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

Ladies and gentlemen, the program is about to begin. Reminder that you can submit questions at any time via the Ask Questions tab on the webcast page. At this times, it's my pleasure to turn the program over to your hist, Tazeen Ahmad.

Okay. Great. Thank you, and good morning, everybody. Thanks for continuing to participate with us at our Virtual SMID Biotech Conference. It's my pleasure to have my next presenting company with me, Rhythm Pharmaceuticals. And with me for the next 30 minutes or so is CEO, David Meeker. Good morning, David. Thanks for joining us.

Good morning, Tazeen. Thank you.

Well, for those who may not be as familiar with Rhythm, I thought maybe we should do a quick intro of the company. There's a lot going on, so we have a lot to get through. But maybe just if you could level set where you are today as a company, and then we can go straight into Q&A.

Yes. So maybe a very brief background. So Rhythm's a company focused on this melanocortin-4 pathway, which is a pathway in the brain, which controls our hunger and energy expenditure. So we all have this gut brain access, where we eat a meal and there's a signal from the gut to the adipocyte fat cell, which releases leptin and then leptin signals through this pathway. And what we're focused on are patients, individuals who have impairment in this pathway. And there's two ways they can get it, either genetic or traumatic, meaning and most commonly, we'll talk about that more later, but a tumor that might grow into the hypothalamus where this pathway is located. And/or the surgery often or most commonly that is used to treat the tumor damages this pathway through damaging the hypothalamus. So impairment in the pathway and then quite simply, what Rhythm has is this therapy setmelanotide, and IMCIVREE is the branded name, which is essentially a replacement therapy for the endogenous ligand, which when you impair the pathway, it's deficient. And so we really like to think about ourselves as restoring function as opposed to manipulating function. Where the company is today, we were approved for 3 genetic indications, 3 different genes, POMC, leptin receptor and then Bardet-Biedl syndrome, and we'll talk a little bit more about what's different there from just the straight pure monogenetic. But we're approved for those 3. And then we had exciting data over the summer, where we presented the initial results from our Phase II study, looking at hypothalamic obesity, which is in this category of acquired or traumatic. So where we are today.

Yes, there's a lot going on. So maybe we can start off for your currently approved indications. Give us a sense of how big each addressable market is? Because even though it's rare disease, even within rare diseases, there's like different gradations. And how your patient finding efforts have been going for those approved indications?

Yes. So the numbers I'll share basically are focused on the U.S., and then we'll go to Europe, but there's similar prevalences for these genetic is what we believe. So for the POMC leptin receptor biallelic [ formula ] disease, our first indications, as we said from the very beginning, that's an extremely rare, and we know that both historically and also because we're actively doing genetic testing to try to identify these individuals, and the hit rate is very, very low. What we've told the world is we believe in it's -- what is happening, is that we'll have tens of patients on therapy in the first few years. And that's the world we're living in. So nothing has fundamentally changed there. We made the decision not to put an active commercial force on the ground, meaning salesforce and supporting individuals, given that the opportunity was so small. But we did take advantage and obviously, have the opportunity to engage the system. So price was set, market access activities begun in a very meaningful and helpful way, learning just some of the dynamics and logistics that have come to support our BBS world. POMC leptin receptor biallelic deficiencies in Europe are better identified. Again, I don't think the prevalence is different necessarily. But as a [ rule ], rare diseases, as I've said many times, people know Europe has done a much better job. They have centers of excellence or single-payer healthcare systems. And so patients get referred to these centers. So you have these congregations of patients, they do more genetic testing as a rule. And so we -- there's on the order of maybe 100 patients across EU4 in the U.K. with POMC that have been identified. And as opposed to like literally, like I said, tens or starting point, we only have one of our patients from the U.S. in our original Phase III trial out of 10. It's a small number, but disproportionately, it was enrolled out of Europe. So that's that world. Bardet-Biedl syndrome, again, very different. And people have asked for analogs on with Bardet-Biedl syndrome. It's syndromic and -- meaning that it's -- the diagnosis is made by a constellation of presenting signs and symptoms. So these are individuals who present with early-on sort of obesity and hyperphagia, that's a really critical part of the presenting sign or symptom in terms of what they complain of. And then they have these other organ involvement. So they'll have eye involvement, a high percentage of these patients may be [ legally ] blind by the time they reach age 20, renal involvement, they may have an extra digit. So those are all clues for a physician who's looking at that patient, and as a rule, you may not think about it Bardet-Biedl, but you may say, "Wow, there's something going on here, I think it's genetic," and that pushes people. So much higher number of patients diagnosed at the start. The prevalence for Bardet-Biedl, we've put on our website, 1,500 to 2,500 as we've shared and are continuing to learn more, using a lot of information out of Europe where we've extrapolated from countries, again, where they're better identified. So we've used France as an example. We think there's on the order of 700 patients in France identified today. And easily, there's 2x that. But if you use a 1,000 and correct for the populations, you can get -- I think the U.S. number is probably much more in the 4,000 to 5,000 range as a prevalence as opposed to our original belief of 2,500. And it's supported by the fact that when we're out there in the field, it's not a desert. We're finding these patients. And some rare diseases that we've worked on, it's truly a desert. So again, advantage is being syndromic, better starting place. And I think from coming out of Genzyme world, as you know, the lysosomal storage disease, I think there are some good analogs there. Mucopolysaccharidosis I is a syndromic where every bit is good, if not better, as a starting point for some of those. So long story short, we're quite optimistic, and we'll talk about the start here, which I think supports that optimism. In Europe, similarly, again, similar population, but more identified. 1,500 patients, we believe, have been identified across EU4 in the U.K., so even a larger starting point as compared to the U.S.

Yes. So maybe with that in mind, you've had a few quarters to launch now. And how can you tell us how the launch is going in terms of awareness from physicians? And how important is it for your salesforce to have points of contact with doctors before they prescribe the drug to patients?

Yes. So a couple of parts to that question. I think the -- so how is the launch going? I mean, as I've said early on, please don't judge us by the revenues. I think early in any launch, it's hard to project often, and rare diseases are particularly complex. So what we tried to do with the metrics we've released to date, which we think are most meaningful in giving any observer an understanding about how these communities are built and launches of all. So the 3 metrics, as you know, we've described at our third quarter earnings call that we have 120-plus scripts written. That was up from about -- so I can't remember what our 6-week number, it was about 50 scripts maybe. But we've had that significant increase in the number of scripts, one. Two, the number of physicians, and this is a really important number because often rare diseases, you have a concentration and maybe one physician is writing a disproportionate number of scripts, but we've had over 80 physicians who have written a script for those that are 120 plus. So that's highly reassuring because what you want to see in a rare disease world is you're building the community as you want to see new physicians coming in. And often, again, in the rare disease, particularly in the United States, because we don't have these centers of excellence, a lot of rare disease patients are managed by their primary care physician, whether it's a pediatrician, whether it's a general practitioner. And not surprisingly, I would argue or at least I've come to appreciate the willingness, these physicians, they're not looking to be "experts" and necessarily treat a lot of patients. But when their patient calls them and says, which is how I think it happens as much as the physician going to the patient, patients follow their communities. Obviously, we're an Internet-connected world. And they know, they know the drug has been approved. And so we had about 1/4 of those 80 who were physicians we had not previously engaged. So to your question of how important is it to engage the physician before, highly valuable, but not critical. And I think we have and we'll continue to see a significant number of physicians who take this on and are writing scripts, being completely new to this world. And interestingly, if it's really working, some of those physicians, otherwise, the primary care world, may say, "Look, this is interesting. I'm willing to make this a bit of a hobby or a sub focus for my practice." And they'll pick up multiple patients. They begin to get known and patients are referred to them. And we've had some world leaders in other worlds, rare disease worlds who have emerged from sort of a primary care practice, not the classic academic setting.

Yes. That's interesting. One other thing I wanted to ask you about, and we've had some conversations about this already, is obesity now is a much talked about topic, right? Not just for rare disease but for general population use. And so with the rise in popularity of, let's say, the [ GLP-1 ] class of drugs, I get a lot of questions, and we've had this theoretical discussion about why wouldn't a doctor first prescribe a [ GLP ] to one of these patients, even if they knew that their obesity was more genetically induced. I mean, is there any evidence that would support any type of weight loss in that patient population? And I ask only because those drugs are not rare disease priced and so -- and are, I guess, well known now really to everyone. And so why wouldn't even the patient ask for that drug?

Yes, it's a great question. Again, a lot of parts to it. So let me break it down a little bit. I think first, just from the [ obesity ], as you said, it's an amazing moment for individuals living with obesity and [ GLP-1 ] class is amazing drugs, right? I mean, for the first time, I think we can all say there's drugs that have great efficacy and acceptable side effect profile. So that's going to revolutionize that world. What's happening as we all watch this, is the challenge for the company is the [ Lenovo ] leading in working at spaces to convince the world healthcare systems that obesity is a disease, that is not a lifestyle choice and that you need to treat it as a disease with medication. Where Rhythm plays in that whole thing is, yes, absolutely, obesity is a disease, but it's not one disease, it's many diseases. And we're in a sense the poster child for evidence that there's different ways you can develop a [ vesicle ] obesity. It's important to understand that. Monogenetic drivers may be one, there's [ traumatic ] cause maybe another, but getting the right therapy for the right [ disease ]. So that's number 1. Number 2 is, there's also, I think, a bit of a concept, you've got these amazing drugs and suddenly obesity solved, right? And again, what we've worked hard to help the world understand and I think internally, our conviction is really growing. Apples and oranges. These are just completely different diseases. Now it's not that the [ GLP-1s ] can't help a patient achieve weight loss with one of these monogenetic drivers, for example, but they're not addressing the fundamental underlying question. So when we've been engaging physicians and healthcare systems, we don't go and say, this is a population with obesity. And we think our obesity drug is better than that obesity drug. It's really -- no, no. This is a rare disease population that needs a therapy that is specific for its rare disease and separating ourselves, if you will. So the success we've had here in the U.S. and very much in Europe has been driven by the fact that, no, we're not going in as just another obesity drug. We're going in as the first therapy for a rare disease with devastating consequences. And then the third, the apples and oranges part is supported by this understanding. And one of the key elements is hunger, this hyperphagia. And I have to say, in the Bardet-Biedl world, I think you're going to ask me some questions later, I'll jump ahead of that about. What do physicians appreciate, there's -- we are extremely early on the physician side in terms of their understanding and appreciation of the role hunger plays in this. I mean as physicians we're all trained to -- you react to what you can see, and of course, weight is an easy thing to measure and follow on. People like to lose weight. But what's devastating patients' lives, compromising their ability to be productive to excel in school, to get the sleep that they need, et cetera, is this unrelenting hunger drive. And what's been quite remarkable with the drug is the drug quite said, no. And when it's quieted down, does the patient's life change, that family's life can be pretty significantly transformed. And what we're seeing is doctors often don't appreciate that. If you go and tell them, "No, no, this is really severe hunger ," I mean that doesn't register, right? I mean everybody says, well, I have been hungry too, but -- but once the patient is on drug and then people see and appreciate the difference, that's when the light bulb is really going on. So we're in that evolution. So all of those factors are what are part of our challenge and what we're working to do is to help people understand, it's different. There's not just one obesity problem here.

So I mean, if a person is genetically predisposed to having this particular issue, surely, your drug will likely produce the most weight loss. Is there a risk, though, that before the patient can get to your drug, they might have to go through trying those other drugs first? So you look at those patients, but maybe it's slightly delayed relative to what you and I might have thought a couple of years ago. Is that reasonable, just based on where you sit to...

Yes. So the question makes absolute sense. And in certain cases, physicians will go to these drugs on their own. What's interesting is the healthcare system tends not to do that, has not done it so far. So nobody is stepping us through. And the healthcare system and rare diseases, I think, in general, but rare disease specifically, it is highly respectful of the indication in the sporting clinical evidence. So we're the only drug approved, for example, for Bardet-Biedl management. And it's just a label question. It's not -- and the other thing about rare diseases, which, again, people know, we play, if you will, we live on the ultra-rare side of the equation, under 10,000 patients in these different categories. That's under the radar. And for better or worse, you can argue that should be that way, but it's relatively under the radar. And so people follow the label. They just -- they check and say, do you have the drug, it's a proof of that indication, you get it. I'll give you one anecdote just ironically, but I think it highlights some of the challenges. One of the physicians working with their state Medicaid in the middle of the country. It's easier for me to get my patient on setmelanotide than it is to get [ GLP-1 ] from one of my patients with obesity, more general cause of obesity. So again, it just highlights a bit of the apples and oranges. We're not -- people aren't putting us side by side.

Yes. Okay. That makes sense. So maybe in the few minutes we have, I did want to touch upon the potential for [ HO ]. I'm intrigued by this because you won't have to really search these patients out, that will be obvious. And tell us about what data you have so far and what we should expect to see, going forward, in order for this to become an approved indication.

Yes. I mean, on just to reinforce what you led off there with that question, I mean -- so we think there's on the order of 5,000 to 10,000 patients in the U.S. with [ hypothalamic ]obesity. And that's not 5,000 Bardet-Biedl patients, 5,000 [ HO ] patients, so those are similar. And they're completely different, and they're completely different for the reason, as you indicated. These patients were otherwise normal until they develop their tumor or whatever led to their hypothalamic injury and then the surgery. And they come out of that injury, that setting, that moment in time, and they really explode off their growth chart, which is it's not sort of this [ gradual ] weight gain that people think about when they -- these are kids largely, but it's kids and adults who explode off. So that's the world we went into. Multiple things have been tried in this indication. I mean there's a well-organized patient organizations. And they -- those well-organized patient organizations develop almost as a function of need, right? The more severe the need, the more likely people are to get together and try to say, what do we do? So there's a pretty well-organized group there. And the -- as I said, the many multiple 5-plus, which is a lot of drugs have been tried in this disease with no effect literally. So what we saw and what we presented on the full 18-patient Phase II data at the TOS meeting a month ago in San Diego was that on average, we saw 14.5% mean decrease in BMI after 16 weeks. So that's good, and that's playing in the range of the [ GLPs ] and others. I've said that it's only part of the story. What we found -- what I find really striking about this data is it's not the mean, it's the consistency. So literally across the 18, I mean, we had a range of responses. But there was -- for those who responded less well, and there was only a couple, there was a very good explanation. And so you can look at that group of 18 and said, if you took the drug for the full 16 weeks, you had a dramatic response to this drug. And then we also showed long-term extension data for 13 patients who are out at their first visit and 5 who were out at their second visit, 6-month visit in the long-term extension and -- the weight loss continues. And so I think where we're going to go with this drug, and I know you and the world are interested in like why we continue to lose and how does it work is, you can imagine biologically in this early data set, I would say, it's possible that the prospect of getting back to your prior baseline. So if you had a normal BMI before, I think you can potentially get back to your normal BMI after. No, you shouldn't keep going, right? You should get back to BMI. But it's back to this idea that we're replacing and restoring function as opposed to manipulating. So the replacement, restore, the body gets back to its set point. And so that's our expectation, going forward. And as I said, it's the consistency of the responses, which gives me a lot of like, wow, this is -- could be meaningful.

Yes. So when should we expect to see the next update from that?

So I think -- so two things. So, one is we'll continue to follow the small cohorts. So 14 of the patients have gone into long-term extension. We -- I can -- I know we will update that longer term because your -- that question is really critical to give people insight about how this continues to evolve. So we haven't projected, but I can imagine a follow-on meeting, second half of the year, we'll put out something there. That's one. Two, in terms of the Phase III trial, very focused, and we've had our meeting with the FDA as we reported, and we've aligned on the trial design, which is -- will be a 8-week dose titration, followed by 52 weeks at the dose, and this was just the black and white, here's the role from the FDA. So it's the 1-year study. From the timing, we've projected 6 to 12 months to enroll. What I can tell you, and I know there is interest in terms of how physicians are responding, this has been about as positive response to we'd like to do a trial "Are you interested that I've ever been associated with?" So -- and they all have patience. So that part says, "Wow, this could enroll quickly." I can tell you what has given me, and I've been reminded by my team multiple times, I am not seeing this as a -- it's a hard time for clinical trial sites out there. I mean coming out of COVID, and there's lack of resources in these institutions. And so the logistics of getting trials going is more challenging probably than it's been in a while. So that's the attention there. We've got to navigate that. So I think the 6 to 12 months to enroll is the right guidance than 12-plus to run the trial and then we'll read it out. So back to what we expect to see in '23, it will be some update from the original Phase II patients.

Okay. And I'm going to squeeze in one last one, which is, do you expect that you would be able to provide sales guidance for 2023?

Sales guidance. I hate sales guidance, as you know. So the answer is, no. And what we'll do is we'll continue to provide so the scripts, the physicians prescribing and importantly, and we're increasingly -- we didn't talk so much about market access, but that's been very positive. It lags. It's early, but we talked about 40 plus, and we'll continue to update that number as we go forward. And I think that will give the observer a really good feel about this. And obviously, we'll report out the revenue, and that will increasingly catch up, and we'll convert over to a revenue story eventually. But I think, for the next few quarters, it will be very focused on those metrics.

Sure. Perfect. With that, we're out of time. So David, thanks so much for talking to me this morning. Really appreciate it. It's good to see you, and I hope you have a great rest of December, and we look forward to catching up with you early next year.

Great. Thank you, Tazeen.

All right, thanks. Will talk to you soon. Bye.