“Investors”), relating to ~~quarter-end (see Note 10, “Subsequent Events”~~the issuance and sale of 150,000 shares of a new series of the Company’s Series A Convertible Preferred Stock, par value $0.001 per share, titled the “Series A Convertible Preferred Stock” (the “Convertible Preferred Stock”), for an aggregate purchase price of $150,000, or $1,000 per share (the “Issuance”). The ~~net proceeds from this offering were approximately $125.8 million after deducting underwriting discounts and commissions and offering expenses.~~ Issuance closed on April 15, 2024.

In the future, the Company will be dependent on obtaining funding from third parties, such as proceeds from the issuance of debt, sale of equity, proceeds from out license arrangements, product sales and funded research and development programs to maintain the Company's operations and meet the Company's obligations. There is no guarantee that additional equity or other financings will be available to the Company on acceptable terms, or at all. If the Company fails to obtain additional funding when needed, the Company would be forced to scale back, terminate its operations or seek to merge with or be acquired

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by another company. Management believes that the Company's existing cash resources, together with the proceeds received from the sale of preferred stock in April 2024, will be sufficient to fund the ~~Company's operating plan into~~Company’s operations through at least the ~~first half~~next twelve months from the filing of ~~2019.~~this Quarterly Report on Form 10-Q with the SEC.

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, ~~(“GAAP”)~~or GAAP, and the applicable rules and regulations of the Securities and Exchange Commission, ~~(“SEC”)~~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, ~~(“ASC”)~~or ASC, and Accounting Standards Updates, ~~(“ASU”)~~or ASU, of the Financial Accounting Standards Board, ~~(“FASB”).~~or FASB. As permitted under these rules, certain footnotes or other financial information that are normally required by GAAP have been condensed or omitted.

The accompanying ~~interim~~condensed consolidated balance sheet as of ~~September 30, 2017,~~March 31, 2024, the condensed consolidated statements of operations and comprehensive loss for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2024 and ~~2016,~~2023, the ~~statement~~condensed consolidated statements of stockholders’ equity for the three months ended March 31, 2024 and 2023 and the condensed consolidated statements of cash flows for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2024 and ~~2016, and the statement of convertible preferred stock and stockholders' equity (deficit) for the nine months ended September 30, 2017~~2023 and the related footnote disclosures are unaudited. In management's opinion, the unaudited ~~interim~~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, 2023 and include all adjustments, which ~~include~~are all normal recurring adjustments, necessary for the fair presentation of the interim financial statements. The results for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2024 are not necessarily indicative of the results expected for the full fiscal ~~year.~~year, any other interim periods, or any future year or period.

The ~~Company has historically existed~~accompanying unaudited condensed consolidated financial statements reflect the application of certain significant accounting policies as described below and ~~functioned as part of the consolidated businesses of the Predecessor Company. As noted above, the Predecessor Company's setmelanotide and MC4R agonist programs were transferred~~elsewhere in these notes to the ~~Company as part~~unaudited condensed consolidated financial statements. As of March 31, 2024, there have been no material changes in the ~~Corporate Reorganization on March 21, 2013. These financial statements include the results of operations of setmelanotide and the MC4R agonist program~~Company's significant accounting policies from its inception. As part of the Corporate Reorganization, the Company also entered into a formal payroll services intercompany agreement with the Relamorelin Company. On November 16, 2016, the employees of the Relamorelin Companythose that were providing services to the Company, terminated their employment contracts with the Relamorelin Company and entered into new employment agreements with the Company. On December 15, 2016, the Relamorelin Company closed its sale to a large pharmaceutical company. At September 30, 2017, the Company had seventeen employees directly employed by the Company. During 2016, costs have been allocated to the Company for the purposes of preparing the financial statements based on a specific identification basis or, when specific identification is not practicable, a proportional cost allocation method which allocates expenses based upon the percentage of employee time and research and development effort expended on the Company's business as compared to total employee time and research and development effort of the combined Motus and Rhythm. The proportional use basis adopted to allocate shared costs is in accordance with the guidance of SEC Staff Accounting Bulletin (“SAB”) Topic 1B, ~~Allocation Of Expenses And Related Disclosure In Financial Statements Of Subsidiaries, Divisions Or Lesser Business Components Of Another Entity. Management has determined that the method of allocating costs to the Company is reasonable. Cost allocation was no longer required subsequent to the 2016 sale of the Relamorelin Company.~~

Management believes that the statements of operations include a reasonable allocation of costs and expenses incurred by the Relamorelin Company, which benefited the Company. However, such amounts may not be indicative of the actual level of costs and expenses that would have been incurred by the Company if it had operated as an independent company or of the costs and expenses expected to be incurreddisclosed in the ~~future. Management has not presented an estimate of what the expenses of the Company would have been~~Company’s Annual Report on a standalone basis as it was not practicable to make a reasonable estimate. As such, the financial information herein may not necessarily reflect the financial position, results of operations and cash flows of the Company expected in the future or what it would have been had it been an independent company during the periods presented.

As described above, Relamorelin Company employee costs are allocated to the Company based on a proportional use method. For those employees who became employees of the Company on November 16, 2016, their full employment cost was $2,727Form 10-K for the year ended December 31, ~~2016.~~

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On September 22, 2017, the Company's board of directors approved a 1-for-9.17 reverse stock split of the Company's issued and outstanding shares of common stock. All share and per share amounts in the financial statements have been retrospectively adjusted for all periods presented to give effect of the reverse stock split. On September 29, 2017 the Company filed a third amended and restated certificate of incorporation with the Secretary of State of the State of Delaware to reflect the reverse stock split and authorize 29,919,979 of its shares of common stock, $0.001 par value per share and 159,616,209 shares of preferred stock, $0.001 par value per share. 2023.

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~~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 ~~the allocation of costs from the Relamorelin Company in accordance with SAB Topic 1B, accrued~~estimates related to determining our net product revenue, license revenue, accruals related to research and development expenses, ~~stock‑based~~assumptions used to record stock-based compensation expense, interest expense on our deferred royalty obligation, and the valuation allowance on the Company's

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deferred tax assets. Estimates are periodically reviewed in light of changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known. Actual results could differ materially from those estimates.

Principles of Consolidation

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

Reclassification of Prior Year Balances

Certain prior year amounts have been reclassified to conform to the current period presentation. These reclassifications had no effect on the reported results of operations or cash flows. In the condensed consolidated statements of cash flows, the Company reclassified $2,341 to non-cash accretion and amortization of short-term investments from prepaid expenses and other current assets for the three months ended March 31, 2023. The reason for the reclassification was to conform with the current year’s presentation.

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 ~~fair value~~development and commercialization of therapies for patients with rare diseases. A single management team that reports to the ~~Series A Investor Instrument (see Note 4).~~Chief Executive Officer comprehensively manages the entire business. The Company does not operate separate lines of business with respect to its product or product candidates. Accordingly, the Company has one reportable segment.

~~Off‑Balance~~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~~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~~off-balance sheet risk, such as foreign exchange contracts, option contracts, or other foreign hedging arrangements.

~~Segment Information~~

Operating segments are defined as components of an entity about which separate discrete information is available for evaluation by the chief operating decision maker, or decision‑making group, in deciding how to allocate resources and in assessing performance. The Company ~~views~~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 ~~operations~~customers. For the three months ended March 31, 2024 and ~~manages its business~~2023, approximately 74% and 83%, respectively, of all of the Company’s revenue was generated from a single customer in ~~one operating segment operating exclusively~~the United States. As of March 31, 2024 and December 31, 2023, approximately 72% and 67%, respectively, of the Company’s accounts receivable was outstanding from a single customer in the United States.

~~2017 Series~~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 ~~Investor Instrument~~change in the relationship with the suppliers or manufacturer, or an adverse change in their business, could materially impact future operating results.

The Company relies on separate third parties to perform genetic testing in the United States and Europe, respectively. The inability of the vendor to fulfill testing services for the Company could materially impact future operating results and adversely impact our ability to further develop setmelanotide. A change in the relationship with the genetic testing service providers, or an adverse change in their business, could materially impact future operating results.

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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 ~~classified~~not experienced any credit losses. The Company's contracts with its ~~2017 Series A Investor Instrument (See Note 4)~~customers have customary payment terms that generally require payment within 90 days. The Company analyzes amounts that are past due for collectability, and periodically evaluates the creditworthiness of its customers. As of March 31, 2024 and December 31, 2023, the Company determined an allowance for doubtful accounts 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

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

Revenue from product sales is recognized when the customer obtains control of our product, which occurs at a ~~free‑standing financial instrument. The 2017 Series A Investor Instrument was recorded~~point in time, upon transfer of title to the customer because at that point in time we have no ongoing obligations to the customer. There are no other performance obligations besides the sale of product. We classify payments to our customers or other parties in the distribution channel for services that are distinct and priced at fair value ~~upon the issuance of the Company’s series A preferred stock~~as selling, general and administrative expenses in January 2017, and subsequently remeasured to fair value at each reporting period. Changes in fair value of the financial instrument is recognized as a component of other income (expense), net in the statementour consolidated statements of operations and comprehensive loss. Otherwise, payments to a customer or other parties in the distribution channel that do not meet those criteria are classified as a reduction of revenue, as discussed further below. Taxes collected from the customer relating to product sales and remitted to governmental authorities are excluded from revenue. Because our payment terms are generally ninety days or less, the Company concluded there is not a significant financing component because the period between the transfer of a promised good or service to the customer and when the customer pays for that good or service will be one year or less. The Company expenses incremental costs of obtaining a contract as and when incurred since the expected amortization period of the asset that we would have recognized is one year or less.

Reserves for Variable Consideration

Revenues from product sales are recorded at the net sales price, or the transaction price, which includes estimates of variable consideration for which reserves are established and which result from discounts, rebates, and co-pay assistance 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

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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.

Government rebates: The Company is subject to discount obligations under government programs, including Medicaid programs, Medicare and Tricare in the United States as well as certain government rebates and pricing adjustments in certain international markets that we operate. We estimate Medicaid, Medicare and Tricare rebates based upon a range of possible outcomes that are probability-weighted for the estimated payer mix. These reserves are recorded in the same period the related revenue is recognized, resulting in a reduction of product revenue and the establishment of a liability that is included in accrued expenses and other current liabilities on our condensed consolidated balance sheets. On a quarterly basis, we update our estimates and record any adjustments in the period that we identify the adjustments.

Trade discounts and allowances: The Company provides customary invoice discounts on IMCIVREE sales to certain of our customers for prompt payment that are recorded as a reduction of revenue in the period the related product revenue is recognized. In addition, we receive and pay for various distribution services from our customers in the distribution channel. For services that are not distinct from the sale of our product, 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, 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.

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

License Agreements

LG Chem

In January 2024, we entered into a license agreement and share issuance agreement with LG Chem, Ltd. (“LGC”). Under the terms of the license agreement, we obtained worldwide rights to develop LGC’s proprietary compound LB54640 and will assume sponsorship of two ongoing LGC Phase 2 studies designed to evaluate safety, tolerability, pharmacokinetics and weight loss efficacy of LB54640. The SIGNAL trial is a randomized, placebo-controlled, double-blind study designed to enroll and evaluate approximately 28 patients with acquired hypothalamic obesity. Participants will receive one of three doses of LB54640 by oral administration once daily for up to 52 weeks, and the primary endpoint of the study is the change from baseline in body mass index after 14 weeks of treatment. The open-label, single-arm, 16-week ROUTE trial is designed to enroll five patients with POMC or LEPR deficiency obesity.

We paid LGC $40.0 million in cash and issued shares of our common stock with an aggregate fair value of $18.7 million. The shares were issued at a per share price equal to the ten-day volume weighted-average closing price for our

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common stock, calculated as of the trading day immediately prior to January 4, 2024. We also agreed to make a $40.0 million payment in cash 18 months after the effective date of the license agreement. This payment has been recorded at its present value and reflected in other long-term liabilities on our unaudited condensed consolidated balance sheet.

In addition, and subject to the completion of Phase 2 development of LB54640, the Company has agreed to pay LGC royalties of between low-to-mid single digit percent of net revenues from its MC4R portfolio, including LB54640, commencing in 2029 and dependent upon achievement of various regulatory and indication approvals, and subject to customary deductions and anti-stacking. Royalties may further increase to a low double digit percent royalty, though such royalty would only be applicable on net sales of LB54640 in a region if LB54640 is covered by a composition of matter or method of use patent controlled by LGC in such region and the Company’s MC4R portfolio is not covered by any composition of matter or method of use patents controlled by the Company in such region. Such increased rate would only apply on net sales of LB54640 for the limited remainder of the royalty term in the relevant region.

RareStone Group Ltd.

In December 2021, the Company entered into an Exclusive License Agreement with RareStone Group Ltd., or the RareStone License. Pursuant to the RareStone License, we granted to RareStone an exclusive, sublicensable, royalty-bearing license under certain patent rights and know-how to develop, manufacture, commercialize and otherwise exploit any pharmaceutical product that contains setmelanotide in the diagnosis, treatment or prevention of conditions and diseases in humans in China, including mainland China, Hong Kong and Macao. RareStone has a right of first negotiation in the event that the Company chooses to grant a license to develop or commercialize the licensed product in Taiwan. The arrangement includes a license and an additional performance obligation to supply product upon the request of RareStone.

According to the terms of the RareStone License, RareStone has agreed to seek local approvals to commercialize IMCIVREE for the treatment of obesity and hyperphagia due to biallelic POMC, PCSK1 or LEPR deficiency, as well as Bardet-Biedl and Alström syndromes. Additionally, RareStone has agreed to fund efforts to identify and enroll patients from China in the Company’s global EMANATE trial, a Phase 3, randomized, double-blind, placebo-controlled trial to evaluate setmelanotide in four independent sub-studies in patients with obesity due to a heterozygous variant of POMC/PCSK1 or LEPR; certain variants of the SRCI gene, and certain variants of the SH2B1 gene. In accordance with the terms of the RareStone License, RareStone made an upfront payment to Rhythm of $7,000 and issued Rhythm 1,077,586 ordinary shares. The Company is eligible to receive development and commercialization milestones of up to $62,500, as well as tiered royalty payments on annual net sales of IMCIVREE.

The Company initially estimated the fair value of the ~~Series A Investor Instrument is determined~~RareStone equity to be $2,440 based on a preliminary valuation during the ~~sum~~first quarter of 2022. Upon completion of the valuation procedures during the second quarter of 2022, the Company concluded the initial fair ~~values~~value of the ~~2017 Series A Investor Right/Obligation and~~RareStone equity to be $1,040. During the ~~2017 Investor Call Option. The~~third quarter of 2022, the Company estimated the fair value of the ~~2017 Series A Investor Right/Obligation~~RareStone equity to be de minimis based upon the results of an updated valuation and recorded an other-than-temporary impairment of $1,040 related to the decline in fair value as a component of other expense in our consolidated statements of operations and other comprehensive loss for the ~~probability‑weighted present~~year ended December 31, 2022. The other-than-temporary impairment of $1,040 included the reclassification of a $300 unrealized loss previously recorded as a component of accumulated other comprehensive income (loss) in our condensed consolidated statement of stockholders’ equity during the second quarter of 2022.

The Company received total upfront consideration of $8,040 comprised of an upfront payment of $7,000, and the estimated fair value of the ~~expected benefit~~RareStone equity of $1,040. The Company determined that the RareStone License contains two performance obligations, the delivery of the ~~investment.~~license and the supply of clinical and commercial product. The Company further determined the supply of commercial product to RareStone contains a significant future discount and estimates the discount to be $1,286, which is recorded as a component of deferred revenue on the consolidated balance sheet at December 31, 2023.

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

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will be deferred and recognized over the commercial supply period or upon termination of the agreement. No license revenue was recognized during the years ended December 31, 2023 or 2021.

On October 28, 2022, we delivered written notice, or the October Notice, to RareStone that we have terminated the RareStone License for cause. In accordance with the Notice, we maintain that RareStone has materially breached its obligations under the RareStone License to fund, perform or seek certain key clinical studies and waivers, including with respect to our global EMANATE trial, among other obligations. On December 21, 2022, RareStone provided written notice to us that it objects to the claims in the Notice, including our termination of the RareStone License for cause. On March 16, 2023, we provided written notice, or the March Notice, to RareStone reaffirming our position that RareStone has materially breached its obligations under the RareStone License and that we have terminated the RareStone License for cause, and also requested documentation supporting RareStone’s purported dispute notice objecting to the claims in the Notice.

On May 10, 2023, RareStone provided written notice to the Company reaffirming its objections to the claims in our October Notice and March Notice, including to the Company’s termination of the RareStone License for cause. On November 29, 2023, RareStone wrote to us seeking to negotiate and execute a commercial supply agreement as contemplated under the Exclusive License Agreement, and on January 19, 2024, we responded in writing again reaffirming our position that RareStone has materially breached its obligations under the RareStone License and that we have terminated the RareStone License for cause.

Deferred Royalty Obligation

The Company ~~used~~treats the ~~Black‑Scholes option‑pricing model,~~debt obligation to HealthCare Royalty Management, LLC as discussed further in Note 12, “Long-Term Obligations”, as a deferred royalty obligation, amortized using the effective interest rate method over the estimated life of the revenue streams. The Company recognizes interest expense thereon using the effective rate, which ~~incorporates assumptions~~is based on our current estimates of future revenues over the life of the arrangement. In connection therewith, the Company periodically assesses its expected revenues using internal projections, imputes interest on the carrying value of the deferred royalty obligation, and records interest expense using the imputed effective interest rate. To the extent the Company’s estimates ~~to value~~of future revenues are greater or less than previous estimates or the ~~2017 Series A Investor Call Option and assessed these assumptions and~~estimated timing of such payments is materially different than previous estimates, the Company will account for any such changes by adjusting the effective interest rate on a ~~quarterly~~prospective basis, with a corresponding impact to the reclassification of our deferred royalty obligation. The assumptions used in determining the expected repayment term of the deferred royalty obligation and amortization period of the issuance costs requires the Company to make estimates that could impact the classification of such costs, as ~~additional information impacting~~well as the ~~assumptions was obtained. Estimates~~period over which such costs will be amortized.

Inventory

Prior to receiving approval from the FDA in November 2020 to sell IMCIVREE in the United States, the Company expensed all costs incurred related to the manufacture of IMCIVREE as research and ~~assumptions impacting~~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. The Company values inventories at the lower of cost or estimated net realizable value. The Company determines the cost of inventories, which includes amounts related to materials and manufacturing overhead, on a first-in, first-out basis. Raw materials and work in process includes all inventory costs prior to packaging and labelling, including raw materials, active pharmaceutical ingredient, and drug product. Finished goods include packaged and labelled products. Raw materials and work in process that may be used for either research and development or commercial sale are classified as inventory until the material is consumed or otherwise allocated for research and development. If the material is intended to be used for research and development, it is expensed as research and development once that determination is made.

Cost of Product Sales

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

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

Intangible Assets, Net

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

Impairment of Long-Lived Assets

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, 2024 and 2023, respectively.

Acquired IPR&D and Milestone Expenses

In an asset acquisition, payments incurred prior to regulatory approval to acquire rights to in-process research and development projects are expensed as acquired IPR&D and recorded as a component of research and development expense in the condensed consolidated statements of operations and comprehensive net loss unless the project has an alternative future use. These costs include upfront and development milestone payments related to licensing arrangements, or other asset acquisitions that provide rights to develop, manufacture and/or sell pharmaceutical products. Where contingent development milestone payments are due to third parties, prior to regulatory approval, the payment obligations are expensed when the achievement of the underlying milestone becomes probable. Regulatory and commercial milestone payments made to third parties subsequent to regulatory approval are capitalized as intangible assets and amortized to cost of products sold over the remaining useful life of the related product.

Foreign Currency Translation

The majority of the Company’s operations occurs in subsidiaries that have the U.S. dollar denominated as its functional currency. The assets and liabilities of the Company’s subsidiaries with functional currencies other than the U.S. dollar are translated into U.S. dollars at exchange rates in effect at the balance sheet date. Revenue and expense amounts for these subsidiaries are translated using the average exchange rates for the period. Changes resulting from foreign currency translation are included in accumulated other comprehensive income (loss) on the Company’s consolidated statement of stockholders’ equity. Net foreign currency exchange transaction gains (losses), which are included in other (expense) income, net on our consolidated statements of operations, were immaterial for the three months ended March 31, 2024 and 2023.

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 ~~include~~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.

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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 ~~per share~~ of the ~~underlying series A preferred stock, the expected term of the Series A Investor Call Option, risk‑free interest rate, expected dividend yield~~assets or liabilities.

The Company’s cash equivalents and ~~expected volatility of the price of the underlying preferred stock. The Company~~marketable securities and derivative liability at March 31, 2024 and December 31, 2023 were carried at fair value, determined according to the fair value ~~per share of~~hierarchy. See Note 6 for further discussion.

The carrying amounts reflected in the ~~underlying preferred stock by taking into consideration the most recent sale of our convertible preferred stock~~condensed consolidated balance sheets for accounts payable and ~~the investors' right~~accrued expenses and other current liabilities approximate their fair values due to ~~invest in a subsequent~~

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~~tranche. As the Company is a private company~~their short-term maturities at March 31, 2024 and lacks company‑specific historical and implied volatility information of our stock, it estimated its expected stock volatility based on the historical volatility of publicly traded peer companies for a term comparable to the estimated term of the Series A Investor Call Options. The risk‑free interest rate was determined by reference to the U.S. Treasury yield curve for time periods approximately equal to the estimated term of the Series A Investor Call Option. A dividend yield of zero was assumed.December 31, 2023, respectively.

Net Loss Per Share ~~Attributable to Common Shareholders~~

Basic net loss per share ~~attributable to common stockholders~~ is ~~calculated~~computed by dividing the net loss ~~attributable to common stockholders~~ by the weighted average number of common shares outstanding during the period, without consideration ~~for common stock equivalents. Net loss attributable to common stockholders is calculated by adjusting the net loss~~ of the Company for cumulative preferred stock dividends. During periods of income, the Company allocates to participating securities a proportional share of income determined by dividing total weighted average participating securities by the sum of the total weighted average common shares and participating securities (the “two class method”). The Company's convertible preferred stock participates in any dividends declared by the Company and is therefore considered to be participatingpotential dilutive securities. Participating securities have the effect of diluting both basic and diluted earnings per share during periods of income. During periods of loss, the Company allocates no loss to participating securities because they have no contractual obligation to share in the losses of the Company. Diluted net loss per common share ~~attributable to common stockholders~~ is ~~calculated~~computed by adjusting the weighted average shares outstanding for the potential dilutive ~~effect~~effects of common stock equivalents outstanding ~~for~~during the period ~~determined using~~calculated in accordance with the ~~treasury‑~~treasury stock ~~and if‑converted methods.~~method. For purposes of the diluted net loss per share ~~attributable to common stockholders~~ calculation, ~~convertible preferred stock and~~ stock options, performance stock units and restricted stock units are considered to be common stock equivalents but have been excluded from the calculation of diluted net loss per share, ~~attributable to common stockholders,~~ as their effect would be ~~anti‑dilutive~~anti-dilutive for all periods presented. Therefore, basic and diluted net loss per share ~~were~~is the same for all periods presented.

~~Basic and~~The following table includes the potential common shares that were excluded from the computation of diluted ~~earnings~~net loss per share ~~is calculated~~ as ~~follows:~~

Three Months Ended

Nine Months Ended

September 30,

September 30,


2017

2016

2017

2016
Numerator:

Net loss

$
(10,016)

$
(6,391)

$
(23,178)

$
(17,506)
Cumulative dividends on convertible preferred shares

(1,413)

(800)

(3,785)

(2,396)
Loss attributable to common shares—basic and diluted

$
(11,429)

$
(7,191)

$
(26,963)

$
(19,902)
Denominator:








Weighted-average number of common shares—basic and diluted

6,404,254

10,196,292

8,918,389

10,196,292
Loss per common share—basic and diluted

$
(1.78)

$
(0.71)

$
(3.02)

$
(1.95)

their effect would have been anti-dilutive for the periods indicated:


	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

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 April 2012, the Jump‑Start Our Business Startups Act (the “JOBS Act”) was signed into law. The JOBS Act contains provisions that, among other things, reduce certain reporting requirements for an “emerging growth company.” As an emerging growth company, the Company elected to not take advantage of the extended transition period afforded by the JOBS Act for the implementation of new or revised accounting standards, and as a result, will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non‑emerging growth companies.

~~In February 2016,~~November 2023, the FASB issued ASU ~~2016‑02, Leases~~2023-07, Segment Reporting (Topic ~~842). ASU 2016‑02~~280): Improvements to Reportable Segment Disclosures. The standard requires ~~lessees~~disclosure of incremental segment information on an annual and interim basis and allows for multiple measures of a segment’s profit or loss provided that one of those measures is consistent with GAAP. The amendments in this update do not change how a public company identifies its operating segments, aggregates those operating segments, or applies the quantitative thresholds to ~~recognize lease assets and lease liabilities for those leases classified as operating leases under previous GAAP. A lessee~~determine its reportable segments,

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~~should recognize~~but rather requires public entities to provide in ~~the statement of financial position~~interim periods all disclosures about a ~~liability to make lease payments (the lease liability)~~reporting segment’s profit or loss and ~~a right‑of‑use asset representing its right to use the underlying asset~~assets that are currently required annually. ASU 2023-07 becomes effective for the ~~lease term. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets~~annual period starting on January 1, 2024, and lease liabilities. The recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee have not significantly changed from previous GAAP. There continues to be a differentiation between finance leases and operating leases. ASU 2016‑02 is effective for ~~fiscal years beginning after December 15, 2018, and~~ interim periods ~~within those fiscal years, and early~~starting on January 1, 2025. Early adoption is permitted. The Company is currently evaluating the disclosure requirements related to the new standard but does not anticipate a material impact to its net financial position.

3. Asset Acquisitions

LG Chem, Ltd.

On January 4, 2024, the Company entered into a license agreement and share issuance agreement with LG Chem, Ltd. (“LGC”). Under the terms of the license agreement, the Company obtained worldwide rights to LGC’s proprietary compound LB54640 and will assume sponsorship of two ongoing LGC Phase 2 studies designed to evaluate safety, tolerability, pharmacokinetics and weight loss efficacy of LB54640.

The total purchase consideration of $92.4 million was composed of $40.0 million of cash paid at closing and issued shares of the Company’s common stock with an aggregate value of $20.0 million. The shares were issued at a per share price equal to the ten-day volume weighted average closing price for our common stock, calculated as of the trading day immediately prior to January 4, 2024. As of January 4, 2024, the fair value of common stock issued was $18.7 million. The total purchase consideration also includes a $40.0 million license fee payable in 18 months, whose present value at closing was $33.7 million, and $0.8 million of transaction costs which are recorded as selling, general and administrative expenses.

In addition, under the terms of the license agreement, we agreed to pay LGC up to $205 million in cash upon achieving various regulatory and sales milestones based on net sales of LB54640. In addition and subject to the completion of Phase 2 development of LB54640, the Company has agreed to pay LGC royalties of between low-to-mid single digit percent of net revenues from its MC4R portfolio, including LB54640, commencing in 2029 and dependent upon achievement of various regulatory and indication approvals, and subject to customary deductions and anti-stacking. Royalties may further increase to a low double digit percent royalty, though such royalty would only be applicable on net sales of LB54640 in a region if LB54640 is covered by a composition of matter or method of use patent controlled by LGC in such region and the Company’s MC4R portfolio is not covered by any composition of matter or method of use patents controlled by the Company in such region. Such increased rate would only apply on net sales of LB54640 for the limited remainder of the royalty term in the ~~process~~relevant region.

The assets acquired were In-Process Research and Development (IPR&D) assets. However, since the IPR&D assets were determined to have no alternative future use, the Company recognized the $92.4 million of ~~evaluating~~purchase consideration as research and development expense in the ~~impact~~three months ended March 31, 2024.

The Company determined that the additional contingent consideration did not meet the definition of ~~adoption~~a derivative as of ~~ASU 2016‑02~~the acquisition date. Therefore, the Company did not record a contingent consideration liability on the acquisition date. The Company will recognize any future contingent consideration payments related to the LG Chem transaction in the period in which the achievement of the underlying milestones becomes probable.

Xinvento B.V.

On February 27, 2023, the Company, through its wholly-owned Dutch subsidiary, Rhythm Pharmaceuticals Netherlands B.V., a Dutch private limited liability company (“Rhythm BV”), entered into a Share Purchase Agreement (the “Purchase Agreement”) with Xinvento B.V., a Dutch private limited liability company based in the Netherlands (“Xinvento”), and the other parties named therein, pursuant to which, and concurrently with the execution thereof, Rhythm BV acquired all of the issued and outstanding shares of Xinvento. The aggregate consideration at closing was approximately $5,667, inclusive of transaction costs, as adjusted pursuant to the terms of the Purchase Agreement and subject to the distribution and payment terms set forth therein (the “Closing Purchase Price”).

16

Table of Contents

In addition to the Closing Purchase Price, the Purchase Agreement provides for the payment of additional contingent consideration totaling up to $206,000 upon achievement of certain development, regulatory and commercial milestones by Xinvento, as follows: (i) up to an aggregate of $6,000 in clinical development milestones; (ii) up to an aggregate of $125,000 in regulatory approval and commercial milestones; and (iii) up to an aggregate of $75,000 in sales milestones in the event a second molecule is selected, developed and approved.

The total purchase consideration of $5,667 was composed of $4,520 of cash paid at closing, a $500 holdback, paid in the three months ended March 31, 2024, and $647 of acquisition-related costs. The Company determined that substantially all of the value as of acquisition date related to Xinvento’s In-Process Research and Development. As a result, the Company determined this transaction should be accounted for as an asset acquisition.

The assets acquired were In-Process Research and Development (IPR&D) assets. However, since the IPR&D assets were determined to have no alternative future use, the Company recognized the $5,667 of purchase consideration as research and development expense in the year ended December 31, 2023.

The Company determined that the additional contingent consideration did not meet the definition of a derivative as of the acquisition date. Therefore, the Company did not record a contingent consideration liability on the acquisition date. The Company will recognize any future contingent consideration payments related to the Xinvento transaction in the period in which the achievement of the underlying milestones becomes probable.

Xinvento's results of operations are included in the condensed consolidated financial ~~position and results~~statements from the date of acquisition. For the three months ended March 31, 2024, the net loss associated with the operations of Xinvento was de minimis in the Company’s condensed consolidated statements of operations.

~~In March 2016, the FASB issued ASU 2016‑09,~~ ~~Improvements to Employee Share‑Based Payment Accounting (Topic 718)~~ ~~that changes the accounting for certain aspects of share‑based payments to employees. The guidance requires the recognition~~

4. Inventory

Inventory consists of the income tax effects of awards in the income statement when the awards vest or are settled, thus eliminating additional paid in capital pools. The guidance also allows for the employer to repurchase more of an employee's shares for tax withholding purposes without triggering liability accounting. In addition, the guidance allows for a policy election to account for forfeitures as they occur rather than on an estimated basis. The guidance is effective for annual periods beginning after December 15, 2016,following:


	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

5. Accrued Expenses and interim periods within those annual periods with early adoption permitted. Accordingly, the standard is effective for the Company on January 1, 2018. The Company adopted the standard as of January 1, 2017. The adoption did not have a material impact on the Company's financial position, results of operations or cash flows.

In November 2016, the FASB issued ASU 2016‑18, Statement of Cash Flows (Topic 230): Restricted Cash that changes the presentation of restricted cash and cash equivalents on the statement of cash flows. Restricted cash and restricted cash equivalents will be included with cash and cash equivalents when reconciling the beginning‑of‑period and end‑of‑period total amounts shown on the statement of cash flows. This amendment is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. The Company adopted the standard as of January 1, 2017. The adoption did not have a material impact on the Company’s statements of cash flows.

In May 2017, the FASB issued ASU 2017‑09, Compensation‑Stock Compensation (Topic 718): Scope of Modification Accounting. ASU 2017‑09 provides clarity and reduces both (1) diversity in practice and (2) cost and complexity when applying the guidance in Topic 718, to a change to the terms or conditions of a share‑based payment award. The amendments in ASU 2017‑09 should be applied prospectively to an award modified on or after the adoption date. ASU 2017-09 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. The adoption of ASU 2017-09 is not expected to have a material impact on the Company's financial position or results of operations.

~~In July 2017, the FASB issued ASU 2017‑11, Earnings Per Share (Topic 260), Distinguishing~~Other Current Liabilities from Equity (Topic 480) and Derivatives and Hedging (Topic 815): I. Accounting for Certain Financial Instruments with Down Round Features; II. Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception. Part I of this update addresses the complexity of accounting for certain financial instruments with down round features. Down round features are features of certain equity‑linked instruments (or embedded features) that result in the strike price being reduced on the basis of the pricing of future equity offerings. Current accounting guidance creates cost and complexity for entities that issue financial instruments (such as warrants and convertible instruments) with down round features that require fair value measurement of the entire instrument or conversion option. Part II of this update addresses the difficulty of navigating Topic 480, Distinguishing Liabilities from Equity, because of the existence of extensive pending content in the FASB Accounting Standards Codification. This pending content is the result of the indefinite deferral of accounting requirements about mandatorily redeemable financial instruments of certain nonpublic entities and certain mandatorily redeemable noncontrolling interests. The amendments in Part II of this update do not have an accounting effect. ASU 2017-11 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. The Company is currently assessing the potential impact of adopting ASU 2017‑11 on its financial statements and related disclosures.

11

~~Table of Contents~~

~~3. Accrued Expenses~~

Accrued expenses and other current liabilities consisted of the following:

September 30,

December 31,

2017

2016
Research and development costs

$
2,005

$
2,049
Professional fees

371

182
Payroll related

625

344
Other

107

80
Accrued expenses

$
3,108

$
2,655


	March 31,		December 31,
	2024		2023
Research and development costs	$	13,193	$	12,925
Professional fees		3,960		3,833
Payroll related		7,754		15,439
Royalties		1,278		1,180
Sales Allowances		10,144		9,475
Other		8,202		5,410
Accrued expenses and other current liabilities	$	44,531	$	48,262

~~4. Preferred Stock~~

In January 2017, pursuant to the Series A preferred stock purchase agreement, by and among the Company and certain purchasers, and as part of an initial tranche closing, the Company issued 20,475,001 shares of Series A convertible preferred stock, par value $0.001 per share, at a purchase price of $1.00 per share, resulting in net proceeds of $20,377 to the Company (the “January 2017 Initial Tranche Closing”). The Series A preferred stock purchase agreement provided for the delayed issuance by the Company of up to an additional 20,474,998 shares of Series A convertible preferred stock as part of a second tranche closing at a purchase price of $1.00 per share (the “2017 Series A Investor Right/Obligation”). The second tranche is contingent upon: (1) the Company's cash, cash equivalents and short‑term investments balance, net of accounts payable and accrued liabilities, falling below $5.0 million and (2) the Company's satisfaction of contractual and customary representations and warranties. Unless otherwise mutually agreed upon in writing, the rights and obligations underlying the second tranche (if not previously executed) will terminate on the first to occur of the following dates: (1) the date (the “Roadshow Acceleration Date”) on which the Company files with the U.S. Securities and Exchange Commission, or SEC, the last pre‑effective amendment to the registration statement prior to the start of the Company's roadshow in connection with the Intial Public Offering, or IPO, provided, that such termination shall be contingent upon the consummation of the IPO pursuant to the same registration statement that was on file with the SEC on the Roadshow Acceleration Date, without withdrawal thereof or filing of a subsequent registration statement in replacement thereof; and (2) the date of the consummation of a Deemed Liquidation Event (as defined below). To the extent the closing of the second tranche has not already taken place, the investors in the first tranche also have a call right on the shares underlying the second tranche whereby such shares can be purchased for the same price as the second tranche (the “2017 Series A Investor Call Option”). The 2017 Series A Investor Call Option terminates upon the Roadshow Acceleration Date. The 2017 Series A Investor Right/Obligation and the 2017 Series A Investor Call Option have been evaluated and determined to be a free standing instrument, the 2017 Series A Investor Instrument. The 2017 Series A Investor Instrument is being accounted for as a liability (see Note 2).

In August 2017, the Series A Investors waived the $5.0 million cash balance requirement of the Series A Investor Right/Obligation and closed the second tranche of the series A preferred stock financing. The Company issued 20,474,998 shares of Series A convertible preferred stock, par value $0.001 per share, at a purchase price of $1.00 per share, resulting in gross proceeds of $20,475 to the Company. The 2017 Series A Investor Call Option expired unexercised at that time.

Upon the closing of an initial public offering with a minimum price per share and gross proceeds of at least $1.00 and $50.0 million, respectively, the Series A convertible preferred stock will automatically convert into shares of common stock on a 9.17‑for‑1 basis.

~~The holders of the Series A convertible preferred stock have the following rights and preferences:~~

~~Voting Rights~~

The holders of Series A convertible preferred stock are entitled to vote, together with the holders of common stock, on all matters submitted to stockholders for a vote. Each preferred stockholder is entitled to the number of votes equal to the number of shares of common stock into which each preferred share is convertible at the time of such vote. In addition, pursuant to the Company's charter, the holders of record of the outstanding shares of Series A convertible

12

~~Table of Contents~~

~~preferred stock are entitled to elect one director to serve as the Series A preferred director on the board of directors of the Company.~~

~~Dividends~~

The holders of Series A convertible preferred stock are entitled to receive dividends in preference to any dividend on common stock at the rate of 8.0% per year of the original issue price. Dividends shall accrue annually, whether or not declared, and shall be cumulative. The Company may not declare, pay or set aside any dividends on shares of any other class or series of capital stock of the Company unless the holders of Series A convertible preferred stock then outstanding shall first receive, or simultaneously receive, dividends on each outstanding share of Series A convertible preferred stock. Through September 30, 2017 and December 31, 2016, no dividends had been declared or paid by the Company. Accrued dividends, whether or not declared, shall also be payable upon any liquidation event. At September 30, 2017 and December 31, 2016, cumulative preference dividends amounted to $7,914, or $0.10 per share and $4,129, or $0.10 per share, respectively.

~~Liquidation~~

In the event of any liquidation, dissolution or winding‑up of the Company or a Deemed Liquidation Event (as defined below), the holders of Series A convertible preferred stock then outstanding shall be entitled to be paid out of the assets of the Company available for distribution to stockholders, and before any payment shall be made to holders of common stock, an amount per share equal to greater of (i) the original issue price per share, plus any accrued but unpaid dividends thereon, whether or not declared, plus any declared but unpaid dividends thereon, if any, or (ii) such amount per share as would have been payable had all shares of Series A convertible preferred stock been converted to common stock prior to such liquidation. If upon such event, the assets of the Company available for distribution are insufficient to permit payment in full to the holders of Series A convertible preferred stock, the proceeds will be ratably distributed among the holders of Series A convertible preferred stock in proportion to the respective amounts that they would have received if they were paid in full. After payments have been made in full to the holders of Series A convertible preferred stock, the remaining assets of the Company available for distribution will be distributed among the holders of Series A convertible preferred stock, the holders of the Series A-1 convertible junior preferred stock, and the holders of common stock as if the shares of Series A convertible preferred stock and Series A-1 convertible junior preferred stock were converted to common stock immediately prior to the liquidation event.

A merger, acquisition, sale of voting control or other transaction of the Company in which the stockholders of the Company do not own a majority of the outstanding shares of the surviving company shall be considered a Deemed Liquidation Event. A sale, exclusive license, transfer or other disposition of all or substantially all of the assets of the Company shall also be considered a Deemed Liquidation Event. Each share of Series A convertible preferred stock may be redeemed at the option of the holder upon the occurrence of a deemed liquidation event. As of September 30, 2017 and December 31, 2016, the liquidation preference of the outstanding shares of Series A convertible preferred stock was approximately $88,864 and $44,129, respectively.

~~Conversion~~

Each share of Series A convertible preferred stock is convertible into common stock at the option of the stockholder at any time after the date of issuance. In addition, each share of Series A convertible preferred stock will be automatically converted into shares of common stock, at the applicable conversion ratio then in effect, upon the earlier of (i) a qualified public offering with gross proceeds of at least $50,000 and a price of not less than $1.00 per share, subject to appropriate adjustment for any stock dividend, stock split, combination or other similar recapitalization, and (ii) the date specified by vote or written consent of the holders of at least two‑thirds of the then outstanding shares of series A preferred stock. The shares of Series A convertible preferred stock will be converted to common stock, at par value, with the remainder recorded to additional paid‑in capital.

The conversion ratio of the Series A convertible preferred stock is determined by dividing the original issue price per share by the conversion price of $9.17 per share, subject to appropriate adjustment in the event of any stock dividend, stock split, combination or recapitalization affecting the Series A convertible preferred stock. As of September 30, 2017

13

~~Table of Contents~~

~~and December 31, 2016, the outstanding shares of Series A convertible preferred stock were convertible into 8,827,692~~ ~~and~~ ~~4,362,050 shares of common stock, respectively.~~

5.6. Fair Value of Financial Assets and ~~Liability~~Liabilities

As of ~~September 30, 2017~~March 31, 2024 and December 31, ~~2016,~~2023, the carrying amount of cash and cash equivalents and ~~short‑term~~short-term investments was ~~$30,415~~$201,199 and ~~$10,537,~~$275,846 respectively, which approximates fair value. Cash and cash equivalents and ~~short‑term~~

17

Table of Contents

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 and had a total balance of $28,722 and $7,984 as of September 30, 2017 and December 31, 2016, respectively.~~

A1. The financial ~~liability was recognized by the Company during the nine months ending September 30, 2017 related to the 2017 Series A Investor Instrument that was exercised in August 2017. The liability was~~assets valued based on ~~significant~~Level 2 inputs ~~not observable~~consist of corporate debt securities and commercial paper, which consist of investments in the market, which represents a Level 3 measurement within the fair value hierarchy. For the year ended December 31, 2016, the Company had no financial liabilities outstanding measured at fair value.highly-rated investment-grade corporations.

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

Fair value Measurements as of

September 30, 2017 using:


Level 1

Level 2

Level 3

Total
Assets:

Cash Equivalents:








Government Funds

$
—

$
—

$
—

$
—
Money Market Funds

26,221

—

—

26,221
Marketable Securities:








Government Funds

2,501

—

—

2,501
Total

$
28,722

$
—

$
—

$
28,722
Liabilities:








2017 Series A Investor Instrument

$
—

$
—

$
—

$
—
Total

$
—

$
—

$
—

$
—

Fair value Measurements as of

December 31, 2016 using:


Level 1

Level 2

Level 3

Total
Assets:

Cash Equivalents:








Government Funds

$
2,000

$
—

$
—

$
2,000
Money Market Funds

1,987

—

—

1,987
Marketable Securities:








Government Funds

3,997

—

—

3,997
Total

$
7,984

$
—

$
—

$
7,984

value:


	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

The estimated fair value of the derivative liability related to our Royalty Interest Financing Agreement (RIFA) with HealthCare Royalty Partners was determined using Level 3 inputs. The fair value measurement of the derivative liability 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.

The embedded derivative liability associated with our deferred royalty obligation, as discussed further in Note 12, “Long-Term Obligations”, is measured at fair value using an option pricing Monte Carlo simulation model and is included as a component of the deferred royalty obligation on the condensed consolidated balance sheets. The embedded derivative liability is subject to remeasurement at the end of each reporting period, with changes in fair value recognized as a component of other (expense) income, net. The assumptions used in the option pricing Monte Carlo simulation model include: (1) our estimates of the probability and timing of related events; (2) the probability-weighted net sales of IMCIVREE, including worldwide net product sales, upfront payments, milestones and royalties; (3) our risk-adjusted discount rate that includes a company specific risk premium; (4) our cost of debt; (5) volatility; and (6) the probability of a change in control occurring during the term of the instrument.

1418

Table of Contents


	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

Marketable Securities

The following tables summarize the Company's marketable securities:

September 30, 2017

Gross

Gross

Amortized

Unrealized

Unrealized

Fair


Cost

Gains

Losses

Value
Assets

Government Funds (due within 1 year)

$
2,502

$
—

$
(1)

$
2,501

$
2,502

$
—

$
(1)

$
2,501


	December 31, 2016
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value

									March 31, 2024
											Gross		Gross
									Amortized		Unrealized		Unrealized		Fair
									Cost		Gains		Losses		Value
Assets
Government Funds (due within 1 year)	$	3,997	$	—	$	—	$	3,997
	$	3,997	$	—	$	—	$	3,997
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

~~Below~~

7. 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 1.3 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, 2024, 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, 2024, all of which is under a non-cancellable operating lease:


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

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8. Intangible Assets


		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

As of March 31, 2024, the Company’s finite-lived net intangible assets, which totaled $6,815 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, 2024, amortization expense for the next five years and beyond is summarized as follows:


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

Amortization expense totaled $214 and $214 for the three months ended March 31, 2024 and 2023, respectively. Amortization expense is included in cost of sales in the condensed consolidated statements of operations and comprehensive loss.

9. Income Taxes

The Company recorded an income tax provision of approximately $300 for the three months ended March 31, 2024. The income tax provision is a ~~roll forward~~result of taxable income from the Company’s foreign jurisdictions. The Company did not record an income tax provision for the three months ended March 31, 2023, as it generated sufficient tax losses during the period. The Company expects to maintain a full valuation allowance against its net deferred tax assets for the year.

10. Common Stock

As of March 31, 2024, an aggregate of 15,285,096 shares of common stock was 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 8,804,692 and 1,294,531 shares available for future grants under the Company’s 2017 Equity Employee Stock Purchase Plan.

On November 2, 2021, the Company entered into a Sales Agreement with Cowen and Company, LLC (“Cowen”), pursuant to which the Company may issue and sell shares of its common stock, having an aggregate offering price of up to $100.0 million, from time to time through an “at the market” equity offering program under which Cowen acts as sales agent (the “ATM Program”). Between August 10, 2023 and August 21, 2023, the Company sold approximately two million shares of its common stock in the ATM Program for net proceeds of approximately $48.9 million. The Company intends to use the net proceeds from the ATM Program to support its global commercialization efforts for IMCIVREE® (setmelanotide) and clinical development programs in hypothalamic obesity and other rare MC4R pathway diseases.

On February 29, 2024, the Company and Cowen entered into Amendment No. 1 to Sales Agreement (the “Amendment”) to increase the aggregate offering price of the shares of Common Stock that may be issued and sold pursuant to the Sales Agreement to $200,000,000 (excluding the aggregate offering price of shares of Common Stock

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issued and sold pursuant to the Sales Agreement prior to February 29, 2024). In connection with the Amendment, on February 29, 2024, the Company filed with the SEC a prospectus supplement, dated February 29, 2024, which, combined with the Base Prospectus (together, the “New Prospectus”), amended the Prior Prospectus in its entirety. The issuances and sales under the Sales Agreement, as amended by the Amendment, will be made pursuant to the Registration Statement and the New Prospectus.

On February 9, 2022, the Company’s board of directors adopted the Rhythm Pharmaceuticals, Inc. 2022 Employment Inducement Plan or the Inducement Plan, without stockholder approval pursuant to Rule 5635(c)(4) of the Nasdaq Stock Market LLC listing rules or 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 the three months ended March 31, 2024, 553,889 stock option awards have been issued under the Inducement Plan. As of March 31, 2024, 281,196 restricted stock unit awards have been granted under the Inducement Plan. As of March 31, 2024, 164,915 shares of common stock are available for future grant under the Inducement Plan.

On January 4, 2024, the Company issued 432,143 shares of common stock as partial consideration for its acquisition of the worldwide rights to LGC’s proprietary compound LB54640.

11. Related-Party Transactions

Expenses paid directly to related parties for the three months ended March 31, 2024 and 2023, were $135 and $322, respectively. Outstanding payments due to related parties as of March 31, 2024 and December 31, 2023 were $5 and $1, respectively. See also Note 13, “Subsequent Events” for disclosure regarding transactions after March 31, 2024.

12. Long-Term Obligations

On June 16, 2022, we entered into a RIFA with entities managed by HealthCare Royalty Management, LLC, collectively referred to as the Investors. Pursuant to the RIFA and subject to customary closing conditions, the Investors have agreed to pay the Company an aggregate investment amount of up to $100,000, or the Investment Amount. Under the terms of the RIFA, we received $37,500 on June 29, 2022 upon FDA approval of IMCIVREE in BBS, referred to as the Initial Investment Amount, and we received an additional $37,500 on September 29, 2022 of the Investment Amount upon EMA approval for BBS. On September 12, 2023, we received the remaining $24,370 of the Investment Amount, net of debt issuance costs, following the achievement of a specified amount of cumulative net sales of IMCIVREE between July 1, 2022 and September 30, 2023.

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

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worldwide net product sales and upfront payments, milestones, and royalties. We made repayments of $2,783 in the three months ended March 31, 2024. As of March 31, 2024 we have made cumulative payments of $10,313.

The Investors’ rights to receive the Revenue Interests will terminate on the date on which the Investors have received payments equal to a certain percentage of the funded portion of the Investment Amount including the aggregate of all payments made to the Investors as of such date, each percentage tier referred to as the Hard Cap, unless the RIFA is earlier terminated. The total Revenue Interests payable by us to the Investors is capped between 185% and 250% of the Investment Amount paid, dependent on the aggregate royalty paid between 2028 and 2032. If a change of control of occurs, the Investors may accelerate payments due under the RIFA up to the Hard Cap plus any other obligations payable under the RIFA.

The repayment period commenced on July 8, 2022 for the Initial Investment Amount, and expires on the earlier of (i) the date at which the Investors received cash payments totaling an aggregate of a Hard Cap ranging from 185% to 250% of the Initial Investment Amount or (ii) the legal maturity date of July 8, 2034. If the Investors have not received payments equal to 250% of the Investment Amount by the twelve-year anniversary of the initial closing date, we will be required to pay an amount equal to the Investment Amount plus a specific annual rate of return less payments previously received by Investors. In the event of a change of control, we are obligated to pay Investors an amount equal to the Hard Cap in effect at the time, ranging from 185% to 250% plus any Under Performance Payment of the Investment Amount less payments previously received by Investors. In addition, upon the occurrence of an event of default, including, among others, our failure to pay any amounts due to Investors under the deferred royalty obligation, insolvency, our failure to pay indebtedness when due, the revocation of regulatory approval of IMCIVREE in the U.S. or our breach of any covenant contained in the RIFA and our failure to cure the breach within the prescribed time frame, we are obligated to pay Investors an amount equal to the Hard Cap in effect at the time of default ranging from 185% to 250% plus any Under Performance Payment of the Investment Amount less payments previously received by Investors. In addition, upon an event of default, Investors may exercise all other rights and remedies available under the RIFA, including foreclosing on the collateral that was pledged to Investors, which consists of all of our present and future assets relating to IMCIVREE.

We have evaluated the terms of the RIFA and concluded that the features are similar to those of a debt instrument. Accordingly, we have accounted for the transaction as long-term debt and presented it as a deferred royalty obligation on our condensed consolidated balance sheets. We have further evaluated the terms of the RIFA and determined that the repayment of the Hard Cap in effect at the time which ranges from 185% to 250% of the Investment Amount, less any payments made to date, upon a change of control is an embedded derivative that requires bifurcation from the debt instrument and fair value recognition. We determined the fair value of the derivative using an option pricing Monte Carlo simulation model taking into account the probability of change of control occurring and potential repayment amounts and timing of such payments that would result under various scenarios, as further described in Note 2, “Summary of Significant Accounting Policies” to our condensed consolidated financial statements. The aggregate fair value of the embedded derivative liability was $660 and $1,150 as of March 31, 2024 and December 31, 2023, respectively. We will remeasure the embedded derivative to fair value each reporting period until the time the features lapse and/or termination of the deferred royalty obligation. For the three months ended March 31, 2024 and 2023, we recognized other income of $490 and $50, respectively, due to the remeasurement of the embedded derivative liability.

The carrying value of the deferred royalty obligation as of March 31, 2024 was $107,368 based on $100,000 of proceeds, net of the fair value of the ~~2017 Series A Investor Instrument for~~bifurcated embedded derivative liability upon execution of the ~~nine months ended September 30, 2017:~~


	~~2017 Series A Investor~~
	~~Instrument~~
~~Fair value at December 31, 2016~~	$	—
~~Fair value upon the January 2017 Initial Closing, net~~		~~328~~
~~Change in fair value through the date of settlement~~		~~1,863~~
~~Reclassification of liability upon August 2017 Second Tranche Closing~~		~~(2,191)~~
~~Fair value at September 30, 2017~~	$	—

RIFA, and debt issuance costs incurred. The ~~fair~~carrying value of the ~~Series A Investor Instrument is~~deferred royalty obligation approximated fair value as of March 31, 2024 and December 31, 2023. The effective interest rate as of March 31, 2024 was 15.15%. In connection with the ~~sum~~deferred royalty obligation, we incurred debt issuance costs totaling $3,287. Debt issuance costs have been netted against the debt and are being amortized over the estimated term of the ~~probability‑weighted fair value of~~debt using the ~~2017 Investor Right/Obligation and~~effective interest method, adjusted on a prospective basis for changes in the ~~2017 Series A Call Option.~~

~~The following~~underlying assumptions and ~~inputs were~~inputs. The assumptions used in determining the ~~fair value~~expected repayment term of the ~~2017~~debt and amortization period of the issuance costs requires that we make estimates that could impact the short and long-term classification of these costs, as well as the period over which these costs will be amortized.

13. Subsequent Events

On April 1, 2024, the Company entered into an Investment Agreement (the “Investment Agreement”) with certain affiliates of Perceptive Advisors LLC (“Perceptive”) and certain other investors (each, an “Investor” and collectively, the

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“Investors”), relating to the issuance and sale of 150,000 shares of a new series of the Company’s Series A ~~Investor Call Option valued using~~Convertible Preferred Stock, par value $0.001 per share, titled the ~~Black‑ Scholes option pricing model:~~

August 2017 Second Tranche Closing

Series A Convertible Preferred Stock Exercise Price

$
1.00

Series A Convertible Preferred Stock Fair Value

$
1.33

Expected term

1.5 months

Expected volatility

64.0
%
Expected interest rate

0.95
%
Expected dividend yield

—

~~In August 2017, upon~~“Series A Convertible Preferred Stock” (the “Convertible Preferred Stock”), for an aggregate purchase price of $150,000, or $1,000 per share (the “Issuance”). The Issuance closed on April 15, 2024. Prior to the closing of the ~~second tranche~~Issuance, certain of the ~~series A preferred stock financing, the 2017 Series A Investor Call Option expired unexercised.~~

~~The Company estimated the fair value~~investors and certain of their affiliated entities held over 5% of the ~~2017 Series A Investor Right/Obligation as~~Company’s common stock, par value $0.001 per share (the “Common Stock”).

On May 7, 2024, the ~~probability‑weighted present value~~Company filed an Amended and Restated Certificate of Designations in respect of the expected benefit of the investment. The expected benefit is the difference between the expected future value of shares issued upon the second tranche closing and the investment price for the second tranche closing. The expected future value is estimated as a weighted average of IPO and remain private scenarios, and the future value is convertedConvertible Preferred Stock containing certain technical amendments to ~~a present value assuming a closing date of October 15, 2017 and a nominal, risk‑free discount rate.~~

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~~6. Common Stock~~

~~In March 2013, the Company issued 10,196,292 shares of common stock at a purchase price of $0.001 per share. As of December 31, 2016, the LLC entity owned all of these shares.~~

On August 21, 2017, the LLC entity exchanged 8,578,646 of its shares of the Company's common stock for 78,666,209 shares of the Company's series A‑1 junior preferred stock and the LLC entity distributed all of its shares of the Company's series A‑1 junior preferred stock to the holders of its preferred units and the remaining 1,617,646 shares of its common stock to the holders of its common units. Following this distribution, the LLC entity no longer owns any of the Company's shares. The series A‑1 junior preferred stock is not redeemable and does not have a stated dividend or liquidation preference. These shares will convert to common stock on a 9.17‑to‑1 basis upon the earlier of (i) a qualified public offering with gross proceeds of at least $50,000 and a price of not less than $1.00 per share, subject to appropriate adjustment for any stock dividend, stock split, combination or other similar recapitalization, and (ii) the date specified by vote or written consent of the holders of the requisite holders of series A preferred stock and series A‑1 junior preferred stock.

In September 2017, the Company's board of directors approved a 1-for-9.17 reverse stock split of the Company's issued and outstanding shares of common stock. All shares and per share amounts in the financial statements have been retrospectively adjusted for all periods presented to give effect of the reverse stock split.

~~7. Significant Agreements~~

~~License Agreements~~

The Predecessor Company entered into a license agreement on February 26, 2010 with Ipsen Pharma, S.A.S. (“Ipsen”) that granted full worldwide right for two programs that include the clinical candidates setmelanotide and relamorelin. As a result of the Corporate Reorganization described in Note 1, the Ipsen license was converted to separate license agreements for the setmelanotide program held by the Company and the relamorelin program held by the Relamorelin Company, respectively. Under the terms of the setmelanotide Ipsen license agreement, assuming that setmelanotide is successfully developed, receives regulatory approval and is commercialized, Ipsen may receive aggregate payments of up to $40,000 upon the achievement of certain development and commercial milestones and royalties on future product salesConvertible Preferred Stock. The amendments contained in the ~~mid‑single digits. Substantially all~~Amended and Restated Certificate of ~~such aggregate payments of up to $40,000 are for milestones that may be achieved no earlier than first commercial sale of setmelanotide. In~~Designations (x) limited the event that the Company executes a sublicense agreement, it shall make payments to Ipsen, depending on the date of such sublicense agreement, ranging from 10% to 20% of all revenues actually received under such sublicense agreement.

In July 2017, the Company made a prepayment on the first milestone event associated with this license agreement. The first milestone relates to the initiation of a Phase 3 study for setmelanotide in a pivotal multi-center human clinical trial in a large number of patients. The prepayment associated with this milestone was $1,000.

In January 2016, the Company entered into a licensing agreement with Camurus AB, or Camurus, for the use of Camurus’ drug delivery technology. The contract includes a non‑refundable and non‑creditable signing fee of $500, which was paid during January 2016. The Camurus Agreement also includes up to $7,750 in one‑time, non‑refundable development milestones achievable upon certain regulatory successes. The Company is also required to pay to Camurus royalties, mid to mid‑high single digit, on a product‑by‑product and country‑by‑country basis of annual net sales, until the later of (i) 10 years after the date of first commercial sale of such product in such country; or (ii) the expirationvoting rights of the ~~last~~Convertible Preferred Stock to expire valid claim of all licensed patent rights in such country covering such product. The Company is also required to pay one‑time, non‑refundable, non‑creditable sales milestones upon the achievement of certain sales levels for such product and cannot be in excess of $57,000.

In March 2017, the Company achieved the first milestone event associated with this license agreement. The Company completed the first manufactured batch using the Camurus drug delivery technology and filed an investigational new drug application with the FDA. The fee associated with this milestone was $250.

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~~8. Related‑Party Transactions~~

The Company shared costs with the Relamorelin Company, its affiliate, including payroll, facilities, information technology and other research and development and general and administrative overhead costs. Additionally, the Relamorelin Company had paid certain Company expenses directly on behalf of the Company. Shared costs incurred by the Relamorelin Company and Company expenses paid by the Relamorelin Company on behalf of the Company are allocated from the Relamorelin Company to the Company as described in Note 1 and Note 2. The Relamorelin Company was sold to a large pharmaceutical company on December 15, 2016.

The LLC entity made payments on behalf of the Company totaling $105 related to allocated 2016 employee bonuses. Those costs are recorded as a payable due to the LLC entity from the Company at December 31, 2016 on the balance sheet.

Expenses paid directly by the Company to consultants considered to be related parties amounted to $294, $880, $184 and $386 for the three and nine months ended September 30, 2017 and 2016, respectively. Outstanding payments due to these related parties as of September 30, 2017 and December 31, 2016 were $130 and $50, respectively, and were included within accounts payable on the balance sheet. Expenses paid by the Relamorelin Company to these related parties amounted to zero, zero, $173 and $622 for the three and nine months ended September 30, 2017 and 2016, respectively.

Employees of certain holders of series A and series B convertible preferred units of the LLC entity, have been retained as consultants supporting development activities of the Company and the Relamorelin Company for which the holders are paid cash compensation pursuant to consulting arrangements. Compensation payments related to these consultants totaled $33, $77, $11 and $48 for the three and nine months ended September 30, 2017 and 2016, respectively.

~~9. Income Taxes~~

In the Company's financial statements, income taxes, including deferred tax balances, have been calculated on a separate tax return basis. Certain of the Company's activities and costs have been included in the tax returns filed by the Relamorelin Company and the LLC entity. Prior to the Corporate Reorganization, the Company's operations were included in the tax returns filed by the Predecessor Company. The Company has filed tax returns on its own behalf since the Corporate Reorganization.

For the year ended December 31, 2016, the Company did not have a current or deferred income tax expense or benefit as the entity has incurred losses since inception and has provided a full valuation allowance against its deferred tax assets.

~~10. Subsequent Events~~

On October 5, 2017, the Company filed an amended and restated certificate of incorporation with the Secretary of State of the State of Delaware to increase its authorized number of shares of common stock to 120,000,000 shares of common stock, $0.001 par value per share and 10,000,000 shares of preferred stock, $0.001 par value per share.

On October 10, 2017 the Company completed its IPO of 8,107,500 shares of common stock at an offering price of $17.00 per share, which included the exercise in full by the underwriters of their option to purchase up to 1,057,500 additional shares of common stock. The Company received gross proceeds of approximately $137,828 or net proceeds of $125,780 after deducting underwriting discounts, commissions and estimated offering expenses. In connection with the IPO, the Company’s outstanding shares of convertible preferred stock were automatically converted into 17,406,338 shares of common stock. After the IPO, our outstanding common shares were 27,284,140. The financial statements as of September 30, 2017, including share and per share amounts, do not include the effects of the IPO.

On October 10, 2017 upon consummation of the Company’s IPO, the Company adopted the 2017 equity incentive plan (the “2017 plan”). The 2017 plan serves as the successor to the 2015 equity incentive plan (the “2015 plan”), and no further awards will be made under the 2015 plan. All awards outstanding under the 2015 plan have been treated as outstanding under the 2017 plan. The aggregate number of24.9438 shares of the Company’s common stock ~~which~~per $1,000 liquidation preference of Convertible Preferred Stock and (y) eliminated a 1% step up in the interest rate that otherwise would have applied in the unlikely event that the Company was required to obtain and failed to obtain stockholder approval for certain conversion shares underlying the Convertible Preferred Stock.

On May 2, 2024, the Company entered into an agreement to amend the current material operating lease agreement for its head office facility located at 222 Berkeley Street in Boston, Massachusetts. Under the amendment, the current lease has been extended for five years through July 31, 2030, with $5,694 committed to future lease payments.

14. Commitments and Contingencies

Legal Proceedings

The Company, from time to time, may be ~~issued~~

17

~~Table~~party to various litigation arising in the ordinary course of ~~Contents~~

~~under the 2017 plan or with respect to which awards may be granted may~~business. The Company is not exceed 4,018,538 shares. The number of shares which may be issued under the 2017 plan includes shares of common stock available for issuance under the 2015 plan, including the portion of those sharespresently subject to ~~options outstanding~~any pending or threatened litigation that it believes, if determined adversely to the Company, individually, or taken together, would reasonably be expected to have a material adverse effect on its business or financial results.

Other

The Company is party to various agreements, principally relating to licensed technology, that ~~date. The number~~require future payments relating to milestones whose achievement may become probable in subsequent periods, or royalties on future sales of ~~shares authorized under~~specified products. Additionally, the ~~2017 plan will~~Company is party to various contracts with CROs and CMOs that generally provide for termination on notice, with the exact amounts in the event of termination to be ~~increased each January 1, by an amount equal to 4%~~based on the timing of the termination and the terms of the agreement.

Based on the Company’s ~~outstanding shares of stock~~current development plans as of March 31, 2024, the ~~end~~Company does not expect to make milestone payments due to third parties during the next 12 months from the filing of this Annual Report on Form 10-K, in connection with our license agreements. These milestones are generally recognized in the period in which the achievement of the ~~immediately preceding fiscal year.~~underlying milestones becomes probable. When the achievement of these milestones or sales have not occurred, such contingencies are not recorded in the Company’s consolidated financial statements.

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~~Table of Contents~~

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

You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited condensed consolidated financial statements and ~~the~~ related notes ~~and other financial information included~~appearing elsewhere in this Quarterly Report on Form 10-Q and with our audited financial statements and the notes thereto for the year ended December 31, 2016 included in our prospectus dated October 4, 2017 filed with the Securities and Exchange Commission pursuant10-Q. In addition to ~~Rule 424(b) under the Securities Act of 1933, as amended. Some~~historical information, some of the information contained in this discussion and analysisor set forth elsewhere in this Quarterly Report on Form 10-Q ~~including~~contains forward-looking statements ~~regarding~~within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and is subject to the “safe harbor” created by those sections. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including without limitation statements regarding:the promise or potential of any of our products or product candidates; the marketing and commercialization of IMCIVREE (setmelanotide), and the timing of commercialization; the design, success, cost and timing of our product development activities and clinical trials for setmelanotide and our other product candidates; our ability to obtain regulatory approval for setmelanotide in further indications, as well as for our other product candidates; our financial performance, including

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our expectations regarding our existing cash, operating losses, expenses and sources of future financing; ~~statements regarding~~the sufficiency of our ~~plans~~cash, cash equivalents and short-term investments to ~~research, develop and commercialize setmelanotide, if approved; statements regarding the impact of changes in accounting standards; statements regarding~~fund our operations; our ability to hire and retain necessary personnel; ~~statements~~patient enrollments and the timing thereof; the timing of announcements regarding results of clinical trials; our ability to protect our intellectual property; ~~statements regarding~~ongoing activities under and our ability to negotiate our collaboration and license agreements, if needed, and the impact of termination; our marketing, commercial sales, and revenue generation; expectations surrounding our manufacturing arrangements; the potential financial impact, the ongoing integration process of Xinvento B.V.; the impact of the current economic slowdown on our business and operations and our future financial results; and other statements identified by words such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “intends,” “may,” “might,” “likely,” “plans,” “potential,” “predicts,” “projects,” “seeks,” “should,” “target,” “will,” “would,” or similar expressions and the negatives of those terms ~~include forward‑looking statements that involve risks and uncertainties.~~~~Forward-looking~~are forward-looking statements. These forward-looking statements are ~~not~~neither promises ornor guarantees of future performance, and are subject to a variety of known and unknown risks, uncertainties, and ~~uncertainties,~~other important factors, many of which are beyond our control, and which could cause actual results to differ materially from those contemplated in such forward-looking statements. ~~These~~We discuss factors ~~include~~that we believe could cause or contribute to these differences below and elsewhere in this report, including but not limited to those set forth in Part II, Item 1A under the heading “Risk Factors” of this Quarterly Report on Form 10-Q. ~~Our actual results could differ materially from~~Except as may be required by law, we have no plans to update our forward-looking statements to reflect events or circumstances after the ~~results described in or implied by~~date of this Quarterly Report on Form 10-Q. We caution readers not to place undue reliance upon any such ~~forward‑looking statements. Forward-looking~~forward-looking statements, which speak only as of the date ~~hereof, and, except as required by law, we undertake no obligation to update or revise these forward-looking statements.~~ made.

Overview

We are a global, commercial-stage biopharmaceutical company dedicated to transforming the lives of patients and their families living with rare neuroendocrine diseases. We are focused on advancing our melanocortin-4 recptor (MC4R) agonists, including our lead asset, IMCIVREE® (setmelanotide), as a precision medicine designed to treat hyperphagia and severe obesity caused by rare MC4R pathway diseases. While obesity affects hundreds of millions of people worldwide, we are advancing developing therapies for a subset of individuals who have hyperphagia, a pathological hunger that leads to abnormal food-seeking behaviors, and severe obesity due to an impaired MC4R pathway, which may be caused by traumatic injury or genetic variants. The MC4R pathway is an endocrine pathway in the ~~development~~brain that is responsible for regulating hunger, caloric intake and commercialization of peptide therapeutics for the treatment of rare genetic deficiencies that result in life‑threatening metabolic disorders. Our lead peptide product candidate is setmelanotide, a potent, first‑in‑class melanocortin-4 receptor, orenergy expenditure, which consequently affect body weight. IMCIVREE, an MC4R agonist for ~~the treatment of rare genetic disorders of obesity. We believe setmelanotide, for~~ which we ~~have exclusive~~hold worldwide rights, ~~has~~is the ~~potential to serve as replacement~~first-ever therapy developed for ~~the treatment of melanocortin-4,~~patients with certain rare diseases that is approved or ~~MC4, pathway deficiencies. MC4 pathway deficiencies result~~authorized in the ~~disruption of satiety signals~~United States, European Union (EU), Great Britain, Canada and ~~energy homeostasis in~~other countries and regions. IMCIVREE is approved by the body, which, in turn, leads to intense feelings of hunger and to obesity. Our development efforts are initially focused on obesity related to six single gene-related, or monogenic, MC4 pathway deficiencies, pro-opiomelanocortin, or POMC, leptin receptor, or LepR, Bardet‑Biedl syndrome, Alström syndrome, POMC heterozygous and POMC epigenetic disorders for which there are currently no effective or approved treatments. We believe that the MC4 pathway is a compelling target for treating these genetic disorders because of its critical role in regulating appetite and weight by promoting satiety and weight control, and that peptide therapeutics are uniquely suited for activating this target.

We have demonstrated proof of concept in Phase 2 clinical trials in POMC deficiency obesity, LepR deficiency obesity and Bardet‑Biedl syndrome, three genetic disorders of extreme and unrelenting appetite and obesity, in which setmelanotide dramatically reduced both weight and hunger. The U.S. Food and Drug Administration (FDA) for chronic weight management in adult and pediatric patients 6 years of age and older with monogenic or ~~FDA, has acknowledged the importance~~syndromic obesity due to: (i) proopiomelanocortin (POMC), proprotein convertase subtilisin/kexin type 1 (PCSK1) or leptin receptor (LEPR) deficiency as determined by an FDA-approved test demonstrating variants in POMC, PCSK1, or LEPR genes that are interpreted as pathogenic, likely pathogenic, or of ~~this preliminary clinical evidence by giving setmelanotide breakthrough therapy designation~~uncertain significance (VUS); or (ii) Bardet-Biedl syndrome (BBS). The European Commission (EC) and Great Britain’s Medicines & Healthcare Products Regulatory Agency (MHRA) have authorized IMCIVREE for the treatment of obesity and the control of hunger associated with genetically confirmed BBS or genetically confirmed loss-of-function biallelic POMC, including PCSK1, deficiency or biallelic LEPR deficiency in adults and children 6 years of age and above. In addition to the United States and Canada, we have achieved market access for IMCIVREE for BBS or POMC and LEPR deficiencies, or both, in 14 countries outside the United States, and we continue to collaborate with authorities to achieve access in additional markets.

In addition to initial commercial efforts, we are advancing what we believe is the most comprehensive clinical research program ever initiated in MC4R pathway diseases, with multiple ongoing and planned clinical trials. Our MC4R pathway program is designed to expand the total number of patients who would benefit from setmelanotide therapy or our one of our new drug candidates, RM-718, which is designed to be a more selective MC4R agonist with weekly administration, or LB54640, an investigational oral small molecule MC4R agonist in Phase 2 clinical trials. With setmelanotide, we have completed enrollment in our Phase 3 trial in patients with hypothalamic obesity. Our Phase 3 EMANATE trial, comprised of four independent substudies evaluating setmelanotide in genetically caused MC4R pathway diseases, and our Phase 2 DAYBREAK trial evaluating setmelanotide in additional genetic ~~defects upstream~~indications, are ongoing. With RM-718, in March 2024 we initiated a Phase 1 in-human trials, including a multiple-ascending dose study in patients with hypothalamic obesity. In our recently completed Phase 3 pediatrics trial in 12 patients between the ages of 2 and younger than 6 with BBS or POMC or LEPR deficiency obesities, setmelanotide achieved the ~~MC4 receptor~~primary endpoint

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with a 3.04 mean reduction in BMI-Z score (a measure of body mass index deviations from what is considered normal) and 18.4 percent mean reduction in BMI. We are seeking regulatory approval in the ~~leptin-melanocortin~~United States and Europe to expand the label for IMCIVREE to treat patients as young as 2 years of age with these diseases based on these data.

We are leveraging what we believe is the largest known DNA database focused on obesity - with almost 80,000 sequencing samples as of December 31, 2023 - to improve the understanding, diagnosis and care of people living with severe obesity due to certain variants in genes associated with the MC4R pathway. Our sequencing-based epidemiology estimates show that each of these genetically-defined MC4R pathway ~~which includes both~~deficiencies are considered rare diseases, according to established definitions based on patient populations. Our epidemiology estimates are approximately 4,600 to 7,500 for U.S. patients in initial FDA-approved indications, including obesity due to biallelic POMC, ~~deficiency~~PCSK1 or LEPR deficiencies,

and BBS. We estimate the epidemiology for patients with hypothalamic obesity to be between 5,000 and ~~LepR deficiency obesity. Setmelanotide is currently~~10,000 in the United States, based on our analysis of published literature. Our epidemiology estimates for the indications being studied in our Phase 3 ~~development~~EMANATE trial suggest that approximately 53,000 U.S. patients with one of these genetically driven obesities have the potential to respond well to setmelanotide. Similarly, our epidemiology estimates for ~~POMC deficiency obesity~~patients with genetic indications who demonstrated an initial response in our Phase 2 DAYBREAK trial is approximately 65,300. We believe that all these patients face similar challenges as other patients with rare diseases, namely lack of awareness, resources, tests, tools and, ~~LepR deficiency obesity.~~ especially, therapeutic options.

We are ~~currently enrolling~~developing setmelanotide to address additional patients with acquired hypothalamic obesity. In our Phase 2 trial evaluating setmelanotide as a treatment for hypothalamic obesity, as announced in November 2022, 16 of 18 patients achieved the primary endpoint with a body mass index (BMI) decrease greater than 5 percent on setmelanotide therapy, and we observed a 14.5 mean percent reduction in BMI across all patients. Fourteen of these patients transitioned from this Phase 2 trial into our open-label, long-term extension trial and they remain on therapy, as of April 2024. Twelve of these 14 patients had achieved a 25.5% reduction in mean BMI from baseline at one year on setmelanotide therapy. We completed enrollment in the pivotal 120-patient cohort in our ~~POMC deficiency obesity~~ Phase 3 clinical trial. ~~We expect~~Patients with acquired hypothalamic obesity aged 4 years or older were randomized 2:1 to ~~complete enrollment by~~setmelanotide therapy or placebo for a total of 60 weeks, including up to eight weeks for dose titration. The primary endpoint is the ~~end~~percent change in BMI after approximately 52 weeks on a therapeutic regimen of ~~2017~~setmelanotide versus placebo. Key secondary endpoints include the proportion of patients who achieve ≥5% reduction in BMI from baseline in adults (≥18) or BMI Z-score reduction of ≥0.2 from baseline in pediatrics after approximately 52 weeks on a therapeutic regimen of compared with placebo, and ~~to report~~mean change in the weekly average of the daily most hunger score in patients ≥12 years from baseline after approximately 52 weeks on a therapeutic regimen of setmelanotide versus placebo.

In collaboration with Camurus AB, or Camurus, we had been developing a once-weekly, long-acting formulation of setmelanotide using Camurus' FluidCrystal® technology. As announced in December 2023, we have paused development in favor of advancing RM-718. In March 2024, we communicated results from a Phase 3 switch study of weekly setmelanotide and daily setmelanotide formulations to Camurus. The results showed that pharmacokinetic data were supportive of the feasibility of a weekly formulation of setmelanotide, and data showed that the weekly setmelanotide formulation had similar efficacy and safety profile as the approved formulation for daily injection.

Additional recent clinical, regulatory, corporate and commercial updates include:

On May 7, 2024 we announced that approximately 100 new prescriptions for IMCIVREE for Bardet-Biedl syndrome (BBS) were written by U.S. prescribers and we have received payor approval for reimbursement for approximately 70 prescriptions during the first quarter of 2024.

On May 3, 2024 we delivered one oral presentation and two posters at The Pediatric Endocrine Society’s (PES) Annual Meeting May 2-5, 2024 in Chicago, IL, which highlighted previously disclosed data that showed setmelanotide achieved clinically meaningful weight reduction in pediatric patients with hypothalamic obesity, BBS or POMC and LEPR deficiency obesities.

On April 29, 2024 we announced the publication of results from our Phase 2 study of setmelanotide for the treatment of hypothalamic obesity in the ~~first half~~peer-reviewed journal The Lancet Diabetes & Endocrinology. The publication

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highlighted that setmelanotide achieved a mean percent reduction in BMI of 15% from baseline (N=18) at 16 weeks of therapy, and preliminary data from Rhythm’s long-term extension study showing patients with hypothalamic obesity (n=12) achieved mean BMI reduction of approximately 26% at one year on setmelanotide treatment.

On March 25, 2024 we announced that the first ~~patient in our LepR deficiency obesity Phase 3 trial in the fourth quarter of 2017, and to complete enrollment in 2018. We recently demonstrated preliminary proof of concept~~patients had been dosed in our Phase 21 clinical trial ~~in Bardet‑Biedl syndrome, indicating that this is~~of RM-718, an investigational, weekly melanocortin-4 receptor (MC4R)-specific agonist designed to be MC1R-sparing and to potentially avoid hyperpigmentation.

We also ~~a setmelanotide‑responsive, upstream MC4 pathway disorder. We are continuing to enroll patients in this trial and~~ expect to ~~report preliminary Phase 2 results in~~achieve the fourth quarter of 2017. We expect to initiate a Phase 3 clinical trial in Bardet‑Biedl syndrome in 2018. We have also initiated Phase 2 clinical trials in Alström syndrome, POMC heterozygous deficiency obesity and POMC epigenetic disorders and expect to enroll patients in these trials in the second half of 2017. We anticipate reporting preliminary results in these additional Phase 2 indications in the first half of 2018.following near-term milestones:

●

Complete submission of a supplementary New Drug Application (sNDA) to the FDA seeking a label expansion to treat pediatric patients between 2 and younger than 6 years old in approved indications in the second quarter of 2024, and potentially receive EMEA approval in the fourth quarter of 2024;

●

Begin dosing patients in the Japanese, 12-patient supplemental cohort of the Phase 3 trial evaluating setmelanotide in hypothalamic obesity in the second quarter of 2024;

●

Announce data from stage 2 of the exploratory Phase 2 DAYBREAK study evaluating setmelanotide in certain genetically-caused MC4R pathway diseases in the third quarter of 2024;

●

Begin dosing the first patients in the Phase 2 SIGNAL trial evaluating LB54640, an investigational oral small molecule MC4R agonist, in patients with hypothalamic obesity, in the third quarter of 2024. The 28-patient SIGNAL trial is a randomized, placebo-controlled, double-blind study designed to evaluate three dose levels of LB54640. The primary endpoint of the study is the change from baseline in body mass index after 14 weeks of treatment, and patients may continue on therapy for up to 52 weeks;

●

Complete enrollment in two or more substudies in the Phase 3 EMANATE trial evaluating setmelanotide in genetically caused MC4R pathway diseases in the second half of 2024;

●

Complete the Company’s Phase 1 clinical trial of RM-718, an investigational, weekly melanocortin-4 receptor (MC4R)-specific agonist, and announce data from this trial – including data from a planned cohort of patients with hypothalamic obesity - in the first half of 2024; and

●

Announce top-line data in the Phase 3 trial evaluating setmelanotide in hypothalamic obesity in the first half of 2025.

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~~We have leveraged skilled experts, consultants, contract research organizations, or CROs, and contractors to manage~~Up until recently, our ~~clinical~~ operations under the leadership and direction of our management. We expect to expand our infrastructure to manage our clinical, finance and commercial operations with a higher proportion of full‑time employees. We have seventeen employees, five of whom hold Ph.D. or M.D. degrees. Of these employees, twelve are engaged in development and commercialization activities and five are engaged in support administration, including business development and finance. In the near‑term, we expect to significantly expand our clinical, commercial and finance personnel, in particular, and will incur increased expenses as a result.

~~Our operations to date~~ have been limited primarily to conducting research and development activities for setmelanotide. To date, we have not generated ~~any~~sufficient cash flow from product ~~revenue~~sales and have financed our operations primarily through the proceeds received from the sales of common and preferred stock, royalty interest financing, asset sales, as well as capital contributions from the ~~Predecessor Company, the Relamorelin Company and the LLC entity and, more recently, the private placement of equity securities to outside investors. On October 10,~~former parent company, Rhythm Holdings LLC. From August 2015 through August 2017, we ~~completed~~raised aggregate net proceeds of $80.8 million through our ~~intial~~issuance of series A preferred stock. Since our initial public offering, or IPO, of 8,107,500 shares of common stock at an offering price of $17.00 per share, which included the exercise in full by the underwriters of their option to purchase up to 1,057,500 additional shares of common stock. We received grosson October 10, 2017 and our underwritten follow-on offerings through October 2022, we have raised aggregate net proceeds of approximately ~~$137.8~~$791.5 million ~~before~~through the issuance of our common stock after deducting underwriting discounts, commissions and offering related transaction costs. We also received $100.0 million from the sale of our Rare Pediatric Disease Priority Review Voucher, or PRV, to Alexion Pharmaceuticals, Inc. in February 2021. In ~~connection~~June 2022, we entered into the Revenue Interest Financing Agreement (“RIFA”), with entities managed by HealthCare Royalty Partners, collectively referred to as the ~~IPO,~~Investors, and through December 31, 2023 have received cumulative proceeds of $96.7 million, net of certain transaction costs.

IMCIVREE became commercially available to patients 6 years of age and older with obesity due to POMC, PCSK1 or LEPR deficiency in the ~~Company’s outstanding shares~~U.S. in the first quarter of ~~convertible preferred stock were automatically converted into 17,406,338 shares~~2021 and patients 6 years of ~~common stock. The financial statements as of September 30, 2017, including share~~age and ~~per share amounts, do not include~~older with obesity due to BBS during June 2022. Following marketing authorizations in the ~~effects of~~EU and Great Britain, we are pursuing a country-by-country strategy to establish market access and reimbursement for IMCIVREE in several countries. During March 2022, we treated the ~~IPO. We will not generate revenue from product sales until~~first patients with IMCIVREE in France under the paid early access program and we ~~successfully complete development and obtain regulatory approval for setmelanotide, which we expect will take a number of years and is subject to significant uncertainty.~~treated the first patients with IMCIVREE in Germany during June 2022. We expect to continue to fund our operations through the sale of equity,

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debt financings or other sources. We ~~intend to build~~have built our own marketing and commercial sales infrastructure in the United States and weare in the process of building a similar infrastructure in several European markets and the United Kingdom. We may enter into collaborations with other parties for certain markets outside the United States. However, we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms, or at all. If we fail to raise capital or enter into such other arrangements as, and when, needed, we may have to significantly delay, scale back or discontinue the development or commercialization of setmelanotide.

As of ~~September 30, 2017,~~March 31, 2024 we had an accumulated deficit of ~~$99.7~~$1,036.1 million. Our net ~~losses were $10.0 million, $23.2 million, $6.4~~loss was $141.4 million and ~~$17.5~~$52.2 million for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2024 and ~~2016,~~2023, respectively. We expect to continue to incur significant expenses and ~~increasing~~ operating losses ~~over~~for the foreseeable future. ~~We expect our~~Our expenses ~~will~~may increase ~~substantially~~ in connection with our ongoing activities, as we:

●

·

continue to conduct clinical trials for ~~setmelanotide;~~

setmelanotide and our other product candidates;

●

·

engage contract manufacturing organizations, or CMOs, for the manufacture of ~~setmelanotide for~~ clinical ~~trials;~~

and commercial-grade setmelanotide;

●

·

seek regulatory approval for ~~setmelanotide;~~

setmelanotide for future indications, and for our other product candidates;

●

·

expand our clinical and financial operations and build a marketing and commercialization ~~infrastructure; and~~

infrastructure;

●

·

engage in the sales and marketing efforts necessary to support the continued commercial efforts of IMCIVREE globally;

●

take into account the levels, timing and collection of revenue earned from sales of IMCIVREE and other products approved in the future, if any; and

●

continue to operate as a public company.

As of ~~September 30, 2017,~~March 31, 2024, our existing cash and cash equivalents and ~~short‑term~~short-term investments were approximately ~~$30.4 million and after giving effect~~$201.2 million. On April 1, 2024, we entered into an Investment Agreement with certain investors resulting in the issuance of convertible preferred stock to the ~~aggregate net~~investors and proceeds ~~from our IPO~~to the Company of $150.0 million, as disclosed in ~~October 2017, $156.2 million.~~ Note 13, “Subsequent Events”, to the unaudited condensed consolidated financial statements included under Part I, Item 1 of this Quarterly Report on Form 10-Q.

We expect that our existing cash and cash equivalents and short-term investments as of March 31, 2024, combined with the ~~net~~ proceeds received from the April 2024 issuance of ~~this offering~~convertible preferred stock, will ~~enable us~~be sufficient to fund our ~~operating expenses~~ operations into ~~the first half of 2019~~.2026.

Corporate Background ~~and Distribution~~

We are a Delaware corporation organized in February 2013 under the name Rhythm Metabolic, Inc., and as of October 2015, under the name Rhythm Pharmaceuticals, Inc. Prior to our organization and the Corporate Reorganization referred to below, we were part of Rhythm Pharmaceuticals, Inc., a Delaware corporation which was organized in November 2008 and which commenced active operations in 2010. We refer to this corporation as the Predecessor Company.

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In March 2013, the Predecessor Company underwent a corporate reorganization, which we refer to as the Corporate Reorganization, pursuant to which all of the outstanding equity securities of the Predecessor Company were exchanged for units of Rhythm Holding Company, LLC, a newly‑organized limited liability company, which we refer to as the LLC entity. After the consummation of this exchange and as part of the Corporate Reorganization, the Predecessor Company contributed setmelanotide and the MC4R agonist program to us and distributed to the LLC entity all of the then issued and outstanding shares of our stock. The result of the Corporate Reorganization was that we and the Predecessor Company became wholly‑owned subsidiaries of the LLC entity and the two product candidates and related programs that were originally held by the Predecessor Company were separated, with relamorelin and the ghrelin agonist program being retained by the Predecessor Company and setmelanotide and the MC4R agonist program being held by us. We refer to the Predecessor Company after consummation of the Corporate Reorganization as the Relamorelin Company. The Predecessor Company filed the Investigational New Drug Application, or IND, for setmelanotide in October 2011 and conducted the setmelanotide clinical trials up until the Corporate Reorganization, after which all clinical trials have been conducted by us.

In October 2014, the LLC entity granted to Actavis plc, now owned by Allergan, Inc., or Allergan, an exclusive option to acquire the Relamorelin Company. The transaction was limited to the acquisition of the Relamorelin Company and did not include our company. In October 2016, the option to acquire the Relamorelin Company was exercised and the sale to Allergan closed on December 15, 2016.

In August 2015, December 2015, January 2017 and August 2017, we sold 25,000,000 shares, 15,000,000 shares, 20,475,001 shares and 20,474,998 shares, respectively, of our series A convertible preferred stock to certain investors. Following the closing of our series A convertible preferred stock financings, the LLC entity remained our largest stockholder, with the balance of our stock being owned by our series A investors. In August 2017, the LLC entity exchanged 8,578,646 of its shares of our common stock for 78,666,209 newly‑issued shares of our series A‑1 junior preferred stock and the LLC entity distributed all of its shares of our series A‑1 junior preferred stock to the holders of its preferred units and the remaining 1,617,646 shares of our common stock to the holders of its common units. We refer to the exchange and distribution as the Distribution. The series A‑1 junior preferred stock converted into shares of our common stock on a 9.17‑for‑1 basis upon the closing of our IPO. Following the Distribution, the LLC entity did not own any of our common stock.

In connection with our IPO, we effected a 1‑for‑9.17 reverse stock split of our outstanding common stock on September 29, 2017. All share and per share amounts in the financial statements have been retrospectively adjusted for all periods presented to give effect of the reverse stock split.

~~On October 13, 2015, the Relamorelin Company changed its name to Motus Therapeutics, Inc. and we changed our name to Rhythm Pharmaceuticals, Inc.~~

~~We shared certain costs with the Relamorelin Company and effective December 2016 in connection with the sale of the Relamorelin Company, we no longer share these costs.~~

Financial Operations Overview

Revenue

To date, we have ~~not~~ generated ~~any revenue from~~approximately $123.4 million in product sales and do not expect to generate any revenue from the sale of setmelanotide for at least several years. We cannot predict if, when, or to what extent we will generate revenues from the commercialization and sale of setmelanotide. Setmelanotide is currently our onlyrevenue. Our lead product candidate, IMCIVREE, was approved by the FDA in November 2020 for chronic weight management in adult and pediatric patients six years of age and older with obesity due to POMC, PCSK1 or LEPR deficiency confirmed by genetic testing. IMCIVREE became commercially available in the United States in the first quarter of 2021. We recorded our first sales of IMCIVREE in the United States in March 2021 and we ~~may never succeed~~made our first sales in ~~achieving regulatory approval for setmelanotide or any other product candidate that we decide to pursue in~~France during March 2022 under the ~~future.~~

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paid early access program. IMCIVREE was approval by the FDA and the EC in adult and pediatric patients six years of age and older with obesity due to BBS in June and September 2022, respectively. Following these approvals for BBS, we expect our sales of IMCIVREE will continue to grow as we identify and treat more patients with this disease and obtain reimbursement throughout the international markets in which we operate.

Cost of sales

All of our inventory of IMCIVREE produced prior to FDA approval is available for commercial or clinical use. Most of the manufacturing costs have been recorded as research and development expenses in prior periods. Accordingly, the product cost component related to IMCIVREE included in cost of sales for the three months ended March 31, 2024 and 2023 was insignificant. We expect cost of sales to increase in 2024 as we continue to sell inventory that is produced after we began capitalizing manufacturing costs for IMCIVREE commercial inventory. We expect cost of sales to increase in 2023 as we continue to sell inventory that is produced after we began capitalizing manufacturing costs for IMCIVREE commercial inventory.

Research and development expenses

Research and development expenses consist primarily of costs incurred for our research activities, including our drug discovery and genetic sequencing efforts, and the clinical development of setmelanotide, which include:

●

·

expenses incurred under agreements with third parties, including CROs that conduct research and development and preclinical activities on our behalf, and the cost of consultants and CMOs that manufacture drug products for use in our preclinical studies and clinical trials;

●

·

~~employee‑related~~employee-related expenses including salaries, benefits and ~~stock‑based~~stock-based compensation expense;

●

·

the cost of lab supplies and acquiring, developing and manufacturing preclinical and clinical study materials; ~~and~~

●

·

the cost of genetic sequencing of potential patients in clinical studies;

●

facilities, depreciation, and other expenses, which include rent and maintenance of facilities, insurance and other operating ~~costs.~~

costs;

●

acquired in process research and development costs associated with the acquisition of Xinvento B.V., or Xinvento in the three months ended March 31, 2023; and

●

acquired in process research and development costs associated with the acquisition of LG Chem’s proprietary compound LB54640 in the three months ended March 31, 2024.

We expense research and development costs to operations as incurred. Nonrefundable advance payments for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses. The capitalized amounts are expensed as the related goods are delivered or the services are performed.

The following table summarizes our current research and development ~~program for setmelanotide.~~expenses:

Three Months Ended

Nine Months Ended

September 30,

September 30,
Research and Development Summary


2017

2016

2017

2016

(in thousands)
Setmelanotide Program

$
5,971

$
5,419

$
16,241

$
13,963

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We are unable to predict the duration and costs of the current or future clinical trials of ~~setmelanotide.~~our product candidates. The duration, costs, and timing of clinical trials and development of setmelanotide, RM-718, LB54640, and a potential therapeutic product candidate for CHI will depend on a variety of factors, including:

●

·

the scope, rate of progress, and expense of our ongoing, as well as any additional, clinical trials and other research and development activities;

●

·

the rate of enrollment in clinical trials;

●

·

the safety and efficacy demonstrated by setmelanotide in future clinical trials;

●

·

changes in regulatory requirements;

●

·

changes in clinical trial design; and

●

·

the timing and receipt of any regulatory approvals.

A change in the outcome of any of these variables with respect to the development of ~~setmelanotide~~our product candidates would significantly change the costs and timing associated with its development and potential commercialization.

Research and development activities are central to our business model. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of ~~later‑stage~~later-stage clinical trials. We expect research and development costs to increase significantly for the foreseeable future as our setmelanotide and other development ~~program progresses.~~programs progress. However, we do not believe that it is possible at this time to accurately project total ~~program‑specific~~program-specific expenses to commercialization and there can be no guarantee that we can meet the funding needs associated with these expenses.

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~~General~~Selling, general and administrative expenses

Selling expenses consist of professional fees related to preparation for the commercialization of setmelanotide, as well as salaries and related benefits for commercial employees, including stock-based compensation. As we further implement and execute our commercialization plans to market setmelanotide in new territories and as we explore new collaborations to develop and commercialize setmelanotide, we anticipate that these expenses will materially increase.

General and administrative expenses consist primarily of salaries and other related costs, including ~~stock‑based~~stock-based compensation, relating to our ~~full‑time~~full-time employees ~~and until December 2016, for personnel which have been allocated from the Relamorelin Company.~~not involved in R&D or commercial activities. Other significant costs include rent, ~~which previously had been allocated from the Relamorelin Company,~~ legal fees relating to patent and corporate matters and fees for accounting and consulting services.

The following table summarizes our current selling, general and administrative ~~expenses.~~expenses:

Three Months Ended

Nine Months Ended

September 30,

September 30,


2017

2016

2017

2016

(in thousands)
General and administrative expense

$
2,315

$
982

$
5,188

$
3,567

We anticipate that our selling, general and administrative expenses will increase in the future to support our continued and expanding ~~development~~commercialization efforts ~~potential commercialization of setmelanotide~~for IMCIVREE in the United States and the European Union as well as increased costs of operating as a global commercial stage biopharmaceutical public company. These increases will likely include increased costs related to the hiring of additional personnel and fees to outside consultants, lawyers and accountants, ~~costs of~~ compliance with local rules and regulations in the United States and foreign jurisdictions, exchange listing ~~rules~~ and ~~U.S.~~ Securities and Exchange Commission, or SEC, ~~rules,~~expenses, insurance and investor relations costs, among other expenses.

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Critical Accounting Policies and Estimates

Our management’s discussion and analysis of our financial condition and results of operations are based on our financial statements, which we have prepared in accordance with accounting principles generally accepted in the United States, ~~generally accepted accounting principles.~~or GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting periods. OnThese items are monitored and analyzed by us for changes in facts and circumstances on an ongoing basis, ~~we evaluate our~~and material changes in these estimates ~~and judgments, including those described~~could occur in ~~greater detail below.~~the future. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

~~While~~There were no significant changes to our ~~significant~~critical accounting policies ~~are described~~as reported in ~~more detail in the notes to~~ our ~~financial statements included elsewhere in this Quarterly~~Annual Report on Form ~~10-Q, we believe that the following accounting policies are the most critical to aid in fully understanding and evaluating our financial condition and results of operations.~~

~~Basis of Presentation~~

~~Presentation~~

We have historically existed and functioned as part of the consolidated businesses of the Predecessor Company. Our MC4 business was contributed to us from the Predecessor Company on March 21, 2013 as part of the Corporate Reorganization. At that time, we also entered into the Payroll Services Agreement. In December 2016, the shared employees terminated their existing employment agreements and entered into new agreements with us. Until December 2016, we shared costs with the Relamorelin Company, including finance, accounting, research and development and operations. These shared costs were allocated to us from the Relamorelin Company10-K for the purposes of preparing the financial statements based on a specific identification basis or, when specific identification is not practicable, a proportional cost allocation method which allocates expenses based upon the percentage of employee time and research and development effort expended on our business as compared to total employee time and research and development effort. The proportional use basis adopted to allocate shared costs is in accordance with the guidance of Staff Accounting Bulletin Topic 1B. Our management has determined that the proportional use method of allocating costs to us from the Relamorelin Company is reasonable.

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~~Accrued research and development expenses~~

As part of the process of preparing our financial statements, we are required to estimate the value associated with goods and services received in the period in connection with research and development activities. This process involves reviewing quotations and contracts, identifying services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of the actual cost, or alternatively, the deferral of amounts paid for goods or services to be incurred in the future. The majority of our service providers invoice us monthly in arrears for services performed or when contractual milestones are met. We make estimates of our accrued expenses or prepaid expenses as of each balance sheet date in our financial statements based on facts and circumstances known to us at the time those financial statements are prepared. We periodically confirm the accuracy of our estimates with the service providers and make adjustments if necessary. The significant estimates in our accrued research and development expenses include fees paid to CROs and CMOs in connection with research and development activities.

We accrue our expenses related to CROs and CMOs based on our estimates of the services received and efforts expended pursuant to quotes and contracts with CROs and CMOs that conduct research and development and manufacturing on our behalf. The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows. The allocation of CRO upfront expenses for both clinical trials and preclinical studies generally tracks actual work activity. However, there may be instances in which payments made to our vendors will exceed the level of services provided and result in a prepayment of the research and development expense. In accruing service fees delivered over a period of time, we estimate the time period over which services will be performed and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from our estimate, we adjust accrued or prepaid expense accordingly. Although we do not expect our estimates to be materially different from amounts actually incurred, if our estimates of the status and timing of services performed differ from the actual status and timing of services performed, it could result in us reporting amounts that are too high or too low in any particular period. To date, there have been no material differences between our estimates of such expenses and the amounts actually incurred.

~~2017 Series A Investor Instrument~~

We have classified our 2017 Series A Investor Instrument (See Note 4 to our financial statements included elsewhere in this Quarterly Report on Form 10-Q) as a liability as it is a free‑standing financial instrument. The 2017 Series A Investor Instrument was recorded at fair value upon the issuance of our series A preferred stock in January 2017, and subsequently remeasured to fair value at each reporting period. Changes in fair value of this financial instrument is recognized as a component of other income (expense), net in the statement of operations and comprehensive loss. The fair value of the Series A Investor Instrument is determined to be the sum of the fair values of the 2017 Series A Investor Right/Obligation and the 2017 Investor Call Option. We estimated the fair value of the 2017 Series A Investor Right/Obligations as the probability‑weighted present value of the expected benefit of the investment.

We used the Black‑Scholes option‑pricing model, which incorporates assumptions and estimates, to value the 2017 Series A Investor Call Option and assessed these assumptions and estimates on a quarterly basis as additional information impacting the assumptions was obtained. Estimates and assumptions impacting the fair value measurement include the fair value per share of the underlying series A preferred stock, the expected term of the 2017 Series A Investor Call Options, risk‑free interest rate, expected dividend yield and expected volatility of the price of the underlying preferred stock. We determined the fair value per share of the underlying preferred stock by taking into consideration the most recent sale of our convertible preferred stock and the investors' right to invest in a subsequent tranche. As we are a private company and lack company‑specific historical and implied volatility information of our stock, we estimated our expected stock volatility based on the historical volatility of publicly traded peer companies for a term comparable to the estimated term of the 2017 Series A Investor Call Options. The risk‑free interest rate was determined by reference to the U.S. Treasury yield curve for time periods approximately equal to the estimated term of the 2017 Series A Investor Call Options. A dividend yield of zero was assumed.

24

~~Table of Contents~~

~~Stock-based compensation~~

Prior to August 2015, we did not have our own equity compensation plan. In August 2015, our Board of Directors and our stockholders approved and we adopted the 2015 equity incentive plan, as amended and in effect prior to the closing of our IPO, or the 2015 Plan, which we terminated upon consummation of our IPO and replaced with the 2017 equity incentive plan, or the 2017 Plan. The 2017 Plan provides for the grant of incentive and non-qualified stock options and restricted stock and stock grants to employees, consultants, advisors and directors, as determined by the Board of Directors. We have reserved 4,018,538 shares of common stock under the 2017 Plan. The first option grants issued by us under the 2015 Plan were issued in the fourth quarter of 2015. Shares of common stock issued upon exercise of stock options are generally issued from authorized but unissued shares. The 2015 Plan provides that the exercise price of incentive stock options cannot be less than 100% of the fair market value of the common stock on the date of the award for participants who own less than 10% of the total combined voting power of stock, and not less than 110% for participants who own more than 10% of the voting power. Options and restricted stock granted under the 2015 Plan will vest over periods as determined by our Compensation Committee and approved by our Board of Directors.

We estimate the fair value of our stock-based awards to employees and non-employees using the Black-Scholes option-pricing model, which requires the input of highly subjective assumptions, including (a) the expected volatility of our stock, (b) the expected term of the award, (c) the risk-free interest rate, and (d) expected dividends. Due to the lack of a public market for the trading of our common stock and a lack of company-specific historical and implied volatility data, we have based our estimate of expected volatility on the historical volatility of a group of companies in the pharmaceutical and biotechnology industries in a similar stage of development as us and that are publicly traded. For these analyses, we have selected companies with comparable characteristics to ours including enterprise value, risk profiles and with historical share price information sufficient to meet the expected life of the stock-based awards. We compute the historical volatility data using the daily closing prices for the selected companies' shares during the equivalent period of the calculated expected term of our stock-based awards. We will continue to apply this process until a sufficient amount of historical information regarding the volatility of our own stock price becomes available. We have estimated the expected life of our employee stock options using the "simplified" method, whereby, the expected life equals the average of the vesting term and the original contractual term of the option. The risk-free interest rates for periods within the expected life of the option are based on the U.S. Treasury yield curve in effect during the period the options were granted. Upon adopting ASU 2016-09, ~~Improvements to Employee Share‑Based Payment Accounting (Topic 718)~~ ~~on January 1, 2017, we have elected to account for forfeitures as they occur.~~

~~Income taxes~~

Income taxes have been calculated on a separate tax return basis. Certain of our activities and costs have been included in the tax returns filed by the Relamorelin Company and the LLC entity. Prior to the Corporate Reorganization, our operations were included in the tax returns filed by the Predecessor Company. We have filed tax returns on our own behalf since the Corporate Reorganization.

~~We account for uncertain tax positions in accordance with the provisions of Accounting Standards Codification, or ASC, Topic 740,~~ ~~Accounting for Income Taxes~~, or ASC 740. When uncertain tax positions exist, we recognize the tax benefit of tax positions to the extent that the benefit will more likely than not be realized. The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances. As offiscal year ended December 31, ~~2016, we do not have any uncertain tax positions.~~

Income taxes are recorded in accordance with ASC 740, which provides for deferred taxes using an asset and liability approach. We recognize deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. We determine our deferred tax assets and liabilities based on differences between financial reporting and tax bases of assets and liabilities, which are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Valuation allowances are provided, if based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

25

~~Table of Contents~~

As of December 31, 2016, we had net operating loss carryforwards to reduce federal and state incomes taxes of approximately $46,934 and $24,432, respectively. If not utilized, these carryforwards begin to expire in 2033. At December 31, 2016, we also had available research and development tax credits for federal and state income tax purposes of approximately $971 and $369, respectively. The federal and state credits begin to expire in 2033 and 2028, respectively.

Utilization of the net operating loss and tax credit carryforwards may be subject to a substantial annual limitation due to ownership change limitations that have occurred previously or that could occur in the future, as provided by Section 382 of the Internal Revenue Code of 1986, as amended, or the Code, or Section 382, as well as similar state provisions and other provisions of the Code. Ownership changes may limit the amount of net operating losses and tax credit carryforwards that can be utilized annually to offset future taxable income and tax, respectively. In general, an ownership change, as defined by Section 382, results from transactions that increase the ownership of 5.0% stockholders in the stock of a corporation by more than 50% in the aggregate over a three-year period.2023.

Results of Operations

Comparison of the three months ended ~~September 30, 2017~~March 31, 2024 and ~~2016~~2023

The following table summarizes our results of operations for the three months ended ~~September 30, 2017~~March 31, 2024 and ~~2016,~~2023, together with the changes in those items in dollars and as a percentage:

Three Months Ended

September 30,

Change


2017

2016

$

%

(in thousands)

Statement of Operations Data:

Operating Expenses:









Research and development

$
5,971

$
5,419

$
552

10
%
General and administrative

2,315

982

1,333

136
%
Total operating expenses

8,286

6,401

1,885

29
%
Loss from operations

(8,286)

(6,401)

(1,885)

29
%
Other (expense) income, net

(1,730)

10

(1,740)

NM
%
Net loss and comprehensive loss

$
(10,016)

$
(6,391)

$
(3,625)

57
%


	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	%

Product revenue, net. Product revenue, net increased by $14.5 million to $26.0 million for the three months ended March 31, 2024 from $11.5 million for the three months ended March 31, 2023, an increase of 126%. We expect our sales of IMCIVREE to continue to increase following the FDA approval for the treatment of patients with BBS in the United States in June 2022 and ten other countries since then. For the three months ended March 31, 2024 and 2023, a substantial amount of our product revenue, or 74% and 83%, respectively, was generated from sales of our product to patients in the United States.

Cost of sales. Cost of sales increased by $1.4 million to $2.8 million for the three months ended March 31, 2024 from $1.4 million for the three months ended March 31, 2023, an increase of 98%, which was driven by a corresponding increase in revenue in the three months ended March 31, 2024. Cost of sales is composed of royalty expense due to Ipsen Pharma S.A.S., or Ipsen, on our net product revenue, amortization of our capitalized sales-based milestone payment made to Ipsen, upon our first commercial sale in the United States and European Union, the cost of product, as well as costs associated with our patient assistance programs. Specifically, the $1.4 million increase in cost of sales in the three months ended March 31, 2024 from the same period in 2023 was due to $0.7 million of additional royalties due to our growth in

30

Table of Contents

sales and $0.7 million attributed to increased product cost associated with higher sales volume. We expect cost of sales as a percentage of product revenue, net to continue to be in a range of 10% to 12% in the foreseeable future.

Research and development expense. Research and development expense increased by ~~$0.6~~$90.7 million to ~~$6.0~~$128.7 million ~~in 2017~~for the three months ended March 31, 2024 from ~~$5.4~~$37.9 million ~~in 2016,~~for the three months ended March 31, 2023, an increase of ~~10%~~239%. The net increase was primarily due to the following:

●

acquired in process research and development costs associated with the acquisition of LG Chem’s proprietary compound LB54640 of $92.4 million in the three months ended March 31, 2024;

●

an increase of $2.3 million in our clinical trial costs associated with increased activity in our Phase 3 hypothalamic obesity trial and our Phase 3 EMANATE trial, as well as clinical trial costs for the two clinical trials inherited from LGC in the three months ended March 31, 2024;

●

an increase of $1.1 million due to increased preclinical research costs related to RM-718; and

●

an increase of $1.2 million in salaries, benefits and stock-based compensation related to the hiring of additional full-time employees in order to support the growth of our research and development program.

The above increases were partially offset by:

●

the purchase of in-process research and development assets of $5.7 million from Xinvento, BV in the three months ended March 31, 2023, which did not recur in the three months ended March 31, 2024.

Selling, general and administrative expense. Selling, general and administrative expense increased by $9.7 million to $34.4 million for the three months ended March 31, 2024 from $24.6 million for the three months ended March 31, 2023, an increase of 40%. The increase was primarily due to the ~~initiation of additional new clinical trials in 2017 and an increase in other development activities associated with setmelanotide, offset~~following:

●

an increase of $5.2 million due to increased compensation and benefits related costs associated with additional headcount to support our expanding business operations as well as to establish commercial operations in international regions;

●

an increase of $2.2 million related to professional services costs, including legal, consulting and tax services; and

●

an increase of $2.1 million related to costs associated with ongoing sales and marketing activities for IMCIVREE’s expansion in the US and international markets.

Other income (expense), net. Other income (expense), net decreased by ~~the completion of some pre-clinical research studies. We hired additional personnel in the clinical and development departments during the quarter ended September 30, 2017.~~

~~General and administrative expense.~~ ~~General and administrative expense increased by $1.3~~$1.6 million to ~~$2.3~~($1.2) million ~~in 2017 from $1.0 million in 2016, an increase of 136%. The increase was primarily due to stock compensation expense related to~~for the revaluation of certain option grants to our former president upon changing from an employee to nonemployee status, the legal costs related to the distribution of the LLC entity’s common shares to its members and general office expenses due to the increase in headcount during the quarter ended September 30, 2017.

26

~~Table of Contents~~

~~Comparison of nine~~three months ended ~~September 30, 2017 and 2016.~~

~~The following table summarizes our results of operations~~March 31, 2024 from $0.4 million for the ~~nine~~three months ended ~~September 30, 2017 and 2016, together with the changes in those items in dollars and as a percentage:~~

Nine Months Ended

September 30,

Change


2017

2016

$

%

(in thousands)

Statement of Operations Data:

Operating Expenses:









Research and development

$
16,241

$
13,963

$
2,278

16
%
General and administrative

5,188

3,567

1,621

45
%
Total operating expenses

21,429

17,530

3,899

22
%
Loss from operations

(21,429)

(17,530)

(3,899)

22
%
Other income (loss)

(1,749)

24

(1,773)

NM
%
Net loss and comprehensive loss

$
(23,178)

$
(17,506)

$
(5,672)

32
%

~~Research and development expense.~~ ~~Research and development expense increased by $2.3 to $16.2 million in 2017 from $14.0 million in 2016, an increase of 16%.~~March 31, 2023. The ~~increase~~decrease was primarily due to the ~~initiation~~following:

●

a decrease of interest income of $0.4 million earned on our short-term investments, based on lower average investment balances;

●

an increase in non-cash interest expense of $0.8 million related to amortization of debt discount and deferred financing fees associated with our higher deferred royalty obligation balance; and

●

recognition of $0.9 million of non-cash interest expense in the three months ended March 31, 2024 associated with accretion of the non-current liability payable to LGC in July, 2025.

The above amounts were partially offset by:

31

Table of additional new clinical trials in 2017 and an increase in other market development activities associated with setmelanotide. We hired additional personnel in the clinical operations department at the end of 2016 and throughout 2017.Contents

●

an increase in other income from the change in fair value of our RIFA embedded derivative of $0.5 million.

~~General and administrative expense.~~ General and administrative expense increased by $1.6 million to $5.2 million in 2017 from $3.6 million in 2016, an increase of 45%. The increase was primarily due to stock compensation expense related to new option grants in 2017, legal costs related to the distribution of the LLC entity’s common shares to its members and general office expenses due to the increase in headcount at the end of 2016 and throughout 2017.

Liquidity and Capital Resources

As of September 30, 2017, our existing cash and cash equivalents and short‑term investments were approximately $30.4 million. After giving effect to the aggregate net proceeds of our IPO in October 2017 of $125.8 million,March 31, 2024, our cash and cash equivalents and ~~short‑term~~short-term investments ~~are $156.2 million as of September 30, 2017.~~were approximately $201.2 million.

Cash flows

The following table provides information regarding our cash flows for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2024 and ~~2016:~~2023:

Nine Months Ended September 30,


2017

2016

Change

(in thousands)
Net cash provided by (used in):

Operating activities

$
(21,575)

$
(17,040)

$
(4,535)
Investing activities

1,407

(5,214)

6,621
Financing activities

41,542

—

41,542
Net increase (decrease) in cash and cash equivalents

$
21,374

(22,254)

43,628



	Three Months Ended March 31,
	2024		2023

	(in thousands)
Net cash (used in) provided by:
Operating activities	$	(40,743)	$	(36,433)
Investing activities		30,050		18,464
Financing activities		4,243		(133)
Effect of exchange rates on cash		(71)		86
Net (decrease) increase in cash, cash equivalents and restricted cash	$	(6,521)		(18,016)

Net cash used in operating activities

The use of cash in all periods resulted primarily from our net ~~losses~~loss adjusted for ~~non‑cash~~non-cash charges and changes in components of ~~working capital.~~operating assets and liabilities.

Net cash used in operating activities was ~~$21.6~~$40.7 million for the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2024 and consisted primarily of a net loss of ~~$19.6~~$141.4 million adjusted for ~~non‑cash~~non-cash items of $102.8 million, which consisted of ~~stock‑based~~

27

~~Table~~non-cash stock-based compensation, depreciation and amortization, rent expense and the change in the fair value of ~~Contents~~our embedded derivative liability, totaling $10.4 million. Our net loss adjusted for non-cash items also includes $92.4 million of acquired IPR&D assets, which are classified as investing activities. The change in operating assets and liabilities used net cash of approximately $2.2 million, primarily driven by net increases in prepaid expenses and other assets of $2.4 million and net decreases in accounts payable and accrued expenses of $1.3 million, offset by a net increase in long-term assets of $1.2 million and decreases in accounts receivable and inventory of $0.3 million.

Net cash used in operating activities was $36.4 million for the three months ended March 31, 2023 and consisted primarily of a net loss of $52.2 million adjusted for non-cash items of $15.3 million, which consisted of non-cash stock-based compensation, depreciation and amortization and ~~deferred~~ rent expense, ~~and the mark to market revaluation~~totaling $9.9 million. Our net loss also included $5.4 million of ~~the Series A Investor Instrument.~~acquired IPR&D assets, which are classified as investing activities. The change in operating assets and liabilities reflected a total ~~use~~net source of cash of approximately ~~$1.9~~$0.4 million ~~mainly for deferred issuance costs~~from an increase in accounts payable and ~~prepaid expenses.~~

Net cash used in operating activities was $17.0 million for the nine months ended September 30, 2016, and consisted primarily of a net loss of $16.5 million adjusted for non‑cash items, which consisted of stock‑based compensation, depreciation and amortization and deferred rent expense. The significant items in the change in operating assets and liabilities include a decrease in accrued expenses of ~~$0.3~~$5.2 million, offset by increases to accounts receivable and ~~an increase in deferred issuance costs~~inventory of ~~approximately $0.3~~$4.8 million.

Net cash provided by ~~(used in)~~ investing activities

Net cash provided by investing activities was $30.1 million for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2024 and relates to ~~the net~~gross maturities of ~~short‑term~~short-term investments of ~~$1.4 million.~~

~~Net~~$70.1 million, offset by cash used ~~in investing activities~~ for the ~~nine months ended September 30, 2016 relates to the net purchases~~purchase of ~~short‑term investments of $4.2~~LGC’s proprietary compound LB54640 for $40.0 million ~~and the buildout of our new headquarters facility and furniture and equipment of $1.0 million.~~in January 2024.

Net cash provided by investing activities was $18.5 million for the three months ended March 31, 2023 and relates to $92.7 million of maturities of short-term investments, partially offset by $69.6 million of purchases of short-term investments, and cash used in the acquisition of Xinvento, BV of $4.5 million.

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Table of Contents

Net cash provided by (used in) financing activities

Net cash provided by financing activities was ~~$41.5~~$4.2 million for the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2024, and ~~represents the net~~consisted of proceeds of $7.0 million from the ~~first~~exercise of stock options and ~~second tranche of our~~the issuance of ~~series A preferred~~common stock from Employee Stock Purchase Plan. These proceeds were offset by $2.8 million of repayments on our deferred royalty obligation.

Net cash used in ~~January 2017~~financing activities was $0.1 million for the three months ended March 31, 2023, and ~~August 2017, respectively.~~consisted of $1.4 million of repayments on our deferred royalty obligation, offset by proceeds of $1.3 million from the exercise of stock options and the issuance of common stock under the Employee Stock Purchase Plan.

Funding requirements

We expect our expenses to increase in connection with our ongoing activities, particularly as we continue the clinical development of and seek marketing approval for ~~setmelanotide.~~setmelanotide for future indications, continue the clinical development of our other product candidates and build out our global organization. In addition, ~~if we obtain marketing approval for setmelanotide,~~ we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution to the extent that such sales, marketing and distribution are not the responsibility of potential collaborators. We also expect to incur additional costs associated with operating as ~~an independent company, and upon the closing of our IPO and operating as~~ a public company.

On April 1, 2024, we entered into an Investment Agreement with certain investors resulting in the issuance of convertible preferred stock to the investors and proceeds to the Company of $150.0 million, as disclosed in Note 13, “Subsequent Events”, to the unaudited condensed consolidated financial statements included under Part I, Item 1 of this Quarterly Report on Form 10-Q. We expect that ~~the net proceeds from our IPO, together with~~ our existing cash and cash equivalents and short-term investments as of the end of March 31, 2024, combined with the proceeds received from the April 2024 issuance of convertible preferred stock, will ~~enable us~~be sufficient to fund our ~~operating expenses~~operations into 2026. Our cash and cash equivalents are maintained at ~~least through 2018.~~ financial institutions in amounts that exceed federally-insured limits. In the event of failure of any of the financial institutions where we maintain our cash and cash equivalents, there can be no assurance that we will be able to access uninsured funds in a timely manner or at all.

We may need to obtain substantial additional funding in connection with our research and development activities and any continuing operations thereafter. If we are unable to raise capital when needed or on favorable terms, we would be forced to delay, reduce or eliminate our research and development programs or future commercialization efforts.

Our future capital requirements will depend on many factors, including:

●

·

the cost to continue to commercialize setmelanotide, by building an internal sales force or entering into collaborations with third parties and providing support services for patients;

●

the scope, progress, results and costs of clinical trials for our setmelanotide ~~program;~~

program as well as for RM-718 and LB54640, and in connection with a therapeutic product candidate for CHI;

●

·

the costs, timing and outcome of regulatory review of our setmelanotide ~~program;~~

program as well as for RM-718 and LB54640, and in connection with a therapeutic product candidate for CHI;

●

·

the costs related to the acquisition, integration, research and development and commercialization efforts related to the acquisition of Xinvento B.V. and any related therapeutic product candidates;

●

the obligations owed to Ipsen, ~~Pharma S.A.S.,~~Camurus and Takeda Pharmaceutical Company Limited, or ~~Ipsen,~~Takeda, and LG Chem pursuant to our license ~~agreement;~~

agreements;

●

·

the extent to which we acquire or ~~in‑license~~in-license other product candidates and technologies;

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Table of Contents

●

·

the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual ~~property‑related~~property-related claims; ~~and~~

●

·

our ability to establish and maintain additional collaborations on favorable terms, if at ~~all.~~

all; and

●

the costs of operating as a public company

~~Developing~~Although IMCIVREE has been approved by the FDA in certain indications, and became commercially available in the first quarter of 2021, IMCIVREE may not achieve commercial success. In addition, developing our setmelanotide program is a ~~time‑consuming,~~time-consuming, expensive and uncertain process that may take years to complete, and we may never generate the necessary data or results required to obtain future marketing ~~approval~~approvals and achieve product sales. In addition, setmelanotide, if approved, may not achieve commercial success. Our commercial revenues, if any, will be derived from sales of setmelanotide that we do not expect to be commercially available for several years, if at all. Accordingly, we will need to continue to rely on additional financing to achieve our business objectives. Adequate additional financing may not be available to us on acceptable terms, or at all.

Further, the global economy, including credit and financial markets, has recently experienced extreme volatility and disruptions, including severely diminished liquidity and credit availability, rising interest and inflation rates, declines in consumer confidence, declines in economic growth, increases in unemployment rates and uncertainty about economic stability. All of these factors could impact our liquidity and future funding requirements, including but not limited to our ability to raise additional capital when needed on acceptable terms, if at all. The duration of this economic slowdown is uncertain and the impact on our business is difficult to predict. See “Risk Factors— Unfavorable global political or economic conditions could adversely affect our business, financial condition or results of operations.”

Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances and licensing arrangements. In August 2015, December 2015, January 2017 and August 2017, respectively, we issued 25,000,000, 15,000,000, 20,475,001 and 20,474,998, shares of series A preferred stock, respectively, at a price of $1.00 per share, resulting in gross proceeds of $81.0 million.

To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Debt financing, if available, involves agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.

If we raise funds through additional collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our setmelanotide program on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market our setmelanotide program that we would otherwise prefer to develop and market ourselves.

~~Contractual obligations~~ATM program

We enter into agreements in the normal course of business with CROs and CMOs for clinical trials and clinical supply manufacturing and with vendors for clinical research studies and other services and products for operating purposes. We do not classify these as contractual obligations where the contracts are cancelable at any time by us, generally upon 30 days' prior written notice to the vendor.

Milestone and royalty payments associated with our license agreements with Ipsen and Camurus AB, or Camurus, have not been included as contractual obligations as we cannot reasonably estimate if or when they will occur. Under the terms of the Ipsen license agreement, assuming that setmelanotide is successfully developed, receives regulatory approval and is commercialized, Ipsen may receive aggregate payments of up to $40.0 million upon the achievement of certain development and commercial milestones under the license agreement and royalties on future product sales. The majority of the aggregate payments under the Ipsen license agreement are for milestones that may be achieved no earlier than first commercial sale of setmelanotide. In the event that we enter into a sublicense agreement, we will make payments to Ipsen, depending on the date of the sublicense agreement, ranging from 10% to 20% of all revenues actually received under the sublicense agreement. Under the terms of the Camurus license agreement, assuming that setmelanotide is successfully developed, receives regulatory approval and is commercialized, Camurus may receive aggregate payments of up to $64.75 million upon the achievement of certain development and commercial milestones under the license agreement and royalties on future product sales. The majority of the aggregate payments under the Camurus license agreement are for milestones that may be achieved no earlier than first commercial sale of setmelanotide.

InOn November ~~2015,~~2, 2021, we entered into a ~~Lease~~Sales Agreement with Cowen and Company, LLC (“Cowen”), pursuant to which we may issue and sell shares of its common stock, having an aggregate offering price of up to $100.0 million, from time to time through an “at the market” equity offering program under which Cowen acts as sales agent (the “ATM Program”). Between August 10, 2023 and August 21, 2023, we sold approximately two million shares of our common stock in the ATM Program for ~~an office facility~~net proceeds of approximately $48.9 million.

On February 29, 2024, the Company and Cowen entered into Amendment No. 1 to Sales Agreement (the “Amendment”) to increase the aggregate offering price of the shares of Common Stock that may be issued and sold pursuant to the Sales Agreement to $200,000,000 (excluding the aggregate offering price of shares of Common Stock issued and sold pursuant to the Sales Agreement prior to February 29, 2024). In connection with the Amendment, on February 29, 2024, the Company filed with the SEC a prospectus supplement, dated February 29, 2024, which, combined with the Base Prospectus (together, the “New Prospectus”), amended the Prior Prospectus in its entirety. The issuances and sales under the Sales Agreement, as amended by the Amendment, will be made pursuant to the Registration Statement and the New Prospectus.

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On September 19, 2022, we completed a public offering of 4,800,000 shares of common stock at ~~500 Boylston Street, Boston, Massachusetts. The lease term commenced~~a price to the public of $26.00 per share. We received $116.9 million in ~~May 2016~~net proceeds after deducting underwriting discounts, commissions and ~~has~~offering expenses. In addition, we granted the underwriters a ~~term of five years with a five-year renewal~~30-day option to ~~extend~~purchase up to an additional 720,000 shares of its common stock at the ~~lease.~~price to the public, less underwriting discounts and commissions. On October 18, 2022, we completed the sale of an additional 580,000 shares of common stock at a price to the public of $26.00 per share pursuant to the partial exercise of the underwriters’ option to purchase additional shares, for aggregate net proceeds of approximately $14.2 million after deducting underwriting discounts, commissions and offering expenses.

Contractual obligations

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~~Table~~As of ~~Contents~~

~~Future minimum payments~~March 31, 2024, apart from additional contractual obligations under our acquisition of Xinvento and LG Chem’s LB54640 as disclosed in Note 3, “Asset Acquisitions”, to the ~~operating lease agreements~~unaudited condensed consolidated financial statements included under Part I, Item 1 of this Quarterly Report on Form 10-Q, there were no other material changes to our principal contractual obligations and commitments as ~~of September 30, 2017, are as follows:~~

Operating Lease
2017

$
73
2018

298
2019

305
2020

311
2021

131
Total

1,118

~~Off‑balance Sheet Arrangements~~

~~We did not have, during~~reported in our Annual Report on Form 10-K for the ~~periods presented, and we do not currently have, any off‑balance sheet arrangements, as defined under applicable SEC rules.~~fiscal year ended December 31, 2023.

Item 3. Quantitative and Qualitative Disclosures About Market ~~Risk.~~Risk

~~We are exposed to market risk in the ordinary course of our business. These risks primarily include interest rate sensitivities.~~ As of ~~September 30, 2017, we had cash, cash equivalents~~March 31, 2024, there were no material changes to our quantitative and ~~short-term investments of approximately $30.4 million,~~qualitative disclosures about market risks as reported in Part II, Item 7A “Quantitative and ~~after giving effect to the aggregate net proceeds from~~Qualitative Disclosures About Market Risks” in our IPO in October 2017, approximately $156.2 million. The proceeds from our IPO were invested in United States treasury money market funds. The interest-earning instruments carry a degree of interest rate risk; however, historical fluctuations in interest income have not been significant. We are not exposed to foreign currency exchange rates.

~~JOBS Act~~

In April 2012, the Jumpstart our Business Startups Act of 2012, or JOBS Act, was enacted. Section 107 of the JOBS Act provides that an “emerging growth company,” or EGC, can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended, or the Securities Act,Annual Report on Form 10-K for complying with new or revised accounting standards. Thus, an EGC can delay the adoption of certain newly implemented accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected not to avail ourselves of this extended transition period and, as a result, we will adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies.

We are in the process of evaluating the benefits of relying on other exemptions and reduced reporting requirements under the JOBS Act. Subject to certain conditions, as an EGC, we intend to rely on certain of these exemptions, including without limitation, (i) providing an auditor's attestation report on our system of internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes‑Oxley Act and (ii) complying with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor's report providing additional information about the audit and the financial statements, known as the auditor discussion and analysis. We will remain an EGC until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of this offering, (b) in which we have total annual gross revenue of at least $1.07 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common stock that is held by non‑affiliates exceeds $700 million as of the priorended December ~~31st, and (2) the date on which we have issued more than $1.0 billion in non‑convertible debt securities during the prior three‑year period.~~31, 2023.

Item 4. Controls and ~~Procedures.~~Procedures

~~Evaluation~~Limitations on Effectiveness of ~~Disclosure~~ Controls and Procedures

Disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, are controls and other procedures designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified by the rules and forms promulgated by the SEC. Disclosure controls and

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procedures include, without limitation, controls and procedures designed to ensure that such information is accumulated and communicated to management, including the chief executive officer and the chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.

In connection with the preparation of this Quarterly Report on Form 10-Q, we completed an evaluation, as of September 30, 2017, under the supervision of and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, as to the effectiveness of ourWe maintain disclosure controls and procedures (as ~~such~~that term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act).

~~It should be noted~~ In designing and evaluating our disclosure controls and procedures, management recognizes that any ~~system of~~ controls ~~however~~and procedures, no matter how well designed and operated, can provide only reasonable ~~and not absolute,~~ assurance ~~that~~of achieving the ~~objectives of the system will be met.~~desired control objectives. In addition, the design of ~~any control system~~disclosure controls and procedures must reflect the fact that there are resource constraints and that management is ~~based~~required to apply judgment in ~~part upon certain assumptions about~~evaluating the ~~likelihood~~benefits of ~~future events.~~possible controls and procedures relative to their cost.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a- 15(e) and 15d- 15(e) under the Exchange Act, as of the end of the period covered by this Quarterly Report on Form 10-Q. Based ~~upon the~~on such evaluation, our ~~Chief Executive Officer~~principal executive officer and ~~Chief Financial Officer~~principal financial officer have concluded that, as of ~~September 30, 2017,~~March 31, 2024, our disclosure controls and procedures were not effective at athe reasonable assurance ~~level.~~level due to the material weakness described below.

Material Weakness in Internal Control

As previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023, we identified a material weakness in internal control related to ineffective information technology general controls, or ITGCs, in the areas of user access and program change management over our key accounting and reporting information technology, or IT, system. As a result, the related business process controls (IT application controls and IT-dependent manual controls) that are dependent on the ineffective ITGCs, or that use data produced from the system impacted by the ineffective ITGCs, were also ineffective.

The material weakness identified above did not result in any material misstatements in our financial statements or disclosures, and there were no changes to previously released financial results. Our management concluded that the unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q, present fairly, in

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all material respects, our financial position, results of operations, and cash flows for the periods presented in accordance with accounting principles generally accepted in the United States of America, or U.S. GAAP.

Remediation of Material Weakness

Our management is committed to maintaining a strong internal control environment. In response to the identified material weakness above, management has taken and intends to continue to take comprehensive actions to remediate the material weakness in internal control over financial reporting.

The remediation actions include: (i) developing and implementing additional training and awareness programs addressing ITGCs and policies, including educating control owners concerning the principles and requirements of each control, with a focus on user access; (ii) increasing the extent of oversight and verification checks included in the operation of user access and program change management controls and processes; (iii) deploying additional tools to support administration of user access and program change management; and (iv) enhancing quarterly management reporting on the remediation measures to the Audit Committee of the Board of Directors.

We believe that these actions, when fully implemented, will remediate the material weakness. The weakness will not be considered remediated, however, until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. We may also conclude that additional measures may be required to remediate the material weakness in our internal control over financial reporting, which may necessitate additional implementation and evaluation time. We will continue to assess the effectiveness of our internal control over financial reporting and take steps to remediate the known material weakness expeditiously.

Changes in Internal Control Over Financial Reporting

~~There~~Except as described above, there were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and ~~15d‑15(f)~~15d-15(f) under the Exchange Act) that occurred during the ~~period~~fiscal quarter covered by this ~~report~~Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II - OTHER INFORMATION

Item 1. Legal ~~Proceedings.~~Proceedings

We are not currently a party to any material legal proceedings.

Item 1A. Risk Factors

Our operations and financial results are subject to various risks and uncertainties, including those described below, which could adversely affect our business, financial condition, results of operations, cash flows, and the trading price of our common stock. Additional risks and uncertainties that we currently do not ~~presently known to us~~know about or that we currently ~~deem~~believe to be immaterial may also ~~may~~ impair our ~~business operations.~~business. You should carefully consider the risks described below and the other information in this Quarterly Report on Form 10-Q for the period ended March 31, 2024 (the “Quarterly Report”), including our unaudited condensed consolidated financial statements and the related notes thereto, and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Risks Related to Our Financial Position and Need for Capital

We are a ~~clinical‑~~commercial stage biopharmaceutical company with a limited operating history and have not generated ~~any~~significant revenue from product sales. We have incurred significant operating losses since our inception, anticipate that we will incur continued losses for the foreseeable future and may never achieve profitability.

We are a ~~clinical‑~~commercial stage biopharmaceutical company with a limited operating history on which to base your investment decision. Biopharmaceutical product development is a highly speculative undertaking and involves a substantial degree of risk. We were incorporated in February ~~2013 in connection with the Corporate Reorganization.~~2013. Our operations to date have been ~~limited~~ primarily focused on developing and commercializing IMCIVREE® (setmelanotide) to treat patients living with hyperphagia and severe obesity caused by rare MC4R pathway diseases. Our business activities have included acquiring rights to intellectual property, business planning, raising capital, developing our technology, identifying potential product candidates, undertaking preclinical studies and conducting research and development activities, including clinical trials, for setmelanotide. WeTo date we have ~~never~~ generated ~~any~~approximately $123.0 million of revenue from product sales. In the United States, IMCIVREE is approved for chronic weight management in adult and pediatric patients 6 years of age and older with monogenic or syndromic obesity due to POMC, PCSK1 or LEPR deficiency as determined by an FDA approved test demonstrating variants in POMC, PCSK1 or LEPR genes that are interpreted as pathogenic, likely pathogenic, or of uncertain significance, or BBS. The EC has authorized IMCIVREE for the treatment of obesity and the control of hunger associated with genetically confirmed BBS or genetically confirmed loss-of-function biallelic POMC, including PCSK1, deficiency or biallelic LEPR deficiency in adults and children 6 years of age and above. The MHRA authorized setmelanotide for the treatment of obesity and the control of hunger associated with genetically confirmed BBS or genetically confirmed loss-of-function biallelic POMC, including PCSK1, deficiency or biallelic LEPR deficiency in adults and children 6 years of age and above. Health Canada has approved IMCIVREE for weight management in adult and pediatric patients 6 years of age and older with obesity due to BBS or genetically-confirmed POMC, PCSK1, or LEPR deficiency due to variants interpreted as pathogenic, likely pathogenic, or of uncertain significance. In total, to date we have achieved market access for IMCIVREE for BBS or POMC and LEPR deficiencies, or both, in 14 countries, and we continue to collaborate with authorities to achieve access in additional markets.

We have not obtained any other regulatory approvals for setmelanotide. We first commercialized IMCIVREE in the U.S. in the first quarter of 2021 and therefore do not have a long history operating as a commercial company. We are continuing to transition from a company with a research and development focus to a company capable of supporting commercial activities and we may not be successful in such transition. We are still at the early stages of demonstrating our ability to manufacture at commercial scale, or arrange for a third party to do so on our behalf, or conduct sales, marketing and distribution activities necessary for successful product commercialization. Consequently, any predictions made about our future success or viability may not be as accurate as they could be if we had a longer operating history.

Since our inception, we have focused substantially all of our efforts and financial resources on the research and development of setmelanotide, which is ~~currently~~approved by the FDA and Health Canada and authorized by the EC and the

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MHRA, as noted above, and is in ~~Phase 3 clinical~~ development ~~for two indications, POMC deficiency obesity and LepR deficiency obesity, and in various phases of development for~~to address patients affected by several other indications. We have funded our

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operations to date primarily through the proceeds from the sales of common stock and preferred stock, asset sales, royalty interest financing, as well as capital contributions from ~~the Predecessor Company, the Relamorelin Company and the~~our former parent, Rhythm Holdings LLC, ~~entity and proceeds from sales of preferred stock~~ and have incurred losses in each year since our inception.

Our net ~~loss and comprehensive~~ losses were ~~$10.0 million, $23.2 million, $6.4~~$141.4 million and ~~$17.5~~$52.2 million for the ~~three months~~years ended March 31, 2024 and ~~the nine months ended September 30, 2017 and 2016,~~2023, respectively. As of ~~September 30, 2017,~~March 31, 2024, we had an accumulated deficit of ~~$99.7~~$1,036 million. Substantially all of our operating losses have resulted from costs incurred in connection with our development ~~program~~programs and from commercial and general and administrative costs associated with our operations. Our prior losses, combined with expected future losses, have had and will continue to have an adverse effect on our stockholders’ deficit and working capital. We expect our research and development expenses to significantly increase in connection with our additional clinical trials of setmelanotide, with clinical trials of our product candidates (RM-718, which is designed to be a more selective MC4R agonist with weekly administration, and LB54640, an investigational oral small molecule MC4R agonist now in Phase 2 clinical trials), and with the development of any other product candidates we may choose to ~~pursue.~~pursue, including a product candidate for CHI. In addition, ifsince we ~~obtain marketing approval~~have market access for ~~setmelanotide,~~IMCIVREE for BBS or POMC and LEPR deficiencies, or both, in 14 countries, we ~~will~~expect to continue to incur significant sales, marketing and outsourced manufacturing expenses. Nevertheless, setmelanotide may not be a commercially successful drug. We ~~also~~have and will continue to incur additional costs associated with operating as a public company. As a result, we expect to continue to incur significant and increasing operating losses for the foreseeable future. Because of the numerous risks and uncertainties associated with developing pharmaceutical products, we are unable to predict the extent of any future losses or when we will become profitable, if at all. Even if we do become profitable, we may not be able to sustain or increase our profitability on a quarterly or annual basis.

Our ability to become profitable depends upon our ability to generate revenue. To date, we have ~~not~~ generated ~~any~~approximately $123.0 million of revenue from setmelanotide, and we do not know when, or if, we will generate any revenue. We do not expect to generate significant revenue unless and until we obtain marketing approval for, and begin to sell, setmelanotide.product sales. Our ability to generate revenue depends on a number of factors, including, but not limited to, our ability to:

●

·

~~initiate and successfully complete later‑stage clinical trials that meet their clinical endpoints;~~

·

~~initiate and successfully complete all safety studies required~~continue to ~~obtain U.S. and foreign marketing approval for setmelanotide as a treatment for obesity caused by genetic deficiencies affecting the MC4 pathway;~~

·

~~successfully manufacture or contract with others to manufacture setmelanotide;~~

·

commercialize setmelanotide ~~if approved,~~ by building ~~an internal sales force~~ a commercial organization and/or entering into collaborations with third parties; ~~and~~

●

·

ensure IMCIVREE is available to patients;

●

continue to achieve market acceptance of setmelanotide in the medical community and with ~~third‑party payors.~~

third-party payors;

●

continue to initiate and successfully complete later-stage clinical trials for setmelanotide, RM-718, LB54640, or other product candidates that meet their clinical endpoints;

●

continue to initiate and successfully complete all studies required to obtain U.S. and foreign marketing approvals for setmelanotide as a treatment to address patients with deficiencies affecting the MC4R pathway; and

●

successfully manufacture or contract with others to manufacture setmelanotide, or RM-718 and LB54640 if approved.

~~Absent~~As described above, absent our entering into collaboration or partnership agreements, we have and expect to continue to incur significant sales and marketing, ~~costs~~commercialization, and research and development costs. Additionally, as a result of the acquisition of Xinvento B.V., we ~~prepare~~also expect to ~~commercialize setmelanotide. Even if we initiate~~devote substantial financial resources to the research and ~~successfully complete our pivotal clinical trials~~development and ~~setmelanotide is approved~~potential commercialization of a product candidate for ~~commercial sale, and we incur the costs associated with these activities, setmelanotide may not be a commercially successful drug.~~CHI. We may not achieve profitability soon after generating product sales, if ever. If we are unable to generate significant product revenue, we will not become profitable and will be unable to continue operations without continued funding.

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We will need to raise additional funding, which may not be available on acceptable terms, or at all. Failure to obtain this necessary capital when needed may force us to delay, limit or terminate our product development efforts or other operations.

We are currently in the early stages of commercializing IMCIVREE for chronic weight management in patients with obesity due to BBS, POMC, PCSK1 or LEPR deficiencies in the U.S., Canada, the EU and Great Britain and advancing setmelanotide through clinical ~~development.~~development for additional indications in the United States and for potential approvals in other countries. Developing peptide therapeutic products is expensive and we expect our research and development expenses to increase substantially in connection with our ongoing activities, particularly as we advance setmelanotide in additional clinical ~~trials.~~trials, as well as in connection with research and development activities for setmelanotide, RM-718, and LB54640, and in connection with a product candidate for CHI as a result of the acquisition of Xinvento B.V. We intend to use ~~the proceeds from~~ our ~~IPO primarily for~~available cash resources to advance the clinical development of setmelanotide, for disease-education and ~~regulatory approval of setmelanotide.~~community-building activities, patient identification, and commercialization activities related to IMCIVREE. Depending on the status of additional regulatory ~~approval~~approvals and ~~if approved,~~ commercialization of setmelanotide, as well as the progress we make in ~~the sale~~sales of ~~setmelanotide,~~IMCIVREE, we may still require significant additional capital to fund the continued development of setmelanotide and our operating needs ~~thereafter.~~thereafter, , as well as research and development activities for setmelanotide, RM-718, LB54640, and a product candidate for CHI. We may also need to raise additional funds if we choose to pursue additional indications and/or geographies for setmelanotide or otherwise expand more rapidly than we presently anticipate.

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~~Through~~From August 2015 ~~we received capital contributions from the Predecessor Company, the Relamorelin Company and the LLC entity. In August 2015, December 2015, January 2017 and~~through August 2017, we raised aggregate ~~gross~~net proceeds of ~~$25.0~~$80.8 million ~~$15.0 million, $20.5 million and $20.5 million, respectively,~~ through our issuance of series A preferred stock. In connection with our initial public offering, or IPO, in October 2017 and our underwritten follow-on offerings through December 2023, we raised aggregate net proceeds of approximately $791.5 million through the issuance of our common stock after deducting underwriting discounts, commissions and offering related transaction costs. We received a further $100.0 million from asset sales, specifically in connection with the sale of our Rare Pediatric Disease Priority Review Voucher, or PRV, to Alexion Pharmaceuticals, Inc. In June 2022, we entered into a Revenue Interest Financing Agreement, or RIFA, with HealthCare Royalty Partners for a total investment amount of up to $100.0 million, conditioned upon our achievement of certain clinical development and sales milestones. As of ~~September 30, 2017,~~March 31, 2024, we have received $96.7 million of aggregate proceeds, net of debt issuance costs, under the RIFA. We also received $150.0 million in net proceeds under an investment agreement, or the Investment Agreement, with certain affiliates of Perceptive Advisors LLC, or Perceptive, and certain other investors, relating to the issuance and sale of 150,000 shares of a new series of the Company’s Series A Convertible Preferred Stock, par value $0.001 per share, titled the “Series A Convertible Preferred Stock”, or the Convertible Preferred Stock, for an aggregate purchase price of $150.0 million, or $1,000 per share. As of March 31, 2024, our cash and cash equivalents and ~~short‑term~~short-term investments were approximately ~~$30.4 million and after giving effect to the aggregate net proceeds from our IPO in October 2017, $156.2~~$201.2 million. We expect that ~~the net proceeds from our IPO, together with~~ our existing cash and cash equivalents and short-term investments will be sufficient to fund our ~~operating expenses~~operations into ~~the first half of 2019.~~2026. However, our operating plan may change as a result of many factors currently unknown to us, and we may need to seek additional funds sooner than planned, through public or private equity or debt financings, government or other ~~third‑party~~third-party funding, marketing and distribution arrangements and other collaborations, strategic alliances and licensing arrangements, or a combination of these approaches. We will also require additional capital to obtain additional regulatory ~~approval~~approvals for, and to continue to commercialize, ~~setmelanotide.~~setmelanotide, as well as for research and development activities for setmelanotide, RM-718, LB54640, and a product candidate for CHI. Raising funds in the current economic and geopolitical environment may present additional challenges. Even if we believe we have sufficient funds for our current or future operating plans, we may seek additional capital if market conditions are favorable or if we have specific strategic considerations.

We maintain the majority of our cash and cash equivalents in accounts with major U.S. and multi-national financial institutions, and our deposits at certain of these institutions exceed insured limits. Market conditions can impact the viability of these institutions. In the event of failure of any of the financial institutions where we maintain our cash and cash equivalents, there can be no assurance that we would be able to access uninsured funds in a timely manner or at all. Any inability to access or delay in accessing these funds could adversely affect our business and financial position.

Any additional fundraising efforts may divert our management from their ~~day‑to‑day~~day-to-day activities, which may adversely affect our ability to commercialize IMCIVREE and develop setmelanotide RM-718, LB54640, and ~~commercialize setmelanotide.~~a product candidate for CHI. In addition, we cannot guarantee that future financing will be available in sufficient amounts or on

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terms acceptable to us, if at all. Moreover, the terms of any financing may adversely affect the holdings or the rights of our stockholders and the issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the market price of our shares to decline. The sale of additional equity or convertible securities would dilute all of our stockholders. The incurrence of indebtedness would result in increased fixed payment obligations, and we may be required to agree to certain restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell or license intellectual property rights, and other operating restrictions that could adversely impact our ability to conduct our business. We could also be required to seek funds through arrangements with collaborative partners or other third parties at an earlier stage than otherwise would be desirable and we may be required to relinquish rights to setmelanotide or technologies or otherwise agree to terms unfavorable to us, any of which may have a material adverse effect on our business, operating results and prospects.

If we are unable to obtain funding on a timely basis, we may be required to significantly curtail, delay or discontinue one or more of our research or development programs or the commercialization of setmelanotide or be unable to expand our operations or otherwise capitalize on our business opportunities, as desired, which could materially adversely affect our business, financial condition and results of operations.

Our ~~very limited operating history may make it difficult for you to evaluate the success of our business to date and to assess our future viability.~~

We are an early‑stage company. The Predecessor Company commenced active operations in February 2010, and we were incorporated as a separate company in February 2013. Our operations to date have been limited primarily to acquiring rights to intellectual property, business planning, raising capital, developing our technology, identifying potential product candidates, undertaking preclinical studies and, beginning in November 2010, conducting clinical trials. We have not yet demonstratedRevenue Interest Financing Agreement with Healthcare Royalty Partners could restrict our ability to ~~successfully complete a pivotal Phase 3 clinical trial, obtain marketing approvals, manufacture at commercial scale, or arrange~~commercialize IMCIVREE, limit cash flow available for ~~a third party~~our operations and expose us to ~~do so on~~risks that could adversely affect our behalf or conduct sales, marketing and distribution activities necessary for successful product commercialization. Consequently, any predictions made about our future success or viability may not be as accurate as they could be if we had a longer operating history.

~~In addition, as a new~~ business, we may encounter unforeseen expenses, difficulties, complications, delays and other known and unknown factors. We will need to transition at some point from a company with a research and development focus to a company capable of supporting commercial activities and we may not be successful in such a transition.

~~We expect our~~ financial condition and ~~operating~~ results of operations.

On June 16, 2022, we entered into the RIFA, with entities managed by HealthCare Royalty Management, collectively referred to ~~continue~~as the Investors. Pursuant to ~~fluctuate significantly from quarter‑to‑quarter~~the RIFA and ~~year‑to‑year due~~subject to customary closing conditions, the Investors agreed to pay us an aggregate investment amount of up to $100.0 million, or the Investment Amount. Under the terms of the RIFA, we received $37.5 million on June 29, 2022 upon FDA approval of IMCIVREE in BBS, and an additional $37.5 million on September 29, 2022, following EC marketing authorization for BBS on September 6, 2022. On September 12, 2023, we received the remaining $24.4 million of the Investment Amount, net of debt issuance costs, following the achievement of a specified amount of cumulative net sales of IMCIVREE between July 1, 2022 and September 30, 2023.

As consideration for the Investment Amount and pursuant to the RIFA, we agreed to pay the Investors a tiered royalty on our annual net revenues, or Revenue Interest, including worldwide net product sales and upfront payments and milestones. The applicable tiered percentage will initially be 11.5% on annual net revenues up to $125 million, 7.5% on annual net revenues of between $125 million and $300 million and 2.5% on annual net revenues exceeding $300 million. If the Investors have not received cumulative minimum payments equal to 60% of the amount funded by the Investors to date by March 31, 2027 or 120% of the amount funded by the Investors to date by March 31, 2029, we must make a cash payment immediately following each applicable date to the Investors sufficient to gross the Investors up to such minimum amounts after giving full consideration of the cumulative amounts paid by us to the Investors through each date, referred to as the Under Performance Payment. As the repayment of the funded amount is contingent upon worldwide net product sales and upfront payments, milestones, and royalties, the repayment term may be shortened or extended depending on actual worldwide net product sales and upfront payments, milestones, and royalties. As of March 31, 2024 we have made $10,313 of payments, including $2,783 in the three months ended March 31, 2024.

The Investors’ rights to receive the Revenue Interests will terminate on the date on which the Investors have received payments equal to a ~~variety~~certain percentage of ~~factors, many~~the funded portion of ~~which are beyond our control. Accordingly, you should not rely upon~~ the ~~results~~Investment Amount including the aggregate of all payments made to the Investors as of such date, each percentage tier referred to as the Hard Cap, unless the RIFA is earlier terminated. The total Revenue Interests payable by us to the Investors is capped between 185% and 250% of the Investment Amount paid to us, dependent on the aggregate royalty paid between 2028 and 2032. If a change of control of occurs, the Investors may accelerate payments due under the RIFA up to the Hard Cap plus any ~~quarterly or annual periods as indications of future operating performance.~~

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other obligations payable under the RIFA.

Our ~~historical financial information is not necessarily representative of~~obligations under the ~~results we would~~RIFA could have ~~achieved as an independent company,~~significant negative consequences for our security holders and ~~may not be a reliable indicator of~~ our ~~future results.~~

~~The historical financial information we have included in this Quarterly Report on Form 10-Q may not reflect what our~~business, results of operations and financial ~~position and cash flows would have been had we been an independent company during the periods presented. This is primarily because:~~condition by, among other things:

•

·

increasing our ~~historical financial information reflects allocations for services historically provided~~vulnerability to ~~us by the Predecessor Company~~adverse economic and ~~the Relamorelin Company, which allocations may not reflect the costs we now and in the future will incur for similar services as an independent company; and~~

industry conditions;

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•

·

limiting our ability to obtain additional financing or enter into IMCIVREE partnership agreements;

•

requiring the dedication of a portion of our cash flow from operations to service our indebtedness, which will reduce the amount of cash available for other purposes;

•

limiting our ~~historical financial information does not reflect changes that we have incurred and expect~~flexibility to ~~continue~~plan for, or react to, ~~incur as a result of operating as an independent company and from reduced economies of scale, including~~ changes in ~~cost structure, personnel needs, financing and operations of~~ our ~~business.~~

business;

•

placing us at a possible competitive disadvantage with competitors that are less leveraged than us or have better access to capital; and

•

if we fail to comply with the terms of the RIFA, resulting in an event of default that is not cured or waived, Investors could seek to enforce their security interest in our cash and cash equivalents and all assets relating to IMCIVREE that secures such indebtedness.

To the extent we incur additional debt (including without limitation additional amounts under the RIFA), the risks described above could increase.

Risks Related to the Development of Setmelanotide and Other Product Candidates

Positive results from ~~early~~earlier clinical trials of setmelanotide may not be predictive of the results of later clinical trials of setmelanotide. If we cannot generate positive results in our later clinical trials of setmelanotide, we may be unable to successfully develop, obtain regulatory approval for, and commercialize additional indications for setmelanotide.

Positive results from any of our Phase 1, ~~and~~ Phase 2, or Phase 3 clinical trials of setmelanotide, or initial results from other clinical trials of setmelanotide, may not be predictive of the results of later clinical trials. The duration of effect of setmelanotide tested in our Phase 1 and Phase 2 clinical trials was often for shorter periods than ~~that planned for testing~~ in our ~~current~~ pivotal Phase 3 clinical trials. The duration of effect of setmelanotide has only been studied in ~~long‑term~~long-term durations for a small number of patients in our Phase 2 and Phase 3 clinical trials and safety or efficacy issues may arise when more patients are studied in longer ~~trials.~~trials and on commercial drug. It is possible that the effects seen in ~~short‑term~~short-term clinical trials will not be replicated in ~~long‑term~~long-term or larger clinical trials. In addition, not all of our trials demonstrated statistically significant weight loss and there can be no guarantee that future trials will do so.

Positive results ~~for~~observed in one ~~indication~~patient population are not necessarily predictive of positive results for other ~~indications.~~populations. We have demonstrated statistically significant and clinically meaningful reductions in weight and hunger in Phase 3 clinical trials in obesity due to POMC, PCSK1 or LEPR deficiencies and BBS, and believe we have demonstrated proof of concept in Phase 2 clinical trials in impairments due to a variant in one of the two alleles in the POMC, ~~deficiency obesity, LepR deficiency obesity,~~PCSK1, or LEPR genes (HET obesity), as well as the SRC1 and ~~Bardet‑Biedl syndrome, three~~SH2B1 genes, all genetic ~~disorders~~diseases of extreme and unrelenting appetite and ~~obesity, in which setmelanotide dramatically reduced both weight and hunger.~~obesity. We hypothesize that patients with other upstream genetic ~~defects~~variants in the ~~MC4~~MC4R pathway may also respond with reductions in weight and hunger after treatment with ~~setmelanotide, however~~setmelanotide. However, patients with other upstream genetic ~~defects~~variants may not have a similar response to setmelanotide, and until we obtain more clinical data in other genetic ~~defects,~~variants, we will not be sure that we can achieve proof of concept in such ~~indications. In addition, while~~populations.

We are actively working to advance additional genetic variants related to the MC4R pathway through our clinical development programs. Our continued development efforts are focused on obesity related to several single gene related, or monogenic, MC4R pathway impairments: BBS; obesity due to a genetic variant in one of the two alleles of the POMC, PCSK1 or LEPR gene, or HETs; obesity due to steroid receptor coactivator 1, or SRC1, variants; obesity due to SH2B adapter protein 1, or SH2B1; hypothalamic obesity; and MC4R deficiency obesity. For example, in April 2022 we ~~believe that proof~~enrolled the first patient in our pivotal Phase 3 EMANATE clinical trial of ~~concept in Bardet‑Biedl syndrome has been demonstrated by improvements in hunger and weight reduction, supporting that this~~setmelanotide. The trial is a ~~setmelanotide‑responsive, MC4 pathway disorder,~~randomized, double-blind, placebo-controlled study with four independent sub-studies evaluating setmelanotide in patients with: heterozygous POMC/PCSK1 obesity; heterozygous LEPR obesity; certain variants of the ~~results~~SRC1; or certain variants of ~~this trial are still at a preliminary stage.~~

~~We have or~~SH2B1 genes. Each of the four sub-studies will ~~have multiple clinical trials~~be entirely independent of ~~setmelanotide ongoing, which are~~the others and, if successful, is designed to ~~include multiple genetically~~support separate regulatory submissions to the FDA and EMA in each studied population. However, the FDA and EMA may not view

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positive results in one sub-study, even if such results are statistically significant and clinically defined populations under one investigational protocol, although each population is enrolled and analyzed separately. A “basket” trial design could potentially decrease the time to study new populations by decreasing administrative burden, however, these trials do not overcome limitations to extrapolating data from the experience in one disease to other diseases, because safety and efficacy results in eachmeaningful, as being sufficient for approval for any given indication ~~are analyzed separately. Accordingly, clinical success~~.

Success in a basket trial, or any trial in one ~~indication,~~cohort, may not predict success in another ~~indication.~~cohort. In contrast, in the event of an adverse safety issue, clinical hold, or other adverse finding in one or more ~~indications~~cohorts being tested, such event could adversely affect our trials in the other ~~indications~~cohorts and may delay or prevent completion of ~~the~~such clinical trials.

Many companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in later stage clinical trials after achieving positive results in ~~early stage~~early-stage development, and we cannot be certain that we will not face similar setbacks. These setbacks have been caused by, among other things, pre-clinical findings made while clinical trials were underway. ~~We have completed the key toxicology studies that we believe the U.S. Food and Drug Administration, or the FDA, and the European Medicines Agency, or EMA, will require for approval, which include,~~

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among others, chronic toxicity studies, reproductive and developmental toxicity studies, and juvenile toxicology studies. Based on the totality of animal testing results to date, including the lack of any observed genotoxicity or tissue proliferative activity of setmelanotide in chronic toxicity studies, we have requested that the FDA permit us to defer carcinogenicity studies until after approval of a new drug application, or NDA, for setmelanotide. Accordingly, we believe that we will be able to defer all carcinogenicity studies until after we receive regulatory approval to market setmelanotide. However, the FDA has indicated that it will not make a decision on our request until after reviewing our final toxicology study reports. Accordingly, at this time, there can be no guarantee that we will be able to achieve this deferral which could impact the timing of any potential NDA approval as well as the time frame to achieve commercialization.

In addition to the foregoing issue, the FDA has requested that in our chronic rat and monkey studies we assess certain cells in brain, renal and liver tissues for the presence of vacuoles, which are common membrane‑bound compartments. The recommendation was based on the FDA’s review of a summary of a rat study that noted the presence of macrophage aggregates, which are groupings of specific white blood cells, in the choroid plexus, a network of blood vessels and epithelial tissue in the membrane lining outside the brain and spinal cord. The FDA noted that the existence of macrophage aggregates appears to be related to the polyethylene glycol vehicle in the product, rather than setmelanotide itself. We do not believe that the appearance of these aggregates raises any safety concerns, in part because of the localization of these aggregates. However, the FDA has not indicated that they agree with our position, and, accordingly, we are performing additional assessments for the presence of vacuoles, including assessments by an independent pathologist. Despite these additional assessments, the FDA may still not agree with our interpretation, and may require us to reflect these findings in the toxicological portion of the product labeling.

Additionally, setbacks may be caused by new safety or efficacy observations made in clinical trials, including previously unreported adverse ~~events.~~events, or AEs. Moreover, preclinical and clinical data are often susceptible to varying interpretations and analyses, and many companies that believed their product candidates performed satisfactorily in preclinical studies and clinical trials nonetheless failed to obtain FDA approval or ~~European Commission authorization.~~a marketing authorization from the EC or foreign regulatory authorities. If we fail to obtain positive results in our Phase 3 clinical trials of setmelanotide, the development timeline and regulatory approval and commercialization prospects for setmelanotideand, correspondingly, our business and financial prospects, would be materially adversely affected.

Interim, “topline” and preliminary data from our clinical trials that we announce or publish from time to time may change as more patient data become available and are subject to audit and verification procedures that could result in material changes in the final data.

From time to time, we may publicly disclose preliminary or topline data from our preclinical studies and clinical trials, which is based on a preliminary analysis of then-available data, and the results and related findings and conclusions are subject to change following a more comprehensive review of the data related to the particular study or trial. We make assumptions, estimations, calculations and conclusions as part of our analyses of data, and we may not have received or had the opportunity to fully and carefully evaluate all data. As a result, the topline or preliminary results that we report may differ from future results of the same studies, or different conclusions or considerations may qualify such results, once additional data have been received and fully evaluated. Topline data also remain subject to audit and verification procedures that may result in the final data being materially different from the preliminary data we previously published or reported. As a result, topline data should be viewed with caution until the final data are available.

From time to time, we may also disclose interim data from our preclinical studies and clinical trials. Interim data from clinical trials that we may complete are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues and more patient data become available. Adverse differences between preliminary or interim data and final data could significantly harm our business prospects. Further, disclosure of interim data by us or by our competitors could result in volatility in the price of our common stock.

Further, others, including regulatory agencies, may not accept or agree with our assumptions, estimates, calculations, conclusions or analyses or may interpret or weigh the importance of data differently, which could impact the value of the particular program, the approvability or commercialization of the particular product candidate or product and our Company in general. In addition, the information we choose to publicly disclose regarding a particular study or clinical trial is based on what is typically extensive information, and you or others may not agree with what we determine is material or otherwise appropriate information to include in our disclosure.

If the interim, topline, or preliminary data that we report differ from actual results, or if others, including regulatory authorities, disagree with the conclusions reached, our ability to obtain approval for, and commercialize, our product candidates may be harmed, which could harm our business, operating results, prospects or financial condition.

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The exclusive license agreement with LGC is important to our business. If we or LGC fail to adequately perform under the agreement, the development of LB54640 could be delayed, or if we or LGC terminate the agreement, we would lose our rights to develop and commercialize LB54640.

In January 2024, we entered into a license agreement and share issuance agreement with LGC. Pursuant to the terms of the license agreement, we obtained exclusive worldwide rights to develop LGC’s proprietary compound LB54640 and assumed sponsorship of two ongoing LGC Phase 2 studies designed to evaluate safety, tolerability, pharmacokinetics and weight loss efficacy of LB54640. In addition and subject to the completion of Phase 2 development of LB54640, we have agreed to pay LGC royalties of between low-to-mid single digit percent of net revenues from our MC4R portfolio, including LB54640, commencing in 2029 and dependent upon achievement of various regulatory and indication approvals, and subject to customary deductions and anti-stacking. Royalties may further increase to a low double digit percent royalty, though such royalty would only be applicable on net sales of LB54640 in a region if LB54640 is covered by a composition of matter or method of use patent controlled by LGC in such region and the Company’s MC4R portfolio is not covered by any composition of matter or method of use patents controlled by the Company in such region. Such increased rate would only apply on net sales of LB54640 for the limited remainder of the royalty term in the relevant region. The license agreement will continue until the expiration of the obligation to pay royalties in all countries or regions, unless terminated earlier. We or LGC can terminate the license agreement in certain circumstances, including for the other party’s material uncured breach. If the license agreement is terminated, we would lose our rights to develop and commercialize LB54640, and, under some circumstances, we could be subject to certain ongoing payments, penalties and fees, all of which in turn would have a material adverse effect on our business.

The number of patients suffering from each of the ~~MC4~~MC4R pathway ~~deficiencies~~variants we are targeting is small and has not been established with precision. If the actual number of patients is smaller than we estimate, our revenue and ability to achieve profitability may be materially adversely affected.

Due to the rarity of our target indications, there is no comprehensive patient registry or other method of establishing with precision the actual number of patients with ~~MC4~~MC4R pathway deficiencies. As a result, we have had to rely on other available sources to derive clinical prevalence estimates for our target indications. In addition, we have internal genetic sequencing results from individuals with severe obesity that provide another approach to estimating prevalence. As of March 31, 2024, our database had approximately 80,000 sequencing samples. Since the published epidemiology studies for these genetic ~~deficiencies~~variants are based on relatively small population samples, and are not amenable to robust statistical analyses, it is possible that these projections may significantly exceed the addressable population, particularly given the need to genotype patients to definitively confirm a diagnosis.

WeBased on multiple epidemiological methods, we have estimated the potential addressable patient populations with these ~~MC4~~MC4R pathway deficiencies based on the following sources and assumptions:

●

·

POMC Deficiency ~~Obesity.~~ ~~There~~Obesity. POMC Deficiency Obesity is defined by the presence of biallelic variants in the POMC or PCSK1 genes that are interpreted as pathogenic, likely pathogenic, or of uncertain significance. Our addressable patient population estimate for POMC deficiency obesity is approximately 100 to 500 patients in the United States, with a comparable addressable patient population in Europe. Our estimates are based on:

●

approximately 50 patients with POMC deficiency obesity noted in a series of published case reports, each mostly reporting a single or small number of patients. However, we believe our addressable patient population for this deficiency may be approximately 100 to 500 patients in the United States, and a comparable addressable patient population in Europe, as most of the reported cases are from a small number of academic research centers, and because genetic testing for POMC deficiency obesity is often unavailable and currently is rarely ~~performed. Based~~performed;

●

our belief, based on discussions with experts in rare diseases, ~~we also believe~~that the number of diagnosed cases could increase ~~several‑fold~~several-fold with increased awareness of this deficiency and the availability of new ~~treatments.~~

treatments;

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●

·

U.S. Census Bureau figures for adults and children, and Centers for Disease Control and Prevention, or CDC, prevalence numbers for adults with severe obesity (body mass index, or BMI, greater than 40 kg/m2) and for children with severe early-onset obesity (99th percentile at ages two to 17 years old); and

●

our internal sequencing yield for POMC deficiency obesity patients (including both POMC and PCSK1 gene diseases), defined as patients having biallelic variants in the POMC or PCSK1 genes that are interpreted as pathogenic, likely pathogenic, or of uncertain significance, of approximately 0.05%.

●

~~LepR~~LEPR Deficiency Obesity. LEPR Deficiency Obesity ~~and POMC Heterozygous Deficiency Obesity.~~is defined by the presence of biallelic variants in the LEPR gene that are interpreted as pathogenic, likely pathogenic, or of uncertain significance. Our addressable patient population estimate for ~~LepR~~LEPR deficiency obesity is approximately 500 to 2,000 patients in the United States, ~~and for~~

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~~POMC heterozygous deficiency obesity is approximately 4,000 patients in the United States,~~ with a comparable addressable patient population ~~for both indications~~ in Europe. Our estimates are based on:

●

·

epidemiology studies on ~~LepR~~LEPR deficiency ~~and POMC heterozygous deficiency~~obesity in small cohorts of patients comprised of children with severe obesity and adults with severe obesity who have a history of early onset obesity;

●

·

U.S. Census Bureau figures for adults and children and ~~Centers for Disease Control and Prevention, or~~ CDC prevalence numbers for adults with severe ~~adult obese patients (body mass index, or BMI,~~obesity (BMI, greater than 40 kg/m2) and for children with severe ~~early onset obese children~~early-onset obesity (99th percentile at ages two to 17 years old); ~~and~~

●

·

with wider availability of genetic testing expected for ~~LepR~~LEPR deficiency ~~and POMC heterozygous deficiency~~obesity and increased awareness of new treatments, our belief that up to 40% of patients with these ~~disorders~~diseases may eventually be ~~diagnosed.~~

diagnosed; and

Using these sources and assumptions, we calculated our estimates for addressable populations by multiplying (x) our estimate of the number of patients comprised of children with severe obesity and our estimate of a projected number of adults with severe obesity who have a history of early onset obesity, (y) the estimated prevalence from epidemiology studies of approximately 1% for LepR deficiency and 2% for POMC heterozygous, and (z) our estimated diagnosis rate of up to 40%.

●

·

our internal sequencing yield for LEPR deficiency obesity patients, defined as patients having biallelic variants in the LEPR gene that are interpreted as pathogenic, likely pathogenic, or of uncertain significance, of approximately 0.09%.

●

~~Bardet‑Biedl Syndrome.~~Bardet-Biedl Syndrome. Our addressable patient population estimate for ~~Bardet‑Biedl syndrome~~BBS is approximately ~~1,500~~4,000 to ~~2,500~~5,000 patients in the United States based on:

●

·

~~Published~~published prevalence estimates of one in 100,000 in North America, which projects to approximately 3,250 people in the United States. We believe the majority of these patients are addressable patients; ~~and~~

●

·

comparisons to our patient identification efforts in Europe where we believe there are approximately 1,500 patients diagnosed and being cared for at academic centers in Europe;

●

our patient identification efforts to date in the United States;

●

~~We believe~~our internal sequencing yield for biallelic pathogenic or likely pathogenic variants in BBS genes of approximately 0.3%; and

●

our belief that with wider availability of genetic testing expected for ~~Bardet‑Biedl syndrome~~BBS and increased awareness of new treatments, the number of patients diagnosed with this disorder will increase.

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●

·

POMC, PCSK1, or LEPR Heterozygous Obesities; SRC1 and SH2B1 Obesities. Our potential setmelanotide-responsive patient population estimate for POMC, PCSK1, or LEPR heterozygous, SRC1 and SH2B1 obesity patients with at least one variant interpreted as pathogenic, likely pathogenic, or of uncertain significance suspected pathogenic is approximately 53,000 patients in the United States. Our estimates are based on:

●

U.S. Census Bureau population data and CDC prevalence numbers for early onset obesity (120% the 95th percentile between the ages of 2-5 years);

●

~~Alström Syndrome.~~ our internal sequencing yield of patients with POMC, PCSK1, or LEPR heterozygous, SRC1 or SH2B1 variants interpreted as pathogenic, likely pathogenic, or of uncertain significance of approximately 10-15%; and

●

a clinical response rate of 40% for patients carrying pathogenic or likely pathogenic variants, and 20% for patients carrying a variant of uncertain significance.

The clinical response rate used in this calculation is based on the clinical data currently available to us from our trials and may change as more data become available.

●

MC4R Deficiency Obesity. Our addressable patient population estimate for ~~Alström syndrome~~MC4R-rescuable deficiency obesity is approximately ~~500 to 1,000~~10,000 patients ~~worldwide.~~in the United States. This estimate is based on:

●

·

U.S. Census Bureau population data and CDC prevalence numbers for early onset obesity (120% the 95th percentile between the ages of 2-5 years);

●

a comprehensive ongoing biochemical screening study indicating there may be a defined subset of individuals who carry MC4R variants that may be rescued by an MC4R agonist; and

●

~~Published prevalence estimates~~our internal sequencing yield for MC4R deficiency obesity patients of ~~one~~approximately 2.0% prior to application of functional filters.

●

Hypothalamic obesity. Our addressable patient population estimate for hypothalamic obesity (HO) is 5,000 to 10,000 patients in ~~1,000,000~~the United States. This estimate is based on:

●

diagnosis of an underlying HO etiology such as craniopharyngioma (CP), astrocytoma, or other brain tumors with CP accounting for approximately 50% of HO etiologies;

●

an annual incidence of CP of approximately 1.3 to 2.2 per million per year in ~~North America,~~the United States, which projects to approximately ~~325 people~~600 cases of CP per year based on a United States population of approximately 329 million;

●

approximately 50% (based on a published range of 6% to 91%) of CP patients develop HO;

●

published estimates of overall survival (OS) after CP diagnosis, with a 20-year OS of 84%;

●

allowing for patients that develop HO due to other factors besides CP, results in an estimated HO prevalence after CP diagnosis in the United States exceeding 2,500-7,500 patients; and

●

internal Company estimate is based on reported incidence of hypothalamic obesity following CP and long-term survival rates.

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●

Obesity due to a deficiency in the MC4R pathway caused by variants in the SEMA3 family, PHIP, TBX3 or PLXNA family. Our addressable patient population estimate for obesity patient with variants in these genes is approximately 63,500 patients in the United States. ~~We believe the majority of these patients are addressable patients; and~~
This estimate is based on:

●

·

~~We believe that with wider availability of~~results from our URO genetic testing ~~expected~~program with samples from more than 36,000 participants, classification of variants for ~~Alström syndrome~~pathogenic, likely pathogenic and ~~increased awareness~~20% of ~~new treatments,~~with a variant of uncertain significance and applied to established estimate of approximately 5 million people in the ~~number of patients diagnosed~~US with ~~this disorder will increase.~~

early-onset obesity.

·

~~POMC Epigenetic Disorders.~~ ~~There is currently no epidemiology data that defines the prevalence of POMC epigenetic disorders.~~

We believe that the patient populations in the ~~European Union~~EU are ~~at least as large as~~similar to those in the United States. However, we do not have comparable epidemiological data from the ~~European Union~~EU and these estimates are therefore based solely on applying relative population percentages to the ~~Company‑derived~~Company-derived estimates described above.

We are conducting additional clinical epidemiology studies to strengthen these prevalence projections. In parallel, we are also developing a patient registry for diagnosed patients with POMC deficiency and LepR deficiency which will further inform prevalence projections for these rareDefining the exact genetic ~~orders.~~

~~Another method to estimate the size of these ultra‑rare populations by genetic epidemiology~~variants that result in MC4R pathway diseases is using newly available large genomic databases, containing full genome sequencing or exome sequencing. Ultra‑rare orphan diseases are generally categorized as those that affect fewer than 20 patients per million. We have begun some substantial efforts

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with a series of such databases and/or collaborators. Much of our preliminary work has been with a database of approximately 140,000 genomes, which is representative of the U.S. population. These efforts generally are based on the prevalence of heterozygous mutations, as true null mutations are ultra‑rare, and then standard scientific methods such as the Hardy‑Weinberg equilibrium calculations, are applied to estimate the prevalence in the U.S. population. These methods make assumptions that may not be sufficiently robust for ultra‑rare genetic disorders, and have the inherent variability of estimates for rare events. In addition, the databases currently available only provide limited clinical data, such as, age, weight and BMI, that would be needed to associate genetic defects with severe obesity. However, until these data are confirmed in further genetic epidemiology efforts in additional databases, we must continue to base our patient population estimates on clinical epidemiological information.

~~In addition,~~complex, so if any approval that we obtain is based on a narrower definition of these patient populations than we had anticipated, then the potential market for setmelanotide for these indications will be smaller than we originally believed. In either case, a smaller patient population in our target indications would have a materially adverse effect on our ability to achieve commercialization and generate revenues.

If the actual number of patients suffering from each of the MC4 pathway deficiencies we are targeting is smaller than we estimate or if any approval that we obtain is based on a narrower definition of these patient populations, including pediatric populations, our ability to recruit patients to our trials may be materially adversely affected.

If the actual number of patients with any of the MC4 pathway deficiencies we are targeting is lower than we believe, it may be difficult to recruit patients, and this may affect the timelines for the completion of clinical trials. If we experience delays or difficulties in the enrollment and/or retention of patients in clinical trials, our regulatory submissions or receipt of ~~necessary regulatory~~additional marketing approvals could ~~also~~ be delayed or prevented.

~~The~~We may not be able to initiate or continue our planned clinical trials on a timely basis or at all for our product candidates if we are unable to recruit and enroll a sufficient number of eligible patients to participate in these trials through completion of such trials as required by the FDA or other comparable foreign regulatory authorities. Patient enrollment is a significant factor in the timing of clinical trials. Our ability to enroll eligible patients may be limited or may result in slower enrollment than we anticipate.

Our clinical trials will compete with other clinical trials that are in the same therapeutic areas as our product candidates, including general obesity, and this competition reduces the number and types of patients available to us, as some patients who might have opted to enroll in our trials may instead opt to enroll in a trial being conducted by one of our competitors. Because the number of qualified clinical investigators and clinical trial sites is limited, we expect to conduct some of our clinical trials at the same clinical trial sites that some of our competitors use, which will reduce the number of patients who are available for our clinical trials at such clinical trial sites. In addition, there are limited patient pools from which to draw for clinical studies. In addition to the rarity of genetic diseases of obesity, the eligibility criteria of our clinical studies will further limit the pool of available study participants as we will require that patients have specific characteristics that we can measure or to assure their disease is either severe enough or not too advanced to include them in a study. Patient enrollment for our current or any future clinical trials may be affected by other factors, including:

●

size and nature of the patient population;

●

severity of the disease under investigation;

●

availability and efficacy of approved drugs for the disease under investigation;

●

patient eligibility criteria for the trial in question as defined in the protocol;

●

perceived risks and benefits of the product candidate under study;

●

clinicians’ and patients’ perceptions as to the potential advantages of the product candidate being studied in relation to other available therapies, including any new products that may be approved or future product candidates being investigated for the indications we are investigating;

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●

clinicians’ willingness to screen their patients for genetic markers to indicate which patients may be eligible for enrollment in our clinical trials;

●

delays in or temporary suspension of the enrollment of patients in our planned clinical trial due to public health emergencies;

●

ability to obtain and maintain patient consents;

●

patient referral practices of physicians;

●

the ability to monitor patients adequately during and after treatment;

●

proximity and availability of clinical trial sites for prospective patients; and

●

the risk that patients enrolled in clinical trials will drop out of the trials before completion, including as a result of health conditions or being forced to quarantine, or, because they may be late-stage cancer patients or for other reasons, will not survive the full terms of the clinical trials.

In addition, the pediatric population is an important patient population for setmelanotide, RM-718, and LB54640, and our addressable patient population estimates include pediatric populations. However, it may be more challenging to conduct studies in ~~this population,~~younger participants, and to locate and enroll pediatric patients. ~~Additionally,~~These factors may make it ~~may be challenging to ensure that pediatric or adolescent patients adhere to clinical trial protocols.~~

~~We currently are treating patients 12 years of age and older in our trials, but we aim to gain regulatory approval and labeling~~difficult for ~~patients six years of age and older. Accordingly, we have applied for permission from the FDA and other equivalent competent authorities in the EU member states~~us to enroll ~~these younger~~enough patients ~~aged six~~ to 11, in our pivotal trials. However, there may be issues that preclude this approval including, but not limited to, potential disagreement on dose titration or delivery methods and suitability of patient reported outcomes in younger patients, as well as avoiding over‑suppression of normal appetite in adolescents. In addition, the competent authorities in the EU member states may consider the polyethylene glycol vehicle in the product to carry additional risks in pediatric patients. We cannot guarantee that the FDA or other equivalent competent authorities in the EU member states will ultimately grant permission to enroll the younger pediatric patient population, nor can we predict whether they will require additional pre‑clinical studies or estimate the timing for approval, if any, of including patients under 12 in our trials or for the use of setmelanotide for such patients at all. The inability to obtain permission from the FDA or other equivalent competent authorities in the EU member states to enroll these younger patients under age 12 may narrow our potential patient population such that we may experience delays in enrolling sufficient numbers of patients in our clinical trials. Furthermore, if the FDA or other equivalent competent authorities in the EU member states do not approve the enrollment of the younger patient population in clinical trials or does not approve the use of setmelanotide in this population, the product candidate will not be labeled for promotion for these patients, even if they approve an NDA for setmelanotide for patients 12 and older.

While we have no knowledge of competitors developing product candidates intended to treat MC4 pathway deficiencies, competitors may emerge. If that were to occur and competitors initiated clinical trials for product candidates that treat the same indications as setmelanotide, patients who would otherwise be eligible forcomplete our clinical trials ~~may instead enroll~~ in ~~the clinical trials of our competitors’ product candidates.~~

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~~Patient enrollment is also affected by other factors including:~~

·

~~the severity of the disease under investigation;~~

·

~~the eligibility criteria for the clinical trial in question;~~

·

~~the perceived risks and benefits of the product candidate under study;~~

·

~~the success of efforts to facilitate timely enrollment in clinical trials;~~

·

~~the patient referral practices of physicians;~~

·

~~the ability to monitor patients adequately during and after treatment; and~~

·

~~the proximity and availability of clinical trial sites for prospective patients.~~

a timely and cost-effective manner. Our inability to enroll a sufficient number of patients for our clinical trials would result in significant delays ~~could~~or may require us to abandon one or more clinical trials ~~altogether and could delay or prevent our receipt of necessary regulatory approvals.~~altogether. Enrollment delays in our clinical trials may also result in increased development costs for setmelanotide ~~which would cause the value of our company to decline~~ and ~~limit~~any future product candidates and jeopardize our ability to obtain additional ~~financing.~~marketing approvals for the sale of setmelanotide. Furthermore, even if we are able to enroll a sufficient number of patients for our clinical trials, we may have difficulty maintaining participation in our clinical trials through the treatment and any follow-up periods.

Failures or delays in the commencement or completion of our planned clinical trials of setmelanotide, RM-718, or LB54640 could result in increased costs to us and could delay, prevent or limit our ability to generate revenue and continue our business.

We completed Phase 2 clinical trials for setmelanotide in 2016 for POMC deficiency obesity and are currently enrolling Phase 3 clinical trials for setmelanotide for POMC deficiency obesity in 2017. We completed Phase 2 clinical trials for setmelanotide for LepR deficiency obesity, and we expect to enroll the first patient in our LepR deficiency obesity Phase 3 clinical trial in the second half of 2017. We have also initiated Phase 2 clinical trials for Bardet‑Biedl syndrome, Alström syndrome, POMC heterozygous deficiency obesity, and POMC epigenetic disorders. Successful completion of ~~such~~our ongoing and planned clinical trials is a prerequisite to submitting an NDA or NDA supplement to the FDA, ~~a marketing authorization application~~an MAA to the EMA, and other applications for marketing authorization to equivalent competent authorities in foreign jurisdictions, and consequently, successful completion of such trials, at a minimum, will be required for regulatory approvals and the ~~ultimate approval and~~ commercial marketing of ~~setmelanotide.~~ setmelanotide for additional indications as well as RM-718 and LB54640.

We do not know whether our planned ~~additional Phase 2 or Phase 3~~ clinical trials will begin or whether any of our clinical trials will be completed on schedule, if at all, as the commencement and successful completion of clinical trials can be delayed or prevented for a number of reasons, including but not limited to:

●

·

inability to generate sufficient preclinical or other in vivo or in vitro data to support the initiation of clinical studies;

●

delays in the completion of preclinical laboratory tests, animal studies and formulation studies in accordance with FDA’s good laboratory practice requirements and other applicable regulations;

●

the FDA or other equivalent competent authorities in foreign jurisdictions may deny permission to proceed with our ongoing or planned ~~Phase 3 clinical~~ trials or any other clinical trials we may initiate, or may place a clinical trial on ~~hold;~~

hold or be suspended;

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●

·

delays in filing or receiving ~~approvals~~authorization to proceed under an additional investigational new drug application, or ~~additional~~ IND, ~~that may be~~or similar foreign application if required;

●

·

~~negative results from our ongoing and planned preclinical studies, or~~delays in reaching a consensus with the FDA orand other ~~equivalent competent authorities in foreign jurisdictions requiring additional preclinical studies;~~

regulatory agencies on study design and obtaining regulatory authorization to commence clinical trials;

●

·

~~delays in commencing additional necessary preclinical studies, including carcinogenicity and juvenile toxicology studies;~~

·

delays in reaching or failing to reach agreement on acceptable terms with prospective contract research organizations, or CROs, and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites;

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●

·

difficulties in obtaining Institutional Review Board, or IRB, and/or ethics committee approval or opinion to conduct a clinical trial at a prospective site or sites;

●

since many already diagnosed patients are at academic sites, delays in conducting clinical trials at academic sites due to the particular challenges and delays typically associated with those ~~sites;~~

sites, as well as the lack of alternatives to these sites which have already diagnosed patients;

●

·

inadequate quantity or quality of setmelanotide, RM-718, LB54640 or other materials necessary to conduct clinical trials, including delays in the manufacturing of sufficient supply of finished drug product;

●

·

~~difficulties obtaining Institutional Review Board, or IRB, and/or ethics committee approval to conduct a~~challenges in identifying, recruiting and training suitable clinical ~~trial at a prospective site or sites;~~

investigators;

●

·

challenges in recruiting and enrolling suitable patients to participate in clinical trials, including the size and nature of the patient population, the proximity of patients to clinical trial sites, eligibility criteria for the clinical trial, the nature of the clinical trial protocol, the availability of approved effective treatments for the relevant disease and competition from other clinical trial programs for similar indications;

trials;

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·

severe or unexpected ~~drug‑~~drug related side effects experienced by patients in a clinical trial, including side effects previously identified in our completed clinical trials;

●

difficulty collaborating with patient groups and investigators;

●

failure by our CROs, other third parties or us to perform in accordance with the FDA’s or any other regulatory authority’s good clinical practice requirements, or GCPs, or applicable regulatory guidelines in other countries;

●

occurrence of adverse events associated with setmelanotide, RM-718 or LB54640 that are viewed to outweigh their potential benefits, or occurrence of adverse events in trial of the same or similar class of agents conducted by other companies;

●

changes to the clinical trial protocols;

●

clinical sites deviating from trial protocol or dropping out of a trial;

●

changes in regulatory requirements and guidance that require amending or submitting new clinical protocols;

●

changes in the standard of care on which a clinical development plan was based, which may require new or additional trials;

●

selection of clinical endpoints that require prolonged periods of observation or analyses of resulting data;

●

the cost of clinical trials of our product candidates being greater than we anticipate;

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·

~~delays in identifying and recruiting patients with any of the genetic causes of obesity in indications that we are targeting;~~

●

·

~~disagreement by the FDA, other regulatory agencies~~clinical trials of our product candidates producing negative or ~~the equivalent competent authorities in foreign jurisdictions with our clinical trial designs,~~inconclusive results, which may result in ~~turn cause delays in initiating~~ our deciding, or regulators requiring us, to conduct additional clinical trials or ~~may lead to rejection~~abandon development of ~~our interpretation~~such product candidates; and

●

development of ~~data from clinical trials or to changes in the requirements for approval even after it has reviewed and commented on the design for our clinical trials;~~

·

the requirement to have a placebo controlled study even though the FDA and EMA did not impose one for POMC deficiency obesity, as we cannot be certain that this will be true for other indications or that the FDA or EMA, an advisory committee or the equivalent competent authorities in foreign jurisdictions will not change its guidance, as it has done so in the past for other open control trials;

·

~~uncertainty related~~antibodies to the ~~length of placebo‑controlled intervals~~drug or adjuvants may result in ~~clinical trials;~~

·

~~the need to perform non‑inferiority trials, which can be larger, longer and more costly, if treatment is approved for similar indications;~~

·

potential delays in the initiation of our clinical trials of LepR deficiency obesity due to the fact that we have not yet had discussions with the FDA regarding clinical trials for LepR deficiency obesity and, accordingly, do not know if the FDA will disagree with our clinical trial design;

·

POMC heterozygous deficiency may have additional challenges, including that the FDA the EMA, or the equivalent competent authorities in foreign jurisdictions may require that we show that setmelanotide works better in these patients than in the genetically normal population; other challenges associated with these patients may include additional delays in initiating clinical trials for this indication due to uncertainty about the subset of these patients who will respond effectively to setmelanotide and the lack of discussion for this indication with the FDA;

·

~~reports from preclinical or clinical testing of other weight~~ loss ~~therapies may raise safety or efficacy concerns; and~~

·

~~difficulties retaining patients who have enrolled in a clinical trial but may be prone to withdraw due to rigors of the clinical trial, lack~~ of efficacy ~~side‑effects, personal issues~~ or ~~loss of interest.~~

safety events.

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~~Clinical trials may also be delayed or terminated as a result of ambiguous or negative interim results.~~ In addition, a clinical trial may be suspended or terminated by us, the FDA or other equivalent competent authorities in foreign jurisdictions, the ~~IRBs or ethics committees~~IRB at the sites where the IRBs ~~or the ethics committees~~ are overseeing a clinical trial, a data and safety monitoring board, or DSMB, or Safety Monitoring Committee, or SMC, overseeing the clinical trial at issue or other equivalent competent authorities due to a number of factors, including, among others:

●

·

failure to conduct the clinical trial in accordance with regulatory requirements or our clinical trial protocols;

●

·

inspection of the clinical trial operations or trial sites by the FDA or other equivalent competent authorities that reveals deficiencies or violations that require us to undertake corrective action, including the imposition of a clinical hold;

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·

unforeseen safety issues, adverse side effects or lack of effectiveness;

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·

changes in government regulations or administrative actions;

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·

problems with clinical trial supply materials; and

●

·

lack of adequate funding to continue the clinical trial.

~~Changes~~Delays in ~~regulatory requirements, FDA~~the completion of any preclinical studies or ~~EMA guidance or unanticipated events during our~~ clinical trials of setmelanotide, ~~may occur, which may result~~RM-718 or LB54640 will increase our costs, slow down our product candidate development and the regulatory approval processes and delay or potentially jeopardize our ability to commence product sales and generate product revenue. In addition, many of the factors that cause, or lead to, a delay in ~~changes to clinical trial protocols, changes to instruments for measuring subjective systems~~the commencement or ~~additional clinical trial requirements, which could result in increased costs to us and could delay our development timeline.~~

~~Changes in regulatory requirements, FDA guidance, guidance published by the EMA or the other competent authorities in foreign jurisdictions, or unanticipated events during our~~completion of clinical trials may ~~force us~~also ultimately lead to ~~amend~~the denial of a regulatory approval for setmelanotide, RM-718 or LB54640. Any delays to our preclinical studies or clinical ~~trial protocols~~trials that occur as a result could shorten any period during which we may have the exclusive right to commercialize setmelanotide, RM-718 or LB54640, in each case if approved, and our competitors may be able to bring products to market before we do, and the ~~FDA, or~~commercial viability of our product candidates could be significantly reduced. Any of these occurrences may harm our business, financial condition and prospects significantly.

In addition, the FDA’s and other ~~competent authorities in foreign jurisdictions~~regulatory authorities’ policies with respect to clinical trials may ~~impose~~change and additional ~~clinical trial requirements.~~government regulations may be enacted. For instance, the ~~FDA issued draft guidance~~regulatory landscape related to clinical trials in the EU recently evolved. The EU Clinical Trials Regulation (CTR) which was adopted in April 2014 and repeals the EU Clinical Trials Directive, became applicable on ~~developing products for weight management in February 2007. In March 2012,~~January 31, 2022. While the FDA’s Endocrinologic and Metabolic Drugs Advisory Committee met to discuss possible changes to how the FDA evaluates the cardiovascular safety of weight‑management drugs, and the FDA may require additional studies to support registration. In addition, the FDA is considering broader applicability of requirements for cardiovascular outcomes trials, or CVOTs, presenting the possibility of cardiovascular risk pre‑approval, including for obesity products. While our Phase 3 discussions with the FDA have not resulted inEU Clinical Trials Directive required a requirement for any of these activities, any future requirement for these activities could result in additional clinical requirements for setmelanotide, increase our costs and delay approval of setmelanotide.

~~Amendments to our~~separate clinical trial ~~protocols would require resubmission~~application (CTA) to be submitted in each member state in which the clinical takes place, to both the competent national health authority and an independent ethics committee, the CTR introduces a centralized process and only requires the submission of a single application for multi-center trials. The CTR allows sponsors to make a single submission to both the competent authority and an ethics committee in each member state, leading to a single decision per member state. The assessment procedure of the CTA has been harmonized as well, including a joint assessment by all member states concerned, and a separate assessment by each member state with respect to specific requirements related to its own territory, including ethics rules. Each member state’s decision is communicated to the ~~FDA~~sponsor via the centralized EU portal. Once the CTA is approved, clinical study development may proceed. The CTR foresees a three-year transition period. The extent to which ongoing and IRBs or other competent authorities and ethics committees in foreign jurisdictions for review and approval, which may adversely impact the cost, timing or successful completion of a clinical trial. If we experience delays completing, or if we terminate, any of our clinical trials, or if we are required to conduct additional clinical trials, the commercial prospects for setmelanotide may be harmed and our ability to generate product revenue will be delayed.

In addition, as part of commencing our Phase 3 clinical trial for setmelanotide in POMC deficiency obesity, we sought FDA concurrence with, and received substantial input on, the use of Patient Reported Outcome, or PRO, and Observer Reported Outcome, or ORO questionnaires for measuring subjective endpoints for changes in hunger and/or food‑seeking behavior and compulsions. A PRO is a measurement based on a report that comes from the patient about the status of a patient’s health condition, without amendment or interpretation of the patient’s response by a clinician or anyone else. An ORO is a measurement based on an observation by someone other than the patient or a health professional, such as a parent, spouse or other non‑clinical caregiver who is in a position to regularly observe and report on a specific aspect of the patient’s health. In our Phase 3 clinical trial for setmelanotide, based on the FDA feedback, we plan to measure the ability of setmelanotide to mitigate hunger and/or hyperphagia, the overriding physiological drive to eat, through PRO and ORO questionnaires. The questionnaires are designed to elicit feedback from patients on how well setmelanotide decreases

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~~their hunger, and from their family members or caregivers on the effect of setmelanotide on the patients’ food seeking behavior.~~

To our knowledge, no sponsor of an approved drug has yet used PRO or ORO questionnaires to generate data on hyperphagia or hunger mitigating endpoints. Because we may be relying on clinical endpoints that have not previously been the subject of prior FDA approvals, there is a risk that the FDA or other equivalent competent authorities in foreign jurisdictions may not consider the endpoints to provide evidence of clinically meaningful results or that results may be difficult for the FDA to interpret, in particular for the pediatric age group. If we experience delays in our ongoing validation of our PRO or ORO questionnaires, or do not receive agreement with those proposed questionnaires based on the conceptual framework, content reliability, other measures of validity, or their ability to detect changes in hyperphagia or hunger, we may experience delays in our trials or in product approval as well as be unable to reference data on hyperphagia or hunger in our product labeling. Finally, our Phase 3new clinical trials will be ~~assessing hunger using multiple methods, some of~~governed by the CTR varies. Clinical trials for which ~~were previously used in Phase 2, but some of which were initiated in Phase 3 trials~~an application was submitted (i) prior to January 31, 2022 under the EU Clinical Trials Directive, or (ii) between January 31, 2022 and January 31, 2023 and for which ~~little data is available. Hence it is possible that~~ the ~~effects on hunger seen in Phase 2 trials may differ with some~~sponsor has opted for the application of the EU Clinical Trials Directive remain governed by said Directive until January 31, 2025. After this date, all clinical trials (including those which are

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ongoing) will become subject to the provisions of the CTR. Compliance with the CTR requirements by us and our third-party service providers, such as CROs, may impact our developments plans.

It is currently unclear to what extent the United Kingdom (UK) will seek to align its regulations with the EU. On January 17, 2022, the MHRA launched an eight-week consultation on reframing the UK legislation for clinical trials and which aimed to streamline clinical trials approvals, enable innovation, enhance clinical trials transparency, enable greater risk proportionality, and promote patient and public involvement in clinical trials. The UK Government published its response to the consultation on March 21, 2023 confirming that it would bring forward changes to the legislation. These resulting legislative amendments will determine how closely the UK regulations are aligned with the CTR. A decision by the UK not to closely align its regulations with the new ~~methodologies for assessing hunger being used in Phase 3 trials, or may not support language~~approach adopted in the ~~proposed product labeling.~~EU may have an effect on the cost of conducting clinical trials in the UK as opposed to other countries.

If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies governing clinical trials, our development plans may be impacted.

Setmelanotide, RM-718 or LB54640 may cause undesirable side effects that could delay or prevent additional regulatory ~~approval,~~approvals, limit the commercial profile of an approved labeling, or result in significant negative consequences following marketing ~~approval, if any.~~approval.

First generation MC4R agonists were predominantly small molecules that failed in clinical trials due to significant safety issues, particularly increases in blood pressure, and had limited efficacy. Undesirable side effects caused by setmelanotide, RM-718 or LB54640 could cause us or regulatory authorities to interrupt, delay or halt clinical trials and could result in a more restrictive labeling or the delay or denial of additional regulatory ~~approval~~approvals by the FDA or other equivalent competent authorities in foreign jurisdictions. Treatment-related side effects could also affect patient recruitment or the ability of enrolled patients to complete the trial or result in potential product liability claims. Any of these occurrences may prevent us from achieving or maintaining market acceptance of the affected product candidate and may adversely affect our business, financial condition and prospects significantly.

Setmelanotide, ~~is an~~RM-718 and LB54640 are MC4R ~~agonist.~~agonists. Potential side effects of MC4R agonism, which have been noted either with setmelanotide or with other MC4R agonists in clinical trials and preclinical studies, may include:

●

·

adverse effects on cardiovascular parameters, such as increases in heart rate and blood pressure;

●

·

erections in males and similar effects in women, such as sexual arousal, clitoral swelling and hypersensitivity;

●

·

nausea and vomiting;

●

·

reduced appetite;

●

·

headache;

●

effects on mood, depression, anxiety and other psychiatric manifestations; and

●

·

other effects, ~~specifically back pain, headaches, fatigue, diarrhea~~for which most investigators reported as unrelated to setmelanotide and ~~joint pain, that have been seen numerically more frequently in setmelanotide‑treated patients as compared with placebo patients.~~

for which no increased incidence or pattern is currently evident.

~~Injection~~In addition, injection site reactions have been seen in subcutaneous, or SC, injections with setmelanotide. ~~In addition,~~Also, setmelanotide has likely ~~off‑~~off target effects on the ~~closely‑~~closely related MC1 receptor, which mediates tanning in response to sun exposure. Other MC1 receptor mediated effects include darkening of skin blemishes, such as freckles and moles, and hair color ~~change in one subject.~~change. The cosmetic effects are not tolerated by all patients, as a small number of patients have withdrawn from treatment due to skin darkening. These effects have generally been reversible in clinical trials after discontinuation of setmelanotide, but it is still unknown if they will be reversible with ~~long‑~~long term exposure. The MC1 receptor mediated effects

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may also carry risks. The ~~long‑~~long term impact of MC1 receptor activation has not been tested in clinical trials, and could potentially include increases in skin cancer, excess biopsy procedures and cosmetic blemishes. These skin changes may also result in unblinding, which could make interpretation of clinical trial results more complex and possibly subject to bias.

~~The safety data we~~ We have disclosed to date represents our interpretation of the data at the time of disclosure and they are subject to our further review and analysis. The only serious adverse event possibly attributed to setmelanotide in

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our clinical trials was one report of atypical chest pain seen in our Phase 2 clinical trial with once daily SC injection, although there was no evidence of any serious respiratory or cardiac cause on careful examination. Overall, there have been five other serious adverse events in the overall clinical development program in addition to the serious adverse event described above: two others during treatment on setmelanotide, left arm numbness and influenza immunization reaction and three during treatment with placebo, including biliary dyskinesia, severe groin strain and pelvic inflammatory disease. None of these serious adverse events was considered related to setmelanotide.

~~We are~~ also ~~initiating~~initiated trials of setmelanotide in potential new indications that include patients who might have more serious underlying ~~conditions, such as Alström syndrome and lipodystrophy.~~conditions. It is possible that the underlying conditions in these patients, such as congestive heart failure and ~~pancreatitis,~~potentially other conditions, may confound the understanding of the safety profile of setmelanotide.

~~In addition,~~If these or other significant adverse events or other side effects are observed in any of our ~~interpretation of the safety data from our~~ongoing or planned clinical trials, ~~is contingent upon~~we may have difficulty recruiting patients to the ~~review and ultimate approval~~clinical trials, patients may drop out of our trials, or we may be required to abandon the trials or our development efforts of that product candidate altogether. We, the FDA, other comparable regulatory authorities or an IRB may also suspend clinical trials of a product candidate at any time for various reasons, including a belief that subjects in such trials are being exposed to unacceptable health risks or adverse side effects. Some potential therapeutics developed in the biotechnology industry that initially showed therapeutic promise in early-stage trials have later been found to cause side effects that prevented their further development. Even if the side effects do not preclude setmelanotide, RM-718 or LB54640 from obtaining or maintaining marketing approval or obtaining additional approvals, undesirable side effects may inhibit market acceptance due to its tolerability versus other ~~equivalent competent authorities in foreign jurisdictions. The FDA or other equivalent competent authorities in foreign jurisdictions may not agree with~~therapies. Any of these developments could materially adversely affect our ~~methods of analysis or our interpretation of the results. In addition, the long‑term effects of setmelanotide have only been tested in a limited number of patients.~~business, financial condition and prospects.

Further, if ~~setmelanotide receives marketing approval and~~ we or others identify undesirable side effects caused by the ~~product,~~products, or any other similar product, before or after ~~the approval,~~regulatory approvals, a number of potentially significant negative consequences could result, including:

●

·

regulatory authorities may request that we withdraw the product from the market or may limit or vary their approval of the product through labeling or other means;

●

·

regulatory authorities may require the addition of labeling statements, such as a “boxed” warning or a contraindication;

●

·

the FDA, the EU competent authorities and other equivalent competent authorities in foreign jurisdictions may require the addition of a Risk Evaluation and Mitigation Strategy, or REMS, or other specific obligations as a condition for marketing authorization due to the need to limit treatment to rare patient populations, or to address safety concerns;

●

·

we may be required to change the way the product is distributed or administered ~~conduct additional clinical trials~~ or change the labeling of the product;

●

·

we may be required to conduct additional studies and clinical trials or comply with other post-market requirements to assess possible serious risks;

●

we may be required to conduct long term safety follow-up evaluations, including setting up disease and drug based registries;

●

we may decide to remove the product from the marketplace;

●

·

we could be sued and held liable for injury caused to individuals exposed to or taking the product; and

●

·

our reputation may suffer.

Any of these events could prevent us from achieving or maintaining market acceptance of setmelanotide, RM-718 or LB54640, and could substantially increase the costs of commercializing setmelanotide, RM-718 or LB54640 and significantly impact our ability to successfully commercialize setmelanotide, RM-718 or LB54640 and generate revenues.

~~Although we have been granted~~51

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We may not be able to obtain or maintain orphan drug ~~designation~~designations for setmelanotide, ~~in treating POMC deficiency obesity, we may be unable~~RM-718 or LB54640 or to obtain ~~orphan drug designation for other uses~~ or ~~to obtain~~maintain exclusivity in any use. Even with exclusivity, competitors may obtain approval for different drugs that treat the same indications as ~~setmelanotide.~~setmelanotide, RM-718 and LB54640.

The FDA may designate drugs for relatively small patient populations as orphan drugs. Under the Orphan Drug Act of 1983, or the Orphan Drug Act, the FDA may designate a product candidate as an orphan drug if it is intended to treat a rare disease or condition, which is defined under the Federal Food, Drug and Cosmetic Act, or FDCA, as having a patient population of fewer than 200,000 individuals in the United States, or a patient population greater than 200,000 in

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the United States where there is no reasonable expectation that the cost of developing the drug will be recovered from sales in the United States.

Generally, if a product candidate with an orphan drug designation receives the first marketing approval for the ~~indication~~disease or condition for which it has such designation, the product is entitled to a period of seven years of marketing exclusivity, which precludes the FDA from approving another marketing application for a product that constitutes the same drug treating the same ~~indication~~disease or condition for that marketing exclusivity period, except in limited circumstances.

The exclusivity period in the United States can be extended by six months if the NDA sponsor submits pediatric data that fairly respond to a written request from the FDA for such data. ~~Even under these circumstances, we may not be granted pediatric approval from the FDA for these indications.~~ Orphan drug exclusivity may be revoked if the FDA determines that the request for designation was materially defective or if the manufacturer is unable to assure sufficient quantity of the product to meet the needs of patients with the rare disease or condition. Other potential benefits of orphan drug designation and/or approval of a designated drug include eligibility for: exemption from certain prescription drug user fees, tax credits for certain qualified clinical testing expenses, and waivers from the pediatric assessment requirements of the Pediatric Research Equity ~~Act,~~Act.

In the EU, orphan designation is granted by the EC based on a scientific opinion of the EMA’s Committee for Orphan Medicinal Products. A medicinal product may be designated as orphan if its sponsor can establish that (i) the product is intended for the diagnosis, prevention or ~~PREA.~~treatment of a life-threatening or chronically debilitating condition; (ii) either (a) such condition affects no more than 5 in 10,000 persons in the EU when the application is made, or (b) the product, without the benefits derived from orphan status, would not generate sufficient return in the EU to justify investment; and (iii) there exists no satisfactory method of diagnosis, prevention or treatment of such condition authorized for marketing in the EU, or if such a method exists, the medicinal product will be of significant benefit to those affected by the condition. The application for orphan designation must be submitted before the application for marketing authorization.

~~Although~~Grant of orphan designation by the EC also entitles the holder of this designation to financial incentives such as reduction of fees or fee waivers, protocol assistance, and access to the centralized marketing authorization procedure. In addition to a range of other benefits during the development and regulatory review, orphan medicinal products are, upon grant of marketing authorization and assuming the requirement for orphan designation are also met at the time the marketing authorization is granted, entitled to ten years of exclusivity in all EU member states for the approved therapeutic indication, which means that the competent authorities cannot accept another MAA, grant a marketing authorization, or accept an application to extend a marketing authorization for a similar product for the same indication for a period of ten years. The period of market exclusivity is extended by two years for orphan medicinal products that have also complied with an agreed pediatric investigation plan, or PIP. No extension to any supplementary protection certificate can be granted on the basis of pediatric studies for orphan indications. Orphan medicinal product designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval process.

The ten-year market exclusivity in the EU may be reduced to six years if, at the end of the fifth year, it is established that the product no longer meets the criteria for which it received orphan designation, including where it is shown that the product is sufficiently profitable not to justify maintenance of market exclusivity, or where the prevalence of the condition has increased above the threshold. Additionally granting of an authorization for another similar orphan medicinal product where another product has market exclusivity can happen at any time: (i) the second applicant can establish that its product, although similar, is safer, more effective or otherwise clinically superior; (ii) the applicant cannot supply enough orphan medicinal product or (iii) where the applicant consents to a second orphan medicinal product application.

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In connection with IMCIVREE’s approval, the FDA granted us seven years of orphan drug exclusivity for setmelanotide for chronic weight management in adult and pediatric patients 6 years of age and older with obesity due to POMC, PCSK1, or LEPR deficiency confirmed by genetic testing demonstrating variants in POMC, PCSK1, or LEPR genes that are interpreted as pathogenic, likely pathogenic, or of uncertain significance. The FDA also granted us seven years of orphan drug exclusivity for setmelanotide for chronic weight management in adult and pediatric patients 6 years of age and older with monogenic or syndromic obesity due to BBS. In the EU, we obtained ten years of market exclusivity for setmelanotide for the treatment of obesity and the control of hunger associated with genetically confirmed loss-of-function biallelic POMC, including PCSK1, deficiency or biallelic leptin receptor (LEPR) deficiency in adults and children 6 years of age and above.

We have also been granted orphan ~~drug~~designation for setmelanotide for the treatment of Alström syndrome in both the United States and the EU. Setmelanotide has also been granted orphan designation for setmelanotide in treating ~~POMC deficiency~~Prader-Willi syndrome and acquired hypothalamic obesity ~~if we request orphan drug designation for setmelanotide for other uses, there~~in the EU. There can be no assurance that we will be able to maintain the benefits orphan drug exclusivity, or that the FDA or the EC will grant ~~such designation. For example, if the population of patients who would be appropriate candidates~~orphan designations for ~~a drug is 200,000 or more individuals, the drug may not qualify~~setmelanotide for other uses. In addition, orphan drug designation ~~even if~~neither shortens the ~~population for which the sponsor seeks approval is lower than 200,000. Additionally, the designation of setmelanotide as an orphan drug does not guarantee that the FDA will accelerate~~development time or regulatory review time of a drug nor gives the drug any advantage in the regulatory review or ~~ultimately approve, setmelanotide.~~approval process.

Even ifthough we ~~obtain~~have obtained orphan drug exclusivity for certain uses of setmelanotide, ~~that exclusivity~~such exclusivities may not effectively protect setmelanotide from competition because different drugs can be approved for the same condition. In the United States, even after an orphan drug is approved, the FDA may subsequently approve another drug for the same condition if the FDA concludes that the latter drug is not the same drug or is clinically superior in that it is shown to be safer, more effective or makes a major contribution to patient care.

On August 3, 2017, Congress passed the FDA Reauthorization Act of 2017, or the FDARA. FDARA, among other things, codified the FDA’s pre‑existing regulatory interpretation, to require that a drug sponsor demonstrate the clinical superiority of an orphan drug that is otherwise the same as a previously approved drug for the same rare disease in order to receive orphan drug exclusivity. The new legislation reverses prior precedent holding that the Orphan Drug Act unambiguously requires that the FDA recognize the orphan exclusivity period regardless of a showing of clinical superiority. The FDA may further reevaluate the Orphan Drug Act and its regulations and policies. We do not know if, when, or how the FDA may change the orphan drug regulations and policies As discussed above, similar rules apply in the ~~future, and it is uncertain how any changes might affect our business. Depending on what changes the FDA may make to its orphan drug regulations and policies, our business could be adversely impacted.~~EU.

Although we have obtained ~~breakthrough therapy~~PRIME designation in the EU for setmelanotide for the treatment of obesity and the control of hunger associated with deficiency disorders of the MC4R receptor pathway and Breakthrough Therapy designation for setmelanotide for the treatment of obesity associated with ~~genetic~~certain defects upstream of the ~~MC4 receptor~~MC4R in the ~~leptin‑~~leptin melanocortin pathway, which includes ~~both~~ POMC deficiency obesity, ~~and LepR~~LEPR deficiency obesity, Bardet-Biedl syndrome and Alström syndrome, as well as hypothalamic obesity in the United States, the FDA may rescind the ~~breakthrough~~Breakthrough Therapy designation and we may be unable to obtain ~~breakthrough therapy~~Breakthrough Therapy designation for other uses. In addition, ~~breakthrough therapy~~Breakthrough Therapy designation by the FDA or PRIME designation by the EMA may not lead to a faster development, regulatory review or approval process, and it does not increase the likelihood that setmelanotide will receive additional marketing ~~approval~~approvals in the United ~~States.~~States or additional marketing authorizations in the EU.

~~Under the Food and Drug Administration Safety and Innovation Act, or FDASIA, the~~The FDA is authorized under the FDCA to give certain ~~products “breakthrough therapy~~product candidates “Breakthrough Therapy designation.” A Breakthrough ~~therapy~~Therapy product candidate is defined as a product candidate that is intended, alone or in combination with one or more other drugs or biologics, to treat a serious or ~~life‑~~life threatening disease or condition, ~~and~~where preliminary clinical evidence indicates that such product candidate may demonstrate substantial improvement on one or more clinically significant endpoints over existing therapies. The FDA will seek to ensure the sponsor of ~~breakthrough therapy~~Breakthrough Therapy product candidate receives intensive guidance on an efficient drug development program, intensive involvement of senior managers and experienced staff on a proactive, collaborative and ~~cross‑~~cross disciplinary ~~review~~

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~~and a rolling review process whereby~~review. In addition, the FDA may consider reviewing portions of an NDA before the sponsor submits the complete ~~application.~~application, a process also known as rolling review. Product candidates designated as breakthrough therapies by the FDA may be eligible for other expedited programs, such as priority review, ~~if supported by clinical data.~~provided the relevant criteria are met.

Designation as ~~breakthrough therapy~~Breakthrough Therapy is within the discretion of the FDA. Accordingly, even if we believe ~~setmelanotide meets~~our product candidates meet the criteria for designation as ~~breakthrough therapy for other uses,~~Breakthrough Therapy, the FDA may disagree. In any event, the receipt of ~~breakthrough therapy~~Breakthrough Therapy designation for a product candidate, or acceptance for one or more of the FDA’s other expedited programs, may not result in a faster development process, review or approval compared to products considered for approval under conventional FDA procedures and does not guarantee ultimate approval by the FDA. Regulatory standards to demonstrate safety and efficacy must still be met. Additionally, the FDA may later decide that the product candidate no longer meets the conditions for designation and may withdraw designation at any time or decide that the time period for FDA review or approval will not be shortened.

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The PRIME (PRIority MEdicines) scheme was launched by the EMA in 2016. In the EU, innovative products that target an unmet medical need and are expected to be of major public health interest may be eligible for a number of expedited development and review programs, such as the PRIME scheme, which provides incentives similar to the Breakthrough Therapy designation in the United States. PRIME is a voluntary scheme aimed at enhancing the EMA’s support for the development of medicines that target unmet medical needs. It is based on increased interaction and early dialogue with companies developing promising medicines, to optimize their product development plans and speed up their evaluation to help them reach patients earlier. The benefits of a PRIME designation include the appointment of a rapporteur before submission of an MAA, early dialogue and scientific advice at key development milestones, and the potential to qualify products for accelerated review earlier in the application process. In late June 2018, setmelanotide was granted eligibility to PRIME by the Committee for Medicinal Products for Human Use, or CHMP for the treatment of obesity and the control of hunger associated with deficiency disorders of the MC4R receptor pathway. Acknowledging that setmelanotide targets an unmet medical need, the EMA offers enhanced support in the development of the medicinal product through enhanced interaction and early dialogue to optimize our development plans and speed up regulatory evaluation in the EU. As part of this designation, the EMA has provided guidance to us concerning the development of setmelanotide. However, the EMA may later decide that such product candidates no longer meet the conditions for qualification or decide that the time period for review or approval will not be shortened. Neither does the PRIME designation guarantee that the EC will grant additional marketing authorizations for setmelanotide.

Product developers that benefit from PRIME designation may be eligible for accelerated assessment (in 150 days instead of 210 days), which may be granted for medicinal products of major interest from a public health perspective or that target an unmet medical need, but this is not guaranteed.

We may not be able to translate the ~~current~~once-daily formulations of setmelanotide for methods of delivery that would be acceptable to the FDA or other equivalent competent authorities in foreign jurisdictions or commercially successful.

Setmelanotide is currently administered by once-daily SC injection using small ~~insulin‑~~insulin type ~~needles.~~needles and syringes. SC injection is generally less ~~well‑~~well received by patients than other methods of administration, such as oral administration. Considerable additional resources and efforts, including potential studies, may be necessary in order to translate the ~~current formulations~~once-daily formulation of setmelanotide into ~~forms~~a once-weekly formulation that ~~will~~may be ~~well‑~~well received by patients.

We have entered into a license agreement with Camurus AB, or Camurus, for the use of Camurus’ drug delivery technology, FluidCrystal, to formulate once-weekly setmelanotide. This formulation, if successfully developed for setmelanotide, and approved by the FDA and other regulatory authorities, will be delivered subcutaneously, similar to our ~~current~~once-daily formulation, except that we anticipate it ~~will~~would be injected once weekly. In addition, we have initiated development of an auto-injector device designed to make administration of our once-weekly product candidate easier and more convenient for our patients.

While we have started consultations with regulatory authorities about the potential path for approval of the once-weekly formulation, and have initiated clinical studies of the once-weekly formulation, we cannot yet estimate the requirements for non-clinical and clinical data, manufacturing program, time, cost, and probability of success for approval. Regulatory authorities have limited experience evaluating Camurus’ formulations, which further complicates our understanding regarding the information that may be required to obtain approval of a once-weekly formulation.

We received FDA approval of the once-daily formulation in the initial NDA submission for setmelanotide, and plan to seek approval of the once-weekly formulation at a later time. While we plan to ~~utilize~~develop the ~~current~~once-weekly formulation, or to develop other new and useful formulations and delivery technology for setmelanotide, we cannot estimate the probability of success, nor the resources and time needed to succeed. If we are unable to gain approval and utilize ~~this~~the once-weekly formulation, or to develop new formulations, setmelanotide may not achieve significant market acceptance and our business, financial condition and results of operations may be materially harmed.

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Our approach to treating patients with ~~MC4~~MC4R pathway deficiencies requires the identification of patients with unique genetic subtypes, for example, POMC genetic deficiency. The FDA or other equivalent competent authorities in foreign jurisdictions could require the clearance, approval or ~~CE mark~~certification of an in vitro companion diagnostic device to ensure appropriate selection of patients as a condition of approving ~~setmelanotide.~~setmelanotide in additional indications. The ~~development and~~requirement that we obtain clearance, approval or ~~CE mark~~certification of an in vitro companion diagnostic device ~~would~~will require substantial financial resources, and could delay or prevent the receipt of additional regulatory ~~approval of setmelanotide.~~approvals for setmelanotide, or adversely affect those we have already obtained.

We ~~intend to focus~~have focused our development of setmelanotide as a treatment for obesity caused by certain genetic deficiencies affecting the ~~MC4~~MC4R pathway. ~~In order to assist~~ To date, we have employed in identifying this subset of patients, we employ a genetic diagnostic test, which is a test or measurement that evaluates the presence of genetic variants in a patient. The FDA has advised that for our clinical trial of setmelanotide to treat POMC deficiency obesity, it will be sufficient to use vitro genetic diagnostic testing known as Sanger bi‑directional nucleotide sequencing, as long as that testing is performed by laboratories meeting the standards of the Clinical Laboratory Improvement Amendments, or CLIA, for Laboratory Developed Tests, or LDTs. Currently the Centers for Medicare and Medicaid Services, or CMS, regulates LDTs and the laboratories that develop them, and enforces CLIA. CMS evaluates whether there is clinical utility for each specific test, and also performs postmarket oversight of laboratory operational processes. CMS coverage determinations of clinical utility measure the ability of the test to impact clinically meaningful health outcomes, such as mortality or morbidity, through the adoption of efficacious treatments. CMS’s oversight through the CLIA program is designed to confirm that a lab assesses analytical validity, but does not confirm whether it had results from an analytical validity assessment that were sufficient to support the claimed intended use of the test. The FDA has issued guidance indicating, however, that in the future it intends to assert jurisdiction over LDTs and to increase regulatory requirements for LDTs. If the FDA does so, the burdens and costs of using LDTs to select patients for setmelanotide could increase, the availability of those LDTs could be negatively affected, and our development program for setmelanotide could be delayed, which in turn could delay or impair our ability to proceed to commercialization.

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~~Although the FDA has advised us that an LDT is sufficient for identifying patients~~enrollment in our clinical trials, including our clinical trials for IMCIVREE and for other potential indications for setmelanotide. If the ~~agency also indicated~~safe and effective use of any of our product candidates depends on an in vitro diagnostic that is not otherwise commercially available, then the FDA may require approval or clearance of that diagnostic, known as a companion diagnostic, at the same time as, or in connection with, the FDA approval of an such product candidates.

In the EU, until May 25, 2022, in vitro diagnostic medical devices were regulated by Directive 98/79/EC, or the IVDD, which has been repealed and replaced by Regulation (EU) No 2017/746, or the IVDR. Unlike the IVDD, the IVDR is directly applicable in EU member states without the need for member states to implement into national law. The regulation of companion diagnostics is now subject to further requirements set forth in the IVDR. However, on October 14, 2021, the EC proposed a “progressive” roll-out of the IVDR to prevent disruption in the supply of in vitro diagnostic ~~device may~~medical devices. The European Parliament and Council adopted the proposed regulation on December 15, 2021. The IVDR became applicable on May 26, 2022 but there is a tiered system extending the grace period for many devices (depending on their risk classification) before they have to be ~~necessary should clinical results reveal~~fully compliant with the regulation. For instance, class C devices (including devices that ~~genetic testing is needed~~are intended to be used as companion diagnostics) have until May 26, 2026 to comply with the new requirements. In January 2024, the EC proposed an extension of the grace period which would lead, if adopted, to a transition period until December 31, 2028 for ~~the safe use of setmelanotide, such~~class C devices for instance. The IVDR introduces a new classification system for companion diagnostics which are now specifically defined as ~~to avoid significant toxicities in certain patients or because the drug might provide only marginal benefits except in a very clearly defined eligible population.~~ ~~In vitro~~ ~~companion~~ diagnostic ~~devices provide information~~tests that ~~is essential for~~support the safe and effective use of a ~~corresponding therapeutic product. These~~specific medicinal product, by identifying patients that are suitable or unsuitable for treatment. Companion diagnostics will have to undergo a conformity assessment by a notified body. Before it can issue an EU certificate, the notified body must seek a scientific opinion from the EMA on the suitability of the companion diagnostic ~~devices~~to the medicinal product concerned if the medicinal product falls exclusively within the scope of the centralized procedure for the authorization of medicines, or the medicinal product is already authorized through the centralized procedure, or MAA for the medicinal product has been submitted through the centralized procedure. For other substances, the notified body can seek the opinion from a national competent authorities or the EMA. These modifications may ~~be co‑developed~~make it more difficult and costly for us to obtain regulatory clearances or approvals or certification for our companion diagnostics or to manufacture, market or distribute our products after clearance, approval or certification is obtained. Compliance with ~~a device manufacturer or with a laboratory, and generally require FDA approval as well.~~the new requirements may impact our development plans for setmelanotide.

~~Should~~If the FDA or ~~other equivalent competent authorities in foreign jurisdictions require the use~~a comparable regulatory authority requires clearance, approval or certification of a companion diagnostic ~~device, we may face significant delays or obstacles in obtaining approval of an NDA, or of comparable foreign marketing authorization~~ for setmelanotide, ~~as the FDA~~RM-718 or other equivalent competent authorities in foreign jurisdictions may take the position that a companion diagnostic is required prior to granting approval of setmelanotide. In addition, we may be dependent on the sustained cooperation and effort of third‑party collaborators with whom we may partner in the future to develop ~~in vitro~~ companion diagnostic devices. We and our potential future collaborators may encounter difficulties in developing such tests, including issues relating to the selectivity and/or specificity of the diagnostic, analytical validation, reproducibility or clinical validation. AnyLB54640, any delay or failure by us or our ~~potential~~current and future collaborators to develop or obtain regulatory clearance or approval of, or ~~to CE mark,~~certification of, such tests, if necessary, could delay or prevent us from obtaining additional approvals for setmelanotide, or adversely affect the approvals we have already obtained. For example, in November 2020, the FDA approved IMCIVREE for chronic weight management in adult and pediatric patients 6 years of age and older with obesity due to POMC, PCSK1, or LEPR deficiencies confirmed by genetic testing demonstrating variants in POMC, PCSK1, or LEPR genes that are interpreted as pathogenic, likely pathogenic, or of uncertain significance. Although the FDA did not require that we obtain approval of ~~setmelanotide.~~

Ifa companion diagnostic prior to approving the ~~FDA deems setmelanotide~~New Drug Application, or NDA, for IMCIVREE, in connection with the NDA approval we agreed as a post-marketing commitment to ~~require~~conduct adequate analytical and clinical validation testing to develop and establish an in vitrocompanion diagnostic device to accurately ~~identify~~and reliably detect patients with variants in the ~~patients who belong~~POMC, PCSK1, and LEPR genes that may benefit from setmelanotide therapy. In September 2020, our collaboration partner, Prevention Genetics, submitted a de novo request seeking FDA authorization to ~~the target subset, the FDA will require product labeling that limits use to only those patients who express the genetic variants identified by the device. Moreover, even if setmelanotide and~~market such an in vitrocompanion diagnostic device ~~are approved together,~~for IMCIVREE as a Class II medical device. In January 2022, the ~~device itself may be subject~~FDA granted the de novo request for classification for the POMC/PCSK1/LEPR CDx Panel for market authorization as a Class II device. If the FDA or a comparable regulatory authority requires clearance, approval or certification of a companion diagnostic when we seek additional approvals for

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setmelanotide, RM-718 or LB54640, any delay or failure by us or our current and future collaborators to ~~reimbursement limitations that~~develop or obtain regulatory clearance or approval of, or certification of, such tests, if necessary, could ~~limit access to treatment and therefore~~delay or prevent us from obtaining such additional approvals for setmelanotide, or adversely affect the approvals we have already obtained.

We rely, and expect that we will continue to rely, on third parties to conduct clinical trials for setmelanotide, RM-718 and LB54640. If these third parties do not successfully carry out their contractual duties or meet expected deadlines, we may not be able to obtain additional regulatory approvals for or commercialize setmelanotide, RM-718 or LB54640, and our business ~~and financial results.~~could be substantially harmed.

We have agreements with third-party CROs to operationalize, provide monitors for and to manage data for our ongoing clinical trials. We rely heavily on these parties for the execution of clinical trials and control only ~~one product candidate~~certain aspects of their activities. As a result, we have less direct control over the start-up, conduct, timing and completion of these clinical trials, and the management of data developed through the clinical trials than would be the case if we were relying entirely upon our own staff. Communicating with outside parties can also be challenging, potentially leading to mistakes as well as difficulties in coordinating activities. However, we remain responsible for the conduct of these trials and are subject to enforcement which may include civil and criminal liabilities for any violations of FDA rules and regulations and the comparable foreign regulatory provisions during the conduct of our clinical trials. Outside parties may:

●

have staffing difficulties;

●

fail to comply with contractual obligations;

●

devote inadequate resources to our clinical trials;

●

experience regulatory compliance issues;

●

undergo changes in priorities or become financially distressed; or

●

form more favorable relationships with other entities, some of which may be our competitors.

These factors, among others, may materially adversely affect the willingness or ability of third parties to conduct our clinical trials and may subject us to unexpected cost increases that are beyond our control. Nevertheless, we are responsible for ensuring that each of our studies is conducted in accordance with the applicable protocol, legal, regulatory and scientific standards, and our reliance on CROs does not relieve us of our regulatory responsibilities. We and our CROs are required to comply with GCPs, which are regulations and guidelines enforced by the FDA, the competent authorities of the EU member states and equivalent competent authorities in foreign jurisdictions for any products in clinical development. The FDA and foreign regulatory authorities enforce GCPs through periodic inspections of clinical trial sponsors, principal investigators, and trial sites, and IRBs. If we or our CROs fail to comply with applicable GCPs, the clinical data generated in our clinical trials may be deemed unreliable and the FDA or other equivalent competent authorities in foreign jurisdictions may require us to perform additional clinical trials before approving our marketing applications, if ever. We cannot assure you that, upon inspection, the FDA or foreign regulatory authorities will determine that any of our clinical trials have complied with GCPs. In addition, our clinical trials must be conducted with products produced under current Good Manufacturing Practices, or cGMPs and similar foreign requirements. Our failure or the failure of our CROs to comply with these regulations may require us to repeat clinical trials, which would delay the regulatory approval process and could also subject us to enforcement action up to and including civil and criminal penalties.

If any of our relationships with these third-party CROs terminate, we may not be able to enter into arrangements with alternative CROs. If CROs do not successfully carry out their contractual duties or obligations or meet expected deadlines, if they need to be replaced or if the quality or accuracy of the clinical data they obtain are compromised due to the failure to adhere to our clinical protocols, regulatory requirements or for other reasons, any such clinical trials may be extended, delayed or terminated, and we may not be ~~successful in any future efforts~~able to ~~identify~~obtain regulatory approval for, or successfully commercialize,

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setmelanotide, RM-718 or LB54640. As a result, our financial results and ~~develop additional product candidates.~~

~~We have only one product candidate~~the commercial prospects for setmelanotide, RM-718 or LB54640, would be harmed, our costs could increase and ~~may seek to identify and develop additional product candidates, both within and outside of our current area of expertise. If so, the success of our business may depend primarily on~~ our ability to identify, develop and commercialize these products. Research programs to identify new product candidates require substantial technical, financial and human resources. We may fail to identify other potential product candidates for clinical development for a number of reasons. Our research methodology maygenerate revenue could be unsuccessful in identifying potential product candidates or our potential product candidates may be shown to have harmful side effects or may have other characteristics that may make the products unmarketable or unlikely to receive marketing approval. We may focus our efforts and resources on potential programs or product candidates that ultimately prove to be unsuccessful. In addition, any such efforts could adversely impact our continued development and commercialization of setmelanotide.delayed.

If any of these events occur, we may be forced to abandon some or all of our development efforts for a program or programs, which would have a material adverse effect on our business and could potentially cause us to cease operations.

~~Prader‑Willi syndrome, or PWS, is a complex disease, and companies have had difficulties in developing new therapies for PWS.~~

Although we have been granted orphan drug designation for setmelanotide in treating PWS, we are not moving directly towards a Phase 3 trial in PWS at this time, but instead will be assessing how to proceed in another Phase 2 trial. We do not know the probability that we will be able to proceed to Phase 3 and/or approval, even when these efforts are completed. In addition, the experience by others suggests that PWS patients are high risk for adverse experiences and hence clinical trials in that population are extremely challenging. It may be both difficult to determine if adverse effects in this population are due to the disease, setmelanotide or some combination of both. PWS is a complex multigenic disease, and the hypothesis that PWS is an upstream MC4 pathway disorder is supported primarily on the role of only one of those genes, MAGEL2, in animal models of obesity. Our results may support that PWS is not an upstream MC4 pathway disorder. Alternatively, other design factors may have influenced the outcome of this trial, and we will be reassessing in 2018 the possibility of future Phase 2 trials in PWS that address the following potential factors: duration of treatment,

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younger age of population, improved setmelanotide pharmacokinetics, consideration of higher doses, and operational limitations of the completed Phase 2 trial. There can be no assurances that some of the factors that affected the results of the PWS trials will not also adversely impact the results of our trials for other indications.

Risks Related to the Commercialization of ~~Setmelanotide~~IMCIVREE and, if Approved, our Products Candidates

~~Even~~The successful commercialization of IMCIVREE and any other product candidates for which we obtain approval will depend in part on the extent to which governmental authorities, private health insurers, and other third-party payors provide coverage and adequate reimbursement levels. Failure to obtain or maintain coverage and adequate reimbursement for IMCIVREE or our other product candidates, if any and if approved, ~~reimbursement policies~~ could limit our ability to ~~sell setmelanotide.~~market those products and decrease our ability to generate revenue.

~~Market acceptance and sales of setmelanotide~~Our ability to successfully commercialize IMCIVREE or any other product candidates for which we obtain approval will depend in part on the extent to which coverage and reimbursement ~~policies~~for these product candidates and ~~may~~related treatments will be ~~affected by healthcare reform measures.~~available from government authorities, private health insurers and other organizations. Government authorities and ~~third‑party~~third-party payors, such as private health insurers and health maintenance organizations, decide which medications they will pay for and establish reimbursement ~~levels for those medications. Cost containment is a primary concern~~levels.

Increasing efforts by governmental and third-party payors in the ~~U.S.~~United States and abroad to cap or reduce healthcare ~~industry and in foreign jurisdictions. Government authorities and these third‑party payors have attempted~~costs may cause such organizations to ~~control costs by limiting~~limit both coverage and the ~~amount~~level of reimbursement for ~~particular medications. We cannot be sure~~recently approved products, such as IMCIVREE, and, as a result, they may not cover or provide adequate payment. Even if we show improved efficacy or improved convenience of administration, third-party payors may deny or revoke the reimbursement status of our product candidates, if approved, or establish prices for our product candidates at levels that ~~reimbursement will be available for setmelanotide and, if reimbursement is available, the level of such reimbursement. Reimbursement may impact the demand for, or the price of setmelanotide.~~are too low to enable us to realize an appropriate return on our investment. If reimbursement is not available or is available only at limited levels, we may not be able to successfully commercialize ~~setmelanotide.~~IMCIVREE or other product candidates, and may not be able to obtain a satisfactory financial return. Further, as we continue to grow as an organization, previously-established prices may no longer be sufficient and could create additional pricing pressure for us.

No uniform policy for coverage and reimbursement for products exist among third-party payors in the United States. Therefore, coverage and reimbursement for products can differ significantly from payor to payor. As a result, the coverage determination process is often a time-consuming and costly process that may require us to provide scientific and clinical support for the use of IMCIVREE to each payor separately, with no assurance that coverage and adequate reimbursement will be applied consistently or obtained in the first instance. Furthermore, rules and regulations regarding reimbursement change frequently, in some cases on short notice, and we believe that changes in these rules and regulations are likely.

In some foreign countries, particularly in Canada, Great Britain and in the EU member states, the pricing and reimbursement of prescription ~~pharmaceuticals~~only medicinal products is subject to strict governmental ~~control.~~control which varies widely between countries. In these countries, pricing negotiations with governmental authorities can take six to 12twelve months or longer after the receipt of regulatory approval and product launch. To obtain favorable reimbursement for the indications sought or pricing approval in some countries, we may be required to conduct a clinical trial that compares the ~~cost‑~~cost effectiveness of ~~setmelanotide~~IMCIVREE with other available therapies. If reimbursement for ~~setmelanotide~~IMCIVREE is unavailable in any country in which we seek reimbursement, if it is limited in scope or amount, if it is conditioned upon our completion of additional clinical trials or if pricing is set at unsatisfactory levels, our operating results could be materially adversely affected.

In the ~~European Union,~~EU, in particular, each EU member state can restrict the range of medicinal products for which its national health insurance system provides reimbursement and can control the prices of medicinal products for human use marketed in its territory. As a result, following receipt of marketing authorization in an EU member state, through any application route, an applicant is required to engage in pricing discussions and negotiations with the competent pricing authority in the individual EU member states. Some EU member states operate positive and negative list systems under which products may only be marketed once a reimbursement price has been agreed upon. Other EU member states approve a specific price for the medicinal product or may instead adopt a system of direct or indirect controls on the profitability of the company placing the medicinal product on the market. The downward pressure on healthcare costs in general, particularly prescription drugs, has become more intense. As a result, increasingly high barriers are being erected to the entry of new

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products. In addition, we may face competition for ~~setmelanotide~~IMCIVREE from lower priced products in foreign countries that have placed price controls on pharmaceutical products.

Health Technology Assessment, or HTA, of medicinal products, however, is becoming an increasingly common part of the pricing and reimbursement procedures in the United Kingdom and some EU member states, including ~~the United Kingdom,~~ France, Germany, ~~Ireland,~~ Italy, Spain, the Netherlands, Belgium, Norway and Sweden. HTA is the procedure according to which the assessment of the public health impact, therapeutic impact and the economic and societal impact of use of a given medicinal product in the national healthcare systems of the individual country is conducted. HTA generally focuses on the clinical efficacy and effectiveness, safety, cost, and ~~cost‑~~cost effectiveness of individual medicinal products as well as their potential implications for the healthcare system. Those elements of medicinal products are compared with other treatment options available on the market. The outcome of HTA regarding specific medicinal products will often influence the pricing and reimbursement status granted to these medicinal products by the competent authorities of individual EU member states. The extent to which pricing and reimbursement decisions are influenced by the HTA of the specific medicinal product varies between EU member states. In addition, pursuant to Directive 2011/24/EU on the application of patients’ rights in ~~cross‑~~cross border healthcare, a voluntary network of national authorities or bodies responsible for HTA in the individual EU member states was established. The purpose of the network is to facilitate and support the exchange of scientific information concerning HTAs. This may lead to harmonization of the criteria taken into account in the conduct of HTAs between EU member states and in pricing and reimbursement decisions and may negatively affect price in at least some EU member states.

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~~Table~~On December 13, 2021, Regulation No 2021/2282 on HTA, amending Directive 2011/24/EU, was adopted. While the Regulation entered into force in January 2022, it will only begin to apply from January 2025 onwards, with preparatory and implementation-related steps to take place in the interim. Once applicable, it will have a phased implementation depending on the concerned products. This Regulation intends to boost cooperation among EU member states in assessing health technologies, including new medicinal products, and provide the basis for cooperation at the EU level for joint clinical assessments in these areas. It will permit EU member states to use common HTA tools, methodologies, and procedures across the EU, working together in four main areas, including joint clinical assessment of ~~Contents~~

the innovative health technologies with the highest potential impact for patients, joint scientific consultations whereby developers can seek advice from HTA authorities, identification of emerging health technologies to identify promising technologies early, and continuing voluntary cooperation in other areas. Individual EU member states will continue to be responsible for assessing non-clinical (e.g., economic, social, ethical) aspects of health technology, and making decisions on pricing and reimbursement.

If we are unable to establish sales and marketing capabilities or enter into agreements with third parties to market and sell ~~setmelanotide, if approved,~~IMCIVREE, we may not be able to generate any revenue.

~~We do not currently have infrastructure in place for the sale, marketing or distribution of pharmaceutical products.~~ In order to market ~~setmelanotide, if approved by the FDA or other equivalent competent authorities in foreign jurisdictions,~~IMCIVREE, we must continue to build our sales, marketing, managerial and other ~~non‑technical~~non-technical capabilities or make arrangements with third parties to perform these services. Although we have received FDA and Health Canada approval, and EC and MHRA marketing authorization for certain indications, we are early in our commercialization efforts. Therefore, you should not compare us to commercial-stage biotechnology companies, and you should not expect that we will generate substantial revenues or become profitable in the near term. If we are unable to establish adequate sales, marketing and distribution capabilities, whether independently or with third parties, or if we are unable to do so on commercially reasonable terms, our business, results of operations, financial condition and prospects would be materially adversely affected.

~~Even if we receive marketing approval for setmelanotide in the United States, we~~We may never receive regulatory approval to market setmelanotide outside of the United ~~States.~~States, Canada, the European Union and Great Britain.

We intend to ~~pursue~~seek marketing ~~approval for setmelanotide~~authorizations in ~~the European Union and in other~~various countries worldwide. In order to market any product outside of the United States, Canada, the EU or Great Britain, we must establish and comply with the numerous and varying safety, efficacy and other regulatory requirements of other countries. ~~Approval~~Marketing authorization procedures vary among countries and can involve additional setmelanotide testing and additional administrative review periods. The time required to obtain ~~approvals~~marketing authorization in other countries might differ from that required to obtain FDA ~~approval.~~approval or marketing authorization from the EC or the MHRA. The marketing ~~approval~~authorization processes in other countries may

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implicate all of the risks detailed above regarding FDA approval in the United States as well as other risks. In particular, in many countries outside of the United States and Europe, products must receive pricing and reimbursement approval before the product can be commercialized. Obtaining this approval can result in substantial delays in bringing products to market in such countries. ~~Marketing approval~~Grant of marketing authorization in one country does not ensure grant of marketing ~~approval~~authorization in another country, but a failure or delay in obtaining marketing ~~approval~~authorization in one country may have a negative effect on the regulatory process or commercial activities in others. Failure to obtain marketing ~~approval~~authorization in other countries or any delay or other setback in obtaining such ~~approval~~authorizations would impair our ability to market setmelanotide in such foreign markets. Any such impairment would reduce the size of our potential market share and could have a material adverse impact on our business, results of operations and prospects.

~~Even if we receive marketing approval for setmelanotide, we~~We may not achieve market acceptance for IMCIVREE, which would limit the revenue that we generate from the sale of ~~setmelanotide.~~IMCIVREE.

The commercial success of ~~setmelanotide, if approved by the FDA or other equivalent competent authorities in foreign jurisdictions,~~IMCIVREE will also depend upon the awareness and acceptance of ~~setmelanotide~~IMCIVREE within the medical community, including physicians, patients and ~~third‑party~~third-party payors. If ~~setmelanotide is approved but~~IMCIVREE does not achieve an adequate level of acceptance by patients, physicians and ~~third‑party~~third-party payors, we may not generate sufficient revenue to become or remain profitable. Before granting reimbursement approval, ~~third‑party~~third-party payors may require us to demonstrate that, in addition to treating obesity caused by certain genetic deficiencies affecting the ~~MC4~~MC4R pathway, ~~setmelanotide~~IMCIVREE also provides incremental health benefits to patients. Our efforts to educate the medical community and ~~third‑party~~third-party payors about the benefits of ~~setmelanotide~~IMCIVREE may require significant resources and may never be successful. All of these challenges may impact our ability to ever successfully market and sell ~~setmelanotide.~~IMCIVREE.

Market acceptance of ~~setmelanotide, if approved,~~IMCIVREE will depend on a number of factors, including, among others:

●

·

the ability of ~~setmelanotide~~IMCIVREE to ~~treat~~provide chronic weight management in patients with obesity caused by certain genetic deficiencies affecting the ~~MC4~~MC4R pathway and, if required by any competent authority in connection with the approval for these indications, to provide patients with incremental health benefits, as compared with other available treatments, therapies, devices or surgeries;

●

·

the complexities of genetic testing, including obtaining genetic results that support patient treatment with IMCIVREE;

●

the relative convenience and ease of SC injections as the necessary method of administration of ~~setmelanotide,~~IMCIVREE, including as compared with other treatments for ~~obese patients;~~

patients with obesity;

●

·

the prevalence and severity of any adverse side effects associated with ~~setmelanotide;~~

IMCIVREE;

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●

·

limitations or warnings contained in the labeling approved ~~as well as the existence of a REMS,~~ for ~~setmelanotide~~IMCIVREE by the FDA or the specific obligations imposed as a condition for marketing authorization imposed by other equivalent competent authorities in foreign jurisdictions, particularly by the ~~European Commission;~~

EC;

●

·

availability of alternative treatments, including a number of obesity therapies already approved or expected to be commercially launched in the near future;

●

·

our ability to increase awareness of these diseases among our target populations through marketing and other cross-functional efforts;

●

the size of the target patient population, and the willingness of the target patient population to try new therapies and of physicians to prescribe these therapies;

●

·

the ability of ~~setmelanotide~~IMCIVREE to treat the maximum range of pediatric patients, and any limitations on its indications for ~~use, such as if the labeling limits the approved population to patients ages 12 and above;~~

use;

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●

·

the strength of marketing and distribution support and timing of market introduction of competitive products;

●

·

publicity concerning ~~setmelanotide~~IMCIVREE or competing products and treatments;

●

·

pricing and cost effectiveness;

●

·

the effectiveness of our sales and marketing strategies;

●

·

our ability to increase awareness of ~~setmelanotide~~IMCIVREE through marketing efforts;

●

·

our ability to obtain sufficient ~~third‑party~~third-party coverage or reimbursement;

●

·

the willingness of patients to pay ~~out‑of‑pocket~~out-of-pocket in the absence of ~~third‑party~~third-party coverage; and

●

·

the likelihood that ~~the FDA or other equivalent~~ competent authorities in foreign jurisdictions may require development of a REMS or other specific obligations as a condition of approval or ~~post‑approval,~~post-approval, may not agree with our proposed REMS or other specific obligations, or may impose additional requirements that limit the promotion, advertising, distribution or sales of ~~setmelanotide.~~

IMCIVREE.

Our industry is intensely competitive. If we are not able to compete effectively against current and future competitors, we may not be able to generate revenue from the sale of ~~setmelanotide,~~IMCIVREE, our business will not grow and our financial condition and operations will suffer.

The biotechnology and pharmaceutical industries are intensely competitive and subject to rapid and significant technological change. We have competitors in a number of jurisdictions, many of which have substantially greater name recognition, commercial infrastructures and financial, technical and personnel resources than we have. Established competitors may invest heavily to quickly discover and develop compounds that could make ~~setmelanotide~~IMCIVREE obsolete or uneconomical. Any new product that competes with an approved product may need to demonstrate compelling advantages in efficacy, convenience, tolerability and safety to be commercially successful. In addition, payors may require that patients try other medications known as step therapy or a “step-edit,” including medications approved for treatment of general obesity, before receiving reimbursement for IMCIVREE. Other competitive factors, including generic competition, could force us to lower prices or could result in reduced sales. In addition, new products developed by others could emerge as competitors to ~~setmelanotide.~~IMCIVREE and our other product candidates. If we are not able to compete effectively against our current and future competitors, our business will not grow and our financial condition and operations will suffer.

Currently, IMCIVREE is the only approved treatment for providing chronic weight management in patients with obesity due to BBS or POMC, PCSK1 or LEPR deficiencies, and there are no approved ~~or effective current~~ treatments for ~~regulating hunger and hyperphagia related behaviors of~~chronic weight management in patients with deficiencies with deficiencies due to a variant in one of the two alleles in the POMC, PCSK1, or LEPR genes (HET obesity), SRC1 deficiency obesity, ~~LepR~~SH2B1 deficiency obesity, ~~Bardet‑Biedl syndrome, Alström syndrome, POMC heterozygous~~MC4R deficiency obesity, ~~or POMC epigenetic disorders.~~and hypothalamic obesity. Bariatric surgery is not a good treatment option for these genetic ~~disorders~~diseases of obesity because the severe obesity and hyperphagia associated with these ~~disorders~~diseases are considered to be risk factors for bariatric surgery. ~~While~~Also, existing therapies indicated for general obesity, including glucagon-like peptide-1 (GLP-1) receptor agonists, such as Wegovy^®, and glucose-dependent insulinotropic polypeptide (GIP) and glucagon-like peptide-1 (GLP-1) agonists, such as tirzepatide which is being investigated as a treatment for obesity, do not specifically restore function impaired by genetic deficiencies in the MC4R pathway, which we believe is the root cause of hyperphagia and obesity in patients with MC4R genetic variants. Based on search results from ClinicalTrials.gov, we are unaware of any competitive products in ~~development~~

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therapeutic clinical studies for the obesity and hyperphagia caused by ~~MC4~~upstream MC4R pathway ~~deficiencies specifically, new~~deficiencies. New competitors may emerge which could limit our business opportunity in the future.

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We face potential product liability exposure, and, if claims are brought against us, we may incur substantial liability.

The use of setmelanotide, RM-718, and LB54640 in clinical trials and the sale of ~~setmelanotide, if approved,~~IMCIVREE exposes us to the risk of product liability claims. Product liability claims might be brought against us by patients, healthcare providers or others selling or otherwise coming into contact with ~~setmelanotide.~~IMCIVREE. For example, we may be sued if any product we develop allegedly causes injury or is found to be otherwise unsuitable during product testing, manufacturing, marketing or sale. Any such product liability claims may include allegations of defects in manufacturing, defects in design or a failure to warn of dangers inherent in the product, including as a result of interactions with alcohol or other drugs, negligence, strict liability and a breach of warranties. Claims could also be asserted under state consumer protection ~~laws.~~laws and any equivalent laws in foreign countries. If we become subject to product liability claims and cannot successfully defend ourselves against them, we could incur substantial liabilities. In addition, regardless of merit or eventual outcome, product liability claims may result in, among other things:

●

·

withdrawal of patients from our clinical trials;

●

·

substantial monetary awards to patients or other claimants;

●

·

decreased demand for ~~setmelanotide~~IMCIVREE or any future product candidates following marketing approval, if obtained;

●

·

damage to our reputation and exposure to adverse publicity;

●

·

litigation costs;

●

·

distraction of management’s attention from our primary business;

●

·

loss of revenue; and

●

·

the inability to successfully commercialize ~~setmelanotide~~IMCIVREE or any future product candidates, if approved.

We maintain product liability insurance coverage for our clinical trials and commercial product with a $10.0 million annual aggregate coverage limit. Our insurance coverage may be insufficient to reimburse us for any expenses or losses we may suffer. Moreover, in the future, we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses, including if insurance coverage becomes increasingly expensive. If and when we obtain marketing approval for setmelanotide, we intend to expand our insurance coverage to include the sale of commercial products. However, we may not be able to obtain this product liability insurance on commercially reasonable terms. Large judgments have been awarded in class action lawsuits based on drugs that had unanticipated side effects. The cost of any product liability litigation or other proceedings, even if resolved in our favor, could be substantial, particularly in light of the size of our business and financial resources. A product liability claim or series of claims brought against us could cause our stock price to decline and, if we are unsuccessful in defending such a claim or claims and the resulting judgments exceed our insurance coverage, our financial condition, business and prospects could be materially adversely affected.

~~Risks Related to Our Dependence on Third Parties~~

We rely, and expect that we will continue to rely, on third parties to conduct clinical trials for setmelanotide. If these third parties do not successfully carry out their contractual duties or meet expected deadlines, we may not be able to obtain regulatory approval for or commercialize setmelanotide and our business could be substantially harmed.

We enter into agreements with third‑party CROs to provide monitors for and to manage data for our ongoing clinical trials. We rely heavily on these parties for the execution of clinical trials for setmelanotide and control only certain aspects of their activities. As a result, we have less direct control over the conduct, timing and completion of these clinical

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trials and the management of data developed through the clinical trials than would be the case if we were relying entirely upon our own staff. Communicating with outside parties can also be challenging, potentially leading to mistakes as well as difficulties in coordinating activities. However, we remain responsible for the conduct of these trials and are subject to enforcement which may include civil and criminal liabilities for any violations of FDA rules and regulations and the comparable foreign regulatory provisions during the conduct of our clinical trials. Outside parties may:

·

~~have staffing difficulties;~~

·

~~fail to comply with contractual obligations;~~

·

~~devote inadequate resources to our clinical trials;~~

·

~~experience regulatory compliance issues;~~

·

~~undergo changes in priorities or become financially distressed; or~~

·

~~form more favorable relationships with other entities, some of which may be our competitors.~~

These factors may materially adversely affect the willingness or ability of third parties to conduct our clinical trials and may subject us to unexpected cost increases that are beyond our control. Nevertheless, we are responsible for ensuring that each of our studies is conducted in accordance with the applicable protocol, legal, regulatory and scientific standards, and our reliance on CROs does not relieve us of our regulatory responsibilities. We and our CROs are required to comply with current Good Clinical Practices, or cGCPs, which are guidelines enforced by the FDA, the Competent Authorities of the EU member states and equivalent competent authorities in foreign jurisdictions for any products in clinical development. The FDA enforces these regulations and cGCP guidelines through periodic inspections of clinical trial sponsors, principal investigators and trial sites. If we or our CROs fail to comply with applicable cGCPs, the clinical data generated in our clinical trials may be deemed unreliable and the FDA or other equivalent competent authorities in foreign jurisdictions may require us to perform additional clinical trials before approving our marketing applications. We cannot assure you that, upon inspection, the FDA will determine that any of our clinical trials comply with cGCPs. In addition, our clinical trials must be conducted with products produced under current Good Manufacturing Practices, or cGMPs. Our failure or the failure of our CROs to comply with these regulations may require us to repeat clinical trials, which would delay the regulatory approval process and could also subject us to enforcement action up to and including civil and criminal penalties.

If any of our relationships with these third‑party CROs terminate, we may not be able to enter into arrangements with alternative CROs. If CROs do not successfully carry out their contractual duties or obligations or meet expected deadlines, if they need to be replaced or if the quality or accuracy of the clinical data they obtain are compromised due to the failure to adhere to our clinical protocols, regulatory requirements or for other reasons, any such clinical trials may be extended, delayed or terminated, and we may not be able to obtain regulatory approval for, or successfully commercialize, setmelanotide. As a result, our financial results and the commercial prospects for setmelanotide in the subject indication would be harmed, our costs could increase and our ability to generate revenue could be delayed.

We rely completely on ~~third‑party~~third-party suppliers to manufacture our clinical and commercial drug supplies of setmelanotide, RM-718, and LB54640, and we intend to rely on third parties to produce ~~commercial supplies of setmelanotide and~~ preclinical, clinical and commercial supplies of any future product candidate.

We do not currently have, nor do we plan to acquire, the infrastructure or capability to ~~internally~~ manufacture our clinical and commercial drug supply ofinternally for setmelanotide, or any future product candidates, for use in the conduct of our preclinical studies and clinical trials, and we lack the internal resources and the capability to manufacture any product candidate on a clinical or commercial scale. The facilities used by our contract manufacturing organizations, or CMOs, to manufacture the active pharmaceutical ingredient, or API, and final drug product must ~~pass~~successfully complete inspection by the FDA and other equivalent competent authorities in foreign jurisdictions pursuant to inspections that ~~would~~have been and will be conducted ~~after we submit our~~following submission of NDAs, NDA supplements or ~~relevant~~comparable foreign regulatory ~~submission~~submissions to the other equivalent competent authorities in foreign jurisdictions. Our failure or the failure of our CMOs to successfully

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complete preapproval inspection of the manufacturing facilities of setmelanotide, RM-718, and LB54640 could delay the regulatory approval process. In addition, our clinical

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trials must be conducted with products produced under ~~cGMP~~GMP and similar foreign regulations. Our failure or the failure of our CROs or CMOs to comply with these regulations may require us to repeat clinical trials, which would delay the regulatory approval process and could also subject us to enforcement action, including civil and criminal penalties. IfWhen we import any drugs or drug substances, we would be subject to FDA, United States Department of Agriculture, and U.S. Bureau of Customs and Border Patrol ~~or CBP,~~ import regulation requirements. Such enforcement for our failure or our CROs or CMOs’ failure to comply with these regulations could result in import delays, detention of products, and, depending on criteria such as the history of violative activities, the FDA could place a foreign firm or certain drug substances or products on Import Alert and require that all such drug substances or products be subject to detention without physical examination ~~or DWPE,~~ which could significantly impact the global supply chain for ~~setmelanotide. FDARA provides that prescription drug products, with~~setmelanotide, RM-718, and LB54640. With the exception of those on the FDA’s drug shortage list or properly imported by individuals, ~~may not be imported~~the FDCA prohibits the importation of prescription drug products for commercial use if they were manufactured in a foreign country, unless they have been approved or are otherwise authorized to be marketed in the United States and are labeled accordingly.

We currently contract with a third ~~party~~parties for the manufacture of setmelanotide, RM-718, and LB54640 and intend to continue to do so in the future. We have entered into a process development and manufacturing ~~services agreement~~service agreements with our CMOs, Corden Pharma ~~Brussels S.A,~~Switzerland, LLC, or Corden, ~~formerly~~(formerly Peptisyntha SA prior to its acquisition by ~~Corden, under which Corden will provide~~Corden), and Neuland Laboratories for certain process development and manufacturing services for regulatory starting materials and/or raw materials in connection with the manufacture of setmelanotide. We have ~~also~~ entered into ~~a process development~~long-term commercial supply agreements with PolyPeptide Group and ~~manufacturing services agreement with~~ Recipharm Monts ~~S.A.S, or Recipharm, under which Recipharm will provide certain process development~~S.A.S. for manufacturing of drug substance and ~~manufacturing services in connection with the manufacture of setmelanotide.~~drug product for IMCIVREE. Under our agreements, we pay ~~both Corden and Recipharm~~these third parties for services in accordance with the terms of mutually agreed upon work orders, which we ~~Corden and Recipharm~~ may enter into from time to time. The agreement with Corden also provides that, subject to certain conditions, for a period following each product launch date, we will source from Corden a portion of our requirements for that product being sourced from non‑affiliate third parties. We may need to engage additional ~~third‑party~~third-party suppliers to manufacture our clinical and/or commercial (subject to approval) drug supplies. ~~In the future, if we approach commercialization of setmelanotide or any future product candidate, we will need to engage~~We also have engaged other third parties to assist in, among other things, ~~labeling, packaging,~~ distribution, ~~post‑approval~~post-approval safety reporting and pharmacovigilance activities. We cannot be certain that we can engage ~~third‑party~~third-party suppliers on terms as favorable as those that are currently in place.

We do not perform the manufacturing of any drug products and are completely dependent on our CMOs to comply with ~~cGMPs~~GMPs and similar foreign requirements for manufacture of both drug substance, or API and finished drug product. We recognize that we are ultimately responsible for ensuring that our drug substances and finished drug product are manufactured in accordance with ~~cGMPs,~~GMPs and similar foreign requirements, and, therefore, the company’s management practices and oversight, including routine auditing, are critical. If our CMOs cannot successfully manufacture material that ~~conform~~conforms to our specifications and the strict regulatory requirements of the FDA or other equivalent competent authorities in foreign jurisdictions, they may be subject to administrative and judicial enforcement for ~~non‑compliance~~non-compliance and the drug products would be deemed misbranded or adulterated and prohibited from distribution into interstate commerce. Furthermore, all of our CMOs are engaged with other companies to supply and/or manufacture materials or products for such companies, which exposes our manufacturers to regulatory risks for the production of such materials and products. As a result, failure to satisfy the regulatory requirements for the production of those other company materials and products may affect the regulatory clearance of our CMOs’ facilities generally. In addition, satisfying the regulatory requirements for production of setmelanotide, RM-718, and LB54640 with multiple suppliers, while assuring more robust drug availability in the future, adds additional complexity and risk to regulatory approval. If the FDA or another equivalent competent foreign regulatory agency does not approve these facilities for the manufacture of setmelanotide, RM-718, and LB54640 or if it withdraws its approval in the future, we may need to find alternative manufacturing facilities, which would adversely impact our ability to develop, obtain regulatory approval for or market ~~setmelanotide.~~setmelanotide, RM-718, or LB54640.

We are ~~currently in the process of~~ manufacturing finished drug product for use in our upcoming or ongoing clinical ~~trials.~~trials and for commercial supply. We believe we currently have a sufficient amount of finished setmelanotide, ~~diluent~~RM-718, LB54640, and placebo to complete our ongoing and planned clinical ~~trials.~~trials, and for commercial IMCIVREE supply. However, these projections could change based on delays encountered with manufacturing activities, equipment scheduling and material lead times. Any such delays in the manufacturing of finished drug product could delay our planned clinical trials of setmelanotide, RM-718, and LB54640, and our commercial IMCIVREE supply, which could delay, prevent or limit our ability to generate revenue and continue our business.

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We do not have ~~long‑~~long term supply agreements in place with all of our contractors ~~and each batch~~involved with the manufacturing of our weekly formulation of setmelanotide isand RM-718, and LB54640. We currently place individual batch or campaign orders with the CMOs/suppliers that are individually contracted under aexisting master services and quality agreements for the weekly formulation of setmelanotide, RM-718, and ~~supply agreement.~~LB54640. If we engage new contractors, such contractors must be approved by the FDA and other equivalent competent authorities in foreign jurisdictions. We will need to submit

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information to the FDA and other equivalent competent authorities in foreign jurisdictions describing the manufacturing changes. If manufacturing changes occur ~~post‑approval,~~post-approval, the FDA ~~will~~and foreign regulatory authorities may have to approve these changes. We plan to continue to rely upon CMOs and, potentially, collaboration partners to manufacture commercial quantities of setmelanotide, RM-718, and LB54640, if approved. Our current scale of manufacturing appears adequate to support all of our current needs for clinical trial and initial commercial supplies for ~~setmelanotide. If~~ setmelanotide, ~~is approved,~~RM-718, and LB54640, if approved. Going forward, we ~~will~~may need to identify additional CMOs or partners to produce setmelanotide, RM-718, and LB54640 on a larger scale.

In light of our election to terminate the exclusive license agreement with RareStone Group Ltd., or RareStone, the development of setmelanotide in certain indications and commercialization of IMCIVREE in certain markets could be delayed or terminated and our business could be adversely affected.

In December 2021, we entered into an Exclusive License Agreement with RareStone, 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.

Under the RareStone License, we are dependent upon RareStone to successfully commercialize any applicable collaboration products in China, including mainland China, Hong Kong and Macao. We cannot directly control RareStone's commercialization activities or the resources it allocates to setmelanotide. Our interests and RareStone's interests may differ or conflict from time to time, or we may disagree with RareStone's level of effort or resource allocation. RareStone may internally prioritize setmelanotide differently than we do or it may not allocate sufficient resources to effectively or optimally commercialize setmelanotide.

On October 28, 2022, we delivered a written notice to RareStone that we have terminated the RareStone License for cause. In accordance with the notice, we maintain that RareStone has materially breached its obligations under the RareStone License to fund, perform or seek certain key clinical studies and waivers, including with respect to the Company’s global EMANATE trial, among other obligations. On December 21, 2022, RareStone provided written notice to the Company that it objects to the claims in our October 28, 2022 notice, including the Company’s termination of the RareStone License for cause. On March 16, 2023, we provided written notice to RareStone reaffirming our position that RareStone has materially breached its obligations under the RareStone License and that we have terminated the RareStone License for cause, and also requested documentation supporting RareStone’s purported dispute notice objecting to the claims in the Notice. On May 10, 2023, RareStone provided written notice to the Company reaffirming its objections to the claims in our October 28, 2022 notice and March 16, 2023 notice, including to the Company’s termination of the RareStone License for cause. On November 29, 2023, RareStone wrote to us seeking to negotiate and execute a commercial supply agreement as contemplated under the Exclusive License Agreement, and on January 19, 2024, we responded in writing again reaffirming our position that RareStone has materially breached its obligations under the RareStone License and that we have terminated the RareStone License for cause.

There can be no assurance that we will be able to negotiate an appropriate cure to the alleged material breaches, which we believe are incurable, and, if required, we expect to seek appropriate relief under the terms of the RareStone License. Termination of, or any possible litigation focused on, the RareStone License could cause significant delays in our product development and commercialization efforts for setmelanotide and could prevent us from commercializing IMCIVREE in the markets covered by the RareStone License without first expanding our internal capabilities or entering into another agreement with a third party. Any alternative collaboration or license could also be on less favorable terms to us. In addition, under the agreement, RareStone agreed to provide funding for certain clinical development activities. To date, no such funding has been provided. If the agreement were terminated, however, we may need to refund any such

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potential payments and seek additional funding to support the research and development of setmelanotide or discontinue any research and development activities for setmelanotide in China, including mainland China, Hong Kong and Macao, which could have a material adverse effect on our business.

Risks Related to Our Intellectual Property Rights

If we are unable to adequately protect our proprietary technology or maintain issued patents that are sufficient to protect setmelanotide, RM-718, and LB54640, others could compete against us more directly, which would have a material adverse impact on our business, results of operations, financial condition and prospects.

Our commercial success will depend in part on our success in obtaining and maintaining issued patents and other intellectual property rights in the United States and elsewhere and protecting our proprietary technology. If we do not adequately protect our intellectual property and proprietary technology, competitors may be able to use our technologies and erode or negate any competitive advantage we may have, which could harm our business and ability to achieve profitability.

We cannot provide any assurances that any of our patents have, or that any of our pending patent applications that mature into issued patents will include, claims with a scope sufficient to protect ~~setmelanotide.~~setmelanotide, RM-718, and LB54640. Other parties have developed technologies that may be related or competitive to our approach, and may have filed or may file patent applications and may have received or may receive patents that may overlap with our patent applications, either by claiming the same methods or formulations or by claiming subject matter that could dominate our patent position. The patent positions of biotechnology and pharmaceutical companies, including our patent position, involve complex legal and factual questions, and, therefore, the issuance, scope, validity and enforceability of any patent claims that we may obtain cannot be predicted with certainty.

Although an issued patent is presumed valid and enforceable, its issuance is not conclusive as to its validity or its enforceability and such patent may not provide us with adequate proprietary protection or competitive advantages against competitors with similar products. Patents, if issued, may be challenged, deemed unenforceable, invalidated or circumvented. U.S. patents and patent applications or the patents and patent application obtained or submitted pursuant to comparable foreign laws, may also be subject to interference proceedings, ex parte reexamination, inter partes review proceedings, ~~post‑grant~~post-grant review proceedings, supplemental examination and challenges in ~~district~~ court. Patents may be subjected to opposition or comparable proceedings lodged in various foreign, both national and regional, patent offices. These proceedings could result in either loss of the patent or denial of the patent application or loss or reduction in the scope of one or more of the claims of the patent or patent application. In addition, such proceedings may be costly. Thus, any patents that we may own or exclusively license may not provide any protection against competitors. Furthermore, an adverse decision in an interference proceeding can result in a third party receiving the patent right sought by us, which in turn could affect our ability to develop, market or otherwise commercialize setmelanotide.

Competitors may also be able to design around our patents. Other parties may develop and obtain patent protection for more effective technologies, designs or methods. The laws of some foreign countries do not protect our proprietary rights to the same extent as the laws of the United States, and we may encounter significant problems in protecting our proprietary rights in these countries. If these developments were to occur, they could have a material adverse effect on our sales.

In addition, proceedings to enforce or defend our patents could put our patents at risk of being invalidated, held unenforceable or interpreted narrowly. Such proceedings could also provoke third parties to assert claims against us, including that some or all of the claims in one or more of our patents are invalid or otherwise unenforceable. If any of our patents covering setmelanotide are invalidated or found unenforceable, our financial position and results of operations would be materially and adversely impacted. In addition, if a court found that valid, enforceable patents held by third parties covered setmelanotide, our financial position and results of operations would also be materially and adversely impacted.

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The degree of future protection for our proprietary rights is uncertain, and we cannot ensure that:

●

·

any of our patents, or any of our pending patent applications, if issued, will include claims having a scope sufficient to protect setmelanotide;

●

·

any of our pending patent applications will issue as patents;

●

·

we will be able to successfully commercialize ~~setmelanotide, if approved,~~IMCIVREE or our other product candidates before our relevant patents expire;

●

·

we were the first to make the inventions covered by each of our patents and pending patent applications;

●

·

we were the first to file patent applications for these inventions;

●

·

others will not develop similar or alternative technologies that do not infringe our patents;

●

·

any of our patents will be found to ultimately be valid and enforceable;

●

·

any patents issued to us will provide a basis for an exclusive market for our commercially viable products, will provide us with any competitive advantages or will not be challenged by third parties;

●

·

we will develop additional proprietary technologies or product candidates that are separately patentable; or

●

·

our commercial activities or products will not infringe upon the patents of others.

We rely upon unpatented trade secrets, unpatented ~~know‑how~~know-how and continuing technological innovation to develop and maintain our competitive position, which we seek to protect, in part, by confidentiality agreements with employees, consultants, collaborators and vendors. We also have agreements with employees and selected consultants that obligate them to assign their inventions to us. It is possible that technology relevant to our business will be independently developed by a person who is not a party to such an agreement. We may not be able to prevent the unauthorized disclosure or use of our technical knowledge or trade secrets by consultants, collaborators, vendors, former employees and current employees. Furthermore, if the parties to our confidentiality agreements breach or violate the terms of these agreements, we may not have adequate remedies for any such breach or violation, and we could lose our trade secrets through such breaches or violations. Further, our trade secrets could otherwise become known or be independently discovered by our competitors.

We may be involved in lawsuits to protect or enforce our patents or the patents of our licensors, which could be expensive, ~~time‑~~time consuming and unsuccessful.

Competitors may infringe our patents or the patents of our licensors. To counter infringement or unauthorized use, we may be required to file infringement claims, which can be expensive and ~~time‑~~time consuming and divert the attention of our management and key personnel from our business operations. Even if we prevail in any lawsuits that we initiate, the damages or other remedies awarded may not be commercially meaningful. In addition, in an infringement proceeding, a court may decide that a patent of ours or our licensors is not valid, is unenforceable and/or is not infringed, or may refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover the technology in question. An adverse result in any litigation or defense proceedings could put one or more of our patents at risk of being invalidated or interpreted narrowly and could put our patent applications at risk of not issuing.

Interference proceedings provoked by third parties or brought by us may be necessary to determine the priority of inventions with respect to our patents or patent applications or those of our licensors. An unfavorable outcome could require us to cease using the related technology or to attempt to license rights to it from the prevailing party. Our business could be harmed if the prevailing party does not offer us a license on commercially reasonable terms. Our defense of

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litigation or interference proceedings may fail and, even if successful, may result in substantial costs and distract our management and other employees. We may not be able to prevent, alone or with our licensors, misappropriation of our

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intellectual property rights, particularly in countries where the laws may not protect those rights as fully as in the United States.

Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. There could also be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a material adverse effect on the price of our common stock.

We may infringe the intellectual property rights of others, which may prevent or delay our product development efforts and stop us from commercializing or increase the costs of commercializing ~~setmelanotide, if approved.~~IMCIVREE or our other product candidates.

Our success will depend in part on our ability to operate without infringing the intellectual property and proprietary rights of third parties. We cannot assure you that our business, products and methods do not or will not infringe the patents or other intellectual property rights of third parties. For example, numerous ~~third‑party~~third-party U.S. and ~~non‑~~non U.S. patents and pending applications exist that cover melanocortin receptor analogs and methods of using these analogs.

The pharmaceutical industry is characterized by extensive litigation regarding patents and other intellectual property rights. Other parties may allege that setmelanotide or the use of our technologies infringes patent claims or other intellectual property rights held by them or that we are employing their proprietary technology without authorization. For example, we received a letter in January 2013 from a third party bringing to our attention several patents and patent applications, both U.S. and non‑U.S. We responded in April 2013 and have not received any further correspondence since then. Although most of the patents and patent applications mentioned in the letter were abandoned or not in force at the time the letter was sent to us, and subsequent to our response, the third party has allowed three additional U.S. patents to lapse for non‑payment of patent maintenance fees, we cannot assure you that the holder of these third‑party patents will not attempt to assert these patents against us.

Patent and other types of intellectual property litigation can involve complex factual and legal questions, and their outcome is uncertain. Any claim relating to intellectual property infringement that is successfully asserted against us may require us to pay substantial damages, including treble damages and attorney’s fees if we are found to be willfully infringing another party’s patents, for past use of the asserted intellectual property and royalties and other consideration going forward if we are forced or choose to take a license. In addition, if any such claim were successfully asserted against us and we could not obtain such a license, we may be forced to stop or delay developing, manufacturing, selling or otherwise commercializing ~~setmelanotide.~~IMCIVREE or our other product candidates.

If we are unable to avoid infringing the patent rights of others, we may be required to seek a license, defend an infringement action or challenge the validity of the patents in court, or redesign our products. Patent litigation is costly and time consuming. We may not have sufficient resources to bring these actions to a successful conclusion.

In addition, in order to avoid infringing the intellectual property rights of third parties and any resulting intellectual property litigation or claims, we could be forced to do one or more of the following, which may not be possible and, even if possible, could be costly and ~~time‑~~time consuming:

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cease development of setmelanotide and commercialization of ~~setmelanotide;~~

IMCIVREE or our other product candidates;

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pay substantial damages for past use of the asserted intellectual property;

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obtain a license from the holder of the asserted intellectual property, which license may not be available on reasonable terms, if at all; and

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in the case of trademark claims, rename ~~setmelanotide.~~

setmelanotide and/or its trade name IMCIVREE.

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Any of these risks coming to fruition could have a material adverse effect on our business, results of operations, financial condition and prospects.

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We may be subject to claims challenging the inventorship or ownership of our patents and other intellectual property.

We may also be subject to claims that former employees, collaborators or other third parties have an ownership interest in our patents or other intellectual property. Litigation may be necessary to defend against these and other claims challenging inventorship or ownership. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, such intellectual property. Such an outcome could have a material adverse effect on our business. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees.

Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non‑compliance with these requirements.

The U.S. Patent and Trademark Office, or U.S. PTO, and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other provisions during the patent process. There are situations in which noncompliance can result in abandonment or lapse of a patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. In such an event, competitors might be able to enter the market earlier than would otherwise have been the case.

Issued patents covering setmelanotide or our other product candidates could be found invalid or unenforceable if challenged in court.

If we or one of our licensing partners threatened or initiated legal proceedings against a third party to enforce a patent covering setmelanotide, the defendant could claim that the patent covering setmelanotide isor our other product candidates are invalid and/or unenforceable. In patent litigation in the United States, defendant counterclaims alleging invalidity and/or unenforceability are commonplace. Grounds for a validity challenge include alleged failures to meet any one of several statutory requirements, including novelty, ~~non‑obviousness~~non-obviousness and enablement. Grounds for unenforceability assertions include allegations that someone connected with prosecution of the patent withheld material information from the U.S. PTO, or made a misleading statement, during patent prosecution. Third parties may also raise similar claims before administrative bodies in the United States or abroad, even outside the context of litigation. Such mechanisms include ~~re‑examination,~~ re-examination, inter partes review, post grant review and equivalent proceedings in foreign jurisdictions, for example, opposition proceedings. Such proceedings could result in revocation or amendment of our patents in such a way that they no longer cover setmelanotide or competitive products. The outcome following legal assertions of invalidity and/or unenforceability is unpredictable. With respect to validity, for example, we cannot be certain that there is no invalidating prior art, of which we and the patent examiner were unaware during prosecution. If a defendant were to prevail on a legal assertion of invalidity and/or unenforceability, we would lose at least part, and perhaps all, of the patent protection on setmelanotide. Such a loss of patent protection would have a material adverse impact on our business.

We do not seek to protect our intellectual property rights in all jurisdictions throughout the world and we may not be able to adequately enforce our intellectual property rights even in the jurisdictions where we seek protection.

Filing, prosecuting and defending patents on setmelanotide in all countries and jurisdictions throughout the world would be prohibitively expensive, and our intellectual property rights in some countries outside the United States could be less extensive than those in the United States. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the United States. Consequently, we may not be able to prevent third parties from practicing our inventions in all countries outside the United States, or from selling or importing products made using our inventions in and into the United States or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and further, may export otherwise infringing products to territories where we have patent protection, but enforcement is not as strong as that in the United States. These products may compete with our product and our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.

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Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents and other intellectual property protection, particularly those relating to biopharmaceuticals, which could make it difficult for us to stop the infringement of our patents or marketing of competing products in violation of our proprietary rights generally. For example, an April 2017 report from the Office of the United States Trade Representative identified a number of countries, including India and China, where challenges to the procurement and enforcement of patent rights have been reported. Several countries, including India and China, have been listed in the report every year since 1989. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly, could put our patent applications at risk of not issuing and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectual property rights around

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the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.

We are dependent on licensed intellectual property. If we were to lose our rights to licensed intellectual property, we may not be able to continue developing or commercializing setmelanotide ~~if approved.~~or LB54640.

We have licensed our rights to setmelanotide from Ipsen Pharma SAS, or ~~Ipsen.~~Ipsen, and our rights to LB54640 from LG Chem, Ltd, or LG Chem. Our ~~license~~licenses with Ipsen ~~imposes~~and LG Chem impose various obligations on us, and provides Ipsen and LG Chem the right to terminate the license in the event of our material breach of the license agreement, our failure to initiate or complete certain development of a licensed product, or our commencement of an action seeking to have an Ipsen or LG Chem licensed patent right declared invalid. Termination of our license from Ipsen or LG Chem would result in our loss of the right to use the licensed intellectual property, which would materially adversely affect our ability to develop and commercialize setmelanotide and LB54640, respectively, as well as harm our competitive business position and our business prospects. Furthermore, if our license agreement with LG Chem were terminated, we may be subject to certain refunds or be subject to certain payments to LG Chem.

We also have licensed from Camurus its drug delivery technology, FluidCrystal, to formulate once-weekly setmelanotide. Our license with Camurus imposes various obligations on us, and provides Camurus the right to terminate the license in the event of our material breach of the license agreement. Termination of our license from Camurus would result in our inability to use the licensed intellectual property.

We may enter into additional licenses to ~~third‑party~~third-party intellectual property that are necessary or useful to our business. Future licensors may also allege that we have breached our license agreement and may accordingly seek to terminate our license with them. In addition, future licensors may have the right to terminate our license at will. Any termination could result in our loss of the right to use the licensed intellectual property, which could materially adversely affect our ability to develop and commercialize setmelanotide, ~~if approved,~~ as well as harm our competitive business position and our business prospects.

WeAny termination could result in our loss of the right to use the licensed intellectual property, which could materially adversely affect our ability to develop and commercialize setmelanotide or LB54640, as well as harm our competitive business position and our business prospects.

While we have registered trademarks for the commercial trade name IMCIVREE (setmelanotide) in the United States, the EU, and other countries, we have not yet ~~registered trademarks~~obtained trademark protection for ~~a commercial trade name for setmelanotide~~IMCIVREE in certain foreign jurisdictions and failure to secure such registrations could adversely affect our business.

WeWhile we have received registered trademarks for the commercial trade name IMCIVREE (setmelanotide) and its logo in the United States, the EU, and other countries, we have not yet ~~registered trademarks~~obtained trademark protection for ~~a commercial trade name for setmelanotide. Any future~~IMCIVREE in certain foreign jurisdictions and are pursuing trademark registrations in other jurisdictions. Our trademark applications may be rejected during trademark registration proceedings. Although we would be given an opportunity to respond to those rejections, we may be unable to overcome them. In addition, in the U.S. PTO and in comparable agencies in many foreign jurisdictions, third parties are given an opportunity to oppose pending trademark applications and to seek to cancel registered trademarks. Opposition or cancellation proceedings may be filed against our trademarks, and our trademarks may not survive those proceedings. Moreover, any name we propose to use for setmelanotide in the United States must be approved by the FDA, regardless of whether we have registered it, or applied to register it, as a trademark. The FDA typically conducts a review of proposed product names, including an evaluation of potential for confusion with other product names. If the FDA objects to any of our proposed product names, we may be required to expend significant additional resources in an effort to identify a suitable substitute name that would qualify under applicable trademark laws, not infringe the existing rights of third parties and be acceptable to the FDA.

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If we do not obtain additional protection under the ~~Hatch‑Waxman~~Hatch-Waxman Amendments and similar foreign legislation by extending the patent terms and obtaining product exclusivity for setmelanotide and our other product candidates, our business may be materially harmed.

Depending upon the timing, duration and specifics of FDA marketing approval for setmelanotide and our other product candidates, one or more of the U.S. patents we license may be eligible for limited patent term restoration under the Drug Price Competition and Patent Term Restoration Act of 1984, referred to as the ~~Hatch‑~~Hatch Waxman Amendments. The ~~Hatch‑~~Hatch Waxman Amendments permit a patent term restoration of up to five years as compensation for patent term lost during product development and the FDA regulatory review ~~process.~~process, and we have applied to the U.S. PTO for patent term

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extension. However, we may not be granted an extension because of, for example, failure to apply within applicable deadlines, failure to apply prior to expiration of relevant patents or otherwise failure to satisfy applicable requirements. Moreover, the applicable time period or the scope of patent protection afforded could be less than we request. If we are unable to obtain patent term extension or restoration or the term of any such extension is less than we request, our competitors may obtain approval of competing products following our patent expiration, and our ability to generate revenues could be materially adversely affected.

~~While we believe that~~Because setmelanotide contains active ingredients that ~~would be treated by~~ the FDA ashas determined to be a new chemical entity, ~~or a new drug product, and, therefore, if approved, should be~~it has been afforded five years of ~~marketing~~non-patent data exclusivity by the FDA. Following the expiration of this exclusivity period, the FDA ~~may disagree with that conclusion and~~ may approve generic products ~~within a period that is less than five years.~~referencing the information included in our NDA for setmelanotide. Manufacturers may seek to launch these generic products following the expiration of the applicable marketing exclusivity period, even if we still have patent protection for setmelanotide. Recent legislation enacted by Congress created, among other things, new causes of action against innovator companies that refuse to offer samples of drugs for purposes of testing and developing generic or biosimilar products or to allow companies to participate in a shared Risk Evaluation and Mitigation Strategy (REMS). Competition that setmelanotide may face from generic versions could materially and adversely impact our future revenue, profitability and cash flows and substantially limit our ability to obtain a return on the investments we have made in setmelanotide.

If we fail to obtain an extension of patent protection under similar foreign legislation, where applicable, our competitors may obtain approval of competing products following our patent expiration, and our ability to generate revenues could be materially adversely affected in the foreign countries concerned.

Changes in U.S. patent law could diminish the value of patents in general, thereby impairing our ability to protect our ~~product.~~products.

The United States has enacted and is currently implementing the America Invents Act of 2011, ~~wide‑~~wide ranging patent reform legislation. Further, the U.S. Supreme Court has ruled on several patent cases in recent years, either narrowing the scope of patent protection available in certain circumstances or weakening the rights of patent owners in certain situations. In addition to increasing uncertainty with regard to our ability to obtain future patents, this combination of events has created uncertainty with respect to the value of patents, once obtained. Depending on decisions by the U.S. Congress, the federal courts and the U.S. PTO, the laws and regulations governing patents could change in unpredictable ways that would weaken our ability to obtain new patents or to enforce our existing patents or future patents.

We may be subject to damages resulting from claims that we or our employees have wrongfully used or disclosed alleged trade secrets of their former employers.

Our employees have been previously employed at other biotechnology or pharmaceutical companies, including our competitors or potential competitors. We may be subject to claims that these employees or we have inadvertently or otherwise used or disclosed trade secrets or other proprietary information of the former employers of our employees. Litigation may be necessary to defend against these claims. Even if we are successful in defending against these claims, litigation could result in substantial costs and be a distraction to management. If we fail in defending such claims, in addition to paying money damages, we may lose valuable intellectual property rights or personnel. A loss of key personnel or their work product could hamper or prevent our ability to commercialize setmelanotide, which would materially adversely affect our commercial development efforts.

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Risks Related to Regulatory Approval and Marketing of Setmelanotide and Other Legal Compliance Matters

Even if we complete the necessary clinical trials, the regulatory and marketing approval process is expensive, time consuming and uncertain and may prevent us from obtaining additional approvals for the commercialization of setmelanotide. We depend entirely on the success of setmelanotide, which is in Phase 3 clinical development for treatment of POMC deficiency obesity and LepR deficiency obesity. We cannot be certain that we will be able to obtain regulatory approval for, or successfully commercialize, setmelanotide.our product candidates. If we are not able to obtain, or if there are delays in obtaining, required regulatory approvals for our product candidates, we will not be able to commercialize ~~setmelanotide,~~such and our ability to generate revenue will be materially impaired.

~~We currently have only one product candidate, setmelanotide, in clinical development, and our~~Our business depends ~~entirely~~largely on its successful clinical development, regulatory approval and ~~commercialization. We currently have no drug products~~commercialization of our product candidates. In the United States, IMCIVREE is approved for ~~sale~~chronic weight management in adult and ~~may never be able~~pediatric patients 6 years of age and older with monogenic or syndromic obesity due to ~~develop marketable drug products. Setmelanotide, which is currently~~POMC, PCSK1 or LEPR deficiency as determined by a FDA-approved test demonstrating variants in ~~Phase 3 clinical development~~POMC, PCSK1 or LEPR genes that are interpreted as apathogenic, likely pathogenic, or of uncertain significance, or BBS. Health Canada has approved IMCIVREE for weight management in adult and pediatric patients 6 years of age and older with obesity due to BBS or genetically-confirmed POMC, PCSK1, or LEPR deficiency due to variants interpreted as pathogenic, likely pathogenic, or of VUS. The EC has authorized setmelanotide for the treatment ~~for genetic deficiencies affecting the MC4 pathway, including POMC deficiency~~of obesity and ~~LepR~~the control of hunger associated with genetically confirmed BBS or genetically confirmed loss-of-function biallelic POMC, including PCSK1, deficiency or biallelic LEPR deficiency in adults and children 6 years of age and above. The UK’s MHRA authorized setmelanotide for the treatment of obesity and the control of hunger associated with genetically confirmed BBS or genetically confirmed loss-of-function biallelic POMC, including PCSK1, deficiency or biallelic LEPR deficiency in adults and children 6 years of age and above. Setmelanotide will require substantial additional clinical development, testing and regulatory approval before we are permitted to commence ~~commercialization.~~commercialization in indications beyond those currently approved for IMCIVREE in the United States, the EU and Great Britain, and our other product candidates will require similar efforts before we are permitted to commercialize them for any indication. The clinical trials, ~~of setmelanotide are, and the~~ manufacturing and marketing of ~~setmelanotide will be,~~our product candidates are subject to extensive and rigorous review and regulation by numerous government authorities in the United States and in other countries where we intend to test and, if approved, market ~~setmelanotide.~~ such product candidates.

Before obtaining regulatory approvals for the commercial sale of any product candidate, we must demonstrate through ~~non‑clinical~~nonclinical testing and clinical trials that the product candidate is safe and effective for use in each target indication. This process can take many years and approval, if any, may be conditional on ~~post‑marketing~~postmarketing studies and surveillance, and will require the expenditure of substantial resources beyond ~~the proceeds we raised from~~ our IPO. When a sponsor relies exclusively or predominantly on foreign clinical data, the FDA may require a showing that those data are applicable to the U.S. population and U.S. medical practice, which in some cases may require bridging studies or other evidence.existing cash resources. Of the large number of drugs in development in the United States and in other countries, only a small percentage will successfully complete the FDA regulatory approval process or the equivalent process in foreign jurisdictions and will be commercialized. In addition, we have not discussed all of our proposed development programs with the FDA ofor the competent authorities of foreign jurisdictions. Accordingly, even if we are able to obtain the requisite financing to continue to fund our development and clinical trials, we cannot assure you that setmelanotide will be successfully developed or commercialized.

We are not permitted to market setmelanotide in the United States until we receive approval of an NDA from the FDA, or in any foreign jurisdictions until we receive the requisite approval from such countries. We have two Phase 3 clinical trials underway, one each for the treatment of POMC deficiency obesity and LepR deficiency obesity. Under our current development program, we plan to conduct a single Phase 3 clinical trial for POMC deficiency obesity. To date, in our ongoing discussions with the FDA, the agency has not asked for additional Phase 3 trials in POMC deficiency obesity, but the agency could still require us to conduct additional Phase 3 clinical trials for this indication. Moreover, for POMC deficiency obesity, the FDA could alter its previous advice on many aspects of the trial—the small size, the open label design, the amount of past medical history available on individual patients, the statistical analysis plan, the definition of clinically‑relevant success for the protocol, entry of patients ages 12 or over—all of which may impact the timing and ability to obtain FDA approval. There are other aspects of the trial for which we have not received advice from the FDA, such as the number of U.S. versus non‑U.S. patients and the number of patients with POMC gene defects versus the number of patients with PCSK1 defects, which could also impact the timing of and our ability to obtain FDA approval. We have not discussed the protocol for a Phase 3 program for LepR deficiency obesity with the FDA and thus we do not know if the FDA will provide advice on this trial that differs from the advice provided by the FDA for the trial in POMC deficiency obesity. Therefore, the timeline for enrollment, availability of data, and cost of conducting such trials are uncertain, and could be less favorable than those applicable to the POMC deficiency obesity program.

In addition, the FDA and other equivalent competent authorities in foreign jurisdictions will expect for there to be no introduction of bias in the open‑label Phase 3 trials. Accordingly, we proposed to the FDA that little, if any, efficacy data will be available to us in any form until the Phase 3 trials are complete.

The FDA or other regulatory authorities and other equivalent competent authorities in foreign jurisdictions will also require that we conduct one or more pivotal trials for each other indication sought. In addition, we are not sure if one

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or more Phase 3 trials would be required for approval in each other indication. The need and length of placebo‑controlled data in these pivotal trials and the number of patients required for these approvals is also unclear. We expect to seek an indication for obesity caused by monogenic deficiencies affecting the MC4 pathway. We are currently conducting Phase 3 trials for treatment of setmelanotide in POMC deficiency obesity and LepR deficiency obesity and Phase 2 trials for treatment of Bardet‑Biedl syndrome, Alström syndrome, POMC heterozygous deficiency obesity, and POMC epigenetic disorders. If the clinical data meet key primary and secondary endpoints for safety and efficacy, our overall clinical program may be less time consuming and require fewer patients than might a program for a broader obesity indication.

In the European Union we are currently conducting the Phase 3 clinical trial RM‑493‑012 in Germany and the United Kingdom. In France, the clinical trial application has recently been approved by the competent authorities. On March 23, 2017, we received EMA scientific advice on the appropriateness and sufficiency of the non‑clinical and clinical development programs to support an initial marketing authorization application in POMC deficiency obesity. The EMA scientific advice included preliminary advice on the clinical trial RM‑493‑012. The EMA expressed general support for the ongoing Phase 3 program in POMC deficiency obesity. The EMA, advised that the regulatory strategy for a rare disorder is supported, and that the EMA may have to rely on scarce data. The EMA advised, however, that we need to consider whether full approval, approval under conditional or exceptional circumstances would be the most appropriate pathway for application for POMC deficiency obesity.

Given the orphan status of setmelanotide for the treatment of POMC deficiency in the European Union the marketing authorization application for a POMC deficiency obesity indication will be submitted via the centralized procedure. In addition, we plan to submit a pediatric investigation plan for setmelanotide to the EMA Pediatric Development Committee in 2017.

We cannot assure you that the clinical trials we are conducting in the European Union will be completed within this timeline. Similar to the United States, we are subject to comprehensive regulatory oversight by the EMA and the competent authorities of the individual EU member states where we are conducting our clinical trials. Failure by us or by any of our third party partners to comply with EU laws and the related national laws of individual EU member states governing the conduct of clinical trials may result in the suspension of clinical trials and in other administrative, civil, or criminal penalties.

Our plan is to expand our internal clinical development operations and capabilities so that we can continue to enroll and manage our Phase 2 clinical trials, and enroll and manage our Phase 3 clinical trials, such that, if the clinical trials are successful, we can file an NDA for POMC deficiency obesity in the United States by 2019. We believe we have finalized the design, timing and size of our Phase 3 trial for POMC deficiency obesity with the FDA but we cannot assure you that the trial will not be subject to further modification or that it will be completed on time. In addition, obtaining ~~approval of an NDA and the approval of a marketing authorization application from the European Commission~~FDA or EC is a complex, lengthy, expensive and uncertain process, and the FDA, EMA or equivalent competent authorities in foreign jurisdictions may delay, limit or deny approval of ~~setmelanotide~~our product candidates for many reasons, including, among others:

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the FDA, the EMA, or other equivalent competent authorities in foreign jurisdictions may disagree with our interpretation of data from clinical trials, or may change the requirements for approval even after it has reviewed and commented on the design for our clinical trials;

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we may not be able to demonstrate to the satisfaction of the FDA, the EMA, or other equivalent competent authorities in foreign jurisdictions that ~~setmelanotide is~~our product candidates are safe and effective ~~in treating obesity caused by certain genetic deficiencies affecting the MC4 pathway;~~

for their intended uses;

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the results of our clinical trials may not be interpretable or meet the level of statistical or clinical significance required by the FDA, the EMA, or other equivalent competent authorities in foreign

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jurisdictions for marketing approval. For example, the potential unblinding of setmelanotide studies due to easily identifiable ~~adverse events~~AEs may raise the concern that potential bias has affected the clinical trial results;

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the FDA, the EMA, or other equivalent competent authorities in foreign jurisdictions may disagree with the number, size, conduct or implementation of our clinical trials;

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the FDA, the EMA, or other equivalent competent authorities in foreign jurisdictions may require that we conduct additional clinical trials or ~~pre‑clinical~~pre-clinical studies;

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the FDA, the EMA, or other equivalent competent authorities in foreign jurisdictions or the applicable foreign regulatory agency may identify deficiencies in our chemistry, manufacturing or controls of ~~setmelanotide;~~

our product candidates, or in the commercial production of such product candidates that may be required to support product approval;

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the CROs that we retain to conduct our clinical trials may take actions outside of our control that materially adversely impact our clinical trials;

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the FDA, the EMA, or other equivalent competent authorities in foreign jurisdictions may find the data from preclinical studies and clinical trials insufficient to demonstrate that clinical and other benefits of ~~setmelanotide~~a product candidate outweigh its safety risks;

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the FDA, the EMA, or other equivalent competent authorities in foreign jurisdictions may disagree with our interpretation of data from our preclinical studies and clinical trials;

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the FDA ~~the EMA,~~ or other equivalent competent authorities in foreign jurisdictions may not approve the formulation, labeling or specifications of ~~setmelanotide;~~

our product candidates;

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the FDA, the EMA, or other equivalent competent authorities in foreign jurisdictions may not accept data generated at our clinical trial sites;

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~~if and when our NDA or our marketing authorization application is submitted and reviewed by an advisory committee,~~ the FDA, the EMA, or the equivalent competent authorities in foreign jurisdictions may have difficulties scheduling an advisory committee meeting in a timely manner or the advisory committee may recommend against approval of our application or may recommend that the FDA, the EMA, or the equivalent competent authorities in foreign jurisdictions require, as a condition of approval, additional preclinical studies or clinical trials, limitations on approved labeling or distribution and use restrictions;

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we may not be able to meet any post-market requirements or commitments agreed to in connection with regulatory approvals

●

the FDA may require development of a REMS as a condition of ~~approval or post‑approval, or may not agree with our proposed REMS~~additional approvals or may impose additional requirements that limit the promotion, advertising, distribution, or sales of ~~setmelanotide. In addition,~~ our product candidate;

●

the ~~European Commission~~EC may grant only conditional approval marketing authorization or based on the EMA’s opinion impose specific obligations as a condition for marketing authorization, or may require us to conduct post authorization safety studies as a condition of grant of marketing authorization;

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the FDA or other equivalent competent foreign regulatory ~~agency~~agencies may deem our manufacturing processes or our facilities or the facilities of our CMOs inadequate to preserve the identity, strength, quality, purity, or potency of our product; or

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the FDA ~~the European Commission,~~ or the equivalent competent authorities in foreign jurisdictions may change its approval policies or adopt new regulations and guidance.

Any of these factors, many of which are beyond our control, could jeopardize our ability to obtain additional regulatory ~~approval for and~~approvals, or to successfully market ~~setmelanotide.~~IMCIVREE. Moreover, because our business is ~~entirely~~largely dependent upon setmelanotide, any such setback in our pursuit of regulatory ~~approval~~approvals would have a material adverse effect on our business and prospects.

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and commercialize our product candidates.

The EU pharmaceutical legislation is currently undergoing a complete review process, in the context of the Pharmaceutical Strategy for Europe initiative, launched by the EC in November 2020. The EC’s proposal for a revision of several legislative instruments related to medicinal products (potentially reducing the duration of regulatory data protection, revising the eligibility for expedited pathways, etc.) was published on April 26, 2023. The proposed revisions remain to be agreed and adopted by the European Parliament and European Council and the proposals may therefore be substantially revised before adoption, which is not anticipated before early 2026. The revisions, may however have a significant impact on the pharmaceutical industry and our business in the long term.

Disruptions at the FDA and other government agencies caused by funding shortages or global health concerns could hinder their ability to hire, retain or deploy key leadership and other personnel, or otherwise prevent new or modified products from being developed, approved or commercialized in a timely manner or at all, which could negatively impact our business.

The ability of the FDA and foreign regulatory authorities to review and or approve new products can be affected by a variety of factors, including government budget and funding levels, statutory, regulatory, and policy changes, the FDA’s and foreign regulatory authorities’ ability to hire and retain key personnel and accept the payment of user fees, and other events that may otherwise affect the FDA’s and foreign regulatory authorities’ ability to perform routine functions. Average review times at the FDA and foreign regulatory authorities have fluctuated in recent years as a result. In addition, government funding of other government agencies that fund research and development activities is subject to the political process, which is inherently fluid and unpredictable. Disruptions at the FDA and other agencies, such as the EMA, following its relocation to Amsterdam and resulting staff changes, may also slow the time necessary for new drugs and biologics to be reviewed and/or approved by necessary government agencies, which would adversely affect our business. For example, over the last several years, the U.S. government has shut down several times and certain regulatory agencies, such as the FDA, have had to furlough critical FDA employees and stop critical activities.

Separately, in response to the COVID-19 pandemic, the FDA postponed most inspections of domestic and foreign manufacturing facilities at various points. Even though the FDA has since resumed standard inspection operations, any resurgence of the virus or emergence of new variants may lead to inspectional or administrative delays. If a prolonged government shutdown occurs, or if global health concerns prevent the FDA or other regulatory authorities from conducting their regular inspections, reviews, or other regulatory activities, it could significantly impact the ability of the FDA or other regulatory authorities to timely review and process our regulatory submissions, which could have a material adverse effect on our business.

Our failure to obtain marketing approval in foreign jurisdictions would prevent setmelanotide or our other product candidates from being marketed abroad, and any ~~approval~~current or future approvals we ~~are~~have been or may be granted for setmelanotide or other products in the United States would not assure approval of setmelanotide or other products in foreign jurisdictions.

In order to market and sell setmelanotide and any other product candidate that we may develop in the ~~European Union~~EU and many other jurisdictions, we or our ~~third‑party~~third-party collaborators must obtain separate marketing authorizations and comply with numerous and varying regulatory requirements. The ~~approval~~marketing authorization procedure varies among countries and can involve additional testing. The time required to obtain ~~approval~~marketing authorization may differ substantially from that required to obtain FDA approval. The ~~regulatory approval~~marketing authorization process outside the United States generally includes all of

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the risks associated with obtaining FDA approval. In addition, in many countries outside the United States, it is required that the product be approved for reimbursement before the product can be sold in that country. We or these third parties may not obtain ~~approvals~~marketing authorization from competent authorities outside the United States on a timely basis, if at all. Approval by the FDA does not ensure ~~approval~~grant of marketing authorization by competent authorities in other countries or jurisdictions, and ~~approval~~grant of marketing authorization by one competent authority outside the United States does not ensure ~~approval~~grant of marketing authorization by competent authorities in other countries or jurisdictions or by the FDA. We may not be able to file for marketing ~~approvals~~authorizations and may not receive necessary ~~approvals~~marketing authorization to commercialize setmelanotide in any market. Additionally, ~~on June 23, 2016,~~ the ~~electorate in~~UK’s withdrawal from the ~~United Kingdom voted in favor of leaving the European Union,~~EU, commonly referred to as ~~Brexit. On March 29, 2017,~~Brexit, has resulted in the ~~country formally notified the European Union of its intention to withdraw pursuant to Article 50~~relocation of the ~~Lisbon Treaty. Since a significant proportion~~EMA from the UK to the Netherlands. This relocation has caused, and may continue to cause, disruption in the administrative and medical scientific links between the EMA and the MHRA, including delays in granting clinical trial authorization or marketing authorization, disruption of importation and export of active substance and other components of new drug formulations, and disruption of the supply chain for clinical trial product and final authorized formulations. The cumulative effects of the disruption to the regulatory framework may add considerably to the development lead time to marketing authorization and commercialization of setmelanotide, or any other product candidates in the United Kingdom is derived from European Union directives and regulations, the referendum could materially impact the regulatory regime with respect to the approval of setmelanotide in the United Kingdom EU and/or the ~~European Union. Any~~UK. Although we have obtained FDA approval and marketing authorization from the EC and the MHRA for setmelanotide, any delay in obtaining, or an inability to obtain, any marketing ~~approvals,~~authorization, for any of our other product candidates, as a result of Brexit or otherwise, would prevent us from commercializing ~~setmelanotide~~our product candidates in the ~~United Kingdom~~UK and/or the ~~European Union~~EU and restrict our ability to generate revenue and achieve and sustain profitability. If any of these outcomes occur, we may be forced to restrict or delay efforts to seek ~~regulatory approval~~marketing authorization in the ~~United Kingdom~~UK and/or ~~European Union~~EU for ~~setmelanotide,~~any of our other product candidates, which could significantly and materially harm our business.

~~Even if we obtain~~The terms of our current and future potential marketing ~~approval~~approvals for setmelanotide ~~the terms of approval~~and other product candidates and ongoing regulation may limit how we manufacture and market setmelanotide and other products, and compliance with such requirements may involve substantial resources, which could materially impair our ability to generate revenue.

~~Even if we receive marketing approval for setmelanotide, regulatory~~Regulatory authorities may impose significant restrictions on setmelanotide’s indicated uses or marketing or impose ongoing requirements for potentially costly post approval ~~studies. Setmelanotide~~studies, and the same may be true for our other product candidates, if approved. We and setmelanotide will also be subject to ongoing requirements by the FDA ~~the EMA,~~ and ~~the competent~~foreign regulatory authorities, ~~in the EU member states,~~ governing labeling, packaging, storage, advertising, promotion, marketing, distribution, importation, exportation, ~~post‑approval,~~post-approval changes, manufacturing, recordkeeping, and submission of safety and other post market information. Advertising and promotional materials must comply with the FDCA and implementing regulations and foreign regulations, and are subject to FDA and foreign regulatory authorities oversight and post-marketing reporting obligations, in addition to other potentially applicable federal and state laws. The FDA and the other competent foreign authorities ~~haves~~have significant post market authority, including, for example, the authority to require labeling changes based on new safety information and to require post market studies or clinical trials to evaluate serious safety risks related to the use of a drug. The FDA and foreign regulatory authorities also has the authority to require, as part of an NDA or similar foreign application or post approval, the submission of a REMS or other specific obligations, which may include Elements to Assure Safe ~~Use,~~Use. Any REMS or ~~ETASU. Any REMS~~other specific obligations required by the FDA or foreign regulatory authorities may lead to increased costs to assure compliance with new post approval regulatory requirements and potential requirements or restrictions on the sale of approved products, all of which could lead to lower sales volume and revenue. The holder of an approved NDA also must submit new or supplemental applications and obtain FDA approval for certain changes to the approved product, product labeling or manufacturing process, or adding new manufacturers. Similar requirements apply in foreign jurisdictions.

Manufacturers of drug products and their facilities may be subject to payment of application and program fees and are subject to continual review and periodic inspections by the FDA and other equivalent competent authorities for compliance with cGMPs and other regulations. If we or a regulatory agency discover problems with setmelanotide, such as ~~adverse events~~AEs of unanticipated severity or frequency, or problems with the facility where setmelanotide is manufactured or disagrees with the promotion, marketing or labeling of the product, a regulatory agency may impose restrictions on setmelanotide, the manufacturer or us, including requiring withdrawal of setmelanotide from the market or suspension of manufacturing. If we ~~setmelanotide~~ or the manufacturing facilities for setmelanotide fail to comply with applicable regulatory requirements, a regulatory agency may, among other things:

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issue warning letters or untitled letters;

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seek an injunction or impose civil or criminal penalties or monetary fines;

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vary, suspend or withdraw marketing approval;

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suspend any ongoing clinical trials;

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refuse to approve pending applications or supplements to applications submitted by us;

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suspend or impose restrictions on operations, including costly new manufacturing requirements; or

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seize or detain setmelanotide, refuse to permit the import or export of setmelanotide, or request that we initiate a product recall.

Any government investigation of alleged violations of law could require us to expend significant time and resources in response and could generate negative publicity. The occurrence of any event or penalty described above may inhibit our ability to commercialize our product candidates and adversely affect our business, financial condition, results of operations and prospects.

Accordingly, ~~assuming we receive marketing approval for setmelanotide,~~ we and our CMOs will continue to expend time, money and effort in all areas of regulatory compliance, including manufacturing, production, product surveillance and quality control. If we are not able to comply with ~~post‑approval~~post-approval regulatory requirements, we could have the marketing approvals for setmelanotide withdrawn by regulatory authorities and our ability to market any future products could be limited, which could adversely affect our ability to achieve or sustain profitability. Thus, the cost of compliance with ~~post‑approval~~post-approval regulations may have a negative effect on our operating results and financial condition.

In addition, a sponsor’s responsibilities and obligations under the FDCA and FDA regulations, and those of equivalent foreign regulatory agencies, may change and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of our product candidates. We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action, either in the United States or abroad. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may be subject to enforcement action and we may not achieve or sustain profitability.

Similar to the United States, both marketing authorization holders and manufacturers of medicinal products are subject to comprehensive regulatory oversight by the EMA and the competent authorities of the individual EU member states, both before and after grant of the manufacturing and ~~Marketing Authorizations.~~marketing authorizations. This oversight includes control of compliance with ~~cGMP~~GMP rules, which govern quality control of the manufacturing process and require documentation policies and procedures. We and our ~~third party~~third-party manufacturers would be required to ensure that all of our processes, methods, and equipment are compliant with ~~cGMP.~~GMP. Failure by us or by any of our ~~third party~~third-party partners, including suppliers, manufacturers, and distributors to comply with EU laws and the related national laws of individual EU member states governing the conduct of clinical trials, manufacturing approval, marketing authorization of medicinal products, both before and after grant of marketing authorization, and marketing of such products following grant of authorization may result in administrative, civil, or criminal penalties. These penalties could include delays in or refusal to authorize the conduct of clinical trials or to grant ~~Marketing Authorization,~~marketing authorization, product withdrawals and recalls, product seizures, suspension, revocation or variation of the marketing authorization, total or partial suspension of production, distribution, manufacturing, or clinical trials, operating restrictions, injunctions, suspension of licenses, fines, and criminal penalties.

In addition, EU legislation related to pharmacovigilance, or the assessment and monitoring of the safety of medicinal products, provides that the EMA and the competent authorities of the EU member states have the authority to require companies to conduct additional ~~post‑approval~~post-approval clinical efficacy and safety studies. The legislation also governs the obligations of marketing authorization holders with respect to additional monitoring, ~~adverse event~~AE management and reporting. Under the pharmacovigilance legislation and its related regulations and guidelines, we may be required to conduct a labor intensive collection of data regarding the risks and benefits of marketed products and may be required to engage in ongoing

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assessments of those risks and benefits, including the possible requirement to conduct additional clinical studies, which may be ~~time‑~~time consuming and expensive and could impact our profitability. ~~Non‑compliance~~Noncompliance with such obligations can lead to the variation, suspension or withdrawal of marketing authorization or imposition of financial penalties or other enforcement measures.

~~Recently enacted~~Current and future healthcare reform legislation or regulation may increase the difficulty and cost for us and any future collaborators to ~~obtain marketing approval of and~~ commercialize setmelanotide and may adversely affect the prices we, or they, may obtain and may have a negative impact on our business and results of operations.

In the United States and some foreign jurisdictions there have been, and continue to be, a number of legislative and regulatory changes and proposed changes regarding the healthcare system that could, among other things, ~~prevent or delay marketing approval of setmelanotide,~~ restrict or regulate ~~post‑approval~~post-approval activities with respect to IMCIVREE and affect our ability, or the ability of any future collaborators, to profitably sell ~~any products for which we, or they, obtain marketing approval.~~our products. Among policy makers and payors in the United States and elsewhere, there is significant interest in promoting changes in healthcare systems with the stated goals of containing healthcare costs, improving quality and/or expanding access. In the United States and elsewhere, the pharmaceutical industry has been a particular focus of these efforts and has been significantly affected by major legislative

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initiatives. We expect that current laws, as well as other healthcare reform measures that may be adopted in the future, may result in more rigorous coverage criteria and in additional downward pressure on the price that we, or any future collaborators, may receive for IMCIVREE or any product candidates approved ~~products.~~for sale.

~~In March 2010, President Obama signed into law the~~The Patient Protection and Affordable Care Act ~~as amended~~(ACA) was signed into law in 2010. The ACA substantially changed the way healthcare is financed by both governmental and private insurers, and significantly affects the ~~Health Care and Education Affordability Reconciliation Act, or collectively the ACA.~~U.S. pharmaceutical industry. Among the provisions of the ACA of importance to our business, including, without limitation, our ability to commercialize and the prices we may obtain for any ~~of setmelanotide and~~product candidates that are approved for sale, are the following:

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an annual, nondeductible fee on any entity that manufactures or imports specified branded prescription drugs and biologic agents, apportioned among these entities according to their market share in certain government healthcare programs, although this fee does not apply to sales of certain products approved exclusively for orphan indications;

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expansion of eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to certain individuals with income at or below 133% of the federal poverty level, thereby potentially increasing a manufacturer’s Medicaid rebate liability;

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expansion of manufacturers’ rebate liability under the Medicaid Drug Rebate Program by increasing the minimum rebate for both branded and generic drugs, ~~and~~ revising the ~~definition of~~ “average manufacturer ~~price,” or AMP, for calculating and reporting Medicaid drug rebates on outpatient prescription drug prices~~price” definition, and extending rebate liability from fee-for-service Medicaid utilization to ~~prescriptions for individuals enrolled in Medicare Advantage plans;~~

include the utilization of Medicaid managed care organizations as well;

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~~introduction~~expansion of ~~a price reporting requirement for drugs that are inhaled, instilled, implanted, injected, or infused and not generally dispensed through retail community pharmacies;~~

·

~~addition~~the list of ~~more~~ entity types eligible for participation in the Public Health Service ~~the~~ 340B drug pricing program, or the 340B ~~program;~~

program, to include certain free-standing cancer hospitals, critical access hospitals, rural referral centers, and sole community hospitals, but exempting “orphan drugs,” such as IMCIVREE, from the 340B ceiling price requirements for these covered entities;

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~~established~~establishment of the Medicare Part D coverage gap discount program, ~~by requiring~~which requires manufacturers to provide a ~~50% point‑of‑sale‑~~70% point of sale discount off the negotiated price of applicable brand drugs to eligible beneficiaries during their coverage gap period as a condition for the manufacturers’ outpatient drugs to be covered under Medicare Part D;

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a ~~new Patient‑~~Patient Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research;

and

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the Independent Payment Advisory Board, or IPAB, which has authority to recommend certain changes to the Medicare program to reduce expenditures by the program that could result in reduced payments for prescription drugs. However, the IPAB implementation has been not been clearly defined. ACA provided that under certain circumstances, IPAB recommendations or recommendations of the Secretary of Health and Human Services will become law unless Congress enacts legislation that will achieve the same or greater Medicare cost savings; and

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~~established~~establishment of the Center for Medicare and Medicaid Innovation within CMS to test innovative payment and service delivery models to lower Medicare and Medicaid spending, ~~potentially~~ including prescription drug spending.

Since its enactment, certain provisions of the ACA have been subject to judicial, executive, and legislative challenges. On June 17, 2021, the U.S. Supreme Court dismissed the most recent judicial challenge to the ACA brought by several states without specifically ruling on the constitutionality of the ACA. Thus, the ACA will remain in effect in its current form.

In addition, other legislative changes have been proposed and adopted since the ACA was enacted. For example, beginning April 1, 2013, Medicare payments ~~for all items and services, including drugs and biologics,~~to providers were reduced ~~by 2%~~ under the sequestration ~~(i.e., automatic spending reductions)~~ required by the Budget Control Act of 2011, ~~as amended by~~which will remain in effect through 2032, unless additional Congressional action is taken. Additionally, on January 2, 2013, the American Taxpayer Relief Act of ~~2012. Subsequent legislation extended the 2% reduction, on average, to 2025. Sequestration may result in additional reductions in Medicare and other healthcare funding and, if we obtain regulatory~~

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~~approvals, may otherwise affect the prices we may obtain for setmelanotide or the frequency with which setmelanotide is prescribed or used if approved.~~

Legislative changes to or regulatory changes under the ACA remain possible and appear likely in the 115th U.S. Congress and under the Trump administration. The nature and extent of any legislative or regulatory changes to the ACA, including repeal and replacement initiatives, are uncertain at this time. It is possible that ACA repeal and replacement initiatives, if enacted2012 was signed into law, ~~could ultimately result in fewer individuals having health insurance coverage~~which, among other things, further reduced Medicare payments to several providers, including hospitals, imaging centers and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. On March 11, 2021, the American Rescue Plan Act of 2021 was signed into law, which eliminated the statutory Medicaid drug rebate cap, beginning January 1, 2024. Previously, the Medicaid rebate was capped at 100% of a drug’s average manufacturer price, or ~~in individuals having insurance coverage with less generous benefits. The scope of potential future legislation to modify or repeal and replace ACA provisions is highly uncertain in many respects.~~AMP.

Additional changes that may affect our business include the expansion of new programs such as Medicare payment for performance initiatives for physicians under the Medicare Access and CHIP Reauthorization Act of 2015, or MACRA, which ~~will be~~was fully implemented in 2019. At this time, it is unclear how the introduction of ~~the~~this Medicare quality payment program will impact overall physician reimbursement. The ~~costs~~cost of prescription pharmaceuticals in the United States has also been the subject of considerable discussion in the United ~~States, and members of Congress and the Administration~~States. There have ~~stated that they will address such costs through new legislative and administrative measures. This focus has resulted in~~been several Congressional inquiries, as well as legislative and ~~proposed bills~~regulatory initiatives and executive orders designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drug products.

Moreover, the federal government and the individual states in the United States have become increasingly active in developing proposals, passing legislation and implementing regulations designed to control drug pricing, including price or patient reimbursement constraints, discounts, formulary flexibility, marketing cost disclosure, drug price increase reporting, and other transparency measures. These types of initiatives may result in additional reductions in Medicare, Medicaid, and other healthcare funding, and may otherwise affect the prices we may obtain for IMCIVREE or the frequency with which IMCIVREE is prescribed or used.

Most significantly, on August 16, 2022, President Biden signed the Inflation Reduction Act of 2022 (IRA) into law. This statute marks the most significant action by Congress with respect to the pharmaceutical industry since adoption of the ACA in 2010. Among other things, the IRA requires manufacturers of certain drugs to engage in price negotiations with Medicare, with prices that can be negotiated subject to a cap (with resulting prices for the initial ten drugs first effective in 2026); imposes rebates under Medicare Part B and Medicare Part D to penalize price increases that outpace inflation (first due in 2023); redesigns the Medicare Part D benefit (beginning in 2024); and replaces the Part D coverage gap discount program with a new discounting program (beginning in 2025). The IRA permits the Secretary of the Department of Health and Human Services (HHS) to implement many of these provisions through guidance, as opposed to regulation, for the initial years. HHS has and will continue to issue and update guidance as these programs are implemented. On August 29, 2023, HHS announced the list of the first ten drugs that will be subject to price negotiations, although the Medicare drug price negotiation program is currently subject to legal challenges. The impact of the IRA on the pharmaceutical industry cannot yet be fully determined, but is likely to be significant.

Under the IRA discounting program that will replace the coverage gap discount program in 2025, manufacturers must give a 10 percent discount on Part D drugs in the initial coverage phase, and a 20 percent discount on Part D drugs in the so-called “catastrophic phase” (the phase after the patient incurs costs above the initial phase out-of-pocket threshold, which will be $2,000 beginning in 2025). The IRA allows the 10 and 20 percent discounts to be phased in over time for certain drugs for “specified manufacturers.” In April 2024, CMS informed us that we are deemed a specified manufacturer. We are still evaluating the potential impact of this status on our future revenues.

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IMCIVREE is reimbursed under Medicare Part D, and the reimbursement amount will be impacted by the 10 and 20 percent discounts under the IRA’s new discounting program. We anticipate that these increased discounts will impact IMCIVREE revenues, while also having an industry-wide impact on the cost of Part D drugs. The impact on IMCIVREE revenues could be offset because the IRA’s redesign of certain Part D components, some of which went into effect in 2024, resulted in an increase in the number of patients able to afford this therapy. The amount of the offset, if any, is inherently uncertain and difficult to predict.

The IRA discounting program that will replace the coverage gap discount program will also increase financial obligations of Part D prescription drug plans with respect to beneficiaries in the catastrophic coverage phase. This may incentivize Part D prescription drug plans to seek greater price concessions from us in order to include IMCIVREE on their formularies.

We expect that these and other healthcare reform measures that may be adopted in the future may result in more rigorous coverage and payment criteria and in additional downward pressure on the price that we receive for any approved drug. Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private payors. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability, or commercialize our drugs. We expect that additional state and federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare products and services, which could result in reduced demand for our ~~drug~~product candidates or additional pricing pressures. We cannot predict with certainty what impact any federal or state health reforms will have on us, but such changes could impose new or more stringent regulatory requirements on our activities or result in reduced reimbursement for our products, any of which could adversely affect our business, results of operations and financial condition.

The pricing of prescription pharmaceuticals is also subject to governmental control outside the United States. In these countries, pricing negotiations with governmental authorities can take considerable time after the receipt of marketing approval for a product. To obtain reimbursement or pricing approval in some countries, we may be required to conduct a clinical trial that compares the cost effectiveness of setmelanotide to other available therapies. If reimbursement of our products is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, our ability to generate revenues and become profitable could be impaired.

~~If we participate~~ For more details concerning the risks related to pricing and reimbursement in the ~~Medicaid Drug Rebate Program~~EU, please refer to the discussion in the risk factor “The successful commercialization of IMCIVREE and any other product candidates for which we obtain approval will depend in part on the extent to which governmental authorities, private health insurers, and other third-party payors provide coverage and adequate reimbursement levels. Failure to obtain or maintain coverage and adequate reimbursement for IMCIVREE or our other product candidates, if any and if approved, could limit our ability to market those products and decrease our ability to generate revenue” in this Quarterly Report.

If we fail to comply with our reporting and payment obligations under ~~that program~~the Medicaid Drug Rebate Program or other governmental pricing programs ~~that~~in which we participate, ~~in,~~ we could be subject to additional reimbursement requirements, penalties, sanctions and fines, which could have a material adverse effect on our business, financial condition, results of operations and growth prospects.

Medicaid is a joint federal and state program administered by the states for low income and disabled beneficiaries. We ~~expect to~~ participate in and have certain price reporting obligations tounder the Medicaid Drug Rebate ~~program. Under~~Program, or the MDRP, as a condition of having covered outpatient drugs payable under Medicaid ~~Drug Rebate program,~~and, if ~~we successfully commercialize setmelanotide, we would be required~~applicable, under Medicare Part B. The MDRP requires us to pay a rebate to ~~each~~ state Medicaid ~~program~~programs every quarter for each unit of our covered outpatient drugs ~~that are~~ dispensed to Medicaid beneficiaries and paid for by a state Medicaid ~~program as a condition of having federal funds being made available to the states for our drugs under Medicaid and Medicare Part B. Those rebates are~~program. The rebate is based on pricing data that we ~~would have to~~must report on a monthly and quarterly basis to the Centers for Medicare ~~and~~& Medicaid Services, or CMS, the federal agency that administers the ~~Medicaid Drug Rebate program.~~MDRP and other governmental healthcare programs. These data include the average manufacturer price (AMP) for each drug and, in the case of innovator products, the best price, ~~for each drug~~ which in general represents the lowest price available from the manufacturer to ~~any entity~~certain entities in the U.S. in any pricing structure, calculated to include all sales and associated rebates, discounts and other price concessions. The Medicaid rebate consists of two components, the basic rebate and the additional rebate, which is triggered if the AMP for a drug increases faster than inflation. If we become aware that our MDRP government price reporting submission for a prior quarter was incorrect or has changed as a result

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of recalculation of the pricing data, we must resubmit the corrected data for up to three years after those data originally were due. If we fail to provide information timely or are found to have knowingly submitted false information to the government, we may be subject to civil monetary penalties and other sanctions, including termination from the MDRP. In the event that CMS terminates our rebate agreement pursuant to which we participate in the MDRP, no federal payments would be available under Medicaid or Medicare Part B for our covered outpatient drugs. Our failure to comply with ~~these~~our MDRP price reporting and rebate payment obligations ~~if we participate in the program~~ could negatively impact our financial results.

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~~Table~~The ACA made significant changes to the MDRP, as described under the risk factor “Current and future healthcare reform legislation or regulation may increase the difficulty and cost for us and any future collaborators to obtain marketing approval of ~~Contents~~and commercialize setmelanotide and may adversely affect the prices we, or they, may obtain and may have a negative impact on our business and results of operations,” above. In addition, in March 2021, the American Rescue Plan Act of 2021 was signed into law, which, among other things, eliminated the statutory cap on drug manufacturers’ MDRP rebate liability, effective January 1, 2024. Previously, under law enacted as part of the ACA, drug manufacturers’ MDRP rebate liability was capped at 100% of the AMP for a covered outpatient drug. Congress could enact additional legislation that further increases Medicaid drug rebates or other costs and charges associated with participating in the MDRP. Additional legislation or the issuance of regulations relating to the MDRP could have a material adverse effect on our results of operations.

The recently-enacted IRA imposes rebates under Medicare Part B and Medicare Part D that are triggered by price increases that outpace inflation (first due in 2023), as described under the risk factor “Current and future healthcare reform legislation or regulation may increase the difficulty and cost for us and any future collaborators to obtain marketing approval of and commercialize setmelanotide and may adversely affect the prices we, or they, may obtain and may have a negative impact on our business and results of operations,” above. The Medicare Part D rebate will be calculated on the basis of the AMP figures we report pursuant to the MDRP.

Federal law requires that any company that participates in the ~~Medicaid Drug Rebate program~~MDRP also participate in the Public Health Service’s 340B drug pricing program in order for federal funds to be available for the manufacturer’s drugs under Medicaid and, if applicable, Medicare Part B. ~~The~~We participate in the 340B program, which is administered by the Health Resources and Services Administration, or HRSA, and requires ~~participating manufacturers to agree~~us to charge statutorily defined covered entities no more than the 340B “ceiling price” for ~~the manufacturer’s~~our covered outpatient drugs. These 340B covered entities include a variety of community health clinics and other entities that receive health services grants from the Public Health Service, as well as hospitals that serve a disproportionate share of ~~low‑income~~low-income patients. The ACA expanded the list of covered entities to include certain ~~free‑standing~~free-standing cancer hospitals, critical access hospitals, rural referral centers and sole community hospitals, but exempts “orphan ~~drugs”~~drugs,” such as IMCIVREE, from the ceiling price requirements for these covered entities. The 340B ceiling price is calculated using a statutory formula based on the ~~average manufacturer price~~AMP and rebate amount for the covered outpatient drug as calculated under the ~~Medicaid Drug Rebate program,~~MDRP, and in general, products subject to Medicaid price reporting and rebate liability are also subject to the 340B ceiling price calculation and discount requirement. We must report 340B ceiling prices to HRSA on a quarterly basis, and HRSA publishes those prices to 340B covered entities. In addition, HRSA has finalized regulations regarding the calculation of the 340B ceiling price and the imposition of civil monetary penalties on manufacturers that knowingly and intentionally overcharge covered entities for 340B-eligible drugs. HRSA has also finalized an administrative dispute resolution process through which 340B covered entities may pursue claims against participating manufacturers for overcharges, and through which manufacturers may pursue claims against 340B covered entities for engaging in unlawful diversion or duplicate discounting of 340B drugs. Our failure to comply 340B program requirements could negatively impact our financial results. Any additional future changes to the definition of average manufacturer price and the Medicaid rebate amount under the ACA or other legislation or regulation could affect our 340B ceiling price calculations and also negatively impact our results of operations if we successfully commercialize setmelanotide. In addition, legislation may be introduced that, if passed, would further expand the 340B program to additional covered entities or would require participating manufacturers to agree to provide 340B discounted pricing on drugs used in an inpatient setting.financial results.

In order for IMCIVREE or any product candidates, if approved, to be ~~eligible to have our products that we successfully commercialize~~ paid for with federal funds under the Medicaid ~~program~~and Medicare Part B programs and purchased by certain federal agencies and grantees, we also ~~would have to~~ participate in the U.S. Department of Veterans Affairs, or VA, Federal Supply Schedule, or FSS, pricing program. As part of this program, we ~~would be obligated~~are required to make our products available for procurement on an FSS contract under which we must comply with standard government terms and conditions and charge a price that is no higher than the statutory Federal Ceiling Price, or FCP, to four federal agencies (VA, U.S. Department of Defense, or DOD, Public Health Service, and U.S. Coast Guard). The FCP is based on the Non-Federal Average Manufacturer Price, or Non-FAMP, which we must calculate and report to

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the VA on a quarterly and annual basis. Pursuant to applicable law, knowing provision of false information in connection with a Non-FAMP filing can subject a manufacturer to significant civil monetary penalties ~~can be applied if we participate in these programs~~for each item of false information. The FSS pricing and ~~if we are found to have knowingly submitted any false price information to the government or if we fail to submit the required price data on a timely basis. Such conduct~~contracting obligations also ~~could be grounds for CMS to terminate the Medicaid drug rebate agreement pursuant to which we would~~contain extensive disclosure and certification requirements.

We also participate in the ~~Medicaid drug rebate~~Tricare Retail Pharmacy program, under which we are required to pay quarterly rebates on utilization of innovator products that are dispensed through the Tricare Retail Pharmacy network to Tricare beneficiaries. The rebates are calculated as the difference between the annual Non-FAMP and FCP. We are required to list our innovator products on a Tricare Agreement in ~~which case federal payments may not be available under Medicaid~~order for ~~our covered outpatient drugs. We cannot assure you that our submissions will not be found by CMS or another government agency~~them to be ~~incomplete or incorrect.~~

eligible for DOD formulary inclusion. If we ~~obtain marketing approval for setmelanotide,~~overcharge the government in connection with our FSS contract or Tricare Agreement, whether due to a misstated FCP or otherwise, we ~~will be subject~~are required to ~~strict enforcement of post‑marketing requirements and we~~refund the difference to the government. Failure to make necessary disclosures and/or to identify contract overcharges could ~~be subject to substantial penalties, including withdrawal of our product from the market, if we fail to comply with all regulatory requirements.~~

~~If we obtain marketing approval for setmelanotide, we will be subject to continual requirements of and review by the FDA and equivalent competent authorities~~result in foreign jurisdictions. These requirements may include, but are not limited to, post‑approval studies to be conducted which may include carcinogenicity studies, a QT interval prolongation study in one form or another, and ongoing natural history studies with patient registries. Other requirements may also include, among other things, restrictions governing promotion of an approved product, submissions of safety and other post‑marketing information and reports, registration and listing requirements, cGMP requirements relating to manufacturing, quality control, quality assurance and corresponding maintenance of records and documents, and requirements regarding the distribution of samples to physicians and recordkeeping. The FDA and other federal and state agencies, including the Department of Justice and other equivalent competent authorities in foreign jurisdictions, closely regulate compliance with all requirements governing prescription drug products, including requirements pertaining to marketing and promotion of drugs in accordance with the provisions of the approved labeling and manufacturing of products in accordance with cGMP requirements. Violations of such requirements may lead to investigations alleging violations of the FDCA, and other statutes, includingallegations against us under the False Claims Act and other ~~federal~~laws and regulations. Unexpected refunds to the government, and responding to a government investigation or enforcement action, would be expensive and time-consuming, and could have a material adverse effect on our business, financial condition, results of operations and growth prospects.

Individual states continue to consider and have enacted legislation to limit the growth of healthcare costs, including the cost of prescription drugs and combination products. A number of states have either implemented or are considering implementation of drug price transparency legislation. Requirements of pharmaceutical manufacturers under such laws include advance notice of planned price increases, reporting price increase amounts and factors considered in taking such increases, wholesale acquisition cost information disclosure to prescribers, purchasers, and state ~~health care fraud~~agencies, and ~~abuse~~new product notice and reporting. Such legislation could limit the price or payment for certain drugs, and a number of states are authorized to impose civil monetary penalties or pursue other enforcement mechanisms against manufacturers who fail to comply with drug price transparency requirements, including the untimely, inaccurate, or incomplete reporting of drug pricing information.

Pricing and rebate calculations vary among products and programs. The calculations are complex and are often subject to interpretation by us, governmental or regulatory agencies, and the courts. CMS, the Department of Health & Human Services Office of Inspector General, and other governmental agencies have pursued manufacturers that were alleged to have failed to report these data to the government in a timely or accurate manner. Governmental agencies may also make changes in program interpretations, requirements or conditions of participation, some of which may have implications for amounts previously estimated or paid. We cannot assure you that any submissions we are required to make under the MDRP, the 340B program, the VA/FSS program, the Tricare Retail Pharmacy Program, and other governmental drug pricing programs will not be found to be incomplete or incorrect.

The FDA and other regulatory agencies actively enforce the laws ~~as well as state consumer protection laws.~~and regulations prohibiting the promotion of off-label uses.

In the United States, the FDA strictly regulates marketing, labeling, advertising and promotion of prescription drugs. These regulations include standards and restrictions for direct-to-consumer advertising, industry-sponsored scientific and educational activities, promotional activities involving the internet and off-label promotion. Any regulatory approval that the FDA grants is limited to those specific diseases and indications for which a product is deemed to be safe and effective by the FDA. For example, the FDA-approved label for IMCIVREE is limited to chronic weight management in adult and pediatric patients 6 years of age and older with monogenic or syndromic obesity due POMC, PCSK1, or LEPR, deficiency confirmed by FDA-approved test demonstrating variants in POMC, PCSK1, or LEPR genes that are interpreted as pathogenic, likely pathogenic, or of uncertain significance, and due to BBS. In addition to the FDA approval required for new formulations, any new indication for an approved product also requires FDA approval. If we are not able to obtain FDA approval for any desired future indications for our drugs and ~~other equivalent competent authorities in foreign jurisdictions strictly regulate the promotional claims that~~product candidates, our ability to effectively market and sell our products may be ~~made about prescription products, such as setmelanotide, if approved. In particular, a product~~reduced and our business may ~~not~~ be ~~promoted~~adversely affected.

While physicians in the United States may choose, and are generally permitted, to prescribe drugs for uses that are not described in the product’s labeling and for uses that differ from those tested in clinical trials and approved by the ~~FDA or such other~~ regulatory ~~agencies as reflected~~authorities, our ability to promote the products is narrowly limited to those indications that are specifically approved by the FDA. These “off-label” uses are common across medical specialties and may constitute an appropriate treatment for some patients in varied circumstances. For example, we are actively evaluating IMCIVREE in subjects with

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~~the product’s approved labeling. If we receive marketing approval for setmelanotide as a treatment for~~other forms of obesity caused by defects in the MCR4 pathway. We are not currently permitted to, and do not, market or promote setmelanotide for these uses.

Regulatory authorities in the United States generally do not regulate the behavior of physicians in their choice of treatments. Regulatory authorities do, however, restrict communications by pharmaceutical companies on the subject of off-label use. Although recent court decisions suggest that certain ~~genetic deficiencies affecting~~off-label promotional activities may be protected under the ~~MC4 pathway, physicians may nevertheless prescribe setmelanotide~~First Amendment, the scope of any such protection is unclear. If our promotional activities fail to ~~their patients in a manner that is inconsistent~~comply with the ~~approved labeling. If we are found to have promoted such off‑label uses,~~FDA’s regulations or guidelines, we may ~~become~~be subject to ~~significant liability. The federal government has levied large civil~~warnings from, or enforcement action by, these authorities. In addition, our failure to follow FDA rules and ~~criminal fines against companies for alleged improper~~guidelines relating to promotion and ~~has enjoined several companies~~advertising may cause the FDA to issue warning letters or untitled letters, bring an enforcement action against us, suspend or withdraw an approved product from ~~engaging~~the market, require a recall or institute fines or civil fines, or could result in ~~off‑label promotion. The FDA has also requested that companies enter into consent decrees~~disgorgement of money, operating restrictions, injunctions or ~~permanent injunctions under~~criminal prosecution, any of which ~~specified promotional conduct is changed or curtailed. Oversight~~could harm our reputation and management of promotional practices may require operational changes and additions, if setmelanotide is approved and commercialized. If we cannot successfully manage the promotion of setmelanotide, if approved, we could become subject to significant liability, which would materially adversely affect our ~~business and financial condition.~~business.

In the ~~European Union,~~EU, the advertising and promotion of our products are subject to EU laws governing promotion of medicinal products, interactions with physicians, misleading and comparative advertising and unfair commercial practices. In addition, other legislation adopted by individual EU member states may apply to the advertising and promotion of medicinal products. These laws require that promotional materials and advertising in relation to medicinal products comply with the product’s Summary of Product Characteristics, or SmPC, as approved by the competent authorities. The SmPC is the document that provides information to physicians concerning the safe and effective use of the medicinal product. It forms an intrinsic and integral part of the marketing authorization granted for the medicinal product. Promotion of a medicinal product that does not comply with the SmPC is considered to constitute ~~off‑~~off label promotion. The ~~off‑~~off label promotion of medicinal products is prohibited in the ~~European Union.~~EU. The applicable laws at ~~European Union~~EU level and in the individual EU member states also prohibit the ~~direct‑to‑~~direct to consumer advertising of ~~prescription‑~~prescription only medicinal products. Violations of the rules governing the promotion of medicinal products in the ~~European Union~~EU could be penalized by administrative measures, fines and imprisonment. These laws may further limit or restrict the advertising and promotion of our products to the general public and may also impose limitations on our promotional activities with health care professionals.

We may be subject to federal, state and ~~state~~foreign healthcare laws and ~~regulations.~~regulations, including fraud and abuse laws, health information privacy and security laws, and antitrust laws. If we are unable to comply or have not fully complied with such laws and regulations, we could face criminal sanctions, damages, substantial civil penalties, reputational harm and diminished profits and future earnings.

Healthcare providers, physicians and others will play a primary role in the recommendation and prescription of setmelanotide, and other product candidates, if approved. Our arrangements and interactions with healthcare professionals, ~~third‑party~~third-party payors, patients and others will expose us to broadly applicable fraud and abuse, ~~anti‑kickback,~~antikickback, false claims and other healthcare laws and regulations that may constrain the business or financial arrangements and relationships through which we market, sell and distribute setmelanotide, if we obtain marketing approval. The U.S. federal, state and ~~state~~foreign healthcare laws and regulations that may affect our ability to operate include, but are not limited to:

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The United States federal ~~Anti‑Kickback~~healthcare Anti-Kickback Statute, which prohibits, among other things, persons and entities from knowingly and willfully soliciting, offering, paying, or receiving remuneration, (anything of value), directly or indirectly, in cash or in kind, to induce or reward either the referral of an individual for, or the purchase, lease order or arranging for or recommending of the purchase, lease or order of any good or service for which payment may be made, in whole or in part, by federal healthcare programs such as Medicare and Medicaid. This statute has been interpreted to apply to arrangements between pharmaceutical companies on one hand and prescribers, purchasers, ~~and~~ formulary managers, and patients on the other. Liability under the ~~Anti‑Kickback~~Anti-Kickback Statute may be established without proving actual knowledge of the statute or specific intent to violate it. In addition, the government may assert that a claim including items or services resulting from a violation of the federal Anti‑Kickback Statute constitutes a false or fraudulent claim for purposes of the federal civil False Claims Act. Although there are a number of statutory ~~exemptions~~exceptions and regulatory safe harbors to the federal ~~Anti‑Kickback~~Anti-Kickback Statute protecting certain common business arrangements and activities from prosecution or regulatory sanctions, the ~~exemptions~~exceptions and safe harbors are drawn narrowly. Practices that involve remuneration to those who prescribe, purchase, or recommend pharmaceutical and biological products, including certain discounts, or engaging such individuals or patients as consultants, advisors, or speakers, may be subject to scrutiny if they do not fit

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squarely within an ~~exemption~~exception or safe harbor. Our practices may not in all cases meet all of the criteria for safe harbor protection from ~~anti‑kickback~~anti-kickback liability. Moreover, there are

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no safe harbors for many common practices, such as educational and research grants, charitable donations, product ~~support~~ and patient ~~assistance~~support programs.

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The federal civil False Claims Act prohibits individuals or entities from, among other things, knowingly presenting, or causing to be presented a false or fraudulent claim for payment of government funds, or knowingly making, using or causing to made or used a false record or statement material to an obligation to pay money to the government or knowingly concealing or knowingly and improperly avoiding, decreasing or concealing an obligation to pay money to the federal government. Actions under the False Claims Act may be brought by the Attorney General or as a qui tam action by a private individual in the name of the government. Such private individuals may share in amounts paid by the entity to the government in recovery or settlement. Many pharmaceutical manufacturers have been investigated and have reached substantial financial settlements with the federal government under the civil False Claims Act for a variety of alleged improper activities including causing false claims to be submitted as a result of the marketing of their products for unapproved and thus ~~non‑reimbursable~~non-reimbursable uses, inflating prices reported to private price publication services which are used to set drug payment rates under government healthcare programs, and other interactions with prescribers and other customers including those that may have affected their billing or coding practices and submission to the federal government. The government may assert that a claim including items or services resulting from a violation of the federal ~~Anti‑Kickback~~Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal civil False Claims Act. False Claims Act liability is potentially significant in the healthcare industry because the statute provides for treble damages and significant mandatory penalties per false or fraudulent claim or statement for violations. Because of the potential for large monetary exposure, healthcare and pharmaceutical companies often resolve allegations without admissions of liability for significant and material amounts to avoid the uncertainty of treble damages and per claim penalties that may be awarded in litigation proceedings. Settlements may require companies to enter into corporate integrity agreements with the government, which may impose substantial costs on companies to ensure compliance. Pharmaceutical and other healthcare companies also are subject to other federal false claims laws, including, among others, federal criminal healthcare fraud and false statement statutes that extend to ~~non‑government~~non-government health benefit programs.

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The federal Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic and Clinical Health Act, or HIPAA, imposes criminal and civil liability for executing a scheme to defraud any healthcare benefit program, including private third-party payors, and also imposes obligations, with respect to safeguarding the privacy, security and transmission of individually identifiable health information.

·

Penalties for failure to comply with a requirement of HIPAA vary significantly and include civil monetary penalties as well as criminal penalties for knowingly obtaining or disclosing individually identifiable health information in violation of HIPAA. The criminal penalties increase if the ~~federal~~wrongful conduct involves false ~~statements statute~~pretenses or the intent to sell, transfer or use identifiable health information for commercial advantage, personal gain or malicious harm. HIPAA also prohibits knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement or representation, or making or using any false writing or document knowing the same to contain any materially false, fictitious or fraudulent statement or entry in connection with the delivery of or payment for healthcare benefits, items or services.

·

~~Numerous~~ Similar to the federal and state laws and regulations that address privacy and data security, including state data breach notification laws, state health information privacy laws, and federal and state consumer protection laws (e.g., Section 5healthcare Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the ~~FTC Act), govern the collection, use, disclosure and protection of health‑related and other personal information.~~

statute or specific intent to violate it to have committed a violation.

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The ~~federal transparency requirement known as the~~ federal Physician Payments Sunshine Act, ~~being~~ implemented as the Open Payments Program, requires certain manufacturers of drugs, devices, biologics and medical supplies to report payments and other transfers of value to physicians for which payment is available under Medicare, Medicaid or the

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Children’s Health Insurance Program (with certain exceptions) to report annually to the United States Department of Health and Human Services, Centers for Medicare and Medicaid Services, information related to physicians (defined to include doctors, dentists, optometrists, podiatrists, and chiropractors), certain non-physician practitioners (physician assistants, nurse practitioners, clinical nurse specialists, certified nurse anesthetists, anesthesiology assistants and certified nurse-midwives) and teaching hospitals, as well as ownership and ~~investments~~investment interests held by physicians and their immediate family members. ~~Pharmaceutical and biological manufacturers with products for which payment is available under Medicare, Medicaid or the State Children’s Health Insurance Program are required to~~Manufacturers must submit ~~a report to the Centers for Medicare and Medicaid Services within the U.S. Department of Health and Human Services~~reports on or before the 90th day of each calendar year disclosing reportable payments made in the previous calendar year.

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Analogous state laws and regulations, such as state ~~anti‑kickback~~anti-kickback and false claims laws, which may apply to items or services reimbursed under Medicaid and other state programs or, in several states, regardless of the ~~payer.~~payer, including private insurers. Some state laws ~~also~~ require pharmaceutical companies to report expenses relating to the marketing and promotion of pharmaceutical products and to report gifts and payments to ~~certain~~individual health care providers in those states. Some of these states also prohibit certain ~~marketing‑related~~marketing-related activities including the provision of gifts, meals, or other items to certain health care providers. Some states restrict the ability of manufacturers to offer co-pay support to patients for certain prescription drugs. Some states require the posting of information relating to clinical studies and their outcomes. Other states and cities require identification or licensing of sales representatives. In addition, ~~California, Connecticut, Nevada, and Massachusetts~~several states require pharmaceutical companies to implement compliance programs or marketing codes of conduct.

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Analogous foreign laws and regulations, including restrictions imposed on the promotion and marketing of medicinal products in the EU member states and other countries, restrictions on interactions with healthcare professionals and requirements for public disclosure of payments made to physicians. Laws (including those governing promotion, marketing and anti-kickback provisions), industry regulations and professional codes of conduct often are strictly enforced. Even in those countries where we may decide not to directly promote or market our products, inappropriate activity by our international distribution partners could have implications for us.

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Ensuring that our business arrangements and interactions with healthcare professionals, ~~third‑party~~third-party payors, patients and others comply with applicable healthcare laws and regulations will require substantial resources. Various state, federal and foreign regulatory and enforcement agencies continue actively to investigate violations of health care laws and regulations, and the United States Congress continues to strengthen the arsenal of enforcement tools.

It is possible that governmental authorities will conclude that our business practices do not comply with current or future statutes, regulations or case law involving applicable antitrust, fraud and abuse, privacy, or other healthcare laws and regulations. If our operations, including our engagements with healthcare professionals, researchers and patients, or our disease awareness and/or patient identification initiatives including genetic testing programs, or anticipated activities to be conducted by our ~~sales and marketing team,~~field teams, were found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to costly investigations, significant civil, criminal and administrative monetary penalties, imprisonment, damages, fines, ~~and~~disgorgement, exclusion from government funded healthcare programs, such as Medicare and Medicaid, contractual damages, diminished profits and future earnings, and the curtailment or restructuring of our ~~operation,~~operations, any of which could substantially disrupt our ~~operations.~~operations or financial results. Although compliance programs can mitigate the risk of investigation and prosecution for violations of these laws, the risks cannot be entirely eliminated. Any action against us for violation of these laws or regulations, even if we successfully defend against it, could cause us to incur significant legal expenses and generate negative publicity, which could harm our financial condition and divert our management’s attention from the operation of our business.

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Our employees may engage in misconduct or other improper activities, including violating applicable regulatory standards and requirements or engaging in insider trading, which could significantly harm our business.

We are exposed to the risk of employee fraud or other misconduct. Misconduct by employees could include intentional failures to comply with the regulations of the FDA and applicable ~~non‑~~non U.S. regulators, provide accurate information to the FDA and applicable ~~non‑~~non U.S. regulators, comply with healthcare fraud and abuse laws and regulations in the United States and abroad, report financial information or data accurately or disclose unauthorized activities to us. In particular, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, misconduct, kickbacks, ~~self‑dealing~~self-dealing and other abusive practices. These laws and regulations restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements. Employee misconduct could also involve the improper use of, including trading on, information obtained in the course of clinical trials, which could result in regulatory sanctions and serious harm to our reputation. It is not always possible to identify and deter employee misconduct, and any precautions we take to detect and prevent this activity may be ineffective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with these laws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of significant fines or other sanctions. Some of these laws and related risks are described under the risk factor “We may be subject to federal and state healthcare laws and regulations. If we are unable to comply or have not fully complied with such laws and regulations, we could face criminal sanctions, damages, substantial civil penalties, reputational harm and diminished profits and future earnings” of this Quarterly Report.

~~Our~~Actual or perceived failure to comply with data protection, privacy and security laws, ~~and~~ regulations could lead to government enforcement actions and significant penalties against us, and adversely impact our operating results.

WeThe global data protection landscape is rapidly evolving, and we are or may become subject to ~~U.S. data protection~~numerous state, federal and foreign laws, requirements and regulations ~~(i.e.,~~governing the collection, use, disclosure, retention, and security of personal information. Implementation standards and enforcement practices are likely to remain uncertain for the foreseeable future, and we cannot yet determine the impact future laws, regulations, standards, or perception of their requirements may have on our business. This evolution may create uncertainty in our business, affect our ability to operate in certain jurisdictions or to collect, store, transfer use and share personal information, necessitate the acceptance of more onerous obligations in our contracts, result in liability or impose additional costs on us. The cost of compliance with these laws, regulations ~~that address privacy~~ and ~~data security) at both~~standards is high and is likely to increase in the future. Any failure or perceived failure by us to comply with federal, state or foreign laws or regulations, our internal policies and ~~state levels. The legislative~~procedures or our contracts governing our processing of personal information could result in negative publicity, government investigations and ~~regulatory landscape for data protection continues~~enforcement actions, claims by third parties and damage to ~~evolve,~~our reputation, any of which could have a material adverse effect on our financial performance, business and ~~in recent years there has been an increasing focus on privacy and data security issues. Numerous~~operating results.

In the United States, numerous federal and state laws and regulations, including HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009 and regulations implemented thereunder, collectively HIPAA, state data breach notification laws, state health information privacy laws and federal and state consumer protection laws, ~~(e.g.,~~including Section 5 of the ~~FTC Act),~~Federal Trade Commission Act, which govern the collection, use, ~~and~~ disclosure and protection of ~~health‑related~~health-related and other personal ~~information. Failure~~information, may apply to ~~comply with data protection laws~~our operations and ~~regulations could result in government enforcement actions~~the operations of current and create liability for us, which could include civil and/or criminal penalties, private litigation and/or adverse publicity that could negatively affect our operating results and business. In addition, wefuture collaborators. We may obtain health information from third parties, such as research institutions with which we collaborate, that are subject to privacy and security requirements under HIPAA. Although we are not directly subject to HIPAA, other than potentially with respect to providing certain employee benefits, we could be subject to criminal penalties if we knowingly obtain or disclose individually identifiable health information maintained by a HIPAA covered entity in a manner that is not authorized or permitted by HIPAA. In addition, state laws govern the privacy and security of health, research and genetic information in specified circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts. Further, we may also be subject to other state laws governing the privacy, processing and protection of personal information. For example, the California Consumer Privacy Act of 2018, or CCPA, went into effect on January 1, 2020. The CCPA creates individual privacy rights for California consumers and increases the privacy and security obligations of entities handling certain personal information. The CCPA provides for civil penalties for violations, as well as a private right of action for data breaches that

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has increased the likelihood, and risks associated with data breach litigation. Further, the California Privacy Rights Act, or CPRA, generally went into effect on January 1, 2023, and significantly amends the CCPA. It imposes additional data protection obligations on covered businesses, including additional consumer rights processes, limitations on data uses, new audit requirements for higher risk data, and opt outs for certain uses of sensitive data. It also creates a new California data protection agency authorized to issue substantive regulations and could result in increased privacy and information security enforcement. Additional compliance investment and potential business process changes may also be required. Similar laws have passed in Virginia, Utah, Connecticut and Colorado, and have been proposed in other states ~~Switzerland~~ and at the federal level, reflecting a trend toward more stringent privacy legislation in the United States. The enactment of such laws could have potentially conflicting requirements that would make compliance challenging. In addition, some of our research activities involve minors, which may be subject to additional laws and can require specialized consent processes, privacy protections, and compliance procedures. In the event that we are subject to or affected by HIPAA, the CCPA, the CPRA or other ~~countries have also adopted~~domestic privacy and data protection laws, any liability from failure to comply with the requirements of these laws could adversely affect our financial condition.

Furthermore, the Federal Trade Commission, or FTC, and ~~regulations, which impose significant compliance obligations. In~~many state Attorneys General continue to enforce federal and state consumer protection laws against companies for online collection, use, dissemination and security practices that appear to be unfair or deceptive. For example, according to the ~~European Union,~~FTC, failing to take appropriate steps to keep consumers’ personal information secure can constitute unfair acts or practices in or affecting commerce in violation of Section 5(a) of the Federal Trade Commission Act. The FTC expects a company’s data security measures to be reasonable and appropriate in light of the sensitivity and volume of consumer information it holds, the size and complexity of its business, and the cost of available tools to improve security and reduce vulnerabilities.

Our operations abroad may also be subject to increased scrutiny or attention from data protection authorities. For example, in Europe, the collection and use of personal data, including health and genetic data, is governed by the provisions of the ~~EU Data Protection Directive.~~GDPR. The ~~European Union Data Protection Directive~~GDPR became effective on May 25, 2018, and imposes strict requirements for the ~~national implementing legislation~~processing of the ~~EU member states impose strict obligations and restrictions on~~personal data of individuals within the ~~ability to collect, analyze and transfer personal data,~~European Economic Area, or EEA, or in the context of our activities in the EEA, including health data from clinical trials and ~~adverse event~~AE reporting. In

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particular, these requirements include certain obligations ~~and restrictions concern~~concerning the consent of the individuals to whom the personal data relates, the information provided to the individuals, ~~notification~~the transfer of personal data ~~processing obligations to~~out of the ~~competent national data protection authorities~~EEA, security breach notifications, and ~~the~~ security and confidentiality of the personal ~~data.~~data, and violations of these requirements could result in substantial fines, up to the greater of 20 million Euros or 4% of total global annual turnover. In addition to the foregoing, a breach of the GDPR could result in regulatory investigations, reputational damage, orders to cease/change our processing of our data, enforcement notices, and/or assessment notices for a compulsory audit. We may also face civil claims including representative actions and other class action type litigation (where individuals have suffered harm), potentially amounting to significant compensation or damages liabilities, as well as associated costs, diversion of internal resources, and reputational harm. Data protection authorities from the different EU and EEA member states may also interpret the ~~EU Data Protection Directive~~GDPR and national laws differently and impose additional requirements, which ~~add~~adds to the complexity of processing personal data in the ~~European Union.~~EU and the EEA.

~~Guidance on implementation~~Additionally, from January 1, 2021, we have had to comply with the GDPR and ~~compliance practices are often updated~~also the United Kingdom GDPR, or ~~otherwise revised. For example,~~UK GDPR, which, together with the EUamended United Kingdom Data Protection ~~Directive prohibits~~Act 2018, retains the ~~transfer~~GDPR in United Kingdom national law following Brexit. The UK GDPR mirrors the fines under the GDPR, e.g., fines up to the greater of €20 million (£17.5 million) or 4% of global turnover.

Among other requirements, the GDPR and UK GDPR also regulate transfers of personal data subject to the GDPR or UK GDPR to third countries ~~outside of the European Union,~~that have not been found to provide adequate protection to such personal data, including the United ~~States, that are not considered by the European Commission to provide an adequate level of data protection.~~

~~The judgment by~~States. Case law from the Court of Justice of the European Union, ~~in Case C‑362/14 Maximillian Schrems v. Data Protection Commissioner,~~ or the ~~Schrems case, held~~CJEU, states that reliance on the ~~Safe Harbor Framework, which was relied upon~~standard contractual clauses - a standard form of contract approved by ~~many~~the EC as an adequate personal data transfer mechanism - alone may not necessarily be sufficient in all circumstances and that transfers must be assessed on a case-by-case basis. On October 7, 2022, President Biden signed an Executive Order on ‘Enhancing Safeguards for United States ~~entities as a basis for transfer of personal~~Intelligence Activities’ which introduced new redress mechanisms and binding safeguards to address the concerns raised by the CJEU in relation to data transfers from the ~~European Union~~EEA to the United States ~~was invalid. United States~~and which formed the basis of the new EU-US Data Privacy Framework (“DPF”), as released on December 13, 2022. The DPF also introduced a new redress mechanism for EU and UK citizens which addresses a key concern in the previous CJEU judgments and may mean transfers under standard contractual clauses are less likely to be challenged in the future. The EC adopted its Adequacy Decision in relation

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to the DPF on July 10, 2023, rendering the DPF effective as a GDPR transfer mechanism to U.S. entities ~~therefore, had only~~self-certified under the ~~possibility~~DPF. On October 12, 2023, the UK Extension to the DPF came into effect (as approved by the UK Government), as a UK GDPR data transfer mechanism to U.S. entities self-certified under the UK Extension to the DPF. We currently rely on the ~~alternate procedures for such data transfer provided in~~EU standard contractual clauses and the UK Addendum to the EU ~~Data Protection Directive.~~

On February 29, 2016, however, the European Commission announced an agreement with the United States Department of Commerce, or the DOC, to replace the invalidated Safe Harbor framework with a new “Privacy Shield”. On July 12, 2016, the European Commission adopted a decision on the adequacy of the protection provided by the Privacy Shield. The Privacy Shield is intended to address the requirements set out by the Court of Justice of the European Union in the Schrems case. The Privacy Shield imposes more stringent obligations on companies, provides stronger monitoring and enforcement by the DOC and the Federal Trade Commission, and makes commitments on the part of public authorities regarding access to information. United States entities have been able to certify to the DOC their compliance with the privacy principles of the Privacy Shield since August 1, 2016 and rely on the Privacy Shield certification to transfer of personal data from the European Union to the United States.

In September 2016, the Irish privacy advocacy group Digital Rights Ireland brought an action for annulment of the European Commission decision on the adequacy of the Privacy Shield before the Court of Justice of the EU, Case T‑670/16. In October 2016, a further action for annulment was brought by three French digital rights advocacy group, La Quadrature du Net, French Data Network and the Fédération FDN, Case T‑738/16. Both cases are currently pending before the European Court of Justice. If the Court of Justice of the European Union invalidates the Privacy Shield, it will no longer be possible to rely on the Privacy Shield certificationstandard contractual clauses as relevant to transfer personal data ~~from~~outside the ~~European Union~~EEA and the UK, including to ~~entities in the United States. Adherence to the Privacy Shield is not, however, mandatory. Entities based in~~ the United States, ~~are permitted~~with respect to ~~rely either on their adherence~~both intragroup and third-party transfers. Following a period of legal complexity and uncertainty regarding international personal data transfers, particularly to the ~~Privacy Shield or on~~United States, we expect the ~~other authorized means~~regulatory guidance and ~~procedures~~enforcement landscape to ~~transfer personal data provided by the EU Data Protection Directive.~~

In addition, the EU Data Protection Regulation entered into force on May 24, 2016 and will apply from May 25, 2018. The EU Data Protection Regulation will introduce new data protection requirements in the European Union and substantial fines for breaches of the data protection rules. The EU Data Protection Regulation will increase our responsibility and liabilitycontinue to develop, in relation to ~~personal data that~~transfers to the United States and elsewhere. In particular, we ~~process,~~expect the DPF Adequacy Decision to be challenged and international transfers to the United States and to other jurisdictions more generally to continue to be subject to enhanced scrutiny by regulators. As a result, we may have to make certain operational changes and implement revised standard contractual clauses and other relevant documentation for existing data transfers arrangements within required time frames.

Although we work to comply with applicable laws, regulations and standards, our contractual obligations and other legal obligations, these requirements are evolving and may be ~~required~~modified, interpreted and applied in an inconsistent manner from one jurisdiction to ~~put in place additional mechanisms to ensure compliance~~another, and may conflict with ~~the new data protection rules.~~

one another or other legal obligations with which we must comply. Our failure to comply with our obligations under the GDPR or UK GDPR, including any failure to adopt measures to ensure that we can continue to conduct the data processing activities that we initiated in the EU before the GDPR entered into application, the UK GDPR, and other countries’ privacy or data security-related laws could adversely impact our ability to use the data generated in our studies. And any actual or perceived failure to comply with these data protection laws or ~~changes in the way in which these laws are implemented,~~adequately address privacy and security concerns could lead to government enforcement actions and significant penalties against us, and adversely impact our operating results.

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Our future growth depends, in part, on our ability to continue to penetrate foreign markets, where we will be subject to additional regulatory burdens and other risks and uncertainties.

Our future profitability will depend, in part, on our ability to continue to commercialize setmelanotide and our other product candidates in foreign markets for which we intend to rely on collaborations with third parties. IfAs we continue to commercialize setmelanotide in foreign markets, we will be subject to additional risks and uncertainties, including:

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our customers’ ability to obtain reimbursement for setmelanotide in foreign markets;

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our inability to directly control commercial activities because we are relying on third parties;

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the burden of complying with complex and changing foreign regulatory, tax, accounting and legal requirements;

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different medical practices and customs in foreign countries affecting acceptance in the marketplace;

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import or export licensing requirements;

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longer accounts receivable collection times;

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longer lead times for shipping;

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language barriers for technical training;

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reduced protection of intellectual property rights in some foreign countries;

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foreign currency exchange rate fluctuations; and

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the interpretation of contractual provisions governed by foreign laws in the event of a contract dispute.

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Foreign sales of setmelanotide could also be adversely affected by the imposition of governmental controls, political and economic instability, trade restrictions and changes in tariffs.

Laws and regulations governing any international operations we may have in the future may preclude us from developing, manufacturing and selling setmelanotide or our other product candidates outside of the United States and require us to develop and implement costly compliance programs.

If we continue to expand our operations outside of the United States, we must dedicate additional resources to comply with numerous laws and regulations in each jurisdiction in which we plan to operate. The Foreign Corrupt Practices Act of 1977, or the FCPA, prohibits any U.S. individual or business from paying, offering, authorizing payment or offering anything of value, directly or indirectly, to any foreign official, political party or candidate for the purpose of influencing any act or decision of such third party in order to assist the individual or business in obtaining or retaining business. The FCPA also obligates companies whose securities are listed in the United States to comply with certain accounting provisions requiring the company to maintain books and records that accurately and fairly reflect all transactions of the company, including international subsidiaries, and to devise and maintain an adequate system of internal accounting controls for international operations.

Compliance with the FCPA is expensive and difficult, particularly in countries in which corruption is a recognized problem. In addition, the FCPA presents particular challenges in the pharmaceutical industry, because, in many countries, hospitals are operated by the government, and doctors and other hospital employees are considered foreign officials. Certain payments to hospitals in connection with clinical trials and other work have been deemed to be improper payments to government officials and have led to FCPA enforcement actions.

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Various laws, regulations and executive orders also restrict the use and dissemination outside of the United States, or the sharing with certain ~~non‑U.S.~~non-U.S. nationals, of information classified for national security purposes, as well as certain products and technical data relating to those products. If we expand our presence outside of the United States, it will require us to dedicate additional resources to comply with these laws, and these laws may preclude us from developing, manufacturing or selling certain product candidates and products outside of the United States, which could limit our growth potential and increase our development costs.

The failure to comply with laws governing international business practices may result in substantial civil and criminal penalties and suspension or debarment from government contracting. The Securities and Exchange Commission, or SEC, also may suspend or bar issuers from trading securities on U.S. exchanges for violations of the FCPA’s accounting provisions.

The results of the United Kingdom’s ~~referendum on withdrawal~~departure from the ~~European Union~~EU may have a negative effect on global economic conditions, financial markets and our business.

~~On March 29, 2017,~~Following a national referendum and enactment of legislation by the ~~Government~~government of the ~~United Kingdom initiated~~UK, the ~~formal procedure of withdrawal~~UK formally withdrew from the ~~European Union. The procedure involves~~EU on January 31, 2020.

Since the end of the Brexit transition period on January 1, 2021, Great Britain (England, Scotland and Wales) has not been directly subject to EU law and has operated under a ~~two‑year negotiation period~~separate regulatory regime to the EU. It is currently unclear to what extent the UK Government will seek to align its regulations with the EU. EU law which has been transposed into UK law through secondary legislation still remains applicable in ~~which~~Great Britain, however, new EU legislation such as the ~~United Kingdom~~CTR is not applicable in Great Britain post-Brexit. While the UK has indicated a general intention that new laws regarding the development, manufacture and commercialization of medicinal products in the ~~European Union must conclude an agreement setting out~~UK will align closely with EU law, there remain limited detailed proposals for the future regulation of medicinal products.

Under the terms of the ~~United Kingdom’s withdrawal~~Ireland/Northern Ireland Protocol, EU law still generally applies to Northern Ireland. However, on February 27, 2023 the UK Government and the ~~arrangements~~EC reached a political agreement in the “Windsor Framework” to address discrepancies in the Protocol’s operation. This new framework fundamentally changes the existing system under the Northern Ireland Protocol, including with respect to the regulation of medicinal products in the UK. In particular, the MHRA will be responsible for approving all medicinal products destined for the ~~United Kingdom’s future relationship with~~UK market (i.e., Great

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Britain and Northern Ireland), and the ~~European Union. This negotiation period could~~EMA will no longer have any role in approving medicinal products destined for Northern Ireland. A single UK-wide MA will be ~~extended~~granted by the MHRA for all medicinal products to be sold in the UK, enabling products to be sold in a ~~unanimous decision~~single pack and under a single authorization throughout the UK. The Windsor Framework was approved by the EU-UK Joint Committee on March 24, 2023, so the UK government and the EU will enact legislative measures to bring it into law. On June 9, 2023, the MHRA announced that the medicines aspects of the ~~European Council,~~Windsor Framework will apply from January 1, 2025.

Whilst the EU-UK Trade and Cooperation Agreement (TCA) includes the mutual recognition of GMP inspections of manufacturing facilities for medicinal products and GMP documents issued, it does not contain wholesale mutual recognition of UK and EU pharmaceutical regulations and product standards. There may be divergent local requirements in ~~agreement with~~Great Britain from the ~~United Kingdom.~~

~~The referendum has created significant uncertainty concerning~~EU in the future, ~~relationship between~~which may impact clinical and development activities that occur in the ~~United Kingdom~~UK. Similarly, clinical trial submissions in the UK will not be able to be bundled with those of EU Member States within the EMA Clinical Trial Information System, or CTIS. Any divergences may increase the cost and complexity of running our business, including with respect to the ~~European Union. This includes~~conduct of clinical trials.

Since a significant proportion of the ~~laws~~regulatory framework in the UK applicable to our business and our product candidates is derived from EU directives and regulations, ~~that will apply as~~ the ~~United Kingdom determines which European Union laws~~withdrawal could continue to ~~replace or replicate~~impact the regulatory regime with respect to the development, manufacture, importation, approval and commercialization of our product candidates in the ~~event of a withdrawal. From a regulatory perspective,~~UK. Great Britain is no longer covered by the ~~United Kingdom’s withdrawal could result in significant complexity and risks. A basic requirement related to~~EU’s procedures for the grant of ~~a marketing authorization for a medicinal product in the European Union~~MA (Northern Ireland is the requirement that the applicant is established in the European Union. Following withdrawal of the United Kingdom from the European Union, marketing authorizations previously granted to applicants established in the United Kingdom may no longer be valid. Moreover, depending upon the exact terms of the United Kingdom’s withdrawal, there is an arguable risk that the scope of a marketing authorization for a medicinal product grantedcovered by the ~~European Commission pursuant to~~centralized authorization procedure and can be covered under the ~~centralized procedure would not, in the future, include the United Kingdom. In these circumstances, an authorization granted by the United Kingdom’s competent authorities would always be~~decentralized or mutual recognition procedures). A separate MA is required to ~~place medicinal products~~market drugs in Great Britain. Such changes could increase our costs and otherwise adversely affect our business. Any delay in obtaining, or an inability to obtain regulatory approvals, as a result of Brexit or otherwise, may prevent us from commercializing our product candidates in Great Britain and restrict our ability to generate revenue and achieve or sustain profitability. If any of these outcomes occur, we may be forced to restrict or delay efforts to seek regulatory approval in Great Britain for our product candidates, which could significantly and materially harm our business.

Any further changes in relation to international trade, tariff and import/export regulations as a result of Brexit or otherwise may impose unexpected duty costs or other non-tariff barriers on ~~the United Kingdom market.~~

In addition, the laws and regulations that will apply after the United Kingdom withdraws from the European Union may have implications for manufacturing sites that hold certification issued by the United Kingdom competent authorities. Our capability to rely on these manufacturing sites for products intended for the European Union market would also depend upon the exact terms of the United Kingdom’s withdrawal.

~~The United Kingdom referendum has also given rise to calls for the governments of other EU member states to consider withdrawal from the European Union.~~us. These developments, or the perception that ~~they~~any of them could occur, ~~have had~~may reduce global trade and, ~~may continue to have a material adverse effect on global economic conditions~~in particular, trade between the impacted nations and the ~~stability of global~~UK.

It is unclear what financial, ~~markets. They may significantly reduce global market liquidity~~regulatory and ~~restrict~~legal implications the ~~ability of key market participants to operate in certain financial markets.~~

~~The efforts~~withdrawal of the ~~Trump administration to pursue regulatory reform may limit~~UK from the ~~FDA’s ability to engage in oversight and implementation activities~~EU will have in the ~~normal course,~~long-term and ~~that could negatively impact our business.~~

~~The Trump administration has taken several executive actions, including~~how such withdrawal will affect us, and the issuance of a number of executive orders, that could impose significant burdens on, or otherwise materially delay, the FDA’s ability to engage in routine regulatory and oversight activities such as implementing statutes through rulemaking, issuance of guidance, and review and approval of marketing applications. On January 30, 2017, President Trump issued an executive order, applicable to all executive agencies, including the FDA, that requires that for each notice of proposed rulemaking or final regulation to be issued in fiscal year 2017, the agency shall identify at least two existing regulations to be repealed, unless prohibited by law. These requirements are referred to as the “two‑for‑one” provisions. This executive order includes a budget neutrality

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provision that requires the total incremental cost of all new regulations in the 2017 fiscal year, including repealed regulations, to be no greater than zero, except in limited circumstances. For fiscal years 2018 and beyond, the executive order requires agencies to identify regulations to offset any incremental cost of a new regulation. In interim guidance issued by the Office of Information and Regulatory Affairs within the Office of Management and Budget, or OMB, on February 2, 2017, the administration indicates that the “two‑for‑one” provisions may apply not only to agency regulations, but also to significant agency guidance documents. It is difficult to predict how these requirements will be implemented, and thefull extent to which our business could be adversely affected.

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Risks Related to the Acquisition of Xinvento B.V.

We may fail to realize the anticipated benefits of our acquisition of Xinvento B.V., those benefits may take longer to realize than expected, and we may encounter significant integration difficulties.

In February 2023, in order to expand our pipeline and build on our focus on rare endocrinology diseases, we acquired Xinvento B.V., a Netherlands-based biotech company focused on developing therapies for congenital hyperinsulinism (CHI). We expect that the integration process will be complex, costly and time-consuming. As a result, we are devoting, and will continue to be required to devote, significant management attention and resources to integrating Xinvento B.V. into our business. The integration process may be disruptive to our business and the expected benefits may not be achieved within the anticipated time frame, or at all. The Xinvento B.V. intellectual property may not have the scientific value and commercial potential which we envision. We may not be able to integrate the two businesses successfully, and we could assume unknown or contingent liabilities. It is possible that the integration process could result in the diversion of our management’s attention, the disruption or interruption of, or the loss of momentum in, our ongoing business or inconsistencies in standards, controls, procedures and policies, any of which could adversely affect our ability to maintain relationships with third parties or the ability to achieve the anticipated benefits of the acquisition of Xinvento B.V., or could otherwise adversely affect our business and financial results.

We do not anticipate generating revenue from any Xinvento B.V. therapeutic candidate or technology sales for many years.

We do not expect to derive revenue from the sale of any Xinvento B.V. therapeutic candidate or technology for many years, if at all, and there can be no assurance that regulatory approvals will be received or if received that they will impact the FDA’s ability to exercise its regulatory authority. If these executive actions impose constraints on FDA’s ability to engage in oversight and implementation activities in the normal course, our business may be ~~negatively impacted.~~received when anticipated.

Risks Related to Employee Matters and Managing Growth

Our future success depends on our ability to retain our key employees and consultants, and to attract, retain and motivate qualified personnel.

We are highly dependent on ~~Keith M. Gottesdiener, M.D.,~~ our Chief Executive Officer and President, Hunter Smith, our Chief Financial Officer and Treasurer, Nithya Desikan, our Chief Commercial Officer, Lex H.T. Van der Ploeg, Ph.D., our Chief Scientific Officer, and Fred T. Fiedorek, M.D., our Chief Medical Officer.executive leadership team. We have employment agreements with these individuals ~~that became effective upon consummation of our IPO,~~ but any individual may terminate his or her employment with us at any time. The loss of their services might impede the achievement of our research, development and commercialization objectives. We also do not have any ~~key‑person~~key-person life insurance on any of these key employees. We rely on consultants and advisors, including scientific and clinical advisors, to assist us in formulating our development and commercialization strategy. Our consultants and advisors may be employed by employers other than us and may have commitments under consulting or advisory contracts with other entities that may limit their availability to us and may not be subject to ~~non‑compete~~non-compete agreements. Recruiting and retaining qualified scientific personnel and sales and marketing personnel will also be critical to our success. We may not be able to attract and retain these personnel on acceptable terms given the competition among numerous pharmaceutical and biotechnology companies for similar personnel. We also experience competition for the hiring of scientific personnel from universities and research institutions. Failure to succeed in clinical trials may make it more challenging to recruit and retain qualified scientific personnel.

We will need to develop and expand our ~~company,~~Company, and we may encounter difficulties in managing this development and expansion, which could disrupt our operations.

~~As a public company, we~~We expect to increase our number of employees and the scope of our operations. In particular, we will need to continue our transition from a research and development company to a commercial company. To manage our anticipated development and expansion, we must continue to implement and improve our managerial, operational and financial systems, expand our facilities and continue to recruit and train additional qualified personnel. Also, our management may need to divert a disproportionate amount of its attention away from their ~~day‑to‑day~~day-to-day activities and devote a substantial amount of time to managing these development activities. Due to our limited resources, we may not be able to effectively manage the expansion of our operations or recruit and train additional qualified personnel. This may result in weaknesses in our infrastructure, and give rise to operational mistakes, loss of business and commercial opportunities, loss of

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employees and reduced productivity among remaining employees. ~~The physical expansion of our operations may lead to significant costs and may divert financial resources from other projects, such as the development of setmelanotide.~~ If our management is unable to effectively manage our expected development and expansion, our expenses may increase more than expected, our ability to generate or increase our revenue could be reduced and we may not be able to implement our business strategy.

The physical expansion of our operations may lead to significant costs and may divert financial resources from other projects, such as the development of setmelanotide and our other product candidates. Many of our suppliers and collaborative and clinical trial relationships are located outside the United States, and we have and may continue to hire employees located outside of the United States. Accordingly, our business has and may continue to be subject to economic, political, regulatory and other risks associated with international operations, such as compliance with tax, employment, immigration and labor laws for employees living or traveling abroad, workforce uncertainty in countries where labor unrest is more common than in the United States, as well as difficulties associated with staffing and managing international operations, including differing labor relations. Any of these factors could materially affect our business, financial condition and results of operations. Our future financial performance and our ability to commercialize ~~setmelanotide, if~~our approved products and compete effectively will depend, in part, on our ability to effectively manage the future development and expansion of our ~~company.~~Company.

~~In order to satisfy our obligations as a public company, we will need to hire additional qualified accounting and financial personnel with appropriate public company experience.~~

As a newly public company, we must establish and maintain effective disclosure and financial controls. We will need to continue to hire additional accounting and financial personnel with appropriate public company experience and

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technical accounting knowledge, and it may be difficult to recruit and retain such personnel. Even if we are able to hire appropriate personnel, our existing operating expenses and operations will be impacted by the direct costs of their employment and the indirect consequences related to the diversion of management resources from product development efforts.

Our ~~internal computer~~information technology systems, or those of our ~~third‑party~~third-party CROs, CMOs or other contractors or consultants, may fail or suffer security breaches, which could result in a material disruption of setmelanotide development ~~programs.~~programs, regulatory investigations, enforcement actions and lawsuits.

~~Our internal computer~~In the ordinary course of our business, we collect and store sensitive data, including intellectual property, our proprietary business information and that of our suppliers, as well as personally identifiable information of employees. Similarly, our third-party CROs, CMOs and other contractors and consultants possess certain of our sensitive data. The secure maintenance of this information is material to our operations and business strategy. Despite the implementation of security measures, our information technology systems and those of our ~~third‑party~~third-party CROs, CMOs and other contractors and consultants are vulnerable to attack, damage, ~~from~~or interruption by hacking, cyberattacks, computer viruses and malware (e.g. ransomware), malicious code, phishing attacks and other social engineering schemes, unauthorized access, natural disasters, terrorism, ~~war and~~ telecommunication and electrical ~~failures. If~~failures, employee theft or misuse, human error, fraud, denial or degradation of service attacks, sophisticated nation-state and nation-state-supported actors or unauthorized access or use by persons inside our organization, or persons with access to systems inside our organization. Any such attack, incident or breach could compromise our information technology systems and the information stored there could be accessed, publicly disclosed, lost, corrupted or stolen. Further, attacks upon information technology systems are increasing in their frequency, levels of persistence, sophistication and intensity, and are being conducted by sophisticated and organized groups and individuals with a wide range of motives and expertise. As a result of the continued hybrid work environment, we may also face increased cybersecurity risks due to our reliance on internet technology and the number of our employees who are working remotely, which may create additional opportunities for cybercriminals to exploit vulnerabilities. Because the techniques used to obtain unauthorized access to, or to sabotage, systems change frequently and often are not recognized until launched against a target, we may be unable to anticipate these techniques or implement adequate preventative measures. We may also experience security breaches that may remain undetected for an extended period. Even if identified, we may be unable to adequately investigate or remediate incidents or breaches due to attackers increasingly using tools and techniques that are designed to circumvent controls, to avoid detection, and to remove or obfuscate forensic evidence.

The legislative and regulatory landscape for privacy and data protection continues to evolve, and there has been an increasing amount of focus on privacy and data protection issues with the potential to affect our business, including recently enacted laws in a majority of states requiring security breach notification, some also require implementation of reasonable security measures and provide a private right of action in the event of a breach. Costs of breach response, mitigation, investigation, remediation, notice and ongoing assessments can be considerable. Thus, any access, disclosure, damage or other loss of information, including our data being breached at our partners or third-party providers, could result in legal claims or proceedings and liability under state, federal and international privacy laws, disruption of our operations, and damage to our reputation, which could adversely affect our business.

We and certain of our service providers have been and from time to time will continue to be subject to cyberattacks and security incidents. While we do not believe that we have experienced any significant system failure, accident or security breach to date, if such an event were to occur and cause interruptions in our operations, it could result in a material

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disruption of our programs. For example, the loss of clinical trial data for setmelanotide or other product candidates could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. To the extent that any disruption or security breach results in a loss of or damage to our data or applications or other data or applications relating to our technology or product ~~candidate,~~candidates, or inappropriate disclosure of confidential or proprietary information, we could incur liabilities and the further development of setmelanotide and our product candidates could be delayed.

It could also expose us to risks, including an inability to provide our services and fulfill contractual demands, and could cause management distraction and the obligation to devote significant financial and other resources to mitigate such problems, which would increase our future information security costs, including through organizational changes, deploying additional personnel, reinforcing administrative, physical and technical safeguards, further training of employees, changing third-party vendor control practices and engaging third-party subject matter experts and consultants and reduce the demand for our product and services. We ~~may acquire businesses or products, form strategic alliances or create joint ventures in the future, and we may not realize their benefits.~~

We may acquire additional businesses or products, form strategic alliances or create joint ventures with third parties that we believe will complement or augment our existing business. If we acquire businesses with promising markets or technologies, wemaintain cyber liability insurance; however, this insurance may not be ~~able~~sufficient to ~~realize~~cover the ~~benefit~~financial, legal, business or reputational losses that may result from an interruption or breach of ~~acquiring such businesses if we are unable to successfully integrate them~~our systems. There can be no assurance that our cybersecurity risk management program and processes, including our policies, controls or procedures, will be fully implemented, complied with or effective in protecting our ~~existing operations~~systems and company culture. We may encounter numerous difficulties in developing, manufacturing and marketing any new products resulting from a strategic alliance, joint venture or acquisition that delay or prevent us from realizing their expected benefits or enhancing our business. We cannot assure you that, following any such acquisition, we will achieve the expected synergies to justify the transaction.information.

Risks Related to Our Common Stock

Our ~~principal stockholders~~directors and ~~management~~executive officers and their affiliated entities own a significant percentage of our stock and, if they choose to act together, will be able to exert significant ~~control~~influence over matters subject to stockholder approval.

~~Based on the number of shares outstanding as of September 30, 2017, after the closing our IPO in October 2017, our~~Our executive officers and directors ~~holders of 5% or more of our capital stock~~ and their respective affiliates, ~~beneficially owned~~in the aggregate, hold shares representing approximately ~~64.1%~~5.9% of our outstanding voting ~~stock. These~~stock as of April 22, 2024. As a result, if these stockholders ~~will have the ability~~were to ~~influence us through this ownership position. These stockholders may~~choose to act together, they would be able to ~~determine~~significantly influence all matters ~~requiring stockholder approval.~~submitted to our stockholders for approval, as well as our management and affairs. For example, these stockholders ~~may be able to control~~could significantly influence elections of directors, any amendments of our organizational documents, or approval of any merger, sale of assets, or other major corporate transaction. This may prevent or discourage unsolicited acquisition proposals or offers for our common stock that you may feel are in your best interest as one of our stockholders.

~~Anti‑takeover~~Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of us, even one that may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current management.

We are a Delaware corporation. Provisions in our amended and restated certificate of incorporation and amended and restated bylaws may delay or prevent an acquisition of us or a change in our management. In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which limits the ability of stockholders owning in excess of 15% of our outstanding voting stock to merge or combine with us. Although we believe these provisions collectively will provide for an opportunity to obtain greater value for stockholders by requiring potential acquirers to negotiate with our board of directors, they would apply even if an offer rejected by our board were considered beneficial by some stockholders. In addition, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors, which is responsible for appointing the members of our

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management. Any provision in our amended and restated certificate of incorporation and amended and restated bylaws or Delaware law that has the effect of delaying or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our common stock, and could also affect the price that some investors are willing to pay for our common stock.

~~An active market for our common stock may not be maintained.~~

Prior to our IPO, there had been no public market for shares of our common stock. Our stock only recently began trading on The NASDAQ Global Market, but we can provide no assurance that we will be able to maintain an active trading market on The NASDAQ Global Market or any other exchange in the future. If an active market for our common stock does not develop or is not maintained, it may be difficult for our stockholders to sell shares without depressing the market price for the shares or at all. An inactive market may also impair our ability to raise capital by selling shares and may impair our ability to acquire other businesses, applications or technologies using our shares as consideration.

~~If securities or industry analysts do not publish research or reports or publish unfavorable research or reports about our business, our stock price and trading volume could decline.~~

The trading market for our common stock will depend in part on the research and reports that securities or industry analysts publish about us, our business, our market or our competitors. We do not control these analysts. We currently have very limited research coverage by securities and industry analysts. If no additional securities or industry analysts commence coverage of our company, the trading price for our stock would be negatively impacted. If one or more of the analysts who covers us downgrades our stock, our stock price would likely decline. If one or more of these analysts issues unfavorable commentary or ceases to cover us or fails to regularly publish reports on us, interest in our stock could decrease, which could cause our stock price or trading volume to decline.

~~Unfavorable global economic conditions could adversely affect our business, financial condition or results of operations.~~

Our results of operations could be adversely affected by general conditions in the global economy and in the global financial markets. The global financial crisis caused extreme volatility and disruptions in the capital and credit markets. A severe or prolonged economic downturn, such as the global financial crisis, could result in a variety of risks to our business, including weakened demand for setmelanotide and our ability to raise additional capital when needed on acceptable terms, if at all. A weak or declining economy could also strain our suppliers, possibly resulting in supply disruption, or cause our customers to delay making payments for our services. Any of the foregoing could harm our business and we cannot anticipate all of the ways in which the current economic climate and financial market conditions could adversely impact our business.

Market volatility may affect our stock price and the value of your investment.

The market price for our common stock ~~is likely to be~~has been volatile and may continue to fluctuate significantly in response to a number of factors, most of which we cannot control, including, among others:

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·

plans for, progress of, or results from preclinical studies and clinical trials of ~~setmelanotide;~~

setmelanotide and our other product candidates;

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·

the failure of the FDA or EMA to approve ~~setmelanotide;~~

IMCIVREE for additional indications;

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announcements of new products, technologies, commercial relationships, acquisitions or other events by us or our competitors;

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the success or failure of other weight loss therapies and companies targeting rare diseases and orphan drug treatment;

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regulatory or legal developments in the United States and other countries;

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·

failure of setmelanotide or our other product candidates, if approved, to achieve commercial success;

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fluctuations in stock market prices and trading volumes of similar companies;

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general market conditions and overall fluctuations in U.S. equity markets;

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global macroeconomic conditions, including with respect to inflation rates or interest rates, labor shortages, supply chain shortages, disruptions and instability in the banking industry and other parts of the financial services sector, or other economic, political or legal uncertainties or adverse developments;

●

terrorism and/or political instability, unrest and wars, such as the conflicts involving Ukraine and Russia or Israel and Hamas, which could delay or disrupt our business, and if such political unrest escalates or spills over to or otherwise impacts additional regions it could heighten many of the other risk factors included in this sections;

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natural disasters (including as a result of climate change), which could cause significant damage to the infrastructure upon which our business operations rely, and the timing, nature or severity of which we may be unable to prepare for;

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economic instability, outbreak of disease or epidemics, boycotts, curtailment of trade and other business restrictions;

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variations in our quarterly operating results;

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changes in our financial guidance or securities analysts’ estimates of our financial performance;

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changes in accounting principles;

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our ability to raise additional capital and the terms on which we can raise it;

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sales of large blocks of our common stock, including sales by our executive officers, directors and significant stockholders;

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additions or departures of key personnel;

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discussion of us or our stock price by the press and by online investor communities; and

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other risks and uncertainties described in these risk factors.

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Our quarterly operating results may fluctuate significantly.

We expect our operating results to be subject to quarterly fluctuations. Our net loss and other operating results will be affected by numerous factors, including:

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variations in the level of expenses related to our development programs;

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addition or termination of clinical trials;

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any intellectual property infringement lawsuit in which we may become involved;

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regulatory developments affecting ~~setmelanotide;~~

setmelanotide and our other product candidates;

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our execution of any collaborative, licensing or similar arrangements, and the timing of payments we may make or receive under these arrangements;

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the achievement and timing of milestone payments under our existing collaboration and license agreements; and

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·

~~if setmelanotide receives regulatory approval,~~ the level of underlying demand for ~~that product~~setmelanotide and customers’ buying patterns.

If our quarterly operating results fall below the expectations of investors or securities analysts, the price of our common stock could decline substantially. Furthermore, any quarterly fluctuations in our operating results may, in turn, cause the price of our stock to fluctuate substantially.

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~~We will have broad discretion in how we use the proceeds from our IPO. We may not use these proceeds effectively, which could affect our results of operations and cause our stock price to decline.~~

We will have considerable discretion in the application of the net proceeds from our IPO. We intend to use the net proceeds to fund development and manufacturing of setmelanotide through completion of our Phase 3 clinical trials and subsequent NDA submissions with the FDA for the treatment of POMC deficiency obesity and LepR deficiency obesity, the development of setmelanotide through our Phase 2 proof of concept clinical trials for Bardet‑Biedl syndrome, Alström syndrome, POMC heterozygous deficiency obesity and POMC epigenetic disorders, as well as the initiation of our Phase 3 clinical trials for Bardet‑Biedl syndrome, the preparation for commercialization of setmelanotide, initiatives to expand the diagnosis of genetic obesity, including research and scientific exchange related to our ongoing genotyping and genetic epidemiology studies and for working capital and general administrative expenses, additional research and development expenses, and other general corporate purposes. As a result, investors will be relying upon management’s judgment with only limited information about our specific intentions for the use of the net proceeds. We may use the net proceeds for purposes that do not yield a significant return or any return at all for our stockholders. In addition, pending their use, we may invest the net proceeds in a manner that does not produce income or that loses value.

Our ability to use certain net operating loss carryovers and other tax attributes may be limited.

~~We have incurred substantial losses during our history and we do not expect to become profitable in the near future and may never achieve profitability.~~ Under the Code, a corporation is generally allowed a deduction for net operating losses, or NOLs, carried over from a prior taxable ~~year. Under that provision, we~~year, and can ~~carry forward certain taxable losses of our subsidiaries~~use such NOLs to offset future taxable income, if any, until such losses are used or, for NOLs arising in taxable years ending on or before December 31, 2017, until such NOLs expire. ~~The same is true of other~~Other unused tax attributes, such as research tax ~~credits.~~credits may also be carried forward to offset future taxable income, if any, until such attributes are used or expire. As of December 31, ~~2016,~~2023, we had approximately ~~$46.9~~$555.6 million and ~~$24.4~~$598.0 million of unused federal and state NOL carryforwards, respectively, and approximately $13.1 million and $3.8 million of unused federal and state carryforwards of ~~NOLs, respectively, and approximately $1.0 and $0.4 million of unused federal and state carryforwards of~~research tax credits, respectively. Of the federal NOL carryforwards at December 31, 2023, $482.4 million can be carried forward indefinitely, while $73.2 million will begin to expire in 2033. Additionally, as of December 31, 2023, we had federal orphan drug credits related to qualifying research of $25.5 million.

If a corporation undergoes an “ownership change,” very generally defined as a greater than 50% change by value in its equity ownership by certain shareholders or groups of shareholders over a ~~three‑year~~rolling three-year period, Sections 382 and 383 of the Code limit the corporation’s ability to use carryovers of its ~~pre‑change~~pre-change NOLs, credits and certain other tax attributes to reduce its tax liability for periods after the ownership change. Our issuance of common stock pursuant to ~~our IPO~~prior public offerings may ~~result~~have resulted in a limitation under Code Sections 382 and 383, either separately or in combination with certain prior or subsequent shifts in the ownership of our common stock. Future changes in our stock ownership, some of which are outside of our control, could also result in an ownership change under Sections 382 and 383 of the Code. In addition, for taxable years beginning after December 31, 2020, utilization of federal NOLs generated in tax years beginning after December 31, 2017 are limited to a maximum of 80% of the taxable income for such year, after taking into account utilization of NOLs generated in years beginning before January 1, 2018 and determined without regard to such NOL deduction. Further regulatory changes could also limit our ability to utilize our NOLs. As a result, our ability to use carryovers of ~~pre‑change~~ NOLs and credits to reduce our future U.S. federal income tax liability may be subject to limitations. This could result in increased U.S. federal income tax liability for us if we generate taxable income in a future period. Limitations on the use of NOLs and other tax attributes could also increase our state tax liability. Any such limitation could have a material adverse effect on our results of operations in future years. We have not completed a study to assess

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whether an ownership change for purposes of Section 382 or 383 has occurred, or whether there have been multiple ownership changes since our inception, due to the significant costs and complexities associated with such study.

The use of our tax attributes will also be limited to the extent that we do not generate positive taxable income in future tax periods. We do not expect to generate positive taxable income in the near future and we may never achieve tax profitability.

Substantial future sales or perceived potential sales of our common stock in the public market could cause the price of our common stock to decline significantly.

Sales of our common stock in the public market, or the perception that these sales could occur, could cause the market price of our common stock to decline significantly. As of March 31, 2024, we had 60,964,468 shares of common stock outstanding.

We may be at an increased risk of securities class action litigation.

Historically, securities class action litigation has often been brought against a company following a decline in the market price of its securities. This risk is especially relevant for us because biotechnology and pharmaceutical companies have experienced significant stock price volatility in recent years. If we were to be sued, it could result in substantial costs and a diversion of management’s attention and resources, which could harm our business.

We do not intend to pay dividends on our common stock and, consequently, your ability to achieve a return on your investment will depend on appreciation in the price of our common stock.

We have never declared or paid any cash dividends on our common stock and do not currently intend to do so in the foreseeable future. We currently anticipate that we will retain future earnings for the development, operation and expansion of our business and do not anticipate declaring or paying any cash dividends in the foreseeable future. Additionally, Convertible Preferred Stock will rank senior to the shares of the Company’s common stock, with respect to the payment of dividends and the distribution of assets upon a liquidation, dissolution or winding up of the Company. Holders of the Convertible Preferred Stock will be entitled to a regular dividend at a rate as specified in the Amended and Restated Certificate of Designations filed by the Company with the Secretary of State of the State of Delaware.

Therefore, the success of an investment in shares of our common stock will depend upon any future appreciation in their value. There is no guarantee that shares of our common stock will appreciate in value or even maintain the price at which you purchased them.

Our common stock is subordinated to our Convertible Preferred Stock.

In connection with the closing of our Investment Agreement, the Company issued 150,000 shares of a new series of the Company’s Convertible Preferred Stock for an aggregate purchase price of $150.0 million, or $1,000 per share. The Convertible Preferred Stock will rank senior to the shares of the Company’s common stock, with respect to the payment of dividends and the distribution of assets upon a liquidation, dissolution or winding up of the Company. The Convertible Preferred Stock will initially have a liquidation preference of $1,000 per share; provided that the liquidation preference in dissolution or upon a change of control shall be increased to be 175% of the then applicable liquidation preference, as described in the Amended and Restated Certificate of Designations. The Convertible Preferred Stock will be convertible into shares of our common stock at the option of the holders thereof at any time following the expiration or termination of any applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, or the HSR Act.

Additionally, holders of the Convertible Preferred Stock will not initially be entitled to voting rights in the election of directors of the Company. Following the expiration or termination of any applicable waiting period under the HSR Act, holders of the Convertible Preferred Stock generally will be entitled to vote with the holders of the shares of our common stock on all matters submitted for a vote of holders of shares of our common stock (voting together with the holders of shares of our common stock as one class) on an as-converted basis, subject to certain ownership limitations. On May 7,

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2024, the Company filed an Amended and Restated Certificate of Designations in respect of the Convertible Preferred Stock containing certain technical amendments to the terms of the Convertible Preferred Stock. The amendments contained in the Amended and Restated Certificate of Designations (x) limited the voting rights of the Convertible Preferred Stock to 24.9438 shares of the Company’s common stock per $1,000 liquidation preference of Convertible Preferred Stock and (y) eliminated a 1% step up in the interest rate that otherwise would have applied in the unlikely event that the Company was required to obtain and failed to obtain stockholder approval for certain conversion shares underlying the Convertible Preferred Stock. Additionally, certain matters will require the approval of the holders of two-thirds of the outstanding Convertible Preferred Stock, voting as a separate class, including (1) the authorization, creation, increase in the authorized amount of, or issuance of any class or series of senior or pari passu equity securities or any security convertible into, or exchangeable or exercisable for, shares of senior or pari passu equity securities, (2) amendments, modifications or repeal of any provision of the Company’s charter or of the Amended and Restated Certificate of Designations that would adversely affect the rights, preferences or voting powers of the Convertible Preferred Stock, and (3) certain business combinations and binding or statutory share exchanges or reclassification involving the Convertible Preferred Stock unless such events do not adversely affect the rights, preferences or voting powers of the Convertible Preferred Stock.

In the future, we may make additional offerings of debt or preferred equity securities, including convertible or non-convertible senior or subordinated notes, convertible or non-convertible preferred stock, medium-term notes and trust preferred securities, to raise cash or bolster our liquidity, to refinance indebtedness, for working capital, to finance strategic initiatives and future acquisitions or for other purposes. Upon liquidation, holders of our debt securities and shares of preferred stock and lenders with respect to other borrowings may receive distributions of our available assets prior to the holders of our common stock. In addition, any preferred stock we may issue could have a preference on liquidating distributions or a preference on distribution payments that could limit our ability to make a distribution to the holders of our common stock. Since our decision to issue securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings. Thus, our stockholders bear the risk of our future offerings reducing the market price of our common stock.

Provisions in our certificate of incorporation and bylaws and Delaware law might discourage, delay or prevent a change in control of our Company or changes in our management and, therefore, depress the market price of our common stock.

Our certificate of incorporation and bylaws contain provisions that could depress the market price of our common stock by acting to discourage, delay or prevent a change in control of our Company or changes in our management that the stockholders of our Company may deem advantageous. These provisions, among other things:

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establish a classified board of directors so that not all members of our board are elected at one time;

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permit only the board of directors to establish the number of directors and fill vacancies on the board;

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provide that directors may only be removed “for cause” and only with the approval of two-thirds of our stockholders;

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authorize the issuance of “blank check” preferred stock that our board could use to implement a stockholder rights plan (also known as a “poison pill”);

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eliminate the ability of our stockholders to call special meetings of stockholders;

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prohibit stockholder action by written consent, which requires all stockholder actions to be taken at a meeting of our stockholders;

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prohibit cumulative voting;

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authorize our board of directors to amend the bylaws;

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establish advance notice requirements for nominations for election to our board or for proposing matters that can be acted upon by stockholders at annual stockholder meetings; and

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require a super-majority vote of stockholders to amend some provisions described above.

In addition, Section 203 of the General Corporation Law of the State of Delaware, or the DGCL, prohibits a publicly-held Delaware corporation from engaging in a business combination with an interested stockholder, generally a person which together with its affiliates owns, or within the last three years has owned, 15% of our voting stock, for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner.

Any provision of our certificate of incorporation, bylaws or Delaware law that has the effect of delaying or preventing a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our capital stock and could also affect the price that some investors are willing to pay for our common stock.

Our certificate of incorporation provides that the Court of Chancery of the State of Delaware is the exclusive forum for substantially all disputes between us and our stockholders and our bylaws designate the federal district courts of the United States as the exclusive forum for actions arising under the Securities Act, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.

Our certificate of incorporation provides that the Court of Chancery of the State of Delaware is the exclusive forum for: (i) any derivative action or proceeding brought on our behalf; (ii) any action asserting a claim of breach of fiduciary duty; (iii) any action asserting a claim against us arising under the DGCL, our certificate of incorporation or our bylaws; and (iv) any action asserting a claim against us that is governed by the internal affairs doctrine. In addition, our bylaws provide that the federal district courts of the United States are the exclusive forum for any complaint raising a cause of action arising under the Securities Act. Any person or entity purchasing or otherwise acquiring any interest in any of our securities shall be deemed to have notice of and consented to the provisions of our certificate of incorporation and bylaws described above. These exclusive-forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage lawsuits against us and our directors, officers and other employees. If a court were to find these provisions of our certificate of incorporation or bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving the dispute in other jurisdictions, which could seriously harm our business.

General Risk Factors

We may acquire businesses or products, form strategic alliances or create joint ventures in the future, and we may not realize their benefits.

We may acquire additional businesses or products, form strategic alliances or create joint ventures with third parties that we believe will complement or augment our existing business. If we acquire businesses with promising markets or technologies, we may not be able to realize the benefit of acquiring such businesses if we are unable to successfully integrate them with our existing operations and company culture. We may encounter numerous difficulties in developing, manufacturing and marketing any new products resulting from a strategic alliance, joint venture or acquisition that delay or prevent us from realizing their expected benefits or enhancing our business. We cannot assure you that, following any such acquisition, we will achieve the expected synergies to justify the transaction.

An active market for our common stock may not be maintained.

Our stock began trading on the Nasdaq Global Market in October 2017 and we can provide no assurance that we will be able to continue to maintain an active trading market on the Nasdaq Global Market or any other exchange in the future. If an active market for our common stock is not maintained, it may be difficult for our stockholders to sell shares without depressing the market price for the shares or at all. An inactive market may also impair our ability to raise capital by selling shares and may impair our ability to acquire other businesses, applications or technologies using our shares as consideration.

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If securities or industry analysts do not continue to publish research or reports or publish unfavorable research or reports about our business, our stock price and trading volume could decline.

The trading market for our common stock depends in part on the research and reports that securities or industry analysts publish about us, our business, our market or our competitors. We do not control these analysts. If we lose securities or industry analysts coverage of our Company, the trading price for our stock would be negatively impacted. If one or more of the analysts who covers us downgrades our stock, our stock price would likely decline. If one or more of these analysts issues unfavorable commentary or ceases to cover us or fails to regularly publish reports on us, interest in our stock could decrease, which could cause our stock price or trading volume to decline.

Raising additional capital may cause dilution to our existing stockholders, restrict our operations or require us to relinquish rights.

We may seek additional capital through a combination of private and public equity offerings, debt financings, collaborations and strategic and licensing arrangements. ~~To the extent that~~From time to time we may raise additional capital through the sale of common stock or securities convertible or exchangeable into common stock, such as our sale of Convertible Preferred Stock under the Investment Agreement, which did cause in the case of the Investment Agreement and may cause in the future a stockholder’s ownership interest in our ~~company will~~Company to be diluted. In addition, the terms of any such securities may include liquidation or other preferences that materially adversely affect the rights of our stockholders. Debt financing, if available, would increase our fixed payment obligations and may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds through collaboration, strategic partnerships and licensing arrangements with third parties, we may have to relinquish valuable

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rights to setmelanotide, our intellectual property or future revenue streams, or grant licenses on terms that are not favorable to us. See “Our common stock is subordinated to our Convertible Preferred Stock.”

~~Sales~~Unfavorable global political or economic conditions could adversely affect our business, financial condition or results of operations.

Our results of operations could be adversely affected by general conditions in the global economy and in the global financial markets. The global economy, including credit and financial markets, has recently experienced extreme volatility and disruptions, including severely diminished liquidity and credit availability, rising interest and inflation rates, declines in consumer confidence, declines in economic growth, increases in unemployment rates and uncertainty about economic stability. A severe or prolonged economic downturn or recession and a ~~substantial number~~continued increase in inflation rates or interest rates could result in a variety of ~~shares~~risks to our business, including weakened demand for setmelanotide and our ability to raise additional capital when needed on acceptable terms, if at all. There can be no assurance that further deterioration in credit and financial markets and confidence in economic conditions will not occur. A weak or declining economy could also strain our suppliers, possibly resulting in supply disruption, or cause our customers to delay making payments for our services. Increased inflation rates and related increases in interest rates can adversely affect us by increasing our costs, including labor and employee benefit costs. In addition, geopolitical conflicts and war could disrupt or otherwise adversely impact our operations and those of third parties upon which we rely. Related sanctions, export controls or other actions have and may in the future be initiated by nations including the U.S., the EU or Russia (e.g., potential cyberattacks, disruption of energy flows, etc.), which could adversely affect our business and/or our supply chain, our CROs, CMOs and other third parties with which we conduct business. Any of the foregoing could harm our business and we cannot anticipate all of the ways in which the current economic climate and financial market conditions could adversely impact our business.

Business interruptions could adversely affect our operations.

Our operations are vulnerable to interruption by fire, severe weather conditions, power loss, telecommunications failure, terrorist activity, public health crises and pandemic diseases, and other natural and man-made disasters or events beyond our control. Our facilities are located in regions that experience severe weather from time to time. We have not undertaken a systematic analysis of the potential consequences to our business and financial results from a major tornado, flood, fire, earthquake, power loss, terrorist activity, public health crisis, pandemic diseases or other disasters and do not

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have a recovery plan for such disasters. In addition, we do not carry sufficient insurance to compensate us for actual losses from interruption of our ~~common stock in the public market~~business that may occur, and any losses or damages incurred by us could ~~cause~~harm our ~~stock price to fall.~~

~~If our existing stockholders sell, or indicate an intention to sell, substantial amounts~~business. The occurrence of our common stock in the public market after the lock-up and other legal restrictions on resale lapse, the trading price of our common stock could decline. Based upon the number of shares outstanding as of September 30, 2017, and after giving effect to the closing of our IPO in October 2017, we had outstanding a total of approximately 27.3 million shares of common stock. Of these shares, approximately 7.2 million of the shares of our common stock sold in the IPO are freely tradable, without restriction, in the public market.

The lock-up agreements pertaining to our IPO will expire on April 2, 2018, following which up to an additional 19.2 million shares of common stock will be eligible for sale in the public market, of which approximately 13.0 million shares are held by current directors, executive officers and their respective affiliates and may be subject to Rule 144 under the Securities Act. The underwriters from our IPO may, however, in their sole discretion, permit our officers, directors and other stockholders who are subject to these lock-up agreements to sell or transfer shares prior to the expiration of the lock-up agreements.

In addition, approximately 4.0 million shares of our common stock that are either subject to outstanding stock awards or reserved for future issuance under our 2017 Plan are eligible for sale in the public market to the extent permitted by the provisions of various vesting schedules and Rule 144 and Rule 701 under the Securities Act. If these additional shares of common stock are sold, or if it is perceived that they will be sold, in the public market, the trading price of our common stock could decline.

The holders of approximately 18.9 million shares of our common stock, or approximately 69.1% of our total outstanding common stock as of September 30, 2017 and after giving effect to the issuance of shares in our IPO, will be entitled to rights with respect to the registration of their shares under the Securities Act, subject to vesting schedules and to the lock-up agreements described above. Registrationany of these shares under the Securities Act would result in the shares becoming freely tradable without restriction under the Securities Act, except for shares purchased by affiliates. Any sales of securities by these stockholdersbusiness disruptions could seriously harm our operations and financial condition and increase our costs and expenses.

We have ~~a material adverse effect on the trading price of our common stock.~~

~~We are an “emerging growth company,”~~incurred and ~~as a result of the reduced disclosure and governance requirements applicable~~will continue to ~~emerging growth companies, our common stock may be less attractive to investors.~~

We are an “emerging growth company” as defined in the JOBS Act, and we intend to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes‑Oxley Act of 2002, as amended, or Section 404, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. If we choose not to comply with the auditor attestation requirements of Section 404, our auditors will not be required to attest to the effectiveness of our internal control over financial reporting. As a result, investors may become less comfortable with the effectiveness of our internal controls and the risk that material weaknesses or other deficiencies in our internal controls go undetected or may increase. If we choose to provide reduced disclosures in our periodic reports and proxy statements while we are an emerging growth company, investors would have access to less information and analysis about our executive compensation, which may make it difficult for investors to evaluate our executive compensation practices. We cannot predict if investors will find our common stock less attractive because we will rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile. We may take advantage of these reporting exemptions until we are no longer an “emerging growth company.” We will remain an “emerging growth company” until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of our IPO, (b) in which we have total annual gross revenue of at least $1.07 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common stock that is held by non‑affiliates exceeds $700 million as of the prior

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~~June 30~~th~~, and (2) the date on which we have issued more than $1.0 billion in non‑convertible debt during the prior three‑year period.~~

~~We will~~ incur ~~increased~~substantial costs as a result of operating as a public company, ~~and~~ our management will ~~be required~~continue to devote substantial time to new compliance initiatives and corporation governance ~~policies.~~policies, and we will need to hire additional qualified accounting and financial personnel with appropriate public company experience.

As a public company, we have incurred and ~~particularly after we are no longer an emerging growth company, we~~ will continue to incur significant legal, accounting and other ~~expenses that we did not incur as a private company.~~expenses. The ~~Sarbanes‑~~Sarbanes Oxley Act of 2002, ~~or Sarbanes‑Oxley,~~ the ~~Dodd‑Frank~~Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of the ~~NASDAQ~~Nasdaq Global Market and other applicable securities rules and regulations impose various requirements on public companies, including establishment and maintenance of effective disclosure and financial controls and corporate governance practices. Our management and other personnel will ~~need~~continue to devote a substantial amount of time to these compliance ~~initiatives.~~initiatives and we will need to continue to hire additional accounting and financial personnel with appropriate public company experience and technical accounting knowledge. Even if we are able to hire appropriate personnel, our existing operating expenses and operations will be impacted by the direct costs of their employment and the indirect consequences related to the diversion of management resources from product development efforts. Moreover, these rules and regulations will continue to increase our legal and financial compliance costs and ~~will~~ make some activities more ~~time‑~~time consuming and costly. For example, we expect that these rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance, which in turn could make it more difficult for us to attract and retain qualified members of our board of directors.

~~We are evaluating these rules and regulations, and cannot predict or estimate the amount of additional costs we may incur or the timing of such costs.~~ These rules and regulations are often subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in ~~continuing~~future uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices.

~~For as long as~~If we ~~remain~~fail to maintain an ~~emerging growth company,~~effective system of internal control over financial reporting, we may ~~take advantage~~not be able to accurately report our financial results or prevent fraud. As a result, stockholders could lose confidence in our financial and other public reporting, which would harm our business and the trading price of ~~certain exemptions from various~~our common stock.

Effective internal control over financial reporting ~~requirements~~is necessary for us to provide reliable financial reports and, together with adequate disclosure controls and procedures, is designed to prevent fraud. Any failure to implement required new or improved controls, or difficulties encountered in their implementation could cause us to fail to meet our reporting obligations. As described further below, we have identified a material weakness in our internal control over financial reporting. Any testing by us conducted in connection with Section 404, or any testing by our independent registered public accounting firm, may reveal additional deficiencies in our internal control over financial reporting that are ~~applicable~~deemed to be material weaknesses or that may require prospective or retroactive changes to our financial statements or identify other ~~public companies that are not applicable to emerging growth companies as described in the preceding risk factor.~~areas for further attention or improvement.

Pursuant to Section 404, ~~of Sarbanes‑Oxley,~~ we ~~will be~~are required to furnish a report by our management on our internal control over financial reporting. ~~However, while we remain an emerging growth company, we will not be required~~To continue to ~~include an attestation report on internal control over financial reporting issued by our independent registered public accounting firm. To~~ achieve and maintain compliance with Section 404, ~~within the prescribed period,~~ we ~~will be engaged~~engage in a process to document and evaluate our internal control over financial reporting, which is both costly and challenging. In this regard, we ~~will~~ need to continue to dedicate internal resources, potentially engage outside consultants and adopt a detailed work plan to assess and document the adequacy of internal control over financial reporting, continue steps to improve control processes as appropriate, validate through testing that controls are functioning as documented and implement a continuous reporting and improvement process for internal control over financial reporting. Despite our efforts, ~~there is a risk that~~from time to time we ~~will~~may not be able to conclude ~~within the prescribed timeframe or at all,~~ that our internal control over financial reporting is effective as required by Section ~~404. If we identify one or more~~404, as is the case of our Annual Report on Form 10-K for the year ended December 31, 2023, due to the material ~~weaknesses~~weakness identified and described below. Additionally, the material weakness in our internal control over financial reporting has resulted in our management being unable to conclude, and any additional material weakness in our internal control over financial reporting may in the future result in our management being unable to conclude, that our disclosure controls and procedures were effective for the applicable period.

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In addition, as we no longer qualify as a non-accelerated filer, we are required to include an attestation report on internal control over financial reporting issued by our independent registered public accounting firm. If we are unable to maintain effective internal control over financial reporting, we may not have adequate, accurate or timely financial information, our independent registered public accounting firm may issue a report that is adverse, as it did in our Annual Report on Form 10-K for the year ended December 31, 2023. A material weakness could result in a restatement of our financial statements, failure to meet our reporting obligations in a timely manner, the imposition of sanctions, including the inability of registered broker dealers to make a market in our common stock, or investigation by regulatory authorities. Any such action or other negative results caused by our inability to meet our reporting requirements or comply with legal and regulatory requirements or by disclosure of an accounting, reporting or control issue could adversely affect the trading price of our securities and our business. Ineffective internal control over financial reporting could also reduce our ability to obtain financing or could increase the cost of any financing we obtain. Any of these could, in turn, result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements.

We have identified a material weakness in our internal controls over financial reporting and may ~~be at an increased risk of securities class action litigation.~~

~~Historically, securities class action litigation has often been brought against a company following a decline~~identify additional material weaknesses in the ~~market price~~future or otherwise fail to maintain an effective system of ~~its securities. This risk~~internal controls, which may result in material misstatements of our consolidated financial statements or cause us to fail to meet our periodic reporting obligations.

A material weakness is ~~especially relevant~~a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of a company’s annual or interim financial statements will not be prevented or detected on a timely basis. We identified a material weakness in internal control related to ineffective information technology general controls (“ITGCs”) in the areas of user access and program change management over our key accounting and reporting information technology (“IT”) system. As a result, the related business process controls (specifically, the IT application controls and IT-dependent manual controls) that are dependent on the ineffective ITGCs, or that use data produced from the system impacted by the ineffective ITGCs, were also ineffective. Although the material weakness identified above did not result in any material misstatements in our consolidated financial statements for ~~us because biotechnology~~the periods presented and ~~pharmaceutical companies have experienced significant stock price volatility~~there were no changes to previously released financial results, our management concluded that these control deficiencies constitute a material weakness and that our internal control over financial reporting was not effective as of December 31, 2023.

Our management, under the oversight of the Audit Committee of our Board of Directors and in ~~recent years. If~~consultation with outside advisors, has begun evaluating and implementing measures designed to remediate the material weakness. In particular, we are taking steps to remediate this material weakness by (i) developing and implementing additional training and awareness programs addressing ITGCs and policies, including educating control owners concerning the principles and requirements of each control, with a focus on user access; (ii) increasing the extent of oversight and verification checks included in the operation of user access and program change management controls and processes; (iii) deploying additional tools to support administration of user access and program change management; and (iv) enhancing quarterly management reporting on the remediation measures to the Audit Committee of the Board of Directors. The above controls need to operate for a sufficient period of time so that management can conclude that our controls are operating effectively. As such, the material weakness will not be considered remediated until management has concluded through the implementation of these remediation measures and additional testing that these controls are effective. Additionally, a material weakness in our internal control over financial reporting has resulted in our management being unable to conclude, and any additional material weakness in our internal control over financial reporting may in the future result in our management being unable to conclude, that our disclosure controls and procedures were effective for the applicable period.

We are designing and implementing new controls and measures to remediate this material weakness as noted above. However, we cannot assure you that the measures we are taking will be ~~sued, it~~sufficient to remediate the material weakness or avoid the identification of additional material weaknesses in the future. Our failure to implement and maintain effective internal control over financial reporting could result in ~~substantial costs~~errors in our consolidated financial statements that could result in a restatement of our financial statements and ~~a diversion~~could cause us to fail to meet our periodic reporting obligations, any of ~~management’s attention and resources,~~ which could ~~harm our business.~~

~~We do not intend to pay dividends on our common stock~~diminish investor confidence in us and ~~consequently, your ability to achieve~~cause a ~~return on your investment will depend on appreciation~~decline in the price of our common stock.

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The increasing focus on environmental sustainability and social initiatives could increase our costs, harm our reputation and adversely impact our financial results.

There has been increasing public focus by investors, customers, environmental activists, the media and governmental and nongovernmental organizations on a variety of environmental, social and other sustainability matters. We experience pressure to make commitments relating to sustainability matters that affect us, including the design and implementation of specific risk mitigation strategic initiatives relating to sustainability. If we are not effective in addressing environmental, social and other sustainability matters affecting our business, or setting and meeting relevant sustainability goals, our reputation and financial results may suffer. In the future, we may engage in sustainability-related initiatives and voluntary disclosures or commitments, which may be costly and may not have ~~never declared or paid any cash dividends~~the desired effect. We may experience increased costs in order to execute upon our sustainability goals and measure achievement of those goals, which could have a materially adverse impact on our ~~common stock~~business and ~~do not currently intend to do so~~financial condition. In addition, this emphasis on environmental, social and other sustainability matters has resulted and may result in the ~~foreseeable future. We currently anticipate~~adoption of new laws and regulations, including new reporting requirements. If we fail to comply with new laws, regulations or reporting requirements, our reputation and business could be adversely impacted. Moreover, our actions may subsequently be determined to be insufficient by various stakeholders, and we may be subject to investor or regulator engagement or activism. Additionally, many of our business partners and suppliers may be subject to similar reporting and stakeholder expectations, which may augment or create additional risks, including risks that may not be known to us.

Short sellers of our stock may be manipulative and may drive down the market price of our common stock.

Short selling is the practice of selling securities that the seller does not own, but rather has borrowed or intends to borrow from a third party with the intention of buying identical securities at a later date to return to the lender. A short seller hopes to profit from a decline in the value of the securities between the sale of the borrowed securities and the purchase of the replacement shares, as the short seller expects to pay less in that purchase than it received in the sale. It is therefore in the short seller’s interest for the price of the stock to decline, and some short sellers publish, or arrange for the publication of, opinions or characterizations regarding the relevant issuer, often involving misrepresentations of the issuer’s business prospects and similar matters calculated to create negative market momentum, which may permit them to obtain profits for themselves as a result of selling the stock short.

As a public entity, we may be the subject of concerted efforts by short sellers to spread negative information in order to gain a market advantage. In addition, the publication of misinformation may also result in further lawsuits, the uncertainty and expense of which could adversely impact our business, financial condition, and reputation. There are no assurances that we will ~~retain future earnings for the development, operation and expansion of our business and do~~ not ~~anticipate declaring~~face further short sellers’ efforts or ~~paying any cash dividends~~similar tactics in the ~~foreseeable future. Therefore,~~

78

~~Table of Contents~~

future, and the ~~success of an investment in shares~~market price of our common stock ~~will depend upon any future appreciation in~~may decline as a result of their ~~value. There is no guarantee that shares of our common stock will appreciate in value or even maintain the price at which you purchased them.~~actions.

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

Unregistered Sales of Equity Securities

~~During the quarter ended September 30, 2017, we issued and sold the following unregistered securities:~~

~~On August 18, 2017 we issued 20,474,998 shares of series A preferred stock, $0.001 par value per share, to a number of accredited investors for $1.00 per share. These shares were issued~~Except as previously disclosed in ~~reliance on Regulation D, Rule 506 and/or Rule 4(2) under the Securities Act.~~

~~We granted options under the 2015 Plan to purchase an aggregate of 540,996 shares of~~ our common stock to employees, consultants and directors, having exercise prices ranging from $6.88 to $8.44 per share which issuances were exempt from registration under Rule 701 under the Securities Act. During this period, 152,671 stock options were exercised.

~~Use of Proceeds~~

~~On September 25, 2017, the SEC declared effective our registration statement~~Current Report on Form ~~S-1 (File No. 333-220327), as amended,~~8-K filed ~~in connection with our IPO. The IPO closed~~ on ~~October 10, 2017 and~~April 1, 2024, we issued and sold 8,107,500 shares of our common stock at a price to the public of $17.00 per share, which included the exercise in full of the underwriters’ option to purchase 1,057,500 additional shares. We received gross proceeds from the IPO of approximately $137.8 million, before deducting underwriting discounts and commissions of approximately $9.6 million, and estimated offering expenses of approximately $2.4 million. ~~Morgan Stanley, Bank of America Merrill Lynch, Cowen Inc. and Needham & Company acted as book-running managers for the offering.~~ ~~No offering expenses were paid or are payable, directly or indirectly, to our directors or officers, to persons owning 10% or more of any class of our equity securities or to any of our affiliates.~~

The net proceeds from the IPO have been invested in United States treasury money market funds. There has been no material change in the expected use of the net proceeds from our IPO as described in our registration statement on Form S-1.

~~Issuer Purchases of Equity Securities~~

We did not ~~repurchase~~make any unregistered sales of ~~our~~ equity securities during the ~~three months ended September 30, 2017.~~period covered by the report.

Use of Proceeds

Not applicable.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

None.

Item 3. Defaults Upon Senior Securities

Not applicable.

99

Table of Contents

Item 4. Mine Safety Disclosure

Not applicable.

Item 5. Other Information

(a)

Disclosure in lieu of reporting on a Current Report on Form 8-K.

Item 3.03. Material Modification to Rights of Security Holders; Item 5.03. Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.

~~None~~As previously disclosed, on April 1, 2024, the Company entered into an Investment Agreement with certain affiliates of Perceptive Advisors LLC and certain other investors relating to the issuance and sale of 150,000 shares of a new series of the Company’s Series A Convertible Preferred Stock, par value $0.001 per share, titled the “Series A Convertible Preferred Stock” (the “Convertible Preferred Stock”), for an aggregate purchase price of $150,000,000, or $1,000 per share, and on April 15, 2024, the Company filed the Certificate of Designations with the Secretary of State of the State of Delaware, effective the same day.

On May 7, 2024, the Company filed an Amended and Restated Certificate of Designations in respect of the Convertible Preferred Stock containing certain technical amendments to the terms of the Convertible Preferred Stock. The amendments contained in the Amended and Restated Certificate of Designations (x) limited the voting rights of the Convertible Preferred Stock to 24.9438 shares of the Company’s common stock per $1,000 liquidation preference of Convertible Preferred Stock and (y) eliminated a 1% step up in the interest rate that otherwise would have applied in the unlikely event that the Company was required to obtain and failed to obtain stockholder approval for certain conversion shares underlying the Convertible Preferred Stock.

The foregoing description Amended and Restated Certificate of Designations is not complete and is qualified in its entirety by reference to the full text of such document, a copy of which is filed as Exhibit 3.4 to this Quarterly Report on Form 10-Q and is incorporated by reference herein.

(b)

Material changes to the procedures by which security holders may recommend nominees to the board of directors.

None.

(c)

Insider Trading Arrangements and Policies.

During the three months ended March 31, 2024, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

79100

Table of Contents

Item 6. Exhibits

Incorporated by Reference
Exhibit
Number

Exhibit Description

Form

Date

Number
3.1

Amended and Restated Certificate of Incorporation.

S-1/A

9-25-2017

3.3
3.2

Amended and Restated Bylaws.

S-1/A

9-25-2017

3.5
4.1

Form of Common Stock Certificate.

S-1/A

9-25-2017

4.1
4.2

Amended and Restated Investors’ Rights Agreement, dated August 21, 2017.

S-1

9-5-2017

4.2
10.1

Form of Indemnification Agreement.

S-1/A

9-25-2017

10.1
10.2*†

2017 Equity Incentive Plan and Form of Option Agreement and Notice of Exercise.

10.3†

Offer Letter, dated November 16, 2016, by and between the Registrant and Bart Henderson.

S-1

9-5-2017

10.3
10.4†

Offer Letter, dated November 16, 2016, by and between the Registrant and Keith M. Gottesdiener.

S-1

9-5-2017

10.4
10.5†

Offer Letter, dated November 16, 2016, by and between the Registrant and Fred T. Fiedorek.

S-1

9-5-2017

10.5
10.6

License Agreement, dated March 21, 2013, by and between the Registrant (f/k/a Rhythm Metabolic, Inc.) and Ipsen Pharma S.A.S.

S-1

9-5-2017

10.6
10.7

Development and Manufacturing Services Agreement, dated July 17, 2013, by and between the Registrant (f/k/a Rhythm Metabolic, Inc.) and Peptisyntha Inc. (n/k/a Corden Pharma International).

S-1

9-5-2017

10.7
10.8

License Agreement dated January 4, 2016, by and between the Registrant and Camurus AB

S-1

9-5-2017

10.8
10.9

Amended and Restated Payroll Services Agreement, dated March 21, 2013, by and between the Registrant (f/k/a Rhythm Metabolic, Inc.) and Rhythm Pharmaceuticals, Inc.

S-1

9-5-2017

10.9
10.10*†

Rhythm Pharmaceuticals, Inc. 2017 Employee Stock Purchase Plan.

10.11

Lease, dated November 25, 2015, by and between 500 Boylston & 222 Berkeley Owner (DE) LLC and the Registrant.

S-1

9-5-2017

10.11
10.12

Consulting Agreement, dated June 12, 2017, by and between the Registrant and Bart Henderson.

S-1

9-5-2017

10.12
10.13†

Offer Letter, dated September 13, 2017, by and between the Registrant and Keith M. Gottesdiener.

S-1/A

9-25-2017

10.13
10.14†

Offer Letter, dated September 13, 2017, by and between the Registrant and Fred T. Fiedorek.

S-1/A

9-25-2017

10.14


		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.
101.DEF*	Inline XBRL Taxonomy Extension Definition Linkbase Document.

80101

Table of Contents

10.15

Development and Manufacturing Services Agreement, dated as of December 21, 2016, by and between Registrant and Recipharm Monts S.A.S.

S-1

9-5-2017

10.15
10.16†

Offer Letter, dated September 13, 2017, by and between the Registrant and Hunter Smith.

S-1/A

9-25-2017

10.18
10.17†

Offer Letter, dated September 13, 2017, by and between the Registrant and Nithya Desikan.

S-1/A

9-25-2017

10.19
10.18†

Summary of Non‑Employee Director Compensation Policy.

S-1

9-5-2017

10.20
10.19†

2015 Equity Incentive Plan and Form of Option Agreement and Notice of Exercise.

S-1/A

9-25-2017

10.21
31.1*

Certification of the Chief Executive Officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).

31.2*

Certification of the Chief Financial Officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).

32.1*

Certification of the Chief Executive Officer, as required by Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).

32.2*

Certification of the Chief Financial Officer, as required by Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).

101.INS*

XBRL Instance Document.

101.SCH*

XBRL Taxonomy Extension Schema Document.

101.CAL*

XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF*

XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB*

XBRL Taxonomy Extension Label Linkbase Document.

101.PRE*

XBRL Taxonomy Extension Presentation Linkbase Document.

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).

* Filed ~~herewith~~herewith.

†** Furnished herewith.

‡‡ Indicates ~~management contract~~that portions of this exhibit (indicated by asterisks) have been omitted pursuant to Regulation S-K, Item 601(b)(10). Such omitted information is not material and the registrant customarily and actually treats such information as private or ~~compensatory plan~~confidential.

81102

Table of Contents

~~SIGNATURES~~

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


			RHYTHM PHARMACEUTICALS, INC.
	~~RHYTHM PHARMACEUTICALS, INC.~~

Dated: ~~November 14, 2017~~May 7, 2024	By:	/s/ ~~Keith M. Gottesdiener~~David P. Meeker, M.D.
		Name: ~~Keith M. Gottesdiener~~David P. Meeker, M.D.
		Title: President and Chief Executive Officer ~~President and Director~~
		(Principal Executive Officer)

Dated: ~~November 14, 2017~~May 7, 2024	By:	/s/ Hunter C. Smith
		Name: Hunter C. Smith
		Title: Chief Financial Officer and Treasurer
		(Principal Financial ~~and Accounting~~ Officer)

82103


Delaware	~~46‑2159271~~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 ☐
~~Large accelerated filer~~ ☐	~~Accelerated filer~~ ☐
Non-accelerated filer ☐
~~Non-accelerated filer~~ ☒	Smaller reporting company ☐
~~(Do not check if a smaller reporting company)~~	Emerging growth company ☒☐


		(Unaudited)
		September 30,	December 31,
	2017		2016

Assets
Current assets:
Cash and cash equivalents	$	27,914	$	6,540
Short-term investments		2,501		3,997
Prepaid expenses and other current assets		1,621		638
Total current assets		32,036		11,175
Property, plant and equipment, net		845		930
Deferred issuance costs		1,698		9
Restricted cash		225		225
Total assets	$	34,804	$	12,339
Liabilities, convertible preferred stock and stockholders’ equity (deficit)
Current liabilities:
Accounts payable	$	2,271	$	1,895
Due to related party		—		105
Deferred rent		81		76
Accrued expenses and other current liabilities		3,108		2,655
Total current liabilities		5,460		4,731
Long-term liabilities:
Deferred rent		250		311
Total liabilities		5,710		5,042
Commitments and contingencies
Preferred stock:
Series A Convertible Preferred Stock, $1.00 par value: 80,950,000 shares authorized; 80,949,999 shares issued and outstanding at September 30, 2017 and 40,000,000 shares issued and outstanding at December 31, 2016; (aggregate liquidation preference of $88,864 and $44,129 at September 30, 2017 and December 31, 2016 respectively)		80,950		40,000
Stockholders’ equity (deficit):
Common stock, $0.001 par value: 29,919,979 shares authorized; 1,770,302 and 10,196,292 shares issued and outstanding and September 30, 2017 and December 31, 2016, respectively		2		10
Series A-1 Convertible Junior Preferred Stock, $0.001 par value, 78,666,209 shares authorized; 78,666,209 and no shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively		79		—
Additional paid-in capital		47,784		43,830
Accumulated deficit		(99,721)		(76,543)
Total stockholders’ equity (deficit)		(51,856)		(32,703)
Total liabilities, convertible preferred stock and stockholders’ equity (deficit)	$	34,804	$	12,339


	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


			Page No.
PART I	FINANCIAL INFORMATION

	Item 1. Condensed Consolidated Financial Statements (Unaudited)		3
3
	Condensed Consolidated Balance Sheets		3

	Condensed ~~Balance Sheets~~		3

	~~Condensed~~Consolidated Statements of Operations and Comprehensive Loss		4
4

	Condensed Consolidated Statements of Stockholders’ Equity		5


	Condensed ~~Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit)~~		5

	~~Condensed~~Consolidated Statements of Cash Flows		6
6

	Notes to Unaudited Condensed Consolidated Financial Statements		7
7

	Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations		23
19

	Item 3. Quantitative and Qualitative Disclosures About Market Risk		35
30

	Item 4. Controls and Procedures		30 35

PART II	OTHER INFORMATION
31

	Item 1. Legal Proceedings		37
31

	Item 1A. Risk Factors		37
31

	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		99
79

	Item 3. Defaults Upon Senior Securities		99
79

	Item 4. Mine Safety Disclosure		100
79

	Item 5. Other Information		100
79
	Item 6. Exhibits		101
		~~Item 6. Exhibits~~		80

SIGNATURES			82 103



	Three months ended September 30,				Nine months ended September 30,
	2017		2016		2017		2016
Operating expenses:
Research and development	$	5,971	$	5,419	$	16,241	$	13,963
General and administrative		2,315		982		5,188		3,567
Total operating expenses		8,286		6,401		21,429		17,530
Loss from operations		(8,286)		(6,401)		(21,429)		(17,530)
Other income (expense):
Revaluation of Series A Investor Instrument		(1,781)		—		(1,863)		—
Interest income, net		51		10		114		24
Total other income (expense):		(1,730)		10		(1,749)		24
Net loss and comprehensive loss	$	(10,016)	$	(6,391)	$	(23,178)	$	(17,506)
Net loss attributable to common stockholders	$	(11,429)	$	(7,191)	$	(26,963)	$	(19,902)
Net loss attributable to common stockholders per common share, basic and diluted	$	(1.78)	$	(0.71)	$	(3.02)	$	(1.95)
Weighted average common shares outstanding, basic and diluted		6,404,254		10,196,292		8,918,389		10,196,292


															Total
	Series A Convertible						Series A-1 Junior				Additional				Stockholders’
	Preferred Stock			Common Stock			Preferred Stock				Paid-In		Accumulated		Equity
	Shares	Amount		Shares	Amount		Shares		Amount		Capital		Deficit		(Deficit)
Balance at December 31, 2015	40,000,000	$	40,000	10,196,292	$	10	—	$	—	$	42,662	$	(50,671)	$	(7,999)
Stock compensation expense	—		—	—		—	—		—		1,168		—		1,168
Net loss	—		—	—		—	—		—		—		(25,872)		(25,872)
Balance at December 31, 2016	40,000,000		40,000	10,196,292		10	—		—		43,830		(76,543)		(32,703)
Stock compensation expense	—		—	—		—	—		—		1,569		—		1,569
Issuance of common stock in connection with exercise of stock options	—		—	152,671		—	—		—		700		—		700
Change in unrealized loss on marketable securities	—		—	—		—	—		—		1		—		1
Issuance of Series A Convertible Preferred Stock	40,949,999		40,622	—		—	—		—		(108)		—		(108)
Settlement of Series A investor instrument	—		328	—		—	—		—		1,863		—		1,863
Exchange of common stock held by LLC entity for Series A-1 Junior Preferred Stock	—		—	(8,578,661)		(8)	78,666,209		79		(71)		—		—
Net loss	—		—	—		—	—		—		—		(23,178)		(23,178)
Balance at September 30, 2017(unaudited)	80,949,999	$	80,950	1,770,302	$	2	78,666,209	$	79	$	47,784	$	(99,721)	$	(51,856)


						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				Nine Months Ended
	September 30,				September 30,
	2017		2016		2017		2016
Numerator:
Net loss	$	(10,016)	$	(6,391)	$	(23,178)	$	(17,506)
Cumulative dividends on convertible preferred shares		(1,413)		(800)		(3,785)		(2,396)
Loss attributable to common shares—basic and diluted	$	(11,429)	$	(7,191)	$	(26,963)	$	(19,902)
Denominator:
Weighted-average number of common shares—basic and diluted		6,404,254		10,196,292		8,918,389		10,196,292
Loss per common share—basic and diluted	$	(1.78)	$	(0.71)	$	(3.02)	$	(1.95)


	Fair value Measurements as of
	September 30, 2017 using:
	Level 1		Level 2		Level 3		Total
Assets:
Cash Equivalents:
Government Funds	$	—	$	—	$	—	$	—
Money Market Funds		26,221		—		—		26,221
Marketable Securities:
Government Funds		2,501		—		—		2,501
Total	$	28,722	$	—	$	—	$	28,722
Liabilities:
2017 Series A Investor Instrument	$	—	$	—	$	—	$	—
Total	$	—	$	—	$	—	$	—


	Fair value Measurements as of
	December 31, 2016 using:
	Level 1		Level 2		Level 3		Total
Assets:
Cash Equivalents:
Government Funds	$	2,000	$	—	$	—	$	2,000
Money Market Funds		1,987		—		—		1,987
Marketable Securities:
Government Funds		3,997		—		—		3,997
Total	$	7,984	$	—	$	—	$	7,984


	September 30, 2017
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
Assets
Government Funds (due within 1 year)	$	2,502	$	—	$	(1)	$	2,501
	$	2,502	$	—	$	(1)	$	2,501


	August 2017 Second Tranche Closing
Series A Convertible Preferred Stock Exercise Price	$	1.00
Series A Convertible Preferred Stock Fair Value	$	1.33
Expected term		1.5 months
Expected volatility		64.0	%
Expected interest rate		0.95	%
Expected dividend yield		—


	Three Months Ended
	September 30,				Change
	2017		2016		$		%
	(in thousands)
Statement of Operations Data:
Operating Expenses:
Research and development	$	5,971	$	5,419	$	552	10	%
General and administrative		2,315		982		1,333	136	%
Total operating expenses		8,286		6,401		1,885	29	%
Loss from operations		(8,286)		(6,401)		(1,885)	29	%
Other (expense) income, net		(1,730)		10		(1,740)	NM	%
Net loss and comprehensive loss	$	(10,016)	$	(6,391)	$	(3,625)	57	%


	Operating Lease
2017	$	73
2018		298
2019		305
2020		311
2021		131
Total		1,118

10.15	Development and Manufacturing Services Agreement, dated as of December 21, 2016, by and between Registrant and Recipharm Monts S.A.S.	S-1	9-5-2017	10.15
10.16†	Offer Letter, dated September 13, 2017, by and between the Registrant and Hunter Smith.	S-1/A	9-25-2017	10.18
10.17†	Offer Letter, dated September 13, 2017, by and between the Registrant and Nithya Desikan.	S-1/A	9-25-2017	10.19
10.18†	Summary of Non‑Employee Director Compensation Policy.	S-1	9-5-2017	10.20
10.19†	2015 Equity Incentive Plan and Form of Option Agreement and Notice of Exercise.	S-1/A	9-25-2017	10.21
31.1*	Certification of the Chief Executive Officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).
31.2*	Certification of the Chief Financial Officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).
32.1*	Certification of the Chief Executive Officer, as required by Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).
32.2*	Certification of the Chief Financial Officer, as required by Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).
101.INS*	XBRL Instance Document.
101.SCH*	XBRL Taxonomy Extension Schema Document.
101.CAL*	XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF*	XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB*	XBRL Taxonomy Extension Label Linkbase Document.
101.PRE*	XBRL Taxonomy Extension Presentation Linkbase Document.

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).

Three Months Ended

March 31,

Research and development summary

Research and development expense