Rhythm Pharmaceuticals, Inc. (RYTM) Q4 FY2025 Earnings Call Transcript & Summary

Good day and thank you for standing by. Welcome to the Rhythm Pharmaceuticals Fourth Quarter and Fiscal Year 2025 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Dave Connolly. Please go ahead.

Thank you, Tanya. I'm David Connolly here at Rhythm Pharmaceuticals. For those of you participating on the conference call, our slides can be accessed and controlled by going to the Investors section of our website, ir.rhythmtx.com. This morning, we issued a press release that provides the fourth quarter 2025 and full year 2025 financial results and a business update, and that press release is also available on our website. Our agenda is listed on Slide 2. On the call today are David Meeker, our Chairman, Chief Executive Officer and President; Jennifer Lee, Executive Vice President, Head of North America; Hunter Smith, Chief Financial Officer; and Yann Mazabraud, Executive Vice President, Head of International is on the line joining us from Europe. On Slide 3, I'll 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 reports on file with the SEC. In addition, any forward-looking statements represent our views as of today and should not be relied upon as representing our views as of any subsequent dates. We specifically disclaim any obligation to update such statements. With that, I'll turn the call over to David Meeker, who will begin on Slide 5.

Thank you, David. Good morning and thank you all for joining. We preannounced our revenue for the fourth quarter, highlighting the continued strong performance by our commercial teams. The BBS opportunity continues to grow at a steady rate, both in the United States and ex-US markets. Jennifer's North American team, which was fully hired and in place at the start of the fourth quarter, continues to take full advantage of the PDUFA extension to prepare for our expected launch. Our growing early access experience with HO in Europe reinforces our belief in this opportunity, as Yann will highlight. I'm pleased to report we had our end of Phase 2 meeting with the FDA for the Bivamelagon HO study. We were able to share the 9-month data, which included a minimum of 6 months on drug for the original placebo patients. I will share these new data that show persistent BMI reductions and consistent safety and tolerability over the next few slides. Our goal will be to present the data, including the full 52-week data at a medical meeting midyear. Slide 6 is to remind you of the original Bivamelagon Phase 2 design. Patients were randomized to either placebo or 1 of 3 dosing cohorts for a period of 14 weeks. Last July, we announced positive top line results at 14 weeks with patients in the 400 and 600-milligram arms achieving a mean BMI reduction of 7.7% and 9.3%, respectively. Similar BMI reductions as achieved by setmelanotide at the same time point. At the end of 14 weeks, the study remained blinded and all patients were then redose escalated to preserve the blind from 200 milligrams to the target dose of 600 milligrams for the balance of the open-label extension period. Slide 7 shows the disposition of the 28 patients. As a reminder, 1 patient discontinued after the first visit due to rectal bleeding, judged unrelated to study drug. One 64-year-old male who had lost 14.5% at 14 weeks in the 600-milligram cohort chose not to continue into the open-label for personal reasons. Since then, one patient has stopped taking the drug but remains in the trial as a retained dropout. In summary, 26 of 28 patients remain active in the trial, including retained dropout patients, so 25 out of 28 remain on active drug. The next 4 slides show individual patient data at 40 weeks. Slide 8 shows the placebo patients whose baseline BMI was calculated, in this slide, whose baseline BMI was calculated from their 14-week clinic visit when they converted to active drug. With the exception of the 12-year-old female, who we believe was not compliant, all patients showed a response to drug after 14 weeks, which included the up-titration period with further deepening at 26 weeks, the week 40 visit. And of note, 1 patient did not have a 40-week visit, but she remains in the trial. Similarly, for the original 200-milligram cohort on Slide 9, all patients with the exception of the retained dropout patient who is actively gaining weight and the patient who we believe is not compliant have had a response at 28 weeks and further deepening at 40 weeks. The modest response on 200 milligrams alone at 14 weeks does suggest that this dose is probably subtherapeutic for many patients. Slides 10 and 11 show the data for the original 400 and 600-milligram cohorts. With the exception of the 2 patients who are not fully compliant, one each in the original 400 and 600-milligram cohorts, all patients have had a good response to drug with 11 of 14 patients decreasing by 10% or more. The mean BMI decrease for the 400-milligram cohort at 40 weeks, including the noncompliant patient was 10.8% and the mean BMI decrease for the 600-milligram cohort, including the noncompliant patient who gained 7.5% and the patient who dropped out at 14 weeks was 14.3%. Of note, the setmelanotide Phase 3 data at the 40-week time point in patients not on a concomitant GLP-1 from our Phase 3 study was 15%. With regard to safety, the drug is better tolerated when taken with a small amount of food. The side effect profile continues to mimic what we see with setmelanotide. The nausea and vomiting tends to occur early and then patients tolerize. The episodes of diarrhea tend to be a little more sporadic or mild in severity and no patients have discontinued because of diarrhea. In this trial, the compliance issues have been predominantly in the younger teenagers who we believe have struggled with the size of the pills. As we have indicated, we will have an easier to swallow single pill formulation going forward for each of 200-, 400-, and 600- milligram doses, and we will have a chewable tablet for younger patients. Next steps for this program will include bioequivalent studies comparing the new and old formulations, a drug-drug interaction study and a hepatic impairment study. We expect to have the majority of this work completed in drug supply for Phase 3 studies by the end of the year with the goal of initiating the Phase 3 HO study by year-end 2026. I would characterize our FDA meeting as highly constructive on multiple fronts. They confirmed that pivotal is ready to move to Phase 3. As many of you know, we were hoping, given the prior setmelanotide data and the placebo cohort data that we could negotiate a 6-month double-blind period and a smaller number of subjects given the effect of the drug. They were confirmed that with a new chemical entity, a full 12-month double-blind randomized controlled trial would be required as well as a larger number of patients to build up the safety database. We are awaiting the final minutes from that meeting but expect that number to be closer to the full 142 patients studied in our setmelanotide trial. Our plan will be to run this trial largely in countries where setmelanotide will not be available for acquired HO in the near future, which should facilitate enrollment. There was no discussion of setmelanotide in the upcoming PDUFA date, but the FDA is communicating with us on the expected timeline, and we have received the first feedback on the label. I'm not going to make further comments today on that feedback as it is preliminary and pending the final submission of data on all 142 patients, which will be incorporated into the label. As shown on Slide 13, we have multiple upcoming milestones with PDUFA for HO, top line data from our Japanese HO cohort and the EMANATE readout all coming in March. For EMANATE, we are working to get the top line data with the goal of releasing that data by the end of March. The PWS trial continues on track to get to the full 6-month data by midyear. At our December release, we indicated that 1 patient had discontinued the trial. Since then, we've had no further dropouts with all remaining 17 patients continuing on treatment. We have taken no further data cuts and have no further patient updates to provide on this call. The 718 weekly formulation continues to enroll in HO, and we are on track to have initial 3-month data by midyear. With that, I'll turn the call over to Jennifer.

Thank you, David. Starting with BBS, we had another steady quarter of growth in prescriptions as our teams continue to focus on educating healthcare providers to expedite patient diagnosis and working with payers to secure approval for reimbursement. Importantly, patients are benefiting from IMCIVREE therapy as it is the only approved therapy that targets the root cause of rare MC4R pathway diseases like BBS. We continue to be inspired by patient success stories. For example, one adult male patient with BBS, who is a resident of an assisted living facility had such severe hyperphagia and preoccupation with food that he could not participate in group outings. After 6 months on IMCIVREE therapy, he not only lost 40 pounds, but his hyperphagia had quieted down meaningfully, and now he's able to socialize with others and participate in group activities. Now on Slide 15. Our teams are continuing to prepare for the acquired hypothalamic obesity launch, pending regulatory approval and our March 20 PDUFA goal date. Acquired HO is a distinct post-injury neuroendocrine disease characterized by impairment of the MC4R pathway leading to hyperphagia and accelerated and sustained weight gain. With an estimated prevalence of 10,000 in the United States, acquired HO represents a significant opportunity for Rhythm to expand the reach of IMCIVREE and the benefit it brings to patients. If approved, IMCIVREE would be the first therapy for these patients that currently have no approved treatment option. As we've discussed previously, we expanded our sales force from 16 to 42, all highly experienced launching new therapies in rare diseases. With the extra time ahead of launch, our engagement efforts have continued. Claims data helped us identify healthcare providers who we believe are caring for patients with acquired HO. Our HCP engagement has been focused on disease awareness to help drive suspected cases to formalize diagnoses of acquired HO. We already have engaged with HCPs who care for more than 2,000 patients diagnosed with or suspected to have acquired HO. Let me outline an example of the ongoing dialogue around patients suspected to have HO. Our team engaged with an endocrinologist who treat several patients with sustained hypothalamic injury. During a meeting with a field team member who outlined that injury in the hypothalamus could cause impairment of the MC4R pathway, leading to acquired hypothalamic obesity, the physician noted that one patient in particular stood out. This patient experienced severe weight gain following treatment of a brain tumor, subsequently underwent gastric bypass surgery and later initiated GLP-1 therapy with minimal benefit. Now with a clear understanding of the clinical diagnosis of acquired hypothalamic obesity and appropriate screening criteria, this physician indicated that he suspects additional patients may have acquired HO, and he'll bring them back for evaluation and diagnosis confirmation. Moving on to the next slide. We have also learned more about the management of aHO patients through our Territory Managers' disease education efforts. In addition to the ongoing engagement of our MSL or Medical Science Liaison team, we have identified approximately 40 priority medical centers throughout the nation based on their significant concentration of aHO patients. Approximately 1/3 of the potential aHO patients who we have identified via claims data are managed within these centers. The majority of these have pituitary centers where hypothalamic disorders are managed by multidisciplinary teams. While there are similarities within these organizations relating to which specialty is brought in to manage the tumor and treatment as well as the hormonal dysfunctions associated with the procedure, there is variability in terms of who manages aHO. In one center, the endocrinologists involved in the treatment of the hormonal dysfunctions would also take on the responsibility to treat the weight gain. In another center, these patients' hormonal dysfunctions would be managed by the endocrinologists, but they would be sent to the community PCP or obesity specialists to be treated for their weight gain. Understanding these differences allows us to better pinpoint who would potentially be the diagnoser of aHO versus the obesity treater and future potential prescriber of IMCIVREE if approved for aHO. Our team continues their HCP engagement and identification of patients who would benefit from IMCIVREE once approved. Now on to my last slide. Beyond HCP engagement, we also continue to engage with payers to secure access for patients as soon as possible following approval. Our education and engagement around BBS established a robust base for securing access for aHO as payers have come to recognize the differentiation of MC4R pathway diseases and the value that IMCIVREE offers patients. For acquired hypothalamic obesity, payer coverage following approval, our expectation is for policy updates to occur within 3 to 9 months. We are excited by the progress we have made and are ready for launch pending approval in acquired hypothalamic obesity. Now, let me turn it over to Yann.

Thank you, Jennifer. I will begin on Slide 19. We had a strong year in 2025 as our international organization has grown to more than 100 employees across 13 countries. With the ongoing BBS and POMC/LEPR sales and the reimbursed Early-access programs for acquired hypothalamic obesity in France and Italy, IMCIVREE is now available in more than 25 countries outside the United States, including 8 countries newly added during the year. Our growth in 2025 was driven by sales in countries with established access and new countries coming online. Our team engages with key experts across Europe to advance education and the understanding of rare MC4R pathway diseases. In 2025, 64 abstracts, both originals and encores were accepted for posters or oral presentations at 12 international and national scientific congresses. Next slide. Here, I highlight one recent publication entitled Early-onset of Obesity Model, Impact of Early-onset Obesity on Comorbidity Risk and Life expectancy, which was very recently published in Obesity facts, the European Journal of Obesity. This peer-reviewed Early-onset obesity disease model, which we developed in collaboration with leading European experts, integrates data from more than 140 publications to quantify how the age of onset, the severity, and the duration of obesity negatively affect the risk of comorbidities, the health outcomes, and the life expectancy. This reinforces that Early-onset Obesity is a serious progressive disease and stresses the urgent need for early intervention. These findings supports rent focus on early diagnosis and treatment of obesity driven by impairment of the MC4R pathway, where addressing the underlying cause earlier has the potential to reduce long-term disease burden and create meaningful benefit for patients, families and healthcare systems. Next slide, Slide 21. Now moving to acquired hypothalamic obesity. We are planning for multiple opportunities in Europe and Japan with a higher per capita prevalence of acquired HO than the United States and Europe and an estimated population of 5,000 to 8,000 patients, Japan represents a meaningful long-term opportunity for our MC4R agonist franchise. We continue to make significant progress ahead of our anticipated Japanese launch, establishing a strong leadership team focused on engaging with experts and healthcare centers. Earlier this month, our team had a very positive in-person meeting with the Japanese PMDA. And as David said, we anticipate top line data from the Phase 3 cohort of Japanese patients in March. In Europe, our EMA submission for HO is under review. We anticipate a CHMP opinion in Q2 and the EU marketing authorization in the second half of 2026. The steady growth in our reimbursed early access programs for HO in France and Italy is a very positive indicator for our success in Europe and help establish foundational relationships with expert physicians and local authorities. The French regulatory authorities renewed this month the authorization for the IMCIVREE AP1 reimbursed early-access program, which clearly illustrates the benefit patients are receiving as part of this program and the high unmet need. Pending marketing authorization from the EMA in the second half of 2026, we will begin establish reimbursement for acquired HO in Europe on a country-by-country basis as we have done before for POMC and LEPR, and BBS. With that, I will turn over to Hunter.

Thank you, Yann. 2025 proved to be a strong year with solid growth in global sales of IMCIVREE and multiple value-driving milestones achieved across our portfolio of MC4R agonists. We enter 2026 well capitalized with more promising potential catalysts ahead. I'll begin on Slide 23 and walk you through our results for the fourth quarter, which was another solid quarter as well as the full year revenue, both of which we preannounced in January. Revenues from sales of IMCIVREE were $57.3 million for the fourth quarter of 2025, representing a quarter-over-quarter increase of 12% and $194.8 million for the full year, an increase of approximately 50% from 2024. On a sequential quarterly basis, revenue growth was driven by an increase of approximately 10% in the number of patients on reimbursed therapy globally. In the fourth quarter of 2025, $39 million or 68% of product revenue was generated in the United States and $18.3 million or 32% of product revenue was generated outside the United States. On Slide 24 is the walk from the $51.3 million in global sales in Q3 to the $57.3 million in Q4. In the fourth quarter, the volume of vials shipped to our specialty pharmacy in the United States was approximately $1.7 million greater than the vials shipped, than the vials dispensed to patients. This compares to an excess of vials shipped over dispense of $3 million in Q3 2025. The net effect produced a negative $1.3 million inventory swing from Q3 to Q4. For the second consecutive quarter, inventory days on hand at the specialty pharmacy increased ending approximately 20 days versus a normalized level of around 10 to 15 days. As was the case with year-end 2024 and as is common across our industry, this type of growth in days on hand represents a potential pull forward of revenue from the quarter of actual patient demand and can, with all other things being equal, have a dampening effect on the first quarter of the year. US revenue grew by $2.1 million quarter-over-quarter due to increases in product dispensed to patients. ex-US revenues increased $5.2 million or 40% versus the third quarter of 2025. The sequential increase was largely due to the negative impact on the third quarter of a onetime $3.2 million charge related to the final agreement with France on the reimbursed price for IMCIVREE for the treatment of BBS, POMC and LEPR deficiency. On Slide 25 is the financial snapshot of year-over-year performance as well as the fourth quarter 2025 results compared to the fourth quarter of 2024. Net product revenues in Q4 2025 increased by $15.4 million or 37% over Q4 2024. Gross to net for US sales was approximately 84.6%, generally in line with the gross to net percentage from previous quarters. Cost of goods sold this quarter was 8.5% of product revenue and was mostly attributable to cost of materials and our royalty payment on setmelanotide due to Ipsen. COGS as a percentage of product revenue was down slightly this quarter based on an increase in finished goods inventory. We generally expect cost of goods sold to be between 10% and 12% of net product revenue with variation due to how our inventory balances change and the corresponding capitalization of labor and overhead costs as was the case in Q4. Research & Development expenses were $42 million for Q4 compared to $41.2 million in the same quarter last year. Sequentially, R&D expenses decreased by approximately $4 million compared to the third quarter of 2025. More than half of that decrease was due to the transition of our area development managers in the United States to sales reps or territory managers, moving their salaries and stock compensation to SG&A effective October 1. Costs in the fourth quarter from our Phase 3 HO trial with setmelanotide and our Phase 2 trial with Bivamelagon decreased from the third quarter. SG&A expenses were $57.5 million for Q4 2025 as compared to $38.1 million in Q4 last year. Sequentially, SG&A expenses increased by $5.1 million or approximately 10% compared to the third quarter of 2025. Increased SG&A spend from Q3 to Q4 was due to increased headcount costs and professional fees associated with the anticipated launch in acquired hypothalamic obesity, including the transfer of the field force described previously. For Q4 2025, weighted average common shares outstanding were approximately 67 million. Our GAAP EPS for the fourth quarter of 2025 was a net loss per basic and diluted share of $0.73, which includes $0.02 per share from $1.3 million of accrued dividends on convertible preferred stock. Cash used in operations was approximately $25 million in the fourth quarter and $116 million for the full year. We ended 2025 with approximately $389 million in cash, cash equivalents and short-term investments, which we expect to be sufficient to fund planned operations for at least 24 months. On Slide 26, a few additional items of note. First, our GAAP operating expenses for 2025 totaled $362.3 million. That included $66.8 million in stock-based compensation. Non-GAAP operating expenses for the year were $295.5 million. This came in at the lower end of the range that we guided for at this time last year. Our common share count is 68,285,039 shares as of February 24. This number includes 729,164 shares of common stock, which were converted from preferred shares since the end of the third quarter. Recall, we raised $150 million in gross cash proceeds through the issuance of convertible preferred shares in April 2024. Following this partial conversion, there are 2,395,831 potential common shares that could be converted from the remaining preferred shares. The recent conversions represented almost 25% of the initial preferred shares, hence reducing our liability of dividends payable to preferred shareholders. Lastly, on Slide 27, we are offering annual guidance on non-GAAP operating expenses. For 2026, we anticipate approximately $385 million to $415 million, which includes non-GAAP R&D expenses of $197 million to $213 million and non-GAAP SG&A expenses of $188 million to $202 million. The overall increase in non-GAAP operating expenses for 2026 of approximately $104.5 million at the midpoint, which is about 35% over 2025 is the result of the success of our clinical programs in 2025 and represents future investments derived at driving long-term growth and increasing shareholder value. There are 3 primary drivers of the growth in anticipated 2026 spending. First, approximately 30% of the year-over-year increase will come from increased spending on formulation development, manufacturing and clinical supply of our next-generation MC4R agonist, Bivamelagon and RM-718 as we continue to move both compounds through proof-of-concept studies and hopefully registrational studies in the coming years. Second, approximately 25% of the increase will be on US commercial operations in support of the HO launch. Third, approximately 15% of the increase will be to build out Rhythm's operations in Japan in anticipation of a potential approval in HO. Overall, this forecasted year-over-year growth in operating expenses is the product of the last few years clinical, regulatory and commercial success and represents a meaningful opportunity to invest in Rhythm's long-term potential to serve patients with MC4R pathway diseases. With that, I'll hand the call back over to David. Thank you.

Thank you, Hunter. And Tanya, we can open it up for questions.

[Operator Instructions] Our first question will be coming from Derek Archila of Wells Fargo.

Congrats on all the progress here. David, just first on Bivamelagon's Phase 3, your comments suggest that this will largely look like setmelanotide Phase 3. So in terms of sample size and duration, but are there any changes to enrollment criteria that you would think of or other features of the trial that you can comment on?

No. I mean those are the principal things that we were looking to get feedback on. I think to your point, the trial will largely mimic our Phase 3. We continue to look at our patient reported outcome measures. Are there other things we can do to get better and better at, for example, understanding hyperphagia/hunger. Some of these patient-reported outcome tools have not been validated, et cetera. So that's an area which as a company, we might modify, but we didn't get specific feedback from the FDA.

Got it. And then maybe just a follow-up. On the guidelines potentially for HO that could be implemented or kind of evolve over time, I guess, specifically for postsurgical patients where it seems like physicians want to intervene early prior to that significant weight gain. But just any comments on how that might evolve over time and what you're hearing?

Yes. I mean it's a good question. We've had a 6 months post-surgery as an entry criteria to make sure that patients were stable on their hormones. That's very much a developmental issue because you don't know everything and you want to have things as, or the minimal number of things that might confound your interpretation of the results. In the real world, which is your question, and we've had this feedback from multiple thought leaders and the like, I mean, earlier is better. Why would you know the patient has HO, why would you make them wait 6 months to begin intervene? You wouldn't do that for their thyroid hormone replacement, for example. So I don't think there'll be that kind of guidance in the label. We'll see where guidelines quote unquote "come out." Those will emerge over time, but I haven't heard that. I think the consensus would be as soon as you, the treating physician are comfortable, yes, you want to intervene.

Our next question will be coming from the line of Tazeen Ahmad of Bank of America.

Can you give us an update on where you are with the PWS study? When is the next data update from that? And what type of deepening response are you looking for? Are you looking for more weight loss? Are you looking for better hunger control? Or just can you give us a sense of that?

Yes. Thanks, Tazeen. So as I said in my comments, we're still on track for midyear in terms of providing that update for the 17 patients who remain on drug. I think the one piece of updated data I gave you today was that 17 of 18 patients remain on treatment. I think for a challenging disease. These patients tend not to remain on drug if they don't feel like they're benefiting. So we would take that as encouraging. I don't have an additional cut of the data. So as I said, I don't have further updates there. In terms of what we're looking for, again, we've been very clear and continue to learn. This is a more challenging disease in the sense that there's a lot of other things going on. They have multiple genes affected, not just those potentially impacting the MC4R pathway that are at play in this disease and can confound results. But I think our goal remains the same. We'd be looking to clear 5% on the BMI change. We'll see how we do there. And of course, we'll collect hunger. I mean, the hyperphagia scores, HQ-CT, we shared that data in December with the caveat. This is an uncontrolled trial. So those kind of measures, you really need a placebo-controlled group to know exactly how you're performing, but we will have that data, and of course, we'll share it.

And our next question will be coming from the line of Mike Ulz of Morgan Stanley.

Congratulations on all the progress as well. Maybe just one question on IMCIVREE trends. You mentioned the potential for dampening of sales in 1Q, given some pull forward in 4Q. Maybe you can give a little bit of color on how to think about the growth? Is it just a slowing of growth? Or should we think more flattish?

Well, I'm not going to give you a comment sort of on where external estimates are. We did see negative growth Q4 to Q1 in 2024 into 2025. The buildup of inventory this year in absolute terms is less, so we'll see how that shakes out. But that, it's just that dynamic in and of itself that inventory represents a pull forward of sales from one quarter into, from Q4 out of Q1 into Q4. I think the only other thing is we have the typical experience that faces us every Q1 where there are a lot of planned renewals and planned changes for individual patients. So some patients rotate on to our bridge program and then those get resolved and they rotate off.

And our next question comes from the line of Whitney Ijem of CG.

I just wanted to follow up on EMANATE. You guys have talked about POMC PCSK1 and the SH2B1 substudies as being higher probability. Can you just talk to us a little bit, remind us, is that just driven by the enrollment and the powering of those sub-studies? Or are there genetic biological considerations there as well?

Yes. Let me summarize what I've said previously, but important to remind. So the way we've handicapped this is, yes, we think that the POMC/LEPR are the most likely to be positive, and that's based on the fact that we did have an assay going into the trial that allowed us to determine which of the variants were most likely to be pathogenic meaning that they had true loss of function. There's a range of variants there, of course. So, and the assay has its limitations. But the bottom line is we felt that in that cohort, we were enrolling predominantly patients who would have true loss of function. So that was our best, and we were able to enroll that cohort fully. The leptin receptor, we also had insight into which patients might have true loss of function, but it turns out the leptin receptor head group is extremely rare, those that have this potential loss of function variant. And so that cohort was very significantly under enrolled. And so we weren't so optimistic there or not. And then SRC1, mostly a boost variant of unknown significance, variants of unknown significance disproportionately tend to be benign. And so again, we think there's a high risk that one may not be positive. And the reason we remain somewhat hopeful on SH2B1 is that there's two groups there. One is those who have this deletion, 16p11.2 deletion. So by definition, with a deletion, they would have loss of function. The other part group of that, that's enrolled, the missense mutations associated with SH2B1, then you're back in this, how many of those are VUS and of the VUS, how many are benign versus pathogenic. So long story short, that's how we handicapped it. Again, we're working to get that data out by the end of the year. The other thing I've said is we, like I said, we've been careful and modest in terms of our projections here and what we think might happen. I think whatever we get, we're going to learn a lot from these studies. And minimally, they will form the basis for the next round of studies with our next-generation studies molecules, which we would do anyway. So when we report out, we'll try to give you some insight into how we think about the future there.

Got it. That's helpful. And just one quick follow-up. Should we still be thinking about kind of the 5% weight loss as the kind of bar for success either based on powering or just how you're thinking about it?

Yes. I mean 5% is the guidelines. That's why we Prader-Willi, of course, where we think it's a really tough disease. I mean that is the minimal threshold. And so that's certainly the threshold here. I think in some of our other indications, you get into the world expects more today from a weight loss drug. But technically, it's 5% plus. I think what we would look at is, A, is the study positive? And then B, do we think it's clinically meaningful and would be a meaningful offering to patients with that specific genetic defect.

And our next question will be coming from the line of Corinne Johnson of Goldman Sachs.

Maybe you mentioned the study for Bivamelagon and that the FDA was pretty explicit that new molecules would require a year-long Phase 3. I guess how are you thinking about that then as it relates to the planned development of 718 in the same indication? And kind of separately, but in the same vein, how do you think about managing kind of quality control of the Phase 3 program as you think through enrolling patients' kind of ex-US in order to get that patient population?

Yes. It's a good question. So first on 718, yes, the read-through there would highly likely to be the same. I mean, to be honest, we'd go back, I would look to have another conversation with them. I think part of Biva is it's a small molecule. I think 718 is a peptide. It's highly analogous to setmelanotide. I don't know if they would look at that any differently. But a conservative base case here is, yes, 718 will have to do the same thing that we're being guided to for Biva. Quality control outside the US, the world is small. I mean, the sophistication of running trials outside in these other countries, I mean, there are a number of centers and one or more centers in many or most countries, which are pretty sophisticated. CROs are structured to run trials globally. So I'm not at all worried about quality, I mean, you pay attention to that, we'll be careful, of course. But I think quality control is not the issue. Our challenge, as always, is rare diseases, you want to find sites that have good access to patients.

And our next question will be coming from Phil Nadeau of TD Cowen.

Congrats on the progress. Two from us. So first, in the bivamelagon Phase 3 trial, what dose will you be exploring? It seems like you think 200 milligrams is underdosed. 600 did look a little bit more potent, but the patient numbers were small. So we're curious what dosing paradigm you will use. And then second, on hypothalamic obesity, I think the last number of identified patients that you gave to us was 2,000. It sounds like, as your sales reps are out there shaking the trees and doing medical education, you're finding more and more patients. So, any update to that number?

Yes. So, what was the question on? Yes, the dosing. So we will dose escalate from 200 up to 600, 600 will be the target dose. We look at the data the same way you did. I think there is a difference between 400 and 600 milligrams. I think we're still on a dose-response part of the curve there. The other thing that has been pretty encouraging, and I will say, we've got a number of patients out for the full year. So I have a little insight there. I mean, what happens in HO is that many of the patients continue to just gradually deepen over time. And I'll remind you back to a patient from our Phase 2 study, the most severely affected, oldest individual in that trial, a 24-year-old man who had a starting BMI of 52, 50-plus. And over a period of 4 years, he just continued to gradually decrease his BMI down to a normal BMI of 24. And I think what we're seeing here is not inconsistent with a gradual deepening over time. And so the short answer to your question is, yes, well, the target dose will be 600. There'll be patients who maybe do fine on 400, just as there are patients who do okay on 2 milligrams as opposed to 3, but with setmelanotide. But I think we're incredibly encouraged here. And I think this data gives us high confidence that this pathway is central to HO, and we're correcting as you might expect in the hormonal replacement strategy. With regard to patients, we updated in September, and we've stayed away from sort of giving you monthly or quarterly updates on those patient numbers because a while, I'm not sure how helpful that is. But you are absolutely correct. And as Jennifer highlighted in her comments, the team has been doing a lot of work. We're continuing to find more patients. So yes, that number has gone up. We're learning a lot about the nature of this community, how many patients carry a diagnosis of HO, and how many patients are quote unquote in the suspected category. So this belief in the overall opportunity, the 10,000 is high, and it's higher than it was last September, for example, and we feel really good about the progress we're making.

Our next question will be coming from the line of Jon Wolleben of Citizens.

Just one on Japan. Hunter, you mentioned the investment you guys will be making there. Just wondering how we should think about the opportunity in Japan and the trajectory of a potential adoption.

Yes. Yann, do you want to take that?

Yes. So, potential first. So as I said earlier, we estimate a prevalence between 5,000 and 8,000 patients, and it's a well-documented prevalence. So we are quite sure of this number. The second point was your question about our capabilities. So we are currently building out our team. We have set up an affiliate. We have a full management team in place, and we already have a field medical team on the ground. And from a timeline point of view, David mentioned the data in March. And following that, you can count on 12 months of regulatory and market access and pricing aspects, which means that we should have a launch in the next 12 months from now.

And our next question will be coming from the line of Thomas Smith of Leerink Partners.

Just on the aHO expansion, I appreciate the color on the regulatory interactions. It sounds like you're entering labeling negotiations, which is great. As we think through some of the color you're giving here around reimbursement and payer coverage and activating sites and patients, can you just elaborate a little bit on how you're thinking about the launch cadence relative to BBS?

Yes. So, from the perspective of aHO versus BBS, I think there are similarities and some differences. I think from a similarity perspective, there's still a lot of opportunity, as we've outlined, just in terms of getting these patients to an actual diagnosis of acquired hypothalamic obesity versus just being seen as a patient with obesity for many causes that may not be the root cause in terms of what they are going through. So there's still an opportunity there. I think the other piece is from the perspective of a time line of payer coverage, although we have a great starting point just in terms of all the dialogue we had with BBS in terms of the differentiation of MC4R pathway diseases versus general obesity, it's still going to take some time just in terms of going through the process of having specific PNT meetings so that we get a specific policy for the expansion of the indication in place. And we're similarly in the meantime, going to be working through the process as we get the Rxs in payer by payer. So there are some similarities. I think some of the differences is that in terms of aHO, the precision and confidence just in terms of the data we have, to really pinpoint it down to the right physician to educate to get these patients to a diagnosis. We feel a lot more confident about that. I think in comparison to BBS, those sort of crumbs to lead us to the right physicians is stronger. I think the other aspect is we know, even though like our teams are targeted by the data and following where the patients are, it just made sense that we are actually being led to these medical centers that have these pituitary centers and capabilities. So we know where they go once they have the brain tumor and where they're treated and they stay in that situation for a period of time so that as they start to encounter the symptoms of aHO, we have the ability to really target those incident patients to get to a diagnosis that is not missed. So that's a bit different than what it was like for BBS, which once again gives us a bit more confidence just in terms of being able to identify them earlier in their journey.

Our next question will be coming from Seamus Fernandez of Guggenheim Securities.

This is Evan Wang on for Seamus Fernandez. Just 2 from us. First, with 718, I saw some narrow timelines for Part D. Curious if there's any potential strategies to accelerate time lines there, potentially like a Phase 2/3, just given some of the feedback and data sets around and set. And then second, curious if you're exploring or planning to explore other areas of MC4R development, maybe, or other kind of avenues to treat obesity.

Just to clarify on the last part of the question, other indications that we're thinking about, other approaches? Is that what you're asking?

Other indications or approaches for I guess mostly obesity-related treatment.

Yes. Okay. So for 718, is there a strategy to accelerate? I mean we take, I think, a pretty aggressive view in general. I mean the regulators don't always agree with our approach. And so we end up sometimes in more conservative or conventional approaches. But I think 701, as I said earlier, is likely to be highly similar to Bivamelagon. We'll go with this initial experience in this open-label study and move right to a Phase 3. I don't know if there's an opportunity to accelerate things further there. The other thing is the pressure on the next-gen in HO is we want to get it out as soon as possible. It's a little different from an initial indication opportunity where those patients have no other treatment and setmelanotide will be approved and out there. So patients will have an option. So again, we want to, we'll move as quickly as we can, but it's not quite the same criticality as it might be if there was no treatment available at all. With regard to other indications, I mean, we've talked about the different kinds of, or the different areas that we're interested. So one is genetics, M&A being the first beyond our initial approvals in POMC and LEPR. We have the DAYbreak study. So we will be coming back to specific genes. We will do that development work, as we've said, with next-generation molecules, probably not both molecules in every one of those genetic indications, but we'll come back to you with an updated plan there. And with regard to other approaches to obesity, I mean, yes, we're open to that. We have early programs where we're thinking about different ways, we might complement MC4R. That's all early. We're not at a point where we're prepared to talk about that yet. But we are fully committed to optimizing therapy for these patients with MC4R and deficiencies, and that would include potentially additional approaches.

And our next question will be coming from the line of Joseph Stringer of Needham & Company.

This is Eddie on for Joey. Just a follow-up on MC4R and the EMANATE sub studies. Can you remind us again if you intend to submit these as a combined sNDA for a broader MC4R pathway, or just talk about how the regulatory path might necessitate sort of mutation-specific approvals and then how this might change for these next-gen therapies as you kind of move through the trials in later years? And then a follow-up, I'm sorry if I misheard, did you say that in the BIVA-HOLE that you saw moderately better results, patients not on GLP-1? If I heard that right, can you describe why that might be the case?

Yes. Let me take that last piece first. So when we're trying to create an apples-to-apples comparison from, we took the patients in our 040 Phase 3 setmelanotide trial. If you remember, there was in the treated group, about 15 patients who were on a GLP-1. That group did have a better result. If you remember, they got in the trial by not having responded to a GLP-1. Once they got setmelanotide, they had a very good response. And if you were just to look at that cohort, their actual percent decrease was greater than the group that did not get a GLP-1. Trial was not designed to prove that might be a better outcome. But what we've concluded biologically is, yes, once you correct the underlying defect in setmelanotide, restore the hormonal deficiency, then your ability to respond to another anti-obesity medicine might be restored, and we gain weight for a different reason. And so if you're a patient who's got incremental weight because they love ice cream and they need ice cream all the time, then GLP-1 in that setting, once you've corrected the hormonal deficiency might make sense. So anyway, that was an apples-and-apples change there, and that was the goal there. Your question about M&A in terms of regulatory filing strategy, no, these will be filed individually. Even if all 4 were positive, we would file 4 separate sNDAs. They would be, I said, one at a time evaluations. And then, in the future, I mean, is there an opportunity for a mechanistic kind of approval that wouldn't require a full Phase 3 for every genetic indication? I think that's possible. I would say we're definitely not, or the regulators are definitely not there today. But that's not an unreasonable question for the future.

Our next question will be coming from Paul Matteis of Stifel.

This is Matthew on for Paul. I guess I had one on acquired HO. So for the FDA review, we appreciate the pivotal Phase 3 was already large, but will you be able to supplement your data package with the Japanese cohort? Does the timing work out such that you'll be able to include this before the PDUFA?

Yes, Matthew, it's a good clarification. The answer is yes, and that's partly, I mean, when the FDA gave us their extension back in November, they were very aware of the exact timing of the last patient in visits. And so they had done the calculation, recognizing that there was a very short period of time between when we would have data from that last patient, a Japanese patient and being able to get the data in on the full 142 patients, which is what they wanted. So we're on that path, and we will get that data in. And yes, they are prepared to deal with the fact that, yes, it's, now we're down to a relatively short period of time between that final data submission and the label or potential approval on March 20.

And our next question will be coming from Samantha Semenkow of Citi.

Just maybe one clarification on the Phase 3. You mentioned that you were going to primarily enroll outside in countries where setmelanotide is not available. How does that work necessarily for enrollment in the US? And then just on Prader-Willi, can you just talk about your latest thinking on a potential Phase 3 trial? Would you plan to take both setmelanotide and 718 forward? Or is it more likely that you choose one of these drugs to advance?

Yes. Okay. So, with regard to the Phase 3 for HO, yes, we will run it predominantly outside. I wouldn't exclude having a US site, but setmelanotide will be approved. Patients here have an option. So, the US for multiple reasons becomes a little more complicated. We do not need to have a site in the US I mean we already have US data coming out of our Phase 2 study. So I'm not, again, I'm not so worried about our ability to execute the trial, not using the US, but you never say never, so I would defer final decisions on that. So for Prader-Willi, setmelanotide versus 718, I think this is something, as we've highlighted before, the advantage of going forward with setmelanotide is we've got data in setmelanotide already, may be a supplemental NDA, and so we could, in a sense, roll into that Phase 3. The advantage of going with 718, for example, is that it's a next-gen. We're going to use, do a next-gen study sooner or later, and that's the end game. And if the 718 program is at a point where the gap between when we might start with setmelanotide and when we could start with 718 is not so great, then I think we would take that time delay, if you will, and just go right to 718 and avoid having to run two studies there. But that decision is yet to be made. We'll see how all of this plays forward.

And our last question will be coming from the line of Lisa Walter from RBC

Congrats on the progress. I just have one on Biva. Wondering if you can expand on your dose selection comments. And I realize this might be a bit early as the Phase 3 has not yet even started. But long term, is it possible patients could dose down with a maintenance dose if they happen to reach a normal BMI in the real world? Any color here would be helpful.

Yes. Yes, I'll briefly repeat what I said before on the dose selection. I do think 200 is probably on the border in terms of being therapeutic for most patients. I think 400 to 600 is more likely in range and 600 does seem to have a continued dose response. And so 600 for sure will be our targeted dose just the way 3 milligrams was our targeted dose in the HO setmelanotide trial. With regard to dosing down, what's interesting here is the biology, pathophysiology, it's a hormonal deficiency. So in theory, you take whatever amount you need to restore your hormonal deficiency, but it's not a biologic setting where dosing down makes sense. So I think our expectation is most patients will stay at their target dose. That's been true with setmelanotide as we go forward. So it's not, you get your weight loss and then you can kind of go to a low dose to maintain. That's not the pathophysiology.

I'm showing no questions. I'd now like to turn the call back to David Meeker for closing remarks.

Great. Thank you. So thanks all for tuning in. Again, we remain really excited about the progress here at Rhythm, lots of exciting things coming up. 2025 was a big year. 2026 is going to be equally big. So we look forward to our next update. Thanks all.

And this concludes today's program. Thank you for participating. You may now disconnect.