Scholar Rock Holding Corp

Summary of Significant Accounting Policies

The significant accounting policies used in preparation of the unaudited condensed consolidated financial statements are described in the Company’s audited consolidated financial statements as of and for the year ended December 31, 2025, and the notes thereto, which are included in the Company’s Annual Report on Form 10-K. With the exception of the policies disclosed below for accounts receivable, net, inventory and product revenue, net there have been no material changes to the significant accounting policies previously disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025.

Unaudited Interim Financial Information

The condensed consolidated financial statements of the Company included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). The unaudited condensed consolidated financial statements include the accounts of Scholar Rock Holding Corporation and its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. In the opinion of management, the information furnished reflects all adjustments, all of which are of a normal and recurring nature, necessary for a fair presentation of the results for the reported interim periods. The Company considers events or transactions that occur after the balance sheet date but before the financial statements are issued to provide additional evidence relative to certain estimates or to identify matters that require additional disclosure. The results of operations for interim periods are not necessarily indicative of results to be expected for the full year or any other interim period.

Use of Estimates

The preparation of financial statements in accordance with accounting principles generally accepted in the U.S. (“GAAP”) requires management to make estimates and judgments that may affect the reported amounts of assets and liabilities and related disclosures of contingent assets and liabilities at the date of the financial statements and the related reporting of revenues and expenses during the reporting period. Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable under the circumstances. Actual results could differ from those estimates.

Accounts Receivable, Net

Accounts receivable, net consists of trade receivables which arise from product sales and represent amounts due from specialty pharmacy and specialty distributor customers in the U.S. (collectively, the “Customers”). The Company records trade receivables net of discounts, chargebacks, and any allowances for potential credit losses. An allowance for credit losses is determined based on the financial condition and creditworthiness of customers and the Company considers economic factors and events or trends expected to affect future collections experience, including payment history. For the three and nine months ended September 30, 2026, the Company didnot record any expected credit losses related to outstanding accounts receivable.

Inventory

Inventory is comprised of raw materials, work-in-process and finished goods, and includes costs related to third-party contract manufacturing, packaging, freight-in and overhead. Inventory is stated at the lower of cost or net realizable value with cost based on the first-in-first-out method. Materials that may be used for either research and development or commercial purposes where the intended use is not yet known are classified as inventory until the material is consumed or otherwise allocated for research and development. If the material is used or otherwise allocated for research and development, it is expensed as research and development in the period that determination is made.

Prior to regulatory approval of its product candidates, the Company expenses costs associated with the manufacturing of its product candidates to research and development expense unless the Company is reasonably certain such costs have future commercial use and net realizable value. When the Company believes regulatory approval and subsequent commercialization of its product candidates is probable, and the Company also expects future economic benefit from the sales of the product candidates to be realized, the Company will then capitalize the costs of production as inventory.

The Company performs an assessment of the recoverability of capitalized inventory during each reporting period, and it writes down any excess and obsolete inventories to their estimated realizable value in the period in which the impairment is first identified. Such impairment charges, should they occur, are recorded within cost of product revenue. The determination of whether inventory costs will be realizable requires estimates by management. If actual market conditions are less favorable than projected by management, additional write-downs of inventory may be required, which would be recorded as a cost of product revenue in the statements of operations. There wereno expenses recorded for excess inventory or other impairments during thethree and nine months ended September 30, 2026.

Product Revenue, Net

The Company recognizes net product revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers, or ASC 606, which outlines a five-step process for recognizing revenue from contracts with customers: (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the separate performance obligations in the contract, and (v) recognize revenue associated with the performance obligations as they are satisfied. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. The Company sells ISEMBYLD™ (apitegromab-mstn) (the “Product”) in the U.S. to a specialty distributor, which resells the Product to qualified healthcare providers and to specialty pharmacies, which dispense the Product for administration to patients. The Company has determined that the delivery of the Product to a Customer constitutes a single performance obligation that is satisfied at a point in time, when control of the Product transfers upon delivery to the Customer’s designated facility. Net product revenue is recognized at that time, measured at the transaction price.

The trade payment terms with the Company’s customers do not exceed one year and therefore the Company has elected to apply the practical expedient and no amount of consideration has been allocated as a financing component.

Net product revenue is recorded at the transaction price, which reflects adjustments for chargebacks, government and commercial rebates, product and prompt pay discounts, and distributor and specialty pharmacy service fees, co-pay assistance and product returns (collectively, “gross-to-net adjustments”). These adjustments represent variable consideration under ASC 606 and are estimated using the expected value method or most likely amount method and are recorded when revenue is recognized on the sale of the Product. Gross-to-net adjustments are presented as reductions of accounts receivable when settlement is expected to occur through a reduction of the amount paid by the Customer, and as accrued liabilities when settlement is expected to occur through a payment from the Company. The gross-to-net adjustments are estimates based upon information received from external sources, such as written or oral information obtained from customers with respect to their period-end inventory levels and sales to end-users during the period, in combination with management’s informed judgments. Due to the inherent uncertainty of these estimates, the actual results in the future may vary from the Company’s original estimates. The Company will adjust these estimates in the period such variances become known, which would affect net product revenue and earnings.

Each of the gross-to-net adjustments is discussed below:

Chargebacks — Chargebacks represent the estimated obligations to Customers resulting from the difference in contractual and statutory commitments to make the Product available to certain downstream purchasers, including 340B covered entities and federal agencies, at prices lower than the list price charged to Customers who directly purchase the Product from the Company. These reserves are established in the same period that the related revenue is recognized, resulting in a reduction of product revenue and accounts receivable, and consist of amounts that Customers have claimed but for which the Company has not yet issued a credit, together with the credits the Company expects to issue for Product remaining in the distribution channel at the end of each reporting period.

Government and Commercial Rebates —The Company is subject to rebate obligations under government programs, including the Medicaid Drug Rebate Program and the Medicare Part D Manufacturer Discount Program, and expects to enter into rebate arrangements with commercial payers and pharmacy benefit managers in exchange for coverage of, and formulary position for, the Product. 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 current liability which is included in accrued expenses and other current liabilities. The Company’s liability for these rebates consists of invoices received for claims that have not been paid or for which an invoice has not yet been received, estimates of claims for the current period, and estimated future claims for Product that has been recognized as revenue, but remains in the distribution channel.

Discounts — Certain Customer agreements provide for a contractual discount from the Company’s wholesale acquisition cost that is reflected directly on the Customer’s invoice; product revenue and accounts receivable are recorded as the net invoiced amount. The Company estimates prompt pay discounts based on contractual terms and expectations regarding future customer payment patterns. The adjustments are recorded in the same period the related revenue is recognized, resulting in a reduction of product revenue and accounts receivable.

Distributor and Specialty Pharmacy Service Fees — The Company pays fees to its specialty distributor and specialty pharmacy customers for distribution and other services, including a specialty distributor fee based on a contractually determined fixed percentage of sales and specialty pharmacy fees for program and account management, inventory management, enhanced nursing services, data reporting and shipping. To the extent that the Company has determined that these services are not distinct from the Customer’s purchase of the Product, the adjustments are recorded in the same period the related revenue is recognized, resulting in a reduction of product revenue and the establishment of a current liability which is included in accrued expenses and other current liabilities. Where the Company has determined these services are distinct and at fair value, the fees for such services are recorded as operating expenses as the services are provided.

Copay Assistance — The Company offers a co-pay assistance program, which is intended to provide financial assistance to qualified commercially-insured patients with prescription drug co-payments required by payers. Patients whose Product is reimbursed by a federal or state health care program are not eligible for the program. The Company estimates co-pay assistance using program participation and redemption data provided by the third-party administrator of the program, including amounts expected to be redeemed on Product remaining in the distribution channel, and records the estimate as a reduction of product revenue.

Product Returns — The Company’s contracts with its Customers generally provide for returns only if the Product is damaged or defective upon delivery, if there is a shipment error, or if the product is within an eligible expiry window. The Company estimates product return reserves using contractual terms, Product shelf life, contracted days-on-hand limits, available industry data and its own sales information, including its visibility into the inventory remaining in the distribution channel. These reserves are established in the same period that the related revenue is recognized, resulting in a reduction of product revenue and a refund liability, which is included in accrued expenses and other current liabilities in the Company’s financial statements.

Cash, Cash Equivalents and Restricted Cash

The following table reconciles cash, cash equivalents and restricted cash per the balance sheet to the statement of cash flows (in thousands):

The Company maintains restricted cash associated with a letter of credit related to its lease at 301 Binney Street in Cambridge, Massachusetts and an account associated with its corporate credit card program. The portion of the restricted cash that is associated with its letter of credit is recorded in other current assets on the Company’s balance sheet and the portion associated with the collateral account is recorded as a long-term asset on the Company’s balance sheet.

Recently Issued Accounting Pronouncements

In November 2024, the FASB issued ASU No. 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses(“ASU 2024-03”), and in January 2025, the FASB issued ASU No. 2025-01, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date. ASU 2024-03 requires additional disclosure of the nature of expenses included in the income statement as well as disclosures about specific types of expenses included in the expense captions presented in the income statement. ASU 2024-03, as clarified by ASU 2025-01, is effective for public companies for annual periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company is still evaluating the impact on its disclosures in future years as a result of the adoption of ASU 2024-03.