All right. Good afternoon, everyone, and thanks for joining us at the Morgan Stanley Global Healthcare Conference. I'm Mike Ulz, one of the biotech analysts here, and it's my pleasure to introduce David Meeker, President and CEO of Rhythm Pharmaceuticals. Just as a quick reminder, the format for today is a fireside chat, but if anyone in the audience has a question, please raise your hand and we'll try and address it in our discussion. Before we get started, I just need to read a quick disclosure. 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. With that, maybe I'll hand it over to David to make some introductory comments. Thanks for sharing your time with us today.
Yeah. Thanks, Mike. Yeah. Just to set the stage on Rhythm a bit, it's a good moment for the company. For those who are following, we like to set the company framework up, getting people to think about three pillars. Obviously, we're working on melanocortin four pathway. Our first approved drug, IMCIVREE, first-generation product, was approved in 2020. It's now approved in a couple of genetic, Bardet-Biedl syndrome in 2022, and most recently, HO in the spring of this year. The three pillars we're focused on are a genetic pillar, and we think there's a number of genetic causes of impaired signaling through the melanocortin four pathway.
We did the EMANATE trial and the DAYBREAK trials, which were not positive, but they provided us a lot of information and I think gave us a sense of how we are going to tackle that pillar next, which is taking the genes of greatest interest and focusing on trying to determine the variants that have true loss of function, because with that understanding, then you can run those trials with a much higher probability of success. I think we're pretty confident that the biology, of course, is going to work there. The middle pillar is hypothalamic obesity, 10,000 patients, significant opportunity. I'm sure we'll talk a little bit more about that. Launch is underway. The third pillar is Prader-Willi, and we released some preliminary data out of a study, open label study by Dr. Miller using setmelanotide.
We've told the world, which we will update everybody on which assets specifically we'll take into phase III and then try to give people some sense of timeline, some before the end of the year. Prader-Willi is, as I said, third pillar, and it's a significant opportunity. I think we're quite convinced that the biology is real and works there, and we plan to invest accordingly, and so that'll be a major effort for Rhythm going forward in 2027.
Great. Thanks for that introduction, David. Maybe we'll start with the middle pillar, which is HO, and maybe just give us a brief background there, maybe on the disease, the unmet need, and how IMCIVREE helps these patients.
Yeah. HO is interesting. I'll contrast it with Bardet-Biedl syndrome, our first approval in 2022, which is, as I said, about 5,000 patients and really a classic ultra-rare disease. It's a genetic disease. It's a syndrome. These patients have classic ultra-rare disease challenges trying to get to a diagnosis. Very few experts. There was only one center of excellence in the U.S. when we launched. We've now helped the development of about five other centers. But that's a world where you continue to find patients, and you'll continue to find patients for the next decade, two decades. We expect that opportunity to grow and grow steadily, but a modest pace, and it's driven very much by, it just takes time for these patients to come to awareness, and part of the challenge is there's not a concentrated way to tackle that disease.
They are often cared for by primary care physicians. There's no dedicated specialist who's taking care of them. Although they may see any number of specialists and get to a diagnosis, there's not a concentrated point where they're being taken care of uniformly. HO, in contrast, which is this entity most commonly due to occurring when patients who have a tumor in that area of the brain, hypothalamus, and pituitary in that region, they get it resected. These are benign tumors, but in the process of that treatment, resection and/or radiation, the hypothalamus, that part of the hypothalamus gets damaged where this pathway sits, and so they lose the signaling. They have a loss of alpha-melanocyte-stimulating hormone, which is the key signaling hormone in this pathway. They literally come off the surgical table hungry and are gaining a pound or two a week. That's a classic presentation post-surgery.
There's a very clear before and after to these patients. Up until now, patients going into surgery, about 80%-85% of them will have one or more hormonal deficiency, hypothyroid, adrenal insufficiency, et cetera. They are educated on that when they go into surgery. The surgical team will tell them, "You may develop hypothyroidism, but we can treat that. We can replace your thyroid medicine. It's okay." As a rule, they are not told that hypothalamic obesity is a possibility, and that occurs in about 50% of the patients. Part of the reason they're historically not told is, A, the surgical team may not be so cognizant of it.
Secondly, even if they are, it's one of those situations where they tell the patient about a potential complication and the patient and their family go, "Okay, so what do we do if that happens?" We do not really have a treatment. You have created a level of anxiety in the patient and their family without being able to give them some reassurance that you have a way of dealing with that. That is the world that we have entered into, really a devastating complication. The beauty of this treatment is in HO, it is really a pure. The drug itself taught us what was the cause of that disease.
It was a little bit, I think there were a number of hypotheses not so clear going into our trials, but the response to a precision medicine, this melanocortin four receptor agonist, literally a hormonal replacement, taught the world that that is the underlying biology for this. That is where we are. The team, out of the gate, what has been surprising, as we get a little bit surprising to me, maybe it should not be based on what I just told you, is the level of awareness, even among endocrinologists, is, I would say, modest. It is not like they are taught about this during fellowship training and the like. It is a relatively new disease, back to being defined as much by the medication.
The medication has really given definition to that, and defined it as a distinct entity, number one. Number two, many endocrinologists do not like treating obesity. Obesity treatment has become very much writing scripts for GLP-1s, and so they will manage other endocrine problems, but they-- "I do not do obesity," and they will send the patient to an obesity clinic or some other part of the organization. This part of their disease may well be outsourced, if you will, to another part of the system and the like. We are entering this world where we have got to create awareness.
We have got to help create more experts and, like I said, I think there is a prevalent population here, which is out there and not carrying a diagnosis. Those are the classic rare disease challenges. On the upside, this is a classic specialty opportunity. Unlike Bardet-Biedl syndrome, which is dispersed and being cared for maybe by multiple different specialists and/or primary care physicians, these patients will reliably pass through and/or be primarily cared for by an endocrinologist.
As a company, we approach this in a very different way, which is we can cover all endocrinologists. We had a sales force of about 16 people for Bardet-Biedl syndrome because that was not the strategy. We have hired 42 dedicated salespeople for HO because the goal will be to knock on certainly all of the top-tier endocrinologists, which is about half of that 10,000 number as a start. A lot of advantages, some residual challenges, and of course, we are positive about our first quarter.
Yep. Maybe we can talk about the early launch trends. You shared some promising start forms, so maybe talk about that.
Yeah. At the first quarter, we had about 400+ start forms that were written by 300 physicians. People ask, "How is that relative to expectations?" Going into a launch, these things are really hard to calibrate, but that was a really positive signal. I think it told us that there was a high level of interest. People were willing to write scripts. The 300 docs who wrote those 400 scripts also tells us that it wasn't a small number of docs who were believers, and the rest of the world not, and that they wrote a disproportionate number. But we have, I think, very broad-based uptake. Since the first quarter, we had The New England Journal of Medicine article published. I think that's the kind of addition to the whole picture that makes a big difference.
It's not that often that endocrinology articles get published in The New England Journal of Medicine, so they get a disproportionate amount of attention. Again, I think all of the signals we've had before is that we're very positive about the uptake here, but also very appreciative of the fact that we are early, and we have a lot of work to do on the education side. Particularly, like I said, the endocrinologist and for sure in the community endocrinology setting.
Can you just talk about the early physician feedback, and since education's part of your strategy, maybe walk us through how that works. Is it pretty easy for physicians to understand and then, "Oh, I have patients," and it's a pretty easy, it's just a matter of getting to the numbers, or how's that looking?
Yeah. Easy is not a good word, I think.
It's not the right word, but
No, it's fair. The conversations, this is easy to describe. The classic presentation, which is you have an incident event. You had your surgery, you had trauma, head trauma or something. There's an incident event, and the before and after, something changed, rapidly gaining weight. You have these associated pituitary insufficiency problems. When you talk to an endocrinologist and you say, "Do you have patients with HO?"
They may or may not say, "I have some who are diagnosed," but invariably they will say, "But I have some patients who fit that clinical phenotype. I just haven't given them a diagnosis. I need to get them back in, have that conversation with them," and the like. When we gave you a number last fall of about 2,000 patients who the field teams had identified through their interactions with physicians in the field, the majority of that 2,000 number were in the suspected category, not patients who carry the diagnosis of HO.
That is what has happened. Like I said, we are in the process of some of those patients coming in. The second issue here is, maybe not surprisingly, getting into the endocrinologist's office is not straightforward. I think the general reaction has been, "I will bring this up with them when I see them next at their next scheduled appointment." They are not out there actively calling these patients in. It is what it is. I think their practices are pretty tight. That has been, I think, the second major challenge here is creating that sense of urgency and the ability to have patients pulled back in.
Yeah. Maybe you can talk about just payer adoption, any payer pushback. There was talk before the launch of maybe step edits. What is the latest there?
Yeah. No step edits. We have not had step edits with Bardet-Biedl syndrome, and we have not had here. In a rare disease world, I think the payer world tends to adhere very closely to the label. Of course, that was not part of our trial, number one. Number two, we did have, for example, the GLP world would be a common question about will you be step edited through a GLP?
Yeah.
As I said, they adhere to the label, one. But two, about 25% of the patients in our 140-patient phase III trial were on a GLP, either historically on a GLP, about half of that number, or continuing on a GLP during the trial. We had most of their curves before the trial, and then what happened, and what you could see very clearly was if you give most people a GLP, they will have some weight loss. That mechanism creates an aversion. You will lose some weight. What turns out is if you have a deficit in this pathway, you may lose some weight and plateau well above where you want to be.
You may lose some weight for a while and then start to regain. That was very much the pattern of all the patients with a history of GLP use. Then when they went on setmelanotide, and IMCIVREE, in that case, they had a very consistent, if not even greater response to the drug as everybody else in the trial. So we have that data to support it. As I said, payers tend to follow the label, so no step edits.
Yeah. Makes sense. You mentioned your estimate is 10,000 patients in the U.S., and you, prior to the launch, had about 2,000 identified or suspected. How quickly can you increase that 2,000 number? What are the hurdles? You mentioned some already, but what's the key hurdles?
Yeah. That's outlined the most significant hurdles there. The 2,000 number has increased significantly since last September. We're a year later, not surprisingly. We won't update that number. Again, it's a softer number. We gave you that similar kind of number at the start of the BBS launch. We gave it to you for HO, the world. Now we're into the launch, the start forms, revenue's become a much better metric, and that softer number we probably won't update. But what's interesting, and in today's world, not surprisingly, with all the tools that you have, claims analysis, the ability to follow patients on their trajectory through the healthcare system by tokenizing them.
We have a much better sense as to what we might expect when we go into a physician's office. How many patients they might be caring for. We don't know who the patients are. It supercharges that conversation, literally. We've found the feedback from the field has been that when they go in, the conversations they're having are matching their expectations in terms of what they thought that physician might have and the like. Those are huge advantages when you're trying to launch.
Yeah. You mentioned start forms, and over time, revenues are going to be a good way to think about how the launch is progressing. I guess two questions there. Will you continue to share start forms, and do you think you might provide some revenue guidance at some point in the future?
We will definitely continue to share start forms for the foreseeable future. I think what we did with BBS is once revenues became a more reliable metric, they capture all parts of the dynamic. We stopped giving start forms, so we won't do that indefinitely, but we will for certainly the near term. Of course, the revenues will continue to keep up there. Sorry, what was the second part of the question?
Guidance.
Guidance, yes. That's right. It's hard to do, and historically, we haven't done it. What we've tried to do is help people understand rare disease launches. We've used the word lumpy in the past. It's just a function of you're dealing with smaller populations. There's a variety of different reasons why things may go up and down in a quarter. We've just tried to get people to not be completely quarter-on-quarter focused, but look at the trajectory over time, and I'll look back and say it again. I think this is an opportunity we expect to grow steadily. We do not expect it to peak. We'll continue to penetrate into that 10,000. These kind of rare disease opportunities, BBS and probably HO, back to a dozen peak, you don't fully penetrate. So we'll see where we go.
Yep. Makes sense. You're also planning to launch in Japan by the end of this year, I think Europe first half of next year. So maybe just talk about those market opportunities, how they're different from the U.S., and in terms of the strategies, are the strategies different in those geographies?
Yeah. Let's start with Japan. Jan will provide a deeper dive at the November earnings call and the overall Japan picture. But high level, Japan, we've said there's about 5,000 - 8,000 patients there as compared to 10,000 patients in the U.S. So on a population basis, it's a more prevalent disease in Japan. Don't totally know why. Maybe a higher incidence of craniopharyngiomas in that population, number one. Number two, pretty well organized in the sense of reasonable level of awareness, experts, centers where these surgeries are done. So it's very much think about it as a U.S. kind of- That would be the comparison here. And we're going to go direct. So we have 50 people on the ground in Japan, and the sales force has been hired pre-launch, as was the case in the U.S.
They've had time to be out in the field and interacting with the clinicians and getting a sense of that market. So we'll update the status of Japan, but approval in August, we'll work through getting our pricing and be ready to launch by the end of the year. The European launch will go country by country in a pretty standard way. Germany should be the first out of the gates early in the first quarter, and then we'll see how we do. We had the market access dossiers basically filed within a week of approval last year. So we were well-positioned here, but the process takes time.
Can you maybe talk about just pricing, how to think about it in those two geographies relative to the U.S.?
Yeah. Japan pricing, we'll see how we do. We've described it as being somewhere. We expect it to be between the U.S. and Europe pricing. They do reference other countries, including the U.S., of course. Yeah. We'll see how we do, but we expect to do no worse than Europe.
Yeah
Hopefully, somewhat better. The European pricing structure, the nature of that system is each time you come back with a new indication for the same drug, you revisit the pricing discussions, and you take a haircut, in general, with the belief that you're now serving a larger population, and therefore, you don't need as much per patient. That's the rule. Our expectation and hope is that we're going in with HO, has a very strong data set, and so our goal, obviously, but maybe not unreasonable expectation is that that haircut will not be significant.
Yeah. Makes sense. Maybe we can shift gears now to some of your next-generation programs. You have two MC4R agonists. Maybe just remind us some of the key advantages of those next-generation programs.
Yeah. There's two obvious ones. One is convenience, an oral, a daily oral, or a weekly injectable. The second is the hyperpigmentation. I think we've got good evidence. These are much more specific for the MC4 receptor. They don't hit the MC1 receptor. Just to put that in some context, about 5%-6% of patients who start the drug discontinue because of hyperpigmentation. 95% don't. Meaning that it's not the biggest problem. Not everybody likes it. Some do, but not everybody likes it, even if they stay on drug.
Secondly, we don't have a good sense for this, I certainly don't, but I know they are out there. There are patients who are on the sideline who are worried about the increase in pigmentation getting darker, and that's a reason why they're not starting the drug. I think having options out there that don't have hyperpigmentation, there's no physiologic benefit to that, I think will be a significant advantage here. Then, yeah, better, more convenient drugs are always a good thing.
Always welcome.
Right.
Yep. Makes sense. You talked a little bit about the safety side. What about the efficacy side for both those programs in HO, and what have you learned so far?
Yeah. Remarkably, the HO was such a gift in so many different ways. It is such a sensitive disease model that it was the perfect to test these new drugs in the sense that we could run a relatively small trial and know whether it worked. Our view going in was, if we do not see anything in HO, we are stopping because that tells you we do not have a good MC4R agonist. That was one, and then two, both of them worked, as we have shown. Remarkably, the pattern and the rate of weight loss has been remarkably consistent. It is back to a heterogeneous disease. They were all losing sort of 10%-ish kind of weight at three months, so 12, 14 weeks. All very encouraging. We were not looking to do better.
I think one of the things about setmelanotide and the doses we are using, I think for the most part, we have pretty much extracted maximal efficacy. I do not think it is a world where you can be more potent and get more activity. Prader-Willi, we are using slightly higher doses, so that is a disease where if we need higher doses, we can go to higher doses with setmelanotide. I think there is not a lot of room on the efficacy side to do better.
Yep. Can you talk about next steps for those programs in HO? I think for bivamelagon, you plan to start a phase III by the end of this year. Maybe just talk a little bit about timelines, your current thinking on design of that study as well.
Yeah. HO, we will start the adult portion of that trial. The goal is by the end of the year. The pediatric will start first quarter-ish next year. The separation there is that we need an oral dissolvable tablet for the pediatric, so that part of our development program is on its way, coming. From a design standpoint, BMI has been our weight, it has been our endpoint for basically all of our studies. In this case, we will likely run a combined. We are going to run a co-primary endpoint of hyperphagia and BMI for the adults, and the pediatrics will just be the BMI.
Part of our challenge with getting hyperphagia into the indication statement in a way that might be helpful here in the United States is that the tool itself, we did not have a single tool that could be used across all of our age groups. If you remember, we did our phase III trial in HO. We had a child as young as four and an adult as old as 66. That's a full range, and we were trying to find an endpoint that ran across that. By breaking these into a 12 and above and below in terms of this endpoint, I think it will allow us, A, to use a consistent hyperphagia measurement and have that as hopefully part of the indication statement, then basically a best of both worlds strategy.
Yep. For RM-718, you plan to take that forward also in HO, what may be timelines around that?
Yeah. For both HO and Prader-Willi, very significant opportunities for us. We would anticipate likely developing both agents in both diseases.
Okay.
It's a timing question. For the genetic pillar, if you will, we would not anticipate developing both agents in each gene that we might try. You can see how we might mix and match a bit there. Let's take Prader-Willi, for example. Almost for sure, we will do more than one trial. We will likely do both of those agents, and it's just a question of which one we start with. In the case of HO, we've already made the decision, we're going forward with bivamelagon. There's not the same urgency to get going with 718, so I don't know if that will be a 2027 activity to bring 718 into HO, but I can imagine that that will come into HO and be part of our development strategy going forward.
Maybe we can switch a little bit to Prader-Willi now. You shared some initial data for setmelanotide. Maybe just talk about what you learned there and maybe how it compares to available treatments.
Yeah. There is only one approved treatment, and as we know, VYKAT, and that was a huge advance for the field. One is, it has clear activity. It is a drug that has some side effects. It is not appropriate for every patient with Prader-Willi, but it established a regulatory framework in which you can get the drug and develop. What we have said and what I have talked about historically is when we first started the program, we were very focused on weight change and BMI because, A, we thought we can do that, still think we can do that. If we got weight loss, then almost by definition, we would have a reduction in hyperphagia. That is how the drug works. That was our approach. In the intervening time, Soleno gets approved, based on the hyperphagia study.
We believe, we have not had our meeting with the FDA yet, but our proposal will be, we will absolutely look to run a six-month hyperphagia study as opposed to a 12-month weight reduction study. That will be our strategy going in. I think you asked what we learned from Dr. Miller's study. What was most instructive about hers was 18 patients, highly heterogeneous, some patients more challenging than others. But of the four different metrics that we looked at, so we had BMI, we had DEXA scans looking at fat and lean, and we had the two scores, one HQ-CT, the hyperphagia score, and the other was this anxiety distress symptom score. Not perfectly, but in general, they all moved in the same direction. Now, some more significantly than others. Those patients who were on VYKAT might have had lower hyperphagia scores to start with.
That is how that drug works. But even if they were on VYKAT, their lower score tended to drop and move down. We know symptomatically and from what Dr. Miller tells us, that the trial is done. The patients could stop. They all want to stay on drug. So there is a desire to stay on drug, and they seem to be happy on drug. So I think that is the thing we are taking away. Now, the challenge going into phase III is, of course, you cannot write a label that says patients were happier. We need to measure that and make sure that we are capturing the endpoints that translate to a meaningful label.
Yeah. In HO, you mentioned earlier you saw very consistent efficacy across all three programs with improved hyperpigmentation. With Prader-Willi, obviously you just have setmelanotide data so far. Do you expect the same to be true? The next gens will kind of have a similar profile?
I think so. We're going to go right into a phase III. Part of the reason for that is I do think this is a MC4 agonist question. Setmelanotide told us that MC4 agonists should work in Prader-Willi. The HO efforts with bivamelagon and RM-718 told us that both of those are good MC4 agonists. I don't think the leap of faith is much there
Yep
to be honest.
Makes sense. When do you plan to sort of give an update on the final determination of when you take these two drugs into phase III or one versus the other?
Yeah. So before the end of the year.
Okay. Got it. Yep.
The exact vehicle, we haven't exactly locked down.
Yep
Before the end of the year.
No, makes sense. Maybe just in the last few minutes now, we can go through a couple survey questions. We have been asking all our biotech companies in these key themes. The first one is just innovation coming out of China, your views on that, and has it changed your views on your programs in terms of competitive positioning or anything like that?
For Rhythm, not specifically. I think, every company, particularly as you create value, there may be other companies that come in, and there are some other companies that have early programs in our space. But whether they come from China or elsewhere, that does not so much change our. The rare disease dynamic may be a little different than some of these more common targets where you can have 5± companies working on exactly the same target. I am not sure. Like I said, we do not see China as the same threat that another program might in that sense.
Yep. Makes sense. The second question is just the AI question. How are you using it? How might you use it in the future, and what kind of impacts is it having now and in the future?
Yeah. I think we are all watching this on a daily basis, and so the way we look at this is that AI is increasingly being embedded in many of the tools, commoditized in that sense. We do not need to be cutting edge. We just want to be using things that make sense to make our business more efficient, for sure. On the clinical development side, where there are some really interesting advances back to being more efficient and accelerating, I think we are learning. Again, not looking necessarily to be on the cutting edge, but do not want to be left behind.
Very cognizant of some of the sensitivities around how you manage your data, where you put your data, and the like, and what's happened in the past few weeks, just about the increasing concern about AI and the like, just says, yeah, go into all of this with your eyes wide open. The third part we don't plan, which is using AI to discover new drugs, the like, where there's companies that are set up and built around that as a business model. That's not us, so we'll watch that with interest.
Yep. Makes sense. Then just maybe last question here, I guess which policy variable, whether it's FDA, Medicare negotiation, MFN, tariffs, or global pricing, matters most to you guys?
I think, for us, the short answer on MFN is, A, we're not one of the companies that's negotiated a deal. 2, we sell in 26 countries outside the U.S., so we don't have an active decision to make. Are we going to launch or not launch? We're launched. I think the area that we are certainly most interested in is how the FDA evolves here. Again, we've got new leadership in place coming. We're, like everybody else, following that closely. There's just so much opportunity there if it's done well, and of course, an FDA that doesn't function is really a problem for this industry.
Yep. Okay, great. Looks like we're out of time or just about, so why don't we end it there? David, thanks so much for your time today.
Thank you, Mike.