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

Good day, and thank you for standing by. Welcome to Rhythm Pharmaceuticals Obesity Week 2023 data presentation. [Operator Instructions] Please be advise that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Mr. David Connolly, Head of Investor Relations and Corporate Communications. Please go ahead.

Thank you, Norma, and thank you, everybody, for joining us today. For those of you participating via the conference call, there are accompanying slides that can be accessed and controlled by going to the Events section of our Investors page on our website at ir.rhythmtx.com. Yesterday in the afternoon, we announced data from our long-term extension study evaluating setmelanotide in patients with hypothalamic obesity and additional data, which were presented at the Obesity Society's Obesity Week Conference in Dallas. This press release and the data presentations are now available on our website. On the conference call today, we will hear from Dr. David Meeker, Rhythm's Chair, Chief Executive Officer and President; and Hunter Smith, our CFO, will join us for Q&A. Now moving to Slide 3. I will remind you that this call contains remarks concerning future expectations, plans and prospects, which constitute forward-looking statements. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in our most recent annual or quarterly report on file with the SEC. In addition, any forward-looking statements represent our views only as of today and should not be relied upon as representing our views as of any subsequent date. We specifically disclaim any obligation to update such statements. With that, I'll turn the call over to David, who will begin on Slide 4.

Thank you, Dave, and thanks to all of you for joining this morning. So we are coming off a very good TOS meeting in Dallas, where we held 2 advisory board meetings. One discussing hyperphagia, an incredibly important aspect of these diseases that we know is highly debilitating not only for the patient where it can decrease their ability to concentrate and function, but for family members living with that severe preoccupation with food and the associated behaviors. The second advisory board discussed the importance of getting to a diagnosis of BBS and the role genetics may play in that effort. So there's more to come in these areas as we go forward. We had 6 data presentations, as you can see on Slide 4 to reflect some early work trying to understand how treatment can modify future cardiac risk. It's obviously challenging to do and working with such small cohorts, but the effort of the exercise was support over the obvious point that early and effective intervention is probably good in terms of modifying when subsequent to our future risks. Second, we looked at the long-term maintenance of BMI reduction in both PPL patients and BBS showing the sustained effects of setmelanotide treatment. The 9 BDS adult patients achieved a mean BMI reduction of 16% and the 15 pediatric patients achieved a reduction of 0.7 in their BMI Z score. In patients with POMC LEPR deficiency, we showed a BMI reduction of 20.3% in 11 adult patients and a 1.2 reduction in their mean BMI Z scores for patients younger than 18 after 4 years of setmelanotide therapy. Both of these results highlight the durable effect of long-term treatment. So now let's move to the 12-month data on our long-term extension hypothalamic obesity patient cohort, which obviously, data that we're quite excited about. So on Slide 6, you can see this is the disposition slide we've shown many times, out of 18 patients who entered the original study, 14 went on to enter the long-term extension, and we're reporting here the full 12-month data set for the 12 for whom we have 12 months of data, but we do have the updated data from the other 2 patients who do not have a full 12 months, but you can see their course. And so importantly, we have not lost anyone in our long-term extension. On Slide 7, we have the demographics. These are the baseline characteristics of all 14 patients. The mean age was 13.6 years. Eleven of these patients had a Craniopharyngioma, not surprising as that is the most common cause for patients who go on to develop type hypothalamic obesity. Two had hematomas and one had an astrocytoma. The mean BMI for all patients was 37 with a mean BMI Z for pediatric and adolescent patients of 2.5. For the 95th percentile, let me provide a little bit of context because this may not be a measure that everyone is familiar with, but it is becoming a preferred measure for evaluating weight in patients under the age of 18. So for each patient, the BMI is divided by the BMI value at the 95th percentile for that patient's age and sex. For example, if the 95th percentile BMI value was 25 kilograms per meter squared, and the patient's BMI is 30 kilograms per meter squared, the patient's BMI would be 120% of the 95th percentile or 1.2 times the 95th percentile. So what you see here is these patients had at baseline a 145.3% of the 95th percentile and baseline for these 11 pediatric patients. So moving to Slide 8, we have the efficacy data. In patients on setmelanotide therapy achieved a BMI reduction of 17.7% at 16 weeks, 23.4% at 6 months and 25.5% at 1 year. And it's important to remember when you're looking at the BMI data that -- and we had in children, younger kids under the age of 12 in the trial that you would expect BMI to increase naturally as these children grow. So you're trying to help them reduce their BMI to get them back in a more normal range, but you also have physiology, which is working as a return to health that BMI should be increasing. And we have some of the patients who are in the normal range whose BMI is increasing. So the mean value was confounded by that fact. And when we look at the more age focused measures for patients younger than 18, we see a reduction in their BMI Z score from 2.5 to 1.5 and a reduction of the 95th percentile from 145.3 to 104.5. So overall effect continues to be quite strong. On Slide 9, you see the waterfall plot showing the 16-week and 12-month data, which shows that essentially all patients are showing further deepening or maintenance of an early very strong response. And I'll come back to discuss the 2 patients with a more modest effect who are at the far right-hand side of the slide in the upcoming couple of slides. So on Slide 10, and this is the spaghetti plot, on Slide 10, the Spaghetti plot highlights the fact that some patients do plateau as you would expect, in theory, once they get back to their physiologic set point, which may or may not be a value in the normal range, and that a number of patients who may not have reached that set point, continue to trend down. I want to highlight the patient in the light blue line, it's that top dot on the spaghetti block there, who had lost approximately 13% of their BMI from baseline at 16 weeks but has now increased to still, well below their baseline but now minus 7% from baseline. So this is an 11-year-old patient at trial start, peripubertal male who as best we know, has been compliant with his medication but did have a relaxation in their healthy eating habits after getting on the drug and having a good response that this was associated with an increase in DMI, how the additional physiologic changes that he was experiencing impacted again, a little less clear. But the drug is not magic. And clearly, if you adopt eating habits that are not so healthy, you're not protected from potential weight gain in that setting. The other patient we will discuss on the next slide was the 12-year-old patient with the hematoma, and that was the one patient out of the 18 patients who was compliant with their medications, but failed to lose 10% or more at 16 weeks. So before we leave this slide, I do want to highlight the 2 patients who are intermittently off treatment. So we do not have full 12 months of data, but we have their data to the current point. And the first patient in that panel had a very robust initial response, losing 21% of their BMI at 16 weeks, although he entered the long-term extension, he was immediately lost to follow-up. When he was relocated and re-entered into the trial, he had regained all of his original weight. And the patient had been slowly titrated up again. And as you can see here now, if he's back on medicine with increasing doses, BMI is now down 11% from baseline. The second patient is a patient who struggled with gastrointestinal complaints prior to entering the study and has had a difficult dose throughout her experience there. And so she's been literally up and down on our dose and occasionally of her those. And so when a dose was increased, she lost weight. When it was decreased, she regained and she's now back on treatment and as per the investigator, very happy to be back on treatment. So both of these patients are valuable in highlighting the importance of continuing the medication and showing the on-off effect here. So moving to Slide 11. Slide 11 shows the follow-up DEXA data where, again, for the majority of patients, you can see a further decrease in fat mass shown in green with a much smaller decrease in lean body mass. Patient number 6 in the middle of the slide is the 12-year-old patient with that very modest decrease in BMI relative to the others, although it has slowly and steadily come down. And that patient now is about 8.9% decrease in their BMI. And if you look at the DEXA results -- sorry, 8.7%, apologize. If you look at that patient's DEXA results, you'll see at 16 weeks had an almost 10% decrease in fat mass with a 17% increase in lean body mass. And this pattern has further improved at its follow-up scan with a 15% decrease in fat mass and a 24% increase in lean body mass. So in light of that full data picture, he's actually having an incredibly healthy response to the drug and actually we have paradoxically been one of our better clinical responders overall. So now moving to Slide 12. You can see the positive shifts in obesity classifications with all patients moving by one or more classes. 3 of the patients are actually now in the normal range, below the 85th percentile, and additional 2 or below the 95th percentile whereby that criteria that would not have been eligible to enter the trial. So on Slide 13, this is just a reminder of how important this program is not only for the patients who do not have an approved therapy, which we will have it works, but obviously for Rhythm as well. The U.S. prevalence numbers are in the range of 5,000 to 10,000 with the unusual element as we've highlighted previously, for a rare disease that the vast majority of the population are diagnosed and engaged with the health care system. And finally, on Slide 14, the Phase III trial is ongoing. We're making good progress towards our goal for enrollment by the end of the year. And with that, I will open it up to questions. Operator.

First question will come from the line of Tazeen Ahmad from Bank of America.

David, I just wanted to ask your thoughts as you see the maturing of data for the HO population. How should we be thinking about some points about differentiation from the GLPs which some doctors might still feel might be a first-line therapy for some of these patients. And also, just based on what you said about that one patient that might not have kept to their healthy diet. Is there a difference in the level of hunger that patients who are HLC or relative to other MCR4 defective patients who've received the drug this far?

Yes. So let me take the GLPs first, which there'll be an internal question here. I think I'm going to refer you to remind you of Dr. Abuzzahab's quote we had on the very first analyst call when we presented the initial data. What she has highlighted is that she thinks on the order of about 20% of patients with HO will have some response to a GLP and the magnitude of that response would be on the order of 10% or less. And as I've said many times, pressure tested that with other experts in the field and that resonates with them. If anything, they think that may be a little high not low. There is a recent abstract at the SB meeting, European Society of Pediatric Endocrinology in Europe and where they looked at 3-6 patients and who have been on either liraglutide or semaglutide, and they fit that pattern where they had a resting of their weight gain. And I think the maximum decrease they reported was about 8% in one of the patients there. So people can wait for different reasons. The GLPs and these combo therapies are incredibly powerful and good drugs. And so putting a patient on these drugs, you may and not uncommonly, get some weight loss. I think what's pretty clear is that, one, you're not getting this kind of an effect. So hopefully, this kind of data will increasingly highlight the difference and why what we're doing, replacing the missing hormone in theory is getting at the fundamental problem here, whereas in the other GLPs or any other medication may be working indirectly in terms of trying to modify this problem. And the other piece is, liraglutide has been out since 2014. And if it is available or something may not be quite as good a drug is not a good time, but it's a good drug. And the number of reports that, that works and has been effective. They're extremely limited. So again, if it was magically correcting a problem people would go there. So that question will continue to come up, but I think the more data we can put out and obviously, the Phase III trial should be highly supportive. Again, I feel that people will increasingly understand that this may be the root cause of that problem. And then your question was on diet or sort of how they experience hunger. And the HO patients, what's interesting here is it is a little bit different and part of that may have to do with the genetic causes have a surgical interruption, if you will. They have a very specific impairment of the MC4 pathway without damage to the other parts of the hypothalamus, whereas an HO patient, they're getting various amounts of one trauma to the hypothalamus. And so other circuits to a variable degree can be affected. So the picture is, I would say, much more heterogeneous, -- not all patients complain of hunger in exactly the same way. But in our Phase III trial, we collected 100 scores. And even those patients who started with a lower hunger score, they had a very significant decrease in their hunger from wherever they started. So there's no question that a decrease in hunger as measured by those scales, this lack of inability to feel full, that is being addressed and is playing a significant role here, along with the fact in theory, that we're also significantly increasing the energy expenditure to get these kind of reductions in our overall daily life.

Our next question comes from the line of Philip Nadeau with TD Cowen.

One question, a follow-up on the hunger score. I think you showed a 45% mean decrease in maximal hunger at Week 16. How did that trend over time out to one year? Was that relatively consistent, so the hunger went down and stayed down? Was there some fluctuation? Did the maximum hunger score continue to decrease as weight went down? What was the trend line in the hunger for most patients?

Yes, it's a good question. So we haven't continued to follow the long-term extension data, we collect slightly different things so I don't have that data. But the good news is the indirect measure of that, which is the BMI, I would suggest these kids are obviously doing much better, continue to do much better. I think part of what's been described is that these kids are returning to more normal states, which they were before and a more normal relationship with food. And that's not just CHO population we're hearing from. This is a BBS, the PMC world, it's a very different thing than just I have no desire to eat. Certainly it's not that I lose completely my appetite, but I feel full. I eat a meal I feel full I get up on the table. I leave food on the table. So that is the nature of what I think people are experiencing. But to your specific question, Phil, I don't have the long-term numbers for on this group.

And then second question is on the plateauing. Where did the plateauing of weight tend to occur? I know you said it didn't necessarily mean patients come back to normal, but they get back to maybe the normal physiological set point. So was the plateauing of weight largely in the 5 patients who got to overweight or normal way categories or was there actually some plateauing for patients who were still classified as obese even at Week 52?

Yes. So it will be interesting to see how this plays out. If you go back, and I hope my number is correct here, and I look at Slide 11 with the spaghetti plots. The kids are the individuals who are getting down the 35% to 40%, although some of those are still trending down. Those are part of the group that's getting into their normal range. But the upper group, as I said, your normal, before you get your tumor, if you were an overweight individual before you had your craniopharyngioma and developed HO, this drug in theory could get you back to that prior overweight state, but doesn't necessarily allow you to then fall below that.

Our next question comes from the line of Derek Archila with Wells Fargo.

Just 2 from us. First on HO, maybe just discuss the change in AE rates that you saw between the index trial and the long-term extension, mainly hyperpigmentation and some of the GI-related side effects. It looks like those rates went down pretty meaningfully. And then also on the Bardet-Biedl 3-year data, how do you think that's going to impact the ongoing launch? Have doctors and some of the caregivers have been looking for longer-term data before putting their patients or their kids on IMCIVREE? So again, is that something that you think will impact the launch positively?

Yes. So on the AE rates, as you highlighted, those are the 2 areas, hyperpigmentation and the GI effects. Hyperpigmentation, just a reminder, because it's an on-target effect or off target- on target, this drug hits the MC1 receptor. Every patient will have some change in their pigmentation. It's just that if you're a very fair skin, that change may be very light and not noticeable. In fact, for many patients, we've heard it, they like it. But the darker you are, the more melanin you're releasing and that may be more noticeable. So the reporting of it is highly variable across our studies, but it occurs relatively early. So that will be captured relatively early. That's a onetime event. You get, you don't get it, you report it, you don't report it. The GI complaints, again, what was reassuring is that this drug is very well behaved. I think as we begin to study it more and across different populations, the pattern of the adverse event profile is very consistent. So the GI complaints, the nausea, rarely vomiting, but those 2, they occur early. They tend to occur in the first few weeks of treatment. They can be managed by taking longer to dose escalate or if you need to even going down a dose and continuing for a longer period before you dose escalate. So this has stayed exactly that way. And then to your point, as you get out into beyond the 3-month point, the GI complaints become negligible as a rule, but the exception I highlighted that one patient who continued to struggle throughout the trial. But as a rule, they tend not to be an issue beyond that very early stage. Your question on the BBS data. Yes, I think this all builds. In a rare disease world is, I think, is rarely or one piece of data or one event that dramatically changes the overall picture, but this is highly encouraging. The fact that you go on the drug and if you stay on the drug, you can maintain or continue to lose weight and decrease your overall BMI. And that is consistent with how we think about this, which is unlike a lot of interventions where you're pharmacologically manipulating a situation. You're taking a normal state and trying to disrupt it to get a benefit in another way. We are in theory, replacing a missing hormone [indiscernible] stimulating hormone, which is low or absent in these patients who we're studying and so once that signal has been replaced, then that should be a more normal more physiologic state, and that may be a more durable kind of intervention, and that's what I think this data suggests. How would it affect the launch? Yes, I don't know. Obviously, like I said, all good news is good news, and I think it will help us. I'm not expecting to have a launch of response to me.

Our next question comes from the line of Dae Gon Ha with Stifel.

Two from us, both on HO. So David, if we go back to the Endo presentation in mid-June and then compare that weight class data from them versus the Obesity Week presentation, it seems like the select guys are in that similar BMI reduction. We haven't really seen additional gain on BMI reduction magnitude. So it does seem to kind of portray the plateauing and the reference you made earlier about pretumor weight, maybe where they're landing at. Can you just remind us in terms of the LTE, do we have a longer-term follow-up or are you planning on doing more updates just to kind of keep tabs on what might eventually happen to these individuals? And then second, it's also kind of a multipart question, but the DEXA data, I think it's pretty fascinating you're seeing some lean muscle mass growth. There were a couple of tirzepatide presentations here at Obesity Week that started to look at the leading causes or predictors of individuals that benefited more so than others. I think the cutoff was 30%. I know this data set you have is pretty small, but any insight you can glean from this that can be a predictor of who gains lean muscle mass? And would this be a potential differentiation versus clip-ons or clip GPs?

Yes. So your first question was just are will we continue to follow and monitor these patients? The answer is yes. They'll stay up until the drug is approved in a company-sponsored long-term extension trial. So we will continue to collect data, and we will update at some point here, we haven't guided as to when that will be necessary, but we will, yes. And then 2, I think the DEXA data is, of course, it's really incredibly interesting. I highlighted the kid with the hematoma, who we thought was having a more modest response when, in fact, he actually look like you may be having an incredible response here with gaining the lean mass and then it larger loss of his fat mass. Part of what makes DEXA data challenging for us is unlike a lot of the studies that are done in the patients with general obesity population, they can do large studies and very specifically isolate adults and teams and ultimately children, but we're having to mix them all together. And so we're trying to analyze data. Kids, like I said, in the whole peripubertal stage of life here, where we have to get changes in the body, girls and boys have very different effects, again, as the hormones kick in and the like, and you're trying to interpret your data in that context and so that becomes challenging. But what's really encouraging overall is that I think we have a pretty healthy basic response, which is, for the most part, we're losing much larger amounts of fat mass than we are a lean mass and the potential for gaining lean mass is definitely there. And this is something we're going to follow and the world is following it, because shutting people's appetite down completely, this was highlighted multiple times at the TOS meeting isn't always good and people get into other problems when that happens. So we're encouraged by this.

Our next question comes from the line of Michael Higgins with Ladenburg Thalmann.

Two questions, if I could. In your SB presentation, you provided data from R&D. It included variant classification in which genes are in your trials. But at your Analyst Day, when you provide DAYBREAK data, once you share that variant classification with the DAYBREAK data?

es, the goal will be on the upcoming R&D Day that we will have a presentation on DAYBREAK, yes.

Within that, would you share the varying classification for those handful of genes?

Yes, meaning in the pathogenicity state?