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Document and Entity Information - shares	6 Months Ended
Document and Entity Information - shares	Jun. 30, 2020	Jul. 24, 2020
Document and Entity Information
Document Type	10-Q
Document Quarterly Report	true
Document Transition Report	false
Document Period End Date	Jun. 30, 2020
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
Trading Symbol	RYTM
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	true
Entity Ex Transition Period	true
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		44,118,594
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q2
Entity Central Index Key	0001649904
Amendment Flag	false

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Current assets:
Cash and cash equivalents	$ 59,091	$ 62,294
Short-term investments	169,535	230,165
Prepaid expenses and other current assets	9,193	9,945
Total current assets	237,819	302,404
Property and equipment, net	3,331	3,671
Right-of-use asset	1,932	2,045
Restricted cash	403	403
Total assets	243,485	308,523
Current liabilities:
Accounts payable	4,761	10,415
Accrued expenses and other current liabilities	9,640	13,530
Lease liability	503	472
Total current liabilities	14,904	24,417
Long-term liabilities:
Lease liability	2,828	3,086
Total liabilities	17,732	27,503
Commitments and contingencies
Stockholders' equity:
Preferred Stock, $0.001 par value: 10,000,000 shares authorized; no shares issued and outstanding at June 30, 2020 and December 31, 2019
Common stock, $0.001 par value: 120,000,000 shares authorized; 44,115,612 and 43,996,753 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively	44	44
Additional paid-in capital	615,691	606,307
Accumulated other comprehensive income	630
Accumulated deficit	(390,612)	(325,331)
Total stockholders' equity	225,753	281,020
Total liabilities and stockholders' equity	$ 243,485	$ 308,523

CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Jun. 30, 2020	Dec. 31, 2019
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	44,115,612	43,996,753
Common stock, outstanding	44,115,612	43,996,753

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Operating expenses:
Research and development	$ 22,997	$ 35,308	$ 45,501	$ 58,069
Selling, general, and administrative	8,921	8,841	21,717	16,600
Total operating expenses	31,918	44,149	67,218	74,669
Loss from operations	(31,918)	(44,149)	(67,218)	(74,669)
Other income (expense):
Interest income, net	801	1,353	1,937	2,899
Total other income, net	801	1,353	1,937	2,899
Net loss	$ (31,117)	$ (42,796)	$ (65,281)	$ (71,770)
Net loss per share, basic and diluted	$ (0.71)	$ (1.24)	$ (1.48)	$ (2.08)
Weighted-average common shares outstanding, basic and diluted	44,098,860	34,452,661	44,074,352	34,435,023
Other comprehensive loss:
Net loss	$ (31,117)	$ (42,796)	$ (65,281)	$ (71,770)
Unrealized gain on marketable securities	567		630
Comprehensive loss	$ (30,550)	$ (42,796)	$ (64,651)	$ (71,770)

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($) $ in Thousands	Common stock	Additional Paid-in Capital	Accumulated Other Comprehensive Income	Accumulated Deficit	Total
Beginning balance at Dec. 31, 2018	$ 34	$ 430,824		$ (184,602)	$ 246,256
Beginning balance (in shares) at Dec. 31, 2018	34,410,725
Increase (Decrease) in Stockholders' Equity
Stock compensation expense		2,644			2,644
Issuance of common stock in connection with ESPP		295			295
Issuance of common stock in connection with ESPP (in shares)	12,105
Issuance of common stock in connection with exercise of stock options		54			54
Issuance of common stock in connection with exercise of stock options (in shares)	7,811
Unrealized gain on marketable securities		214			214
Net loss				(28,974)	(28,974)
Ending balance at Mar. 31, 2019	$ 34	434,031		(213,576)	220,489
Ending balance (in shares) at Mar. 31, 2019	34,430,641
Beginning balance at Dec. 31, 2018	$ 34	430,824		(184,602)	246,256
Beginning balance (in shares) at Dec. 31, 2018	34,410,725
Increase (Decrease) in Stockholders' Equity
Net loss					(71,770)
Ending balance at Jun. 30, 2019	$ 34	437,805		(256,372)	181,467
Ending balance (in shares) at Jun. 30, 2019	34,497,542
Beginning balance at Mar. 31, 2019	$ 34	434,031		(213,576)	220,489
Beginning balance (in shares) at Mar. 31, 2019	34,430,641
Increase (Decrease) in Stockholders' Equity
Stock compensation expense		3,272			3,272
Issuance of common stock in connection with exercise of stock options		465			465
Issuance of common stock in connection with exercise of stock options (in shares)	66,901
Unrealized gain on marketable securities		37			37
Net loss				(42,796)	(42,796)
Ending balance at Jun. 30, 2019	$ 34	437,805		(256,372)	181,467
Ending balance (in shares) at Jun. 30, 2019	34,497,542
Beginning balance at Dec. 31, 2019
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 compensation expense		5,475			5,475
Issuance of common stock in connection with ESPP		324			324
Issuance of common stock in connection with ESPP (in shares)	18,673
Issuance of common stock in connection with exercise of stock options		383			383
Issuance of common stock in connection with exercise of stock options (in shares)	72,964
Unrealized gain on marketable securities			$ 63		63
Net loss				(34,164)	(34,164)
Ending balance at Mar. 31, 2020	$ 44	612,489	63	(359,495)	253,101
Ending balance (in shares) at Mar. 31, 2020	44,088,390
Beginning balance at Dec. 31, 2019
Ending balance at Jun. 30, 2020
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
Net loss					(65,281)
Ending balance at Jun. 30, 2020	$ 44	615,691	630	(390,612)	225,753
Ending balance (in shares) at Jun. 30, 2020	44,115,612
Ending balance at Jun. 30, 2020
Beginning balance at Mar. 31, 2020	$ 44	612,489	63	(359,495)	253,101
Beginning balance (in shares) at Mar. 31, 2020	44,088,390
Increase (Decrease) in Stockholders' Equity
Stock compensation expense		3,028			3,028
Issuance of common stock in connection with exercise of stock options		174			174
Issuance of common stock in connection with exercise of stock options (in shares)	27,222
Unrealized gain on marketable securities			567		567
Net loss				(31,117)	(31,117)
Ending balance at Jun. 30, 2020	$ 44	$ 615,691	$ 630	$ (390,612)	$ 225,753
Ending balance (in shares) at Jun. 30, 2020	44,115,612

CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019
Operating activities
Net loss	$ (65,281)	$ (71,770)
Adjustments to reconcile net loss to cash used in operating activities:
Stock-based compensation expense	8,503	5,916
Depreciation and amortization	340	452
Non-cash rent expense	(114)	253
Changes in operating assets and liabilities:
Prepaid expenses and other current assets	(352)	(4,048)
Accounts payable, accrued expenses and other current liabilities	(8,923)	12,273
Net cash used in operating activities	(65,827)	(56,924)
Investing activities
Purchases of short-term investments	(43,413)	(69,875)
Maturities of short-term investments	105,147	142,687
Purchases of property and equipment		(3,126)
Net cash provided by investing activities	61,734	69,686
Financing activities
Proceeds from the exercise of stock options	566	519
Proceeds from issuance of common stock from ESPP	324	295
Net cash provided by financing activities	890	814
Net (decrease) increase in cash, cash equivalents and restricted cash	(3,203)	13,576
Cash, cash equivalents and restricted cash at beginning of year	62,697	49,943
Cash, cash equivalents and restricted cash at end of year	$ 59,494	$ 63,519

Nature of Business

6 Months Ended

Jun. 30, 2020

Nature of Business

Nature of Business

Rhythm Pharmaceuticals, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

(In thousands, except share and per share information)

1. Nature of Business

Rhythm Pharmaceuticals, Inc., or the Company, is a late-stage biopharmaceutical company focused on the development and commercialization of therapeutics for the treatment of rare genetic disorders which are characterized by early-onset, severe obesity and an insatiable hunger or hyperphagia. The Company’s lead product candidate is setmelanotide, a potent melanocortin-4 receptor, or MC4R, agonist for the treatment of rare genetic disorders of obesity. The Company believes setmelanotide, for which it has exclusive worldwide rights, has the potential to restore dysfunctional MC4R signaling due to impaired MC4R pathway function. MC4R pathway deficiencies result in the disruption of satiety signals and energy homeostasis in the body, which, in turn, leads to intense feelings of hunger and to obesity.

The Company’s development efforts are initially focused on obesity related to several single gene-related, or monogenic, MC4R pathway deficiencies: pro-opiomelanocortin, or POMC, deficiency obesity; leptin receptor, or LEPR, deficiency obesity; Bardet-Biedl syndrome, or BBS; Alström syndrome; POMC or LEPR heterozygous deficiency obesity; steroid receptor coactivator 1, or SRC1, deficiency obesity; SH2B adapter protein 1, or SH2B1, deficiency obesity; MC4R deficiency obesity and Smith-Magenis syndrome, as well as additional disorders as part of investigator-initiated protocols. Currently, there are no effective or approved treatments for these MC4R pathway-related disorders. The Company believes that the MC4R pathway is a compelling target for treating these genetic disorders because of its critical role in regulating appetite and weight by promoting satiety and weight control, and that peptide therapeutics are uniquely suited for activating this target.

The Company has also acquired exclusive, worldwide rights from Takeda Pharmaceutical Company Limited, or Takeda, to develop and commercialize T-3525770, now RM-853. RM-853 is a potent, orally available ghrelin o-acyltransferase inhibitor currently in preclinical development.

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 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. 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 if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will realize revenue from product sales.

Corporate Reorganization

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. Prior to its organization and a corporate reorganization, the Company was part of Rhythm Pharmaceuticals, Inc., a Delaware corporation which was organized in November 2008 and which commenced active operations in 2010.

Liquidity

The Company has incurred operating losses and negative cash flows from operations since inception. As of June 30, 2020, the Company had an accumulated deficit of $390,612. The Company has primarily funded these losses through the proceeds from the sales of common and preferred stock as well as capital contributions received from the former parent company, Rhythm Holdings LLC. To date, the Company has no 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, pre-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 June 30, 2020, the Company had $228,626 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, 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 end of 2021.

Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2020

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

Basis of Presentation

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

The accompanying interim balance sheet as of June 30, 2020, the statements of operations and comprehensive loss for the three and six months ended June 30, 2020 and 2019, the statement of stockholders equity and the statement of cash flows for the six months ended June 30, 2020 and 2019 and the related footnote disclosures are unaudited. In management's opinion, the unaudited interim financial statements have been prepared on the same basis as the audited financial statements as of and for the year ended December 31, 2019 and include all adjustments, which are all normal recurring adjustments, necessary for the fair presentation of the interim financial statements. The results for the six months ended June 30, 2020 are not necessarily indicative of the results expected for the full fiscal year, any other interim periods, or any future year or period.

The accompanying unaudited condensed consolidated financial statements reflect the application of certain significant accounting policies as described below and elsewhere in these notes to the unaudited condensed consolidated financial statements. As of June 30, 2020, there have been no material changes in the Company's significant accounting policies from those that were disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

Certain amounts totaling $63 in the consolidated balance sheet as of March 31, 2020 and the consolidated statement of stockholders’ equity for the three months ended March 31, 2020, related to unrealized gains on marketable securities, have been reclassified from additional paid-in capital to accumulated other comprehensive income to conform to the current period presentation. This reclassification had no impact on the previously reported results of operations or cash flows for the three months ended March 31, 2020.

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 accruals related to research and development expenses, assumptions used to record stock-based compensation expense, 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.

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.

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 considers its chief executive officer, or CEO, as its chief operating decision maker. The Company and the CEO view the Company’s operations and manages its business in one operating segment operating exclusively in the United States.

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 at June 30, 2020 and December 31, 2019 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 June 30, 2020 and December 31, 2019, respectively.

Net Loss Per Share

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

computed by adjusting the weighted average shares outstanding for the potential dilutive effects of common stock equivalents outstanding during the period calculated in accordance with the treasury stock method. For purposes of the diluted net loss per share calculation, stock options and restricted stock units are considered to be common stock equivalents but have been excluded from the calculation of diluted net loss per share, as their effect would be anti-dilutive for all periods presented. 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:



	June 30,
	2020		2019
Stock options		4,239,682		3,700,754
Restricted stock units		204,662		—
Potential common shares		4,444,344		3,700,754

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.

Emerging Growth Company Status

The Company is an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act, or JOBS Act, and may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies. The Company may take advantage of these exemptions until the Company ceases to be an emerging growth company. The Company would cease to be an emerging growth company if it has more than $1.07 billion in annual revenue, at the end of its fiscal year when it had more than $700.0 million in market value of its stock held by non-affiliates as of the last business day of the its most recently completed second fiscal quarter (and it has been a public company for at least 12 months, and has filed one Annual Report on Form 10-K), or it issues more than $1.0 billion of non-convertible debt securities over a three-year period.

Even after the Company no longer qualifies as an emerging growth company, the Company may still qualify as a “smaller reporting company” if the market value of its common stock held by non-affiliates is below $250 million (or below $700 million if its annual revenue is less than $100 million) as of the last business day of its second fiscal quarter in any given year, which would allow the Company to continue to take advantage of certain scaled disclosure requirements.

Because the market value of the Company’s common stock held by non-affiliates exceeded $700.0 million as of June 30, 2020, the Company will have been public for more than one year and it has filed at least one Annual Report, the Company will cease to be an emerging growth company and would no longer qualify as a smaller reporting company as of December 31, 2020. As a result, beginning with the Company’s Annual Report on Form 10-K for the year ending December 31, 2020, the Company will be subject to certain requirements that apply to other public companies but did not previously apply to the Company due to its status as an emerging growth company, including the provisions of Section 404(b) of the Sarbanes-Oxley Act, which require that the Company’s independent registered public accounting firm provides an attestation report on the effectiveness of the Company’s internal control over financial reporting.

Section 107 of the Jump-Start Our Business Startups Act, the JOBS Act, provides that an emerging growth company can take advantage of the extended transition period afforded by the JOBS Act for the implementation of new or revised accounting standards. The Company elected to not take advantage of the extended transition period afforded by the JOBS Act for the implementation of new or revised accounting standards, and as a result, will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies.

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.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses-Measurement of Credit Losses on Financial Instruments, which has been subsequently amended by ASU No. 2018-19, ASU No. 2019-04, ASU No. 2019-05, ASU No. 2019-10, ASU No. 2019-11 and ASU No. 2020-03, or ASU 2016-13. The provisions of ASU 2016-13 modify the impairment model to utilize an expected loss methodology in place of the currently used incurred loss methodology and require a consideration of a broader range of reasonable and supportable information to inform credit loss estimates. As a smaller reporting company, ASU 2016-13 was effective for the Company January 1, 2023. Since the Company will cease to be an emerging growth company and a smaller reporting company as of December 31, 2020, the Company is required to adopt the standard during the fourth quarter of 2020. The Company does not expect the adoption of ASU 2016-13 to have a material impact on the Company’s financial position, results of operations and cash flows.

Effective January 1, 2019 the Company adopted FASB ASU 2016-02, Leases (Topic 842), or ASU 2016-02. ASU 2016-02 requires lessees to recognize a right-of-use, or ROU, asset and lease liability for most lease arrangements. The new standard is effective for annual reporting periods beginning after December 15, 2018. The original guidance required application on a modified retrospective basis with the earliest period presented. In August 2018, the FASB issued ASU 2018-11, Targeted Improvements to ASC 842, which included an option to not restate comparative periods in transition and elect to use the effective date of ASC 842, as the date of initial application of transition, which the Company has elected. In addition, the Company elected the package of practical expedients permitted under the transition guidance within the new standard which allowed it to carry forward the historical lease classification. As a result of the adoption of ASC 842 on January 1, 2019, the Company recorded both an operating lease right-of-use asset of $3,265 and a lease liability of $3,636. Additional information and disclosures required by this new standard are contained in Note 5, Right Of Use Asset and Lease Liability.

In December 2019, the FASB issued ASU 2019-12, Income Taxes-Simplifying the Accounting for Income Taxes, or ASU 2019-12. ASU 2019-12 eliminates certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The new guidance also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. The standard is effective for annual periods beginning after December 15, 2020 and interim periods within, with early adoption permitted. Adoption of the standard requires certain changes to be made prospectively, with some changes to be made retrospectively. The Company is currently assessing the impact of this standard on its financial condition and results of operations.

Fair Value of Financial Assets and Liabilities

6 Months Ended

Jun. 30, 2020

Fair Value of Financial Assets and Liabilities

Fair Value of Financial Assets and Liabilities

4. Fair Value of Financial Assets and Liabilities

As of June 30, 2020 and December 31, 2019, the carrying amount of cash and cash equivalents and short-term investments was $228,626 and $292,459, 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 following tables present information about the Company's financial assets 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
	June 30, 2020 using:
	Level 1		Level 2		Level 3		Total
Assets:
Cash Equivalents:
Corporate Debt Securities and Commercial Paper	$	—	$	5,748	$	—	$	5,748
U.S. Treasury Securities and Money Market Funds	$	49,594	$	—	$	—	$	49,594
Marketable Securities:
Corporate Debt Securities and Commercial Paper		—		169,535		—		169,535
Total	$	49,594	$	175,283	$	—	$	224,877


	Fair value Measurements as of
	December 31, 2019 using:
	Level 1		Level 2		Level 3		Total
Assets:
Cash Equivalents:
Corporate Debt Securities and Commercial Paper	$	—	$	8,885	$	—	$	8,885
Money Market Funds		53,014		—		—		53,014
Marketable Securities:
Corporate Debt Securities and Commercial Paper		—		230,165		—		230,165
Total	$	53,014	$	239,050	$	—	$	292,064

Marketable Securities

The following tables summarize the Company's marketable securities:


	June 30, 2020
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
Assets
Corporate debt securities and commercial paper (due within 1 year)	$	168,904	$	642	$	(11)	$	169,535
	$	168,904	$	642	$	(11)	$	169,535


	December 31, 2019
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
Assets
Corporate debt securities and commercial paper (due within 1 year)	$	230,155	$	54	$	(44)	$	230,165
	$	230,155	$	54	$	(44)	$	230,165

- 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

Right of Use Asset and Lease Liability

6 Months Ended

Jun. 30, 2020

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 5 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 June 30, 2020, the Company has not entered into any lease arrangements classified as a finance lease.

Under ASC 842, 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.

As a result of the adoption of ASC 842 on January 1, 2019, the Company recorded both an operating lease right-of-use asset of $3,265 and a lease liability of $3,636. The standard did not materially impact the consolidated statement of cash flows and had no impact on the consolidated statement of operations.

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 has 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 three and six months ended June 30, 2020 and 2019, was $138, $177, $276 and $353, respectively.

Supplemental cash flow information related to the Company’s lease for the six months ended June 30, 2020, includes cash payments of $390 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 June 30, 2020, all of which is under a non-cancellable operating lease:


	Operating Lease
Remainder of 2020	$	396
2021		802
2022		818
2023		834
2024		851
Thereafter		502
Total operating lease payments		4,203
Less: imputed interest		872
Total operating lease liability	$	3,331

Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2020

Summary of Significant Accounting Policies

Basis of Presentation

Use of Estimates

Principles of Consolidation

Off-Balance Sheet Risk and Concentrations of Credit Risk

Segment Information

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.

Net Loss Per Share



	June 30,
	2020		2019
Stock options		4,239,682		3,700,754
Restricted stock units		204,662		—
Potential common shares		4,444,344		3,700,754

Subsequent Events

Emerging Growth Company Status

Application of New or Revised Accounting Standards

Fair Value of Financial Assets and Liabilities (Tables)

6 Months Ended

Jun. 30, 2020

Fair Value of Financial Assets and Liabilities

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


	Fair value Measurements as of
	June 30, 2020 using:
	Level 1		Level 2		Level 3		Total
Assets:
Cash Equivalents:
Corporate Debt Securities and Commercial Paper	$	—	$	5,748	$	—	$	5,748
U.S. Treasury Securities and Money Market Funds	$	49,594	$	—	$	—	$	49,594
Marketable Securities:
Corporate Debt Securities and Commercial Paper		—		169,535		—		169,535
Total	$	49,594	$	175,283	$	—	$	224,877


	Fair value Measurements as of
	December 31, 2019 using:
	Level 1		Level 2		Level 3		Total
Assets:
Cash Equivalents:
Corporate Debt Securities and Commercial Paper	$	—	$	8,885	$	—	$	8,885
Money Market Funds		53,014		—		—		53,014
Marketable Securities:
Corporate Debt Securities and Commercial Paper		—		230,165		—		230,165
Total	$	53,014	$	239,050	$	—	$	292,064

Schedule of marketable securities


	June 30, 2020
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
Assets
Corporate debt securities and commercial paper (due within 1 year)	$	168,904	$	642	$	(11)	$	169,535
	$	168,904	$	642	$	(11)	$	169,535


	December 31, 2019
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
Assets
Corporate debt securities and commercial paper (due within 1 year)	$	230,155	$	54	$	(44)	$	230,165
	$	230,155	$	54	$	(44)	$	230,165

Fair Value of Financial Assets and Liabilities (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Fair Value of Financial Assets and Liabilities
Carrying amount of cash and cash equivalents and short term investments	$ 228,626	$ 292,459
Fair value of financial assets and liabilities
Marketable Securities	169,535	230,165
Fair value of assets	169,535	230,165
Corporate Debt Securities and Commercial Paper
Fair value of financial assets and liabilities
Marketable Securities	169,535	230,165
Recurring \| Estimated fair value
Fair value of financial assets and liabilities
Fair value of assets	224,877	292,064
Recurring \| Corporate Debt Securities and Commercial Paper \| Estimated fair value
Fair value of financial assets and liabilities
Cash Equivalents	5,748	8,885
Marketable Securities	169,535	230,165
Recurring \| US Treasury Securities and Money Market Funds \| Estimated fair value
Fair value of financial assets and liabilities
Cash Equivalents	49,594
Recurring \| Money Market Funds \| Estimated fair value
Fair value of financial assets and liabilities
Cash Equivalents		53,014
Recurring \| Level 1 \| Estimated fair value
Fair value of financial assets and liabilities
Fair value of assets	49,594	53,014
Recurring \| Level 1 \| US Treasury Securities and Money Market Funds \| Estimated fair value
Fair value of financial assets and liabilities
Cash Equivalents	49,594
Recurring \| Level 1 \| Money Market Funds \| Estimated fair value
Fair value of financial assets and liabilities
Cash Equivalents		53,014
Recurring \| Level 2 \| Estimated fair value
Fair value of financial assets and liabilities
Fair value of assets	175,283	239,050
Recurring \| Level 2 \| Corporate Debt Securities and Commercial Paper \| Estimated fair value
Fair value of financial assets and liabilities
Cash Equivalents	5,748	8,885
Marketable Securities	$ 169,535	$ 230,165

Right of Use Asset and Lease Liability (Details) - USD ($) $ in Thousands		3 Months Ended		6 Months Ended
	Jan. 01, 2019	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019	Dec. 31, 2019	Aug. 31, 2018
Right Of Use Asset and Lease Liability
Remaining term of operating lease (in years)				5 years
Operating lease discount rate		10.00%		10.00%
Transition relief package	true
Right-of-use asset	$ 3,265	$ 1,932		$ 1,932		$ 2,045
Operating Lease, Liability	$ 3,636	$ 3,331		$ 3,331
Lease term (in years)							6 years
Lease renewal term (in years)		5 years		5 years			5 years
Option to extend				true
Rent expense, or operating lease costs		$ 138	$ 177	$ 276	$ 353
Cash payments in the measurement of operating lease liability				$ 390

Right of Use Asset and Lease Liability - Operating Lease Maturities (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Jan. 01, 2019
Lessee, Operating Lease, Liability, Payment, Due [Abstract]
Remainder of 2020	$ 396
2021	802
2022	818
2023	834
2024	851
Thereafter	502
Total operating lease payments	4,203
Less: imputed interest	872
Total operating lease liability	$ 3,331	$ 3,636

Common Stock (Details) - USD ($) $ / shares in Units, $ in Thousands			3 Months Ended
	Jan. 06, 2020	Oct. 18, 2019	Mar. 31, 2020	Jun. 30, 2020	Dec. 31, 2019
Common Stock
Common Stock, Shares Authorized				120,000,000	120,000,000
Price per share		$ 18.50
Issuance of stock (in shares)		9,324,324
Net proceeds		$ 161,352
Underwriter option to purchase
Common Stock
Issuance of stock (in shares)		1,216,216
2017 Employee Stock Purchase Plan
Common Stock
Common Stock, Capital Shares Reserved for Future Issuance				8,605,820
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant				1,012,372
2017 Employee Stock Purchase Plan \| Equity Option
Common Stock
Common Stock, Capital Shares Reserved for Future Issuance				7,593,448
Employees stock purchase plan \| Separation Agreement \| Dr. Gottesdiener
Common Stock
Incremental compensation charge			$ 2,811
Employees stock purchase plan \| Separation Agreement \| Dr. Gottesdiener \| Minimum
Common Stock
Share-based Compensation Arrangement by Share-based Payment Award, Post-termination Exercise Period	90 days
Employees stock purchase plan \| Separation Agreement \| Dr. Gottesdiener \| Maximum
Common Stock
Share-based Compensation Arrangement by Share-based Payment Award, Post-termination Exercise Period	2 years

Summary of Significant Accounting Policies - Additional Information (Details) $ in Thousands	3 Months Ended	6 Months Ended
	Mar. 31, 2020 USD ($)	Jun. 30, 2020 item segment
Off Balance Sheet Risk and Concentrations of Credit Risk
Number of federally insured financial institutions \| item		2
Segment Information
Number of operating segments \| segment		1
Unrealized gains on marketable securities, reclassified from additional paid-in capital to accumulated other comprehensive income \| $	$ 63,000

Accrued Expenses (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Accrued Expenses
Research and development costs	$ 5,271	$ 8,059
Professional fees	1,118	1,439
Payroll related	3,091	3,655
Other	160	377
Accrued expenses	$ 9,640	$ 13,530

Related-Party Transactions (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019	Dec. 31, 2019
Accounts Payable
Related Party Transaction
Outstanding payments due to consultants	$ 228		$ 228		$ 264
Consultant
Related Party Transaction
Expenses paid to consultants	$ 916	$ 492	$ 1,776	$ 1,088

Subsequent Events (Details) - Subsequent Events - David P. Meeker, M.D., President and Chief Executive Officer - 2017 Equity Incentive Plan	Jul. 20, 2020 installment shares
Subsequent events
Number of common stock options granted \| shares	900,000
Tranche One
Subsequent events
Vesting percentage	25.00%
Tranche Two
Subsequent events
Vesting percentage	75.00%
Number of installments \| installment	12
Service period	3 months

Summary of Significant Accounting Policies - Shares Excluded For EPS (Details) - shares	6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019
Shares excluded from the computation of diluted net loss per share
Unvested shares from share-based compensation that were anti-dilutive	4,444,344	3,700,754
Employees stock purchase plan
Shares excluded from the computation of diluted net loss per share
Unvested shares from share-based compensation that were anti-dilutive	4,239,682	3,700,754
Restricted stock units
Shares excluded from the computation of diluted net loss per share
Unvested shares from share-based compensation that were anti-dilutive	204,662

Fair Value of Financial Assets and Liabilities - Marketable Securities (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Fair Value of Financial Assets and Liabilities
Amortized Cost	$ 168,904	$ 230,155
Gross Unrealized Gains	642	54
Gross Unrealized Losses	(11)	(44)
Fair Value	169,535	230,165
Corporate Debt Securities and Commercial Paper
Fair Value of Financial Assets and Liabilities
Amortized Cost	168,904	230,155
Gross Unrealized Gains	642	54
Gross Unrealized Losses	(11)	(44)
Fair Value	169,535	230,165
Estimated fair value \| Recurring \| Corporate Debt Securities and Commercial Paper
Fair Value of Financial Assets and Liabilities
Fair Value	169,535	230,165
Level 2 \| Estimated fair value \| Recurring \| Corporate Debt Securities and Commercial Paper
Fair Value of Financial Assets and Liabilities
Fair Value	$ 169,535	$ 230,165