0001558370-22-006790 | 10-Q | XBRL Viewer | Rhythm Pharmaceuticals INC

Print Document View Excel Document

Document and Entity Information - shares	3 Months Ended
Document and Entity Information - shares	Mar. 31, 2022	Apr. 27, 2022
Document and Entity Information
Document Type	10-Q
Document Quarterly Report	true
Document Transition Report	false
Document Period End Date	Mar. 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 Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		50,393,731
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2022
Document Fiscal Period Focus	Q1
Entity Central Index Key	0001649904
Amendment Flag	false

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Mar. 31, 2022	Dec. 31, 2021
Current assets:
Cash and cash equivalents	$ 78,537	$ 59,248
Short-term Investments	162,427	235,607
Accounts receivable	862	1,025
Prepaid expenses and other current assets	11,623	12,507
Total current assets	253,449	308,387
Property and equipment, net	2,722	2,813
Right-of-use asset	1,442	1,522
Intangible assets, net	8,527	4,658
Restricted cash	328	328
Other long-term assets	18,356	11,815
Total assets	284,824	329,523
Current liabilities:
Accounts payable	12,010	5,737
Accrued expenses and other current liabilities	25,199	30,084
Contract liability	9,440	7,000
Lease liability	625	606
Total current liabilities	47,274	43,427
Long-term liabilities:
Lease liability	1,781	1,945
Total liabilities	49,055	45,372
Stockholders' equity:
Preferred Stock, $0.001 par value: 10,000,000 shares authorized; no shares issued and outstanding at March 31, 2022 and December 31, 2021
Common stock, $0.001 par value: 120,000,000 shares authorized; 50,393,731 and 50,283,574 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively	50	50
Additional paid-in capital	818,051	813,041
Accumulated other comprehensive loss	(629)	(1)
Accumulated deficit	(581,703)	(528,939)
Total stockholders' equity	235,769	284,151
Total liabilities and stockholders' equity	$ 284,824	$ 329,523

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Mar. 31, 2022	Dec. 31, 2021
CONDENSED 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	50,393,731	50,283,574
Common stock, outstanding	50,393,731	50,283,574

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (INCOME) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (INCOME)
Product revenue, net	$ 1,498	$ 35
Costs and expenses:
Cost of sales	230	4
Research and development	32,510	19,911
Selling, general, and administrative	21,449	14,518
Total costs and expenses	54,189	34,433
Loss from operations	(52,691)	(34,398)
Other income:
Other income		100,000
Interest income, net	(73)	154
Total other income, net	(73)	100,154
(Loss) income before taxes	(52,764)	65,756
Provision for income taxes	0	22,006
Net (loss) income	$ (52,764)	$ 43,750
Net (loss) income per share, Basic (in dollars per share)	$ (1.05)	$ 0.92
Net (loss) income per share, Diluted (in dollars per share)	$ (1.05)	$ 0.90
Weighted-average common shares outstanding, Basic (in shares)	50,326,627	47,638,565
Weighted average common shares outstanding, Diluted (in shares)	50,326,627	48,501,697
Other comprehensive (loss) income:
Net (loss) income	$ (52,764)	$ 43,750
Unrealized loss on marketable securities	(628)	(107)
Comprehensive (loss) income	$ (53,392)	$ 43,643

CONDENSED 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, 2020	$ 44	$ 625,762	$ 49	$ (459,327)	$ 166,528
Beginning balance (in shares) at Dec. 31, 2020	44,235,903
Increase (Decrease) in Stockholders' Equity
Stock-based compensation expense		5,191			5,191
Issuance of common stock in connection with ESPP		388			388
Issuance of common stock in connection with ESPP (in shares)	17,000
Issuance of common stock in connection with exercise of stock options and vesting of restricted stock units		3,466			3,466
Issuance of common stock in connection with exercise of stock options and vesting of restricted stock units (in shares)	198,855
Unrealized loss on marketable securities			(107)		(107)
Issuance of common stock upon completion of public offering, net of offering costs	$ 6	161,725			161,731
Issuance of common stock upon completion of public offering, net of offering costs (in shares)	5,750,000
Net (loss) income				43,750	43,750
Ending balance at Mar. 31, 2021	$ 50	796,532	(58)	(415,577)	380,947
Ending balance (in shares) at Mar. 31, 2021	50,201,758
Beginning balance at Dec. 31, 2021	$ 50	813,041	(1)	(528,939)	284,151
Beginning balance (in shares) at Dec. 31, 2021	50,283,574
Increase (Decrease) in Stockholders' Equity
Stock-based compensation expense		4,611			4,611
Issuance of common stock in connection with ESPP		399			399
Issuance of common stock in connection with ESPP (in shares)	61,518
Issuance of common stock in connection with exercise of stock options and vesting of restricted stock units (in shares)	48,639
Unrealized loss on marketable securities			(628)		(628)
Net (loss) income				(52,764)	(52,764)
Ending balance at Mar. 31, 2022	$ 50	$ 818,051	$ (629)	$ (581,703)	$ 235,769
Ending balance (in shares) at Mar. 31, 2022	50,393,731

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Operating activities
Net (loss) income	$ (52,764)	$ 43,750
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense	4,611	5,191
Gain on sale of priority review voucher		(100,000)
Deferred tax provision		22,006
Depreciation and amortization	350	201
Non-cash rent expense	(65)	(61)
Changes in operating assets and liabilities:
Prepaid expenses and other current assets	950	1,651
Other long-term assets	(6,661)
Accounts payable, accrued expenses and other current liabilities	(53)	(6,269)
Net cash used in operating activities	(53,632)	(33,531)
Investing activities
Purchases of short-term investments	(39,479)	(297,542)
Maturities of short-term investments	112,128	51,842
Proceeds from sale of priority review voucher		100,000
Purchases of property and equipment	(127)	(12)
Net cash provided by (used in) investing activities	72,522	(145,712)
Financing activities
Net proceeds from issuance of common stock		161,731
Proceeds from the exercise of stock options		3,466
Proceeds from issuance of common stock from ESPP	399	388
Net cash provided by financing activities	399	165,585
Net increase (decrease) in cash, cash equivalents and restricted cash	19,289	(13,658)
Cash, cash equivalents and restricted cash at beginning of period	59,576	101,257
Cash, cash equivalents and restricted cash at end of period	$ 78,865	$ 87,599

Nature of Business

3 Months Ended

Mar. 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 committed to transforming the treatment paradigm for people living with rare genetic diseases of obesity, which are characterized by early-onset, severe obesity and an insatiable hunger or hyperphagia. Rhythm’s precision medicine, IMCIVREE (setmelanotide), for which for which we have exclusive worldwide rights, has the potential to restore dysfunctional melanocortin 4 receptor (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. IMCIVREE was approved in November 2020 by the U.S. Food and Drug Administration (FDA) for chronic weight management in adult and pediatric patients 6 years of age and older with obesity due to proopiomelanocrotin (POMC), proprotein convertase subtilisin/kexin type 1 (PCSK1) or leptin receptor (LEPR) deficiency confirmed by genetic testing and in July and September 2021, respectively, by the European Commission (EC) and Great Britain’s Medicines & Healthcare Products Regulatory Agency (MHRA) for the treatment of obesity and the control of hunger associated with genetically confirmed loss-of-function biallelic POMC, including PCSK1, deficiency or biallelic LEPR deficiency in adults and children 6 years of age and above. IMCIVREE is the first-ever FDA-approved and EC- and MHRA-authorized therapy for patients with these rare genetic diseases of obesity. The Company’s supplemental New Drug Application (sNDA) to the FDA is assigned a Prescription Drug User Fee Act (PDUFA) goal date of June 16, 2022, for the treatment of obesity and control of hunger in adult and pediatric patients six years of age and older with Bardet-Biedl Syndrome (BBS) or Alström syndrome. A Type II variation application to the European Medicines Agency seeking regulatory approval and authorization for setmelanotide to treat obesity and control of hunger in adult and pediatric patients 6 years of age and older with BBS also is under review. In addition, we are advancing a broad clinical development program for setmelanotide in patients with additional rare genetic diseases of obesity in an effort to expand the approved indications in the United States and Europe.

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, France, Italy, the Netherlands and Canada.

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

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 three months ended March 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 March 31, 2022, the Company had an accumulated deficit of $581,703. The Company has primarily funded these losses through the proceeds from the sales of common and preferred stock, asset sales 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, 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 March 31, 2022, the Company had $240,964 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, 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 into at least the fourth quarter of 2023.

Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2022

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 condensed consolidated balance sheet as of March 31, 2022, the condensed consolidated statements of operations and comprehensive (loss) income for the three months ended March 31, 2022 and 2021, the condensed consolidated statements of stockholders’ equity for the three months ended March 31, 2022 and 2021 and the condensed consolidated statements of cash flows for the three months ended March 31, 2022 and 2021 and the related footnote disclosures are unaudited. In management's opinion, the unadited condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements as of and for the year ended December 31, 2021 and include all adjustments, which are all normal recurring adjustments, necessary for the fair presentation of the interim financial statements. The results for the three months ended March 31, 2022 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 March 31, 2022, 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, 2021.

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, 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.

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. At March 31, 2022, substantially 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 the manufacture 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.

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.

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 standard payment terms that generally require payment within 45 days. The Company analyzes amounts that are past due for collectability, and periodically evaluates the creditworthiness of its customers. At March 31, 2022, the Company determined an allowance for doubtful account was not required based upon our review of contractual payments and our customers’ 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

Subsequent to its regulatory approval, the Company began to sell IMCIVREE in the U.S. in March 2021 and in France in March 2022. The product is distributed through an exclusive third-party logistics, or 3PL, distribution agent that does not take title to the product. Once the product is delivered to the Company’s exclusive specialty pharmacy provider, our sole customer in the U.S., the customer, or wholesaler takes title to the product. The wholesaler then distributes the product to health care providers and patients. In our exclusive distribution agreement with the 3PL company, the Company acts as principal because we retain control of the product. The Company generally does not offer returns of product sold to the customer.

Revenue from product sales are 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 customer 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 condensed 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 forty-five days, 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. 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 condensed consolidated balance sheet. 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 our U.S. customer 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 customer 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.

During the three months ended March 31, 2022 and 2021, we recorded product revenue, net, of $1,498 and $35, respectively. The table that summarizes balances and activity in each of the product revenue allowance and reserve categories has not been included for the three months ended March 31, 2022 and 2021, due to the immateriality of the revenue recognized during the periods.

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 proopiomelanocortin (POMC), proprotein convertase subtilisin/kexin type 1 (PCSK1) or leptin receptor (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 five independent sub-studies in patients with obesity due to a heterozygous variant of POMC/PCSK1 or LEPR; certain variants of the SRC1 gene, certain variants of the SH2B1 gene, or PCSK1 N221D deletions within the MC4R pathway. According to the terms of the RareStone License, RareStone made an upfront payment to Rhythm of $7,000 and issued 1,077,586

ordinary shares in the Company. Rhythm will be eligible to receive development and commercialization milestones of up to $62,500, as well as tiered royalty payments on annual net sales of IMCIVREE. As of March 31, 2022, the Company received the upfront payment of $7,000, however the Company has not fulfilled its obligations related to the transfer of know how related to the license, and as such, the upfront payment was recorded as a contract liability on the consolidated balance sheets as of March 31, 2022 and December 31, 2021, respectively. The RareStone equity was issued to Rhythm in February 2022, and recorded at its estimated fair value of $2,440 in other long-term assets and as a component of the contract liability on the condensed consolidated balance sheet at March 31, 2022. The valuation of the RareStone equity is based upon a preliminary valuation and our estimates and assumptions related to this equity valuation are subject to change as we complete our procedures with respect to the valuation.

Cost of Product Sales

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. At March 31, 2022, the Company had $108 of inventory recorded as a component of prepaid and other current assets on the condensed consolidated balance sheet.

Cost of product sales will consist 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.

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

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 three months ended March 31, 2022 and 2021, respectively.

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 March 31, 2022 and December 31, 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 and other current liabilities approximate their fair values due to their short-term maturities at March 31, 2022 and December 31, 2021, respectively.

Net Income (Loss) Per Share

Basic net income (loss) per share is computed by dividing the net income (loss) by the weighted-average number of common shares outstanding during the period, without consideration of potential dilutive securities. Diluted net income (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 income (loss) per share calculation, 781,404 stock options and 82,591 restricted stock units were considered to be common stock equivalents for the three months ended March 31, 2021. For the three months ended March 31, 2022, the common stock equivalents have been excluded from the calculation of diluted net income (loss) per share, as their effect would be anti-dilutive for the period presented due to the net loss incurred.

The following table includes the potential common shares that were excluded from the computation of diluted net loss per share as their effect would have been anti-dilutive for the periods indicated:


	Three Months Ended
	March 31,
	2022		2021
Stock options		7,248,111		3,641,903
Restricted stock units		784,041		97,631
Performance stock units		935,885		—
Potential common shares		8,968,037		3,739,534

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.

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 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. We have adopted ASU 2019-12 as of January 1, 2021 and the adoption of this standard did not have a material impact on the Company’s financial position, results of operations and cash flows.

Accrued Expenses and Other Current Liabilities

3 Months Ended

Mar. 31, 2022

Accrued Expenses and Other Current Liabilities

Accrued Expenses and Other Current Liabilities

3. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following:


	March 31,		December 31,
	2022		2021
Research and development costs	$	12,164	$	17,480
Professional fees		3,494		2,163
Payroll related		3,131		8,371
Royalties		4,866		791
Other		1,544		1,279
Accrued expenses and other current liabilities	$	25,199	$	30,084

Fair Value of Financial Assets

3 Months Ended

Mar. 31, 2022

Fair Value of Financial Assets

Fair Value of Financial Assets

4. Fair Value of Financial Assets

As of March 31, 2022 and December 31, 2021, the carrying amount of cash and cash equivalents and short-term investments was $240,964 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 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
	March 31, 2022 using:
	Level 1		Level 2		Level 3		Total
Assets:
Cash Equivalents:
Commercial Paper	$	—	$	49,477	$	—	$	49,477
Money Market Funds		17,505		—		—		17,505
Marketable Securities:
Corporate Debt Securities and Commercial Paper		—		162,427		—		162,427
Other Long-term Assets:
RareStone Common Stock		—		—		2,440		2,440
Total	$	17,505	$	211,904	$	2,440	$	231,849


	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

The estimated fair value of the shares of RareStone equity was determined using Level 3 inputs. As of March 31, 2022, our RareStone equity represents our only Level 3 assets and liabilities carried at fair market value. The fair value measurement of the RareStone equity is sensitive to changes in the unobservable inputs used to value the financial instrument. Changes in the inputs could result in changes to the fair value of each financial instrument.

Our RareStone equity was valued at $2,440 at March 31, 2022. The Company determined the estimated fair values using a discounted cash flow model under the income approach and an option pricing allocation model for the period end March 31, 2022.

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.

Changes in our level 3 secruities for the three months ended March 31, 2022 and 2021 are as follows:


	Three months ended
	March 31,
	2022		2021
Beginning aggregate estimated fair value of Level 3 securities	$	—	$	—
Initial recording of RareStone equity		2,440		—
Ending aggregate estimated fair value of Level 3 securities	$	2,440	$	—

Marketable Securities

The following tables summarize the Company's marketable securities:


	March 31, 2022
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
Assets
Corporate debt securities and commercial paper (due within 1 year)	$	163,056	$	—	$	(629)	$	162,427
	$	163,056	$	—	$	(629)	$	162,427


	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

Right of Use Asset and Lease Liability

3 Months Ended

Mar. 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 3.3 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 March 31, 2022, the Company has not entered into any lease arrangements classified as a finance lease.

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. The Company has not included the five-year renewal option to extend the lease in its measurement of the right-of-use asset or lease liability.

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


	Operating Lease
2022	$	615
2023		834
2024		851
2025		502
Thereafter		—
Total operating lease payments		2,802
Less: imputed interest		396
Total operating lease liability	$	2,406

Intangible Assets, Net

3 Months Ended

Mar. 31, 2022

Intangible Assets, Net

Intangible Assets, Net

6. Intangible Assets, Net

As of March 31, 2022, the Company’s finite-lived intangible assets, which totaled $8,527 resulted from the capitalization of certain milestone payments made to Ipsen Pharma, S.A.S., or Ipsen, in accordance with the terms of the Company’s license agreement with Ipsen, in connection with the Company’s first commercial sale of IMCIVREE in the U.S. in March 2021 and in France in March 2022.

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


2022	$	641
2023		855
2024		855
2025		855
2026		855
Thereafter		4,466
Total	$	8,527

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 $130 for the three months ended March 31, 2022. Amortization expense is included in cost of sales on the consolidated statements of operations and comprehensive loss.

Income Taxes

3 Months Ended

Mar. 31, 2022

Income Taxes

Income Taxes

7. Income Taxes

The Company did not record a tax provision for the three month period ended March 31, 2022 as the Company generated sufficient tax losses during the period. The Company recorded an income tax provision of $22,006 for the three month period ended March 31, 2021, primarily related to the sale of the PRV, offset by a tax benefit from ordinary losses generated by the Company during the period. The Company expects to have sufficient tax losses in the current year to offset income and thus no current year liability is expected. The Company expects to maintain a full valuation allowance against its net deferred tax assets for the year.

- 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 http://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 http://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 http://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 http://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 http://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 http://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 http://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 http://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 http://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690

+ Details

Common Stock

3 Months Ended

Mar. 31, 2022

Common Stock.

Common Stock

8. Common Stock

As of March 31, 2022, an aggregate of 13,361,315 shares of common stock were reserved for future issuance under the Company’s stock plans, including outstanding stock options, restricted stock units, and performance stock units

that have been issued totaling 8,968,037 and 1,404,259 shares are available for future grants under the Company’s 2017 Employee Stock Purchase Plan.

On February 9, 2022, the Company’s board of directors adopted the Rhythm Pharmaceuticals, Inc. 2022 Employment Inducement Plan (the “Inducement Plan”) without stockholder approval pursuant to Rule 5635(c)(4) of the Nasdaq Stock Market LLC listing rules (“Rule 5635(c)(4)”). In accordance with Rule 5635(c)(4), awards under the Inducement Plan may only be made to a newly hired employee who has not previously been a member of the Company’s board of directors, or an employee who is being rehired following a bona fide period of non-employment by the Company or a subsidiary, as a material inducement to the employee’s entering into employment with the Company or its subsidiary. An aggregate of 1,000,000 shares of the Company’s common stock have been reserved for issuance under the Inducement Plan. The Company will continue to grant awards under the 2017 Plan pursuant to the terms thereof.

The exercise price of stock options granted under the 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 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 Inducement Plan expire no more than 10 years from the date of grant. As of March 31, 2022, no stock option awards have been issued under the Inducement Plan. As of March 31, 2022, no restricted stock unit awards have been granted under the Inducement Plan. As of March 31, 2022, 1,000,000 shares of common stock are available for future grant under the Inducement Plan.

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 $100,000 in "at-the-market" offerings, or the ATM. 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. As of March 31, 2022, there was $100,000 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 $161,731 in net proceeds after deducting underwriting discounts, commissions and 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://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
-Paragraph 13
-Subparagraph (b)
-URI http://asc.fasb.org/extlink&oid=123467817&loc=SL123496158-112644

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
-Paragraph 13
-URI http://asc.fasb.org/extlink&oid=123467817&loc=SL123496158-112644

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
-Paragraph 14
-Subparagraph (c)
-URI http://asc.fasb.org/extlink&oid=123467817&loc=SL123496171-112644

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
-Paragraph 14
-Subparagraph (b)
-URI http://asc.fasb.org/extlink&oid=123467817&loc=SL123496171-112644

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SX 210.3-04)
-URI http://asc.fasb.org/extlink&oid=120397183&loc=d3e187085-122770

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
-Paragraph 18
-Subparagraph (d)
-URI http://asc.fasb.org/extlink&oid=123467817&loc=SL123496189-112644

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
-Paragraph 13
-Subparagraph (g)
-URI http://asc.fasb.org/extlink&oid=123467817&loc=SL123496158-112644

Reference 8: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-URI http://asc.fasb.org/topic&trid=2208762

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 http://asc.fasb.org/extlink&oid=123467817&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
-Subparagraph (h)
-URI http://asc.fasb.org/extlink&oid=123467817&loc=SL123496158-112644

Reference 11: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
-Paragraph 14
-Subparagraph (a)
-URI http://asc.fasb.org/extlink&oid=123467817&loc=SL123496171-112644

Reference 12: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
-Paragraph 18
-Subparagraph (b)
-URI http://asc.fasb.org/extlink&oid=123467817&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 http://asc.fasb.org/extlink&oid=123467817&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 http://asc.fasb.org/extlink&oid=123467817&loc=SL123496158-112644

Reference 15: 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(e)(1))
-URI http://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690

+ Details

Related-Party Transactions

3 Months Ended

Mar. 31, 2022

Related-Party Transactions

Related-Party Transactions

9. Related-Party Transactions

Expenses paid directly to consultants and vendors considered to be related parties amounted to $480 and $636 for the three months ended March 31, 2022 and 2021, respectively. Outstanding payments due to these related parties as of March 31, 2022 and December 31, 2021 were $45 and $50, respectively, and were included within accounts payable on the balance sheet.

Summary of Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2022

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

Accounts Receivable, net

Revenue Recognition

Product Revenue, net

Reserves for Variable Consideration

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

License Agreements

RareStone Group Ltd.

Cost of Product Sales

Intangible Assets, Net

Impairment of Long-Lived Assets

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 Income (Loss) Per Share

The following table includes the potential common shares that were excluded from the computation of diluted net loss per share as their effect would have been anti-dilutive for the periods indicated:


	Three Months Ended
	March 31,
	2022		2021
Stock options		7,248,111		3,641,903
Restricted stock units		784,041		97,631
Performance stock units		935,885		—
Potential common shares		8,968,037		3,739,534

Subsequent Events

Application of New or Revised Accounting Standards

Summary of Significant Accounting Policies (Tables)

3 Months Ended

Mar. 31, 2022

Summary of Significant Accounting Policies

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


	Three Months Ended
	March 31,
	2022		2021
Stock options		7,248,111		3,641,903
Restricted stock units		784,041		97,631
Performance stock units		935,885		—
Potential common shares		8,968,037		3,739,534

Accrued Expenses and Other Current Liabilities (Tables)

3 Months Ended

Mar. 31, 2022

Accrued Expenses and Other Current Liabilities

Schedule of accrued expenses


	March 31,		December 31,
	2022		2021
Research and development costs	$	12,164	$	17,480
Professional fees		3,494		2,163
Payroll related		3,131		8,371
Royalties		4,866		791
Other		1,544		1,279
Accrued expenses and other current liabilities	$	25,199	$	30,084

Fair Value of Financial Assets (Tables)

3 Months Ended

Mar. 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
	March 31, 2022 using:
	Level 1		Level 2		Level 3		Total
Assets:
Cash Equivalents:
Commercial Paper	$	—	$	49,477	$	—	$	49,477
Money Market Funds		17,505		—		—		17,505
Marketable Securities:
Corporate Debt Securities and Commercial Paper		—		162,427		—		162,427
Other Long-term Assets:
RareStone Common Stock		—		—		2,440		2,440
Total	$	17,505	$	211,904	$	2,440	$	231,849


	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 changes in Level 3 securities


	Three months ended
	March 31,
	2022		2021
Beginning aggregate estimated fair value of Level 3 securities	$	—	$	—
Initial recording of RareStone equity		2,440		—
Ending aggregate estimated fair value of Level 3 securities	$	2,440	$	—

Schedule of marketable securities


	March 31, 2022
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
Assets
Corporate debt securities and commercial paper (due within 1 year)	$	163,056	$	—	$	(629)	$	162,427
	$	163,056	$	—	$	(629)	$	162,427


	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

Right of Use Asset and Lease Liability (Tables)

3 Months Ended

Mar. 31, 2022

Right Of Use Asset and Lease Liability

Schedule of operating lease maturities


	Operating Lease
2022	$	615
2023		834
2024		851
2025		502
Thereafter		—
Total operating lease payments		2,802
Less: imputed interest		396
Total operating lease liability	$	2,406

Intangible Assets, Net (Tables)

3 Months Ended

Mar. 31, 2022

Intangible Assets, Net

Schedule of finite-lived intangible assets


2022	$	641
2023		855
2024		855
2025		855
2026		855
Thereafter		4,466
Total	$	8,527

Nature of Business (Details) - USD ($) $ in Thousands	Mar. 31, 2022	Dec. 31, 2021
Nature of Business
Accumulated deficit	$ 581,703	$ 528,939
Carrying amount of cash and cash equivalents and short term investments	$ 240,964	$ 294,855

- Definition

The cumulative amount of the reporting entity's undistributed earnings or deficit.

+ References + Details

Summary of Significant Accounting Policies (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2022 USD ($) Institution segment	Mar. 31, 2021 USD ($)
Off Balance Sheet Risk and Concentrations of Credit Risk
Number of federally insured financial institutions \| Institution	2
Segment Information
Number of operating segments \| segment	1
Number of reporting segments \| segment	1
Revenue Recognition
Payment terms	45 days
Product revenue, net	$ 1,498	$ 35
Impairment of Long-Lived Assets
Tangible asset impairment charges	0	$ 0
Prepaid and other current assets
Inventory
Inventory	$ 108

Summary of Significant Accounting Policies - License Agreements (Details) - Rare Stone Group Ltd. - USD ($) $ in Thousands	1 Months Ended
	Dec. 31, 2021	Feb. 28, 2022
Significant Agreements
Upfront payment	$ 7,000
Equity recorded at fair value		$ 2,440
Aggregate payment upon achievement of development and commercial milestones	$ 62,500
Shares issued for license agreement (in shares)	1,077,586

Summary of Significant Accounting Policies - Shares Excluded For EPS (Details) - shares	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Shares excluded from the computation of diluted net loss per share
Common stock equivalents excluded from the computation of diluted net (income) loss per share due to their anti-dilutive effect (in shares)	50,326,627	48,501,697
Shares excluded from the computation of diluted net loss per share	8,968,037	3,739,534
Stock options
Shares excluded from the computation of diluted net loss per share
Common stock equivalents excluded from the computation of diluted net (income) loss per share due to their anti-dilutive effect (in shares)		781,404
Shares excluded from the computation of diluted net loss per share	7,248,111	3,641,903
Restricted stock units
Shares excluded from the computation of diluted net loss per share
Common stock equivalents excluded from the computation of diluted net (income) loss per share due to their anti-dilutive effect (in shares)		82,591
Shares excluded from the computation of diluted net loss per share	784,041	97,631
Performance stock units
Shares excluded from the computation of diluted net loss per share
Shares excluded from the computation of diluted net loss per share	935,885

Accrued Expenses and Other Current Liabilities (Details) - USD ($) $ in Thousands	Mar. 31, 2022	Dec. 31, 2021
Accrued Expenses and Other Current Liabilities
Research and development costs	$ 12,164	$ 17,480
Professional fees	3,494	2,163
Payroll related	3,131	8,371
Royalties	4,866	791
Other	1,544	1,279
Accrued expenses and other current liabilities	$ 25,199	$ 30,084

Fair Value of Financial Assets (Details) - USD ($) $ in Thousands	Mar. 31, 2022	Dec. 31, 2021
Fair Value of Financial Assets and Liabilities
Carrying amount of cash and cash equivalents and short term investments	$ 240,964	$ 294,855
Fair value of financial assets and liabilities
Marketable Securities	162,427	235,607
Corporate Debt Securities and Commercial Paper
Fair value of financial assets and liabilities
Marketable Securities	162,427	235,607
Recurring \| Estimated fair value
Fair value of financial assets and liabilities
Fair value of assets	231,849	283,904
Recurring \| Commercial Paper \| Estimated fair value
Fair value of financial assets and liabilities
Cash Equivalents	49,477
Recurring \| Corporate Debt Securities and Commercial Paper \| Estimated fair value
Fair value of financial assets and liabilities
Marketable Securities	162,427	235,607
Recurring \| Money Market Funds \| Estimated fair value
Fair value of financial assets and liabilities
Cash Equivalents	17,505	48,297
Recurring \| RareStone Common Stock \| Estimated fair value
Fair value of financial assets and liabilities
Other Long-term Assets	2,440
Recurring \| Level 1 \| Estimated fair value
Fair value of financial assets and liabilities
Fair value of assets	17,505	48,297
Recurring \| Level 1 \| Money Market Funds \| Estimated fair value
Fair value of financial assets and liabilities
Cash Equivalents	17,505	48,297
Recurring \| Level 2 \| Estimated fair value
Fair value of financial assets and liabilities
Fair value of assets	211,904	235,607
Recurring \| Level 2 \| Commercial Paper \| Estimated fair value
Fair value of financial assets and liabilities
Cash Equivalents	49,477
Recurring \| Level 2 \| Corporate Debt Securities and Commercial Paper \| Estimated fair value
Fair value of financial assets and liabilities
Marketable Securities	162,427	$ 235,607
Recurring \| Level 3 \| Estimated fair value
Fair value of financial assets and liabilities
Fair value of assets	2,440
Recurring \| Level 3 \| RareStone Common Stock \| Estimated fair value
Fair value of financial assets and liabilities
Other Long-term Assets	$ 2,440

Fair Value of Financial Assets - Changes in Level 3 Securities (Details) - Level 3 $ in Thousands	3 Months Ended
	Mar. 31, 2022 USD ($)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Initial recording of RareStone equity	$ 2,440
Ending aggregate estimated fair value	$ 2,440

Fair Value of Financial Assets - Marketable Securities (Details) - USD ($) $ in Thousands	Mar. 31, 2022	Dec. 31, 2021
Fair Value of Financial Assets and Liabilities
Amortized Cost	$ 163,056	$ 235,608
Gross Unrealized Gains		50
Gross Unrealized Losses	(629)	(51)
Fair Value	162,427	235,607
Corporate Debt Securities and Commercial Paper
Fair Value of Financial Assets and Liabilities
Amortized Cost	163,056	235,608
Gross Unrealized Gains		50
Gross Unrealized Losses	(629)	(51)
Fair Value	$ 162,427	$ 235,607

Right of Use Asset and Lease Liability (Details)	3 Months Ended
Right of Use Asset and Lease Liability (Details)	Mar. 31, 2022
Right Of Use Asset and Lease Liability
Remaining term of operating lease (in years)	3 years 3 months 18 days
Operating lease discount rate	10.00%
Lease term (in years)	6 years
Lease renewal term (in years)	5 years
Option to extend	true

Right of Use Asset and Lease Liability - Operating Lease Maturities (Details) $ in Thousands	Mar. 31, 2022 USD ($)
Right Of Use Asset and Lease Liability
2022	$ 615
2023	834
2024	851
2025	502
Total operating lease payments	2,802
Less: imputed interest	396
Total operating lease liability	$ 2,406

Intangible Assets, Net (Details) - USD ($) $ in Thousands	3 Months Ended
Intangible Assets, Net (Details) - USD ($) $ in Thousands	Mar. 31, 2022	Dec. 31, 2021
Finite-Lived Intangible Assets, Net, Amortization Expense, Fiscal Year Maturity [Abstract]
2022	$ 641
2023	855
2024	855
2025	855
2026	855
Thereafter	4,466
Total acquired lease intangible assets, net	$ 8,527	$ 4,658
Amortization period	11 years
Amortization of Intangible Assets	$ 130

Income Taxes (Details) - USD ($) $ in Thousands	3 Months Ended
Income Taxes (Details) - USD ($) $ in Thousands	Mar. 31, 2022	Mar. 31, 2021
Income Taxes
Income taxes	$ 0	$ 22,006

- Definition

Amount of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations.

+ References + Details

Common Stock (Details) - USD ($) $ / shares in Units, $ in Thousands				3 Months Ended
	Feb. 09, 2022	Nov. 02, 2021	Feb. 09, 2021	Mar. 31, 2022	Mar. 31, 2021
Common Stock
Issuance of stock (in shares)			5,750,000
Price per share			$ 30.00
Net proceeds from issuance of common stock			$ 161,731		$ 161,731
At-the-market offerings
Common Stock
Aggregate proceeds				$ 100,000
Underwriter option to purchase
Common Stock
Additional shares			750,000
Maximum \| At-the-market offerings
Common Stock
Aggregate proceeds		$ 100,000
2017 Employee Stock Purchase Plan
Common Stock
Common stock reserved for issuance				13,361,315
Shares available for future grant				1,404,259
2017 Employee Stock Purchase Plan \| Equity Option
Common Stock
Common stock reserved for issuance				8,968,037
2022 Employment Inducement Plan
Common Stock
Common stock reserved for issuance	1,000,000
Vesting period of stock option awards	4 years
Expiration period	10 years
Shares available for future grant				1,000,000
2022 Employment Inducement Plan \| Stock options
Common Stock
Issuance of stock (in shares)				0
2022 Employment Inducement Plan \| Restricted stock units
Common Stock
Issuance of stock (in shares)				0

Related-Party Transactions (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Dec. 31, 2021
Accounts Payable
Related Party Transaction
Outstanding payments due to consultants	$ 45		$ 50
Consultant
Related Party Transaction
Expenses paid to consultants	$ 480	$ 636

- 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 http://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 http://asc.fasb.org/extlink&oid=124359900&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 http://asc.fasb.org/extlink&oid=124359900&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 http://asc.fasb.org/extlink&oid=120400017&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 http://asc.fasb.org/extlink&oid=124359900&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 http://asc.fasb.org/extlink&oid=124359900&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 http://asc.fasb.org/extlink&oid=124359900&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 http://asc.fasb.org/extlink&oid=124359900&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 http://asc.fasb.org/extlink&oid=120398452&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 http://asc.fasb.org/extlink&oid=6457730&loc=d3e39549-107864

+ Details