Rhythm Pharmaceuticals, Inc. (RYTM) Earnings Call Transcript & Summary

Good morning, everyone. Thanks for joining us at our Virtual Bank of America Conference. I am Tazeen Ahmad, one of the biotech analysts here at the firm. It's my pleasure this morning to start off the conference with our first presenting company, Rhythm Pharmaceuticals. With me this morning are two folks who might know a little bit about the company, Hunter Smith, who is the Interim Chief Executive Officer and Chief Financial Officer; as well as Murray Stewart, Chief Medical Officer. Good morning, gentlemen. Thanks for joining us this morning.

Thank you.

Good morning, Tazeen. Thanks so much for hosting us.

Of course. So as we kick off our virtual conference, a lot of time we try to make sure we keep certain things similar to our person-to-person meetings that we've had in the past. And so I always like to introduce companies and ask the speaker to give us a quick 1 minute overview of the company, if you could for anyone on the line who might not be as familiar with your story. So maybe hope if you could do that?

Sure. Thanks so much, Tazeen, and thanks to BAML for setting up this conference and keeping things going with the investment community and great biotech companies during COVID. Rhythm Pharmaceuticals is a company that is focused on transforming the care of patients suffering from rare genetic causes of obesity. We're doing this by targeting the melanocortin-4 receptor pathway. The pathway is a pathway in the hypothalamus of the brain that regulates satiety and resting energy expenditure. And this is a pathway that has been studied for many decades and is a well-validated target that nobody has successfully developed an MC4R agonist in the past. Rhythm has -- Rhythm's lead candidate, which is called setmelanotide, is currently in submission of its NDA for the first 2 ultra-rare genetic indications in the pathway, POMC and LEPR deficiency obesity. We submitted at the end of March, under breakthrough, and we hope to have the filing accepted relatively imminently. We expect to also submit for our MAA before the end of this quarter. And then separately from that, we have 2 additional Phase III indications, which are still rare, but are less rare called Bardet-Biedl and Alström syndrome, where we have a fully enrolled Phase III study for both of those indications on which we expect to read out top line data, but before the end of this year. The pathway is a rich path with lots of opportunities for therapeutic intervention. And we also have 5 additional pathway indications in Phase II in our Basket Study today. So it's a very focused strategy with a very rich opportunity for expansion over a multiyear period in a specific window of a very, very significant public health problem, which is obesity. Thank you.

Okay. Great. Thanks for the quick overview. So maybe we could go into a little bit more details on your indications. So for POMC and LEPR deficiency obesity, for example, can you remind us of the pivotal weight loss and hunger reduction data that we saw in those 2 trials? And anything a little bit more specific you can share about your NDA? Your confidence in the review process and just regulatory time lines, given the unusual situation we're in with the pandemic?

Yes. It's Murray here, I'd be delighted to answer that question. So you see, our primary indications were POMC and LEPR. We completed those Phase III studies, and the results were really outstanding. For the POMC study, we saw 80% of our subjects getting 10% weight loss. So 8 out of 10 subjects by 52 weeks had lost more than 10% of their weight. In fact, the mean weight reduction in the POMC population was 25%, which is for those individuals, it was 70 pounds of fat mass they were losing. Associated with this, there was a 27% reduction in hunger. All of these are statistically and clinically meaningful. The LEPR patients, 5 out of LEPR lost 10% weight loss, the mean weight reduction was 12.5%, and there was a 40% reduction in mean hunger scores. So the results in terms of weight loss and reduction of hunger were quite remarkable, and this was accompanied by a good safety profile. So we submitted those data to both the FDA and in the process of submitting it to the MAA. So where we are with the NDA, that was -- the data was submitted in March. We've already heard back from the FDA and starting to get questions through. We formally hope to get agreement of acceptance of the file by the end of this month. And if we get priority view, the time clock would start ticking, which we'd hopefully get us approval by November. So we've had good dialogue with the FDA. The results are good, and we're looking forward to approval by the end of the year. For the MAA, we've already had pre-submission meetings. And just recently, the CHMP granted us an accelerated assessment time line. So we hope to submit the file to the MAA in the next month or 2. The idea is with accelerated assessment, we should hopefully get approval in the first quarter 2021. So from a clinical trial point of view for POMC and LEPR, very encouraging results, submitting to the U.S. and European authorities and on track with our time lines.

Okay. Perfect. And I guess in line with that, whether you -- where are you in your launch preparation? What do you think the right-sized commercial force would look like, given that this is a rare disease? And where in the process are you in terms of building that out?

So it's good question. And these are -- so first of all, the context is important. These are ultra-rare indications. So POMC, we estimate between 100 and 500 patients in the U.S. and for LEPR between 500 and 1,500 patients in the U.S. And we -- these patients are diagnosed genetically. They present with early onset obesity and extreme hyperphagia, but the only way to confirm the diagnosis, which is a homozygous condition, is through genetic sequencing, which is not very common in the U.S. So particularly in the United States, the understanding of the diseases has always been more advanced than Europe. Sequencing for obesity, especially early onset obesity has always been more advanced in Europe and so the diagnosis rates run quite low, and they run very low in the United States. Rhythm has been pioneering that sequencing to try to find these patients and bring them to treatment. And this is a different type of situation than Bardet-Biedl, where the patients are diagnosed syndromically and later confirmed genetically. So POMC and LEPR, to us, represent strong proof that the drug is efficacious, particularly in patients with the most fundamental types of pathway impairment. Our plan to commercialize -- what we've been doing through sequencing is talking about the numbers of patients that we have confirmed with the POMC and LEPR genetics, where so we had talked about identifying 29 of those patients genetically in June of last year in an update that we had done for about our broader sequencing programs. And we plan to continue through sequencing to confirm further patients as the year goes on this year, although that's slowed somewhat because of COVID. Our plan from a commercial perspective is to invest in commercialization, commensurate with the number of patients we've identified in the U.S. and then the other major markets in the rest of the world. Our U.S. infrastructure is coming into place, and we're going to discuss the scale and scope of what we're doing for commercialization in greater detail publicly once we've got the file. It's sometime between the file being accepted and our approval later in the year.

Okay. I will look forward to that then. So can you also share with us essentially an update on your trial? Is that melano type of patients with Bardet-Biedl and Alström syndromes, which you had mentioned at the intro has been potentially bigger than the indications you're initially going for? Specifically, can you talk to us about trial design? How you've -- how it's a little bit different from Phase III trials that you've done for your earlier indications and any use of placebo control?

It's Murray. I'll take that question. Thank you. So yes, the Bardet-Biedl, Alström Phase III trial is first of all, has 38 patients in this study, 32 Bardet-Biedl patients and 6 Alström patients. And in most clinical studies, the ideal is to have a placebo control group. So in this study, we've got upfront a 1:1 randomization. So half the patients go on setmelanotide, starting at 2 and up to 3. And the other half go on placebo. And this is double blind. So the individual subjects don't know whether they're on active therapy of placebo. This is treated for 14 weeks, and then [Audio Gap] are moved on to setmelanotide for a further 52 weeks. So we've got a placebo phase study upfront and then we got opportunity for all patients to receive active therapy. The primary endpoint of the study is proportion of patients over 12 years of age who've got at least 10% reduction in body weight. In addition to that, we're also looking at the mean reduction weight and similarly to the POMC LEPR, we'll be looking at hunger as a secondary parameter, where we'll be looking at the mean percentage reduction in hunger scores and the proportion of patients who've achieved 25% reduction in hunger. The good news about the Phase III study is that it finished recruitment at the end of last year. So we're obviously waiting for the 52 weeks, which will be the end of this year. Everyone is being followed up carefully during this period, and we hope our result at the end of the year.

Okay. Perfect. And then can you give us a little bit more detail on what investors should expect to see in terms of this top data? The primary and secondary endpoints, you did say there were 32 BBS patients with 6 Alström enrolled. Can you give us a sense of how many responders you would need?

Yes. So we expect to get at least 10 patients having a 10% reduction in body weight. Historically, the people with Bardet-Biedl syndrome and Alström, we've looked at in the CRIBBS registry struggled to lose weight. So a conservative estimate would be that these individuals, maybe 10% of them, if they really tried hard, would lose 10% of the weight. And that would mean that out of the -- just under 40 patients, you might expect 3 or 4 if they were on placebo trying really hard that they may get their weight loss down. So if we see more than 10 individuals out of the 40, having a 10% weight loss, clearly, that's a drug effect, and that would be statistically as well as clinically significant. So we're really looking for more than 10 people out of the 40 to get 10% weight loss in the 52-week time period. And the results we'll be able to have, hopefully, by the end of the year. We'll have the full package in 2021. But top line, we should be able to have the primary endpoint, the secondary endpoint of mean weight reduction and reduction of hunger scores. So we hope to be able to share with you the success by the end of the year.

Okay. So you're still expecting the very top line data at the end of this year. Is that right?

Yes, end of the year or the first quarter. Certainly, we'll have the more full results in 2021. We would hope to have at least the main headline results by the end of the year.

Okay. Great. So I guess to continue with BBS and Alström. What kind of steps are you taking to ensure compliance and data integrity?

Yes. So obviously, in the COVID situation, we're concerned about people getting to their clinic with the stay-at-home orders. What is good about our clinical studies is that they can obviously continue on their injections at home. So they self-administer the injections. We've got good supplies of our medicines to the patients. So we are not worried about our supply chain. We've been able to get drug to the patients. So the patients are getting their drug. And we can do many of the interviews over the phone. So we can actually ask them how they're doing in terms of their safety, and we can ask them about their hunger scores and sets out over the phone. We are actually able to use weight measurements at home. So we have calibrated scales that we're delivering to people's houses. They can stand on the scales and due to iPad technology, the investigator can assess their weight by looking at the iPad measurements as they stand on the scale at home. So the good news about the clinical studies with Bardet-Biedl is we're able to do quite a bit virtually. Ideally, we get patients to come into the clinic, but our backup plan is virtual visits. What is good is, a lot of this now is follow-up. So every 6 weeks to 3 months, we follow-up. From a compliance point of view, we've actually been using apps to measure their hunger score on a daily basis. So they get a reminder what we was your hunger score today, and we can see how they're recording that. And if they don't record it, we can send a reminder, what was your hunger score today. So we've got app reminders to help with compliance, and also taking the medication. So the good news is we can follow these patients up, even if they have stay-at-home orders. So we're able to collect the data, do the virtual visits and collect the measurements that will make this study compliant and the data integrity to a high standard.

Okay. Great. So maybe just to clarify on addressable patients. I think Hunter, at the beginning, you gave us an idea of the size opportunity for POMC and LEPR. But how are you thinking about the addressable patients for BBS and Alström there, meaningfully larger? How many patients would you say are diagnosed today versus needing to go find additional ones?

So we've seen estimates of the diagnosis rates that run anywhere from 1,500 to 2,000. So that's a diagnosed prevalence. And we believe that -- so we've used -- we've tended to use 2,500 for the total epi. And the penetrance of obesity and hyperphagia in that population is not quite complete, but it runs in sort of north of 85% in both populations. So we think that the -- because of the different registries and strong longitudinal patient cohorts, which exist in Europe, there's a lot of -- there's a widespread identification of patients. So for example, the CRIBBS registry in the United States has over 500 patients in it. That's run by the Marshfield Clinic in Wisconsin. So overall, I think our feeling is that this is a population that, first of all, is eager for a therapeutic option for obesity and hyperphagia, which is among the most severe symptoms of the -- or severe manifestations of the syndrome. And that was demonstrated by the fact that we had a very significant demand for enrollment in the study. And in fact, in some of the more -- in 1 or 2 of the more prominent sites, we actually were turning away enrollment, so we didn't get overweighted towards 1 or 2 sites. So we feel very good about that addressable patient population and the demand for therapy.

Okay, great. So it does seem like you're trying to build out a pipeline within a product with setmelanotide. And so last fall, you announced an expansion of your Phase II Basket trial to look at that setmelanotide with several additional genetic obesity indications. To the extent that you can, can you talk us through how you pick these indications? And walk us through that study design and your expectations on when we could see data for those?

Yes. Happy to do. So the Basket Study is really a great opportunity for us to look at different genes and different cohorts of individuals in a Phase II setting. So the confidence of the POMC and LEPR showed us that if there was a defect in a gene upstream of the pathway that resulted in patients presenting with severe hyperphagia and obesity that, that was then correctable by setmelanotide by being an agonism at the receptor. So then due to the faulty signaling, setmelanotide then corrected that signaling. So with that strong proof-of-concept in POMC and LEPR, it gave us confidence, say, okay, well, let's look at other genes upstream in the MC4 pathway. So this has allowed us to look at genes such as SRC1. And SRC1 is a transitional coactivator that alters POMC expression. So we know these individuals are hyperphagic and obese. If they got abnormal signaling and decreased POMC expression, we think that contributes to their hyperphagia and obesity, and then we'll give setmelanotide with hopefully showing reduction in hunger and weight loss. SH2B1 is another gene we're looking at. SH2B1 is an adapter protein that regulates leptin receptor activity. So again, if there's abnormal leptin receptor activity, that may explain why these individuals are hyperphagic and obese, with the hope that setmelanotide will correct the hunger and obesity. We're also looking at people who have problems with the MC4 receptor itself. And that's important because it may be that setmelanotide will help some individuals who are abnormal signaling at the receptor itself. So there are different genes that we're able to look at in the Basket Study. What success will look like will be similar to what we've shown before. We know that 10% weight loss in hyperphagic obese is a remarkable clinical endpoint to get to. We know that it's going to work. We normally see success in 3 to 4 months where we see weight loss. And the idea is we want to see individuals in this cohort get to that 10% weight loss, show that it's sustained and shows it's in a large proportion of patients who have defects in those genes. So we're looking at them over this year, and we hope to have some data on at least 1 of the cohorts at the end of the year. Although COVID is making the Basket a little bit more of a challenge, given it's harder to get new patients in, in comparison to the Bardet-Biedl who we've been able to follow up. But the whole idea of the Basket Study is to allow us to look at 10 to 20 patients with different gene defects, so we can see the effects of setmelanotide in those populations.

Okay. Great. Now I guess, going back to the idea of compliance. So of course, the drug currently is a daily subcu injectable, but we know you're working on a once-weekly formulation. Can you give us an idea about how that's progressing? Why you think that's important to have, firstly? How that's progressing? And what data we can expect to see and time lines for that as well?

Yes. So the weekly formulation is a form of formulation used by Camurus, it's a FluidCrystal injection depot technology, and it allows us to inject setmelanotide in the crystal and then release setmelanotide slowly. We know that gives a steady drug exposure with the half-life being well over 120 hours, which means that we're comfortable that we'll get adequate exposure in a week. What we're doing at the moment is a clinical trial comparing the daily with the weekly in terms of efficacy and safety and compatible dosing. And the idea is that when we get the results of these studies, we'll be able to see what the dose differences between a daily and a weekly. And if the weekly is better tolerated and shows similar efficacy to the daily, the weekly would be preferable. Is a clinician dealing with chronic diseases, and obesity is a chronic disease, and these individuals need to inject themselves every day at the moment for the foreseeable future. And that's very difficult to do that in all chronic diseases. Daily injections are really difficult to do. And a weekly formulation will certainly help reduce the patient burden, but yet still maintain efficacy and safety. So a formulation that produces a similar efficacy, good tolerability will clearly be a way forward for the future for patients.

Okay. I have an e-mail question here, asking, just based on what you said Murray, how would you expect compliance rates to be with the daily injectable in a real world setting?

So I think compliance is tough. But I think the good news when we looked at the POMC and LEPR, people were compliant because they saw the drug was working. And I think when people see they're losing weight, people are compliant. We know that compliance drops down with even daily tablet medication if people don't know why they're taking it. But the good news with our compound, when people see the benefit of injection and weight loss, they tend to be more compliant. So that's the hope that the weight loss will make them compliant, but we're not being complacent. We're in regular contact in terms of the app, and encouraging the patient to keep going despite the burden of the injections.

The only thing I would add there, Tazeen, is that the hyperphagia that characterizes these disorders is a very -- is like an omnipresent symptom and a difficult thing for patients to ever get -- to ever not notice. It's analogous to a chronic pain or pruritus in that sense. And so what we've found with some patients who particular -- like in our Phase II studies, where we'd have -- did have a good response on both hunger and weight, they had come down. We had one in particular, who we've talked to extensively about his experience, and he was younger and liked to -- who's kind of arrogant. And he said, I thought I was cured. And what he found was that after a couple of weeks off drug, he just felt physically miserable from the hyperphagia. So we believe that while the tangible benefits of weight loss over time are really, really important for health, it's the hyperphagia and the absence of hyperphagia that will drive compliance in the day-to-day setting.

Okay. Thanks for that Hunter. Before we run out of time, I did want to touch on the topic of what do you think the long-term implications of the pandemic will be, specifically for Rhythm? Is there anything that you're changing in the way that you're doing business or the way the people are accessing the system that you think will persist even after things return to normal? You talked a little bit about this at the beginning, but wanted to get a little bit more detail.

Yes. I think, Murray, you're better suited to address that because it's been very interesting how it's come out in the study setting.

Yes. So I think a couple of things from the clinical point of view. So it may not be clear always, but obesity is a real risk factor for COVID. And I think physicians know it's really important to help people who are extremely obese, lose weight. Obese people are difficult to get off ventilators. Obese people have difficulty breathing anyway, they've more risk of sleep apnea. So there's quite a substantial comorbidity that means that individuals who are obese get COVID, they're at high risk. So it's really important that we help individuals who have extreme obesity lose weight. And I think in that sense, I think there'll be an uptake in the trials. And if the medicine is approved, I think that will be really important. From a clinical trial point of view, there's always a silver lining when things do -- because it makes you think right, do we need to adapt. And I think what we've realized is that we can actually do more clinic visits virtually. We don't always need to get patients in. So some of the interim visits can be done using virtual technology, using calibrated scales at people's home. So I think the pluses are, we're learning how to do clinical trials differently, and we're learning the importance of treating obesity in this pandemic.

Okay. And maybe the last question, how do you think about the ability to go through a potential recession? How are you thinking about the dynamics of the launch into that scenario? And would you have any plans for costs to offset in that situation?

Our burn rate, we expect to remain relatively steady through this process, although we are seeing a bit of a reduction associated with many of the travel and conference types of activities that exist. We're also a pretty lean company. We're running today with only 75 or so employees. And so we don't have a very meaningfully large base burn. A lot of our spending is associated with CMC and our external CROs. So we believe that we're well suited to manage our expense base in difficult economic times and complex economic times. And in addition, because we did the follow-on in October of last year, and we have just under $260 million in cash, which should last us at least through the end of 2021, we feel that we're in a good position going into -- we were in as good a position as we could be going into this crisis, and we are prepared to manage through it, should it persist. I think difficult economic times will be with us for a little while, and that's going to be the reality.

Okay. On that very high note, thanks so much for joining us this morning and starting us off at the conference. We appreciate your participation, and we'll talk with you soon.

Thank you, Tazeen, and likewise, all the best.

Thank you. Bye.

Buh-bye.