Rhythm Pharmaceuticals (RYTM) 10-Q 4 May 20 2020 Q1 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2020	Apr. 24, 2020
Document and Entity Information
Entity Registrant Name	RHYTHM PHARMACEUTICALS, INC.
Entity Central Index Key	0001649904
Document Type	10-Q
Document Period End Date	Mar. 31, 2020
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	true
Entity Ex Transition Period	true
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		44,091,798
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q1

CONSOLIDATED BALANCE SHEETS

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Current assets:
Cash and cash equivalents	$ 55,776	$ 62,294
Short-term investments	201,648	230,165
Prepaid expenses and other current assets	10,436	9,945
Total current assets	267,860	302,404
Property and equipment, net	3,504	3,671
Right-of-use asset	1,989	2,045
Restricted cash	403	403
Total assets	273,756	308,523
Current liabilities:
Accounts payable	5,932	10,415
Accrued expenses and other current liabilities	11,277	13,530
Lease liability	487	472
Total current liabilities	17,696	24,417
Long-term liabilities:
Deferred rent	2,959	3,086
Total liabilities	20,655	27,503
Commitments and contingencies
Stockholders’ equity:
Preferred Stock, $0.001 par value: 10,000,000 shares authorized; no shares issued and outstanding at March 31, 2020 and December 31, 2019, respectively
Common stock, $0.001 par value: 120,000,000 shares authorized; 44,088,390 and 43,996,753 shares issued and outstanding March 31, 2020 and December 31, 2019, respectively	44	44
Additional paid-in capital	612,552	606,307
Accumulated deficit	(359,495)	(325,331)
Total stockholders’ equity	253,101	281,020
Total liabilities and stockholders’ equity	$ 273,756	$ 308,523

CONSOLIDATED BALANCE SHEETS (Pa

CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Mar. 31, 2020	Dec. 31, 2019
CONSOLIDATED BALANCE SHEETS
Preferred stock par value per share	$ 0.001	$ 0.001
Preferred stock, authorized	10,000,000	10,000,000
Preferred stock, issued	0	0
Preferred stock, outstanding	0	0
Common stock, par value per share	$ 0.001	$ 0.001
Common stock, authorized	120,000,000	120,000,000
Common stock, issued	44,088,390	43,996,753
Common stock, outstanding	43,996,753	43,996,753

CONSOLIDATED STATEMENTS OF OPER

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Operating expenses:
Research and development	$ 22,504	$ 22,761
Selling, general, and administrative	12,796	7,759
Total operating expenses	35,300	30,520
Loss from operations	(35,300)	(30,520)
Other income (expense):
Interest income, net	1,136	1,546
Total other income, net	1,136	1,546
Net loss	(34,164)	(28,974)
Net Income (Loss), Including Portion Attributable to Noncontrolling Interest	$ (34,164)	$ (28,974)
Net loss per share attributable to common stockholders, basic and diluted	$ (0.78)	$ (0.84)
Weighted-average common shares outstanding, basic and diluted	44,049,843	34,417,189
Other comprehensive loss:
Net loss	$ (34,164)	$ (28,974)
Unrealized gain on marketable securities	63
Comprehensive loss	$ (34,101)	$ (28,974)

CONSOLIDATED STATEMENTS OF STOC

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($) $ in Thousands	Common stock	Additional Paid-in Capital	Accumulated Deficit	Total
Beginning balance at Dec. 31, 2018	$ 34	$ 430,824	$ (184,602)	$ 246,256
Beginning balance (in shares) at Dec. 31, 2018	34,410,725
Increase (Decrease) in Stockholders' Equity
Stock compensation expense		2,644		2,644
Issuance of common stock in connection with ESPP		295		295
Issuance of common stock in connection with ESPP (in shares)	12,105
Issuance of common stock in connection with exercise of stock options		54		54
Issuance of common stock in connection with exercise of stock options (in shares)	7,811
Change in unrealized gain (loss) on marketable securities		214		214
Net loss			(28,974)	(28,974)
Ending balance at Mar. 31, 2019	$ 34	434,031	(213,576)	220,489
Ending balance (in shares) at Mar. 31, 2019	34,430,641
Beginning balance at Dec. 31, 2019
Ending balance at Mar. 31, 2020
Beginning balance at Dec. 31, 2019	$ 44	606,307	(325,331)	281,020
Beginning balance (in shares) at Dec. 31, 2019	43,996,753
Increase (Decrease) in Stockholders' Equity
Stock compensation expense		5,475		5,475
Issuance of common stock in connection with ESPP		324		324
Issuance of common stock in connection with ESPP (in shares)	18,673
Issuance of common stock in connection with exercise of stock options		383		383
Issuance of common stock in connection with exercise of stock options (in shares)	72,964
Change in unrealized gain (loss) on marketable securities		63		63
Net loss			(34,164)	(34,164)
Ending balance at Mar. 31, 2020	$ 44	$ 612,552	$ (359,495)	$ 253,101
Ending balance (in shares) at Mar. 31, 2020	44,088,390

CONSOLIDATED STATEMENTS OF CASH

CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Operating activities
Net loss	$ (34,164)	$ (28,974)
Adjustments to reconcile net loss to cash used in operating activities:
Stock-based compensation expense	5,475	2,644
Depreciation and amortization	167	245
Non-cash rent expense	(56)	102
Changes in operating assets and liabilities:
Prepaid expenses and other current assets	(847)	(3,321)
Accounts payable, accrued expenses and other current liabilities	(6,673)	(2,074)
Net cash used in operating activities	(36,098)	(31,378)
Investing activities
Purchases of short-term investments	(15,370)	(55,819)
Maturities of short-term investments	44,243	80,171
Purchases of property and equipment		(811)
Net cash used in investing activities	28,873	23,541
Financing activities
Proceeds from the exercise of stock options	383	21
Proceeds from issuance of common stock from ESPP	324	295
Net cash provided by financing activities	707	316
Net increase in cash, cash equivalents and restricted cash	(6,518)	(7,521)
Cash, cash equivalents and restricted cash at beginning of year	62,697	49,943
Cash, cash equivalents and restricted cash at end of year	$ 56,179	$ 42,422

Nature of Business

Nature of Business	3 Months Ended
	Mar. 31, 2020
Nature of Business
Nature of Business	Rhythm Pharmaceuticals, Inc. Notes to Unaudited Condensed Consolidated Financial Statements (In thousands, except share and per share information) 1. Nature of Business Rhythm Pharmaceuticals, Inc. (the “Company” or “we”), is a late-stage biopharmaceutical company focused on the development and commercialization of therapeutics for the treatment of rare genetic disorders which are characterized by early-onset, severe obesity and an insatiable hunger or hyperphagia. The Company’s lead product candidate is setmelanotide, a potent melanocortin‑4 receptor, or MC4R, agonist for the treatment of rare genetic disorders of obesity. We believe setmelanotide, for which we have exclusive worldwide rights, has the potential to restore dysfunctional MC4R signaling due to impaired MC4R pathway function. MC4R pathway deficiencies result in the disruption of satiety signals and energy homeostasis in the body, which, in turn, leads to intense feelings of hunger and to obesity. The Company’s development efforts are initially focused on obesity related to several single gene‑related, or monogenic, MC4R pathway deficiencies: pro‑opiomelanocortin, or POMC, deficiency obesity; leptin receptor, or LEPR, deficiency obesity; Bardet‑Biedl syndrome, or BBS; Alström syndrome; POMC or LEPR heterozygous deficiency obesity; steroid receptor coactivator 1, or SRC1, deficiency obesity; SH2B adapter protein 1, or SH2B1, deficiency obesity; MC4R deficiency obesity and Smith‑Magenis syndrome, as well as additional disorders as part of investigator-initiated protocols. Currently, there are no effective or approved treatments for these MC4R pathway‑related disorders. We believe that the MC4R 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. The Company has also acquired exclusive, worldwide rights from Takeda Pharmaceutical Company Limited, or Takeda, to develop and commercialize T-3525770, now RM-853. RM-853 is a potent, orally available ghrelin o-acyltransferase inhibitor currently in preclinical development for Prader-Willi Syndrome, or PWS. PWS is a rare genetic disorder that results in hyperphagia and early-onset, life-threatening obesity, for which there are no approved therapeutic options. The Company is subject to risks and uncertainties common to late-stage companies in the biotechnology industry, including but not limited to, risks associated with completing preclinical studies and clinical trials, receiving regulatory approvals for product candidates, development by competitors of new biopharmaceutical products, dependence on key personnel, protection of proprietary technology, compliance with government regulations and the ability to secure additional capital to fund operations. Product candidates currently under development will require significant additional research and development efforts, including preclinical and clinical testing and regulatory approval, prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel and infrastructure and extensive compliance-reporting capabilities. Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will realize revenue from product sales. Corporate Reorganization The Company is 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 its organization and a corporate reorganization, the Company was part of Rhythm Pharmaceuticals, Inc., a Delaware corporation which was organized in November 2008 and which commenced active operations in 2010. Liquidity The Company has incurred operating losses and negative cash flows from operations since inception. As of March 31, 2020, the Company had an accumulated deficit of $359,495. The Company has primarily funded these losses through the proceeds from the sales of common and preferred stock as well as capital contributions received from the former parent company, Rhythm Holdings LLC. To date, the Company has no product revenue and management expects operating losses to continue for the foreseeable future. The Company has devoted substantially all of its resources to its drug development efforts, comprising of research and development, manufacturing, conducting clinical trials for its product candidates, protecting its intellectual property, pre-commercialization activities and general and administrative functions relating to these operations. The future success of the Company is dependent on its ability to develop its product candidates and ultimately upon its ability to attain profitable operations. At March 31, 2020, the Company had $257,424 of cash and cash equivalents and short‑term investments on hand. 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, 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 by another company. Management believes that the Company's existing cash resources will be sufficient to fund the Company's operations through at least the end of 2021.

Summary of Significant Accounti

Summary of Significant Accounting Policies	3 Months Ended
	Mar. 31, 2020
Summary of Significant Accounting Policies
Summary of Significant Accounting Policies	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, or GAAP, and the applicable rules and regulations of the Securities and Exchange Commission, 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, or ASC, and Accounting Standards Updates, or ASU, of the Financial Accounting Standards Board, 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 balance sheet as of March 31, 2020, the statements of operations and comprehensive loss for the three months ended March 31, 2020 and 2019, the statement of stockholders equity and the statement of cash flows for the three months ended March 31, 2020 and 2019 and the related footnote disclosures are unaudited. In management's opinion, the unaudited interim financial statements have been prepared on the same basis as the audited financial statements as of and for the year ended December 31, 2019 and include all adjustments, which are all normal recurring adjustments necessary for the fair presentation of the interim financial statements. The results for the three months ended March 31, 2020 are not necessarily indicative of the results expected for the full fiscal year, any other interim periods, or any future year or period. The accompanying unaudited condensed consolidated financial statements reflect the application of certain significant accounting policies as described below and elsewhere in these notes to the unaudited condensed consolidated financial statements. As of March 31, 2020, there have been no material changes in the Company's significant accounting policies from those that were disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019. 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 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 accruals related to research and development expenses, assumptions used to record stock‑based compensation expense, and the valuation allowance on the Company's 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. 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 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 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 considers its chief executive officer, or CEO, as its chief operating decision maker. The Company and the CEO view the Company’s operations and manages its business in one operating segment operating exclusively in the United States. 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 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. 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 of the assets or liabilities. The Company’s cash equivalents and marketable securities at March 31, 2020 and December 31, 2019 were carried at fair value, determined according to the fair value hierarchy. See Note 4 for further discussion. The carrying amounts reflected in the consolidated balance sheets for accounts payable and accrued expenses approximate their fair values due to their short-term maturities at March 31, 2020 and December 31, 2019, respectively. Net Loss Per Share Basic net loss per share is computed by dividing the net loss by the weighted average number of common shares outstanding during the period, without consideration of potential dilutive securities. Diluted net loss per common share is computed by adjusting the weighted average shares outstanding for the potential dilutive effects of common stock equivalents outstanding during the period calculated in accordance with the treasury stock method. For purposes of the diluted net loss per share calculation, stock options and restricted stock units are considered to be common stock equivalents but have been excluded from the calculation of diluted net loss per share, as their effect would be anti‑dilutive for all periods presented. Therefore, basic and diluted net loss per share were the same for all periods presented. The following table includes the potential common shares, presented based on amounts outstanding at each period end, that were excluded from the computation of diluted net loss per share due to their anti-dilutive effect, for the periods indicated: March 31, 2020 2019 Stock options 4,058,347 3,708,819 Restricted stock units 118,662 — Potential common shares 4,177,009 3,708,819 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 June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses-Measurement of Credit Losses on Financial Instruments, or ASU 2016-13. ASU 2016-13 requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss methodology, which will result in more timely recognition of credit losses. ASU 2016-13 is effective for the Company for annual and interim reporting periods beginning after December 15, 2022. Effective January 1, 2019 the Company adopted FASB ASU 2016‑02, Leases (Topic 842), or ASU 2016‑02. ASU 2016‑02 requires lessees to recognize a right-of-use, or ROU, asset and lease liability for most lease arrangements. The new standard is effective for annual reporting periods beginning after December 15, 2018. The original guidance required application on a modified retrospective basis with the earliest period presented. In August 2018, the FASB issued ASU 2018-11, Targeted Improvements to ASC 842, which included an option to not restate comparative periods in transition and elect to use the effective date of ASC 842, as the date of initial application of transition, which the Company has elected. In addition, the Company elected the package of practical expedients permitted under the transition guidance within the new standard which allowed us to carry forward the historical lease classification. As a result of the adoption of ASC 842 on January 1, 2019, the Company recorded both an operating lease right-of-use asset of $3,265 and a lease liability of $3,636. Additional information and disclosures required by this new standard are contained in Note 5, Right Of Use Asset and Lease Liability. In December 2019, the FASB issued ASU 2019-12, Income Taxes-Simplifying the Accounting for Income Taxes, or ASU 2019-12. ASU 2019-12 eliminates certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The new guidance also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. The standard is effective for annual periods beginning after December 15, 2020 and interim periods within, with early adoption permitted. Adoption of the standard requires certain changes to be made prospectively, with some changes to be made retrospectively. We are currently assessing the impact of this standard on our financial condition and results of operations.

Accrued Expenses

Accrued Expenses	3 Months Ended
	Mar. 31, 2020
Accrued Expenses
Accrued Expenses	3. Accrued Expenses Accrued expenses consisted of the following: March 31, December 31, 2020 2019 Research and development costs $ 7,147 $ 8,059 Professional fees 1,613 1,439 Payroll related 2,370 3,655 Other 147 377 Accrued expenses $ 11,277 $ 13,530

Fair Value of Financial Assets

Fair Value of Financial Assets and Liabilities	3 Months Ended
	Mar. 31, 2020
Fair Value of Financial Assets and Liabilities
Fair Value of Financial Assets and Liabilities	4. Fair Value of Financial Assets and Liabilities As of March 31, 2020 and December 31, 2019, the carrying amount of cash and cash equivalents and short‑term investments was $257,424 and $292,459, respectively, which approximates fair value. Cash and cash equivalents and short‑term investments includes investments in 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. The financial assets valued based on Level 2 inputs consist of corporate debt securities and commercial paper, which consist of investments in highly-rated investment-grade corporations. The following tables present information about the Company's financial assets 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 March 31, 2020 using: Level 1 Level 2 Level 3 Total Assets: Cash Equivalents: Money Market Funds $ 51,714 $ — $ — $ 51,714 Marketable Securities: Corporate Debt Securities and Commercial Paper — 201,648 — 201,648 Total $ 51,714 $ 201,648 $ — $ 253,362 Fair value Measurements as of December 31, 2019 using: Level 1 Level 2 Level 3 Total Assets: Cash Equivalents: Corporate Debt Securities and Commercial Paper $ — $ 8,885 $ — $ 8,885 Money Market Funds 53,014 — — 53,014 Marketable Securities: Corporate Debt Securities and Commercial Paper — 230,165 — 230,165 Total $ 53,014 $ 239,050 $ — $ 292,064 Marketable Securities The following tables summarize the Company's marketable securities: March 31, 2020 Gross Gross Amortized Unrealized Unrealized Fair Cost Gains Losses Value Assets Corporate debt securities and commercial paper (due within 1 year) $ 201,575 $ 348 $ (275) $ 201,648 $ 201,575 $ 348 $ (275) $ 201,648 December 31, 2019 Gross Gross Amortized Unrealized Unrealized Fair Cost Gains Losses Value Assets Corporate debt securities and commercial paper (due within 1 year) $ 230,155 $ 54 $ (44) $ 230,165 $ 230,155 $ 54 $ (44) $ 230,165

Right of Use Asset and Lease Li

Right of Use Asset and Lease Liability	3 Months Ended
	Mar. 31, 2020
Right Of Use Asset and Lease Liability
Right Of Use Asset and Lease Liability	5. 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 5.25 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, 2020, the Company has not entered into any lease arrangements classified as a finance lease. Under ASC 842, the Company determines, at the inception of the contract, whether the contract is or contains a lease based on whether the contract provides the Company the right to control the use of a physically distinct asset or substantially all of the capacity of an asset. Leases with an initial noncancelable term of twelve months or less that do not include an option to purchase the underlying asset that the Company is reasonably certain to exercise are classified as short-term leases. The Company has elected as an accounting policy to exclude from the consolidated balance sheets a right of use asset and lease liability for short-term leases. Upon adoption of ASC 842, the Company elected the transition relief package, permitted within the standard, pursuant to which the Company did not reassess the classification of existing leases, whether any expired or existing contracts contain a lease, and whether existing leases have any initial direct costs. The Company also elected the practical expedient of not separating lease components from non-lease components for all leases. There was no cumulative-effective adjustment to the opening balance of retained earnings. The Company reviews all material contracts for embedded leases to determine if they have a right-of-use asset. The Company recognizes rent expense on a straight-line basis over the lease period. The depreciable life of assets and leasehold improvement are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise. As a result of the adoption of ASC 842 on January 1, 2019, the Company recorded both an operating lease right-of-use asset of $3,265 and a lease liability of $3,636. The standard did not materially impact the consolidated statement of cash flows and had no impact on the consolidated statement of operations. The Company’s office lease includes both lease and non-lease components. Non-lease components relate to real estate taxes, insurance, operating expenses and common area maintenance, which are usually billed at actual amounts incurred proportionate to the Company’s rented square feet of the building. These non-lease components are expensed by the Company as they are incurred and are not included in the measurement of the lease liability. The Company’s corporate headquarters is located in Boston, Massachusetts. This facility houses the Company’s research, clinical, regulatory, commercial and administrative personnel. In August 2018, the Company amended its existing lease agreement and the new lease term commenced May 2019 and has a term of six years with a five-year renewal option to extend the lease. As of January 1, 2019, the Company has not included the five-year renewal option to extend the lease in its measurement of the ROU asset or lease liability. Rent expense, or operating lease costs, for the three months ended March 31, 2020 and 2019, was $138 and $177, respectively. Supplemental cash flow information related to the Company’s lease for the three months ended March 31, 2020, includes cash payments of $195 used in the measurement of its operating lease liability. The following table presents the maturities of the Company’s operating lease liability related to office space as of March 31, 2020, all of which is under a non-cancellable operating lease: Operating Lease Remainder of 2020 $ 591 2021 802 2022 818 2023 834 2024 851 Thereafter 502 Total operating lease payments 4,398 Less: imputed interest 952 Total operating lease liability $ 3,446

Common Stock

Common Stock	3 Months Ended
	Mar. 31, 2020
Preferred Stock and Common Stock
Preferred Stock and Common Stock	6. Common Stock On October 18, 2019 the Company completed a public offering of 9,324,324 shares of common stock at an offering price of $18.50 per share, which included the exercise in full by the underwriters of their option to purchase up to 1,216,216 additional shares of common stock. The Company received net proceeds of $161,352 after deducting underwriting discounts, commissions and offering expenses. On January 6, 2020, the Company announced that Keith Gottesdiener, M.D., the Company’s Chief Executive Officer and President, will step down from his roles with the Company. Dr. Gottesdiener stepped down from his roles as CEO, President and member of the Board of Directors following the submission of the Company’s NDA filing on March 27, 2020. In connection with the above announcement, the Company and Dr. Gottesdiener entered into a separation agreement which entitles Dr. Gottesdiener to certain severance payments and benefits as set forth therein. The Company modified certain equity awards held by Dr. Gottesdiener. The modification included the continuation of vesting of stock options through the end of December 31, 2020 and an extension of the post-termination exercise period for vested options from 90 days to up to two years. In connection with this modification, the Company recorded an incremental compensation charge of $2,811 during the three months ended March 31, 2020. As of March 31, 2020, an aggregate of 8,633,042 shares of common stock were reserved for future issuance under our stock plans, including outstanding stock options and restricted stock units to purchase 7,620,670 shares of common stock and 1,012,372 shares available for future grant under our 2017 Employee Stock Purchase Plan.

Related-Party Transactions

Related-Party Transactions	3 Months Ended
	Mar. 31, 2020
Related-Party Transactions
Related-Party Transactions	7. Related‑Party Transactions Expenses paid directly to consultants and vendors considered to be related parties amounted to $860 and $596 for the three months ended March 31, 2020 and 2019, respectively. Outstanding payments due to these related parties as of March 31, 2020 and December 31, 2019 were $237 and $264, respectively, and were included within accounts payable on the balance sheet.

Summary of Significant Accoun_2

Summary of Significant Accounting Policies (Policies)	3 Months Ended
	Mar. 31, 2020
Summary of Significant Accounting Policies
Basis of Presentation	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, or GAAP, and the applicable rules and regulations of the Securities and Exchange Commission, 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, or ASC, and Accounting Standards Updates, or ASU, of the Financial Accounting Standards Board, 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 balance sheet as of March 31, 2020, the statements of operations and comprehensive loss for the three months ended March 31, 2020 and 2019, the statement of stockholders equity and the statement of cash flows for the three months ended March 31, 2020 and 2019 and the related footnote disclosures are unaudited. In management's opinion, the unaudited interim financial statements have been prepared on the same basis as the audited financial statements as of and for the year ended December 31, 2019 and include all adjustments, which are all normal recurring adjustments necessary for the fair presentation of the interim financial statements. The results for the three months ended March 31, 2020 are not necessarily indicative of the results expected for the full fiscal year, any other interim periods, or any future year or period. The accompanying unaudited condensed consolidated financial statements reflect the application of certain significant accounting policies as described below and elsewhere in these notes to the unaudited condensed consolidated financial statements. As of March 31, 2020, there have been no material changes in the Company's significant accounting policies from those that were disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.
Use of Estimates	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 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 accruals related to research and development expenses, assumptions used to record stock‑based compensation expense, and the valuation allowance on the Company's 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	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.
Off-Balance Sheet Risk and Concentrations of Credit Risk	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 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 sheet risk, such as foreign exchange contracts, option contracts, or other foreign hedging arrangements.
Segment Information	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 considers its chief executive officer, or CEO, as its chief operating decision maker. The Company and the CEO view the Company’s operations and manages its business in one operating segment operating exclusively in the United States.
Fair Value Measurements	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 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. 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 of the assets or liabilities. The Company’s cash equivalents and marketable securities at March 31, 2020 and December 31, 2019 were carried at fair value, determined according to the fair value hierarchy. See Note 4 for further discussion. The carrying amounts reflected in the consolidated balance sheets for accounts payable and accrued expenses approximate their fair values due to their short-term maturities at March 31, 2020 and December 31, 2019, respectively.
Net Loss Per Share	Net Loss Per Share Basic net loss per share is computed by dividing the net loss by the weighted average number of common shares outstanding during the period, without consideration of potential dilutive securities. Diluted net loss per common share is computed by adjusting the weighted average shares outstanding for the potential dilutive effects of common stock equivalents outstanding during the period calculated in accordance with the treasury stock method. For purposes of the diluted net loss per share calculation, stock options and restricted stock units are considered to be common stock equivalents but have been excluded from the calculation of diluted net loss per share, as their effect would be anti‑dilutive for all periods presented. Therefore, basic and diluted net loss per share were the same for all periods presented. The following table includes the potential common shares, presented based on amounts outstanding at each period end, that were excluded from the computation of diluted net loss per share due to their anti-dilutive effect, for the periods indicated: March 31, 2020 2019 Stock options 4,058,347 3,708,819 Restricted stock units 118,662 — Potential common shares 4,177,009 3,708,819
Subsequent Events	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	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 June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses-Measurement of Credit Losses on Financial Instruments, or ASU 2016-13. ASU 2016-13 requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss methodology, which will result in more timely recognition of credit losses. ASU 2016-13 is effective for the Company for annual and interim reporting periods beginning after December 15, 2022. Effective January 1, 2019 the Company adopted FASB ASU 2016‑02, Leases (Topic 842), or ASU 2016‑02. ASU 2016‑02 requires lessees to recognize a right-of-use, or ROU, asset and lease liability for most lease arrangements. The new standard is effective for annual reporting periods beginning after December 15, 2018. The original guidance required application on a modified retrospective basis with the earliest period presented. In August 2018, the FASB issued ASU 2018-11, Targeted Improvements to ASC 842, which included an option to not restate comparative periods in transition and elect to use the effective date of ASC 842, as the date of initial application of transition, which the Company has elected. In addition, the Company elected the package of practical expedients permitted under the transition guidance within the new standard which allowed us to carry forward the historical lease classification. As a result of the adoption of ASC 842 on January 1, 2019, the Company recorded both an operating lease right-of-use asset of $3,265 and a lease liability of $3,636. Additional information and disclosures required by this new standard are contained in Note 5, Right Of Use Asset and Lease Liability. In December 2019, the FASB issued ASU 2019-12, Income Taxes-Simplifying the Accounting for Income Taxes, or ASU 2019-12. ASU 2019-12 eliminates certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The new guidance also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. The standard is effective for annual periods beginning after December 15, 2020 and interim periods within, with early adoption permitted. Adoption of the standard requires certain changes to be made prospectively, with some changes to be made retrospectively. We are currently assessing the impact of this standard on our financial condition and results of operations.

Summary of Significant Accoun_3

Summary of Significant Accounting Policies (Tables)	3 Months Ended
	Mar. 31, 2020
Summary of Significant Accounting Policies
Schedule of potential common shares, presented based on amounts outstanding at each period end, excluded from computation of diluted net loss per share attributable to common stockholders	March 31, 2020 2019 Stock options 4,058,347 3,708,819 Restricted stock units 118,662 — Potential common shares 4,177,009 3,708,819

Accrued Expenses (Tables)

Accrued Expenses (Tables)	3 Months Ended
	Mar. 31, 2020
Accrued Expenses
Schedule of accrued expenses	March 31, December 31, 2020 2019 Research and development costs $ 7,147 $ 8,059 Professional fees 1,613 1,439 Payroll related 2,370 3,655 Other 147 377 Accrued expenses $ 11,277 $ 13,530

Fair Value of Financial Asset_2

Fair Value of Financial Assets and Liabilities (Tables)	3 Months Ended
	Mar. 31, 2020
Fair Value of Financial Assets and Liabilities
Schedule of financial assets and liabilities measured at fair value on a recurring basis	Fair value Measurements as of March 31, 2020 using: Level 1 Level 2 Level 3 Total Assets: Cash Equivalents: Money Market Funds $ 51,714 $ — $ — $ 51,714 Marketable Securities: Corporate Debt Securities and Commercial Paper — 201,648 — 201,648 Total $ 51,714 $ 201,648 $ — $ 253,362 Fair value Measurements as of December 31, 2019 using: Level 1 Level 2 Level 3 Total Assets: Cash Equivalents: Corporate Debt Securities and Commercial Paper $ — $ 8,885 $ — $ 8,885 Money Market Funds 53,014 — — 53,014 Marketable Securities: Corporate Debt Securities and Commercial Paper — 230,165 — 230,165 Total $ 53,014 $ 239,050 $ — $ 292,064
Schedule of marketable securities	March 31, 2020 Gross Gross Amortized Unrealized Unrealized Fair Cost Gains Losses Value Assets Corporate debt securities and commercial paper (due within 1 year) $ 201,575 $ 348 $ (275) $ 201,648 $ 201,575 $ 348 $ (275) $ 201,648 December 31, 2019 Gross Gross Amortized Unrealized Unrealized Fair Cost Gains Losses Value Assets Corporate debt securities and commercial paper (due within 1 year) $ 230,155 $ 54 $ (44) $ 230,165 $ 230,155 $ 54 $ (44) $ 230,165

Right of Use Asset and Lease _2

Right of Use Asset and Lease Liability (Tables)	3 Months Ended
	Mar. 31, 2020
Right Of Use Asset and Lease Liability
Schedule of operating lease maturities	Operating Lease Remainder of 2020 $ 591 2021 802 2022 818 2023 834 2024 851 Thereafter 502 Total operating lease payments 4,398 Less: imputed interest 952 Total operating lease liability $ 3,446

Nature of Business (Details)

Nature of Business (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Nature of Business
Accumulated deficit	$ (359,495)	$ (325,331)
Carrying amount of cash and cash equivalents and short term investments	$ 257,424	$ 292,459

Summary of Significant Accoun_4

Summary of Significant Accounting Policies - Additional Information (Details)	3 Months Ended
	Mar. 31, 2020segmentitem
Off Balance Sheet Risk and Concentrations of Credit Risk
Number of federally insured financial institutions | item	2
Segment Information
Number of operating segments | segment	1

Summary of Significant Accoun_5

Summary of Significant Accounting Policies - Shares Excluded For EPS (Details) - shares	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Shares excluded from the computation of diluted net loss per share
Unvested shares from share-based compensation that were anti-dilutive	4,177,009	3,708,819
Employees stock purchase plan
Shares excluded from the computation of diluted net loss per share
Unvested shares from share-based compensation that were anti-dilutive	4,058,347	3,708,819
Restricted stock units
Shares excluded from the computation of diluted net loss per share
Unvested shares from share-based compensation that were anti-dilutive	118,662

Summary of Significant Accoun_6

Summary of Significant Accounting Policies - Application of New or Revised Accounting Standards (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019	Jan. 01, 2019
Summary of Significant Accounting Policies
Right-of-use asset	$ 1,989	$ 2,045	$ 3,265
Operating Lease, Liability	$ 3,446		$ 3,636

Accrued Expenses (Details)

Accrued Expenses (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Accrued Expenses
Research and development costs	$ 7,147	$ 8,059
Professional fees	1,613	1,439
Payroll related	2,370	3,655
Other	147	377
Accrued expenses	$ 11,277	$ 13,530

Fair Value of Financial Asset_3

Fair Value of Financial Assets and Liabilities (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Fair Value of Financial Assets and Liabilities
Carrying amount of cash and cash equivalents and short term investments	$ 257,424	$ 292,459
Fair value of financial assets and liabilities
Marketable Securities	201,648	230,165
Fair value of assets	201,648	230,165
Corporate Debt Securities and Commercial Paper
Fair value of financial assets and liabilities
Marketable Securities	201,648	230,165
Recurring | Estimated fair value
Fair value of financial assets and liabilities
Fair value of assets	253,362	292,064
Recurring | Corporate Debt Securities and Commercial Paper | Estimated fair value
Fair value of financial assets and liabilities
Cash Equivalents		8,885
Marketable Securities	201,648	230,165
Recurring | Money Market Funds | Estimated fair value
Fair value of financial assets and liabilities
Cash Equivalents	51,714	53,014
Recurring | Level 1 | Estimated fair value
Fair value of financial assets and liabilities
Fair value of assets	51,714	53,014
Recurring | Level 1 | Money Market Funds | Estimated fair value
Fair value of financial assets and liabilities
Cash Equivalents	51,714	53,014
Recurring | Level 2 | Estimated fair value
Fair value of financial assets and liabilities
Fair value of assets	201,648	239,050
Recurring | Level 2 | Corporate Debt Securities and Commercial Paper | Estimated fair value
Fair value of financial assets and liabilities
Cash Equivalents		8,885
Marketable Securities	$ 201,648	$ 230,165

Fair Value of Financial Asset_4

Fair Value of Financial Assets and Liabilities - Marketable Securities (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Fair Value of Financial Assets and Liabilities
Amortized Cost	$ 201,575	$ 230,155
Gross Unrealized Gains	348	54
Gross Unrealized Losses	(275)	(44)
Fair Value	201,648	230,165
Corporate Debt Securities and Commercial Paper
Fair Value of Financial Assets and Liabilities
Amortized Cost	201,575	230,155
Gross Unrealized Gains	348	54
Gross Unrealized Losses	(275)	(44)
Fair Value	201,648	230,165
Estimated fair value | Recurring | Corporate Debt Securities and Commercial Paper
Fair Value of Financial Assets and Liabilities
Fair Value	201,648	230,165
Level 2 | Estimated fair value | Recurring | Corporate Debt Securities and Commercial Paper
Fair Value of Financial Assets and Liabilities
Fair Value	$ 201,648	$ 230,165

Right of Use Asset and Lease _3

Right of Use Asset and Lease Liability (Details) - USD ($) $ in Thousands	Jan. 01, 2019	Mar. 31, 2020	Mar. 31, 2019	Dec. 31, 2019	Aug. 31, 2018
Right Of Use Asset and Lease Liability
Remaining term of operating lease (in years)		5 years 3 months
Operating lease discount rate		10.00%
Transition relief package	true
Lease term (in years)					6 years
Lease renewal term (in years)		5 years			5 years
Option to extend		true
Rent expense, or operating lease costs		$ 138	$ 177
Cash payments in the measurement of operating lease liability		195
Right-of-use asset	$ 3,265	1,989		$ 2,045
Operating Lease, Liability	$ 3,636	$ 3,446

Right of Use Asset and Lease _4

Right of Use Asset and Lease Liability - Operating Lease Maturities (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Jan. 01, 2019
Lessee, Operating Lease, Liability, Payment, Due [Abstract]
Remainder of 2020	$ 591
2021	802
2022	818
2023	834
2024	851
Thereafter	502
Total operating lease payments	4,398
Less: imputed interest	952
Total operating lease liability	$ 3,446	$ 3,636

Common Stock (Details)

Common Stock (Details) - USD ($)	Jan. 06, 2020	Oct. 18, 2019	Mar. 31, 2020	Dec. 31, 2019
Preferred and Common Stock
Common Stock, Shares Authorized			120,000,000	120,000,000
Common Stock, Par or Stated Value Per Share			$ 0.001	$ 0.001
Preferred Stock, Shares Authorized			10,000,000	10,000,000
Preferred Stock, Par or Stated Value Per Share			$ 0.001	$ 0.001
Issuance of stock (in shares)		9,324,324
Price per share		$ 18.50
Net proceeds		$ 161,352,000
Underwriter option to purchase
Preferred and Common Stock
Issuance of stock (in shares)		1,216,216
2017 Employee Stock Purchase Plan
Preferred and Common Stock
Common Stock, Capital Shares Reserved for Future Issuance			8,633,042
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant			1,012,372
2017 Employee Stock Purchase Plan | Equity Option
Preferred and Common Stock
Common Stock, Capital Shares Reserved for Future Issuance			7,620,670
Employees stock purchase plan | Separation Agreement | Dr. Gottesdiener
Preferred and Common Stock
Incremental compensation charge			$ 2,811
Employees stock purchase plan | Separation Agreement | Dr. Gottesdiener | Minimum
Preferred and Common Stock
Share-based Compensation Arrangement by Share-based Payment Award, Post-termination Exercise Period	90 days
Employees stock purchase plan | Separation Agreement | Dr. Gottesdiener | Maximum
Preferred and Common Stock
Share-based Compensation Arrangement by Share-based Payment Award, Post-termination Exercise Period	2 years

Related-Party Transactions (Det

Related-Party Transactions (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Dec. 31, 2019
Accounts Payable
Related Party Transaction
Outstanding payments due to consultants	$ 237		$ 264
Consultant
Related Party Transaction
Expenses paid to consultants	$ 860	$ 596