Welcome to the Rhythm Pharmaceuticals First Quarter 2022 Earnings Conference Call. My name is Hilda and I'll be your operator today's call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session [Operator Instructions]. I would now turn the call over to, David Connolly, Investor Relations and Corporate Communications. You may begin.

Thank you, and good morning everybody. I'm Dave Connolly, Head of IR and Corporate Communications here at Rhythm Pharmaceuticals. For those of you participating via the conference call, the accompanying slides can be accessed and controlled by going to the Events section of the Investors page on our Web site at ir.rhythmtx.com. This morning, we issued a press release that provides our first quarter 2022 financial results and business update, which is available on our Web site. As listed on Slide 2, today here with me in Boston for the conference call are; David Meeker, Chair, President and Chief Executive Officer of Rhythm; Jennifer Chien, Executive Vice President, Head of North America; Linda Shapiro, our Chief Medical Officer; Hunter Smith, our Chief Financial Officer; Yann Mazabraud, Executive Vice President, Head of International is on the phone joining us from France. With Slide 3, I'll remind you this call contains 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 important factors, including those discussed in our most recent annual or quarterly 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, who will being on Slide 5.

Thank you, Dave, and good morning, everyone. Thank you for tuning in this morning, and we look forward to updating you on the progress we’ve made in quarter one. But before I do that, I'd like to start on Slide 5 with a bit of an unusual start here. This is cartoon of our biology, many of you know this slide well. And as we all know, it's been a particularly difficult moment in the markets generally and it's been particularly difficult for small and midcap biotechnology companies. And I think at moments like these it's worth looking at fundamentals, are always important, but particularly so with these kind of moments. So I want to spend a couple minutes just reviewing Rhythm's fundamentals. So number one, there is a clear unmet medical need that we are pursuing here. Patients who have a genetic variant that impairs the MC4 pathways suffer from hyperphagia and decreased energy expenditure and consequently onset obesity and all the comorbidities associated with that. Two, the biology is incredibly strong as highlighted on this slide. It's been well studied. The pathway that we are pursuing, the MC4 are pathway, the endogenous ligand, the alpha MSH, which interacts with the MC4 receptor. When it engages, it decreases the appetite, increases energy expenditure and get a reduction in weight. And we have shown in again multiple trials that that's associated with other benefits as well. Third, we have a precision medicine, a solution to this problem. The setmelanotide is an analog for alpha MSH and when it engages the receptor, you get all those benefits. And we are essentially a replacement therapy, it's very simple, conceptually and biologically. And we are working in a world where other approaches to try to manage this problem have not been reliably successful.…

Thank you, David. So beginning on Slide 11 here. We last shared details of our BBS commercial readiness efforts in February. And with PDUFA and launch coming June 16th, we aim today to provide some more details on the tremendous progress our teams have been making. As we outlined before, the estimated prevalence of BBS in the US is 1,500 to 2,500 patients. And we know approximately 70% to 90% of these patients have obesity. We consider these patients in four distinct categories. The first are those that remain undiagnosed. Similar to other rare genetic diseases, the vast majority of patients remain under the care of HCPs who have not yet suspected or clinically diagnosed the patient. This remains a large opportunity. The second category are those patients under the care of HCPs who have suspected BBS, but may not have yet definitively diagnosed them. Physicians may continue with additional evaluation before verifying a clinical diagnosis. In disease states where there is no approved therapy, there may be less urgency to come to a specific diagnosis. Having an approved therapy often aids away or awareness of the disease and some urgency towards making a diagnosis. In the last two segments of patients who have been diagnosed, the territory managers have validated more than 150 physicians who are managing over 350 BBS patients under their care, and we continue to find additional BBS patients through our efforts. Next slide. As we prepare for the upcoming potential approval of IMCIVREE, the priority focus of the territory managers remain on engaging with physicians with already identified BBS patients under their care. For this group, we have a baseline -- they all have a baseline understanding of BBS. But we are continuing to educate on the underlying impairment to MC4 pathway function and the…

Thank you, Jennifer. We're now on Slide 16 to discuss a brief update on our regulatory progress. Our PDUFA goal date for Bardet-Biedl and Alström syndrome is about six weeks away on June 16th, and labeled discussions are anticipated to begin in the coming weeks leading to the final step. In Europe, we anticipate the CHMP will make its recommendation on our Type 2 amendment for BBS this summer with the full decision to come from the European Commission in the fall. And we do have a recent update to report that last week CHMP provided a positive opinion or a modification to the SmPC, the EU label, with recommendations to expand the use of IMCIVREE in patients with moderate and severe renal impairment and biallelic POMC PCSK1 or leptin receptor deficiency. The final EC decision on this amendment is anticipated July and the same amendment modification requests is being considered as part of the scheduled review for BBS. Now on to Slide 17. I'll focus brief remarks on our several ongoing trials evaluating setmelanotide in rare genetic and now also acquired diseases of obesity. Before providing updates on EMANATE, DAYBREAK and our Phase 2 trial in acquired hypothalamic obesity, let me mention briefly our Phase 2 weekly formulation switch trial and our Phase 3 pediatric trial for young children between the ages of two and less than six years. These trials are both important elements of our strategy as we know very well that in BBS and genetic obesities, the hyperphagia and severe obesity begin very early in life and have a devastating effect on these patients and their families. We can bring setmelanotide to these patients earlier in their lives and in a more convenient and user friendly weekly dosing regimen, we believe it will make quite a…

Thank you, Dr. Shapiro. Turning to Slide 25, as David mentioned at the start of the call, we are pleased to report product revenue of $1.5 million from the first quarter of 2022 as compared to approximately $35,000 in the first quarter of 2021. While sales during the quarter included our first sales from outside the US, sales volumes did not significantly affect the quarter's results given how late they occurred during the quarter and the limited number of initial prescriptions involved. Net sales in Q1 '22 was down sequentially versus Q4 2021. This decrease was largely due to a decrease in orders from our specialty pharmacy versus prior quarter, vials shipped from the Ipsen to patients were largely unchanged. Cost of goods sold was $230,000 in Q1. The largest portion of this figure was amortization of sales milestones paid to Ipsen. Rhythm previously paid Ipsen a milestone of $5 million for the first US sale, and during Q1 paid a $4 million milestone covering the first sale in Europe. These milestones will be amortized quarterly. COGS also include the 5% royalty payment payable to Ipsen. Loss from operations was $52.7 million in the quarter, an increase of $18.3 million over the first quarter of 2021. R&D expense increased by $12.6 million to $32.5 million. The increase was primarily due to higher clinical trial expense, involving the startup of our EMANATE, DAYBREAK weekly formulation switch studies. In addition, Rhythm purchased $3.8 million of clinical supply material during the quarter. SG&A expense was $21.4 million in Q1, an increase of $6.9 million versus the first quarter of 2021. The increase was largely the result of increased headcount costs in our US and international commercial organizations, as well as increased marketing spend. Consistent with the results in Q1, we expect our full year 2022 operating expenses to increase over 2021 due to increased clinical development activities. As is typical of large clinical trials, there are significant upfront costs during study startup. In addition, we anticipate higher commercialization activities related to the potential launch of IMCIVREE and BBS in the U.S. as well as ongoing efforts across Europe. Our share count was 50.3 million basic and diluted shares and loss per common share was $1.05. We concluded the quarter in a strong financial position with cash and cash equivalents and short-term investments of $241 million, which we believe will be sufficient to fund Rhythm’s operations in the fourth quarter of 2023. And now I'll turn the call back over to David for concluding remarks. Thank you.

Thank you, Hunter. So I think as you've all heard, we have a lot underway. In the box on the left, I think you know what's most noteworthy is we had a very daunting at one level task of getting all these clinical trials up and running, and they're all basically up and running. And so what we look forward to going forward, lots ahead. PDUFA date, EMEA approval, as you've heard, lots of data that we're reporting out, some of that in the first half, launching in Europe, started in France, Germany and UK, Italy, all to come and also be getting that last de novo study as part of our weekly overall development plan in the second half. So again, very much looking forward to those events and a very important year for Rhythm. And we now welcome your questions. So with that operator, we can go to Q&A.

[Operator Instructions] And we have a question from Phil Nadeau from Cowen and Company.

This is Layla on for Phil. Thank you so much for taking the question and congrats on the progress. Maybe really quickly on the Phase 2 data expected in hypothalamic obesity. Can you maybe just give a brief overview of what you might consider for the concept there, and in terms of the proportion of patients that achieving a reduction in BMI? What would you need to see the progress development?

So the endpoints are focused on changes in body weight, BMI and other BMI related measures in the pediatric population, as well as hunger and hyperphagia scores. I don't think at this time we can comment on what we were need to progress. But middle of the year how we will be announcing the data and plans if appropriate thereafter.

And the only thing I would add to that is the FDA has very clearly outlined that 5% threshold for weight loss, BMI change is clinically significant from a regulatory standpoint. Needless to say, we would need to see at least that. I also think -- we're looking to make a meaningful difference here. And so as Linda said, when we evaluate that data, we’ll not be looking to just barely clear the hurdle, so to speak. So again, I'd be looking for something north of that 5% kind of improvement.

Our next question comes from Derek Archila from Wells Fargo.

Just a couple of questions from us. I just want first on the BBS launch, I would love to just kind of get a sense of how you think the trajectory could go and if there's any good analogs you could point to. Is this something where we expect more of a slow trickle or is there a bolus of patients, given the outreach you've done? Second, I would ask just in terms of the Germany sales, I guess now that you're ramping or you're starting to sell there, how many patients have you actually identified in that country?

I’ll go to Jennifer first on the US launch and then Yann, I’ll turn to you for some comments on Germany.

I think in any rare disease, especially when there's no therapy available, it's difficult to really accurately project the trajectory of any response. With that said, I think that the BBS launch will be completely different in terms of expectations versus what we saw with the PPL approval. We feel first, very, very good in terms of the strong number of patients that have already been identified today. I think, once again, in an area where there's no therapy available, the starting point and where we are, is quite strong. With the territory managers in the field, we have also the corporate accounts team in place. As I outlined, Rhythm in tune actively setting expectations. And we have a team in place that is really quite anxious and ready to go in terms of the launch and helping to get patients on drug and stay on IMCIVREE. So we are very confident in terms of having a successful launch here. And there is a lot of excitement that we hear also from the community from patients, caregivers, as well as physicians.

And any analogs that you think of, maybe I'll just stop. I mean, this is a challenge in the rare disease space. Obviously, there's some similarities in the sense that rare disease drugs on price that -- price point they tend to be priced at often working with physicians who have never written a prescription for a rare disease drug and never gone through the approval process, which is a bit more cumbersome than writing a prescription for your local CVS, obviously. So all that is part of it. But that said, there's not really a good analog for this, but I'll reinforce what Jennifer said. The starting point, with the number of patients we've identified, the level of organization of that community at this point is incredibly positive. So I think in a relative sense, we feel good, very good about where we'll start. And that first six months, as you know, Derek, we've tried to guide people away from this idea that there's a specific expectation, whatever it is, I don't know if we're going to come out of a gate fast, whatever that means, or a bit more slowly. But over time, meaning the six to 12, 12 to 18 month period, that's a period where I would really look at to get a better sense for what this opportunity is going to look like.

So I will start maybe with Europe. So in Europe, you focus UK, we have more than 100 patients already identified biallelic patients and Germany represents roughly more than one sale of this number.

I was going to saying that -- reinforcing again that Europe is well organized.

And maybe just one follow-up if I can squeeze it in. Just in terms of the US and the moving parts around kind of payer and reimbursement for BBS. I mean, I know, I think you have had some discussions, but any update there in terms of just making sure the indication will get paid for.

So I think that this is like one of the areas where we have certainly learned from the initial PPL experience. I would start off and say that from a commercial payer perspective, we have had very strong reimbursement across the board just in terms of coverage of IMCIVREE. There is a couple of different plans that have not made decisions and are opportunities for our corporate accounts team to just go ahead and educate and follow-up, as they move forward in terms of their dialogs with various different payers. From a Medicare perspective, because of the CMS statute on weight loss medications, we expect that we are not going to be successful in terms of coverage there at this point of time. I will outline that, one piece to remember though is, similar in terms of our biallelic PPL patient population and what we saw. The BBS patients that we have identified also because of our focus in terms of where we do disease education, they are primarily younger and more likely to have commercial and/or Medicaid coverage. On the Medicaid side, what we are seeing is, it is mixed. We certainly see states that are covering IMCIVREE. Those that have also not yet made a decision and those that have weight loss exclusions, and decided not to cover IMCIVREE. And once again, I think that with a team on ground, the latter two buckets really are opportunities for our teams to go and educate and differentiate our target populations from the broad obesity population. I think in terms of expectations, we are not expecting to get a 100% coverage across the board. But I do feel positive just in terms of our ability to change the current landscape. We are already seeing positive reception to our value story. And in fact, even in certain states that have outlined from a Medicaid perspective, they are excluding IMCIVREE, we’ve been able to get patients through the process on drug. So it's an evolving process where there is a lot of opportunities to still continue to dialog and educate.

The next question comes from Dae Gon Ha from Stifel.

I'll piggyback off of some of Derek's questions on BBS. Are you able to comment on whether you have already started engaging the FDA on the labeling discussions for BBS? And secondly, when we think about the launch trajectory, I guess, the slide with regards to 350 patients or more being identified, I think the commentary today was more than 150 physicians that take care of those identified patients. So how much of an overlap is there between those physicians that take care of BBS versus the biallelic PPL? Just wondering about the COVID impact, we've heard certain KOL that institutions still restricting in person sales rep meetings. And I've got a follow-up.

I'll give that one to Jennifer. On the engagement with the FDA, as we've said previously, we expect that engagement at some point roughly a month or so ahead of time, and that's all, we've had further update there.

To your question just in terms of [ACP] overlap, for the PPL patient population in terms of this scripts, the volume as outlined from an expectation perspective was low. However, the majority of the physicians coming in were already in our Rhythm CRM, were similar patients or physicians that we were also already engaging with. Hence, there is some overlap with the BBS physician pool. But there's also physicians that have not yet prescribed from a PPL perspective and we are actively engaging with as we move forward.

So the other question is just shifting gears a little bit to DAYBREAK. Following the amendment, you spoke about how within the 10 sub studies or the genotypes that you're looking at, two are actually going to have some broader implications as it is part of 13 gene pathway network. So can you maybe talk a little bit about those two genes? What led you to identify those two versus the other 11? And how much of a derisking can we anticipate based on those two genes with respect to sort of what their protein products do in that MC4R pathway?

So we came to identify the genes by working with the key opinion leaders who are experts in this field, as well as looking into our own preclinical data to identify those that are derisked and most likely do have the greatest potential impact of impairing the pathway and therefore being responsive to setmelanotide. So those two genes that are part of the SISTEMA 3 family of genes were looking both at the flex in A4 as well as the SISTEMA 3G, the two different angles into that family. So we really do feel this will give us the greatest opportunity to be able to identify the impact that that all those associated genes have, as well as the impact that the other genes have based on the science that does support that they do have a strong relevance to the MC4R pathway.

I guess I was just kind of curious how much of a derisking can we really anticipate given that, if it's part of like a complex, for example, that functions as a single unit versus multiple different proteins being engaged at different portions of the pathway. I guess that's kind of what I was trying to get at. But we can certainly catch up offline or talk later after the data is out.

Maybe we can leave it with the -- as Linda said, those two were picked based on looking at the group and figuring that those two are the highest probability responding. If neither one of those show any effect, then we're done with the pathway. If we see a significant effect then of course, we'll dive more deeply into the pathway. So the derisking will occur through that. I think your question is how tightly those two are linked to all the others, and I think there's not a short answer to that question.

The next question comes from Joseph Stringer from Needham & Company.

Two from us. First one is on the CVS Alström. Did FDA request any additional data -- did FDA request any additional data analysis since you initially announced an update in February of this year? And then second question is on EMANATE. Do you anticipate the SRC1 and SH2B1 subsetting to be more faster just given the higher prevalence relative to the head substudies?

I'll start with the EMANATE, because that is the easier answer. So yes, we do anticipate just via the higher prevalence that there will be a faster enrollment of SRC1 and SH2B1 in terms of others. As far as the FDA and no additional requests for data other than that that we spoke about previously. Other than we did submit our periodic benefit risk evaluation report, that's part of our regular requirements. And they just had some follow-ups after we have [Technical Difficulty]. But otherwise, we're on track and no additional requests have been received to date.

Our next question comes from Michael Higgins from Ladenburg Thalmann.

First, just want to follow-up on the comments you've made and also in press release the modification to the summary product characteristics in Europe following making adjustments to the moderate and severe renal impairment on a adjustment for dose escalation, lower max dose, what led to that, is that post marketing, is that something that's on the data and how is that affecting the FDA review?

So we conducted a trial in patients with renal impairment, mild, moderate and severe renal impairment and we assessed the pharmacokinetics, and based on the data from that trial that is what came out of it. We have submitted this data both to the FDA and to the EMA, slightly different pathways by which those regulatory approvals go through. But they are both kind of tied to our CVS submission. And in essence the data shows that there was no need for any dose adjustments in the mild and moderate renal impairment. But if there's a severe renal impairment, the data suggests starting at a lower dose and dose escalating slower. The max target dose can still be the same but it will be dose escalated based on response, clinical response efficacy and safety.

So just a follow-up to that, would you look for the same type of language from the FDA?

Yes. We anticipate they would be quite similar.

And then just a follow up on BBS market. You have discussed the 350 patients that have been identified. There are 750 that the BBS group has. What are your steps that you are taking to close that gap? Obviously, there is some patient confidentiality, but you are working so closely with that group also. Wondering how that is coming together. And the last part of that would be, you mentioned identifying patients through ICD-10 codes. I don't think it's for BBS. So if you could expand on what that is you are finding in those codes.

So I think that just in terms of efforts overall and engagement, the relationship we have with the Marshfield Clinic is extremely strong. And of course, they are the ones who own the registries. And as you outlined, there are some restrictions just in terms of our ability to access and such. But I think based off of their interest also in terms of treatment of the patient population and also interest in the drug that maybe one opportunity also in terms of the play through of how things are communicated with patients that they are also in touch with. I think moving on to the question in terms of the ICD-10 code, there is a benefit. Like I said, this is a very different laucnh from the initial indication because BBS is a syndromic indication. And based off of the various different symptoms where it's eye involvement, obesity, things around renal impairments, et cetera. There is ability to sort of triangulate systems to try to understand which physicians have patients that may be a BBS patients. Particularly if you start with one code, Q87 86, where BBS actually resides, there may be an ability to tease out out of the tens of thousands under that code, which physicians may have diagnosed a BBS patient versus the 10 other plus indications that fall within that category. So we are just trying to be smart in terms of targeted efforts of how we go about disease educating.

And Jennifer, maybe one clarification, the 350 plus patients that your teams have identified are not necessarily all in the registry.

At this point in time, we don't really know the overlap in terms of the 350 plus patients versus the ones that are in the Marshfield registry right now. There maybe -- I would assume that there's not a 100% overlap, as you know, our teams have been on ground educating and targeting various different physicians throughout the nation.

[Operator Instructions]. Our next question comes from Jeff hung from Morgan Stanley.

Ahead of the potential BBS launch, do you have a sense for what percentage of the 350 patients were interested in being treated? Like what kind of pre-screening have you done through the physicians? And then as we look towards the potential approval, how often should we expect updates for the number of identified and treated patients, or what kind of metrics might you provide regular updates on?

In terms of the patients, like I said, it's very difficult to really come up with an estimate just in terms of the exact percentage that will be expected to go on therapy. Maybe if I could also caveat things in certain ways, when you think of the physician populations that we are targeting, a lot of our efforts have been in the past also around the pediatric endocrinologist, endocrinologist. And from that perspective, they are having issues that they're going to these specific physician populations to address and hence they may be a more motivated population in terms of wanting to really seek out a treatment for their obesity and hyperphagia components. So that's a positive factor just in terms of need to treat, desire to find a new option. I think in terms of the second question was related…

In terms of updates. So maybe just one additional point, Jeff, on on terms of the percentage, as Jennifer said, it's impossible to estimate. But I think the point that she made is the critical one, which is these patients that we are confirming and that 350 plus are engaged in the system. They're engaged in the system, they're seeking help. And so they're going to get on therapy would be the prediction. It’s the question, how long, when will they seek it? I mean, there's a lot of factors will dictate how much time it takes, maybe to get them on therapy. But they've already signaled that they're out there looking for help, and so word will get around. In terms of metrics, again, I'll just say we're very early in terms of -- I mean the obvious things, there's patient numbers, there's prescriptions written, there's number of doctors who are writing prescriptions and the like. And what we'll do as we begin to get more experience here is try to look at things that we feel provide the most meaningful insight and we'll clear though. But at this point, we're not -- I can’t tell you exactly what metrics those would be…

Our next question comes from Corinne Jenkins from Goldman Sachs.

So maybe totally different tack here. But as you expand these EMANATE and the DAYBREAK basket studies, I'm curious if you're seeing any change in dynamics with respect to the receptivity or utilization of the URO test, just given there's a higher yield on being able to do something about the genetic screening test as they come back?

We very much in a sense control that and it's broadly available, people can just sign up for it and be shipped a kit. That said, we are very much -- we've shifted our strategy from the beginning of basically wide open, we are just trying to understand the epidemiology. We've now become much more focused our field teams around encouraging screening at those sites, neither the clinical trial sites themselves or clinics that are in some radius around a clinical trial sites. So that when a patient is diagnosed, they have a reasonable chance of being eligible, able to get into EMANATE and DAYBREAK. So it's not a good number -- the number we're screening has gone up somewhat from our no other numbers, but it's governed by a restricted, if you will, by that effort.

With that, I think we're at the end here and want to thank all of you for tuning in. And if there any questions that we did not get to, can you please submit those to Dave Connolly and we’ll work to respond to those individually. And with that, thank you for tuning in.

Thank you. Ladies and gentlemen, this concludes today's conference. Thank you for participating. You may now disconnect.