Rhythm Pharmaceuticals, Inc 10-Q for FY2023 Q3

Rhythm Pharmaceuticals, Inc. (RYTM)

10-Q 2023-11-08 For: 2023-09-30

Added on April 08, 2026

About this 10-Q

Rhythm Pharmaceuticals, Inc filed this 10-Q on November 8, 2023, covering the quarter ended September 30, 2023 (FY2023 Q3).

Headline figures

Quarter ended September 30, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $22.5M; up 425.3% from $4.28M a year earlier
Net loss: $44.16M; compared with a net loss of $40.86M a year earlier
Diluted EPS: -$0.76; compared with -$0.79 a year earlier

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


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


Large accelerated filer ☐	Accelerated filer ☐

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


		Page No.
PART I	FINANCIAL INFORMATION

	Item 1. Condensed Consolidated Financial Statements (Unaudited)	3

	Condensed Consolidated Balance Sheets	3

	Condensed Consolidated Statements of Operations and Comprehensive Loss	4


	Condensed Consolidated Statements of Stockholders’ Equity	5


	Condensed Consolidated Statements of Cash Flows	6

	Notes to Unaudited Condensed Consolidated Financial Statements	7

	Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	22

	Item 3. Quantitative and Qualitative Disclosures About Market Risk	36

	Item 4. Controls and Procedures	36

PART II	OTHER INFORMATION

	Item 1. Legal Proceedings	37

	Item 1A. Risk Factors	37

	Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities	94

	Item 3. Defaults Upon Senior Securities	94

	Item 4. Mine Safety Disclosure	94

	Item 5. Other Information	94

	Item 6. Exhibits	95

SIGNATURES		97


	September 30,		December 31,
	2023		2022

Assets
Current assets:
Cash and cash equivalents	$	64,593	$	127,677
Short-term investments		234,667		205,611
Accounts receivable, net		14,541		6,224
Inventory		7,762		2,917
Prepaid expenses and other current assets		7,638		11,807
Total current assets		329,201		354,236
Property and equipment, net		1,545		2,197
Right-of-use asset		888		1,182
Intangible assets, net		7,242		7,883
Restricted cash		328		328
Other long-term assets		14,995		16,655
Total assets	$	354,199	$	382,481
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	3,839	$	4,797
Accrued expenses and other current liabilities		44,271		32,894
Deferred revenue		1,286		1,434
Lease liability		748		684
Total current liabilities		50,144		39,809
Long-term liabilities:
Deferred royalty obligation		104,699		75,810
Lease liability		692		1,260
Derivative liability		1,190		1,340
Total liabilities		156,725		118,219
Stockholders’ equity:
Preferred Stock, $0.001 par value: 10,000,000 shares authorized; no shares issued and outstanding at September 30, 2023 and December 31, 2022		—		—
Common stock, $0.001 par value: 120,000,000 shares authorized; 59,089,352 and 56,612,429 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively		59		56
Additional paid-in capital		1,050,631		974,356
Accumulated other comprehensive loss		(113)		(92)
Accumulated deficit		(853,103)		(710,058)
Total stockholders’ equity		197,474		264,262
Total liabilities and stockholders’ equity	$	354,199	$	382,481



	Three months ended September 30,				Nine months ended September 30,
	2023		2022		2023		2022
Revenues:
Product revenue, net	$	22,504	$	4,284	$	53,194	$	8,094
License revenue		—		—		—		6,754
Total revenues		22,504		4,284		53,194		14,848
Costs and expenses:
Cost of sales		2,412		497		6,069		1,105
Research and development		33,570		21,116		105,059		85,082
Selling, general, and administrative		30,475		21,938		85,158		65,715
Total costs and expenses		66,457		43,551		196,286		151,902
Loss from operations		(43,953)		(39,267)		(143,092)		(137,054)
Other income (expense):
Other income (expense), net		(159)		(370)		(369)		(370)
Interest expense		(3,149)		(2,144)		(9,342)		(2,190)
Interest income		3,466		920		10,126		988
Total other income (expense), net		158		(1,594)		415		(1,572)
Loss before taxes		(43,795)		(40,861)		(142,677)		(138,626)
Provision for income taxes		368		—		368		—
Net loss	$	(44,163)	$	(40,861)	$	(143,045)	$	(138,626)
Net loss per share, basic and diluted	$	(0.76)	$	(0.79)	$	(2.50)	$	(2.73)
Weighted-average common shares outstanding, basic and diluted		57,874,960		51,400,922		57,154,803		50,712,452

Other comprehensive loss:
Net loss	$	(44,163)	$	(40,861)	$	(143,045)	$	(138,626)
Reclassification of losses on RareStone equity into net loss				300
Foreign currency translation adjustment		76		—		49		—
Unrealized gain (loss), net on marketable securities		(175)		267		(70)		(338)
Comprehensive loss	$	(44,262)	$	(40,294)	$	(143,066)	$	(138,964)


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

Balance at December 31, 2021	50,283,574	$	50	$	813,041	$	(1)	$	(528,939)	$	284,151
Stock-based compensation expense	—		—		4,611		—		—		4,611
Issuance of common stock in connection with ESPP	61,518		—		399		—		—		399
Issuance of common stock in connection with exercise of stock options and vesting of restricted stock units	48,639		—		—		—		—		—
Unrealized loss on marketable securities	—		—		—		(628)		—		(628)
Net loss	—		—		—		—		(52,764)		(52,764)
Balance at March 31, 2022	50,393,731	$	50	$	818,051	$	(629)	$	(581,703)	$	235,769
Stock compensation expense	—		—		5,137		—		—		5,137
Issuance of common stock in connection with exercise of stock options	60,439		—		—		—		—		—
Unrealized gain on marketable securities	—		—		—		23		—		23
Unrealized loss on RareStone equity	—		—		—		(300)		—		(300)
Net loss	—		—		—		—		(45,001)		(45,001)
Balance at June 30, 2022	50,454,170	$	50	$	823,188	$	(906)	$	(626,704)	$	195,628
Stock compensation expense	—		—		4,796		—		—		4,796
Issuance of common stock in connection with ESPP	31,414		—		227		—		—		227
Issuance of common stock in connection with exercise of stock options and vesting of restricted stock units	470,672		1		3,863		—		—		3,864
Issuance of common stock upon completion of public offering, net of offering costs	4,800,000		5		116,969		—		—		116,974
Unrealized gain on marketable securities	—		—		—		267		—		267
Reclassification of losses on RareStone equity into net loss	—		—		—		300		—		300
Net loss	—		—		—		—		(40,861)		(40,861)
Balance at September 30, 2022	55,756,256	$	56	$	949,043	$	(339)	$	(667,565)	$	281,195


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2023		2022		2023		2022
Stock options		6,881,198		6,584,725		6,881,198		6,584,725
Restricted stock units		1,081,619		726,080		1,081,619		726,080
Performance stock units		582,319		811,128		582,319		811,128
Potential common shares		8,545,136		8,121,933		8,545,136		8,121,933


	Fair Value Measurements as of
	September 30, 2023 using:
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents:
Money market funds	$	52,666	$	—	$	—	$	52,666
Marketable securities:
Corporate debt securities and commercial paper		—		234,667		—		234,667
Total	$	52,666	$	234,667	$	—	$	287,333
Liabilities:
Derivative liability	$	—	$	—	$	1,190	$	1,190
Total	$	—	$	—	$	1,190	$	1,190


	Fair Value Measurements as of
	December 31, 2022 using:
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents:
Commercial paper	$	—	$	8,484	$	—	$	8,484
Money market funds		99,962		—		—		99,962
Marketable securities:
Corporate debt securities and commercial paper		—		205,611		—		205,611
Total	$	99,962	$	214,095	$	—	$	314,057
Liabilities:
Derivative liability	$	—	$	—	$	1,340	$	1,340
Total	$	—	$	—	$	1,340	$	1,340


	September 30, 2023
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
Assets
Corporate debt securities and commercial paper (due within 1 year)	$	234,842	$	11	$	(185)	$	234,668
	$	234,842	$	11	$	(185)	$	234,668


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


	Operating Lease
2023	$	211
2024		851
2025		502
Thereafter		—
Total operating lease payments		1,564
Less: imputed interest		(124)
Total operating lease liability	$	1,440


		As of September 30, 2023						As of December 31, 2022
	Estimated life (years)	Cost		Accumulated Amortization		Net		Cost		Accumulated Amortization		Net

Capitalized Milestones	11	$	9,000	$	(1,758)	$	7,242	$	9,000	$	(1,117)	$	7,883


	Three Months Ended
	September 30,				Change
	2023		2022		$		%

	(in thousands)
Statement of Operations Data:
Product revenue, net	$	22,504	$	4,284	$	18,220	425	%
Costs and expenses:
Cost of sales		2,412		497		1,915	385	%
Research and development		33,570		21,116		12,454	59	%
Selling, general, and administrative		30,475		21,938		8,537	39	%
Total costs and expenses		66,457		43,551		22,906	53	%
Loss from operations		(43,953)		(39,267)		(4,686)	12	%
Other income (expense), net		158		(1,594)		1,752	(110)	%
(Loss) income before taxes		(43,795)		(40,861)		(2,934)	7	%
Provision for income taxes		368		—		368	100	%
Net loss	$	(44,164)	$	(40,861)	$	(3,303)	8	%



	Nine months ended September 30,
	2023		2022

Operating activities
Net loss	$	(143,045)	$	(138,626)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense		23,879		14,544
Depreciation and amortization		1,341		1,230
Non-cash interest expense and amortization of debt issuance costs		9,342		2,190
Non-cash rent expense		294		(198)
Loss on RareStone equity investment		—		1,040
Change in fair value of embedded derivative liability		(150)		—
Acquired IPR&D assets classified as investing activities		5,667		—
Changes in operating assets and liabilities:
Accounts receivable		(8,317)		(2,303)
Inventory		(4,845)		(1,575)
Prepaid expenses and other current assets		(2,367)		2,806
Deferred revenue		(148)		474
Other long-term assets, net		1,660		(4,841)
Accounts payable, accrued expenses and other liabilities		9,915		(14,169)
Net cash used in operating activities		(106,774)		(139,428)
Investing activities
Purchases of short-term investments, net		(314,265)		(151,521)
Maturities of short-term investments		291,675		224,607
Payment of milestone obligation under license agreement		—		(4,000)
Acquisition of IPR&D assets, including transaction costs		(5,667)		—
Purchases of property and equipment		(48)		(282)
Net cash (used in) provided by investing activities		(28,305)		68,804
Financing activities
Net proceeds from issuance of common stock		48,875		116,974
Proceeds from the exercise of stock options		2,471		3,863
Proceeds from issuance of common stock from ESPP		1,053		626
Repayments on deferred royalty obligation		(4,824)		—
Proceeds from royalty financing agreement, net of issuance costs		24,370		75,000
Net cash provided by financing activities		71,945		196,463
Effect of exchange rates on cash		50		—
Net (decrease) increase in cash, cash equivalents and restricted cash		(63,084)		125,839
Cash, cash equivalents and restricted cash at beginning of period		128,005		59,576


	Nine months ended
	September 30,
	2023		2022
Beginning aggregate estimated fair value of Level 3 RareStone equity	$	—	$	—
Initial recording of RareStone equity		—		1,040
Change in fair value of embedded derivative		—		(1,040)
Ending aggregate estimated fair value of Level 3 RareStone equity	$	—	$	—

	Nine months ended
	September 30,
	2023		2022
Beginning aggregate estimated fair value of Level 3 liabilities	$	1,340	$	—
Initial recording of embedded derivative		—		1,590
Change in fair value of embedded derivative		(150)		(670)
Ending aggregate estimated fair value of Level 3 liabilities	$	1,190	$	920


2023	$	214
2024		855
2025		855
2026		855
2027		855
Thereafter		3,608
Total	$	7,242


		Incorporated by Reference
Exhibit Number	Exhibit Description	Form	Date	Number
3.1	Amended and Restated Certificate of Incorporation.	10-Q	05/04/2020	3.1
3.2	Amended and Restated Bylaws.	8-K	12/11/2020	3.1
10.1	Amended & Restated Offer Letter, dated July 28, 2023, by and between the Registrant and David P. Meeker.	8-K	08/03/2023	10.1
10.2	Amended & Restated Offer Letter, dated July 28, 2023, by and between the Registrant and Joseph Shulman.	8-K	08/03/2023	10.2
10.3	Amended & Restated Offer Letter, dated August 3, 2023, by and between the Registrant and Jennifer Chien.	8-K	08/03/2023	10.3
10.4	Amended & Restated Offer Letter, dated August 3, 2023, by and between the Registrant and Hunter Smith.	8-K	08/03/2023	10.4
31.1*	Certification of the Principal Executive Officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).
31.2*	Certification of the Principal Financial Officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).
32.1**	Certification of the Principal Executive Officer, as required by Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).
32.2**	Certification of the Principal Financial Officer, as required by Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).
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	RHYTHM PHARMACEUTICALS, INC.

Dated: November 8, 2023	By:	/s/ David P. Meeker, M.D.
		Name: David P. Meeker, M.D.
		Title: President and Chief Executive Officer
		(Principal Executive Officer)

Dated: November 8, 2023	By:	/s/ Hunter C. Smith
		Name: Hunter C. Smith
		Title: Chief Financial Officer and Treasurer
		(Principal Financial Officer)


Date: November 8, 2023

/s/ David P. Meeker, M.D.
Name: David P. Meeker, M.D.
Title: President and Chief Executive Officer (Principal Executive Officer)

ov
Date: November 8, 2023

/s/ Hunter C. Smith
Name: Hunter C. Smith Title: Chief Financial Officer and Treasurer (Principal Financial Officer)

eith
/s/ David P. Meeker, M.D.
Name: David P. Meeker, M.D.
Title: President and Chief Executive Officer (Principal Executive Officer)

November 8, 2023