Morning, everyone again. Thanks for joining us. I'm Whitney Ijem, one of the biotech analysts here at Canaccord, and it is my pleasure to be hosting Rhythm Pharmaceuticals this morning for this fireside chat. We will be speaking with Hunter Smith, CFO. Thanks for joining us, Hunter, and we'll dive right in. If you could just start with a high-level overview of Rhythm for anybody in the audience who's not familiar, what is Rhythm today? What is the drug? What's the pipeline, and where are you hoping to go over the next 5, 10 years?
Sure. Thanks so much, Whitney, and thank you very much to Canaccord Genuity for hosting this terrific conference. We look forward to this every August, and it's a nice way to put a bow on Q2.
Yes.
It's really well-timed. Rhythm Pharmaceuticals is a biotech company based in Boston, with just under 500 employees and operations in well over a dozen countries and approval and/or market access in the U.S., Europe, and we have market access in about 24 countries total and are working on Japan at present. Our primary therapy is setmelanotide, brand name IMCIVREE. It is a melanocortin four receptor agonist, the first melanocortin four receptor agonist ever approved for treatment of rare diseases of obesity in the U.S. or anywhere. We started with ultra-orphan, biallelic forms of obesity that result from knockouts of certain genes that are associated with the production of alpha-melanocyte-stimulating hormone, which is the hormone for which our drug is an analog.
Patients without this hormone, which is produced in the hypothalamus, have very high levels of hunger, insatiable hunger, that is not satisfied by caloric intake. It's a centrally driven signal, and resulting obesity, and they are voracious as newborns, and they become obese as toddlers and continue a lifetime of obesity. We started treating them back around 2015, where we treated our first POMC patient. That patient had an over 40% reduction in BMI over the course of about 12 to 18 months. That case study was written up in the "New England Journal of Medicine," and ultimately, we treated another genetic knockout form called leptin receptor deficiency, and that led to, ultimately, our first approval. Those two disorders were so rare that we didn't launch the drug to treat them. We just made it commercially available.
Ultimately, we then achieved proof of concept in an indication with about 5,000 patients in the U.S., 5,000 patients in Europe, called Bardet-Biedl syndrome. We received approval for that in 2022 on the basis of a global phase III study that we ran, and that was the basis for launching the drug globally and has been the basis of building the company. Q1, which was the last quarter with primarily BBS and some level of POMC/LEPR revenue, we had a run rate of revenue around $60 million a quarter. There's some HO in there, and we'll talk about that in a minute, but that was where we were.
Ultimately, I think the big change for the company was the proof of concept we achieved also in 2022 for acquired hypothalamic obesity, which results from damage to the hypothalamus, either to brain tumors, primarily pituitary tumors like craniopharyngioma, or through other forms of injury to the hypothalamus, can be through blunt force trauma or radiation or things of that nature. That is a 10,000-patient opportunity in the U.S., we estimate. We released phase III data last year, which showed that patients on setmelanotide lost 18.8% of body weight as compared to placebo in a large, 130-patient global randomized study. That study was the basis for seeking approval.
It was also a basis for a New England Journal of Medicine article that was just published in July with the results of the study, the data from the study, and an editorial about the importance of the MC4R pathway for treating obesity. That's IMCIVREE. We've launched for HO in the U.S., and we're going to be launching in Europe and Japan relatively soon. We do it all ourselves. We have a pipeline of two clinical products. One is an oral MC4R agonist called bivamelagon, where we've shown proof of concept in HO, and we are trying to start a phase III in acquired HO by the end of the year. Then we have a weekly injectable product called RM-718, where we've also just shown proof of concept in HO.
Those products will not only have more convenient dosing, but they are more specific and therefore avoid one of the very specific AEs associated with the drug, which is hyperpigmentation that occurs when setmelanotide also hits the MC1 receptor. That's where we are. We have a preclinical program going on in congenital hyperinsulinism. We can talk about that later, but that's where we are for the main area, which is a portfolio of three MC4R agonists and a growing set of diseases that we treat.
Perfect. Awesome. All right. I like this idea of putting a bow on 2Q. We will stick with 2Q and talk about AHO.
Correct.
What went well? Any learnings that you are implementing post this first full quarter?
Sure. Let's start. We are very, very pleased with the start of the AHO launch. It was, we think, strong across the board. All the indicators we have looked at were positive. The first was that we had over 400 start forms in the 14 weeks, 13+ the week between approval and the beginning of the second quarter. In those 14 weeks, over 400 start forms for new patients, having a script written for IMCIVREE. Those start forms were written by over 300 physicians, so that's terrific breadth. Even if you look within the physicians who wrote more than one script, there's very little concentration. Mostly twos and threes in terms of number of scripts per physician. We have had nice progress, getting payers to reimburse the drug. That progress is well ahead of where we were with BBS at this time.
About two-thirds of the scripts that did get approved, as of quarter end, were approved on prior authorization. We already have policies in place in the U.S. covering about 25% of commercial lives and about 35% of Medicaid lives. Very pleased with where we are. We expect that process of seeking additional reimbursement approvals to continue as P&T meetings go on through the balance of the year. Overall, very strong start. I think the one learning we have is that the reps are so busy with the AHO pipeline that the longer and more complex process of helping get BBS patients to therapy is challenging for them to do both at once.
We made the decision early in the post-launch period to separate out a dedicated BBS field for us of 10 territory managers, and we have a chunk of them in place and hope to have the full team out there and in place relatively soon. That I think will allow us to continue to develop and grow the BBS opportunity, which is slower growing, but still very significant and of course a major base of our existing revenue.
Mm-hmm. Okay. That's helpful. So hiring more people, but for a good reason.
Yeah. Absolutely.
Okay. Got it. All right. Then just going to the ultimate size of AHO, I guess you, a couple of years ago, or during development, had been talking about 5,000-10,000 patients. Today, you just said 10,000 patients. So can you talk about what you're seeing out in the field that kind of is giving you confidence to anchor to the top end?
Sure. One of the things that was interesting when we developed proof of concept in this indication was it was an indication where nobody on the street had a model. It took a little while for people to appreciate the size of the unmet need, and it took us a lot. We've had a lot of learnings about it in the process. Some of those learnings relate to what are the contributors to acquired hypothalamic obesity. We started with knowing that there were three tumor types, craniopharyngioma, hamartoma, and a third, which is escaping me at the moment, that are the primary contributors to AHO. What we've realized with clinical experience, both in the phase III study and with our early access program in France, is that there are many other tumor types which can damage to the hypothalamus and result in AHO.
That was item number one. Item number two was that the overall survival of these patients had been measured quite conservatively when estimating the epidemiology. Number three is that there are other contributors to AHO that are not tumor-based. Those things have made us feel very confident in the upper end of that range. When you're out and you have people in the field and you identify patients with physicians, as of September of 2025, we said we had identified more than 2,000 diagnosed or suspected HO patients in the care of our tier 1 and tier 2 physicians. That was very validating because those are face-to-face interactions that validate things we might think are possible based on claims data.
We have progressed that very significantly since then, and that reinforces our confidence in the opportunity.
Mm-hmm. Okay. You haven't updated the number.
We have not updated the number.
Okay. All right. Do you intend to at all, or is there not really value there?
No specific plans to do so at this time.
Okay. Got it. All right. Okay. So then kind of going back to this identified 2,000 number, the question I think post 2Q was, well, if you'd already identified that many patients, in September, is the 2Q progress kind of representing a bolus, both because of that and just for some others, some precedent in the field. So I think you were pretty clear on the call, and I think the quote was, "There's no bolus in this thing." So can you talk about what gives you confidence that there wasn't a bolus, and how, to the extent that you can speak about what you've been seeing since 2Q end?
Sure. We genuinely believe this is a sustainable opportunity based on the Q2 results. There are a variety of factors that give us confidence in that. First, we have seen no slowing of the incoming of new start forms since the end of the quarter. The rate is continuing to go forward nicely. The second thing is that the breadth, 300 writers for 400 scripts, does not indicate a high level of concentration. As I said earlier, intimated earlier, the depth is also still pretty low in the sense that most of the writers who wrote more than one script wrote two or three. You do not have people that wrote 20 or 40 or anything like that.
Third, our level of penetration about the specialty centers where patients are treated for their tumor, and they may remain for treatment for their HO or they may not, as well as community physicians, still remains relatively in the early stages. The numbers we have talked about in terms of the growth of suspected and diagnosed patients, they are concentrated at these tier 1 and tier 2 physicians, which some of whom practice at 45 specialty academic medical centers around the U.S. with a pituitary tumor specialization. We have not even reached every one of those centers yet, let alone activated all of them. The same is true for our tier 1 and tier 2 physicians who are out in the community. We know there are patients with those physicians, and we have not reached all of them nor activated all of them yet.
There is a lot of opportunity in front of us.
Mm-hmm. Okay, got it. I think I will move over to Japan HO given the time. You talked about doing it yourself in Japan and you are in a late stage process with PMDA there. Can you talk about the patient numbers there and what you all need to build to be able to access that opportunity?
Sure. Japan is interesting because it has an elevated incidence of craniopharyngioma for reasons that we don't understand, but the result is that the prevalence of HO is estimated to be 50%-80% of the U.S. prevalence, despite a significantly lower population base. It's a very significant Japanese opportunity, and the PMDA, in general, and Japanese regulatory policy and reimbursement policy has really made significant strides in trying to improve and/or reduce the lag in getting therapies to their patients that they had been experiencing over the last 10-20 years. They're sort of going in the opposite direction of European policymakers. They allowed us to amend our phase III study after it had initiated to add a cohort of a dozen Japanese patients that they said would be sufficient for registration. That was really exciting. We added those patients.
We submitted to Japan. We expect both approval and reimbursement to be timed sort of around the end of the year, enabling us to launch. We are fully staffed for that opportunity. We have hospital affairs liaisons in place, covering the major treatment centers around the country. They are working like our U.S. team did to drive a high level of patient identification prior to launch sometime around the end of the year.
Mm-hmm. Okay. How should we think about the pace of launch in Japan, maybe relative to the U.S. versus Europe?
The guardrails in the U.S. tend to be both the capacity of endocrinologists as a specialty, they're a very in-demand specialty where a lot of people are booking a year out for appointments, and then secondly, just the payer process. People make a big deal about the differences in price between the U.S., Europe, et cetera. But a lot of pharma companies cover a lot of, and we are no exception, cover a lot of non-reimbursed patients with free drug, and that's never somehow makes into that calculation comparing the prices.
But putting that to the side, those are the guardrails in the U.S., but we expect pretty rapid uptake in spite of that.
In Europe, you are at your country level reimbursement, which is sort of staged and milestoned.
It is gradual and sometimes can be extended because you do not reach agreement on negotiations in countries like France or the U.K. Japan, national reimbursement occurs at once, and at the time of approval. Pricing is indexed to the U.S. and a couple of other countries on the basis of a cost-plus methodology, and there is sort of some intractable disease components that allow you to get rare disease pricing. But another difference with Japan is prices, once agreed, are maintained. So there is no, "Oh, it has been six months, so we are cutting your price again," that you experience in certain European markets as well. So those are all attractive.
Now, there are some guardrails in early launch in Japan that are mainly systemic to make sure that it is a safety monitoring process and I think it is allowing people to just gain experience with the drug, and those include a 14-day limit on prescriptions, so people have to go back for renewal every two weeks for a period of time. There are co-pays that are involved and things like that that are designed to keep the uptake a little bit more managed at the beginning before broad adoption takes place.
Okay. Probably shouldn't be expecting a bolus in Japan.
I don't think so.
In 1-2 Q. Okay. All right. Got it. All right. On EU for HO, you've talked about. There was some news yesterday, I think, out of the U.K., and then you've talked about launching in Germany in the first half. I guess, can you remind us where you are in Europe there on the early access programs and then again, kind of help set expectations for what launch could look like as you go country by country?
Sure. We were given paid early access on the basis of our phase II data in France, which makes us one of two non-oncology drugs ever to get paid early access in the French system. That was very exciting for us, and we have a significant, meaningful number of patients on treatment reimbursed in France with HO. That's also a governed process. We cannot promote. The patients have to apply, their physicians apply to these certain specialty centers where they're approved for treatment, and that has allowed us to treat a great variety of different types of HO patients, including congenital HO patients. Our European label doesn't distinguish between acquired and congenital HO, so that's very exciting as well. We've got a lot of treatment experience in France that's been super exciting.
In Italy, we were given paid early access for patients up to 24 years of age who had developed HO as a result of craniopharyngioma specifically. We've had success getting a nice number of patients on treatment there, but it's a narrower approval. We are approved in Europe and as of yesterday, our announcement, we are approved in the U.K. as well. As I think everybody knows, you get approved and then you go through a process of seeking reimbursement country by country, and that can take a significant amount of time. Germany has a prohibition on the reimbursement of lifestyle therapies, even though our diseases are genetic or treat caused by brain tumors. They do not distinguish formally between that and general obesity.
We have, for the past several indications, and will in this case, gone to the G-BA and requested an exemption from that restricted list, which we have previously received and we expect to receive again. We hope that we will receive that by the end of the year, which will allow us to launch in Germany in the first quarter. The other countries in Europe, aside from the early access programs, will start happening as we get reimbursement country by country, and we'll update folks as those timelines become clearer.
Got it. Okay, perfect. Just maybe very briefly, moving the pipeline into HO as well. Just very quickly remind us how you've talked about that in terms of the phase III and timelines, and then we'll switch over to Prader-Willi.
Sure. We expect to start a global phase III for bivamelagon, which is our daily oral MC4R agonist before the end of the year. We have been doing a lot of CMC work to make those tablets smaller and easier for patients to swallow. We are just waiting on our chewable formulation for young kids. We will probably start that with ages 12 and up first, and then add the cohort for the kids.
Got it.
When that is ready. RM-718, we have just announced phase III data, and we are going to then figure out, do we want to do that immediately? Do we want to stage it and do it later? I think with bivamelagon proceeding so well, we have a little bit of optionality and flexibility in that regard.
Yeah, perfect. Okay, excellent. Moving over to Prader-Willi, which has been kind of the new topic, beyond the commercial progress is the new kind of indication expansion potential. Can you maybe talk about that disease just a little bit, help set the stage for what that is, and talk about the data you have shown so far?
Sure. Prader-Willi syndrome is a very difficult disease. Patients lose a significant portion of chromosome 15, and they have a variety of very difficult complications and comorbidities, two of which are severe and quite disturbed hyperphagia at a level that we do not quite see to the same extremis as many of the diseases we are treating currently, as well as a resulting obesity. Those two factors, as well as some others, lead to a lot of early mortality in PWS patients. We did an 18-patient, single-site open label study with Dr. Jennifer Miller at the University of Florida, of which we have data in 17 patients. One dropped out very early.
But of the 17 patients, we showed six months of data several months ago when we were at the ENDO conference, and that indicated a very positive response on BMI, very positive response on HQ-CT, which is the primary score of hyperphagia used in Prader-Willi patients. Significant reduction in adiposity and significant reduction in anxiety as measured by the PADQ. None of the results were as dramatic or as uniformly consistent as the HO results. It is a more complex disease. But we have always believed fundamentally that there is a biological role for the MC4R pathway in treating the disease, or restoring the pathway to treat the disease, and we believe this validates that. And we are thinking, okay, we would like to do a phase III on the basis of those results.
And our decision now is which agent, setmelanotide, bivamelagon, or RM-718 to use in a potential phase III study. So we are hopeful to be able to give an announcement sometime before the end of the year of what our plan is.
Okay, and that will include the design of the phase III study?
It would. And I think we want to do something that will allow us to get an endpoint of hyperphagia by itself, as well as a weight endpoint. So, we expect that the hyperphagia improvement will lead to a weight improvement. But we know that the hyperphagia alone is an important endpoint, and if we can get that, we think it would be very meaningful to patients.
Mm-hmm. Okay. Have you talked about potential size of the study or duration, or how are you thinking about that?
Not really. It would be comparable, I think maybe slightly larger than HO, but I think it's a little too early to tell.
Okay, got it. Size of that opportunity as well, how many patients?
Not all Prader-Willi syndrome patients are obese. Some of that may be due to behavioral controls, but not all of them are obese. We think that the obese population today is in the 8,000-12,500 range.
Mm-hmm. Okay.
That is a U.S. number.
There is significant PWS populations globally.
Mm-hmm. Okay. The concentration of these patients, in terms of where they are managed or diagnosis rate, I guess first, and where they are managed.
Yeah. The diagnosis rate is very high because they are so hypotonic at birth that it tends to trigger genetic testing that leads to that diagnosis.
Got you.
We think it is 85%-90% of all patients in the U.S. are diagnosed.
Yep.
They tend to be concentrated, for treatment purposes, in group homes when they reach later stages of adolescence and/or adulthood.
Mm-hmm. Okay. Then the-
It's a very well-organized and tightly networked community.
Mm-hmm. Okay. We will be looking forward for more color on the path forward there. Then just finally, in the last seconds, cash of roughly $330 million at the end of the quarter. Funds operations for 24 months. I guess, what are the key milestones you can reach with that or just how are you thinking about runway?
Well, we've given that as a general sort of rolling statement of liquidity and it's our standard going concern language.
Okay.
We're very comfortable that we have enough cash that we won't require additional equity. We may require some additional financing, but it will be more to solve for balance sheet liquidity levels rather than milestones that we should be able to get to where we need to go.
Excellent. All right. Well, thank you so much for all of that good color, and thanks everyone for listening.
Thank you.