatility	69.16	%	69.80	%	70.67	%
Expected dividend yield	—		—		—

A summary of the Company's stock option activity for the year ended December 31, 2022 is as follows:


				Weighted‑
		Weighted-		Average
		Average		Remaining		Aggregate
	Number of	Exercise		Contractual		Intrinsic
	Options	Price		Term		Value
Outstanding as of December 31, 2021	5,737,599	$	21.84	6.73	$	3,214
Granted	2,277,330		8.50	—		—
Exercised	(697,377)		13.98	—		4,205
Cancelled	(943,008)		22.42	—		—
Outstanding as of December 31, 2022	6,374,544	$	17.85	7.73	$	73,994
Options exercisable at December 31, 2022	3,092,723	$	20.44	6.80	$	28,317

Restricted Stock Units

The Company may grant restricted stock units (“RSUs”) to employees and nonemployee directors under the 2017 Plan and to employees under the 2022 Inducement Plan. Each RSU represents a right to receive one share of the Company's common stock upon the completion of a specific period of continued service. RSU awards granted are valued at the market price of the Company's common stock on the date of grant. The Company recognizes stock-based compensation expense for the fair values of these RSUs on a straight-line basis over the requisite service period of these awards.

A summary of the Company's restricted stock unit activity for the year ended December 31, 2022 is as follows:


		Weighted-
		Average
	Number of	Grant Date
	RSUs	Fair Value
Unvested as of December 31, 2021	435,589	$	15.74
Granted	597,426		10.48
Vested	(158,546)		20.13
Cancelled	(100,303)		12.78
Unvested as of December 31, 2022	774,166	$	12.18

As of December 31, 2022, the aggregate intrinsic value of unvested RSUs was $22,544.

Performance Stock Units

In November 2021, the Company granted up to a maximum of 956,145 performance stock units (“PSUs”) to employees under the 2017 Plan. Each PSU represents a right to receive one share of the Company's common stock upon vesting. The performance-based stock units granted in 2021 will vest on December 31, 2023 based upon i) continued service through the vesting date and (ii) the achievement of specific clinical development and regulatory performance events, as approved by the compensation committee. PSU awards granted are valued at the market price of the Company's common stock on the date of grant. The Company recognizes stock-based compensation expense for the fair value of these PSUs for the awards that are probable of vesting over the service period. During each financial period, management estimates the probable number of PSU’s that would vest until the ultimate achievement of the performance goal is known. At December 31, 2022, the Company estimates that 32.3% of the PSUs granted will be eligible to vest.

A summary of the Company's performance stock unit activity for the year ended December 31, 2022 is as follows:


		Weighted-
		Average
	Number of	Grant Date
	PSUs	Fair Value
Unvested as of December 31, 2021	956,145	$	13.24
Granted	—		—
Vested	—		—
Cancelled	(151,348)		13.24
Unvested as of December 31, 2022	804,797	$	13.24

The following table summarizes the classification of the Company's stock-based compensation expenses related to stock options, restricted stock units, performance stock units and the employee stock purchase plan recognized in the Company's consolidated statements of operations and comprehensive loss.



	Year Ended
	December 31,
	2022		2021		2020
Research and development	$	5,814	$	7,687	$	6,055
Selling, general, and administrative		14,017		13,117		11,400
Total	$	19,831	$	20,804	$	17,455

Stock-based compensation expense by award type recognized during the years ended December 31, 2022, 2021 and 2020 was as follows:

	Year Ended
	December 31,
	2022		2021		2020
Stock options	$	15,477	$	17,988	$	15,915
Employees stock purchase plan		408		310		180
Restricted stock units		2,918		1,924		1,360
Performance stock units		1,028		582		—
Total	$	19,831	$	20,804	$	17,455

During 2021 and 2020, there were certain awards subject to modification accounting. Per the terms of separation with a former employee, such employee’s stock option awards were amended to provide for accelerated vesting and extended time to exercise vested options. As a result, the Company recognized incremental expense for the stock option awards of $141 and $2,880, respectively. During 2022 there was no significant modification of awards.

As of December 31, 2022, the Company has unrecognized compensation cost of $24,752 related to non-vested employee, non-employee and director stock option awards under the 2017 Plan that is expected to be recognized over a weighted-average period of 2.28 years. The Company has unrecognized compensation cost of $7,036 related to non-vested employee restricted stock unit and performance stock unit awards under the 2017 Plan that is expected to be recognized over a weighted-average period of 1.82 years.

As of December 31, 2022, the Company has unrecognized compensation cost of $4,182 related to unvested employee, stock option awards under the 2022 Inducement Plan that is expected to be recognized over a weighted-average period of 3.60 years. As of December 31, 2022, the Company has unrecognized compensation cost of $3,083 related to unvested employee restricted stock unit and stock option awards that is expected to be recognized over a weighted-average period of 3.66 years.

Income Tax - Operating loss carryforward (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021
Operating loss carryforwards
Increase in valuation allowance	$ 59,046	$ 24,615
Federal net operating loss carryforwards	494,500
State net operating loss carryforwards	484,606
Net operating loss indefinite carryforwards	421,334
Federal orphan drug credit related to qualifying research	19,281
Accrued interest or penalties related to uncertain tax positions	0	$ 0
Research tax credits \| Federal
Operating loss carryforwards
Research tax credits	11,575
Research tax credits \| State
Operating loss carryforwards
Research tax credits	$ 3,550

Income Tax (Tables)

12 Months Ended

Dec. 31, 2022

Income Tax

Schedule of reconciliation of the income tax benefit at the federal statutory tax rate to effective income tax rate


	As of
	December 31,
	2022		2021		2020
Statutory tax rate	21.00	%	21.00	%	21.00	%
State tax, net of federal benefit	9.83	%	7.45	%	6.32	%
Research and development credit	0.78	%	2.94	%	1.46	%
Orphan drug credit	2.15	%	7.58	%	2.40	%
Tax law change	—	%	—	%	—	%
Stock compensation	(0.29)	%	(1.05)	%	(0.53)	%
Other	(0.04)	%	(0.47)	%	(0.30)	%
Change in valuation allowance	(33.44)	%	(37.45)	%	(30.35)	%
Effective tax rate	—	%	—	%	—	%

Schedule of principal components of deferred tax assets


	As of
	December 31,
	2022		2021
Deferred tax assets:
Net operating loss carryforwards	$	135,470	$	113,098
Research and development credits		14,380		13,477
Orphan drug credit		19,281		15,385
Capitalized license fee		2,776		2,651
Stock-based compensation		11,074		9,150
Capitalized research and development costs		29,663		—
Deferred revenue		438		1,901
Accrued expenses & other		4,536		2,976
Total deferred tax assets		217,618		158,638
Valuation allowance		(217,257)		(158,211)
Net deferred tax assets		361		427
Deferred tax liabilities:
Operating lease right-of-use asset and other		(361)		(427)
Total deferred tax liabilities	$	(361)	$	(427)

Fair Value of Financial Assets - Changes in Embedded Derivative Liability (Details) - Revenue Interest Financing Agreement $ in Thousands	12 Months Ended
	Dec. 31, 2022 USD ($)
Fair value of embedded derivative liability
Change in fair value of derivative	$ (250)
Fair value of embedded derivative liability, ending balance	$ 1,340

Stock-based Compensation - RSU and PSU activity (Details) - USD ($) $ / shares in Units, $ in Thousands	1 Months Ended	12 Months Ended
	Nov. 30, 2021	Dec. 31, 2022
Restricted stock units
Number of Units
Outstanding unvested at beginning of the period		435,589
Granted		597,426
Vested		(158,546)
Cancelled		(100,303)
Outstanding unvested at end of the period		774,166
Weighted Average Grant Date Fair Value
Outstanding unvested at beginning of the period		$ 15.74
Granted		10.48
Vested		20.13
Cancelled		12.78
Outstanding unvested at end of the period		$ 12.18
Aggregate intrinsic value		$ 22,544
Performance stock units
Number of Units
Outstanding unvested at beginning of the period		956,145
Granted	956,145
Cancelled		(151,348)
Outstanding unvested at end of the period		804,797
Weighted Average Grant Date Fair Value
Outstanding unvested at beginning of the period		$ 13.24
Cancelled		13.24
Outstanding unvested at end of the period		$ 13.24
Estimated percentage of payment awards granted eligible to vest		32.30%

Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2022

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

Basis of Presentation

Use of Estimates

Principles of Consolidation

Reclassification of Prior Year Balances

inventory, respectively, from changes in prepaid expenses and other current assets to changes in accounts receivable of and inventory, respectively.

Segment Information

Off-Balance Sheet Risk and Concentrations of Credit Risk

Cash and Cash Equivalents

Short-term Investments

Restricted Cash

Accounts Receivable, net

Revenue Recognition

Product Revenue, Net

Reserves for Variable Consideration

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

The table below summarizes balances and activity in each of the product revenue allowance and reserve categories as follows:



	Provision for Cash Discounts		Fees, Rebates and Other Incentives		Total
Beginning Balance at December 31, 2020	$	—	$	—	$	—
Provision related to sales in the current year		74		495		569
Credit and payments made		(53)		(42)		(95)
Ending balance December 31, 2021	$	21	$	453	$	474
Provision related to sales in the current year		367		3,299		3,666
Credit and payments made		(289)		(1,042)		(1,331)
Ending balance December 31, 2022	$	99	$	2,710	$	2,809

Provision for cash discounts are recorded as reductions of accounts receivable, and fees, rebates, and other incentives are recorded as a component of accrued expenses.

License Agreements

Deferred Royalty Obligation

Inventory

Inventory consists of the following:


	December 31,		December 31,
	2022		2021
Raw Materials	$	2,722	$	—
WIP		—		—
Finished Goods		195		111
Total Inventory	$	2,917	$	111

Cost of Product Sales

Intangible Assets, net

Impairment of Long-Lived Assets

The Company evaluates its long-lived assets, which consist primarily of property and equipment and finite lived intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Factors that the Company considers in deciding when to perform an impairment review include significant underperformance of the business in relation to expectations, significant negative industry or economic trends and significant changes or planned changes in the use of the assets. The Company measures recoverability of assets to be held and used by comparing the carrying amount of an asset to the future undiscounted net cash flows expected to be generated by the asset. 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 years ended December 31, 2022, 2021 and 2020.

Prepaid Expenses and Other Current Assets


	December 31,
	2022		2021
Prepaid research and development costs	$	4,392	$	8,404
Other current assets		7,415		3,992
Prepaid expenses and other current assets	$	11,807	$	12,396

Property and Equipment

Property and equipment consists of the following:


	Useful	December 31,
	Life	2022		2021
Leasehold improvements	*	$	2,705	$	2,705
Office equipment	5 years		107		107
Computers and software	3 years		1,291		1,010
Furniture, fixtures and equipment	5 years		1,249		1,249
			5,352		5,071
Less accumulated depreciation and amortization			(3,155)		(2,258)
Property and equipment, net		$	2,197	$	2,813

*Shorter of asset life or lease term.

Depreciation and amortization expense related to property and equipment for the years ended December 31, 2022, 2021 and 2020 was $896, $816, and $690, respectively.

Fair Value Measurements

Level 1 — Quoted market prices in active markets for identical assets or liabilities.

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.

Research and Development Expenses

Income Taxes

Net Loss Per Share


	Year Ended
	December 31,
	2022		2021		2020
Stock options		6,354,544		5,737,599		5,199,235
Restricted stock units		774,166		435,589		176,537
Performance stock units		804,797		956,145		—
Potential common shares		7,933,507		7,129,333		5,375,772

Comprehensive Loss

Patent Costs

Subsequent Events

Application of New or Revised Accounting Standards

Stock-based Compensation (Tables)

12 Months Ended

Dec. 31, 2022

Stock-based Compensation

Schedule of significant assumptions used to compute the fair values of employee and director stock options awarded


	Year ended
	December 31,
	2022		2021		2020
Risk‑free interest rate	2.19	%	0.79	%	0.76	%
Expected term (in years)	6.11		6.11		6.08
Expected volatility	69.16	%	69.80	%	70.67	%
Expected dividend yield	—		—		—

Summary of common stock option activity


				Weighted‑
		Weighted-		Average
		Average		Remaining		Aggregate
	Number of	Exercise		Contractual		Intrinsic
	Options	Price		Term		Value
Outstanding as of December 31, 2021	5,737,599	$	21.84	6.73	$	3,214
Granted	2,277,330		8.50	—		—
Exercised	(697,377)		13.98	—		4,205
Cancelled	(943,008)		22.42	—		—
Outstanding as of December 31, 2022	6,374,544	$	17.85	7.73	$	73,994
Options exercisable at December 31, 2022	3,092,723	$	20.44	6.80	$	28,317

Summary of restricted stock unit activity


		Weighted-
		Average
	Number of	Grant Date
	RSUs	Fair Value
Unvested as of December 31, 2021	435,589	$	15.74
Granted	597,426		10.48
Vested	(158,546)		20.13
Cancelled	(100,303)		12.78
Unvested as of December 31, 2022	774,166	$	12.18

Summary of performance stock unit activity


		Weighted-
		Average
	Number of	Grant Date
	PSUs	Fair Value
Unvested as of December 31, 2021	956,145	$	13.24
Granted	—		—
Vested	—		—
Cancelled	(151,348)		13.24
Unvested as of December 31, 2022	804,797	$	13.24

Summary of stock-based compensation expense



	Year Ended
	December 31,
	2022		2021		2020
Research and development	$	5,814	$	7,687	$	6,055
Selling, general, and administrative		14,017		13,117		11,400
Total	$	19,831	$	20,804	$	17,455

Summary of stock-based compensation expense by award type

	Year Ended
	December 31,
	2022		2021		2020
Stock options	$	15,477	$	17,988	$	15,915
Employees stock purchase plan		408		310		180
Restricted stock units		2,918		1,924		1,360
Performance stock units		1,028		582		—
Total	$	19,831	$	20,804	$	17,455

Stock-based Compensation - 2017 Employee Stock Purchase Plan (Details) - shares				12 Months Ended
	Jan. 01, 2022	Jan. 01, 2021	Jan. 01, 2020	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Stock-based Compensation
Number of common stock options granted				2,277,330
Expected term				6 years 1 month 9 days	6 years 1 month 9 days	6 years 29 days
2017 Employee Stock Purchase Plan
Stock-based Compensation
Common stock reserved for issuance				962,942
Percentage increase in authorized shares under the plan				1.00%
Number of additional shares added	502,835	0	439,968
Number of shares issued				38,051
Purchase price of ESPP meeting certain criteria as of the offering period (as a percent)				85.00%
Discount recognized as compensation expense				15.00%

Summary of Significant Accounting Policies (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2022 USD ($) Institution segment	Dec. 31, 2021 USD ($)	Dec. 31, 2020 USD ($)
Segment Information
Number of operating segments \| segment	1
Number of reporting segments \| segment	1
Off Balance Sheet Risk and Concentrations of Credit Risk
Number of federally insured financial institutions \| Institution	2
Impairment of Long-Lived Assets
Tangible asset impairment charges	$ 0	$ 0	$ 0
Income Taxes
Accrued interest or penalties	0	0
Patent Costs
Costs to secure and defend patents	92,032	68,486	46,125
Patents
Patent Costs
Costs to secure and defend patents	$ 406	332	$ 524
Customer concentration risk \| Customer one \| Revenue benchmark
Off Balance Sheet Risk and Concentrations of Credit Risk
Percentage of revenue generated from customer	85.00%
Prepaid and other current assets
Summary of Significant Accounting Policies
Reclassification of prior year balances		111
Accounts receivable
Summary of Significant Accounting Policies
Reclassification of prior year balances		1,025
Inventory
Summary of Significant Accounting Policies
Reclassification of prior year balances		$ 111

Income Tax

12 Months Ended

Dec. 31, 2022

Income Tax

Income Tax

13. Income Tax

For the years ended December 31, 2022, 2021 and 2020 the Company did not have a current or deferred income tax expense or benefit as the entity has incurred losses since inception and has provided a full valuation allowance against its deferred tax assets.

A reconciliation of the income tax benefit at the federal statutory tax rate to the Company's effective income tax rate is as follows:


	As of
	December 31,
	2022		2021		2020
Statutory tax rate	21.00	%	21.00	%	21.00	%
State tax, net of federal benefit	9.83	%	7.45	%	6.32	%
Research and development credit	0.78	%	2.94	%	1.46	%
Orphan drug credit	2.15	%	7.58	%	2.40	%
Tax law change	—	%	—	%	—	%
Stock compensation	(0.29)	%	(1.05)	%	(0.53)	%
Other	(0.04)	%	(0.47)	%	(0.30)	%
Change in valuation allowance	(33.44)	%	(37.45)	%	(30.35)	%
Effective tax rate	—	%	—	%	—	%

The principal components of the Company's deferred tax assets and liabilities are as follows:


	As of
	December 31,
	2022		2021
Deferred tax assets:
Net operating loss carryforwards	$	135,470	$	113,098
Research and development credits		14,380		13,477
Orphan drug credit		19,281		15,385
Capitalized license fee		2,776		2,651
Stock-based compensation		11,074		9,150
Capitalized research and development costs		29,663		—
Deferred revenue		438		1,901
Accrued expenses & other		4,536		2,976
Total deferred tax assets		217,618		158,638
Valuation allowance		(217,257)		(158,211)
Net deferred tax assets		361		427
Deferred tax liabilities:
Operating lease right-of-use asset and other		(361)		(427)
Total deferred tax liabilities	$	(361)	$	(427)

ASC 740 requires a valuation allowance to reduce the deferred tax assets reported if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. After consideration of all the evidence, both positive and negative, the Company has recorded a full valuation allowance against its deferred tax assets at December 31, 2022 and 2021, because the Company's management has determined that is it more likely than not that these assets will not be realized. The increase in the valuation allowance of $59,046 in 2022 and $24,615 in 2021 primarily relates to the net loss incurred by the Company during each period.

As of December 31, 2022, the Company had federal and state net operating loss carryforwards of approximately $494,500 and $484,606, respectively, which are available to reduce future taxable income. The net operating loss carryforwards expire at various times beginning in 2033 for federal and state purposes. Of the federal net operating loss carryforwards at December 31, 2022, $421,334 can be carried forward indefinitely.

As of December 31, 2022, the Company had federal and state research tax credits of approximately $11,575 and $3,550, respectively, which may be used to offset future tax liabilities. Additionally, as of 2022, the Company had a federal orphan drug credit related to qualifying research of $19,281. These tax credit carryforwards will begin to expire at various times beginning in 2033 for federal purposes and 2028 for state purposes.

The net operating loss and tax credit carryforwards are subject to review and possible adjustment by the Internal Revenue Service and state tax authorities. Net operating loss and tax credit carryforwards may become subject to an annual limitation in the event of certain cumulative changes in the ownership interest of significant stockholders over a three-year period in excess of 50%, as defined under Sections 382 and 383 of the Internal Revenue Code, respectively, as well as similar state provisions and other provisions within the Internal Revenue Code. This could limit the amount of tax attributes that can be utilized annually to offset future taxable income or tax liabilities. The amount of the annual limitation is determined based on the value of the Company immediately prior to the ownership change. Subsequent ownership changes may further affect the limitation in future years.

The Company has not recorded any reserves for uncertain tax positions as of December 31, 2022 and 2021. The Company has not, as yet, conducted a study of research and development credit carryforwards. This study may result in an adjustment to the Company's research and development credit carryforwards; however, until a study is completed and any adjustment is known, no amounts are being presented as an uncertain tax position. A full valuation allowance has been provided against the Company's research and development credits and, if an adjustment is required, this adjustment would be offset by an adjustment to the valuation allowance. Thus, there would be no impact to the balance sheets or statements of operations and comprehensive loss if an adjustment were required.

Interest and penalty charges, if any, related to unrecognized tax benefits will be classified as income tax expense in the accompanying statements of operations and comprehensive loss. As of December 31, 2022 and 2021, the Company had no accrued interest or penalties related to uncertain tax positions.

The Company is subject to examination by the U.S. federal, state and local income tax authorities for tax years 2013 forward. The Company is not currently under examination by the Internal Revenue Service or any other jurisdictions for any tax years.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 10
-Section 50
-Paragraph 21
-URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32857-109319

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 10
-Section S99
-Paragraph 2
-Subparagraph (SAB Topic 11.C)
-URI https://asc.fasb.org/extlink&oid=122134291&loc=d3e330215-122817

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 10
-Section 50
-Paragraph 17
-Subparagraph (b)
-URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32809-109319

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SAB TOPIC 6.I.5.Q1)
-URI https://asc.fasb.org/extlink&oid=122134291&loc=d3e330036-122817

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 10
-Section 50
-Paragraph 14
-URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32705-109319

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 270
-Section 50
-Paragraph 1
-URI https://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-URI https://asc.fasb.org/topic&trid=2144680

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 30
-Section 50
-Paragraph 2
-Subparagraph (a)
-URI https://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 235
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SX 210.4-08(h)(2))
-URI https://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690

+ Details

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021
Current assets:
Cash and cash equivalents	$ 127,677	$ 59,248
Short-term investments	205,611	235,607
Accounts receivable, net	6,224	1,025
Inventory	2,917	111
Prepaid expenses and other current assets	11,807	12,396
Total current assets	354,236	308,387
Property and equipment, net	2,197	2,813
Right-of-use asset	1,182	1,522
Intangible assets, net	7,883	4,658
Restricted cash	328	328
Other long-term assets	16,655	11,815
Total assets	382,481	329,523
Current liabilities:
Accounts payable	4,797	5,737
Accrued expenses and other current liabilities	32,894	30,084
Deferred revenue	1,434	7,000
Lease liability	684	606
Total current liabilities	39,809	43,427
Long-term liabilities:
Deferred royalty obligation	75,810
Lease liability	1,260	1,945
Derivative liability	1,340
Total liabilities	118,219	45,372
Stockholders' equity:
Common stock, $0.001 par value: 120,000,000 shares authorized; 56,612,429 and 50,283,574 shares issued and outstanding at December 31, 2022 and December 31, 2021, respectively	56	50
Additional paid-in capital	974,356	813,041
Accumulated other comprehensive loss	(92)	(1)
Accumulated deficit	(710,058)	(528,939)
Total stockholders' equity	264,262	284,151
Total liabilities and stockholders' equity	$ 382,481	$ 329,523

Nature of Business (Details) - USD ($) $ in Thousands	12 Months Ended	15 Months Ended
Nature of Business (Details) - USD ($) $ in Thousands	Dec. 31, 2022	Sep. 30, 2023	Sep. 29, 2022	Jun. 29, 2022	Jun. 16, 2022
Long-Term Obligations
Revenue Interest Financing Agreement ("RIFA")	$ 72,338
Revenue Interest Financing Agreement
Long-Term Obligations
Initial investment amount received under Revenue Interest Financing Agreement ("RIFA")			$ 37,500	$ 37,500
Revenue Interest Financing Agreement \| 45 business days after achievement
Long-Term Obligations
Initial investment amount received under Revenue Interest Financing Agreement ("RIFA")		$ 25,000
Business days		45 days
Revenue Interest Financing Agreement \| Maximum
Long-Term Obligations
Aggregate investment amount					$ 100,000

Subsequent Events (Details) - USD ($) $ in Thousands		12 Months Ended
Subsequent Events (Details) - USD ($) $ in Thousands	Feb. 27, 2023	Dec. 31, 2022
Subsequent events
Acquisition related costs		$ 62
Subsequent event \| Xinvento B.V.
Subsequent events
Aggregate consideration at closing	$ 5,000
Aggregate payment upon achievement of development, regulatory and commercial milestones	206,000
Clinical development milestone payments	6,000
Regulatory approval and commercial milestones milestone payments	125,000
Sales milestone payments	$ 75,000

Stock-based Compensation - 2022 Inducement Plan (Details) - shares	12 Months Ended
	Dec. 31, 2022	Feb. 09, 2022	Dec. 31, 2021
Stock-based Compensation
Stock options outstanding	6,374,544		5,737,599
2022 Employment Inducement Plan
Stock-based Compensation
Authorized shares		1,000,000
Vesting period	4 years
Stock options outstanding	336,780
Restricted stock unit awards outstanding	173,135
Shares available for future grant	490,085
2022 Employment Inducement Plan \| Maximum
Stock-based Compensation
Expiration period	10 years

Retirement Plan

12 Months Ended

Dec. 31, 2022

Retirement Plan

Retirement Plan

14. Retirement Plan

The Company has a 401(k) defined contribution plan for the benefit for all US employees and permits voluntary contributions by employees subject to IRS-imposed limitations. Beginning in 2021, the Company matched 100% of eligible employee contributions on the first 4% of employee salary (up to the IRS maximum). Contributions for the years ended December 31, 2022, 2021 and 2020 were $1,195, $886 and $321 , respectively.

Right of Use Asset and Lease Liability (Details) - USD ($) $ in Thousands	1 Months Ended	12 Months Ended
	May 31, 2019	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Right Of Use Asset and Lease Liability
Remaining term of operating lease (in years)		2 years 7 months 6 days
Operating lease discount rate		10.00%
Transition relief package					true
Right-of-use asset		$ 1,182	$ 1,522
Lease term (in years)	6 years
Lease renewal term (in years)	5 years					5 years
Option to extend	true
Rent expense, or operating lease costs		551	551	$ 551
Cash payments in the measurement of operating lease liability		$ 818	$ 802	$ 786

Intangible Assets, Net (Tables)

12 Months Ended

Dec. 31, 2022

Intangible Assets, Net

Schedule of finite-lived intangible assets


2023	$	855
2024		855
2025		855
2026		855
2027		855
Thereafter		3,608
Total	$	7,883

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Revenue	$ 23,638	$ 3,154
Costs and expenses:
Cost of sales	2,133	599
Research and development	108,630	104,128	$ 90,450
Selling, general, and administrative	92,032	68,486	46,125
Total costs and expenses	202,795	173,213	136,575
Loss from operations	(179,157)	(170,059)	(136,575)
Other income:
Other (expense), income, net	(790)	100,000
Interest expense	(5,201)
Interest income	4,029	447	2,579
Total other (expense) income, net	(1,962)	100,447	2,579
Net loss	$ (181,119)	$ (69,612)	$ (133,996)
Net loss per share, basic (in dollars per share)	$ (3.47)	$ (1.40)	$ (3.04)
Net loss per share, diluted (in dollars per share)	$ (3.47)	$ (1.40)	$ (3.04)
Weighted-average common shares outstanding, basic (in shares)	52,120,701	49,600,294	44,127,220
Weighted average common shares outstanding, diluted (in shares)	52,120,701	49,600,294	44,127,220
Other comprehensive loss:
Net loss	$ (181,119)	$ (69,612)	$ (133,996)
Unrealized (loss) gain, net on marketable securities	(91)	(1)	49
Comprehensive loss	(181,210)	(69,613)	$ (133,947)
Product revenue
Revenue	16,884	$ 3,154
License revenue
Revenue	$ 6,754

Stock-based Compensation - Stock Options (Details) - USD ($) $ / shares in Units, $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Stock-based Compensation
Number of common stock options granted	2,277,330
Total intrinsic value of stock options exercised	$ 4,205
Stock options
Stock-based Compensation
Grant cliff vesting period	1 year
Stock options \| Minimum
Stock-based Compensation
Vesting period of stock option awards	1 year
Stock options \| Maximum
Stock-based Compensation
Vesting period of stock option awards	4 years
2017 Equity Incentive Plan
Stock-based Compensation
Number of common stock options granted	1,929,345	1,678,230	2,546,075
Weighted average grant date fair value relating to outstanding stock options	$ 4.14	$ 15.69	$ 13.25
Total intrinsic value of stock options exercised	$ 4,205	$ 2,688	$ 2,661
2022 Employment Inducement Plan
Stock-based Compensation
Vesting period of stock option awards	4 years
Number of common stock options granted	347,985	0	0
Weighted average grant date fair value relating to outstanding stock options	$ 13.05	$ 0	$ 0
Total intrinsic value of stock options exercised	$ 0	$ 0	$ 0

Fair Value of Financial Assets - Changes in Level 3 Securities (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021
Fair Value of Financial Assets
Fair Value, Asset, Recurring Basis, Unobservable Input Reconciliation, Gain (Loss), Statement of Income or Comprehensive Income [Extensible Enumeration]	Other Nonoperating Income (Expense)	Other Nonoperating Income (Expense)
Level 3
Fair Value of Financial Assets
Initial recording of RareStone equity	$ 1,040
Realized loss included in other expense	$ (1,040)

Stock-based Compensation - Common stock option activity (Details) - USD ($) $ / shares in Units, $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Number of Options
Outstanding at beginning of the period	5,737,599
Granted	2,277,330
Exercised	(697,377)
Cancelled	(943,008)
Outstanding at end of the period	6,374,544	5,737,599
Options exercisable at end of the period	3,092,723
Weighted-Average Exercise Price
Outstanding at beginning of the period	$ 21.84
Granted	8.50
Exercised	13.98
Cancelled	22.42
Outstanding at end of the period	17.85	$ 21.84
Options exercisable at end of the period	$ 20.44
Weighted-Average Remaining Contractual Term
Outstanding at end of the period	7 years 8 months 23 days	6 years 8 months 23 days
Options exercisable at end of the period	6 years 9 months 18 days
Aggregate Intrinsic Value
Outstanding balance		$ 3,214
Exercised	$ 4,205
Options vested and expected to vest	73,994
Options exercisable	$ 28,317
2017 Equity Incentive Plan
Number of Options
Granted	1,929,345	1,678,230	2,546,075
Aggregate Intrinsic Value
Exercised	$ 4,205	$ 2,688	$ 2,661