RHYTHM PHARMACEUTICALS INC

Previous wording

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 related notes appearing elsewhere in this Quarterly Report on Form 10-Q. In addition to historical information, some of the information contained in this discussion and analysis* or set forth elsewhere in this Quarterly Report on Form 10-Q contains forward-looking statementswithin 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, commercialization, and sales 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 our expectations regarding our existing cash, operating losses, expenses and sources of future financing; the sufficiency of our cash, cash equivalents and short-term investments to fund our operations; our ability to hire and retain necessary personnel; patient enrollments and the timing thereof; the timing of announcements regarding results of clinical trials; our ability to protect our intellectual property; ongoing activities under and our ability to negotiate our collaboration and license agreements, if needed, and the impact of termination; our marketing, commercial sales, revenue generation, and cost of revenue; expectations surrounding our manufacturing arrangements; the potential financial impact and, the ongoing integration process of Xinvento B.V.; the impact of the current or future economic conditions 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 are forward-looking statements. These forward-looking statements are neither promises nor guarantees of future performance, and

Current wording

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 related notes appearing elsewhere in this Quarterly Report on Form 10-Q. In addition to historical information, some of the information contained in this discussion and analysis* or set forth elsewhere in this Quarterly Report on Form 10-Q contains forward-looking statementswithin 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, commercialization, and sales of IMCIVREE (setmelanotide), the design, success, cost and timing of our product development activities and clinical trials for setmelanotide, RM-718, bivamelagon (LB54640), and our other product candidates; our ability to obtain regulatory approval for setmelanotide in further indications, as well as forRM-718, bivamelagon (LB54640), and our other product candidates; our financial performance, including our expectations regarding our existing cash, operating losses, expenses and sources of future financing; the sufficiency of our cash, cash equivalents and short-term investments to fund our operations; our ability to hire and retain necessary personnel; patient enrollments and the timing thereof; the timing of announcements regarding results of clinical trials; our ability to protect our intellectual property; ongoing activities under and our ability to negotiate our collaboration and license agreements, if needed, and the impact of termination; our marketing, commercial sales, revenue generation, and cost of revenue; expectations surrounding our manufacturing arrangements; the potential financial impact and, the ongoing integration process of Xinvento B.V.; the impact of the current or future economic conditions 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 are forward-looking statements. These forward-looking statements are neither promises nor guarantees of future performance, and are subject to a variety of known and unknown risks, uncertainties, and 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. We discuss factors that we believe could cause or contribute to these differences below a…

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Previous wording

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 receptor (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 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 genetic variants or traumatic injury. The MC4R pathway is an endocrine pathway in the brain that is responsible for regulating hunger, caloric intake and energy expenditure, which consequently affect body weight. IMCIVREE, an MC4R agonist for which we hold worldwide rights, is the first-ever therapy developed for patients with certain rare diseases that is approved or authorized in the United States, European Union (EU), Great Britain, Canada and other countries and regions. IMCIVREE is approved by the U.S. Food and Drug Administration (FDA) for chronic weight management in adult and pediatric patients 6 years of age and older with monogenic or 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 uncertain significance (VUS); or (ii) Bardet-Biedl syndrome (BBS). The European Commission (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 2 years of age and above. Great Britain’s Medicines & Healthcare Products Regulatory Agency (MHRA) 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. We have achieved market access or named patient sales of 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.

Current wording

We are a global, commercial-stage biopharmaceutical company dedicated to transforming the lives of patients living with rare neuroendocrine diseases. We are focused on advancing our melanocortin-4 receptor (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 therapies for a subset of individuals who have hyperphagia, a pathological hunger that leads to abnormal food-seeking behaviors, and severe obesity due to impaired MC4R pathway signaling, which may be caused by genetic variants or injury to the hypothalamic region. The MC4R pathway is an endocrine pathway in the brain that is responsible for regulating hunger, caloric intake and energy expenditure, which consequently affect body weight. IMCIVREE, an MC4R agonist for which we hold worldwide rights, is the first-ever therapy developed for patients with certain rare diseases that is approved or authorized in the United States, European Union (EU), Great Britain, Canada and other countries and regions. IMCIVREE is approved by the U.S. Food and Drug Administration (FDA) for chronic weight management in adult and pediatric patients 6 years of age and older with monogenic or 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 uncertain significance (VUS); or (ii) Bardet-Biedl syndrome (BBS). The European Commission (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 2 years of age and above. Great Britain’s Medicines & Healthcare Products Regulatory Agency (MHRA) has authorized IMCIVREE for the treatment of obesity and the control of hunger associated with genetically

Previous wording

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 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 indications, are ongoing. With RM-718, in March 2024 we initiated Phase 1 in-human trials, including a multiple-ascending dose study in patients with hypothalamic obesity, and in July 2024, we announced that we had dosed the first patients in our Phase 2 trial evaluating LB54640 in patients with hypothalamic obesity, and in July 2024, we announced that we had dosed the first patients in our Phase 2 trial evaluating LB54640 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 primary endpoint 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 United States to expand the label for IMCIVREE to treat patients as young as 2 years of age with these diseases based on these data.

Current wording

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 one of our new drug candidates, RM-718, which is designed to be a more selective MC4R agonist with weekly administration, or bivamelagon (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 acquired hypothalamic obesity. Our Phase 3 EMANATE trial, comprised of four independent substudies evaluating setmelanotide in genetically caused MC4R pathway diseases is ongoing, and we recently completed our Phase 2 DAYBREAK trial evaluating setmelanotide in additional genetic indications. With RM-718, in March 2024 we initiated Phase 1 in-human trials, including a multiple-ascending dose study in patients with acquired hypothalamic obesity and expect to begin dosing patients in Part C of this Phase 1 trial in the first quarter of 2025, following completion and final analysis of non-clinical toxicology studies to support long-term dosing and the submission to applicable regulatory authorities of our amendment to the protocol to enable longer term dosing of these patients. In July 2024, we announced that we had dosed the first patients in our Phase 2 trial evaluating bivamelagon (LB54640) in patients with acquired 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 primary endpoint 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 United States to expand the label for IMCIVREE to treat patients as young as 2 years of age with these diseases based on these data.

Previous wording

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

Current wording

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 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, PCSK1 or LEPR deficiencies,

Previous wording

and BBS. We estimate the epidemiology for patients with hypothalamic obesity to be between 5,000 and 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 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 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, especially, therapeutic options.

Current wording

and BBS. We estimate the epidemiology for patients with acquired hypothalamic obesity to be between 5,000 and 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 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 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, especially, therapeutic options.

Previous wording

We also expect to achieve the following near-term milestones:

Current wording

We currently expect to achieve the following near-term milestones:

Previous wording

preferred stock. Since our initial public offering, or IPO, on October 10, 2017 and our underwritten follow-on offerings through October 2022, we have 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 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 June 2022, we entered into the Revenue Interest Financing Agreement (“RIFA”), with entities managed by HealthCare Royalty Partners, collectively referred to as the Investors, and through December 31, 2023 have received cumulative proceeds of $96.7 million, net of certain transaction costs.

Current wording

Up until recently, our operations have been limited primarily to conducting research and development activities for setmelanotide. To date, we have not generated sufficient cash flow from product sales and have financed our operations primarily through the proceeds received from our sales of common and preferred stock, royalty interest financing, asset sales, as well as capital contributions from the former parent company, Rhythm Holdings LLC. From August 2015 through August 2017, we raised aggregate net proceeds of $80.8 million through our issuance of series A preferred stock. Since our initial public offering, or IPO, on October 10, 2017 and our underwritten follow-on offerings through October 2022, we have 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 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 June 2022, we entered into the Revenue Interest Financing Agreement (“RIFA”), with entities managed by HealthCare Royalty Partners, collectively referred to as the Investors, and through December 31, 2023 have received cumulative proceeds of $96.7 million, net of certain transaction costs. On April 1, 2024, we entered into an Investment Agreement with certain investors resulting in the issuance of convertible preferred

Previous wording

As of June 30, 2024 we had an accumulated deficit of $1,068.4 million. Our net loss was $32.3 million and $173.6 million for the three and six months ended June 30, 2024 and 2023, respectively. We expect to continue to incur significant expenses and operating losses for the foreseeable future. Our expenses may increase in connection with our ongoing activities, as we:

Current wording

As of September 30, 2024 we had an accumulated deficit of $1.1 billion. Our net loss was $43.6 million, $217.3 million, $44.2 million and $143 million for the three and nine months ended September 30, 2024 and 2023, respectively. We expect to continue to incur significant expenses and operating losses for the foreseeable future. Our expenses may increase in connection with our ongoing activities, as we:

Previous wording

As of June 30, 2024, our existing cash and cash equivalents and short-term investments were approximately $319.1 million. On April 15, 2024, we entered into an Investment Agreement with certain investors resulting in the issuance of convertible preferred stock to certain investors and proceeds to the Company of $150.0 million, as disclosed in Note 10, “Series A Preferred Stock”, to the unaudited condensed consolidated financial statements included under Part I, Item 1 of this Quarterly Report on Form 10-Q.

Current wording

As of September 30, 2024, our existing cash and cash equivalents and short-term investments were approximately $298.4 million.

Previous wording

To date, we have generated approximately $152.5 million in product revenue. 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 made our first sales in France during March 2022 under the 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.

Current wording

To date, we have generated approximately $185.8 million in product revenue. 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 made our first sales in France during March 2022 under the 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.

Previous wording

We are unable to predict the duration and costs of the current or future clinical trials of 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 congenital hyperinsulinism (CHI) will depend on a variety of factors, including:

Current wording

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

Previous wording

Product revenue, net. Product revenue, net increased by $9.9 million to $29.1 million for the three months ended June 30, 2024 from $19.2 million for the three months ended June 30, 2023, an increase of 51%. 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. For the three months ended June 30, 2024 and 2023, a substantial amount of our product revenue, or 74% and 84%, respectively, was generated from sales of our product to patients in the United States.

Current wording

Product revenue, net. Product revenue, net increased by $10.7 million to $33.3 million for the three months ended September 30, 2024 from $22.5 million for the three months ended September 30, 2023, an increase of 48%. 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. For the three months ended September 30, 2024 and 2023, a substantial amount of our product revenue, or 68% and 80%, respectively, was generated from sales of our product to patients in the United States.

Previous wording

Cost of sales. Cost of sales increased by $0.7 million to $2.9 million for the three months ended June 30, 2024 from $2.2 million for the three months ended June 30, 2023, an increase of 32%, which was driven by a corresponding increase in revenue in the three months ended June 30, 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 $0.7 million increase in cost of sales in the three months ended June 30, 2024 from the same period in 2023 was due to $0.5 million of additional royalties due to our growth in sales and $0.2 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.

Current wording

Cost of sales. Cost of sales increased by $1.4 million to $3.8 million for the three months ended September 30, 2024 from $2.4 million for the three months ended September 30, 2023, an increase of 59%, which was driven by a corresponding increase in revenue in the three months ended September 30, 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 September 30, 2024 from the same period in 2023 was due to $0.5 million of additional royalties due to our growth in sales and $0.9 million attributed to increased product cost associated with higher sales volume. We expect cost of sales to continue to increase as a percentage of product revenue, net to continue to be in a range of 10% to 12% in the foreseeable future.

Previous wording

Research and development expense. Research and development expense increased by $87.4 million to $158.9 million for the six months ended June 30, 2024 from $71.5 million for the six months ended June 30, 2023, an increase of 122%. The net increase was primarily due to the following:

Current wording

*Research and development expense.*Research and development expense increased by $4.4 million to $37.9 million for the three months ended September 30, 2024 from $33.6 million for the three months ended September 30, 2023, an increase of 13%. The net increase was primarily due to the following:

Previous wording

*Selling, general and administrative expense.*Selling, general and administrative expense increased by $6.4 million to $36.4 million for the three months ended June 30, 2024 from $30.0 million for the three months ended June 30, 2023, an increase of 21%. The increase was primarily due to the following:

Current wording

*Selling, general and administrative expense.*Selling, general and administrative expense increased by $4.9 million to $35.4 million for the three months ended September 30, 2024 from $30.5 million for the three months ended September 30, 2023, an increase of 16%. The increase was primarily due to the following:

Previous wording

*Other income (expense), net.*Other income (expense), net increased by $8.8 million to $8.7 million for the three months ended June 30, 2024 from $0.1 million for the three months ended June 30, 2023. The increase was primarily due to the following:

Current wording

*Other income (expense), net.*Other income (expense), net decreased by $0.3 million to ($0.1) million for the three months ended September 30, 2024 from $0.2 million for the three months ended September 30, 2023. The increase was primarily due to the following:

Previous wording

*Product revenue, net.*Product revenue, net increased by $24.3 million to $55.0 million for the six months ended June 30, 2024 from $30.7 million for the six months ended June 30, 2023, an increase of 80%. 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. During the six months ended June 30, 2024 and 2023, a substantial amount of our product revenue, or 75% and 85%, respectively, has been generated in the United States.

Current wording

*Product revenue, net.*Product revenue, net increased by $35.1 million to $88.3 million for the nine months ended September 30, 2024 from $53.2 million for the nine months ended September 30, 2023, an increase of 66%. 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. During the nine months ended September 30, 2024 and 2023, a substantial amount of our product revenue, or 73% and 84%, respectively, has been generated in the United States.

Previous wording

Cost of sales. Cost of sales increased by $2.1 million to $5.8 million for the six months ended June 30, 2024, an increase of 57%. Cost of sales primarily reflects a royalty due to Ipsen, on our net product sales and the amortization of our capitalized sales-based milestone payment made to Ipsen, upon our first commercial sale in the U.S. and EU, the cost of product as well as costs associated with our patient assistance programs. Specifically, the $2.1 million increase in cost of sales for the six months ended June 30, 2024 was due to $1.2 million of additional royalties due to our growth in net product revenue and $0.9 million due to higher product costs from higher net product revenue. We expect cost of sales as a percentage of product revenue, net to be in a range of 10% to 12% in the foreseeable future.

Current wording

Cost of sales. Cost of sales increased by $3.5 million to $9.6 million for the nine months ended September 30, 2024, an increase of 58%. Cost of sales primarily reflects a royalty due to Ipsen, on our net product sales and the amortization of our capitalized sales-based milestone payment made to Ipsen, upon our first commercial sale in the U.S. and EU, the cost of product as well as costs associated with our patient assistance programs. Specifically, the $3.5 million increase in cost of sales for the nine months ended September 30, 2024 was due to $1.8 million of additional royalties due to our growth in net product revenue and $1.7 million due to higher product costs from higher net product revenue. We expect cost of sales as a percentage of product revenue, net to be in a range of 10% to 12% in the foreseeable future.

Previous wording

*Selling, general and administrative expense.*Selling, general and administrative expense increased by $16.1 million to $70.8 million for the six months ended June 30, 2024 from $54.7 million for the six months ended June 30, 2023, an increase of 29%. The increase was primarily due to the following:

Current wording

*Selling, general and administrative expense.*Selling, general and administrative expense increased by $21.0 million to $106.2 million for the nine months ended September 30, 2024 from $85.2 million for the nine months ended September 30, 2023, an increase of 25%. The increase was primarily due to the following:

Previous wording

*Other income (expense), net.*Other (income) expense, net was $7.5 million for the six months ended June 30, 2024 as compared to $0.2 million for the six months ended June 30, 2023.

Current wording

*Other income (expense), net.*Other income (expense), net was $7.4 million for the nine months ended September 30, 2024 as compared to $0.4 million for the nine months ended September 30, 2023.

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As of June 30, 2024, our cash and cash equivalents and short-term investments were approximately $319.1 million.

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As of September 30, 2024, our cash and cash equivalents and short-term investments were approximately $298.4 million.

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The following table provides information regarding our cash flows for the six months ended June 30, 2024 and 2023:

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The following table provides information regarding our cash flows for the nine months ended September 30, 2024 and 2023:

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Net cash used in operating activities was $69.8 million for the six months ended June 30, 2024 and consisted primarily of a net loss of $173.6 million adjusted for non-cash items of $108.1 million, which consisted of non-cash stock-based compensation, depreciation and amortization, rent expense and the change in the fair value of our embedded derivative liability, totaling $18.3 million. Our net loss adjusted for non-cash items also includes $92.4 million of acquired In Process Research and Development (IPR&D) assets, which are classified as investing activities. The change in operating assets and liabilities used net cash of approximately $4.3 million, primarily driven by net increases in accounts receivable and inventory of $6.1 million, net decreases in accounts payable and accrued expenses of $0.8 million, offset by net decreases in long-term assets of $2.2 million and net decreases in prepaid expenses of $0.3 million.

Current wording

Net cash used in operating activities was $95.0 million for the nine months ended September 30, 2024 and consisted primarily of a net loss of $217.3 million adjusted for non-cash items of $121.9 million, which consisted of non-cash stock-based compensation, non-cash interest expense, non-cash accretion and amortization of short-term investments, non-cash accretion of other current liability, gain on settlement of forward contract, depreciation and amortization, rent expense and the change in the fair value of our embedded derivative liability, totaling $29.5 million. Our net loss adjusted for non-cash items also includes $92.4 million of acquired In Process Research and Development (IPR&D) assets, which are classified as investing activities. The change in operating assets and liabilities used net cash of approximately $0.3 million, primarily driven by net increases in accounts receivable and inventory of $9.7 million, offset by net decreases in accounts payable and accrued expenses of $6.7 million and net decreases in long-term assets of $3.2 million.

Previous wording

Net cash used in operating activities was $77.6 million for the six months ended June 30, 2023 and consisted primarily of a net loss of $98.9 million adjusted for non-cash items of $22.6 million, which consisted of non-cash stock-based compensation, depreciation and amortization, rent expense and the change in the fair value of our embedded derivative liability. Our net loss also includes $5.7 million of acquired IPR&D assets, which are classified as investing activities. The change in operating assets and liabilities used net cash of approximately $6.9 million, primarily driven by a net increase in accounts payable and accrued expenses of $5.8 million due to the timing of payments, offset by increases in accounts receivable and inventory of $10.9 million and a net increase in prepaid expenses and other assets of $1.9 million.

Current wording

Net cash used in operating activities was $106.8 million for the nine months ended September 30, 2023 and consisted primarily of a net loss of $143.0 million adjusted for non-cash items of $34.7 million, which consisted of noncash stock-based compensation, depreciation and amortization, rent expense and the change in the fair value of our embedded derivative liability. Our net loss also includes $5.7 million of acquired In-Process Research and Development (IPR&D) assets, which are classified as investing activities. The change in operating assets and liabilities used net cash of approximately $4.1 million, primarily driven by net increases in accounts receivable and inventory of $13.2 million from our increasing revenues and a net increase in prepaid expenses and other assets of $0.8 million, offset by a net increase in accounts payable and accrued expenses of $9.9 million due to the timing of vendor and employee bonus payments.

Previous wording

Net cash provided by investing activities was $21.5 million for the six months ended June 30, 2024 and relates to gross maturities of short-term investments of $127.8 million, offset by purchases of short term investments for $66.3 million and cash used for the purchase of LGC’s proprietary compound LB54640 for $40.0 million in January 2024.

Current wording

Net cash used in investing activities was $69.3 million for the nine months ended September 30, 2024 and relates to purchases of short term investments for $201.9 million and cash used for the purchase of LGC’s proprietary compound bivamelagon (LB54640) for $40.0 million in January 2024, offset by gross maturities of short-term investments of $173.1 million.

Previous wording

Net cash provided by investing activities

Current wording

Net cash provided by financing activities

Previous wording

Net cash provided by financing activities was $150.4 million for the six months ended June 30, 2024, and consisted of net proceeds of $147.8 million from the issuance of Series A Preferred Stock as well as proceeds of $8.4 million from the exercise of stock options and the issuance of common stock from our Employee Stock Purchase Plan. These proceeds were offset by $5.8 million of repayments of our deferred royalty obligation.

Current wording

Net cash provided by financing activities was $152.9 million for the nine months ended September 30, 2024, and consisted of net proceeds of $147.8 million from the issuance of Series A Preferred Stock as well as proceeds of $14.3 million from the exercise of stock options and the issuance of common stock from our Employee Stock Purchase Plan. These proceeds were offset by $9.1 million of repayments of our deferred royalty obligation.

Previous wording

Net cash used in financing activities was $1.1 million for the six months ended June 30, 2023, which comprised of $2.7 million of repayments of our deferred royalty obligation, partially offset by $1.6 million of cash proceeds from the exercise of stock options and the issuance of common stock from our Employee Stock Purchase Plan.

Current wording

Net cash provided by financing activities was $71.9 million for the nine months ended September 30, 2023, and consisted of net proceeds of $48.9 million from the issuance of common stock, net proceeds of $24.4 million from the final investment tranche of our deferred royalty obligation and proceeds of $3.5 million from the exercise of stock options, and the issuance of common stock from Employee Stock Purchase Plan. These proceeds were offset by $4.8 million of repayments of our deferred royalty obligation.

Previous wording

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 10, “Series A Preferred Stock”. We expect that our existing cash and cash equivalents and short-term investments as of June 30, 2024, will be sufficient to fund our operations into 2026. Our cash and cash equivalents are maintained at 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.

Current wording

We expect that our existing cash and cash equivalents and short-term investments as of September 30, 2024, will be sufficient to fund our operations into 2026. Our cash and cash equivalents are maintained at 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.

Previous wording

As of June 30, 2024, apart from additional contractual obligations under our acquisition of Xinvento and LGC’s LB54640 as disclosed in Note 3, “Asset Acquisitions” to the 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

Current wording

As of September 30, 2024, apart from additional contractual obligations under our acquisition of Xinvento and LGC’s bivamelagon (LB54640)as disclosed in Note 3, “Asset Acquisitions” to the unaudited condensed consolidated financial statements included under Part I, Item 1 of this Quarterly Report on Form 10-Q, there were no other material

Previous wording

contractual obligations and commitments as reported in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

Current wording

changes to our principal contractual obligations and commitments as reported in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.