Rhythm Pharmaceuticals, Inc. ($RYTM)

I'm Tazeen Ahmad. I'm one of the senior biotech analysts here at the bank. It's my pleasure to have our next presenting company, Rhythm Pharmaceuticals. Sitting up here on stage with me is David Meeker, who is, of course, President and CEO. Welcome.

Thank you.

So for the few people who may not know about the platform of the company, David, maybe you can give us a quick overview, and then we can go into some specifics.

Sure. So Rhythm is a company that was really founded around the melanocortin-4 pathway biology. The drug that's approved for multiple indications is an analogue of the natural hormone that signals through this melanocortin-4 receptor. And what that biology does is very simply is when we eat a meal, our gut hormone signal to the pancreas and to the adipocyte, the adipocyte releases leptin and it goes to the brain, signals down through this part of the hypothalamus, this POMC neuron, which then causes a hormone alpha-melanocyte-stimulating hormone to be released. And when that interacts with the receptor, it tells the body you're full and there's food on board. So you can increase your metabolic rate. So if you have impaired signaling through that pathway, you might eat a meal or you eat a meal. The body doesn't get the signal, you're full, so you keep eating. And then perversely, the body thinks you're starving, it's not getting the signals food on board, and so it keeps the metabolic rate low. So these patients suffer with disproportionate levels of weight gain, and there's multiple different causes of how you get to impairment, some of which are genetic for which we have some approved indication. Some of them are injury directly, and that's our most recent approval, and we'll talk more about that today, acquired hypothalamic obesity. So those are the 2 main categories that we're working on. And as I said, our drug is an analogue of this natural hormone that's in patient or missing.

Okay. So IMCIVREE, we're all looking at for the HO launch now, but it's been on the market for a bit. You previously had smaller indications approved. So maybe let's start off with those. Give us a sense of where you are, where you think you are in penetrating those markets.

Yes. The first approvals, which were in 2020, and as many companies do, particularly in rare diseases, you follow the biology. And so the best example of impaired signaling was patients who had a genetic impairment in this POMC neuron, so biallelic POMC neuron deficiency, if you will. And that population, that one and another one with the leptin receptor, we thought they might be on the order of 2,500 patients epidemiologically. The challenge of that disease is there's no -- aside from this extreme, early-onset obesity, there weren't really any clear signs that, that obesity might be due to a genetic cause as opposed to general obesity. And of course, we live in an epidemic of obesity. So they don't -- they're lost in the forest truly. I mean, these patients. So they can only really be found with genetic screening. We've done genetic screening. We offer a genetic screening test for free. But we realized early on that this was in reality, a very, very small indication or 2 indications. And so we didn't put a sales force when we -- in the field when we got the drug approved. We made it commercially available. We priced the drug. There was a lot of advantages to having a little bit of that lead time, but it wasn't a true business opportunity that was to stand a company. Our next indication, which was Bardet-Biedl syndrome, larger indication. We think there's about 5,000 patients in the U.S. that have that disease, but it's syndromic. And the advantage of being syndromic, from an identification standpoint, is that there's multiple disease manifestations that signal to the health care provider who is trying to figure out what's going on that there may be an underlying genetic disease here. And that population follows exactly the classic diagnostic odyssey that many patients with a rare disease do. They see multiple specialists until they finally find one who connects the dots and says, "Oh, you have Bardet-Biedl syndrome and sends a genetic test. So that drug -- that indication we got approved in 2022. And from the beginning, we believed, and I think the results to date have supported that is we could build a profitable company around Bardet-Biedl alone. You wouldn't be spending a lot of money on R&D. But if you were really just focused on that, it could support a company. And from the beginning with these genetic indications, and this partly from the world I came from, I believe strongly, all diseases, certainly genetic diseases, they're global. And despite being a smaller U.S. biocentric or biotech company, you want to think globally, and we did from the beginning. And so we have worked to make the drug available outside the U.S. We sell in about 25 countries now for these indications on these 3 genetic indications. So, that laid the foundation for where we are today. And then a little bit of serendipity, which also I think is interesting in terms of how these things evolve. KOLs, thought leaders, one of them who have been doing a lot of thinking about this area came to us and said, you should really try this in this entity called acquired hypothalamic obesity. And famously admit to -- when I took the CEO role in 2020, that trial is just getting underway. And as I looked at the different places we could save money, I thought, well, let's stop that trial because if you injure the hypothalamus, and I'll just give you the quick background for that, why it's humorous in retrospect, these are patients who -- most commonly, they have a tumor that develops in the region of the pituitary gland and the hypothalamus. So tumors that grow up in that area, benign tumors, they can be resected. And when resected, patients can go on and live a relatively normal lifespan. But the surgery, the radiation, sometimes the tumor itself injures the pituitary. And so 80% plus of these patients will come out of surgery with pituitary insufficiency, meaning they need a thyroid replacement, adrenal hormone replacement, vasopressin insufficiency. It can be a long list of hormonal insufficiency related to that pituitary and some hypothalamic damage. But if you get enough hypothalamic damage, you injure this pathway, the melanocortin-4 pathway, which sits there. And so about half of the patients with this underlying tumor come out of surgery and rapidly gain weight. It's like overnight, they have lost the signal that they're full. And so they explosively gain weight. And what we found when we started the trial is that it's incredibly simple. We're replacing that hormone when replaced. And the most striking thing about the clinical trial results was not that we got X percent weight loss, and we got very good weight loss, 19%-ish placebo-adjusted weight loss, but the consistency, it was like virtually every patient who took the drug had a meaningful response. And so that told us we were really fixing something. So my early thought process, which was, well, you're injuring the hypothalamus, I get it, you might injure the pathway, but won't you be losing the receptors as well. And there's a little bit of a mystery there, but no. The answer is either, one, there's enough retained receptor activity in the hypothalamus and/or in the and is probably significant, there are these melanocortin-4 receptors in other parts of the brain, including the brain stem and autonomic nervous system interacting with that, that's probably contributing to the beneficial effect we see. So long story short is that's where we just got our PDUFA data in March 20. We're now 6 weeks into launch and pretty excited about where we're going.

Okay. Thank you for that update. So if we wanted to compare and contrast the launch trajectory of these smaller indications versus HO. Can you just talk to some differences there, expected differences?

Yes. So the dynamics of a Bardet-Biedl syndrome, which I think about as a classic ultra-rare example, these patients tend not to be concentrated in a specific specialist. They're syndromic. So they have -- many of these kids by age 18 are legally blind. So they'll see an ophthalmologist. Many of them have renal insufficiency, so they'll see a nephrologist. They have cognitive defects, so they'll see a neurologist. And so they see a variety of different specialists. So the sales force that we put out was 16 people to cover all of the U.S. and obviously, not with the goal of calling on everybody and calling on all these specialists. And the other challenge is these patients may see multiple specialists. Once they get their diagnosis, they tend to go back to their primary care point, which might be a specialist, but also equally likely might be their primary care, family physician, internal medicine. So there's no way that with the Bardet-Biedl launch, you're going to knock on the doors of doctors who you think might have a patient with that disease. So you try to create a world with greater awareness so that the patient in that community has the ability -- equal ability to find you as much as we find them. And so that's how it builds. And that world in a launch market opportunity tends to grow. We said in the beginning, slow and steady. My team never liked the slow part. So we called it steady. But the point is it's a gradual launch, but it doesn't peak. It just keeps growing. And I'll go back to my Genzyme days. And if you look at the early Genzyme enzyme replacement therapies, 30 years later, multiple -- if you aggregate the companies that are working on Gaucher or Fabry or whatever, those are still $1 billion-plus opportunities that just -- and it's just -- and they're still finding the patients. I mean that is just the nature of these kind of rare diseases. And so we think about the BBS opportunity as a steady growth, whatever trajectory you have, we're on a -- I think it's starting to evolve into a relatively steady picture here. That will go for a long time. And I don't know if the 5,000 patient number in the U.S. is the right number or not. I mean we'll see what happens over time. But it's not like how many years to peak. It's just like however many years you have, you'll have that opportunity. HO in contrast, we think there's about 10,000 patients in the U.S., similar numbers in Europe, for example. We can talk about Japan separately because that's an interesting story. But 10,000 patients, so, twice from a number standpoint, BBS, but it has unique features, which are these patients because the vast majority, 80% plus, have pituitary insufficiency, they're taken care of by endocrinologists. So they are concentrated in a specialty, which means they have all the advantages of a specialty opportunity. And this is what the larger companies like. They love specialty. And the reason being is because you have a problem that is concentrated in a targeted audience. And so when you approach that kind of opportunity commercially, our goal was here, no, we want to cover the endocrinologists. And of course, in today's world, you can do claims work and there's -- the system gives you a much greater ability to understand where these patients may be, how many they may be and which doctors may have them, which has allowed us to take the endocrinology world and tier them and say, okay, who are the top and by top, meaning physicians who are likely to have 2 or 5 or more patients. And those will be prioritized and then you tier down to physicians who may only have one. But with that direction, so we put 42 reps -- sales reps in the field and with the goal of we're going to cover the endocrinologists as opposed to they find us. No, no, we're very actively going to go out there, try to educate that community, but also interact with it and build that relationship. So a very different opportunity, larger numbers, but also different dynamic. So as what we've said is that the expected ramp of HO is going to be meaningfully steeper than it is for BBS, but it also has some of the same ingredients of a classic ultra-rare disease, which is it's a high-priced drug. It will be a prior authorization. We're going to have to go through this medical acceptance process, get policies in place. Patients coming into their doctor, it would be one of these things, well, why don't -- if there's a bad problem and you got a drug approved, why won't they all get a script tomorrow? The answer is you don't call this into the pharmacy. So these patients before you start a drug like this, it's going to be lifelong, expensive, has some side effects. Patients is going to come in and have a conversation with their doctor. And so one of the gating factors will be how quickly they can get in and get their appointment schedule like. So that's the dynamic.

Okay. On your last earnings call, you reported early metrics of the launch. Specifically, you talked about the 100 -- greater than 150 Patient Start Forms written. So can you talk to us about what that means relative to being on the market for just a few weeks? How should we be interpreting demand based on that number?

Yes. Those of you who have heard us talk about this, again, it's virtually impossible to truly predict what's going to happen in a rare disease launch for a variety of reasons, some of which I've listed here. The only real metric we have in Rhythm is at the same point in time for Bardet-Biedl syndrome, we had about 50 Start Forms, scripts equivalents. Here, we have greater than 150. So that ratio doesn't surprise me at all. Incredibly pleased with how we got started. I would have been happy with 2x. It's like you just don't know out of the gate. But -- so yes, we're really pleased with where we are. But I think it's also very supportive of how we expected this opportunity to continue to evolve. And another question, which you either asked or I'll just volunteered is, is there -- was there a bolus? Was there pent-up demand? And there's always in a disease that's a severe disease where you've been in development for a number of years, there's some level of awareness, maybe a lot and patients who are following this and obviously waiting for the approval. So there's that kind of urgency out of the gate. But the numbers we gave you, which were greater than 150 scripts, Start Forms and written by 110 different physicians, which meant that most of those doctors wrote one script. There was a few, obviously, who wrote more than one script. But it wasn't as though we had a small number of doctors who are driving that initial performance here. This is really, I think, reflective of the fact that across the community and patients are coming in, and it's exactly as I would have expected, which is doctors will get their first patient in, they'll write a script, and then the second patient, whenever to the extent they have a second patient, their next -- their visit comes up, they'll write a script. But I don't think it's a dynamic of -- I'm going to try a script and see how that patient does. I think it's going to be very -- I think patients -- physicians are comfortable with the drug. It's been out there since approved drug since 2020. The data is extremely strong in terms of how patients have benefited. Today's world, the community, I mean, they're sharing experiences and pictures and some are quite striking. I mean there's patients who have gotten their lives restored and back to their pre-existing weight, meaning before they had their injury. So I think there's that kind of excitement in the community, but I think the steady part of this growth is a reflection of how quickly patients get in to see their doctor.

Just remind us what the list price is, the announced list price?

Sure. So give me round numbers, if you mind. So a year at fully compliant at full dose is about $380,000 gross to net under councils and they were about $330,000.

Okay. So one question I've gotten leading into the launch is this is obviously priced as a rare disease drug, $330,000 per patient per year, let's say. And if the goal is to help patients lose weight, then why wouldn't a GLP be sufficient in this particular population given the fact that it's priced at a fraction?

Yes, it's a critical question. And we've had -- when we got our first approval in 2020, the whole GLP-1 world was just emerging. And in the beginning, I wouldn't call it tough. It was understandably there were a lot of questions because the GLP-1 results were so amazing. I mean, they're incredible drugs. And a little bit of a view, they're a hammer and everything is a nail. It's like if you just need weight loss, you'll do this. What we've come to appreciate across indications, which is -- remember, when I say across indications, all of these different diseases share the same problem. They have impaired signaling through the pathway. And GLP-1s do not consistently fix the problem. And in fact, in our Phase III trial, we allowed patients who were on a GLP-1 and many of them had tried a GLP-1 previously. In fact, we had about 16 patients who are on a GLP-1 in our Phase III hypothalamic obesity trial. Now they couldn't be actively losing weight, but these are patients who had tried -- almost all of them had either gotten semaglutide or tirzepatide at one point, and multiple of them have had multiple different GLP-1s over time because, again, they had nothing else to try there. When they went on the trial, once you correct the deficiency in this pathway, then the fact that they were on the GLP-1, that group actually did as well or even better, a small number, this trial wasn't designed to test it. But looking at that data, and we have very good historical data, we can see what happened on their GLP-1s, which is when they got on GLP-1, you could see some of them just plateaus, some lost a little weight, but they all tended to regain over time or just not continue losing. And then when they got on the setmelanotide, they had a pretty start this 20% in that group actually 27% placebo-adjusted weight loss. So I think the take-home back to your question of why wouldn't you just use a GLP-1 is -- GLP-1s, the patient -- our problem is essentially hormonal deficiency. So if you are not signaling through this pathway, you're not making alpha-melanocyte-stimulating hormone. -- and that's what our drug is analogue. You have to restore the more normal physiology. Now we gain weight for different reasons. If you need more weight loss, if you're eating because you're depressed, if you're eating because you love ice cream, then a second anti-obesity medication on top of because you corrected that problem might be appropriate. But it won't be a replacement for this.

Okay. And what about the hyperphagia portion?

One of the challenges for the world we've lived in, and we and many others have struggled with this because the general obesity world talks about food noise and the like and that being quieted. I think that's a different thing. I know it's a different thing. This is the -- whatever the patient is experiencing in our world is that fact of not getting a full, just not being full. And so you just feel like you're pursuing it. One of the most striking benefits and now that we're out in the world, for example, in Bardet-Biedl syndrome, it is the quieting -- the hyperphagia removing that drive to eat that has dramatically improved their quality of life in the sense that a child with Bardet-Biedl syndrome who couldn't even be in the kitchen and have a conversation with their parents while they're preparing dinner without just constantly talking about food, can now sit in the kitchen. A child who can go to school and not be stealing other kids' lunches or I mean there's just endless stories about how that preoccupation with food has interfered with their ability to have a normal life, interfered with the family siblings ability. You can't socialize because they can't go out with the child who's suffering from this and go to a party where there's food available. So yes, the hyperphagia is a really important part of it. The language around hunger hyperphagia, food noise, I think, is still evolving, and it makes it a little confusing, but...

Okay. So how should we be thinking about what metrics you'll continue to give us at least in the early quarters of the launch?

Yes. We'll stay -- what we tried to do is stay with this paradigm, talk about is to give people an understanding of is it working? How is it working? And in any opportunity, we did this with Bardet-Biedl syndrome. We start with the epidemiology, which if it's published literature is usually pretty poor, but it's a starting point. Claims data if you have, but we did it for HO. We got a better sense. We updated our number for HO, that's where we felt much more confident. We started with a 5,000 to 10,000 range. We went to 10,000. Then we had our early field force interactions, mostly our existing MSL force, Medical Science Liaison out there earlier last year. That effort up through the fall in September, we had -- we then shared that we -- through direct interactions with a health care provider, we had about 2,000 patients who either had a diagnosis or were suspected of having HO and the suspected was the majority of that. So they weren't carrying the diagnosis, the majority of those patients in the 2,000. And so that's a good number, but that's not -- again, so then you get to -- you launched and you have Start Forms. So those are a hard number. So we're not going to update the 2,000 anymore. I think that's a less reliable number compared to Start Forms. We'll stay with the Start Forms. We'll do that for probably 4 quarters or so and see how we go. And then we'll give you more color around the payers. We didn't do this on this call. 6 weeks is just too early to have a good feel. But hopefully, by our Q2 earnings call, we'll be able to give you a good sense of at least how that's starting to play out. And then ultimately, you move to revenues, which then capture everything and tell you what to do, and we'll stop giving you a Start Form.

So maybe let's move on to a different indication that you're looking at setmelanotide for Prader-Willi. Maybe just tell everybody what PWS is and where you are in development there?

Yes. Prader-Willi, it's a genetic disease also syndromic in a sense that has multiple different manifestations. There's many genes. There's a portion of chromosome 15, which is deleted. And in that section are genes related to this melanocortin-4 pathway. So there's a mouse model. There's reasons -- pretty good reasons to believe that this melanocortin-4 pathway is an important part of the biology of Prader-Willi. It is not the whole thing. And these children in this disease, and they tend to be diagnosed pretty early and reliably is they tend to be very weak, hypotonic at birth. So flaccid muscle is not moving much. They eat poorly, but then it evolves fairly rapidly to this racious hyperphagic where they're eating all the time, they're gaining weight, but accompanied by some really challenging behaviors and other aspects, obsessive-compulsive diseases. The behaviors can lead to violence. And as they get older and bigger, it actually can be quite dangerous for even parents to be in a home with a child with Prader-Willi when they get hungry and frustrated and then they're strong enough that when they act out, they actually can hurt other family members. So they often end up as they move into adulthood to being -- having to be treated or managed in homes and the like. And so devastating disease, no drugs approved. VYKAT, Soleno's drug was the first drug ever approved about a year ago, I get exactly when that was. But -- so that was a huge breakthrough because nothing and even there was a bit of a challenging clinical development program. So -- but big first step. So that's the program. Rhythm, we ran an early trial in Prader-Willi back in 2018 or so and a very complicated trial design, basically it was the wrong trial design. It was too short. The dose was too low and complicated design. And we concluded correctly, we had no effect. However, if you went back and look at the patients who are on the highest dose for the longest period of time, 8 weeks in that trial, they actually had 3 out of the 4 patients seem to have a modest response. So okay, maybe it wasn't completely negative. And then we went back and we're running an open-label study with Dr. Miller, University of Florida. She's one of the leading investigators has been part of many, many trials, including Soleno's trials. And so she enrolled 18 patients. We released data on 8 patients in December. One of the patients stopped after a few weeks related to family-related issues, but 17 patients have stayed in the trial. And so we'll provide updated data, 6-month data now on the 17 at our -- hopefully, at the upcoming ENDO Meeting, pending acceptance of our abstract. And what we've told people, what we'll present our goal is these are small data sets. I find you don't mean that data. It's not very helpful. But we'll give you individual data sets for all 17. So -- and we'll give you multiple measures for each patient. So we'll give you the BMI. We'll hopefully give you DEXA scans, which is looking at fat and lean mass. And this pathway, correcting it has done very well on fat and lean. And if you think about restoring normal physiology, it makes sense. So to the extent GLP-1s, one of the concern is lean muscle mass loss, which is what happens sort of when you get in more of a starvation state with more normal physiology, losing more fat, but preserving lean or preserving the ability to put on lean would make sense. So we're seeing that in some other indications. We'll see what we see in Prader-Willi, but hopefully, that will be supportive. And we'll also look at HQ-CT. So our goal for development in Phase III, and I think we're quite convinced that we have the activity we need to see based on even what we presented in December. We'll move into a Phase III development program, the details of which to be determined and shared as we learn more. But we will seek indications, both for BMI for the weight loss, but also for hyperphagia. How we get there? Do you run 2 trials? Can you get there with both endpoints in one trial? Again, we'll look for regulatory feedback.

Okay. So what would be the next step after you see this data set for Prader-Willi?

Yes. So then the other thing is some of you know, we have a strong life cycle management. So we have a weekly injectable, which is in Phase II for Hypothalamic Obesity and is also enrolling some Prader-Willi patients. And we have a next-generation daily single oral pill, which has already shown very good data in a Phase II HO study, and that will be going into Phase III for HO. So our goal will be to run the Prader-Willi study with one of those two to be determined.

Okay. Perfect. I did want to ask you about the current side-effect profile of setmelanotide. One of the observations that happens to all patients is hyperpigmentation. So this is a daily injectable. It's for rare disease. And so patients will make a risk-reward decision as to whether or not they want to be on the drug. Can you talk about how much of an impact that hyperpigmentation has on whatever portion of the patient population that chooses not to engage in therapy?

Yes, it's a point. I mean, so just to date, in our approved indication, about 5% to 6% of the patients stop because of hyperpigmentation. So in that sense, it's a small fraction of our treated population. That said, it's an on-target effect. And so 100% of the patients will have a darkening. Now some they like it, some they don't. I think for the Bardet-Biedl, probably a little more of an issue, HO, as Dr. Miller has said, what their experience in HO is so great, they don't care as much, so it will probably be less of a problem. Now it is not a positive, meaning -- and so our next-generation therapies were very specifically designed not to hit that MC1 target, which causes the darkening. So our expectation is, and we've got evidence already for both, but we'll continue to flesh this out, that neither one of those will have hyperpigmentation. So we think the next generations will solve that. To the extent it's 5% to 6% who might stay on the drug, that's great. To the extent that we open it up, particularly to certain populations that are more concerned about that, who have patients who are sitting on the sideline. They're not even signing up for initially. And I think that may be also more meaningful than we think.

Okay. And as you think about life cycle management, you mentioned the weekly and you mentioned the oral. How do you imagine them potentially both coexisting?

Yes. So from a company standpoint, we'll be indifferent. Really, the goal from the beginning was to offer choice. So over my career, I've been struck you can predict what you want. But at the end of the day, yes, patients sometimes surprise you. So we'll be indifferent. We'll try to create a pricing structure where that's not a driver. It's just patient choice.

Okay. And it's your belief that those will not have the hyperpigmentation side effects.

Yes. I think, like I said, from a preclinical data, I think, strong. I think our early clinical data very supportive. So I do think we've achieved our goal. We'll -- we've got pretty good evidence on biva. It's a little farther ahead of development than 718. 718 preclinically is even more specific, meaning less likely than biva. So I'm pretty confident there, but let's -- we'll confirm.

Okay. With that, we are out of time. So thank you, David, for spending the last 30 minutes with me, and thanks, everyone, for joining.