Good morning, everyone. Thank you so much for joining us this morning for this session with Rhythm Pharmaceuticals. My name is Whitney Ijem. I'm one of the analysts here on the biotech team at Canaccord. It is my pleasure to turn it over to President, Chair, and CEO, David Meeker.
Yeah. Thanks, Whitney. So I'm gonna just show a handful of slides. I'm not sure if everybody's familiar with the Rhythm story, so these are very sort of background, elevator speech kind of thing, and then, Whitney and I will dive into a conversation about more specific questions. So, I don't. Do I have control here? I guess I do. Here we go. Yeah. So, you know, the value drivers, I'll show you the biology here on the next slide, but, basically, there's three things we tend to focus on. So one is we have an approved drug in these genetic indications, one of which is for Bardet-Biedl syndrome. The first two indications we were approved for were extremely rare. As we said, they're sort of tens of patients. POMC was a very strong proof of concept.
We didn't put a sales force in the field. Bardet-Biedl syndrome, as I'll show you in a minute, is sort of 4,000-5,000 patients in the U.S., and it's just a classic rare disease. Majority of the patients are undiagnosed. We work away on that, but it's a very legitimate opportunity, and we're off to a good start there.
The reason, I think, point number two, people have gotten excited about Rhythm beyond that is that this opportunity, hypothalamic obesity, which is, an entity that develops because, predominantly kids, but also some adults, develop these benign tumors that develop between the pituitary and the hypothalamus, and as they grow into the hypothalamus, they injure the hypothalamus and the pituitary, and it turns out that, many, about half of these kids or individuals coming out of surgery, their weight just shoots up off their growth curve. So they just explode, and it's due to the fact that they've damaged this pathway, which I'm gonna show you. Interestingly enough, and somewhat surprisingly to many, setmelanotide, which is the therapy we're developing, worked extraordinarily well in a small phase II, 18-patient trial.
And then the third pillar here is this pathway I'm gonna show you. There's a number of ways you can impair signaling through the pathway. Some of them are genetic, and then there's this acquired injury piece of it. So the biology here in this cartoon is, it's the action is all in this POMC neuron. So this larger is the arcuate, and then this POMC neuron is the signaling. So when we eat a meal, you know, we eat a meal, we're full, our gut hormones signal to the pancreas, to the adipocyte. Adipocyte releases leptin, leptin goes to the brain, and we're signaling down through the hypothalamus, and at the end of this signaling cascade, leptin inhibits the appetite-stimulating side of the equation, and it activates this POMC neuron side, and that's the side that tells us that we're full.
So it's the satiety side, satiety signal, and at the same time it tells us we're full, it also tells the body, "You got food on board, and so your metabolic rate can go up." If you don't have the signal, then you eat a full meal, you don't realize you're full, and you keep eating. I'll show you a patient on the next slide, but that's the challenge, is they feel like they're continuously eating, and perversely, not only do you not realize you're full, your metabolic rate is low. Early- onset extreme obesity is the problem that these patients live with. A big part of their quality of life is destroyed, however, by this severe preoccupation with food.
And what's missing at the end of this signaling is alpha-melanocyte-stimulating hormone, and setmelanotide, the drug we've developed, is essentially an analog of that. So in our purest sense, it's hormonal replacement therapy, so very simplistically. It's probably a little more complicated than that. This is a patient with Bardet-Biedl syndrome, and, you know, she was born with a number of things at birth. At 2 years old, many of by age 18, many of these children are blind. At 6 years old, she was seen with this pronounced hyperphagia, which is that severe hunger, and eventually ended up getting a diagnosis of BBS and was eventually started at 28 years old. But her quotes here, right, "I was hungry all day long. I even started sneaking food in the middle of the night because my mind was constantly on hunger I didn't realize how much my mental energy was consumed by hunger. I'm finally able to free it up."
And so these are very characteristic ways that people talk about living with this problem. The size of the populations, as I said, Bardet-Biedl, maybe 4,000-5,000 in the U.S. The hypothalamic obesity, back to why, again, the interest in Rhythm and the opportunity here. So 5,000-10,000, so yes, it's larger, but the difference from Bardet-Biedl and hypothalamic obesity is that the vast majority of these patients are diagnosed, and they're diagnosed 'cause they went to surgery, they had their brain tumor.
They know something dramatically changed, number 1, and number 2, unlike Bardet-Biedl, where many of the patients, once diagnosed, get sent back to their primary care physician because there's not necessarily something that the specialist can do. These patients, 80%+ , will also have some degree of pituitary insufficiency, which means they need one or more pituitary hormone replacements, and so they stay with an endocrinologist, so peds endo or adult endo. So they're diagnosed. They tend to be concentrated, and again, I think we can have a pretty good impact there. And then we're exploring, you know, all these different genes in that signaling cascade, and we know that there's one or more, maybe multiple genes, which, once diagnosed, will benefit from the same problem because they have a deficiency, and setmelanotide can address it.
Our pipeline here, in series, our approved product, and you can see on the top, POMC and Bardet-Biedl syndrome. In development, we have a phase III trial for hypothalamic obesity, which will read out. It's fully enrolled, extremely low dropout rate, which tells you something in a world where there's many obesity medications. So it's 80-40 placebo-controlled, so 40 patients on placebo, less than 10% dropout. EMANATE is a phase III trial with 4 different genes looking at that. We just got approval for ages 2- 6 in Europe, and we're filing in the U.S. So again, it's a genetic disease starting at birth. You want to treat as early as possible, and we're working on that.
And from a life cycle management, we have a daily oral, which is in phase II, and a weekly subQ injectable, which is in phase I, going into phase II in a few months here. And then, very, very early program in CHI. And the data, again, this is just 3 slides on data quickly. I mean, the POMC and PCSK1, this was the original. I mean, it was approved on a 12-patient trial. Like I said, extremely rare, but, you know, you can see this patient had a, you know, a 25% decrease in weight over the course of this study. Bardet-Biedl syndrome, more modest weight loss, 9%, 9.5% on average. More complex disease, again, in a disease where relatively, nothing works.
Some patients lose a lot of weight, some less, but the hunger quieting is pretty much universal. And then HO, which was what was really a surprise to all of us, is that even at 16 weeks, the mean decrease in BMI was about 18%, and then at a year, at 25%. So I think for HO, we're getting at very fundamental biology here, that the hormone is replacing. And sorry, that was just our pivotal trial, and we have a great-looking executive team. And with that, we'll go to Q&A. Can we turn that off? You can stop the slides there if you want. It's okay.
I'm going to stand here, and if you go there. So, diving into the BBS launch. And I think you've done. T hat was my bad. A good job of setting expectations, in terms of this being a slow and steady. Is that what people should continue to expect going forward in the U.S.? And then are things any different in Europe, given you have made a lot of progress there recently?
Yeah. Yeah, we have worked hard, and, and part of the reason this, "slow and steady" piece of this is that unlike some launches in well-established patient populations, when you develop a therapy and once there's an understanding of that therapy, it's very quick that the community adopts it and, and people go on treatment. The challenge here is not selling a drug, and we don't actually think of ourselves as selling the drug necessarily. It's building the community. And it's y ou know, when this was launched, when I said it was a classic rare disease, I mean, there was no experts, there was no centers of excellence, very few experts, one or two, actually. There was one center of excellence. Rare diseases like this tend to have no diagnostic tools.
So genetic testing, which is one of the tools, but you can't get genetic testing in the U.S. reliably. You know, insurers, as we know, don't pay for it, et cetera. So, so Rhythm provides that. So we have an 80-panel, gene panel that we provide for free. Anybody can, prescribe it, but those are the things you need to do as a rare disease company, to be successful and to help build that community. So yes, the slow and steady part means that, each quarter, you have to do the work. The good news, and what we've tried to help people get, comfortable with, if you will, is that unlike our first two indications, which we knew were rare and were gonna be hard to find and remain hard to find, which tells you, yeah, they're rare, BBS you can find.
And if you're out there and you're looking for these patients, you know what to look for, you can find them. And so quarter after quarter, we're reliably finding them, but it's not gonna inflect. And the other way, we get asked about, "Okay, how long to peak? What's the peak gonna be?" I'm extending your question a little bit. You know, what we say about that, and maybe one way to think about that, if there's 4,000-5,000 patients in the U.S., what's the probability we can get 1,000 patients on treatment? I think it's quite high. I mean, I think that's totally doable. If there's $250,000-$300,000 net per patient, that would be a $250 million-$300 million dollar opportunity for BBS, U.S. only.
What we don't guide to, in any sense, is how long it would take there. And if you look at classic rare diseases, I came out of Genzyme, and that was my background. You know, many of those enzyme replacement therapies, 1, 2 decades later, are still slowly, steadily growing, and that's the nature of legitimate, sort of, ultra-rare opportunities, right? So they're there. They can be found. Their challenge is getting into a diagnosis. Our goal is to try to, you know, enable that, and then if they need our treatment, then, then they get our treatment. The European piece of this, also, always from beginning my career in industry, recognizing, I think, being U.S.-centric, probably not the best strategy for many things, opportunities. You can be incredibly efficient outside the U.S. if you have the right people.
I think we have highly knowledgeable people running our ex-U.S. organization. ex-U.S., it's all about market access. It's not about calling on doctors. It's all about market access, and that's all about people and relationships, and I think I know we've done incredibly well there in terms of getting pricing. That is, it's not U.S. pricing, but you start there and discount. But we know we're extremely well-positioned at price points that recognize this is a rare disease, and for rare diseases to work, you need to operate at that price point. So we're early. We were off in Germany and France. More recently, we've got U.K., Spain, and Italy, which are beginning to come on, and so they'll go in.
And then you have smaller countries, which, you know, we don't tend to talk about or report so much, but they add each quarter. So Turkey is not uninteresting. We have you know, patients in Turkey on a named patient basis, and the Netherlands began to contribute in a small way. You know, other places in the Middle East are interesting, and we have a toehold in Argentina. So that's how we think about building. It's again, the right people in the right place, and over time, you can create, you know, very meaningful businesses in these areas.
Got it. Okay, that's helpful. And I guess to ask the same question a different way or to expand a little bit, are there additional optimizations or room for improvement, kind of, on the launch side? Or is everything in place, it's going the way you want it, and it's just an execution story chugging along?
No, I think you iterate. You know, there's a rare disease playbook, and we follow it, as many rare disease companies do. Includes patient support programs, community building I'm talking about. But you iterate, and you learn, and every disease is different. And so, you know, one of the things you try to understand, or particularly for BBS, for example, is it's a syndrome, and so what are the referral networks? So they see different specialists. Who do they see? Are there ophthalmologists, they have eye problems, that, you know, characteristically see these patients? And if you can find that ophthalmologist who's known and then, you know, who refers in. And so these are nodes that you can learn on.
Today's world, obviously very different than it was 10 years ago with, you know, social networks, you know, personal promotion. You know, that, that's a very different world. And you know, how we navigate that, and we can learn from that. One of the things we do, this isn't novel, but, many times there's not an ICD-10 code, a code for, this specific disease. There may be a more general code, but you can work and apply for, which we have, and, you know, we now have an ICD-10 code for BBS, which just came in last fall, which again, will make it much easier to, you know, medical record searches and the like, to try to figure out, you know, where these patients might be. So those are things you learn, and yeah, you iterate around.
Okay, and last launch question, although I think it's relevant to future launches as well. But in terms of the moving to younger patients, which you talked about, do you, do you see better persistence in patients who start younger? So moving, getting approval in those younger patients is an important part of the strategy.
It's a good question. I, I don't, I don't think I would conclude we have better persistence necessarily. I mean, you do well if you have highly motivated parents and, you know, they can, i n teenage years, I would say invariably are the worst, for obvious reasons. Adults, I think, are actually pretty good in this population. But I think the key thing about early intervention, 2-6, and, we just did some work, which we helped, you know, you know, support some of that work. But, you know, it was a, published in Europe looking at, 200 publications, a literature review.
But if you have obesity beginning, you know, ages 2- 4 or whatever, and the most severe, if your BMI Z- scores are in the range of 4, for example, which many of their, our patients are, their life expectancy was 37. And I think this is the piece that people, I mean, we think about obesity first as being a lifestyle choice, and, you know, the whole GLP world and Novo and Lilly, I think, have done a great job in terms of really helping the world see obesity more as a disease. Rhythm's position is, yes, it's a disease, but it's not one disease, it's many diseases.
Then the second part of that is if you have early-onset obesity, those comorbidities, they accumulate, and it's not like, you know, you've got a free pass until the age of 10 , and then it gets serious. It's like, no, no, it starts when it starts. And so intervening early is huge, and makes a big difference. So, you know, that kind of work, that publication was, I think, we know many of the KOLs were quite surprised by it. It's not that they didn't know it, but I think sort of seeing the numbers and then putting it to it. That POMC indication I talked about, I don't know any old patients with biallelic POMC deficiency. And again, speaking to, you know, this challenge that, you know, that's, you know, it is a fatal disease, ultimately.
Definitely. Okay, so moving over to HO, which is, you know, the key interest driver in conversations we have with investors, on the story. So I guess, a nd you talked about the robust response you saw in the phase II data. Can you put that into context of what's known or what you hear from KOLs, what they see with the GLP-1/GIPs, etc. , in that setting?
Yeah, so again, so HO, relatively, I mean, it was well recognized, but again, it was still rare and, you know, very much a smaller group of experts who were focused on this, number one. Two, historically, nothing worked in that. And I took this job about 4 years ago, and as I tell many people, I mean, when I came and joined Rhythm in this role, I didn't think it was gonna work. I mean, these, these patients, I got it, the fact that, you know, the tumors injuring the brain and the hypothalamus and that this pathway is just and that may be driving their obesity. But weren't the receptors and the site of action of the drug also being destroyed, and so, you know, how could it work?
So what was most striking was not that we got, you know, significant weight loss or BMI decrease in the arms race of percentage decrease. It was the consistency. It was the fact that literally every patient who took the drug seemed to have a response. And when, you know, they came off the drug for periods, which some did, they regained the weight and then went back on the drug. So it was a very sort of pure test of a, w here the drug is a diagnostic tool because this is a precision medicine. It just works at this MC4R receptor. It doesn't really have other effects. And so, you know, it was a very strong proof of principle. That's probably the underlying biology. So that's number one.
Number 2, in the world where nothing really worked, the early GLPs, exenatide and then liraglutide. Liraglutide's been out since 2014. These patients are relatively desperate. So if liraglutide was working, you know, universally, then, of course, everybody would be on it, and this would not be a problem. That was not the case. So semaglutide, tirzepatide, obviously, you know, better drugs, next-generation drugs. So I think the jury is still out on some of that. But increasingly, what the experts are telling us, and I'd say what we see is, we gain weight for different reasons, right? So if you have a deficit in this pathway, and you correct the deficit, you may now have a satiety signal, you may now recognize that you're full and stop eating.
But if you're eating 'cause you're depressed or you're eating 'cause you love ice cream or whatever, you're still gonna gain weight. So that's another problem that may respond to a different medicine, GLPs, for example, number one. Number two, I think most, many of these patients, many of us, if we go on a GLP, we will lose some weight. But the, I think the experience, early experience with these latest generations is, and what the experts have said, is that, yes, you lose weight, but it tends not to be durable over a course of a year. And many of the case reports are six months. So if you look at it, you get a certain amount of weight loss, six months promising, but I think the, the history of that group and, you know, that's our early experience.
There is a subsegment, and one of the, the experts quoted it this way, that she thinks about 20% of the patients may have a more meaningful response to GLP-1s, and the magnitude of that response will be 10% or less. So there will definitely be some patients who will be managed and probably fine on GLPs. And if they get put on that first, they may never seek a treatment like setmelanotide. But I think the majority, if this is the underlying biology and we're not correcting the underlying biology, they're gonna relapse, and they'll be back.
That's, I think we've seen that before in many diseases, but where, sure, you can treat the symptom with the things that are available, but if you have a drug that directly addresses the biology of the disease, it's - there's value there.
Gotcha. Another thing I'll just say about this is, as this world, 'cause we get asked about this all the time, you know, or often. Combination drugs, and I think, what's fascinating about obesity and really how fast this world is changing, again, not so long ago, it was a lifestyle choice, and now it's a disease. Now, it's many diseases. But it's also one of those diseases like diabetes, like hypertension, and where for sure, you're gonna be using more than one drug. And, you know, if you've replaced the deficit, and so you've had a response to setmelanotide, and then you've plateaued, but you have some other aspect going on, something else that needs to be managed, you add another drug. And anecdotally, we already know, you know, people are beginning to try that, and yeah, it works.
It's not random. So, this is, y eah, we're, we're in the middle of it, and this is how the world's beginning to shape.
Okay, so phase III ongoing in HO with data expected in the first half of next year. You recently on the earnings call, talked about the powering of the study, 99% powered to show a 10% difference?
Yeah, we didn't power at 99%. What happened was we powered it at the usual 90% power. But when we went in there, you negotiate the number of patients that you need, and so they wanted a larger safety database. So the size of the trial now means that we're 99% powered, 80 treated, 40 placebo, and yes, locked for a phase III readout first half next year.
Okay, so, so what keeps you up at night about this study? What are the risks?
Yeah, and as Whitney knows, I, I'm, I've been in the industry a long time, and I, again, I have a lot of, humility around, you know, what you don't know. But this is one of the lower-risk trials I've ever been involved with. And one of the hallmarks of this trial or indicators around this trial, it's a blinded trial. Obviously, we don't know the results, but, one thing you can look at, which is, dropouts. And the dropout rate in this trial, in a world where there are many other GLP-1 or many other options, one of which is GLP-1s, if you felt that there was another option, and you were guessing you were on a placebo, as many patients do in trials, you would leave. You wouldn't hang around.
So we've had less than 10% dropouts, meaningfully less than 10% dropouts, which again suggests an d part of the motivation there for the patients is this will be their earliest access to the medicine. They have to stay in the trial to get the drug in the open- label portion. And so they're staying in, which again, I think says something about... And the other thing, which we did mention, that I just will highlight again on the earnings call, was, in terms of GLP use, 25% of the patients coming into this phase III trial had previously been on a GLP, and 10% of them were still on a GLP. You're allowed to be on a GLP in the trial, as long as you're not losing weight in the three months prior to coming in. That number is still actively on GLPs.
Okay, and in terms of other risks, like is there a risk that patients start to exercise more, and that could change how we think about a placebo response or the powering there or anything else like that?
Yeah, it's an interesting question. So, I think back to the combo thing, if you've replaced the deficit where diet and exercise didn't work previously, and now you've replaced it, it could start working. That would be in the treated group. I think the placebo group, you know, we, we don't, we don't have a big placebo experience here. I mean, there's, you know, there was one placebo-controlled trial of, 40 patients, 20 placebo. Nothing happened there. There was no placebo effect. There's no expectation for a placebo effect here. I, I don't know whether they'll lose a little. Like, you know, they could well gain a little bit, but, no, I don't think there'll be a placebo effect.
Okay, and in the phase II data, you talked about every patient who took the drug lost weight, so it was- a consistent response, but there was, variability in terms of the magnitude. So I guess, did that worry you at all in the phase III or, or not so much, just given the numbers and the, and the powering?
Yeah, I mean, that, that's a good question. I mean, one of the challenges of rare diseases, the biggest challenge in development of rare disease is, A, you gotta find the problem, find the patients, one, but equally is heterogeneity. Because you have a hard time finding the patients, you have to enroll basically whoever you get. So you end up having a heterogeneous group of population, which is not what you want when you wanna test a question. You want a pretty homogeneous population. So we're enrolling in this trial, kids as young as 4 and adults as old as 60 or 65. I can't remember where our upper age group is. So you're mixing all those together and analyzing a primary endpoint of % change in BMI. So, you know, that, that is an inherent confounder. And what was the other part of that question? Sorry.
Well, just if that's a risk as we think about the powering of the study, but I think that range and variability would apply.
Yeah, so I, Yeah, I don't think the effect that we saw. Oh, your question was on the phase II. We saw some variability.
We did, but the least responder in the phase II, everybody virtually took the drug lost 10% or more in that first 16 weeks or was on track to lose 10% or more. We had two patients who stopped because of an AE. But the one patient that didn't, that patient lost 4%, and at a year, that patient lost 12%. But when we ultimately looked at their DEXA scan, this was a teenage boy, that patient had a 23% increase in their lean body mass and a 15% decrease in their fat mass. So in hindsight, and the doctor said, "Yeah, it looks great," that was probably one of our best responder, even though the BMI itself was not measuring. This is where, you know, all the debate around what's the thing you wanna look at when you're looking, thinking about weight loss and the like, so.
Okay. Helpful. So low risk phase III study, reading out first half. Commercial, how should we be thinking about that? The patient populations are different. The HO patients are pretty well understood, well known by doctors. How should we think about that rollout?
Yeah, again, we don't guide. I mean, I would just say, you know, it'll be a steeper ramp than BBS, because these patients are, t hey, for the most part, should know who they are, and they're more concentrated and the like. It will have this sort of inherent drag on rare disease. I think it's a higher price point. You tend to go through prior authorizations. You still have to work through, you know, the education of the payer world. There's physicians, again, in this world that'll require education. So it'll be steeper than BBS. It won't be, you know, a straight line up, but no, we're really optimistic and looking forward to that opportunity.
Excellent. Perfect. In the last 30 seconds here, how will your organization need to change to support the launch in HO?
Yeah. So rare diseases, one of the reasons, you know, people like them in general is that you don't have to have a lot of people, so to speak. And you don't have to have a lot of people because it's not about knocking on doors. It's about, you know, doing the right things, educating, you know, getting KOLs and, you know, working with thought leaders and centers of excellence and the like. So we have about 16 people in the sales force today. We haven't decided exactly to what extent we'll expand it. We will definitely expand it, but there is a lot of overlap with our current call points, so we'll be leveraging a lot of our current infrastructure to manage HO.
Excellent. Thank you so much. Really helpful. Thank you all for coming.
Thank you. Thanks for coming.