13D Filing: OrbiMed Advisors and Rhythm Pharmaceuticals Inc (RYTM)

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(1)

This percentage is calculated based upon 27,131,484 outstanding shares of common stock, par value $0.001 per share (the “Shares”), of Rhythm Pharmaceuticals, Inc. (the “Issuer”), as set forth in the Issuer’s Form 424B4, filed with the Securities and Exchange Commission on October 5, 2017.

(1)

This percentage is calculated based upon 27,131,484 outstanding shares of common stock, par value $0.001 per share (the “Shares”), of Rhythm Pharmaceuticals, Inc. (the “Issuer”), as set forth in the Issuer’s Form 424B4, filed with the Securities and Exchange Commission on October 5, 2017.

(1)

This percentage is calculated based upon 27,131,484 outstanding shares of common stock, par value $0.001 per share (the “Shares”), of Rhythm Pharmaceuticals, Inc. (the “Issuer”), as set forth in the Issuer’s Form 424B4, filed with the Securities and Exchange Commission on October 5, 2017.

Item 1.

Security and Issuer

This Schedule 13D (this “Statement”) relates to the common stock, par value $0.001 per share (the “Shares”), of Rhythm Pharmaceuticals, Inc., a corporation organized under the laws of Delaware (the “Issuer”), with its principal executive offices located at 500 Boylston Street, 11^th floor, Boston, MA 02116.  The common stock is listed on the NASDAQ Global Market under the ticker symbol “RYTM”.  Information given in response to each item shall be deemed incorporated by reference in all other items, as applicable.

On October 10, 2017, the Issuer completed its initial public offering pursuant to which the Issuer agreed to issue and sell to the participants 8,107,500 Shares (the “IPO”).  The purchase price for each Share was $17.00.  As a result of the IPO, the Issuer’s total number of outstanding Shares increased to 27,131,484.

Item 2.

Identity and Background

(a)            This Statement is being filed by OrbiMed Advisors LLC (“Advisors”), a limited liability company organized under the laws of Delaware, OrbiMed Capital GP V LLC (“GP V”), a limited liability company organized under the laws of Delaware, and Samuel D. Isaly (“Isaly”), an individual (collectively, the “Reporting Persons”).

(b) – (c)  Advisors, a registered investment adviser under the Investment Advisers Act of 1940, as amended, is the sole managing member of GP V, which is the sole general partner of OrbiMed Private Investments V, LP (“OPI V”).  OPI V holds Shares as described herein.  Advisors, GP V, and Isaly have their principal offices at 601 Lexington Avenue, 54th Floor, New York, New York 10022.

The directors and executive officers of Advisors and GP V are set forth on Schedules I and II, attached hereto.  Schedules I and II set forth the following information with respect to each such person:

(i)

name;

(ii)

business address;

(iii)

present principal occupation or employment and the name, principal business and address of any corporation or other organization in which such employment is conducted;

(iv)

citizenship.

(d) – (e)   During the last five years, neither the Reporting Persons nor any Person named in Schedule I or II have been (i) convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (ii) a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws.

(f)          Isaly is a citizen of the United States.

Item 3.

Source and Amount of Funds or Other Consideration

On and prior to the close of August 3, 2015, Advisors and GP V, pursuant to their authority under the limited partnership agreement of OPI V, as more particularly referred to in Item 6 below, caused OPI V to purchase 10,937,500 shares of Series A Preferred Stock of the Issuer.  Upon closing of the Issuer’s initial public offering, each share of Series A Preferred Stock converted into Shares on the basis of one Share for each 9.17 shares of Series A Preferred Stock.

On and prior to the close of December 1, 2015, Advisors and GP V, pursuant to their authority under the limited partnership agreement of OPI V, as more particularly referred to in Item 6 below, caused OPI V to purchase 6,562,500 shares of Series A Preferred Stock of the Issuer.  Upon closing of the Issuer’s initial public offering, each share of Series A Preferred Stock converted into Shares on the basis of one Share for each 9.17 shares of Series A Preferred Stock.

On and prior to the close of January 6, 2017, Advisors and GP V, pursuant to their authority under the limited partnership agreement of OPI V, as more particularly referred to in Item 6 below, caused OPI V to purchase 2,924,766 shares of Series A Preferred Stock of the Issuer.  Upon closing of the Issuer’s initial public offering, each share of Series A Preferred Stock converted into Shares on the basis of one Share for each 9.17 shares of Series A Preferred Stock.

On and prior to the close of August 18, 2017, Advisors and GPV, pursuant to their authority under the limited partnership agreement of OPI V, as more particularly referred to in Item 6 below, caused OPI V to purchase 2,924,765 shares of Series A Preferred Stock of the Issuer.  Upon closing of the Issuer’s initial public offering, each share of Series A Preferred Stock converted into Shares on the basis of one Share for each 9.17 shares of Series A Preferred Stock.

On and prior to the close of October 10, 2017, Advisors and GP V, pursuant to their authority under the limited partnership agreement of OPI V, as more particularly referred to in Item 6 below, caused OPI V to purchase 355,000 Shares.

The source of funds for such purchases was the working capital of OPI V and capital contributions made to OPI V.

As a result of the transactions described in this Item 3, the Reporting Persons may be deemed to be the beneficial owners of approximately 10.7% of the outstanding Shares.  GP V, as the general partner of OPI V, may be deemed to be the beneficial owner of approximately 10.7% of the outstanding Shares.  Advisors, as the managing member of GP V, may be deemed to be the beneficial owner of approximately 10.7% of the outstanding Shares.  Isaly, as the managing member of Advisors and the owner of a controlling interest in Advisors, may be deemed to be the beneficial owner of approximately 10.7% of the outstanding Shares.  None of the Reporting Persons have acquired or disposed of any additional Shares since October 10, 2017.

Item 4.

Purpose of Transaction

The Shares initially have been acquired by the Reporting Persons for the purpose of making an investment in the Issuer and not with the intention of acquiring control of the Issuer’s business on behalf of OPI V.

The Reporting Persons from time to time intend to review their investment in the Issuer on the basis of various factors, including the Issuer’s business, financial condition, results of operations and prospects, general economic and industry conditions, the securities markets in general and those for the Issuer’s Shares in particular, as well as other developments and other investment opportunities.  Based upon such review, the Reporting Persons will take such actions in the future as the Reporting Persons may deem appropriate in light of the circumstances existing from time to time.  If the Reporting Persons believe that further investment in the Issuer is attractive, whether because of the market price of the Shares or otherwise, they may acquire Shares or other securities of the Issuer either in the open market or in privately negotiated transactions.  Similarly, depending on market and other factors, the Reporting Persons may determine to dispose of some or all of the Shares currently owned by the Reporting Persons or otherwise acquired by the Reporting Persons either in the open market or in privately negotiated transactions.

Except as set forth in this Statement, the Reporting Persons have not formulated any plans or proposals which relate to or would result in: (a) the acquisition by any person of additional securities of the Issuer or the disposition of securities of the Issuer, (b) an extraordinary corporate transaction, such as a merger, reorganization or liquidation, involving the Issuer or any of its subsidiaries, (c) a sale or transfer of a material amount of the assets of the Issuer or any of its subsidiaries, (d) any change in the present Board of Directors or management of the Issuer, including any plans or proposals to change the number or term of directors or to fill any existing vacancies on the board, (e) any material change in the Issuer’s capitalization or dividend policy of the Issuer, (f) any other material change in the Issuer’s business or corporate structure, (g) any change in the Issuer’s charter or bylaws or other instrument corresponding thereto or other action which may impede the acquisition of control of the Issuer by any person, (h) causing a class of the Issuer’s securities to be deregistered or delisted from a national securities exchange or to cease to be authorized to be quoted in an inter-dealer quotation system of a registered national securities association, (i) a class of equity securities of the Issuer becoming eligible for termination of registration pursuant to Section 12(g)(4) of the Act or (j) any action similar to any of those enumerated above.

Item 5.

Interest in Securities of the Issuer

(a) — (b) As of the date of this filing, the Reporting Persons may be deemed, for purposes of Rule 13d-3 of the Act, directly or indirectly, including by reason of their mutual affiliation, to be the beneficial owners of 2,901,295 Shares held of record by OPI V.  Based upon information contained in the Issuer’s Form 424B4, filed with the Securities and Exchange Commission (the “SEC”) on October 5, 2017, such Shares constitutes approximately 10.7% of the issued and outstanding Shares.  Advisors, pursuant to its authority as the sole managing member of GP V, which is the sole general partner of OPI V, may be deemed to indirectly beneficially own the Shares held by OPI V.  GP V, pursuant to its authority as the general partner of OPI V, may be deemed to indirectly beneficially own the Shares held by OPI V.  Isaly, pursuant to his authority as the managing member of Advisors and owner of a controlling interest in Advisors, pursuant to its limited liability company agreement, may be deemed to also indirectly beneficially own the Shares attributable to Advisors.  As a result, Isaly, Advisors and GP V share the power to direct the vote and the disposition of the Shares held of record by OPI V.

In addition, Advisors and GP V, pursuant to their authority under the limited partnership agreement of OPI V, prior to the date of this filing, caused OPI V to enter into the agreements referred to in Item 6 below.

(c)          Except as disclosed in Item 3, none of the Reporting Persons has effected any transaction during the past sixty (60) days in any Shares.  As a result of several transactions effected between 2015 and 2017, prior to OPI V’s purchase of 335,000 Shares in the IPO, OPI V held 23,349,531 shares of Series A Preferred Stock, beneficial ownership of which was attributable to the Reporting Persons as described in Item 5(a)-(b).

(d)          Not applicable.

(e)          Not applicable.

Item 6.

Contracts, Arrangements, Understandings or Relationship with Respect to Securities of the Issuer

In addition to the relationships between the Reporting Persons described in Items 2, 3 and 5 above, GP V is the sole general partner of OPI V, pursuant to the terms of the limited partnership agreement of OPI V.  Advisors is the sole managing member of GP V, pursuant to the terms of the limited liability company agreement of GP V.  Pursuant to these agreements and relationships, Advisors and GP V have discretionary investment management authority with respect to the assets of OPI V.  Such authority includes the power of GP V and Advisors to vote and otherwise dispose of securities purchased by OPI V.  The number of outstanding Shares held of record by OPI V is 2,901,295.  Advisors and GP V may be considered to hold indirectly 2,901,295 Shares.

Jonathan Silverstein (“Silverstein”), an employee of Advisors, had been a member of the Board of Directors of the Issuer since August 2015. Silverstein stepped down from the board as of the closing of the IPO.

Lock-Up Agreement

In connection with the IPO, OPI V entered into a lock-up agreement with the Issuer (the “Lock-Up Agreement”).  The Lock-Up Agreement provides that, subject to limited exceptions, OPI V will not, during the period ending 180 days after the date of the IPO (the “Lock-Up Period”), directly or indirectly (1) sell, assign, transfer, pledge, contract to sell, or otherwise dispose of, any Shares or securities convertible into or exercisable or exchangeable for Shares with respect to which OPI V has or acquires the power of disposition or (2) enter into any swap or other agreement that transfers, in whole or in part, the economic risk of ownership of any such Shares.

After the Lock-Up Period expires, the Reporting Persons’ Shares will be eligible for sale in the public market, subject to any applicable limitations under Rule 144 under the Securities Act of 1933, as amended (the “Securities Act”), and other applicable U.S. securities laws.

The foregoing description of the Lock-Up Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the form of Lock-Up Agreement, a copy of which is filed as Exhibit 2 and incorporated herein by reference.

In addition, OPI V and certain other stockholders of the Issuer entered into an amended and restated investors’ rights agreement with the Issuer (the “Investors Rights Agreement”), dated as of August 21, 2017.  Pursuant to the Investor Rights Agreement and subject to the terms and conditions therein, the parties agreed that:

The Investors Rights Agreement further provides that, in the event that the Issuer determines to register any of its securities under the Securities Act, either for its own account or for the account of other security holders, the stockholders who are party to the Investors Rights Agreement, including OPI V, will be entitled to certain “piggyback” registration rights allowing the holders to include their shares in such registration, subject to certain marketing and other limitations.  The underwriters of any underwritten offering will have the right to limit the number of registrable securities to be included in the registration statement, but such number may not be below 30% of the total number of Shares included in such registration statement.

Subject to certain limitations, the Issuer will pay the registration expenses of the holders of the shares registered pursuant to the demand, Form S-3 and piggyback registration rights described above.

The Investors Rights Agreement contains customary cross-indemnification provisions, pursuant to which the Issuer is obligated to indemnify the selling stockholders in the event of, among other things, material misstatements or omissions in the registration statement attributable to the Issuer, and the selling stockholders are obligated to indemnify the Issuer for, among other things, material misstatements or omissions attributable to them.

The foregoing description of the Investor Rights Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Investor Rights Agreement, a copy of which is filed as Exhibit 3 and incorporated herein by reference.

Item 7.

Materials to Be Filed as Exhibits

Exhibit	Description
1.	Joint Filing Agreement among OrbiMed Advisors LLC, OrbiMed Capital GP V LLC and Samuel D. Isaly.
2.	Lock-Up Agreement.
3.	Amended and Restated Investors’ Rights Agreement by and among the Issuer and each of the persons listed on Schedule A thereto, dated as of August 21, 2017 (incorporated by reference to Exhibit 4.2 to the Issuer’s Registration Statement on Form S-1 (SEC 333-220337), filed with the SEC on September 5, 2017).

SIGNATURE

After reasonable inquiry and to the best of each of the undersigned’s knowledge and belief, each of the undersigned certifies that the information set forth in this statement is true, complete and correct.

Dated: October 20, 2017

	OrbiMed Advisors LLC
	By:	/s/ Samuel D. Isaly
		Name:	Samuel D. Isaly
		Title:	Managing Member
	OrbiMed Capital GP V LLC
	By:	OrbiMed Advisors LLC
	By:	/s/ Samuel D. Isaly
		Name:	Samuel D. Isaly
		Title:	Managing Member
	Samuel D. Isaly
		/s/ Samuel D. Isaly
		Name:	Samuel D. Isaly

Schedule I

The name and present principal occupation of each of the executive officers and directors of OrbiMed Advisors LLC are set forth below.  Unless otherwise noted, each of these persons are United States citizens and have as their business address 601 Lexington Avenue, 54th Floor, New York, NY 10022.

Name	Position with Reporting Person	Principal Occupation
Samuel D. Isaly	Managing Member	Managing Member OrbiMed Advisors LLC
Carl L. Gordon	Member	Member OrbiMed Advisors LLC
Sven H. Borho German and Swedish Citizen	Member	Member OrbiMed Advisors LLC
Jonathan T. Silverstein	Member	Member OrbiMed Advisors LLC
W. Carter Neild	Member	Member OrbiMed Advisors LLC
Geoffrey C. Hsu	Member	Member OrbiMed Advisors LLC
Evan D. Sotiriou	Chief Financial Officer	Chief Financial Officer OrbiMed Advisors LLC

Schedule II

The business and operations of OrbiMed Capital GP V LLC are managed by the executive officers and directors of its managing member, OrbiMed Advisors LLC, set forth on Schedule I.

EXHIBIT INDEX

Exhibit	Description
1.	Joint Filing Agreement among OrbiMed Advisors LLC, OrbiMed Capital GP V LLC and Samuel D. Isaly.
2.	Lock-Up Agreement.
3.	Amended and Restated Investors’ Rights Agreement by and among the Issuer and each of the persons listed on Schedule A thereto, dated as of August 21, 2017 (incorporated by reference to Exhibit 4.2 to the Issuer’s Registration Statement on Form S-1 (SEC 333-220337), filed with the SEC on September 5, 2017).

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