Rhythm Pharmaceuticals, Inc 10-Q for FY2024 Q1

About this 10-Q

Headline figures

Rhythm Pharmaceuticals, Inc. (RYTM)

10-Q 2024-05-07 For: 2024-03-31

Added on April 08, 2026

Rhythm Pharmaceuticals, Inc filed this 10-Q on May 7, 2024, covering the quarter ended March 31, 2024 (FY2024 Q1).

Three Months Ended

March 31,

Research and development summary

Research and development expense

Quarter ended March 31, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $25.97M; up 126.4% from $11.47M a year earlier
Net loss: $141.37M; compared with a net loss of $52.18M 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	23

	Item 3. Quantitative and Qualitative Disclosures About Market Risk	35

	Item 4. Controls and Procedures	35

PART II	OTHER INFORMATION

	Item 1. Legal Proceedings	37

	Item 1A. Risk Factors	37

	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	99

	Item 3. Defaults Upon Senior Securities	99

	Item 4. Mine Safety Disclosure	100

	Item 5. Other Information	100

	Item 6. Exhibits	101

SIGNATURES		103


	March 31,		December 31,
	2024		2023

Assets
Current assets:
Cash and cash equivalents	$	53,428	$	60,081
Short-term investments		147,771		215,765
Accounts receivable, net		14,695		14,867
Inventory		8,507		8,624
Prepaid expenses and other current assets		11,352		8,931
Total current assets		235,753		308,268
Property and equipment, net		1,149		1,341
Right-of-use asset		670		781
Intangible assets, net		6,815		7,028
Restricted cash		460		328
Other long-term assets		13,804		14,999
Total assets	$	258,651	$	332,745
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	7,550	$	4,885
Accrued expenses and other current liabilities		44,531		48,262
Deferred revenue		1,286		1,286
Lease liability		793		770
Total current liabilities		54,160		55,203
Long-term liabilities:
Deferred royalty obligation		107,368		106,143
Lease liability, non-current		284		490
Derivative liability		660		1,150
Other long-term liabilities		34,598		—
Total liabilities		197,070		162,986
Commitments and contingencies (Note 14)
Stockholders’ equity:
Preferred Stock, $0.001 par value: 10,000,000 shares authorized; no shares issued and outstanding at March 31, 2024 and December 31, 2023		—		—
Common stock, $0.001 par value: 120,000,000 shares authorized; 60,964,468 and 59,426,559 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively		60		59
Additional paid-in capital		1,097,810		1,064,302
Accumulated other comprehensive income (loss)		(181)		134
Accumulated deficit		(1,036,108)		(894,736)
Total stockholders’ equity		61,581		169,759
Total liabilities and stockholders’ equity	$	258,651	$	332,745



	Three months ended March 31,
	2024		2023
Revenues:
Product revenue, net	$	25,967	$	11,469
Total revenues		25,967		11,469
Costs and expenses:
Cost of sales		2,807		1,421
Research and development		128,665		37,945
Selling, general, and administrative		34,382		24,634
Total costs and expenses		165,854		64,000
Loss from operations		(139,887)		(52,531)
Other (expense) income:
Other income (expense), net		524		(27)
Interest expense		(4,755)		(3,061)
Interest income		3,046		3,440
Total other (expense) income, net		(1,185)		352
Loss before income taxes		(141,072)		(52,179)
Provision for income taxes		300		—
Net loss	$	(141,372)	$	(52,179)
Net loss per share, basic and diluted	$	(2.35)	$	(0.92)
Weighted-average common shares outstanding, basic and diluted		60,143,558		56,708,975

Other comprehensive loss:
Net loss	$	(141,372)	$	(52,179)
Foreign currency translation adjustment		(71)		21
Unrealized gain (loss), net on marketable securities		(244)		65
Comprehensive loss	$	(141,687)	$	(52,093)


						Accumulated
				Additional		Other				Total
	Common Stock			Paid-In		Comprehensive		Accumulated		Stockholders’
	Shares	Amount		Capital		Income (Loss)		Deficit		Equity
Balance at December 31, 2023	59,426,559	$	59	$	1,064,302	$	134	$	(894,736)	$	169,759
Stock-based compensation expense	—		—		7,767		—		—		7,767
Issuance of common stock in connection with ESPP	28,495		—		673		—		—		673
Issuance of common stock in connection with exercise of stock options and vesting of restricted stock units	1,077,271		1		6,352		—		—		6,353
Issuance of common stock as consideration for LGC license	432,143		—		18,716		—		—		18,716
Foreign currency translation adjustment	—		—		—		(71)		—		(71)
Unrealized loss on marketable securities	—		—		—		(244)		—		(244)
Net loss	—		—		—		—		(141,372)		(141,372)
Balance at March 31, 2024	60,964,468	$	60	$	1,097,810	$	(181)	$	(1,036,108)	$	61,581

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


	Three Months Ended
	March 31,
	2024		2023
Stock options		7,029,546		6,973,369
Restricted stock units		1,775,146		1,046,232
Performance stock units		—		613,191
Potential common shares		8,804,692		8,632,792


	Fair Value Measurements as of
	March 31, 2024 using:
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents:
Money market funds	$	43,028	$	—	$	—	$	43,028
Marketable securities:
Corporate debt securities and commercial paper		—		147,771		—		147,771
Total	$	43,028	$	147,771	$	—	$	190,799
Liabilities:
Derivative liability	$	—	$	—	$	660	$	660
Total	$	—	$	—	$	660	$	660


	Fair Value Measurements as of
	December 31, 2023 using:
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents:
Commercial paper	$	—	$	—	$	—	$	—
Money market funds		40,868		4,979		—		45,847
Marketable securities:
Corporate debt securities and commercial paper		—		215,765		—		215,765
Total	$	40,868	$	220,744	$	—	$	261,612
Liabilities:
Derivative liability	$	—	$	—	$	1,150	$	1,150
Total	$	—	$	—	$	1,150	$	1,150


	March 31, 2024
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
Assets
Corporate debt securities and commercial paper (due within 1 year)	$	147,742	$	51	$	(22)	$	147,771
	$	147,742	$	51	$	(22)	$	147,771


	December 31, 2023
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
Assets
Corporate debt securities and commercial paper (due within 1 year)	$	215,490	$	282	$	(7)	$	215,765
	$	215,490	$	282	$	(7)	$	215,765


	Operating Lease
2024		640
2025		502
Total operating lease payments		1,142
Add: imputed interest		(65)
Total operating lease liability	$	1,077


		As of March 31, 2024						As of December 31, 2023
	Estimated life (years)	Cost		Accumulated Amortization		Net		Cost		Accumulated Amortization		Net

Capitalized Milestones	11	$	9,000	$	(2,185)	$	6,815	$	9,000	$	(1,972)	$	7,028


2024	$	641
2025		855
2026		855
2027		855
2028		855
Thereafter		2,754
Total	$	6,815


	March 31,		December 31,
	2024		2023
Raw Materials	$	3,226	$	4,625
WIP		2,541		1,104
Finished Goods		2,740		2,895
Total Inventory	$	8,507	$	8,624


	Three months ended
	March 31,
	2024		2023
Beginning aggregate estimated fair value of Level 3 liabilities	$	1,150	$	1,340
Initial recording of embedded derivative		—		—
Change in fair value of embedded derivative		(490)		(50)
Ending aggregate estimated fair value of Level 3 liabilities	$	660	$	1,290


	Three Months Ended
	March 31,				Change
	2024		2023		$		%

	(in thousands)
Statement of Operations Data:
Product revenue, net	$	25,967	$	11,469	$	14,498	126	%
Costs and expenses:
Cost of sales		2,807		1,421		1,386	98	%
Research and development		128,665		37,945		90,720	239	%
Selling, general, and administrative		34,382		24,634		9,748	40	%
Total costs and expenses		165,854		64,000		101,854	159	%
Loss from operations		(139,887)		(52,531)		(87,356)	166	%
Other income (expense), net		(1,185)		352		(1,537)	(437)	%
Loss before income taxes		(141,072)		(52,179)		(88,893)	170	%
Provision for income taxes		300		—		300	100	%
Net loss	$	(141,372)	$	(52,179)	$	(89,193)	171	%


		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	12/18/2023	3.1
3.3	Certificate of Designations	8-K	04/16/2024	3.1
3.4*	Amended and Restated Certificate of Designations
10.1*	Summary of Non-Employee Director Compensation Policy.
10.2‡‡	Exclusive License Agreement, dated January 4, 2024, by and between Rhythm Pharmaceuticals, Inc. and LG Chem, Ltd.	10-K	02/29/2024	10.25
10.3	Investment Agreement dated April 1, 2024, by and between Rhythm Pharmaceuticals, Inc., certain affiliates of Perceptive Advisors LLC, and certain other investors	8-K	04/01/2024	10.1
10.4*	Rhythm Pharmaceuticals, Inc. 2017 Equity Incentive Plan Performance Unit Agreement
10.5*	Third Amendment to Lease, dated May 2, 2024, by and between the Registrant and 500 Boylston & 222 Berkeley Owner (DE) LLC.
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).
101.INS*	Inline XBRL Instance Document - the Instance Document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document.
101.SCH*	Inline XBRL Taxonomy Extension Schema Document.
101.CAL*	Inline XBRL Taxonomy Extension Calculation Linkbase Document.
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101.LAB*		Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE*		Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104*		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).


	RHYTHM PHARMACEUTICALS, INC.

Dated: May 7, 2024	By:	/s/ David P. Meeker, M.D.
		Name: David P. Meeker, M.D.
		Title: President and Chief Executive Officer
		(Principal Executive Officer)

Dated: May 7, 2024	By:	/s/ Hunter C. Smith
		Name: Hunter C. Smith
		Title: Chief Financial Officer and Treasurer
		(Principal Financial Officer)

		Page

Section 1.	Definitions	1
Section 2.	Rules of Construction	14
Section 3.	The Convertible Preferred Stock	14
(a)	Designation; Par Value	14
(b)	Number of Authorized Shares	14
(c)	Form, Dating and Denominations	15
(d)	Method of Payment; Delay When Payment Date is Not a Business Day	15
(e)	Register	16
(f)	Legends	16
(g)	Transfers and Exchanges; Transfer Taxes; Certain Transfer Restrictions	17
(h)	Exchange and Cancellation of Convertible Preferred Stock to Be Converted or to Be Repurchased Pursuant to a Repurchase Upon Change of Control or a Redemption	18
(i)	Status of Retired Shares	19
(j)	Replacement Certificates	19
(k)	Registered Holders	19
(l)	Cancellation	19
(m)	Shares Held by the Company or its Affiliates	20
(n)	Outstanding Shares	20
(o)	Notations and Exchanges	21
Section 4.	Ranking	21
Section 5.	Dividends	21
(a)	Generally	21
(b)	Participating Dividends	23
Section 6.	Rights Upon Liquidation, Dissolution or Winding Up	24
(a)	Generally	24
(b)	Certain Business Combination Transactions Deemed Not to Be a Liquidation	24
Section 7.	Right of the Company to Redeem the Convertible Preferred Stock	24
(a)	No Right to Redeem Before the Redemption Trigger Date	25
(b)	Right to Redeem the Convertible Preferred Stock on or After Redemption Trigger Date	25
(c)	Redemption Prohibited in Certain Circumstances	25
(d)	Redemption Date	25
(e)	Redemption Price	25
(f)	Redemption Notice	25
(g)	Payment of the Redemption Price	26
Section 8.	Right of Holders to Require the Company to Repurchase Convertible Preferred Stock upon a Change of Control	26
(a)	Right of Holders to Require the Company to Repurchase Convertible Preferred Stock upon a Change of Control	26
(b)	Funds Legally Available for Payment of Change of Control Repurchase Price; Covenant Not to Take Certain Actions	26


(c)	Change of Control Repurchase Date	27
(d)	Change of Control Repurchase Price	27
(e)	Change of Control Notice	27
(f)	Procedures to Exercise the Change of Control Repurchase Right	28
(g)	Payment of the Change of Control Repurchase Price	29
(h)	Compliance with Securities Laws	29
Section 9.	Voting Rights	29
(a)	Voting and Consent Rights with Respect to Specified Matters	29
(b)	Right to Vote with Holders of Common Stock on an As-Converted Basis	31
(c)	Procedures for Voting and Consents	32
Section 10.	Conversion	32
(a)	Generally	32
(b)	Conversion at the Option of the Holders	32
(c)	Mandatory Conversion at the Company’s Election.	33
(d)	Conversion Procedures	34
(e)	Settlement upon Conversion	35
(f)	Conversion Rate Adjustments	36
(g)	Voluntary Conversion Rate Increases	38
(h)	Restriction on Conversions and Certain Degressive Issuances	39
(i)	Effect of Common Stock Change Event	42
Section 11.	Certain Provisions Relating to the Issuance of Common Stock	44
(a)	Equitable Adjustments to Prices	44
(b)	Reservation of Shares of Common Stock	44
(c)	Status of Shares of Common Stock	45
(d)	Taxes Upon Issuance of Common Stock	45
Section 12.	No Preemptive Rights	45
Section 13.	Tax Treatment	45
Section 14.	Calculations	45
(a)	Responsibility; Schedule of Calculations	45
(b)	Calculations Aggregated for Each Holder	46
Section 15.	Notices	46
Section 16.	Legally Available Funds	46
Section 17.	No Other Rights	46

Exhibits

Exhibit A: Form of Preferred Stock Certificate		A-1

Exhibit B: Form of Restricted Stock Legend		B-1

RHYTHM PHARMACEUTICALS, INC.


By:	/s/ Hunter Smith
	Name:	Hunter Smith
	Title:	Chief Financial Officer

	RHYTHM PHARMACEUTICALS, INC.

Date:	By:
		Name:
		Title:

Date:	By:
		Name:
		Title:


Date:
	(Legal Name of Holder)

	By:
		Name:
		Title:

	Signature Guaranteed:


	Participant in a Recognized Signature
	Guarantee Medallion Program

	By:
		Authorized Signatory


Non-Employee Director	Annual Fee
Lead Director	$	35,000
Non-Executive Chair	$	30,000
Chairman of the audit committee	$	20,000
Member of the audit committee (other than chairman)	$	10,000
Chairman of the compensation committee	$	15,000
Member of the compensation committee (other than chairman)	$	7,500
Chairman of the governance and nominating committee	$	10,000
Member of the governance and nominating committee (other than chairman)	$	5,000


RHYTHM PHARMACEUTICALS, INC.	FIRST_NAME LAST_NAME



By:
Signature	Signature of Participant


Title:


Participant’s Address:

Period	Annual Net Rent Rate Per Square Foot of Net Rentable Floor Area	Monthly Net Rent
August 1, 2025 – July 31, 2026	$80.00	$91,180.00
August 1, 2026 – July 31, 2027	$81.60	$93,003.60
August 1, 2027 – July 31, 2028	$83.23	$94,863.67
August 1, 2028 – July 31, 2029	$84.90	$96,760.95
August 1, 2029 – July 31, 2030	$86.59	$98,696.16


	LANDLORD:

	500 BOYLSTON & 222 BERKELEY
	OWNER (DE) LLC, a Delaware limited
	liability company


	By:
	Name:	Kristen Binck
	Title:	Vice President

	By:
	Name:	Brian Barriero
	Title:	Vice President


	TENANT:
	RHYTHM PHARMACEUTICALS, INC., a
	Delaware corporation

	By:
	Name:	Hunter Smith
	Title:	CFO


Date: May 7, 2024

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

ov
Date: May 7, 2024

/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)

May 7, 2024