Rhythm Pharmaceuticals, Inc. (RYTM) Q3 2024 Earnings Report, Transcript and Summary

Good day, and thank you for standing by. Welcome to the Rhythm Pharmaceuticals Third Quarter 2024 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] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, David Connolly, Head of Investor Relations and Corporate Communications. Please go ahead.

Thank you, Shannon. I'm Dave Connolly here at Rhythm Pharmaceuticals. For those of you participating on the conference call, our slides can be accessed and controlled by going to the Investors section of our website, ir.rhythmtx.com. This afternoon, we issued our press release that provides our third quarter 2024 financial results and business update, and that press release is available on our website. We are coming to you today from San Antonio, the site of ObesityWeek, the annual meeting of The Obesity Society. Listed on Slide 2 is our agenda. On the call today are David Meeker, our Chairman, Chief Executive Officer and President; Jennifer Lee, Executive Vice President, Head of North America; Hunter Smith, Chief Financial Officer; and Yann Mazabraud, Executive Vice President, Head of International, is on the line joining us from Europe. And on Slide 3, I'll remind you that 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 reports on file with the SEC. In addition, any forward-looking statements represent our views as of only 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 Meeker, who will begin on Slide 5.

Thank you, Dave. So thank you all for joining today. We realized we are probably not the lead story today, November 5th, Election Day, but we are really pleased with both the quarter and the progress we have made in 2024. We recognized at the start of 2024, this would be a year of execution with a highly anticipated readouts coming in 2025. We have executed and in addition to the expected readouts we have one unexpected readout which was presented today at the TOS meeting, an early look at the real-world data and French hypothalamic obesity patients. I will say a little more about that shortly. As shown on Slide 5, we remain focused on our three main value drivers. First, the team continues to drive results through strong execution of our global commercial strategy. Second, we are positioned to expand this patient opportunity to include hypothalamic obesity and we have increased confidence in the potential for this indication based on the new real-world data, efficacy data from the early-access program in France. We remain on track to report topline data from our Phase III trial and acquired hypothalamic obesity in the first half of 2025. Third, we continue to make progress with our MC4R agonist pipeline with DAYBREAK data presented at the Obesity Society's ObesityWeek, demonstrating potential new expansion opportunities and genetic indications, and we continue to progress our next generation MC4R agonist, the weekly RM-718 and the oral daily small molecule bivamelagon. Steady growth continues within IMCIVREE revenues for the third quarter coming in at $33.3 million, driven primarily by BBS sales globally. We continue to identify patients, physicians continue to prescribe IMCIVREE and payers are supporting access. We have an experienced rare disease team executing in challenging environments. And I know, we are only two years post-approval in the U.S. and continuing to introduce new markets internationally. It is early in the commercial lifespan of this opportunity. Our clinical programs are progressing as we remain on track to report topline data from the Phase III HO trial in the first half of 2025. The dropout rate remains less than 10%. We are targeting full enrollment of the Japanese cohort of patients by year-end. Our small molecule program has 50% of the targeted number of patients dosed or in screening. For the RM-718 study, we are completing the rat and non-human primate toxicology studies and we will submit those along with an amendment to allow dosing patients with hypothalamic obesity for more than four weeks to the FDA. We are targeting dosing the first hypothalamic obesity patients with 718 in the first quarter of 2025. We are doing this call, as Dave said, from ObesityWeek, and I want to highlight two of our poster presentations. First are the full results from the DAYBREAK trial. This was an ambitious undertaking where we sought to enroll patients with genetic variants in any one of 30 genes, which literature suggested maybe linked to the MC4R pathway. On Slide 6, you can see the design of the two-part trial and the open-label part-one, we reported out last December, patients who lost 5% or more after 16 weeks were eligible to enter the double-blind, randomized withdrawal part-two, where patients were randomized two to one to either continued setmelanotide therapy or placebo for 24 weeks. On Slide 7, you can see the patient demographics. 49 responder patients entered part-two and 39 patients completed this part of the trial. We had equal numbers of adults and pediatric patients. On average, they live with severe obesity based on their BMI or BMI-Z measurements. Slide 8 shows the summary results with a mean decrease in BMI of 12.4% in the 32 patients on continuous setmelanotide therapy for a total of 40 weeks. And 84% of patients on setmelanotide maintained or further decreased their BMI beyond the initial 5% as opposed to only 29% of patients randomized to placebo during the 24-week stage two of the trial. Overall, we are quite pleased with the results. The trial design worked. The open-label trial period identified patients who seemed to be true responders in that those randomized to continue treatment continue to respond, whereas those randomized to placebo mostly regressed towards baseline. On Slide 9 you can see the individual spaghetti plots for the four of these genes or gene groups. The blue lines represent setmelanotide, whereas the green lines represent the placebo patients. Also note that scales on the graph for each gene are different and were adjusted to accommodate those patients with the greatest decrease in their BMI for that gene group. I won't go through each of the panels, but if you look at the PHIP gene in the upper left, you can see the adult patients on the left and the pediatric patients on the right. In general, those continuing on-setmelanotide had a good response, whereas the three patients randomized to placebo regained weight. The PHIP gene was the gene with the highest overall percentage of responders, particularly in those who completed part-one. The key learnings from this trial is that there are patients who seem to have a clear response to setmelanotide suggesting their variant is impairing signaling through the MC4R pathway. The challenge for future development will be identifying those patients with true loss-of-function variants, recognizing for many of these genes, relatively little work has been done on the different variants, leaving most variants classified today as VUS or variants of unknown significance. Our expectation is that we will do additional research on one or more of these genes, but that work will be done with one or both of our second generation programs. Now, I want to finish my introductory comments talking about HO. We know there is a significant unmet medical need with no approved therapies and we believe the prevalence is in the range of 5,000 to 10,000 patients in each of the U.S. and Europe, as we've described previously, and we believe there maybe similar numbers of patients in Japan. Importantly, unlike BBS, most of these patients are diagnosed and under the care of endocrinologists. We reported out Phase II data in mid-2022 and moved directly to the randomized placebo-controlled 60-week Phase III trial. Both France and Italy in recognition of this significant unmet medical need, the absence of approved therapies and the strength of the Phase II data and an unusual move have made setmelanotide available through paid early-access programs. Patients from France began enrolling late last year and Italian patients are just beginning to receive treatment under the program. Real-world data from the initial French patients which was presented today at TOS is shown on Slide 10. Eight adult patients with a mean age of 31 who had undergone brain surgery 12 years earlier at the mean age of 19 have been followed for three to six months on setmelanotide. As you can see from the slide, they were severely affected with a mean BMI of 44. On average, these eight adult patients had a mean BMI decrease of 5.6% and 12.8% at one in three months respectively after initiating treatment. Patients have continued to lose weight with five patients who have reached the six-month time point experiencing a 21.3% on average decrease in their BMI. We see this data as important for multiple reasons. It is the first new data we have presented since the original Phase II readout in 2022. We had relatively few adult patients in the Phase II trial and almost no adults in the long-term extension leaving us with an important unanswered question, would adults be less responsive than children who are being treated in closer proximity to the onset of their HO. This data set goes a long way in answering that question. These patients were adults with a mean age of 31 as I said, who are on average 12 years out from the time of their injury. The response to date has been consistent and that's one of the most remarkable things is the consistency of the response and robust, further strengthening our conviction in the importance of the MC4R pathway in this disorder and the potential role setmelanotide may play in the management of hypothalamic obesity. So finally on Slide 11 is a summary of our upcoming milestones. The PDUFA date for our U.S. IMCIVREE label expansion to include patients ages two to up to six years old is December 26th, and Jennifer will touch on that. Based on the progress of initial enrollment and sites opening, we expect to complete enrollment in the 12-patient Japanese cohort of our Phase III acquired hypothalamic obesity trial by the end of this year. We also expect to complete enrollment in two of the EMANATE substudies, POMC, PCSK1 and SH2B1 by the end of the year. We do not anticipate being able to achieve a full enrollment in the other two substudies LEPR and SRC1. In the first quarter of 2025, we anticipate we will complete enrollment in the 28-patient Phase II trial evaluating bivamelagon and also in the first quarter begin dosing patients with acquired hypothalamic obesity and Part C of our Phase I trial with a weekly MC4R agonist RM-718. And as we have said many times, our topline data readout from the pivotal 120 patient cohort in our global Phase III trial of setmelanotide with acquired hypothalamic obesity is on track for the first half of the year. With that, I'll turn the call over to Jennifer.

Thank you, David. I will start today on Slide 13. We are continuing to see growth in prescriptions, approvals for reimbursement as well as increased breadth and depth amongst prescribers. In the third quarter, we received approximately 100 new prescriptions and approximately 80 approvals for reimbursement resulting in a steady increase of commercially reimbursed patients. We are pleased with the sustained growth and the continued demand for a therapy that addresses the root cause of hyperphagia and severe obesity in BBS patients. This growth is driven by increases in both the number of first time prescribers as well as repeat prescribers with positive experience with patients on IMCIVREE, the number of physicians with two or more prescriptions continues to increase. At any point of time in the future, this quarter or prior quarters first-time prescribers may become a repeat prescriber as they are now more in tune to recognizing the symptoms of BBS and diagnosing additional BBS patients in their practice. As you would expect to see in rare diseases, these patients are – these physicians are becoming experts in their city and region, which helps to create a network of BBS disease experts throughout the nation to support the optimal care of BBS patients. The breakdown by specialty remains consistent with about half of prescribers falling into the endocrinologist bucket and about half in the primary care or pediatrician bucket with a small number of prescribers and other specialties including medical geneticists, nephrologists and ophthalmologists. We remain pleased with the consistency of payer approvals as initial approvals for reimbursement continue at a steady pace, as have reauthorizations which allow patients to maintain on therapy. Consistent with prior quarters, there remain a small number of denials for reauthorization and we continue to work with patients and providers through the appeals process to regain reimbursement. Next slide. The recognition of the differentiation of BBS patients from the population with general obesity as well as the differentiation of IMCIVREE as a targeted therapy for BBS patients is appreciated by both HCPs and payers. To further support this differentiation, we are looking forward to potentially expanding the label from IMCIVREE to include patients as young as two years of age in the U.S. in our current indication. Early-onset obesity that goes untreated can lead to multiple comorbidities and negatively affect quality of life and life expectancy. We believe that treating patients at an early age will positively impact the lives of these children and their families. Last quarter, Yann reported the European Commission expanded the marketing authorization for IMCIVREE to include children as young as two years of age. And the FDA has accepted with priority review our sNDA for the same expansion and assigned a PDUFA date of December 26, 2024. Our submission was based on our Phase III data in children that demonstrated a 3.04 mean reduction in BMI-Z score, a measure of body mass index deviation from what is considered normal and an 18.4% mean reduction in BMI in 12 patients at 12 months on setmelanotide therapy. Approval in the U.S. on top of EMA authorization would reinforce IMCIVREE's unique position in the market and recognize and differentiate rare MC4R pathway diseases and associated hyperphagia and severe early-onset obesity from general obesity. While the overall patient numbers may provide modest growth, we are excited about what this potential opportunity means for patients and their families. Early-onset obesity and hyperphagia-driven behaviors are more identifiable in children than in adults and their caregivers are often more engaged in actively seeking answers. This will be an important and meaningful milestone for the BBS community. Onto my final slide, we are preparing for a positive outcome in our Phase III trial in acquired hypothalamic obesity and are investing to prepare for the next potential launch. We are engaging in market research to gain insights from physicians, payers and patients and families and actively engaging with patient advocacy group. Also, we are planning to expand our different field and support teams in 2025 as we anticipate increasing physician engagement efforts to provide education on acquired hypothalamic obesity. The unmet need in hypothalamic obesity is significant and there are no approved therapies. We look forward to sharing more details with you next year as we prepare for topline data and get closer to a potential FDA submission and launch. I'll now turn it over to Yann to provide an update on the international region.

Thank you, Jennifer. I will start on Slide 17. The international region is an important contributor to recent success. In this quarter, we delivered a strong revenue growth. IMCIVREE is now available for [indiscernible] or BBS or both in more than 15 countries outside the United States with reimbursement through various government administered programs on inpatient sales. The initial month for the BBS launches in Spain and Italy have started well, but the main drivers of revenues for the ex-U.S. countries continue to be France and Germany. In Germany, our BBS launch is steady and mirrors the consistent growth pattern of the U.S., and we are benefiting from expanding the number of centers that are now treating BBS patients. As Jennifer mentioned, this summer, the EMA expanded the marketing authorization for IMCIVREE to the treatment of children as young as two years old in approved indications. And last month, in Germany, the Federal Joint Committee, or G-BA voted to exclude IMCIVREE for children two to six years old from the country's lifestyle exemption list, and thereby make it eligible for full reimbursement for both PPL and BBS. While this was expected, we are pleased that the committee entertained a very little debate on this topic which illustrates that Germany recognizes the need to treat patients with MC4R pathway disease because these rare disease are distinct from general obesity. Talking about Germany, I would like to share an IMCIVREE success story from a German patient, one of several. One 12 years old girl with BBS with pronounced hyperphagia, the BMI-Z score of plus 1.5 and the fear of needles began therapy more than six months ago. At first, she refused injection. But our resumed at home nursing team helped her overcome her fears and develop within a few weeks, a routine for injection. After one month, she started to inject herself and now we see a normalized hyperphagia, normalized to what is considered LC by her treating physician. She has lost 9.1 kilos and has now a normal body weight for her age. And importantly, her family reports that she has a new sense of independence she did not have before. Anecdotes like this from Germany and elsewhere in the international region underscores a difference we can make in many lives with IMCIVREE and also our patient support program. In France, the reimbursed early-access form for BBS has been ongoing for more than one year now, while we continue to negotiate reimbursement with the authorities. Once we complete negotiation, we will be able to promote IMCIVREE through physician engagement activities. We will be in a strong position to build on the success of the early-access program as we are expanding the number of clinical centers with positive IMCIVREE experience. Next slide. We also have in place paid early-access programs in both France and Italy for patients with hypothalamic obesity. In France, we began treating patients earlier this year, and we are already seeing positive data reports, as David shared. We are quite pleased that patients with hypothalamic obesity have access to setmelanotide are responding well to the therapy, and that treating physicians are reporting positive outcome. The uptake of setmelanotide through this program has been increasing with an approval decision process led by a joint federal multidisciplinary committee, which means mostly a process that is similar to how access is allowed for patients with BBS. In Italy, we are seeing the first patients with hypothalamic obesity begin therapy with setmelanotide under the Law 648 early-access program. The process is a little different than France as the physician directly asks the Ministry of Health to enable these patients to participate in the program. Also this program is limited to patients between six years old and 24 years old was hypothalamic obesity was caused by craniopharyngioma. Next slide. Our BBS launch is beginning this quarter in England and Wales following the positive recommendation from NICE. We expect to start the third BBS patients on reimbursed therapy during the fourth quarter. We anticipate the uptake for IMCIVREE in the UK to be more major than Germany as NICE recommendation limits reimbursement to patients who are younger than 18 years old, when they begin therapy. In the UK, there are four National Health Service BBS specialized clinics that provide care for patients with BBS, two centers that treat adults and two centers that treat children. Each center sees a handful of patients with BBS each month, and we know that the treating physicians will discuss IMCIVREE therapy as a new option with these patients and families. If they decide to proceed, they will be educated on IMCIVREE and train on the daily administration. Following on the positive experience from our launch in Germany, we have commissioned a very comprehensive patient support program with nurses visiting homes, assisting in the administration and addressing any questions or concerns. The BBS community of patients, families, physicians and other members of the clinical care team have been very supportive of one and another and supportive of Rhythm in our approval and launch efforts in England, we are very excited to bringing IMCIVREE. Next slide and my last slide. One of our strategic priorities is to continue engagement with and support for the growing network of physicians who are becoming experts in MC4R pathway diseases. With that, I want to offer details on two events where we are focused on supporting and building up this network. On October 30 and 31, we sponsor transform a scientific meeting designed to engage with and educate the experts of [indiscernible] physician in the early part of their career on rare MC4R pathway diseases. It was attended by 44 physicians from 14 countries. This event was endorsed by the European Association for Study of Obesity, the European Society for Pediatric Endocrinology and the European Society of Endocrinology and co-chaired by Professor Volkan Yumuk, the President of the European Association for the Study of Obesity himself. And next week, we will have a strong presence at the 62nd Annual Meeting of the European Society for Pediatric Endocrinology, which is from November 16 to 18 in Liverpool. We are expecting strong attendance at our satellite symposium entitled early treatment of hyperphagia and early onset severe obesity in children with rare MC4R pathway diseases with a focus on BBS and other rare MC4R pathway diseases. Professor Sadaf Farooqi of the University of Cambridge is the event chair, and she will be joined by Professor Philippe Bills of the University College of London among others. We also have three abstracts accepted for all presentation, all on our sequencing data and analysis from broad, our European genetic sequencing program as well as real-world data from the French early-access program for hypothalamic obesity. These new pediatric data are from pediatric patients with hypothalamic obesity following three to six months on setmelanotide therapy. And now I turn the call over to Hunter.

Thank you, Yann. Turning to Slide 22. Net revenue from global sales in IMCIVREE continued to grow steadily and came in at $33.3 million in Q3 as compared to $22.5 million during the third quarter of last year. On a sequential basis, Q3 revenue represents 14% growth over the second quarter of this year. U.S. revenue in the third quarter was $23.3 million, accounting for 70% of product revenue during the quarter and an increase of 8% in U.S. sales on a sequential basis over the second quarter. Driving this growth was an increase in the number of reimbursed patients on therapy and corresponding increase in volume of vials dispensed patients. Gross-to-net for U.S. sales in the third quarter decreased slightly quarter-over-quarter to 85% from 86% in the second quarter of the year. International revenue was $10 million which accounted for 30% of product revenue and represented an increase of 35% over Q2. More than half of U.S. sales continue to come from the commercial launch in Germany and the early-access programs for both BBS and HO in France. We are also seeing solid revenue contributions from named patient sales in several countries and the launches in Italy and Spain, which are still in their early phases, but progressing well. We are now generating revenue in more than 15 countries outside the United States. Some of these countries receive shipments on a more intermittent basis once or twice a quarter, and hence, we believe some of our Q3 revenue represented a pull forward of demand from Q4. Nonetheless, we are excited that we hit the $10 million mark on international quarterly revenue in Q3. Cost of sales during the quarter was $3.8 million or approximately 11.5% of net product revenue versus 10.1% of net product revenue in the second quarter of this year and 10.7% during the same quarter last year. The primary driver of COGS continues to be the 5% royalty to IMCIVREE under our licensing agreement with setmelanotide as well as higher labor and overhead costs capitalized to inventory based on high production in Q2, which was expensed to COGS in Q3 based on shipments. R&D expenses were $37.9 million for the third quarter compared to $33.6 million during the third quarter of last year. Sequentially, we experienced a 25% increase from R&D expenses of $30.2 million in the second quarter due to a $3 million benefit recorded for changes in scope to the DAYBREAK and M&A trials during Q2. Well, there were additional cost increases in both of those trials this quarter and increased manufacturing development work related to bivamelagon, formerly known as LB54640. SG&A expenses were $35.4 million for the third quarter compared to $30.5 million for the same quarter last year. Q3 SG&A expenses represent a $1 million decrease sequentially versus $36.4 million for the second quarter of 2024. The quarter-over-quarter decrease was largely driven by a reduction in payroll tax expense based on changes in French equity tax loss for non-qualified options this quarter. For the third quarter, weighted average common shares outstanding were $61.2 million. Now let's move to Slide 23. As of September 30, 2024, we reported $298.4 million in cash and cash equivalents. Cash used in operations was approximately $22.6 million in Q3. This was the first quarter as a public company in which Rhythm used less than $25 million in cash for operations, another significant milestone. The trailing 12 months quarterly average cash burn was approximately $28.7 million, so we continue to generate improvements in operating leverage as revenues grow. On a year-to-date basis, cash used for operations was $89.3 million, a reduction of 11% versus the comparable period of 2023. Third quarter operating expenses included total stock-based compensation of $11 million for the quarter compared to $10.4 million in the previous quarter. Reported GAAP EPS for the third quarter was a net loss per basic and diluted share of $0.73, which includes accrued dividends on convertible preferred stock of $1.3 million. As a reminder, this ongoing accrual will be $1.3 million per quarter or $0.02 per share at the current share count. No cash dividends are payable prior to the end of the second quarter of 2026. Turning to Slide 24. Today, with only one quarter remaining in the year, we have reduced our 2024 OpEx guidance to a range of $245 million to $255 million from the prior guidance range of $250 million to $270 million. This updated guidance is comprised of R&D, non-GAAP operating expenses of approximately $137 million and SG&A, non-GAAP operating expenses of approximately $113 million, both of which represent midpoint numbers of these components in our updated estimated guidance range. Lastly, we continue to expect cash on hand to be sufficient to fund planned operations well into 2026, potentially beyond multiple value-creating milestones, including the topline data readout from our Phase III trial in hypothalamic obesity currently planned for the first half of 2025. With that, I'll turn the call back over to David.

Thanks, Hunter. So in summary, I think you've heard a very good quarter and we are entering – finishing the year and entering 2025 with a lot of momentum. So we look forward to future updates. With that, we'll open the call for Q&A.

Thank you. [Operator Instructions] Our first question comes from the line of Phil Nadeau with TD Cowen. Your line is now open.

Good afternoon. Thanks for taking our question and congrats on a strong quarter. Hunter, first question for you. In the prepared remarks, you mentioned there was some pull forward of demand from Q4 into Q3. Would you be able to quantify what the impact was on Q3 from that pull forward? And any other lumpy items included in the revenue number?

It's a little imprecise and it depends, obviously, on the timing and the nature of these orders. But sometimes, if they come late in the quarter, we think it's more attributable to the future quarter. So that's – we estimate that could be around $0.5 million in Q3.

Okay. That is very helpful. Thank you. And then second question on the DAYBREAK trail. Congrats on the data. They continue to look strong. Can you talk about what you need to see to advance one of those populations to a pivotal study? And when do you think you might be in a position to make a go, no go decision on those populations? Thanks.

Yes. Thanks, Phil. So I think the general answer to that is, for each of these genes, the better we can understand the variance, as I said in my remarks, in terms of defining which of the variants are true loss of function because to the extent that we can do that post hoc, you do improve the results. In other words, and right now, many of those lose patients, I'm sure have benign variants in which case the – we wouldn't expect that to be driving their underlying disease. So that's the general comment is we've got to understand that better. A gene like PHIP, we have not a bad sense today. I think there's more work that can be done. That's a gene that has on the order, prevalence numbers, which again are soft, but sort of BBS like in the order of 4,000. That's a gene we might look to go earlier on, but I would – earlier would mean we would do it with a next-generation program. So one or both of those would need to have cleared Phase II NHL.

Got it. That is very helpful. Congrats again on the progress and thanks for taking our questions.

That moves that out. That's a 2026 kind of activity, not a 2025, if we were to do that.

Thank you. Our next question comes from the line of Derek Archila with Wells Fargo. Your line is now open.

Hey, guys. This is Adam on for Derek. Thanks for taking our questions today and congratulations on the quarter. Maybe just a couple on HO from us. Do you think the real-world data from France HO patients will be predictive of what we can see in the Phase III study in terms of BMI reduction. And then also of the five patients who experienced weight loss at six months, can you let us know which patients had previously been on GLP-1s? Thank you.

Yes. So do I think this will be predictive? I think what we would say, the reason this data, I think, is so incredibly helpful. The original Phase II is only 18 patients, one patient who didn't take the drug. So 17 patients who took the drug. Now we have another eight patients. And what's most reassuring is literally every patient who has taken the drug with this diagnosis has had a good response. So in terms of reading through to Phase III, consistency in any clinical trial is incredibly reassuring. The magnitude of the decrease now, I think, remarkably, we're seeing very good percent decreases in the BMI. But we've discouraged trying to stay out of the arms race around percent decrease for these patients that have nothing, simply not gaining way it would be victory for them. So again, we're seeing good percentage decrease. But the more important part of this is the consistency, and I think that predicts well for a positive outcome in the Phase III trial. And then for the five patients, they don't have the breakout, which of the patients were on the GLP-1 specifically, so I can't answer your question whether they were on it. But the doses they are on of the four patients, one of the patients stopped the GLP-1 before they started the trial. So only three of them of the eight were actually on a GLP-1 during. And they were on, as I understood, for the treatment of their diabetes more than a specific attempt to get an obesity weight reduction. But beyond the drug, if they were losing actively losing weight, they would not have been enrolled in this early access program.

Got it. And then maybe just one more from us. At our dinner at ObesityWeek, we had a KOLs noted that they believe that the HO population may be close to 5,000 to 10,000 or even above in the U.S. and they contribute to that somewhat to many patients who have brain tumors who receive radiation may also end up with HO over time. Is this a patient population you've been aware of? And if so, do you have any estimates on how many of these patients may exist? Thank you.

Yes. I think – so this whole area of HO injury and how do you get it as part of the evolution. We focused on those who have a benign tumors, which are a very well-defined group, and they have this very specific moment of injury, if you will, when they go to surgery. There are other ways you can injure the hypothalamus. We hear anecdotally from physicians that they see a similar picture in some of those patients, including radiation patients. So I think there's more to be learned there. We're very interested, obviously, in learning more about that. I have no estimate as to what number of patients there might be, and I think there's more to be learned about their response. But the anecdote you're describing, we've heard that.

Got it. Thank you.

Thank you.

Thank you. Our next question comes from the line of Corinne Johnson with Goldman Sachs. Your line is now open.

Hi. Good afternoon, guys. Maybe a couple of questions from us. First, how should we think about sort of the contribution from Europe as we look into 2025? And do you anticipate that it will become sort of a larger share of overall revenue as we get further into that launch. And then could you also provide us some updates on what you're seeing with respect to adherence and compliance in the BBS patient population? Thanks.

So I'll take the first question, Corinne. I think we've built a solid base in international, and we continue to – we continue to foresee growth there. But the degree to which it keeps pace with the U.S., which is starting from a larger base, I think, is going to be variable quarter-to-quarter.

Okay.

Okay. And the second question was on adherence. So are you talking about the discount rate? Is that what you're focusing on?

Yes, exactly.

Yes. So that's remained – as we said last time, we've ticked up closer to 30% in general, and that hasn't changed. Maybe Jennifer can provide a little more color on what we're doing to continue to work that problem because I think we have some good insight. I can do some things. Jennifer?

Hi, Corinne. To answer your question, I think like when we take a look at the discounts, there's different things that we have learned, many of these are coming early and with this insight, we have continued to really focus a lot of our efforts just in terms of educating and really setting clear expectations. Initially, it was more on the AE profile of the drug, but we also recognized that we needed to provide more expectation around the timing of efficacy impact in patients as well. So we learn as we go, just in terms of being able to maintain those patients on therapy. And I think one other piece that is also important is that there are a lot of different reasons that patients discount. There may be different reasons from a life perspective that may make them potentially interested in it coming back. The vast majority of these patients are consented. So our patient support teams are able to maintain engagement with them. And we have seen patients who have been interested in getting back on therapy as well.

Thank you.

Thank you.

Thank you. Our next question comes from the line of Seamus Fernandez with Guggenheim Securities. Your line is now open.

Thanks, so much. So just wanted to talk a little bit about – a little bit more about HO and the pipeline assets. Just to start with the data coming out of the eight patients in France, obviously, an impressive result in the adult population. I wanted to just get a little bit more color on the opportunity to continue expanding the early access opportunity in Europe with that data? Is that something that you're able to mobilize and then bring more patients onto therapy sooner with that result? And then the second question is really on the pipeline. Obviously, I know there's a strong view that in IMCIVREE or setmelanotide will continue to be very durable. But I think the opportunity to avoid the MC1 receptor, is certainly quite compelling from our conversations with physicians. So just wanted to get a better sense of how those trials are progressing and when you would hope to really share those data. I believe you said midyear in the past, but I didn't know if there are any updates from a recruitment perspective and execution? Thanks so much.

Yes. So Yann, do you want to provide a little color on how the HO process is working and your expectations? Is that going to ramp or stay steady? What would you say?

So thank you, yes. So for sure, in France, it will help, I think, local physician always like to have local data on top of global data. So it will help. For sure, it will also help the takeoff in Italy as well. French and Italian experts talk a lot and look at data, respectively. And on top of that, I can say that there are not so many countries with large early access programs like France and Italy, but there are other smaller countries where we have named patient sales, which will look at this data and likely decide to start some patients, which are currently already identified in need.

Great. And with regard to your second question, Seamus on the next-generation programs agree with you are incredibly important. So for the weekly, the 718, as we've said previously, there's no new update there in the sense that we need to submit the 6-month rodent and the 9-month nonhuman primate. Those studies are ramping up. We need to submit those reports to the FDA and also, at the same time, an amendment which will allow us to treat patients for more than four weeks, which is how the original protocol was written. And as we said, we had trouble, the physicians didn't think they could recruit if patients could only get the drug for four weeks because it’s the first four weeks are quite intense. So the bottom line is, obviously, we want to be able to provide longer-term treatment for those patients. So that's the 718 program. Our goal, we've moved it out a bit is based on the timing of that amendment submission is to dose the first patients in that program in 718. The bivamelagon, we had a very slow start. We got an early – back midyear, I think the first patient in, and then we had a tough summer and just getting sites open. I won't go through all the laundry list of reasons, but we have the sites open now and we're up and rolling. And so the update today is that we've got more than 50 – just about a little more than 50% of the patients either dosed or in screening. So there. It's always hard to give a firm date why you're still recruiting, but our expectation is that we will, for sure, complete enrollment of that trial in the first quarter, which means that a midyear readout is still possible for the small molecule program.

Great. Thanks so much for the update. And then maybe just as one final question. The opportunity for HO in Japan is something that you've talked about in the past – can you just give us a sense of how the HO opportunity is likely to emerge there? And is this something that you still feel confident that it is something that Rhythm can take on, on its own.

Yes. So like we said we're at ObesityWeek. I met with Dr. Tanaka, who is the lead investigator in Japan today. As I highlighted in my script, our expectation is that we'll complete enrollment of the 12 Japanese patients required by the end of this year. He was very positive. Again, about how this is going. The sites are working well together. So if you're asking about our optimism about Japan, I think it's not at all diminished, if anything, it's increased. Can we handle that? Again, I think rare diseases, if you have the right people, again, it's not so much a function of the size of the country necessarily. But if you have the right people, and I think we do as a starting point, you can go it alone. And so that's still our plan today.

Thanks, so much. Congrats on the quarter.

Thank you. Our next question comes from the line of Dae Gon Ha with Stifel. Your line is now open.

Hey, good afternoon, guys. Thanks for taking the questions and congrats on all the data this week. I guess I'll just focus more on the hypothalamic obesity side. Just a couple of questions there. for 718 Part C data, before you go in there, is there any intention from you guys to share the Phase I healthy volunteer just so we can get a sense for the PK as well as the hyperpigmentation side of the profile – as we think about the bivamelagon. I guess when you think about the trial itself, how much of an overlap is there between the trial participating in, I guess, sites participating in that bivamelagon SIGNAL trial versus the Phase III hypothalamic obesity, I recall it was overenrolled. And so I would imagine some of that could bleed into, if you will, and perhaps fast track the bivamelagon enrollment? And then I guess, lastly, just thinking about the broader opportunity, going back to Phil's question, DAYBREAK and M&A, just wanted to get your sense on sort of the commercial opportunity here. Are you kind of thinking about hypothalamic obesity and maybe going after something like a profitability goal first? Or would you be looking after more expansion opportunities by going after M&A than DAYBREAK subsets that might be promising? Thanks so much.

Okay. I may come back to the last one, just – so your first question was about 718, Part C will we share the A and B parts – we haven't made any plans for that. I'm not saying we won't have to think a little bit about where we would do that in terms of the meeting. But given the delay, I think it's perfectly – given the delay in Part C, it's a perfectly reasonable question. So I'll defer and come back to you on that. On your second question, for the biv and the overlap of the site, I'm going to plead ignorance here. We have a number of sites which were not part of the original – or not part of our Phase III HO trial. As you said, we did over role. But most of these sites are new, but I can't tell you for sure that we don't have some overlap there. So maybe we can get back to you offline.

I can probably take third Dae Gon. I think the question of a trade-off between investment in a registrational strategy for M&A and DAYBREAK and profitability, it's a little early to speculate on because it presumes both that we've established a firm timeline to when we would invest in those and what the revenue that we would be generating from HO at that time would be. So there's a lot of moving parts. We consistently try to evaluate them prospectively, but I think it's a little too early to say. What I would say is, as we've said repeatedly, we are very dilution-sensitive as a company. We're all shareholders here. And at the same time, we recognize that the biggest opportunity for the company is to maximize the area under the curve in terms of generating cash flow for our shareholders. So we're trying to optimize all those parts of the best we can.

Great. Well, congrats again. Yes, sounds good and have a safe trip back home.

Thank you. Our next question comes from the line of Whitney Ijem with Canaccord Genuity. Your line is now open.

Hey, guys. Thanks for taking the question. Just one follow-up on the – can you guys still hear me, okay?

Perfect. Yes.

Okay. Sorry. Follow-up on the Japan opportunity. Can you remind us – I know you said the filing in Japan is based on the analysis of the overall study plus the Japanese cohort. Is it the full Japanese cohort out to a year of follow up? Or is there a potential for an interim cut with less follow-up of the Japanese cohort in particular?

Yes, it's the former. So it's – what we've been clear about is the first 120 patients will form the basis for the EU and the U.S. filing. And then there's an additional 11 patients, which was the over-enrollment plus the 12 Japanese patients. When they finish and the Japanese patients will be gating in that, that will be – so it's the last Japanese patient out at a year, that's the filing.

Understood. Okay. Great. Thank you.

Thank you. Our next question comes from the line of Jeff Hung with Morgan Stanley. Your line is now open.

Thanks for taking my question. The French real-world study suggests that patients who had a reception over a decade ago can still derive a benefit from setmelanotide. Are you seeing any patterns on BMI or hunger score that correlates with time since resection? And if not, do you think that setmelanotide would be an ideal therapy regardless of time since resection? And then I have a follow-up.

Yes. No, thanks, Jeff. And you're highlighting what I think is the most amazing part about this. It's I do think it's exactly what you said, which is the time doesn't seem to make a difference. The drop in hunger and the BMI changes are perfectly consistent with what we saw in the HO trial despite the fact that the original Phase II trial was 13 pediatric patients out of the 17. So yes, I think it's says it doesn't matter. It's the defect. The biology of the defect, no matter when you had it, you've interrupted somehow impaired signaling to the MC4R pathway and MC4R agonist seems to be the solution.

Great. And then a few weeks ago, you announced the partnership with Axovia in BBS. Can you just talk about what you hope to gain from it? And will that help you gain greater access to the U.K. registry to reach additional BBS patients? Thanks.

I'm going to let Yann comment on the access to the U.K. registry. What we announced the week ago is a – so we don't fill bills very well. We work closely with them. Obviously, one of the leading experts in the world. And he's doing work now trying to develop a treatment for the eye findings and Bardet-Biedl. So one, we want to support that. Two, we have a shared interest in terms of understanding the epidemiology of BBS. So made sense to work together. And yes, he's got deep data, which I don't think you would deny us, but this is an opportunity to put it together. But Yann, maybe a couple of comments just on your thoughts on that.

No, I can just add that we already a couple of…

Speak up a little bit Yann.

Okay. Is it good now? Do you hear now?

Yes. You got to speak in your phone.

Okay. Is it good now? Yes. Sorry. No, I just – I can add that we already support the BBS registry. Phil Beales and his team have worked on it for many years in collaboration with the BBS U.K. patient association, and we have started to support this effort maybe, I would say, one year ago now, and we will continue to do so.

Great. Thank you.

Thanks, Jeff.

Thank you. Our next question comes from the line of Tazeen Ahmad with Bank of America Securities. Your line is now open.

Hi. Thanks for squeezing me in. In terms of the Phase III data that you're expecting for HO, I think you've given a little bit of a broad guidance for the first half of 2025 should we be expecting that timeline to be condensed maybe early next year some time? Or is that the guidance that you're going to maintain? And what's going to need to happen in order for that sort of timeline to condense. And then secondly, as you think about HO and the use of setmelanotide there, what have doctors told you about the desire to be able to combine GLP-1s with that drug. And I know you're not doing studies on that per se, but commercially speaking, would that be a good time? Thanks.

So your first question, which is totally fair. I mean, what we've said, which is just – we've given you as best we could, the math. So last patient dosed literally at the first day of February, it's a 60-week trial, last patient last out, so you can do the math on 60 weeks from them. And then you've got to close the trial out and the like. So we'll be working as aggressively as we can to close it out efficiently, but it's not an instantaneous. So I don't think we're going to be able to update it a lot better than that. I think we it's not going to be June 30. I think you can all do the math on that and conclude that's not the case. I'm not sure we'll be able to refine it publicly much more than that, but I don't know. I'm not helping you very much there beyond the math. To be honest. Your second question was on the HO – the combination therapies, and there is interest. I mean the whole world is focused on combos in general. In our world, as we've discussed, I think we gain weight for different reasons. So any given patient who has a deficit in their MC4R pathway signaling and does well on setmelanotide. They may plateau. They may also have gained weight for other reasons, which may be amenable to another drug, a GLP-1, for example. And anecdotally, we know that GLP-1s have been added to patients who have been on setmelanotide. And in some of those cases, they've had incremental weight loss, which I think is consistent with that hypothesis. So I think your last question was, is that a good thing? To me, a good thing is anything that gets the patient a better outcome. And we know that the medications can be used together. We know in a mouse model, they were additive. So it makes sense from that standpoint. There's a little bit of overlap in the toxicity. They both have nausea, GI complaints as part of that. And so using the two drugs together, a little more work may be the case, but it can be done.

Okay. Thank you.

Thank you. Our next question comes from the line of Joseph Stringer with Needham & Company. Your line is now open.

Hi. Thanks for taking our question. Just back on the BBS launch, you're seeing pretty steady growth in new patient adds, another 100 TRx in the quarter. Just wondering if you can describe the BBS patients that are new to drug at this point in the launch. Are the vast majority newly diagnosed where and how are they being identified and/or diagnosed? Any color on this would be helpful.

Okay. So we'll start with Jennifer. And then Yann, if you have any thoughts on international can go there, but Jennifer?

Yes. So I think it's a mix in general. I think that our teams overall are doing a lot of [indiscernible] to physicians, they have been in contact with over time through the education and back and forth, those physicians for a rare disease. It's being aware and heightened just in terms of as patients come their way to actually get that patient back understanding the various different symptoms and actually getting that patient to a diagnosis. So it as these patients are more educated and they're more in tuned, it becomes easier for them also to potentially suspect patients to get to diagnosis. So this is how, as I explained, we have some initial first-time prescribers where they have finally gotten to a patient diagnosis and understand the value of IMCIVREE as well as repeat prescribers as well. Both are contributing.

Yann, anything. Yes, maybe we'll leave it there. Joe, is that good?

Great. Thanks for taking our questions.

Thank you. Our next question comes from the line of Raghuram Selvaraju with H.C. Wainwright & Company. Your line is now open.

Thanks so much for taking questions. Just wanted to see if you could comment at all on activities that are planned in congenital hyperinsulinism over the course of 2025, if we should expect any updates on that front? And also, if you could give us some additional color on where you anticipate there might be additional reimbursed early access programs instituted for setmelanotide over the course of 2025? Thanks.

Okay. So for the second part of your question, Yann, I don't know if you've got any other countries where you would want to highlight at this point. But I'll come back to you in just a minute. The first question was on congenital causes. And I think I would put this in the category, the earlier question we got about. Oh, congenital hyper insulinism. Thank you. CHI, I just got clarification. Apologies on that. So on our CHI program, which we have not spoken about, as I said, and we are waiting to develop a molecule, get our lead molecule identified. We've made good progress. And so I will commit to updating in 2025. We won't have a further updates here in 2024, but we are making good progress, and our interest remains high in the CHI. With that, Yann, any other sort of additional early access countries where we would be looking at? You got to go back to your phone.

I am very close from my laptop. Is it better now?

Yes.

Okay. Sorry. So yes, thank you for your question. So not so many countries, in fact, but for good reasons. First, we are, as I said earlier, already in more than 15 countries ex U.S. And a good chunk of these countries are countries where we have early access programs or paid early access. Two, we pick our countries very carefully. So we could be in much more countries, but it would come with less time on more important countries first and we also want to make sure that when we start somewhere, there will be some sustainability. So we pay really attention to where we go. So based on that and back to your questions, we will likely be in two or three additional countries in the next 12 months, but not more than that, again, by choice and by design.

Thank you very much.

Thank you. Our next question comes from the line of Jon Wolleben with Citizens JMP. Your line is now open.

Hi. This is Katherine on for John. I have two questions on reimbursement. The question is, kind what was the current paid rate and how much more – how much room is there to kind of improve upon this and what can be done to improve upon this and the cause of denials currently in the U.S. And then just any color on early discussions with payers regarding HO and reimbursement there? And just kind of how do I identify which patients can get the drug early since you did have shown that it works in patients that have had diagnosis for years now?

Hunter, do you want to comment on the paid rate or?

Sure. By the paid rate, are you speaking to what our coverage among payers where we've been pretty consistent is that we get essentially no coverage from Medicare by statute because we are an obesity that indicated for weight loss. We have a high level of coverage from commercial close to full coverage from commercial, although there are many small commercial plans, which do not – cannot afford or do not have coverage for expensive therapies. And then we have very high levels, plus 80% plus of covered lives in Medicaid. So that's kind of where we've been saying. We've said that the number of scripts that go to free – sorry, the number of patients, the transition to free drug has been running about 20% of scripts.

And maybe one other thing if I understood the question was we don't – a, we don't discount. And b, the price of the drug per se has not been the issue for denial. It's been more policy-related. Do they cover obesity drugs in general, for example, Medicare. That's the reason we don't get covered by Medicare. So does that answer your question or.

So that does answer my question. Thank you so much.

Thank you. I would now like to turn the conference back over to Dr. Meeker for closing remarks.

Okay. Well, thanks again to everybody for tuning in here on a busy day and an unconventional end of the day earnings call. So as I said, we’re excited about where we are. And look forward to our next update. Thanks.

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