Rhythm Pharmaceuticals, Inc. (RYTM) Q2 2021 Earnings Report, Transcript and Summary

Good day and thank you for standing by. Welcome to the Rhythm Pharmaceuticals Q2 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions]. I would now like to hand the conference over to our speaker today, David Connolly, Head of Investor Relations and Corporate Communications at Rhythm. Thank you. Please go ahead.

Thank you. Good morning. I'm David Connolly, Head of IR and Corporate Communications here at Rhythm Pharmaceuticals. With me today for our second quarter financial results and business update conference call are David Meeker, Chair, President and Chief Executive of Rhythm Pharmaceuticals; Murray Stewart, our Chief Medical Officer; Jennifer Chien, Executive Vice President, Head of North America; Yann Mazabraud, Executive Vice President, Head of International, who is dialing in from Europe this morning; and Hunter Smith, our Chief Financial Officer, who's here in Boston with us. For those of you participating via conference call, the accompanying slides can be accessed and controlled by going to the Events section of the Investors page of our website, ir.rhythemtx.com. This morning, we issued two press releases, one of which provides an update on our comprehensive expansion of clinical development program, with five new Phase II and III trials planned to evaluate setmelanotide in rare genetic diseases of obesity and a second press release that provides our second quarter financial results and business update. Both press releases are available on our website. On today's call, on slide two, David will provide an overview and some introductory remarks. Murray will provide an update on regulatory and clinical development plans, Jennifer will provide an update on US commercial, Yann will provide an update on international, and Hunter will provide an update on our finances and balance sheet. Lastly, the team will be available to answer questions. On slide three, I'll walk you through our forward-looking statement. I'll remind you that this call will contain remarks concerning future expectations, plans and prospects, which constitute forward-looking statements. Actual results may differ materially from those indicated by these forward-looking statements as a result of various factors, including those discussed in our most recent annual report on file with the SEC. In addition, any forward-looking statements represent our views only as of today, and should not be relied upon as representing our views as of any subsequent dates. We specifically disclaim any obligation to update such statements. With that, I'll turn the call over to David.

Thank you, Dave. And I'd like to offer my welcome to everyone for Rhythm's first quarterly earnings call. Starting on slide 5, as Dave highlighted, it's been a highly productive quarter. Not a lot of flashy headlines. But we're really pleased with the significant progress that we've made. And I think you'll hopefully appreciate that, particularly on the clinical development front, which Murray will walk you through. Some of the highlights from the second quarter. On the clinical side, again, many discussions with the FDA and EMA leading to our current state with a newly named Phase III EMANATE trial, our newly named Phase II DAYBREAK trial, and then the Phase III study in pediatrics, children ages two to six, and then two Phase III trials for our weekly formulation. We've been very encouraged by our first full quarter of IMCIVREE availability. We're learning a tremendous amount, which Jennifer will walk you through, and we are making significant strides in building out our infrastructure. We got our European Commission Authorization for IMCIVREE, and we knew this was coming, but an incredibly important milestone, nevertheless. And I'm very happy with the indication, the labeled indication that we've got. We're approved for the treatment of obesity and the control of hunger. We have hunger in the US label, but in the European label, it is included in the indication, and again, signals the importance of that aspect of this disease, given the underlying biology. Yann's going to take you through the progress in Europe and outside. We recently announced our agreement with Medison Pharma to commercialize IMCIVREE in Israel. Again, he'll go into a little more depth there. But this agreement signals, again, our commitment to go global with this opportunity. The CRIBBS collaboration, again, recently announced, is an important step certainly for the BBS community and Rhythm as we work to learn more about that opportunity and support that community. I firmly believe, in the area of rare diseases, when you get a drug approved, you're truly just at the beginning of understanding that opportunity. By nature, you have very few patients that may have been treated in the clinical development program. So, much of that learning does begin at that point and this collaboration will give us a real opportunity to learn much more about the natural history of this disease. And, of course, we'll continue to track the benefits as patients move on to IMCIVREE. And finally, URO, our gene panel that we support and offer to the community, which is the backbone of virtually everything we do. And we've provided an updated panel now that extends to 80 genes, and Jennifer will walk you through a little more on that aspect. Turning to slide 6, I know many of you on the phone are familiar, of course, with what we do, but I think it's worth reminding people. We're focused on the rare genetic diseases of obesity, which is very distinct from general obesity. Many times they present in a similar fashion, but the underlying drivers and what they're experiencing is different, characterized by early onset, severe obesity, and the very important aspect of hyperphagia, which is this pathologic hunger associated with persistent and potentially extreme food-seeking behavior and highly impactful in terms of a patient's overall quality of life. It's a genetically defined population, by definition. Tends to be resistant or refractory to therapies and interventions, including bariatric surgery. And it is associated, again, strictly as a function in many cases of the severity of obesity with all the complications and comorbidities we see in that population. So, in essence, this is a life threatening disease with no approved therapies to date other than the three indications that we had approved in November of last year. So, moving to slide 7, our focus as we seek to transform the care of patients with rare genetic diseases of obesity is four fold. The US is our first opportunity to learn and build on the commercial availability of IMCIVREE. That's on track. As we first start making a drug available, it's always interesting to see how patients, the initial patients do, who go on therapy outside of a clinical development program. And I'll just share one anecdote. One of the first patients to go on therapy was an eight year old girl, who experienced a decrease in her BMI at three months. She cleared her reauthorization with her payer. But more importantly, she experienced some of those more subtle things we don't think about, her glasses started fitting better, her shoes started fitting better, she had more energy, and just an overall general improvement in her quality of life. So, again, not to forget, we get focused on the numbers, but some of these more nuanced aspects are what really transform people's lives. Secondly, the clinical development program, and again, I'll leave it to Murray to take you through the details, but that's the backbone of everything we do, the community building, all the educational, the development of experts, of course, patient awareness, and testing, all of that will be anchored by our clinical development efforts, which are increasingly robust. Third, we're poised to deliver on our Bardet-Biedl opportunity, with the filing on track. Again, you will hear in the near term, and we're excited about that opportunity. We've highlighted that the first three genes we've been pursuing, that that opportunity will have tens of patients on near term, many more long term, but it's the needle in the haystack and will take a little bit of time to get there. But Bardet-Biedl is a much better organized community and the 2,500 plus locations in the US, equal or greater numbers, as you'll hear from Yann, outside the US again and we're focused on that. And that's something that we want to get right. And finally, just as a highlighter, we're excited about progress that Yann is making outside the US. Many US biotechs, small companies, tend to shy away from Europe. It's a complex, hard to penetrate, country by country differences that need to be understood. And we're just incredibly fortunate to have someone like Yann with deep experience on leading that effort for us and making the approval – the progress that he has been making. And just for example, as we work with payers, and one of the most important aspects of his efforts and our efforts as a company, are to make sure that the whole community and, certainly, the payer, part of that understands that these diseases are not obesity. These are these rare genetic diseases driven by clear deficits in a pathway in the brain, and that they happen to be associated with obesity, and that, I think, Yann has made good progress with that. So, turning to the left side of my section, slide 8. This is a small pipeline cut, if you will. And working from the right side, we have the three genes approved. And I think the message I want to leave here is that we are going very specifically gene by gene. And so, the expansion of this opportunity will be as we can get additional genes approved. And that's been our clinical development strategy. So, we'll be filing for the BBS and Alström. And just one note on Alström, as Murray will get to as well, we see clear responders there. But we have, I think, that good understanding with both regulatory agencies that absolutely we should file and make the case, and I think we have reasonable optimism, but we will not – one will not unduly impact the other. They will be looked at basically as independent genetic opportunities. The Phase III trial, excited about the five genes we're pushing through the Phase III EMANATE trial. The DAYBREAK trial is a highly efficient way, I think, of understanding additional genes in that pathway. No way that all 31, of course, are going to respond. I think this will allow us to rapidly – relatively rapidly begin to sort that group of 31 that we think, based on existing knowledge, tie them strongly to the pathway. But of course, the ultimate confirmation will come from their response to setmelanotide. And as we said, we're committed to the lifecycle management strategies we're adopting. So with that, I'll turn it over to Murray for the clinical and regulatory update. Murray?

Great, thank you. Let's go to slide 10. As David said, we've been busy. We've been holding multiple meetings with both the FDA and EMA, and we're pleased to report out today that we've achieved agreement on regulatory submissions and several clinical trial designs, which are important steps as we work to expand the label for setmelanotide. We submitted a briefing document to the FDA and did a pre-SNDA meeting with them to discuss the content of the regulatory for Bardet-Biedl and Alström Syndrome. The meeting was successful, and the FDA have agreed to review the BBS and Alström data independently. And while we're cautiously optimistic, given the totality of the data, we do know that the more limited Alström data will not negatively affect our BBS submission. So, we are on track to complete and submit a regular package for supplemental NDA to the FDA in this quarter. For Europe, we also had a successful meeting. And we're on track to complete our submission seeking a Type 2 amendment to our European Marketing Authorization in the fourth quarter. But we are excited about the transformational expansion of our clinical development program, with five new Phase II and III trials, all of which meaningfully broaden the rare genetic disease of obesity patient population we can help with IMCIVREE. The pivotal EMANATE trial studies five specific genes in the MC4R pathway, representing approximately 100,000 to 200,000 patients in the US who may respond to setmelanotide, with a similar number in Europe. The Phase II DAYBREAK trial is designed to buy setmelanotide an additional 31 genes associated with the MC4R pathway. A Phase II trial in pediatric patients aged two to six is designed to address high unmet need and enable better earlier care for children with rare genetic diseases of obesity. And the two Phase III trials for our weekly program, a de novo trial and a switch study. The weekly program is a key aspect of our long-term strategy, which will improve compliance and adherence in these lifelong chronic diseases. Both agencies were very positive of addressing the younger children. The weekly program followed a joint assessment by both agencies, culminating the three-week conference with Rhythm, FDA and EMA. The pathway studies involve briefing documents, draft protocols, and meetings to incorporate feedback and get us to today where we're ready to plan the operational aspects of these studies. Slide 11, we remain very excited about the progress we've made on Bardet-Biedl syndrome. Here is a reminder of our BBS and Alström data from our pivotal trial, which is strong supporter of a successful registrational package. The pivotal trial met the primary and all key secondary endpoints, achieving statistical significance and delivering on clinically meaningful weight loss and hunger reduction. The mean weight loss shown here, however, does not convey the real benefit as it includes not only adults, but children that were growing. So, when you look at the BBS data alone and separate into two groups, adults and children, you see what we believe is the real benefit in clinically meaningful response to setmelanotide across the full range of the population. Slide 12. Recall, we had 28 patients with BBS who were 10 years old or older at enrollment, the patients in the primary analysis set. 53% of adults with Bardet-Biedl syndrome achieved weight loss of 10% or greater and 73% of adults with BBS achieve weight loss of 5% or greater. There was a total of 16 patients with Bardet-Biedl syndrome who were younger than 18, including a few younger than 12 not included in the primary analysis. Two of those 16 withdrew prior to week 52. But when we look at the remaining 14 children adolescents, the data really are quite remarkable. 13 out of 14 achieved a reduction of 0.2 or greater than their BMI-Z scores. As a reminder, BMI-Z is a measure of standard deviation of body mass index from what is considered normal based on someone's age and sex, and a reduction of 0.2 is considered clinically meaningful. Furthermore, 73% of patients went on to enroll into the extension study. We're looking forward to sharing more data from our BBS pivotal trial during the medical conferences this fall, including positive data from the 14-week placebo control period of the trial and full quality of life data. While we've been excited about this data for some time now, we're even more excited about what this means for the Bardet-Biedl community, as they have no therapeutic options for the severe obesity and hyperphagia that greatly affect their lives. I was heartened this weekend to hear from the members of this community during the Bardet-Biedl Foundation and Family Association Virtual Conference. And I was pleased to present an update to setmelanotide to this community Sunday night by video. We're also excited about collaboration with CRIBBS. That is the Clinical Registry Investigating Bardet-Biedl Syndrome that we announced last week. There are more than 600 participants now active in this registry, and we look forward to conducting the deepest examination to date on the natural history of weight gain, hyperphagia and the quality of life in patients with Bardet-Biedl syndrome. Moving on to slide 13 and the first detailed slide of our clinical trials. So, the pediatrics. As a genetic disease, these obese cases present at an early age from just a few months old to five or six years old. And we know from the sequencing results of our Uncovering Rare Obesity genetic test that approximately 20% of these tests are done in children six or younger, and the hit rate for these diseases is consistent with the overall data we've reported. The obesity and hyperphagia are severe in these children. For reference, I'd point to the Journal of Pediatric Child Health, which reviewed cases of POMC deficiency in the April edition this year and include two children from Sydney, Australia, which we will include in our clinical study. This trial is a Phase III study being conducted in North America, Europe and Asia-Pacific countries. We plan to enroll at least 10 patients, five with obesity due to biallelic POMC PCSK or leptin factor deficiency, and five with Bardet-Biedl syndrome. The study is one year long, open label and the primary endpoint is responder analysis, with responders defined as patients achieving a decrease from baseline in their BMI-Z score a greater than 0.2. We're actually set to dose the first patient in this trial in the second half of this year, with already several children identified and ready for screening. Moving to slide 14, advancing a weekly formulation setmelanotide is a key part of our corporate strategy and lifecycle of the drug. As a reminder, we presented interim data from a Phase II study in general obesity, comparing the once weekly formulation of setmelanotide to daily dosing of setmelanotide. The data showed that the weekly formulation of setmelanotide achieved compatible weight loss and hunger reduction to those treated with the daily formulation. And both the weekly and the daily formulations of setmelanotide were observed to be generally well tolerated. For a registration program with two trials, a switch study, a Phase II randomized, double blind trial of daily and weekly formulations which will evaluate efficacy, pharmacokinetics and safety, we have enrolled a total of about 30 patients who are already in our ongoing long-term open label trial. And they've been on 2 milligrams to 3 milligrams daily setmelanotide for at least six months. We will put BBS patients biallelic or het POMC, PCSK, LEPR patients. 20 patients will be greater than 18 years of age. About five will be between 12 and 17. And we include younger children between 6 and 11 years of age. The trial starts with a one week running on daily dosing. Then patients will be randomized on a one to one basis, receive either blind weekly setmelanotide and daily placebo, while on the other arm blinded daily setmelanotide and weekly placebo. Then all patients will have an open label weekly dosing for 13 weeks. The primary endpoint is responder analysis for the proportion of patients with no weight gain or increase of 5% above baseline to week 13. The point is we want to show that individuals maintain weight when switching from weekly to daily and that the drug is safe and well tolerated. The de novo study is a randomized, double blind, de novo trial. We will enroll 40 BBS. Patients who are randomized one to one receive either 30 milligrams weekly or placebo weekly for 18 weeks. All patients then go on to receive 30 milligrams weekly for a further 14 weeks. The primary endpoint will be the mean change in weight at 18 weeks comparing setmelanotide to placebo. Both of these weekly trials in the pediatrics puts us on track for record submissions in United States and Europe in the last half of 2022 or early 2023. Now moving to slide 15. This is the Phase II DAYBREAK trial, which is designed to rapidly assess an additional 31 genes and move towards registration. It's a two stage trial evaluating setmelanotide in patients with specific variants within one of the 31 genes that are in the pathway. For this trial, we expect to dose the first patient by the end of the year. We'll enroll patients between the ages of 6 and 65. They will have a BMI greater than 40 or weight above the 97 percentile. They will have a history of childhood obesity, reported history of hyperphagia and have at least one genetic variant in one of the 31 genes. The two stage design allows for rapid advancement to proof of concept. In stage one, there's an open label running. We will recruit approximately 500 patients, 10 to 20 per gene, for 16 weeks of therapy. We estimate there would be a third, approximately 130 patients, who go into stage two. The criteria to enter stage two are patients greater than 18 achieving 5% weight loss for baseline or those under 18 a BMI-Z decrease of at least 0.1. Now, stage two is a double blind, placebo controlled randomized withdrawal. Last 24 weeks will be based on entry weight and stratified by gene for more prevalent genes. Patients are then randomized two to one to receive setmelanotide or placebo. And the expectation is that those in active therapy will continue to lose weight whereas those on placebo will gain weight. If they gain weight and the body weight increases by at least 5% from stage to entry weight, patient may be rescued and compared to setmelanotide in an open label setting. Rescued patients would not be considered as responders. Slide 16 goes through the endpoints. The primary endpoint is the proportion of patients who enter stage two who are responders compared to the placebo group. Responders above 18 years of age achieve 10% or greater body weight reduction from baseline, whereas responder under 18 achieves a BMI reduction of greater than 0.3 from baseline. Secondary endpoints include proportion of patients who meet 5% weight loss compared to their historic rate, change in percentage in body weight in adults, a BMI-Z reduction in children, we will also look at waist circumference, change in average hunger, as well as overall safety and tolerability. And further secondary measures will include quality of life, such as physical functioning scores. On slide 17 is EMANATE Phase III trial. This is a randomized, double-blind, placebo controlled trial evaluating setmelanotide in five genes within the melanocortin-4 pathway, which we believe demonstrated proof of concept, which we announced in January. This trial is comprised of five independent sub studies evaluating setmelanotide in groups of patients. The first group are heterozygous variants and POMC/PCSK1. The second are heterozygous variants and the leptin receptor gene. The third cohort is those carrying variants in SRC1 gene, the fourth in SH2B1 gene, and finally, the fifth sub study is for patients who carry the PCSK1 N221D deletion. Each sub study is designed to enroll 110 patients randomized one to one. So, 55 will get treatment, 55 will get placebo for a total of 550 patients. It's important to note that patients in each study will be stratified by age. And then hets, POMC, PCSK1 and leptin receptor sub studies, patients will be stratified based on their ACMG classification of their variant. All these patients will have a history of childhood obesity and hyperphagia. We will look at individuals from 60, 65 years and inclusion with BMI above 30, a weight above the 90 percentile. Slide 18. The treatment period is 52 weeks with potential for rescue treatment 26 weeks, if there's a gain in weight of 5% or an increase in BMI above 3%. Given the duration of this trial, we'll provide guidance for both diet and exercise. That's something that we've not done in our clinical development program to date. Anecdotally, we know patients who have failed diet and exercise regimes previously, who then try and have been more successful because of the reduction in hyperphagia, which occurs when they're on setmelanotide. The primary endpoint will be identical across each of the five sub studies. And the primary endpoint is a mean percentage change in BMI at the 52 weeks comparing setmelanotide to placebo. Slide 19 shows our other secondary endpoints. They will include a responder analysis, with responders defined as adults having achieved 5% and 10% loss of body weight or adolescents and children younger than 18 having achieved a BMI reduction of greater than or equal to 5% and 10% at the 52 week timepoint. We will also look at the additional secondaries, mean percentage change in weekly average of most hunger score, the mean change in BMI or BMI-Z, waist circumference, mean bodyweight loss and early responders defined as those losing 5% or more in the first 14 weeks. This is important as this will assess whether early responders predict a greater weight loss at the end of the study. We'll also look at safety, tolerability, and other secondary endpoints of quality of life measures such as physical functioning score. On this study, in particular, we have had several regulatory interactions with both the EMA and the FDA. The primary concern of the FDA specifically with each of the cohort genes in the basket study was small, uncontrolled, and responder analysis as opposed to traditional mean weight loss analysis. Initially, we had proposed to trial with responder analysis as the primary endpoint in the placebo group across the five genes as a comparator. The FDA encouraged a different design, with five separate sub studies, each with its own placebo control, using mean BMI change as the primary endpoint. We've adopted these. The strength of this design is it allows per gene by gene analysis. It allows for children and adults to be combined in one analysis using the change in BMI. Additionally, this will include the strongest placebo data set we have to date on this program, and will give us insight into natural history of these genetic diseases. Now, any of the gene specific sub studies can succeed on their own and allow for separate and independent supplemental NDAs. The result for each study will need to be clinically meaningful and statistically robust to support registration. And as always, this will be a matter of review. The FDA is interested in the pathogenic, likely pathogenic patients and VUS patients as subgroups. And we've stratified the POMC, PCSK1, het study, and the leptin receptor het study where this is relevant by ACMG classification. In summary, we've had constructive interaction with both agencies, and have developed a clinical development program which we believe addresses the concerns of both agencies. Slide 20, our operational approach. We have a well thought out operational plan to support these two studies in parallel. IQVIA, a global clinical research partner, was selected as the CRO. Contracts have been executed and transfer onboarding is well underway for both EMANATE and DAYBREAK. We expect to have more than 75 sites active in 14 countries across the globe – North America, Europe and the Middle East. We'll have a network referring physicians and obesity treaters in the surrounding area, as each trial site will have 5 to 10 referring centers. We are on track to initiate and dose the first patients in these trials by the end of the year. It will take at least a year to 18 months to recruit and screen for each trial. EMANATE has a 52-week treatment period. But as we said earlier, the independent sub studies may allow for one or two sub studies to read out and advance directly to submission ahead of the others. DAYBREAK's treatment period is a little less at 40 weeks, and we may have the same flexibility with opportunities for certain genes or certain cohorts to read out faster than others. Both EMANATE and DAYBREAK trials and their enrollment will be driven by singular community building effort. This is designed to raise awareness of rare genetic disease obesity, educate on early onset obesity and hyperphagia and call for more genetic testing. On slide 21, and before turning over to Jennifer, I want to remind everyone of how safe setmelanotide is posing to be over the years. As of March 2021, we had administered setmelanotide to 639 patients, with 94 on therapy for more than a year, 40 on therapy for more than two years, 17 for more than three, three for more than four and, finally, two out of five on more than five years of therapy. This is consistent safety and tolerability approval. And these numbers give us great confidence as we embark on the DAYBREAK and EMANATE trials. With that, I'll turn over to Jennifer.

Thank you, Murray. If you go to slide 23, you'll see that our main focus is building a community and providing educational resources and expertise as well as tools for identifying, testing and supporting the diagnosis of patients. Diagnosis supports the identification of patients who may be eligible for one of our clinical studies, but also supports identification of patients who may be eligible for IMCIVREE. We are leveraging the clinical development program, its growing network of trial investigators, in addition to diagnosing and treating physicians at referral centers to build this community, which in turn will help support our commercialization efforts. Slide 24. Genetic testing, of course, remains at the center of our corporate strategy. For us, that means uncovering rare obesity, or URO, our free genetic test designed to identify and help physicians diagnose patients with rare genetic diseases of obesity. As David mentioned, we extended the panel to test for 80 genes with ties to obesity. To date, we have completed approximately 10,000 URO tests. It's important to note the panel was just expanded to include all 80 genes. So, now, all the genes in EMANATE and DAYBREAK will be screened moving forward. We have also evaluated and made additional improvements in the URO program. We've developed a new website to make it easier for physicians to order the tests, receive results, and access contact information for genetic counseling support. Physicians will receive the test kits within five days. And in partnership with prevention genetics, we can turn around results within 21 days. Through the years, we have learned a tremendous amount about who orders the test and for whom. So far, more than 1,600 unique HCPs have submitted tests, with pediatric endocrinologists and pediatricians accounting for more than half of them. Medical geneticists, PCPs and family practice also account for a significant portion. Age of patients also provides encouraging data. About 20% of the tests come from children six years of age or younger, with the remaining 80% of submitted samples coming from individuals equal or greater than seven years of age. Patients tested have had severe obesity, with BMI of adults tested on average greater than 47 kilograms per meter squared. Slide 25. In addition to improvements in our URO program, we are building out our field teams to support community building, starting with targeted disease education efforts surrounding our clinical sites. It is important to note that we have already identified more than 660 patients who could potentially enroll in a trial with confirmed genetic variants who live within a reasonable distance to a trial site. Slide 26. Our field teams will include medical science liaisons, or MSLs, and their focus is on medical communications, KOL and physician engagement across biallelic POMC, PCSK1 and LEPR deficiencies, Bardet-Biedl syndrome and rare genetic diseases of obesity being studied in EMANATE and DAYBREAK. Many of our MSLs have been with us for several years, educating physicians and KOLs on the MC4 pathway and its effect on hyperphagia and obesity, supporting collaborations and facilitating educational forums. For example, our GOLD Academy has reached more than 1,000 providers in the last few years, thanks to the work of our MSLs. Second addition to our US field force are our area development managers or ADMs. ADMs will focus on community building, education and genetic testing to drive enrollment in EMANATE, DAYBREAK and other clinical trials. Again, here we are working to build out a referral network around selected sites to test appropriate patients while supporting trial enrollment by engaging with HCPs with potential patients. This supports the development of a local hub and spoke network for referrers and facilitates trial execution. Third portion of our US field force is specific to BBS. We will have a dedicated sales force on the ground who will engage current BBS treaters and diagnosers. Our focus here is on disease education, supporting physicians' understanding of the impact of obesity and hyperphagia on patients and families, while also supporting additional BBS patient diagnosis. Slide 27. For the initial commercial availability of IMCIVREE for patients with biallelic POMC, PCSK1 and LEPR deficiencies, our initial months on the market have gone well. Our US-based infrastructure focuses on RGDO disease education to support additional patient diagnosis, supporting patient and physician education and services and securing market access and reimbursement. On the payer side, we have had positive payer decisions made on IMCIVREE, spanning for large and small plans, commercial and Medicaid. Prior authorizations put in place have been consistent with our PI, including genetic confirmation, BMI greater than 30 and efficacy touchpoint between weeks 12 through 16. As David has outlined, for these initial indications, we expect tens of patients in the first year to have commercial availability, and we are off to a solid start with one full quarter in the books. But more importantly, we are learning and preparing for a commercial launch in BBS in the middle of next year, pending regulatory approvals, of course. Slide 28. We are working to accelerate the diagnosis of BBS patients. Supporting the understanding of the impact of hyperphagia and obesity on patients and families, while supporting market access for IMCIVREE. We are supplementing our current support program to improve customer service and provide support to HCPs and patients. We are in the process of hiring the BBS territory managers and corporate accounts team to continue engagement with HCPs and payers. Separate from this, as Murray outlined earlier, we have announced a collaboration with CRIBBS, where we will learn more about the BBS patients to support our understanding and help prepare us for lunch. With that, I will turn the call over to Yann for an update on our international efforts.

Thank you, Jennifer. And good morning, everyone. It is a very exciting time for Rhythm at the international level. Two weeks ago, we announced that the European Commission granted marketing authorization to IMCIVREE for the treatment of obesity and the control of hunger associated with genetically confirmed loss of function, biallelic POMC, PCSK1 or LEPR deficiency in adults and children six years of age and above. IMCIVREE is the first and only treatment option available for patients in Europe to address the underlying cause of obesity driven by certain genetic defects in the melanocortin-4 receptor pathway. In Europe and many key countries in the Middle East, South America and elsewhere, we are executing on a similar strategy as Jennifer's team in North America, with, first, a focus on community building to support the robust clinical development program already detailed and the commercial efforts. Second, securing market access for IMCIVREE on a country by country approach. And third, planning for BBS launch next year. But there are some differences in Europe. First, for rare genetic disease of obesity, Europe is somewhat better organized with a lot of historical expertise, many national centers of excellence, and three very well established European reference networks with a total of 50 academic centers. More genetic testing focused on this disease has been done as many of these centers do their own genetic testing. On genetic testing, there is an opportunity for us to complement with this existing testing. That is what we are doing as we evolve our European genetic testing and diagnostic strategy. Of course, pricing and reimbursement are also different in Europe and vary by country. We are advancing a country by country reimbursement process and work to make IMCIVREE available to patients as rapidly as possible. I will give you more details in the next slide. These indications are recognized as rare disease and we are making strides in establishing the value as rare disease from a pricing standpoint, with already many successes that I will also mention a bit later. Preparing for BBS is somewhat different too, with large cohorts of patients in approximately 20 European centers of excellence. We can first validate European prevalence numbers with more certainty. Second, there are approximately 2,000 identified BBS patients across EU15 [indiscernible] today. 1,500 of them being in EU5. From an organizational standpoint, we anticipate standalone affiliates and general managers in the major European countries and the UK by the end of this year. A very sophisticated field medical team has been on the ground for the last two years, focusing on community building, enrollment for clinical trials, patient identification and medical education. Slide 31. For biallelic POMC, PCSK1 and LEPR commercial aspects on the country level, we will see a lot of progress in the second half of this year and begin to see reimbursement in 2022. In Germany, we've had very positive engagement with the authorities to date and hope to launch in 2022. In France, we secured last year fast track status, which speeds the launch by six to nine months. And we did file the reimbursement dossier 12 days ago, right after the EMA approval. In the UK, we have been selected for Highly Specialized Technology assessment, or HST, which is a specific status reserved for companies which are treating rare and severe disease that allows for economic justification of the higher price. The NICE committee meeting will happen in December. Pricing in reimbursement dossier are in process for submission in several additional countries. For example, we did submit in Italy two weeks ago, and we are working at the Spanish and Dutch ones. Outside of Europe, we very recently reached an agreement in Israel with Medison Pharma, which is a very well-known rare disease Israeli company with a robust platform and an outstanding track record of successfully advancing programs through the registration and reimbursement processes in order to commercialize IMCIVREE in Israel. We also have a new country leader in Argentina focused on patient identification and establishing access. And we are in parallel evaluating partnerships in several other countries. As you heard, we are making significant progress in several international markets for biallelic POMC, PCSK1 and LEPR, with first sales to come next year. And this bodes very well for the upcoming BBS launch, as well as our community building efforts to drive genetic testing and enrollment in our Phase II and Phase III pathway trials. I will now turn over to Hunter.

Thank you, Yann. And now I'll do a brief review of the second quarter financials. IMCIVREE net revenue was approximately $274,000 in the second quarter, and there was no revenue in the comparable period of 2020. R&D expenses totaled $25 million and SG&A totaled $15.5 million for a net loss of approximately $35.4 million. Shares outstanding were $50.2 million and our net loss per share was $0.70. Rhythm remains very well capitalized. As of June 30, 2021, cash, cash equivalents and short-term investments were approximately $368.2 million, including net proceeds of $98.4 million from the sale of our PRBs and proceeds of $162 million from Rhythm's underwritten public offering which closed in February. This is sufficient to fund our operating expenses and capital expenditure requirements into at least the second half of 2023. As you heard from David, Murray, Jennifer and Yann, we're advancing a robust corporate and clinical development strategy toward a meaningful increase in our identifiable patient population and building out our company to do so. We're well capitalized and well positioned to achieve these goals, thanks to the confidence and support we receive from many of you on the call today. With that, I'll turn it over to David to conclude.

Great. Thanks, Hunter. So, hopefully, what you've appreciated is that we're about halfway through a transformational year for Rhythm. The first half of the year was marked by our announcement of proof of concept data in the het patients, SRC1, SH2B1 deficiency obesity. And we updated you on the genetic sequencing and epidemiology data at that time. Jennifer gave you a little more insight into those efforts, which of course are continuing. We have, as you've heard, made IMCIVREE commercially available and we started our Phase II hypothalamic obesity trial. The second half has even more milestones. The EU decision has already come in. We will present full data analysis from the pivotal Phase III trial in BBS at ESPE in 2021. We will have our US and EU regulatory submissions for BBS and Alström. We're initiating the Phase III trial in peds, the Phase III EMANATE, the Phase II DAYBREAK and two Phase III trials for the weekly formulation, as you heard from Murray, and we will be presenting initial data from the Phase II ongoing basket study in the MC4, our rescuable patients and initial data from the Phase II trial in hypothalamic obesity in the first half of 2022. So, we'll finish on slide 36. And this is a look at our pipeline. And I'll just leave you with that thought. I think many rare disease companies are pursuing a strategy where they'll have a therapy which is specific for a certain disease, they may have multiple therapies for multiple different diseases. And I think many of those companies are well viewed, as they should be. We're a company that has one therapy, but we're pursuing a gene by gene opportunity here. And each one of these genes, where we can establish safety and efficacy, does open up a very meaningful potential opportunity. And so, a pipeline slide, as you see here, and this is, in fact, a truncated version of that. And certainly, if we were to put it out gene by gene, it would be quite long. What people often worry about with this single asset is, what if there's a problem with that asset, and I think, again, I'd encourage you to look at Rhythm in the context of the safety data that Murray highlighted. This is a product that's been in over 630 patients with a couple of individuals out as much as five years. And so, we have an asset that is very much de-risked from that standpoint. Of course, not every gene is going to work here. But again, hopefully, you've heard that we have a program that will allow us to efficiently begin to sort those and really get at the patients who are most likely to benefit from this therapy. So, again, three genes approved, two pending filing here, coming up, and a number of ongoing trials here that we'll be broadening reporting out over the upcoming years. It's a journey, and we are well on our way. So, with that, I'll open it up to questions and turn it back to the operator.

[Operator Instructions]. And our first question comes from the line of Phil Nadeau from Cowen and company.

Congratulations on all the progress. Just a few clarifying questions on the new trial designs that were announced this morning. First, on the EMANATE trial, are you enrolling variants, pathogenic, likely pathogenic or VUS for all six genotypes or are those specifically for POMC and LEPR with the other genotypes enrolling just pathogenic variants?

Starting in reverse order with the last one. So, the last one, by definition, is just one variant, so it's a deletion in N221. So that stands alone. Regarding SRC1, SH2B1, we will include people with pathogenic variants. But we don't need to stratify for them, for most those will be pathogenic variants. It's particularly important for the hets to stratify by the pathogenic and VUS. So, it's just two that we're particularly stratifying for.

The latter will mostly be pathogenic variants, so SRC1…

Yeah.

Second, on the DAYBREAK Phase II, if I heard you correctly, looks like under 18 years, you're using BMI as the endpoint. Why are you using BMI instead of BMI-Z? It seems like under 18, you clearly patients increasing their BMI simply because they're going through puberty or aging?

These we're moving to BMI as BMI allows you to look at both adults and children. So, BMI correlates very well – so BMI corrects for your height in kids. And obviously, an adults, your height isn't changing. So, that's why actually BMI is very solid to use for adults and children. So, in our studies going forward, we've learned from our previous analysis that BMI is probably going to be the major focus for us. When you're dealing with kids, you can look at BMI-Z. You don't have charts for adults, so you can't look at BMI-Z in adults. So, BMI is probably going to be the more robust. But for kids, you can look at BMI, BMI-Z or the 90 percentile, or 95% and the 95 percentile [ph]. So, a number of ways of doing it, but our focus is shifting for BMI because of this ability to look at adults and children.

You're correct in the sense that the BMI-Z may add a little more in terms of sensitivity, if you will, but we believe, and I think with good reason, that since the BMI does include the one major variable we're trying to adjust for of height that it will work.

Just a couple more. On the weekly de novo Phase III, it looks like primary endpoints are week 18. But there is a 14 week open label period after the primary endpoint. What's the purpose of that period? Is that something that the FDA requested or do you just want to keep patients on therapy?

No, we want to actually see what the long-term effect of the weekly is. So, I think at 18 weeks, knowing the daily data, we will show statistical significance and clinically meaningful, and we may be able to file actually on that 18 weeks. But, actually, to see the long-term data on the weekly will be beneficial to patients and to us.

Last question. In terms of the pediatric Phase III, do you need to have one patient at least of each of the POMC, PCSK1 and LEPR genotypes? Or would it be possible for the five patients that could have those genotypes, like if they were all POMC?

The agency has agreed to either one POMC, PCSK1 because that's a rare, LEPR and then one BBS. So, you really just need three. We've actually got them already lined up. So, I don't think the regulatory requirement for getting that data – I think we'll reach that easily.

So you need one of each and then the others can be of any change. Okay, perfect. Congrats again on the progress.

Our next question comes from the line of David Lebowitz from Morgan Stanley.

This is Avatar Jones on for David this morning. We have two questions. First, on the CRIBBS registry collaboration, do you anticipate this partnership will have an impact on, one, patient identification or a launch trajectory in Bardet-Biedl syndrome? And our second question is on market access. Can you possibly provide any quantitative metrics to date?

The CRIBBS registry has approximately 625 BBS patients within their registry, with a goal of having approximately 675 patients by the end of the year, and the vast majority of these patients are from the US. So, a credible source of information just in terms of launch preparation. In parallel with that, as I outlined, we are working with our already existing MSL team and are currently recruiting BBS territory manager team. And because BBS is syndromic, we have the opportunity to be even more targeted in terms of our disease education efforts and also patient identification efforts. In parallel with this, through our just broad RGDO disease education efforts, we are also uncovering biallelic patients that have BBS genes. So, there's already existing patients in the hundreds in the US that have been identified to support a robust launch. And we will be, of course, moving forward just in terms of supplementing that with additional patient finds through our field efforts. From a market access standpoint, as I mentioned, the feedback from the payers have been positive. Our real focus has been on really trying to differentiate our target patient populations from broad obesity based off with a genetic backgrounds. The fact that from early onset, they have this hyperphagia and obesity caused by this mutation in the pathway. And so, once again, we have been successful with over – some of the payer decisions made to date, with the vast majority of these being positive. When we do encounter challenges, we have a support team in place to really work to overcome those challenges and get access for the patients.

Our next question comes from the line of Tazeen Ahmad from Bank of America.

Congrats on the progress for me as well. I have a few focused on commercial. As of right now, can you give us an idea of what the distribution is? Just based on what percent are commercial payers versus what percent are government payers? And then, as you look forward to enrolling the EMANATE trial, you've given us an idea of basically when you expect to file. And so, how have your patient finding efforts resulted in you getting confidence at the rate of enrollments of the study?

Yeah, I think, on the commercial side, Jennifer, just you want to – if we provide, we can't provide full – probably a lot more detail here, Tazeen. But the majority of the payers that we've talked to and have enrolled so far have been commercial payers, by far. And we have been in the Medicaid population, the majority of the Medicaid that we have been working with, we have enrolled to date, again, have been positive, not 100%. But I don't know if that helps.

Tazeen, I would just say, we have as a working assumption for this population that about a third of the patients will be Medicaid. On a long term basis. It's going to jump up and down as we add individual patients. But on a long term basis, we're working with a third as the baseline.

Would that also hold when you expand out to this – potentially 100,000 to 200,000 patients in your bigger indications?

I don't know that we have enough info yet on that demographic to say so. All I would say is that, for the most part, our patients are skewing younger and Medicaid coverage among the young is higher than among the total covered lives in the US.

Your second question on the EMANATE trial and enrollment, I think it's – unfortunately or whatever – early as well. As Jennifer highlighted, there's – in the screening efforts to date in the US, 650 patients would qualify for either the EMANATE trial or the DAYBREAK trial. Our original screen said that we've expanded our URO panel to include 80 genes at the current time. And that does include all 31 genes in the DAYBREAK and the five in the Phase III EMANATE trial. Our previous screen had always included the Phase III EMANATE trial genes. So, a larger percentage of that 650 falls in that bucket. It had only included seven genes in our new 31 genes. So, the expansion, that's been somewhat recent in terms of expanding to 80. There's a good set of genes that we're just starting to look for. But most importantly, to your question, the EMANATE trial has been part of our prior screening efforts. So, we're off to a good start. And then, of course, as Yann said, in Europe, those centers tend to be again better organized with more definitive genetic testing done, than we see in the US.

And our next question comes from the line of Joseph Stringer from Needham & Company.

Two from us. One is just following up on that last comment on – you had a slide, I think slide 30, on some metrics for BBS patients and you're making a comment that some of the European markets may be a little bit more organized than, say, relative to the US. Just curious, you gave a number 2,000 BBS patients ID-ed across EU15 and 1,500 in EU4 plus UK. How does that compare relative to saying what a US – what some US metrics may look like in in terms of genetic identification? And then secondly, on the BBS [indiscernible] SNDA, just curious to get your thoughts on discussions with regulators around inclusion of the [indiscernible] in the SNDA. I know there are some debates, potential debate about whether or not to include that based on some of the Phase III data, but some more color on that would be helpful.

I'll have Jennifer comment just on the US numbers for BBS relative to the European and then Murray can comment on the BBS filing.

The CRIBBS registry has outlined that there are approximately 625 patients in the registry with a goal of increasing that over the years. The vast majority of these patients are from the US. What's interesting is that – and it makes sense – in terms of the patients that are followed, a lot of these patients skew to be younger because they have motivated parents who are also interested in terms of learning more about the disease and participating in terms of the registry with the questions and such. There are opportunities, of course, to – as we move forward with a specific therapy for treatment of these patients to do more disease education, targeted disease education to identify additional patients that may have already been diagnosed and lost in the system, but also to diagnose patients who have been seeking for years for that accurate diagnosis.

With regards to Alström, the agencies were actually welcoming for us to have a frank discussion. They were aware that Alström patient sample were small in the 023, the pivotal study. There were just six Alströms, three of which are evaluable. And part of the dialogue, we went in and said, we wanted to put in the totality of the data, which included Phase II in supplemental. And when we do that, we've got 12 Alström patients. Many of the Alström patients are young and showing some benefit. This may be lost if you just look at weight. So, we put in case narratives of the Alström and both agencies were willing to review the Alström data as part of a separate indication.

[Operator Instructions]. And our next question comes from the line of Graig Suvannavejh from Goldman Sachs.

Certainly got a busy second half before you. If I could ask maybe three questions. First, given all the new trials that you've got, that are about to start, is there a way that perhaps you can easily just summarize when you expect approximate timelines around the readouts for these multiple trials just to help frame it for us and put it in context? The second question I have, and maybe this question is better asked for Hunter, in terms of the spend and OpEx that we should anticipate in the second half, if you can provide some color on what that was like relative to the first half? And then, exiting the fourth quarter, how we should think about 2022? And then, I'll follow up with a third question after you hopefully answer the first two.

I'll start here and then Murray can amplify here. So, from a timeline standpoint, if you take the EMANATE, the Phase III trial, five independent studies. They will enroll by definition at different rates. We've indicated in this presentation that we expect overall a 12 to 18 month enrollment period. The N221D sub study is the most prevalent of the genes. And we would fully expect that to enroll the fastest and be on the early side of that. The pathogenic, likely pathogenic portion of the hets is by far the least common. And we would expect those to be the slowest. And so, for the POMC het and the LEPR hets, and they would be at the upper end of that. And again, there's a huge question more to be learned about sort of how the rates of these are going to play forward. The SH2B1, SRC1 are somewhat in the middle. Let me just give you some numbers because that'll be the most helpful here. In terms of prevalence, the pathogenic, likely pathogenic part of the het have a frequency in this severe early onset obesity population of about 0.2. The SH2B1, SRC1 are 2% plus – 2%, 2.5%. And the N221D is around 5%. So, you can see in a relative magnitude, if it was just a function of screening and frequency of finding based on screening, you can see how that might roll forward. The pediatric trial, as Murray said, 10 patients is the goal, 3 patients is the minimum, those 3 in a sense already identified. So that, again, we expect to play forward over the next year. And similarly, with the weekly, the first switch part of that study, that includes patients, by definition, who are already on therapy, so they're all identified in within the network. That trial will initiate first and should be quite efficient. So, again, should play forward in 2022. And what am I missing here, Murray?

The Phase II DAYBREAK – so the EMANATE will take a while because if you get 18 months recruitment and then 12 months for the actual study, and that's all blinded, you're not going to hear much from EMANATE for a while. But the good news about the DAYBREAK study is because we're looking at people coming in and we can look at each gene in the first section, it's open label, we'll get an idea how that's going. So, we'll hopefully be able to report out next year on some of the Phase II DAYBREAK genes, and then accelerate them. So, I know you asked for a simple answer to when the timelines are. Unfortunately, it's complicated because we'll get quicker readouts in Phase II, longer readouts in the Phase III. And the pediatrics, if we do that quickly, we can get data on that again the end of next year.

Greg, to your question about cash usage as we go forward, obviously, much of this is enrollment and startup dependent and those types of things we have baseline assumptions for. We had an operating use of cash of about $31 million in the quarter, and we paid our $5 million to Ipsen for first commercial sale that we had accrued in the first quarter. And we do expect things to rise from there in Q3 and Q4, but I'm not going to provide too much more guidance beyond the overall cash-out timing of the second half of 2023.

My other question just has to do with the CRIBBS registry and the 600 patients you have there. Could you maybe provide an idea as to what proportion of those patients do you think would be eligible for treatment and if it's some portion, all of them, however you want to describe that? And then beyond that, how quickly, assuming an approval in that indication, do you think they could get on therapy?

We're not going to provide guidance for the launch yet. But I'll let Jennifer take the first part of your question.

In BBS, through different publications and such, approximately 80% of the patients have obesity. Through the work of the CRIBBS registry that captures an incredible amount of demographic data and the patients as well, we'll gain a better understanding in terms of the split out of patients by age and BMI and such that will also help guide the question that you are asking and understanding in terms of uptake within each of these patient populations. I also want to outline that, in contrary to our PPL biallelic study, the BBS study actually did have a large portion of the patients coming from the US. That is a nice initial bolus in terms of patients that can be converted over to commercial patients as a starting point.

And to that point, our goal is some of those patients will be used in the switch study. And again, we're highly focused on getting that switch study initiated and completed in time to coincide with the approval in the US.

And there are no further questions at this time. I'd like to hand the conference back to your speaker, Mr. David Meeker. Please continue.

Okay, great. Well, thanks again all of you for joining in for our first earnings call and that we appreciate your questions and your interest as we go forward. And we look forward to updating you again through a very meaningful second half of the year. Talk soon.

Thank you This concludes today's conference call. Thank you for participating. You may now disconnect.