Welcome to the Morgan Stanley Global Healthcare Conference. I'm Jeff Hung, one of the biotech analysts. For important disclosures, please see the Morgan Stanley Research Disclosure website at www.morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representative. For this session, we have Rhythm Pharmaceuticals with CEO, David Meeker. Welcome, David.
Thank you, Jeff.
So maybe for those who are not as familiar with Rhythm, can you just provide a brief introduction?
Yeah. Rhythm's a company that's focused on this pathway in our brain, melanocortin-4 pathway, which governs hunger and energy expenditure. We have a molecule, setmelanotide, brand name IMCIVREE, which is a replacement hormone for the endogenous ligand, the α-melanocyte-stimulating hormone, which is deficient if you have an impairment in that pathway. We're pursuing a number of different indications, both from a genetic side, which were formed the basis of our initial approvals, and more recently, a traumatic form of injury to the brain. So there are several ways in which this pathway can be impaired. Again, that's the focus of the company. We're global, and have always, personally and as a company, thought that if you want to be successful in rare diseases, you should think globally, and it's doable with the right people. So, we have a global approach to tackling and developing this drug for this pathway.
Great. Well, maybe one question before we dive into the indications. For the indications setmelanotide is approved in and going after, can you just talk about the role of GLP-1 for treating obesity?
Sure. Yeah, I think GLP-1, of course, we all are inundated by that evolving story. It's a rising tide phenomena for Rhythm, and that it does lift all boats. So the greater awareness around obesity has been incredibly helpful. The recognition that obesity is a disease, and the role that Rhythm's played in that story is trying to reinforce, yes, obesity in one level is a disease, but it's not just one disease. It's multiple diseases, and it's critical, as always, to try to figure out which disease you have and then match the appropriate therapy. So, in that sense, all the good work that Lilly and Novo is doing has, I think really helped elevate.
The other thing that's happened with that is that many more doctors are getting their obesity certification. Managing obesity previously, maybe not so interesting, but with the GLPs and multiple tools now, it's become more interesting. And if you're a specialist in obesity medicine, it's not always the common forms of the diseases that you're looking at, but it's the unusual ones that make it really interesting. So all that's beneficial. Now, with regard to GLPs use in these diseases, they're really apples and oranges, which is not to say that they can't be used, that there won't be necessarily a response of a GLP in this, but that response, for the most part, as we understand it, we gain weight for different reasons.
You know, if you love ice cream and, you know, you're eating a lot of ice cream, you're gonna gain weight. You take a GLP and you decrease your craving for ice cream, that's beneficial. However, if your pathway is impaired and you haven't addressed the underlying fundamental problem here, and that's what we're finding, which is, you know, GLPs have been out there, GLP-1 certainly since 2014, and they, if they solve the problem, they'd be used much more widely, so they're not.
Great. Well, almost universally, universally, the program that gets the most interest from investors is Hypothalamic Obesity. So maybe for those that are new to Rhythm, can you just talk about this condition and how it's different from other indications you were already approved in, you know, and such as patient identification?
Yeah, this was. We announced our phase 2 results about a year ago, and it was a surprise, to be honest, certainly to the world, and to some of us, including myself, internally. So it's a form of. It's a disease where it's secondary to an injury to the hypothalamus, and that injury occurs. The vast majority are due to these benign tumors, which grow and develop between the pituitary and the hypothalamus. And as they grow, they invade and injure both of those organs. And so, melanocortin-4 pathway sits largely in the hypothalamus, but there's MC4 receptors, the receptor where our drug works, that are also in the brainstem and the upper spinal cord, which govern other elements of our energy expenditure side of the equation.
So these patients, when they get their tumor and it gets resected and then plus/minus radiation, that injury leads to this remarkable change in their overall growth curve, and they gain a tremendous amount of weight in a shorter period of time. They literally explode off of their growth. Most of these are kids who get it, explode off of their growth charts, and it's completely refractory to what's been tried. And again, GLPs have been tried in this as well. You can get variable amounts of weight loss in some patients, but the underlying problem, there's been nothing that's really addressed the underlying problem.
So what was remarkable about the results that we had in our phase 2 was that was an 18-patient trial, and literally, with the exception of one patient who was non-compliant, 17 out of 17 who took the drug had a meaningful response. And our results at 16 weeks of therapy, which was the original readout, was about a little less than 15% of weight loss or BMI decrease in that period. But again, it's you know, that was a good magnitude of response in a short period of time. But what was really striking, again, was the consistency, which suggested that you know, we were fixing or correcting a fundamental defect. And just one thing, just to remind us how the biology works here is, as I said, what's missing is α- melanocyte-stimulating hormone.
So the endogenous ligand is a hormone, and setmelanotide or IMCIVREE, our drug, is essentially a more potent form of that hormone, so we're a replacement therapy for that. As in many things with medicine, you can do end runs around the problem, trying to use other medications to solve it, but usually, you don't get at it until you fix the underlying defect.
W ith 2Q earnings, you announced that the enrollment for the Phase 3 HO study would be completed this year. So can you just talk about that study and the factors that helped accelerate the timeline?
Yeah. So, pretty profound results coming out of phase 2. We'd gone into the FDA, pretty bullish on those results, and had recommended to the FDA that we do a shorter trial, a 6-month trial. And from a powering standpoint, it didn't require a large number of patients, but there's a very strong rulebook, in a sense, at the FDA. So these trials should be 1 year in duration, so this is a 1-year trial, plus 2 months dose titration, so 60 weeks in total. And then the total number of patients was negotiated on the safe size of the safety database. So it's 120 patients, randomized 2 to 1, treatment to placebo. And where we are now in this trial is we are enrolling.
We did move up our timeline in terms of time to be fully enrolled from end of first quarter to end of the year. That was predicated largely on. The gating factor here is getting these sites open. We'll have about 25 sites participating in the trial. Every site that we've talked to has a list of patients. This is not one of those trials or situations where you get as many sites as you can, and then they go out, and they look for the patient of interest. These are all sites who are actively following HO patients. The other thing is they have their list, and they also know the inclusion criteria for the trial, so they're calling patients who they believe will be eligible. The screen failure rate's very low.
So back to the point, it's really a getting sites open issue. We've gone pretty well on the U.S. side. Europe's taken a little bit longer, and that'll start opening up here in the fall.
Talking about Europe, you secured pre-marketing early access authorization in France. What kind of impact or benefit do you expect from this?
Yeah, that was really exciting. I mean, we for those of you who follow French legislation, they have a mechanism where you can receive early paid access for your therapies, both after EMA approval, but before you've agreed on a reimbursed price, but also before EMA approval. So this was one of, there's been about 21 drugs, I think, is the number that had this AP1 designation. And of that 21, only 7 have been approved on phase 2 data, so we were one of that small group. And of the 7, 5 were for oncology, so we were, you know, one of the other two.
But I think it's highly validating, just, you know, the importance that they, they recognize the unmet medical need here and also the potential, impact or significance of the results that we had, even in that, small number. So aside from the validation part, the prevalence, numbers. Actually, I didn't mention that. We should come to that in a minute, in France, aren't different. Europe, aren't different from the US, we believe. So there's a good number of patients. But what fundamentally makes HO different and part of the excitement, around this, beyond purely the results, which says, "Okay, we see you have a drug that works in this indication," is the fact that we think there's about 5-10,000 patients in the U.S.
Our Bardet-Biedl world, which is our genetic, the other, very significant genetic opportunity, which I guess we'll come to in a moment, is about 4,000-5,000. But what's different between Bardet-Biedl and HO is Bardet-Biedl patients, the vast majority are undiagnosed, and the work that a company does, like Rhythm, is to try to help the system get those patients to a diagnosis. HO, conversely, that 5,000-10,000, they have their tumor. They know who they are. So they're carrying a diagnosis, and it's a pretty well-recognized complication of that, that entity. So that's one. And then two, again, somewhat unlike BBS, they stay with a specialist.
The vast majority of those patients, 80% plus, because of injury to the pituitary, means they need one or more pituitary hormonal replacements, whether it's thyroid or, you know, on the reproductive side and the like. So that, that fact, again, keeps them in a call point and a concentration that is, directly where we're working today. So, long story short, I think that France is, it's a really, like I said, exciting. It won't be a big bolus of patients right away because the process is you, you go through a review committee, so it's gated. It's, it won't be an avalanche. But I think in terms of getting patients on drug and exposure in France, both for, for the physicians and the patients, really a significant step.
Great. Well, maybe let's shift to BBS. The trajectory for the new scripts has remained robust and encouraging. Can you just remind us the process for how, you know, the translation to new scripts and start forms?
Yeah. So, you know, again, in a rare disease world, the way it works, you have, it's, it's very, it's pretty controlled in the sense you have one specialty pharmacy that provides the drugs, so everybody goes through them. You're, you know, we have a relatively small sales force. You don't sell the drug. I mean, much of the work that our teams do is to help create awareness around this. I mean, if a diagnosis of BBS is made, and this is an approved therapy, people, you know, will use the approved therapy. So it's, much of the work is around, again, the diagnosis and then supporting this reimbursement, getting patients through the system. So the start form, doctor wants to write a script, it's, you know, writes a script. It's in a start form.
A big piece of this is we encourage and ask the doctors to encourage patients to consent to allow Rhythm to talk to the patient. And over 90% of the patients have consented. And what that means is that we have a patient support group, a Patient Education Manager, so every patient gets assigned a Patient Education Manager. And particularly in the beginning, they have regular, you know, contact, so there'll be weekly calls with that patient. So in many ways, it's a tighter relationship often than they have with the site itself. And, you know, we're obviously not there to play doctor, but we can play, we can provide a tremendous amount of sort of support.
And a lot of the, y ou know, where you know drugs early on, you have side effects, particularly in this drug, the side effect profiles in the first few weeks, nausea and the vomiting, but that goes down. Just helping patients anticipate, set the right expectations, manage through, you know, things that come up, help them through personal stuff, which has nothing to do with the drug, but can interfere with their ability to be able to continue and to, you know, be compliant with the drug. So it's a support system that, in the rare disease world, can be quite profound and helpful. So all those are elements of trying to get this. Then the last thing is, you know, the reimbursement process itself, which we're thrilled about, you know, where we are.
Virtually everything's a prior auth, although now many of the payers we're going through, you know, perfectly routinely, if you will. Many go through an appeals process, and that appeals can be, you know, 1, 2, 3 appeals. And again, part of what you have to be prepared to do as a rare disease company is you don't give up. You keep working that problem. And more often than not, you get to a satisfactory outcome, and patients are able to access drug. Maybe it's on the third appeal.
You mentioned earlier that the prevalence, you estimate 4,000-5,000, and I believe there's over 600 in the CRIBBS registry. So how is the patient identification going for Rhythm, and what initiatives do you have to continue advancing that?
So one of the big fears, or a fear, certainly, patients or investors, other people who are looking at this, you know, understood there was a pool of patients we were starting with, the CRIBBS. Although we didn't know the names of the patients, that was obviously an identified group of patients. And what happens once that pool is depleted? I mean, if that is, that's sort of the end, and you fall off a cliff. Now, a year later, I think there's growing confidence. Certainly internally, there's a tremendous amount of confidence that, no, it's not going. That those prevalent numbers of 4000-5000 are very real, and again, if anything, I'd push to the five, not the four. And that's just coming as we get more experience.
The patients are out there, and unlike a lot of rare diseases, so our original approvals for POMC and LEPR, um, these were very— They're less than 1,000 patients, right? And they're kind of, they don't have signs and symptoms that help you diagnose them, other than, you know, it's mostly a history and the presence of the early-onset obesity. And they're just—it's low prevalence, low frequency, and so they'd be high. This is not that. If you look for patients with BBS, you will find them. They're out there.
And there's a lot of very healthy discussion going on now about how do you make the diagnosis, evolving from the classic way you make the diagnosis, which was the original review article and the Beales criteria, for those who are familiar with that, where you have to have four of this and two of that, or, you know, it's the classic sort of syndromic kind of description of a disease. Now we have genetics, but the genetics, unlike some diseases, which are monogenetic and black and white, are complex. There's probably 26 genes which are close associated with it, and, you know, there's all kinds of readings that you may get. And what the world is doing now is struggling a little bit.
If you don't have full-blown Beales, but you have some genetics or, you know, that's, that's the world we're playing in. But it's leading to, I think, as it should, physicians and patients thinking about what constitutes a, a BBS diagnosis and the fact that it's a genetic disease. And if you can make an earlier diagnosis, why wouldn't you make an earlier diagnosis? Because particularly, if there's a therapy. So, so that's the world we live in. The specific question was on patient ID. Once you get the system up and going and it's starting to work, as you can see from the results, there's a virtuous circle here, which is the more awareness there is, the more people looking, more patients are found, and that's happening. Other things we do, the genetic testing is helping.
Again, you know, we test on the order of 12,000-15,000 patients a year. And that could be amped. That's still a small fraction that need to be, but I think it's a good balance for Rhythm. We have not insignificant results coming out of that, and they get a positive result there, even if it's not a classic positive. They're, you know, they start doing some more work on maybe this patient could have BBS. So those are a couple examples. The ICD-10, I think you have a question in there on that, the code, that's coming up. So we just got a ICD-10 code. Previously, we had an ICD-9 code, sorry, ICD-10, but it was a syndromic code, meaning it was a bucket of different diseases.
So you didn't know if you had that, whether you had BBS in there, or whether you had something else, or whether you just got thrown in there without a diagnosis. So I think what's gonna happen here is, A, it prospectively will give us a better roadmap to those patients, so that'll be huge. And then secondly, a side benefit is I think the fact that you have a code is gonna force physicians to think about making a diagnosis, as opposed to, "I'm not really sure. I'm just gonna put them in a syndromic bucket." Now it's like: There's a BBS code. Do they have BBS? They not have BBS. Make the call. So again, I think that'll be really helpful in terms of how this all plays forward.
And then, can you just talk about the age dynamics for BBS and where you see greater opportunity going forward?
Yeah. It, you know, we, it's a genetic disease. We skewed, you know, to the pediatric side. The CRIBBS registry is 80% of the participants are less than age 18. They don't die. They just, I think it's a participation issue. They age out, and they choose not to continue to participate. But the adults are out there. So what was really gratifying is, we have a little more than 50% of our patients are adults, and that, and again, it's not completely our focus. We don't ignore the adult population. We are, we're talking to them, I mean, to the adult physicians and the like. But it, I think it speaks to a large segment of the population who's out there with a diagnosis, who are finding us.
And I think a lot of the adults are, you know, people who, they were diagnosed by a specialist. The specialist doesn't hold on to the BBS patient. There's, there's nothing to do. There's no treatment. So they send them back to their primary care physician, and then, you know, over time, you know, you can get discouraged or whatever. You're not asking every week: Is there a therapy for BBS? So, I think gradually what's happening is, they, they are finding us. We do a lot of work with the patient organizations. We have patient ambassadors and social networks and the like that, you know, can try to, get the word out a little more thoroughly. But, but that is a positive development.
Any update on discontinuations? Do you have sufficient numbers to see whether the rate is normalizing yet?
Yeah. So we're a year out. Do I think it's enough numbers to stabilize? It's a good number. I mean, you know, with the number one treatment for a rare disease, I think we're getting into a robust space. Does it tell us where we're gonna level out? I don't think so. I think another year will put us in a pretty good place. I think once you've got a large population that's been on a year, you start to have a much better sense. So we have a population of which maybe 50% has been on for a year, and the others are coming. So that's, you know, how I think that's playing. But I feel really good about our discount rate.
I think a lot of it has to do with our patient support system and ability to, you know, when there's something that comes up that might cause somebody to, you know, step out or, you know, stop treatment. A lot of that stuff can be supported, and, you know, patients are happy to staying on then.
Then maybe one follow-up question on the ICD-10 code. So previously, I guess, with the prior code, do you have a sense for what proportion of patients with that diagnosis code had BBS?
No, it's, I mean, we've been trying to work it algorithmically. I mean, you start with that, you know, big bucket, and then you look for other codes within that, where, you know, somebody has an eye finding or a kidney finding and try to narrow it down that way. So, that is a bucket we've been working, but, but it's a— Yeah, I don't have a number for, you know, what percentage have that, have BBS.
Okay. And then, you know, with over 250 unique prescribers, where do you see the main opportunity going forward? You know, how do you think about capturing additional unique prescribers versus increasing depth of prescribing and refills?
Yeah, I think as always, it's both. You know, what you wanna see—We're, again, thrilled. I'm thrilled with the breadth. I mean, when you see a lot of these physicians who are writing one script, that's great. I mean, these are the patients, I think, who are finding us, and that's what that metric tells us, one. Then, yes, we very actively want to, for physicians who have expressed an interest, move them to taking a little more of an interest in BBS. And, in my former life, the Genzyme enzyme replacement world, we had a number of people who became global thought leaders who started out as primary care physicians.
They just, you know, they had a couple of patients, they started treating them, they took an interest, made a hobby of it and went. So, you're gonna try to move, and then you have a smaller number of people who are the classic thought leaders, you know, academic endocrinologists and the like. And you want that to be robust, but that's a busy group, and I'm not counting on them. Like I said, in many ways, you know, people who aren't burdened by all of the other activities and can really say, "No, I wanna make BBS, you know, part of, you know, my," like I said, "some specialty," if that's it, that's where we'll work.
Okay.
We want both.
Great. Maybe about one question on the R&D Day. So in the fourth quarter, you're hosting that. Maybe just high level, you know, what should we expect to see at that event?
Yeah. So, you know, things that'll come up, so we'll put out the DAYBREAK, and that's our phase 2 basket study. And we'll talk about what we're signaling there is probably 5 ± genes where we have enough data of patients enrolled. There'll be the open- label portion. Responders have gone into a double- blind portion of the trial, Part 2. That'll read out next year, midyear, probably. So, we're not gonna make any decisions based on the data, but we'll share the open- label part, which is about 3 months of treatment.
I'll just say now, I mean, I'm pretty happy with how the DAYBREAK has worked in the sense that it was designed to allow us to pretty efficiently screen a large number of genes and figure out what would be of most interest to pursue next. So we'll have that. We'll show you data from the pediatric trial, which we're filing on now. That's about 11 patients, a mix of POMC, leptin receptor, and Bardet-Biedl syndrome, small. You know, the PEDS is. It won't, you know, change a whole new epidemiology. It's still a relatively small percentage of the overall population, but it's really important for genetic disease. And so being able to start a patient at age 2 as opposed to having to wait till age 6, that's critical.
I mean, we know the GLPs, for example, aren't getting down into the younger ages so quickly. And you know, like I said, the earlier, the better for that world. So we'll show you the PEDS data. We'll update where we are on the SWITCH trial. Just, we can talk about that. And we'll do reinforcement. We'll have presented the HO, the 12-month HO data at the TOS Meeting coming up in October. And so we'll reinforce the findings there and maybe have an expert there to help put that in greater context.
Okay. And then for the weekly formulation, you'll have PK and tolerability data from that SWITCH trial. Can you just walk us through the study and what you'd like to see?
Yeah. So, our weekly strategy, just to bring everybody up to speed, has evolved a little bit. So a weekly formula is a critical aspect of the whole Rhythm story and portfolio management, and so we're obviously fully committed to that. Our current weekly formulation is a form of setmelanotide, our current drug, in a weekly formulation, and that's the one that's in the SWITCH study. What we announced on the earnings call, our last quarter 2 earnings call, is that we have a next-generation molecule, which just has a number now, 718, and that's MC1 sparing. So one of the side effects of setmelanotide is it hits the MC1 receptor, so you get an increase in pigmentation. So, you know, you get skin darkening, and for some, that's no problem.
For others, that you know has been a little bothersome. So if you can eliminate it, great, and we can eliminate it with 718 . 718 also has IP protection out to 2041, and that's a critical element, again, just in terms of the overall life cycle management of this. So, and it's fully owned by Rhythm. It's a new chemical entity. So there's a lot of things about 718 that are highly attractive. So as long as 718 will hopefully be in phase 1, phase 1/2 next year, as long as things look good, then we won't pursue the other one. But right now, we have both of them available, and we'll see how it plays.
The SWITCH study, which was done, as I said, with the current setmelanotide weekly formulation, that was basically a three-month trial, where double- dummy, where patients were randomized, either receiving, continuing—they were previously on drug—continuing their daily or going on a weekly. So we'll—as I said, at the current numbers, it, it—we didn't enroll as many as I hoped because you had to enroll patients who had been on drug. It'll be mostly PK, showing us. Now we know the PK was pretty good, based on work we've done in normal volunteers, so I'm not expecting so much of a surprise there. And then on the tolerability side, again, it's just in patients, we'll get more data there.
It may help us, I'm hoping, you know, again, give us more insight into dosing as best, 'cause you're extrapolating from daily to weekly dosing, and it's obviously not the same. So, those are the kind of insights as we look to preparing for the next trial, that even if we use a 718, I think there's things we could learn from our weekly, current weekly.
You talked about 718 . What should we look for at the R&D Day from that program? Is there anything that we.
Yeah. Yes, I mentioned that. Yeah, we'll present preclinical data. The early work that's been done, we've spoken to some of that, but we'll show you the data on it. We'll show you some of the animal models that, you know, gave us confidence and caused us to be excited about what's evolving there.
Okay, great. Maybe one last question. I mean, you recently raised $50 million through an at-the-market equity offering. Can you just remind us how much cash you have, how far that gets you, and how confident are you that the cash will get you through the HO data?
Yeah. So we finished Q2 with roughly $250 million in cash. We had hit. We have this capped royalty with HealthCare Partners, which we have drawn $50 million on, and we have 75 on. We have the ability to draw an additional $25 million based on hitting some sales milestones for Bardet-Biedl, which we hit early. So, so we were, you know, counting on drawing that down and taking the additional $25 million and then raised the $50 million. So that additional $75 million on top of our $250 million, you know, we did the calculations that say we can get into 2026 is based on an evolving revenue stream that we see emerging in BBS. And those are reasonably conservative calculations that we did to make that forecast.
I think we feel really good about getting into 2026 and on our current timeline for HO, which should read out in the first half of 2025. It puts us well beyond that readout, so.
Great. Well, looks like we'll have to leave it there. Thanks so much for your time.
Thanks, Jeff.