All right, great. Thanks very much. Happy to be here with Hunter Smith, CFO of Rhythm Pharmaceuticals. I'm sure folks know the story well, but I think to just level set, I'll have you, Hunter, maybe just briefly give us a quick update on what you just talked about with how the IMCIVREE launch is going in HO, and then we can dig into that, and then we'll talk about PWS. How does that sound?
That sounds great. First of all, thank you to Paul and the entire Stifel team for this conference, which is always a highlight of the year. It's a great location. There's always great swag. I was expecting a S'well bottle. I don't know if that's what I'm getting this year or not, but expectations are-
You'll get a vest, and you'll like it.
Okay. Expectations are high. Expectations are high. No, really happy to be here, and it is a very exciting time for Rhythm. Most of you are paying close attention. We just announced our third quarter results last week, and I would say we were super enthusiastic about the way our launch in acquired HO, hypothalamic obesity, is going thus far. We were approved back in March, and last week we reported over 700 start forms launched to date, and we had around 500 unique HCPs that wrote prescriptions for IMCIVREE in AHO, of which 25% were repeat prescribers. We think that breadth across a number of 700 start forms is a really terrific number, because most of those physicians come from our top two tiers of endocrinologists that we've been calling on, and that means they have multiple HO patients in their practice, right?
That's a very strong launch base to build off of. That number of over 300 in the second quarter, very aligned with what our expectation has been. If you back out the clinical trial patients that we had in Q2 and Q3, we think we've seen that pace continue through October in Q4, and we have every reason to expect it will continue beyond that. Very pleased about that. Second item we'd want to highlight is we were approved in October, middle of last month, for acquired hypothalamic obesity in Japan. Very exciting opportunity. The Japanese environment, Japanese regulatory and reimbursement authorities have really charted a change in the path to address the drug lag that the market was feeling, a path very different to what we're seeing in developed Europe. Very positive reception for our efforts for IMCIVREE there.
We've identified over 1,000 patients with AHO in Japan, and we have started launch and have patients on therapy. We've cautioned folks to have modest expectations for the first 12 months, because first 12 months post-launch, there are restrictions on the duration of prescriptions, so patients have to return to their HCP every two weeks to get prescriptions renewed. That's burdensome both to the patient and the HCP. That's designed for enhanced monitoring of a new therapy. Once that lifts, we expect the real trajectory of the launch to take hold, but obviously that's going to take a little while.
The third major thing that we talked about at the quarter was we announced an amendment to our licensing agreement for bivamelagon, where we made a fixed payment, or committed to a fixed payment of $350 million over four years to buy down the bivamelagon royalty from somewhere in the 5%-7% range to 1% flat with our partners, LG. That, I think, is a statement about how strongly we feel about the potential of biva as a therapy. Despite our best efforts, there were some disincentives to further development, economic disincentives to further development of biva that were inherent in that licensing agreement, and this amendment gets rid of those.
Now we have every incentive to be full speed ahead with biva, both in HO, but also, just as importantly, in Prader-Willi syndrome, where we've said that biva will go first among our next-gen assets in studying Prader-Willi syndrome, and we hope to meet with the FDA next year. Secondly, hopefully get to starting of a hyperphagia-focused study in patients with PWS in 2027.
Excellent. I am with you that the dispersion of the prescriber base is a very, very interesting kind of leading indicator, not just for there's going to be broad adoption, but also just the implication of how many patients that are out there. From a physician behavior perspective, are most of these physicians kind of calling in patients to write the drug, or is this kind of coming up in sort of the natural course of visits that would have already might have happened?
From what I have been learning from our commercial team and what they've been sharing in both market research and actual field experience, first of all, it speaks to the fundamental capacity challenges that endocrinology faces as a specialty. Endocrinologists are very, very busy. I think even in the major metros in the country, they book out more than a year. They book out a year in advance. Many of them are closed to new patients unless they have very severe conditions. Endocrinology is a very constrained specialty. The result of that, as we understand it, is that they tend to add patients as they come in for their updating their hormonal supplementation that has occurred in concomitant with, or concurrently with their AHO.
Many of them have a diabetes insipidus or hypopituitarism or some other forms of hormonal deficits that occur as a result of the treatment for their underlying tumor. That means that even if a physician is well-educated on the disease, has diagnosed patients, and is ready to prescribe IMCIVREE, there may not be a movement of that patient up in the queue until they're coming in on a regularly scheduled basis. That's just a natural governor on uptake, even if there's a lot of desire for adoption.
Yeah. Okay. But I guess ultimately, that dynamic, is that part of what underlies your confidence that the run rate you're seeing roughly could be sustainable?
Absolutely.
Okay. Makes sense. I know you have not formally updated that 2,000 patient number. You have just said, "Hey, it is higher and continues to increase." As it relates to the 700 or so start forms, can you at least speak qualitatively to the mix of these patients that are either going on therapy or are likely to go on therapy that maybe you did not actually know were identified before pre-launch?
Yes. There is a couple of different components. One is the vast majority of the patients are coming from prescriptions written by tiered physicians. So physicians we were targeting when we started the launch. That is a good fact pattern. In BBS, for example, where we launched in 2022, we regularly had about a third of patients that were what we call fly-ins, i.e., the prescription just comes in, often from primary care, because the BBS patients were scattered, usually one patient in one specific practice in most cases, right? These patients are much more concentrated in endocrinology, and these patients are also these physicians tend to be ones we are already calling on. So, I do not want to say that all of the patients were identified, but I do want to say the bulk of them came from physicians that were in our target group, right?
I think the second thing we would say is we continue to get reach and penetrate our Tier 1, Tier 2, and even Tier 3 physicians. It is a prioritization question. It is an access question. That is the sort of the dynamics of managing a large field force. We continue to get reach across our tiered physicians, and that then further generates future opportunity for prescriptions.
Okay. What do you think you need to get right at Rhythm to maintain or come close to maintaining this patient add rate over the next six to 12 months in the U.S.?
Continued reach, depth of prescription, which we think if somebody has written once and the patient has had a good experience, which most patients have, they are inclined to write a second time. Broadening of the diagnosis rate through disease education, primarily, and through ongoing medical education and peer programs and things of that nature. Then, just continued adoption across the program.
You said a quarter or about a quarter of these physicians have written more than one script. For the 75% of physicians who have not yet, do most of those physicians treat materially more than one HO patient?
Yes, because our Tier 1 is five plus, our Tier 2 is, I think, two to five, that kind of thing. So, yes.
Most of these physicians fit into that box.
Tier 1 and Tier 2, yeah.
Okay. Got it. Anything else that has surprised you so far with this launch?
I would say the payer adoption has been of positive policies, has been certainly more rapid than BBS and review it positively.
Do you think that is just because the drug was already out there, because the data is better?
It's a combination. Drug was out there, data are better, New England Journal paper. I just always go back to the acute nature of the original injury, right? I mean, in so many of these cases, you're dealing with a child between the ages of 4 and 11 who has just gone through a brain tumor, and then has all of these terrible consequences, complications following the brain tumor removal. It's going to be hard for a payer to not stand up and pay attention.
Yep. Okay. Makes sense. On the ex-U.S. market, you've talked a lot about Japan being potentially the second-biggest market for this drug. Maybe just expound upon that. Like, why is that? How do you think about demand there, pricing power, things like that?
Sure. Interestingly, Japan has an enhanced incidence of craniopharyngioma compared to the United States and Europe. We do not have a good explanation for that, but it's fact. Craniopharyngioma is the largest individual driver of AHO, with rates that are variable depending upon the case series you look at, but tend to converge around 50% of patients who develop craniopharyngioma eventually developing AHO, usually driven by the degree of hypothalamic involvement either in the tumor or the resection or both. That drives an epidemiology that we range in 5,000 to 8,000 as compared to around 10,000 in the United States. For a much smaller country, right?
That combination with what we expect to be a higher diagnosis rate, and again, the very sort of supportive regulatory environment, medical affairs environment has been a real positive for what we think is the future potential for launch in Japan. There are a number of different factors that drive pricing and reimbursement in Japan, but we were able to get to an attractive overall price level pretty quickly. Japan has a program of price maintenance, which distinguishes it from European markets, which typically have a program of, "Thank you for all the extra work you've done. Your price is going down.
Got it. Makes sense. Japan, because of this regulatory dynamic, is likely to be a minor contributor in year one. How do you think about the kinetics of the HO revenue ramp elsewhere, ex-U.S.?
Yes. The primary markets that we're focused on outside the U.S. are the EU4 plus the United Kingdom. We're going to go through a process that we've gone through before in Germany, where we are initially prohibited from reimbursement because we are indicated for weight loss, which is described in Germany as a lifestyle condition. We go and we provide supplemental information about the disease state and the patient response and all of that, and then they give us an exception to that restricted list. We've done that for POMC, we've done it for BBS, and we expect to do that successfully for AHO. That should happen sometime in the first quarter, and then we will launch. That's Germany. France, we already have had paid early access in France and been able to keep patients on therapy for a number of years now at an attractively reimbursed level.
We are fully reimbursed in France for BBS, and so it's a supplemental price negotiation, which usually is a more expeditious process than the initial negotiation. Also with AHO data being stronger, plus the multiple, the long stretch of early access leads to the opportunity to, we think, have a good launch experience at some point in 2027 in France. We've also had early access for craniopharyngioma patients below a certain age in Italy. Again, all of these markets, they have their own dynamic. None of them are easy. I would say the U.K. stands out in that not particularly easy regard, but we have a very experienced team that's been able to garner market access with rare disease reimbursement in each of these markets, and hopefully we can get going in all of them in 2027.
To conclude there, we'll be more specific about those timelines as we kick off the new year.
Great. Let's talk about Prader-Willi. Do you want to set the stage and just talk, at least generally speaking, about how you think about getting bivamelagon to market there?
Yeah. So, Prader-Willi is a very challenging disease with significant early mortality, in many cases driven by the consequences of obesity and hyperphagia. There is a clear tie to the MC4R pathway through the knockout of chromosome 15, which leads to the deletion of the MAGEL2 gene. We are very pleased with the phase II data we showed in about 17 patients for IMCIVREE, and that's the basis on which we're pursuing a registrational study, hopefully in 2027. There were several things that led to us to lead with biva. First and foremost, there's a clinical supply component where biva is running ahead of RM-718. Second of all, the perception from talking to KOLs that a daily routinized therapeutic administration is preferable actually to something weekly, which would sort of run counter to what a patient without the sort of OCD challenges that PWS patients might prefer something weekly.
There's a little bit of a, maybe it's going to be preferred from an administration point of view. Those are the two factors, and then obviously the renegotiation of the royalty component obviously removes the final barrier to leading with bivamelagon. We hope to have an FDA meeting about our phase III plans in the new year and then start a study in 2027. We've indicated that our study will be a six-month placebo-controlled hyperphagia study with HQ-CT as the primary endpoint.
Yep. Okay. From an FDA sign-off perspective, not much mystery there? I mean, you're kind of following established precedent at this point.
That's our view, yeah.
Okay. Got it. Makes sense. I mean, the data in PWS look quite promising. I asked you this earlier. I'm sure you get this question a lot. It's open label. Hyperphagia is a severe symptom, but the endpoint has some element of subjectivity. What's given Rhythm the comfort here that the effect size transcends any sort of likely placebo effect in this indication?
Sure. I want to say we had 11 patients in the phase II with clinically meaningful hyperphagias defined, and measures of hyperphagias defined by HQ-CT, of which six were adults. All six had a clinically meaningful reduction in HQ-CT through six months, and three of five of the kids did. So very promising in that respect, and I think what we've learned both from talking to investigators and some of you may know, we have both a relatively new Chief Medical Officer, AJ Joshi, who came from Soleno Therapeutics, where he was head of clinical development there, and then one of our senior physicians, Ashley Shoemaker, who was well-known to the investment community for having run a peds endo clinic at Vanderbilt for a long time.
In being informed by both of them, as well as the history of trials, indicates that placebo effects in HQ-CT tend to have run their course after a couple of months of therapy, of a new therapy, which may be a placebo. Therefore, we would expect that by a six-month period, you would see a true adjustment to the reality of the behavioral disturbances that HQ-CT measures, and therefore, if our therapy is having an effect in the active arm, that you would see both normalization of any placebo effect as well as a true response to the active arm.
For PWS, it is not, as I understand it, you correct me if I am wrong, it is not totally homogeneous as it relates to the genetic issue there, right? These can be variable deletions or mutations or things like that. Is there a way you can try to better enrich the phase III population to be most likely to respond well to the MC4 mechanism?
I am not going to speak to the BMI component of that, because from a genetics point of view, I do not think we have made any determination that as of now, there would be any genetic sub-criteria.
For the study?
For the study. In BMI terms. Therefore, it is more about the fact that clinically meaningful hyperphagia as defined by HQ-CT would have to be an entry criteria.
Okay. But the thesis is, this mechanism should potentially be broadly applicable, not just to certain populations.
That is what we believe, yes.
Okay. Got it. Any questions from the audience for Hunter ? I am going to mention the ultimate Hail Mary. There was a Wall Street Journal article, if you saw it, around Rhythm recently. Care to comment anything about that?
Yeah. We do not comment on market rumors, and those were market rumors.
Okay. Fair enough. Okay. As it relates to 2027, I will spare you with any follow-ups there, and we will just ask one more question to wrap it up, unless there is anything from the audience. If we are sitting here in the second half of 2027, you guys are not going to guide, as we have talked about, but how do you think about how you are going to set goals, and how should we be judging the way the AHO launch is going this time next year?
Sure. It is very timely because as anybody who has worked inside pharmaceutical and biotechnology environments understands, this is the time of year when that is top of mind for management teams and compensation committees and field incentive comp planning. It is all going on right now, right? At the corporate level, you are really focused on broadening the number of patients on therapy as the first priority, because that is what we have the greatest ability to influence. There is always a revenue component, but revenue component is secondary because certainly in the U.S. case, there are non-reimbursed patients, and you do not want anybody to be thinking about, "Okay, we are bringing on only trying to get only reimbursed patients," and things like that.
You are really trying to maximize the number of patients that you can get onto therapy and maximize the field team's utility in that regard. You do measure that in terms of patient adoption, you do measure that in terms of start forms, and you do measure that in terms of ultimately, we still need to be responsible for what we believe will be significant continued revenue growth year-over-year, with a nice increase, do not want to overbuild expectations, but with a nice increase in the ex-U.S. contribution associated with AHO starting to take hold next year as well. Those things will be exciting, and again, we are going to be looking at a broad base of indicators.
There are the things we look at qualitatively, there are things we look at quantitatively around field force effectiveness, and the behavior of writers, and the continued segmentation of HCPs, and hopefully more of them with IMCIVREE awareness, more of them with a positive view of IMCIVREE as a treatment for AHO, and more of them ready to prescribe or having prescribed.
Great. As it relates to just spending and balancing, getting to sustainable profitability, all sort of things like that, launching ex-U.S. is expensive. What is your view on just from this point on, Rhythm is self-sustaining, does not need additional external capital?
We do believe that Rhythm is self-sustaining and does not need external capital, and part of the purpose of the term loan that we just secured was not only to finance the fixed consideration that we promised to LG Chem associated with the bivamelagon in-licensing, but it was also to ensure that as and when spending, if we continue to have negative cash burning quarters, which we should for some time yet, that the dip in liquidity associated with that is balanced by available liquidity in sufficient quantities that we do not need to issue additional equity. Very excited to be at this moment in that sense, right? Maybe I do not need to raise anything ever. I might now someday.
We will see. Putting that to the side, I think we absolutely will have, we have not quantified it yet, but we will have a step-up in spending year-over-year, and I would say there will be three primary drivers of that step-up in spending. First and foremost will be the beginning of the two phase III studies we want to initiate with bivamelagon over the course of 2027, first AHO and second Prader-Willi syndrome. The second being the CMC and clinical supply associated with both bivamelagon as well as formulation development, the auto-injector, and clinical supply for what we will use RM-718. The third will be the growth in individual markets where we are launching IMCIVREE for AHO, primarily in Europe, as well as the annualization of the costs associated with Japan.
Those will be the three biggest drivers of spending year-over-year, and as we've done traditionally, we will attempt to quantify that in a range so that folks can help think about the level of cash consumption and/or generation, as well as the path to profitability in the next couple years.
Great. Awesome. Well, thank you, Hunter. Best of luck.
Thanks, Paul.
Appreciate it.
Good seeing you as always.