Rhythm Pharmaceuticals, Inc. ($RYTM)

All right. Good afternoon, everyone. Thanks for joining us at the Goldman Sachs Global Healthcare Conference. Thrilled to be joined on stage today with David Meeker, the CEO of Rhythm. And we are thrilled to be hosting you ahead of -- I'm going to get this one out of the way early on. I'm head of the endoconference this week where you're going to be sharing data for Prader-Willi. We would love to talk to you about it about what are you going to be able to say?

Thanks, Corinne. Exciting to be here. right? We're really looking forward to Saturday. We have our 6-month data from the open-label study, and patient study run by Dr. Miller of the University of Florida. We presented some very early results last December. We'll now be presenting the full 17 patient data set at 6 months with this group. And our goal will be to -- our goal, we are presenting 4 different data points for each patient. We have almost a complete set on the DEXA. So basically, every patient you'll have their weight change, the BMI or BMIZ for the kids, the DEXA scan results, which gives you the fat and the lean changes; and then 2 patient-reported outcomes, one in HQ-CT of course. And the second is a PDQ questionnaire, which measures anxiety and distress. And so those will be, we'll give you, like I said, the data for each patient and people have the full picture with that. We're not in a position to talk more about it at this conference, needless to say, because we're so close to Saturday, and there's no real good way to answer even hypothetical questions. So we're going to defer on those.

All right, and gentle plug, but you can join us for dinner post that meeting on Saturday night, and if you'd like to do that, reach out to your salesperson. Okay. With that, let's talk about the HO launch because that's all the super topical these days. And maybe just given kind of the audience, we could talk first about just HO was approved in March or IMCIVREE was approved for HO in March. And it was the third approved indication for the drug. But for those not familiar, can you just remind us about the data that supported that approval? And what made it on label relative to your expectations and clinical results?

Yes. So also excited to get that approval in March, which was a 3-month delay on our PDUFA date. I think caught up a little bit in some of the changes in Washington. But the label that we got was a good label. We had been -- we were trying, as we do each time to get a hunger into the indication statement. We were again unsuccessful. And I think the biggest reason is when the FDA, as they've explained it, to get something in the indication statement, you really need hunger to 1 be in your primary endpoint. It was, in this case, a key secondary, but also we study in that trial, as people remember, kids as young as 4 years of age in individuals as old as 66. And so having one patient reported outcome measure for that full range, you don't you have different measures. And so we ended up having subsets of populations and they don't tend to give you an indication based on subsets. So for that reason, Hunger didn't get into the indication statement, but it is in the label. So -- and that's really only an issue, and I'll get back to the launch here in a minute, but that's only really an issue for our conversations with Medicare specifically, Medicare by statute does not cover weight loss drugs. And so anything in the indication statement, which would help differentiate us from a to more general obesity, anti-obesity medication. We've talked to CMS and they're very receptive and they understand what we are trying to do and they understand our drug is different, but that they bound by statute. So from a label standpoint, we got pretty much everything we want, no real restrictions on the label. It's not defined by the requirement for imaging, for example, and the like. It's acquired hypothalamic obesity. So we feel really good about where we ended up coming out of the regulatory process. And then we talked about it on our first quarter earnings call, the initial 6 weeks of launch. I don't know if we want to dive into that now. I'll have it out for comments or turn it back to you for some more questions.

Yes, let's get there. But first, I just want to talk about the market opportunity? Because I think when you started introducing this, it was very much 5,000 to 10,000 and as we've gotten closer to the launch and then since launch, I think you guys have solidified around that 10,000 number. So maybe you could talk about what kind of gave -- what are the kind of puts and takes that give you confidence in that 10,000 number. And what has learned now that you're on market in terms of kind of understanding the market opportunity there?

Yes. So I'll back up and speak a little bit generally about how we get to rare disease epidemiology numbers, and I'll use BBS as an example. When we came out with BBS, it was sort of, I think, 2500 that number and maybe even being misquoting there, but it was a little lower than where we are now. And a couple of things informed our increase to 4,000 to 5,000, which is a number -- prevalent number that we feel really good about for the U.S. only. And so one is we were doing more genetic screening. So that informed us based on what we felt was the prevalence of the background genetics there actually got us to a significantly larger number. Two, the prevalence of the disease in Europe. In the U.S., we felt was highly similar, so much better understanding of the prevalence of the disease in France, for example. So we could take the French number and then correct on a population basis for the U.S. So that gave us a second data point. And then third, which is, I think, really important and part of the answer to the HO is I think when people do rare disease epidemiology, almost invariably, it's rare and not a lot of work has been done. So it tends to be poor in the published literature and the like. And I think you tend to fall in 1 of 2 buckets. And one is either you're trying to inflate your numbers a bit to make a business case. But when you get out in the field, it's really hard to find those patients. Or alternatively, you're sort of working straight up from whatever poor epidemiology you have, and then that epidemiology tends to be larger than what you estimate, not smaller just because inherently, these early estimates tend to underestimate it. I think we're in the second bucket there. So when we went out with our 5,000 to 10,000 estimate, that was very much predicated on sort of the literature kind of review and the like. We then did claims analysis, not just in the U.S. but outside the U.S. So we had claims analysis in Germany. We had claims analysis in Japan. We can talk about that. But on cross populations, all of that was very reinforcing that the numbers on the higher side, 10,000 as opposed to 5. And then that's very important is once we had people in the field, they were finding patients. They were getting strong feedback that the patients were there and the of that is that -- these numbers.

And who are the target physicians and how have you guys tiered your commercial strategy relative to the target physician population?

Yes. So one, we just knew based on the problem here which is majority of individuals having a tumor benign tumor that gets resected, and the complications of that surgery are 80% plus of them have pituitarinsufficiency. So by definition, that group tends to be taken care of by endocrinology. Even if they're not their primary, they will see an end every 6 to 12 months as a rule kind of thing. So we expected them to be in the endocrinologists offices. And then when we did claims analysis and this is where you've got a very hard starting point, which is the injury, most often the tumor and the surgery and the like. So you can identify that population very reliably, you can figure out what percentage or who are the patients who have pituitary insufficiency and then you begin to you get into obesity coating and the like, which is a little less reliable because that doesn't necessarily tell you that, that obesity is due to HO, but you're really starting to narrow the funnel there. So based on that, Jennifer and her North American team, tiered positions based on -- and we're appropriately focused on those who had more than 2 patients basically. So that was our 5,000 patients, and we've built a sales force with a goal of targeting that 5,000 out of the 10,000-plus endos overall.

So then as you've gotten out into the market, you're talking to these physicians, what have you learned in terms of physician feedback about their enthusiasm for the drug, the patients that they're willing to put on it and how they're thinking about adoption.

Yes. And as I said, very reinforcingly many investors and the analysts and the like, do their own work. And I think everybody is pretty much getting the same feedback and what we're hearing in the office is a huge amount of interest a surprising to me anyway, lack of awareness in many settings. And if you think about acquired HO, it's not one of those things that many or most endocrinologists were trained on during fellowship. It's a clear disease, but haven't been given a name. And what will drive that awareness is often the case is the availability of the therapy. So before there was a treatment, if you think about an individual with a now getting ready to go to surgery, they will be total a, not a single patient coming out of surgery will be -- if they have hypothyroidism, it will not be missed. 100% of those patients will have their hypothyroid status diagnosed. And secondly, almost all of them will have been educated about that possibility going into surgery. A very low percentage of patients today are educated about the possibility of developing acquired HO. So why is that? There's no therapy. So you're creating a what we hear and the like is you're creating anxiety within the family for a problem that there's nothing to do about. You may have this problem, Wow, it sounds horrible, but yes, there's not much we can do. Now there's something to do. So I think all of those things will greatly accelerate. So back to your question, what we're hearing going in is a huge amount of interest, bulk of the -- majority of the patients are probably in the suspected category, not confirmed diagnosis. They need to come in and get it. Getting into doctors' offices are sometimes hard to get into previously, and those are busy. But now field team is getting in there much more reliably.

Okay. So then with all of that in the background, you disclosed 150 patient start forms in early May. That was about 6 weeks into the launch. Can you help us bridge from the patient start forms and to revenue as well as like what can you share qualitatively about the trajectory of patient starts since the last update?

Yes. I mean as you know, and we've gotten feedback on this, there's aspects of this opportunity, which are very specialty like and that's a huge advantageous for an ultra-rare disease, and this is at 10,000, that's still ultrarare by any definition. But the specialty like aspect of this is a, if they're not diagnosed, they have a presentation/phenotype, which is very diagnosable. I mean, it's not hard to recognize once you know what they're looking for, and they are concentrated in the specialty. So they are extremely approachable. Our ability to penetrate into that should be high. On the other side of the equation, which is the -- we have many of the challenges of a classic ultra rare, which is day 1, awareness is still relatively low. A lot of work to do. Two, access to the physicians will be writing the script, still challenging. It's not like Endos have big open spaces in their clinic day where patients can just come in and get their scripts written. Three, it's an ultra-rare, so like there's no difference necessarily from anything else where it's a prior off, you have to go through, you have to get policies in place. And so for BBS the average time out of the gate, so getting a patient from a script to approval in about 3 months. Now average. So some patients went through much more quickly. Some took longer. And the longer ones were the multiple appeals that took you out into the farther than that. I'd say our very early start here has been very much what we expected, which is a little easier than BBS, not surprisingly. They know the drug, most of these payers and the disease itself is clearly more severe at 1 level than what the BBS patients are experiencing. So all of that, I think, bodes well for what we expect to have as broad coverage similar to what we have for BBS.

Okay. So I guess with that in mind, maybe be a little bit more specific. When do you anticipate having most of the coverage plans in place? And in the interim, what should we anticipate with respect to reimbursement?

Yes. So 6 to 12 months using BBS as an example. They don't want to -- a new drug gets approved, they don't call a committee meeting, you just get reviewed whenever their formulary committees come up to do their review. So I think 6 to 12 months.

Okay. And what do you anticipate in terms of like gross to net over time once these coverage plans are in place and any other kind of free drug aspects we should keep in mind?

Yes. So we don't discount and haven't and don't anticipate doing that going forward. Our gross net is driven very much off the Medicaid population, which has a mandatory discount, as you know. So that will be the same here. We don't have a good feeling for the size of the Medicaid population. It was large in BBS, a significant part of our overall population. I think there's reasons to believe it might be a little smaller. Conversely, the Medicare population may be a little bit larger given the fact that you have a relatively normal survival, and we have almost very few, if any, over 65 Medicare-eligible patients maybe we will have some here.

Okay. How should we think about compliance and adherence, like maybe relative to your other launches or based on any color you can provide in HO and maybe talk specifically about that hyperpigmentation piece. Or any other things that you think are big drivers of compliance and adherence over time?

Yes. I mean this is a group where the, if anything, I think the adherence will be higher than it was with BBS, although I think it was quite good in BBS overall. The difference here is you've got a population who had a "before state" when they were normal. Now they've experienced they are abnormal and desperately want to get back to the normal state, and so they start feeling better. And so all of those things, I think, are strong contributors towards what we would anticipate would be high levels of adherence. The hyperpigmentation in BBS, which is our major experience, about 5% to 6% of patients discontinue because of hyperpigmentation, not a huge number out of the total of course. I think there's likely to be maybe meaningful part of the population, which is on the sidelines. And so we look forward to the next-generation therapies is bring in on the BBS world. And BBS is a complicated disease. In HO, and talking to some of the KOLs, I mean, some of the feedback is, yes, they just don't care. I mean they're just happy to be. So I'm guessing it will be less here. It won't be 0.

Okay. What about the kind of motivation to get on drug between pediatric and adult populations and any other kind of differences between those 2 groups of people, whether it's the physician or the patients?

Yes. I don't know yet. I mean you can hypothesize reasonably that kids there may be a greater motivation. They've got their parents there, helping to get them in. On the other hand Endo. There's fewer of them, maybe the availability, office slots and we may dictate that. I think if you're living with this problem and you know you have it, it's going to be pretty high, whether you're an analyst. I think the group that may be more challenged is if you're out 20 years from your insult and you don't have a diagnosis, you may just not know and so.

One of the things that we see sometimes in rare disease launches is this concept of like Ebola, et cetera. I guess how do you think about whether that's something that could play out in the HO launch versus, I think, what you characterized in prior launches is slow and steady growth.

Yes. So I think I'll characterize HO as steady. We can take out the slow part -- but it's -- every launch, there will be a segment of the population that can see it coming and a bit of pent-up demand. But -- and we can't tell you that first 6 weeks experience reflected an element of that. I'm sure it did to a small extent. But the ingredients that are here and the opportunity says, no, we didn't get a big bolus and now it's going to taper off. I mean this was a really good start. We feel good about it, but we are looking for steady growth here going forward. And the other thing we're conscious endlessly say this, right? The rare disease launch don't beat us up in the quarters. It's -- we will be up and down around whatever the expectations may be. That's a rare disease launch. But the overall opportunity here over time is absolutely -- we're more and more bullish about that opportunity, the more we learn about it.

Okay. recognizing you can't talk about the Prader-Willi data coming this year, but maybe we could talk about the opportunity set that you see in Prader-Willi, why was this an indication that you thought worth kind of pursuing from a development perspective? And how do you envision the role could play in that population?

Yes. I mean, like every company, and certainly the way I thought about being in this industry is you want to be addressing unmet needs. We -- I've never been a sort of me to kind of strategy in terms of -- that's not really what we do or certainly probably don't do well. So Prader-Willi willy huge unmet medical need in obligated disease. The biology that got us interested as people remember, we ran that trial in the late teens and our initial read on that was it was negative. But when you went back and looked at it and looked at the patients on the highest dose for the longest period, the famous 8 weeks for patients, 3 out of those 4 patients, some did have a response. And so it gave us some encouragement that -- and we know that MAGEL2, for example, 1 of the genes that is affected in a pretail patient is a gene that's part of the signaling through this pathway. We studied MAGEL2 in our Daybreak and in the 3 patients who we had confirmed evidence that they have true loss of function. That was encouraging that had a reasonable response. And so yes. So I think the biology is likely to be embedded. The challenge with Prader-Willi is it's so complex and you have multiple genes that are affected. There's a lot of other most specifically the behaviors and the most -- 1 of the most challenging aspects of compulsive part of it, which is I use the example, as you know, around if you're hardwired to have a snack at 10:00 a.m. And even if you're not hungry, you remove that part of the drive, I still -- that's part of my structured day, I want that snack. So there's a lot of reasons why studying the drug has been challenging here for everybody going into it. But biologically, that's why big unmet need, and I think there's a chance we can make a difference.

One of the questions we fielded in the past has been kind of the clinical relevance of weight losses in endpoint versus hyperphagia. How do you think about weight loss as a primary endpoint in Prader-Willi trials and the relevance that would then translate commercial product?

Yes. I mean we were clear. I was clear when we went into this, that -- we have a drug which has the ability to impact weight. And we -- and that's a -- no drug is approved for that. And clearly, a big part of their unmet medical need. And so that, for sure, would be part of a development program going forward. But I think the experience and what the majority of the companies that have been working to develop a drug for is hyperphagia is a big part of the challenge just for the families and the patient how to manage that, given all their behavioral challenges. Two is the fact that with diazoxide approval, that set a precedent. And so you -- there's a paradigm out there now where you can run a hyperphagia trial that's shorter, so 4 to 6 months as opposed to weight loss trials, which are 52 weeks. So I think if we do something, we would certainly look at both approaches.

Okay. In terms of how you're sizing the commercial opportunity in Prader-Willi, how should we think about it relative to maybe like HO or other indications you currently have in development? And what have you learned with now approved products on that market in terms of the size of market enthusiasm to treat, et cetera?

Well, I'll take the line. I mean, I think the experience of the diazoxide choline out of the gate was -- that was pretty remarkable, but not surprising in that this is a community that is very strong. I mean they've been together for a long time. They're very well organized. They provide tremendous support to any company that's trying to develop a drug. So they're following all programs, they're hopeful for any treatment. And so to get the approval. That was just a huge win for the community, very well known within the community, pent-up demand for sure. That was one part of the dynamic. And the second is it's a very distinct disease so they tend to be taken care of by expert centers. They tend to have clinics that they come into. So their ability as patients, families to access the system when the new drug comes out and get a script written is much greater than HO, for example, where it doesn't have that same kind of organized community and access to the health care system in the form of clinics. With regard to the epidemiology, the whole world -- I think the published literature is pretty good. We've done our own work just to try to understand if there's some nuances we're missing 10,000 to 20,000. I think the addressable population as a starting point, might look at it more around the 10,000 piece of it, a 10,000-person part. But -- but it's clearly in the 10,000 to 20,000.

So with on market, I guess where do you see the residual unmet need for patients in Prader-Willi how does that map to what could offer? You've kind of answered some of this, but just put a finer point on that.

Yes. I mean -- so I'm absolutely convinced that drug works, and it's just a very challenging population, number one. So -- and what they showed and got approval on was the piece of this. I think the unmet need again is something -- it may be that you can have greater effects on hyperphagia. So it's not that they fully addressed it. One, maybe no single drug will address it. I mean that's another potential outcome. We talked about the BMI, weight-related issues not there. They're not -- because of the side effects of diazoxide, they're not indicated the ability to use in diabetes is more challenging than that you can. So there's parts of the population where, as with any drug, the profile of the drug may not match up and give you access to the full population. So there remains and there will remain, I think, a huge unmet need here.

And how do you think about a potential combination use of and -- how will that kind of inform potential future studies in terms of inclusion criteria, et cetera.

Meaning learning off what they did. .

Well, yes, also like will you allow for combination .

That -- so in the data set we have with Dr. Miller -- there's about 9 patients who are out of the 17 who are on CAD. So people can look at that. It's a small data set, of course, -- but I don't know, going forward, we'll have to see -- we'll get through talking about.

Okay. On the next-generation program, 718, dialed. I guess, first, we'll see some updated data from the 1-year study this weekend as well or that will be highlighted at the conference. Could you talk a little bit about that program, what you've seen and the path from here to registrational trial?

Yes. I mean it's all highly confirmatory. I mean the 1-year data is highly confirmatory. I think the mean values are driven again by -- they're basically about the same as setmelanotide and we had some patients in there. We were a small number of the teenage, younger teenage kids who are still struggling a little bit, taking the drug weren't fully compliant. So drug works. I think we've got a good read to the dose. I think there's personally low risk to a Phase III trial. We will run that trial largely outside the U.S. So depending on which countries you're in, always introduce some variables in terms of getting the trial up and going. But our goal is to get first adult patients treated by the end of the year. And our -- the pediatric formulation, I think, will be available in the first quarter. So what we would do there is the peds part of the trial would come in once that formulation. This is a chewable tablet. So we've significantly improved the size of the tablet, so with our current approach formulation. And as I said, we'll get down to the age 4 with this tablet.

Okay. And how will the registrational program compared to the setmelanotide program in terms of any sort of features there?

Very similar. Again, we'll look at this whole issue of hyperphagia and between -- it will be the key secondary probably and/or, but BMI will be a primary endpoint, as always. So it will be very similar as you go forward, I think we're going to work harder to get DEXA scans more formally on all patients. There's more and more interest in the quality of weight loss. I think the way our mechanism works, we've done really well on the quality weight loss, which is -- remember, we're not -- we're restoring more normal physiology, which again, if you're a teenage boy, you should put only mass and you see teenage boys going through a pure rate, putting on lean mass. And so all of that, I think, is a real positive that we'd like to help the world understand.

Okay. You are also planning to share 718 data in AHL this year. Maybe you could remind us what exactly will be shared, maybe when do you think we could kind of have that data and how to inform next steps.

Yes. So we'll target the next quarter earnings call. There's about 10-ish patients that we'll have data on and Yes. I mean what people ask what should we look for? I mean, we're looking to see how this compares to setmelanotide very similar to what we did for We'll show you that data.

Maybe you could talk a little bit about why these drugs matter from a like broader corporate strategy perspective, why does it matter to have an oral and a weekly injectable in terms of the overall franchise?

Yes. From a patient standpoint, I mean, it's just -- I think there's clear advantages to the oral over daily injectable and weekly is a weekly. I think from a side effect profile, the biggest difference for these drugs will be the hyperpigmentation. And as I said, I do think it's just not a good way to estimate this, but we will be very interested to see if it unlocks. And I think it will some percentage of the population -- and of course, from a patent standpoint, this was to move.

Okay. And as you think about kind of allocating investment dollars behind each of these programs and with multiple indications that you could kind of go into, how are you thinking about prioritizing and selecting which drug for which indication?

Broadly in TBD, to be determined category, I think we can all have our opinions about which might be better. I think in general, for a big opportunity like HO, our goal will be approved both get both approved. But there's no urgency to get both approved. I think we'll move as we are with BN HO. We don't have to rush out and do 718, for example, in we can get there, but not tomorrow kind of thing. So we would not prioritize that as the next piece. So we'll probably do some other things with A -- for the smaller opportunities like going back to some of the DAYBREAK genes and the like, we will develop 1 or the other. And because it's unlikely we'd run the 2 trials, it just seems like a bit excessive maybe for a small opportunity. And I don't know, we'll debate it internally why we pick 1 of approach for 1 of the diseases and other another.

And with respect to Prader-Willi, can you share at this stage how you would think about 718 versus? Or what data do you need to have in hand before making that decision is maybe an easier question to answer.

Yes. I will refer that to Saturday.

No problem. Maybe how should we think about the funding picture from here in terms of path through profitability or any additional kind of capital needs you might have as you look at a relatively broad now portfolio across.

So as Hunter likes to say, he can shout out from the audience here. We have more than 24 months, gas, which at 1 level, I think the analyst population would interpret as enough to get us to profitability. Obviously, it depends on what assumptions you make around revenue and the like because that's part of that. That guidance does include a good amount of developmental work and the like. So increase gets back to liquidity whether we'd want to top up -- it's a reasonable question. If we did that, say, we won't do it with equity. There's lots of other instruments and ways to do that, that's certainly being one, given the -- where we are as a company, so.

Okay. So a lot of things to invest behind, but you have done a little bit of BD in the past. I guess what role should we think about BD playing in your forward strategy for the company on maybe like 1, 3, 5-year sort of time line?

Yes. So 1 year, we would remain in our current posture, which is completely opportunistic. If somebody came to us was something that they felt Rhythm could provide a unique contribution and/or 1 of us on the leadership team had insight into an opportunity, then of course, we would look at that, but we're not actively looking. We have more to do internally than we can process arguably. -- to 5-year time line absolutely. I think building a more specific external phasing effort, looking for things that might complement and -- it's all a function of size of the company and increases your ability to do those kind of things and do them well, I think.

As you think about that like 3- to 5-year view, how do you think about the core competencies that Rhythm has and how so it would inform what kind of assets you might be open to bringing in.

Yes. I mean we've been clear, we're not an obesity company. That's certainly not our goal here. What are we good at? I think we are good at rare. And so it's not -- and there's no rare doesn't have to be an endocrine rare. It doesn't -- I mean where is rare. I think that we -- if you have a good solution to an unmet medical need, you can build an effort around it and we would do that. And we're a global organization, -- we're going direct, I think, which speaks again in almost every place, which speaks to the way we think about it and also the capabilities, particularly of our international team. So I think rare first, but war's also a blurry line. So depending on how strong we are, we're pretty open to some different scenarios.

I think with that, we did it. It was lovely chatting with you. Much appreciate everyone who joined us here and online. Thank you, on, David.

Very much appreciate it.