Rhythm Pharmaceuticals Inc (RYTM) 2022 Q4 法說會逐字稿

Good day and thank you for standing by. Welcome to the Rhythm Pharmaceuticals Fourth Quarter and Full Year 2022 Earnings Conference Call. (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, Dave Connolly, Executive Director of Investor Relations and Corporate Communications. Please go ahead.

Thank you, Michelle. I'm Dave Connolly, IR 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 on the Investors page of our website at ir.rhythmtx.com. And this morning, we issued a press release that provides our fourth quarter and year end 2022 financial results and business update, which is available on our website and as listed on Slide 2.

And as listed on Slide 2 is our agenda. Here with me today in Boston are David Meeker, Chair, Chief Executive Officer and President of Rhythm Pharmaceuticals; Jennifer Chien, Executive Vice President, Head of North America; Hunter Smith, our Chief Financial Officer; and Yann Mazabraud, Executive Vice President, Head of International is on the line joining us from Europe.

And 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 on our most recent annual or quarterly reports on file with the SEC. In addition, any forward-looking statements represents our views only as of today and should not be relied upon as representing our views as of any subsequent date. We specifically disclaim any obligation to update such statements.

With that, I'll turn the call over to David who will begin on Slide 5.

Thank you, Dave, and good morning, everyone. Thank you for joining the fourth quarter earnings call, and we are going to talk about earnings, which look good, and this week's announced acquisition of Xinvento. However, before we do that, I want to reflect for a moment on this company's [journey]. It was almost a decade ago when we published the first case records in the New England Journal of Medicine describing the remarkable effect of setmelanotide in 2 patients with POMC deficiency. Since then, we have learned so much about the MC4 receptor pathway, the associated genetic deficiencies, the importance of hyperphagia and energy expenditure in the development of obesity.

At the same time, we started to learn about what it means to live with one of these rare diseases, complete lack of awareness on the part of the healthcare system, the relative shortage of experts, the almost complete lack of genetic testing, all compounded by the societal and medical bias which confronts the individual and family living with obesity. As a mother of 1 child with BBS said, when asked how bad can hyperphagia and obesity be when your child may be losing their sight. Their response? People are kind to blind people.

So the Slide 5, the challenges of living with a rare disease were further highlighted this week as we marked Rare Disease Day at Rhythm with a guest speaker, a mother of 2 children with BBS, who described the incredible challenges of living with the hyperphagia, the severe preoccupation with food and the associated abnormal food-seeking behaviors and how her child and her family's life has been changed since starting IMCIVREE.

And Rare Disease Day leads into Obesity Care Week and World Obesity Day on March 4th, which brings obesity to the forefront as a disease that requires a new way of thinking and new therapeutic options that work. Rhythm is at the center of these awareness events. As we know, obesity is not just 1 disease but many diseases, some of them rare, and each disease deserves a careful evaluation and the right treatment.

Slide 6, 2022 is a transformative year for Rhythm as we now embark on our next chapter as an established commercial stage company, expanding geographically, and now further diversifying our pipeline. The BBS launch, as you will hear from Jennifer and Yann, continues to go extremely well. Since FDA approval in June through the end of the year in the U.S., we have received more than 200 new prescriptions from 125 prescribing physicians with more than 100 patients approved for reimbursement. Our confidence in this opportunity continues to grow.

Internationally, IMCIVREE is now available in 8 ex-U.S. markets for POMC and LEPR. France also includes BBS through paid early access. The success to date in both regions speaks to the quality of the teams we have. And we're continuing to execute on our strategy to expand the overall opportunity for setmelanotide. With strong proof-of-concept data in our Phase II hypothalamic obesity trial in 2022, Phase III trial sites are now being initiated, and we have begun screening of patients. This year we'll also have data readouts in our Phase III pediatrics trial and Phase III switch study evaluating the weekly formulation of setmelanotide and preliminary data from the open-label Stage 1 portion of the Phase II DAYBREAK trial.

Monday we were excited to announce the acquisition of Xinvento, a preclinical Dutch company with a suite of drug candidates for congenital hyperinsulinism, which we believe represents an outstanding fit with Rhythm and our expanded focus [looking at] rare endocrinology. This fits perfectly with our concentration of pediatric endocrinologists, and we've already heard from some of them how they are excited about this development and look forward to working with us as we develop those compounds. We're targeting being in the clinic in 2024, and as noted, we are well capitalized into 2025, and Xinvento acquisition will have no impact on that forecast.

Slide 7. So CHI is a disease where the available treatments are suboptimal, both in terms of safety, tolerability, and importantly, effectiveness. The unmet need is clear. I had the opportunity to get to know Claudine van der Sande, the CEO; and Piet Wigerinck, the CFO, as one of their scientific advisors. I was incredibly impressed by Claudine's personal story, the thoughtful way she's pursued her mission, and the great progress she and Piet have made in a short period of time. The fit with Rhythm was obvious.

CHI is a genetic disease, with patients presenting during the neonatal period with hypoglycemic episodes, which may trigger seizures, loss of consciousness, and with repetitive [insults], brain damage, and death. Biological, in a normally-functioning beta cell, an increase in glucose levels triggers insulin release and as glucose levels drop, insulin release is depressed. In CHI, this process malfunctions and insulin release continues in the presence of low glucose levels, resulting in further lowering of the blood glucose to life-threatening levels. The emergency treatment is dextrose and glucose infused.

We know from patient and family surveys conducted by the international patient organization that these hypoglycemic low blood sugar levels are occurring 1 or more times per day in 25% and 1 or more times per week in an additional 20% of patients despite being on standard of care. This is an ultra-rare disease with an incidence of approximately 1 in 30,000 individuals in the U.S., EU and Japan, respectively. Approximately 70% to 80% of these patients need medical treatment. In addition to patients with chronic hyperinsulinism, there's another population of patients, potentially twice as large, with transient hyperinsulinism in the neonatal period, we will potentially target as well. We look forward to providing a more in-depth presentation on the science and our development plans later this year.

Slide 8. Phase III trial for HO is actively screening patients. This is a double-blind randomized controlled trial of 120 patients randomized 2:1 to setmelanotide or placebo. Patients will be dose-escalated over 8 weeks and then followed for an additional 52 weeks. The primary endpoint is percent change in BMI. We expect it will take 6 to 12 months to enroll, probably skewing closer to the 12-month timeframe.

Slide 10. As you know, this is a fundamentally different opportunity for Rhythm with an estimated 5,000 to 10,000 patients in the U.S. and EU, respectively, largely already identified based on their history of injury to the hypothalamus with associated impairment of the MC4 pathway and their need for ongoing hormonal replacement related to pituitary injury. We look forward to providing an update on the patients in the long-term extension before the end of the year and anticipate that will be tied to an abstract presentation at a fall meeting.

Slide 11. Multiple trials ongoing. These other programs are progressing well. Both the peds and weekly switch trials, as noted, will read out top line data in the second half of this year. We'll provide an initial look at the Phase II DAYBREAK open-label portion in the second half of this year and EMANATE is enrolling patients in each of its 4 independent sub-studies.

Slide 12. Before I turn it over to Jennifer, we are formally updating our BBS prevalence numbers, which we've talked about previously. As we have described, when we look at the identified patient numbers in Europe where the diagnostic rate is ahead of the U.S. and extrapolate that to the U.S. population, combined with the frequency of patients with a biallelic pathogenic variant for BBS being identified in our URO testing program and our initial experience with launch, all of this gives us increased confidence that the target population is larger than originally anticipated. It's on the order of 4,000 to 5,000 patients in the U.S. and similarly in Europe.

With that, I'll turn it over to Jennifer.

Thank you, David. I'm going to be starting on Slide 13 today. We are excited about the current status of our U.S. IMCIVREE BBS launch. We remain focused on our efforts [to see] the diagnosis of patients with BBS and educate them on the availability of IMCIVREE, the only FDA-approved therapy to target an impaired MC4R pathway, a root cause of hunger and obesity in people living with BBS. Through all the efforts of our cross-functional team, we have seen continued progress and success across the journey from diagnosis of BBS patients through to securing access and maintaining patients on therapy due to the benefits they receive.

Next slide. We are pleased with the progress and achievements made in the second full quarter of launch. As we did last quarter, we will share with you today key metrics, we believe, reflect the progress of our launch focusing on prescriptions, prescribers, and payer approval for reimbursement. Since IMCIVREE was approved for BBS by the FDA on June 16, 2022, and through the end of the fourth quarter of 2022, we have received more than 200 new prescriptions for BBS patients coming from more than 125 physicians. This breaks down to more than 120 new prescriptions between June and the end of September and more than 80 in the fourth quarter.

Given that 20 clinical trial patients have converted to commercial prescriptions during the third quarter, we are pleased to see the continued growth in quarter-over-quarter prescriptions. Importantly, we have received payer approval for more than 100 of these prescriptions since launch. The demand for IMCIVREE is strong. Physicians are writing the prescriptions and patients are experiencing benefit on drug.

On the next slide, we'll take a closer look at IMCIVREE prescribers since launch. Not surprisingly, endocrinology, both pediatrics and adult, remains the top specialty amongst our prescribers at a combined 47%. Pediatricians remain second, accounting for 24% of prescribers. On the small pie chart on the right, you can see that approximately 22% of all IMCIVREE prescribers since launch are new to Rhythm. By this we mean they had not been called on by a Rhythm territory manager prior to writing a prescription. Interestingly, these new-to-Rhythm prescribers skewed towards primary care or general pediatrics. We believe this speaks to the success of our

Interestingly, the new tourism prescribers skewed towards primary care or general pediatrics. We believe this speaks to the success of our [nonpersonal] promotion efforts, which indicates a broader physician and patient population, as well as motivated patients who likely became aware of IMCIVREE through our relationship with the BBS Foundation.

Next slide. Getting more than 100 payer approvals for reimbursement is quite a meaningful milestone for us at the end of the fourth quarter. Our payer mix for BBS prescriptions still remains with the vast majority coming from commercial plans and Medicaid and a small [percentage] or 9% coming from Medicare. Time to payer approval remains approximately 1 to 3 months. There are certainly outliers, but this range represents the average, and we are starting to see subsequent prescriptions submitted to payers that have already approved reimbursement for IMCIVREE move faster to approvals.

While the majority of the remaining prescriptions are in the prior authorization and appeal stage, we have moved patients to free drug or PAP, our patient assistance program. By statute, Medicare does not cover anti-obesity medication, so those patients are transitioned to PAP. Similar to other rare diseases, there are patients with small self-insured plans that are [now] providing coverage for IMCIVREE. Finally, Medicaid continues to be a mixed bag as some states offer coverage for IMCIVREE, and others will make a decision on a case-by-case basis through the appeals process. Both of these categories make up the majority of Medicaid plans. There are, however, some states that currently outlined, they will not cover IMCIVREE, and hence, we do also have some Medicaid patients on free drug. We continue to work this is persistently and explore alternative venues for reimbursement for all of our patients and have experienced early success transitioning patients off of PAP. We remain committed in our payer education and outreach efforts to help them recognize BBS as a distinct disease that requires a targeted therapeutic approach.

Next slide. On this slide, we show the age breakdown of BBS patients for whom we have prescriptions (inaudible) launched. Adult account for 46% of prescriptions received, while prescriptions for children and adolescents account for over half of prescriptions received. And the vast majority, 95% of patients with prescriptions have consented to receiving direct connection and education from our patient services team, which we call Rhythm InTune. We are proud to offer this program. Our teams work side-by-side with patients and their families to help them gain insurance coverage and to support them through our education efforts from initiation and maintenance on therapy. We are so pleased and inspired by the overwhelmingly positive feedback from patients and their physicians of Rhythm InTune.

Next slide. While we are happy with the results of the launch to date, we still have more opportunity ahead of us, and we are focused on optimizing our execution moving forward. Last month, we held our 2023 North America team meeting in Dallas to align on our strategy for this year. We have a great foundation in place to build on as 2022 really set the stage for patient identification, prescriptions, and therapy initiation and maintenance as exhibited by the results from the first 2 quarters of commercial launch. And this year, we remain focused on accelerating hope for patients and their families by continuing to engage with our customers around the need to treat hyperphagia and severe early onset obesity caused by an impaired MC4 pathway, educate that IMCIVREE is the right treatment option for patients with BBS.

With a tremendous team in place with deep experience in rare diseases, we are focused on ensuring our engagement with customers cultivates a positive experience with Rhythm and IMCIVREE. And lastly, with the conviction we have of the benefits that patients are receiving on therapy, we remain focused on expediting the [identification] of more patients with BBS who may benefit from IMCIVREE.

With that, let me hand it over to Yann.

Thank you, Jennifer, and good morning. I will start with the Slide 20. So in the international regions, we had a very strong year and a very strong fourth quarter as well, making significant progress in securing access for IMCIVREE for POMC and LEPR indications. And in parallel, working intensely at market access execution for Bardet-Biedl syndrome. IMCIVREE is now available in 8 countries outside the United States. And we are looking forward to continued execution this year. As you can see on the picture, the international team came together in mid-January to kick off the year with a focus on market access, patient identification, launch plans, and operational excellence.

Next slide. For POMC, PCSK1, and LEPR patients, we have identified approximately 100 patients being cared for in medical centers in EU4 and the U.K. and the estimated prevalence is approximately 600 to 2,500 patients in Europe. For POMC and LEPR, we are now fully launched in the U.K., in Germany, in the Netherlands, and in Italy. We achieved paid early access in France, same in Australia and Turkey, and we also have an early access program in Argentina in place. Compared to the United States, we know that the community and referral networks in Europe are better organized for these patients. While the numbers are still small, we are in position to leverage that existing rare disease infrastructure, and we are already doing so.

Next slide. For BBS, we have made significant progress since we received the marketing authorization from the EC in September last year. And like for POMC and LEPR indications, we are in positions to leverage the existing rare disease health care structure. BBS is a larger population. We believe the EU prevalence estimate of 4,000 to 5,000 patients, as David has detailed. We know of approximately 1,500 patients who are diagnosed and being cared for in EU4 and the U.K.

In France, we achieved paid early access for BBS last year. This paid early access program called AP1 allows reimbursed early access for therapies where positive risk-benefit balance is recognized and when no other therapeutic alternatives are available. With approximately 700 patients with BBS diagnosed in France, there is a clear unmet medical need there.

In Germany, we are progressing in our discussion with the Joint Federal Committee, the G-BA, with very positive interaction so far. We are seeking the exemption from the lifestyle drugs reimbursement exclusion list, as we successfully did for POMC and LEPR. And we are looking forward to launching in the second quarter of 2023. In addition, we look forward to launching in the Netherlands in Q4 2023; in Italy and Spain in the first half of 2024; and in the U.K. in the second half of 2024. We are very excited about all the progresses we are making in Europe. We are making steady progress with POMC and LEPR. And with BBS, we are making tremendous strides with securing access. We look forward to launching in Germany this year and bringing several [other] countries online in 2024, like, for example, Belgium and some Nordics countries.

With that, I will pass the baton to Hunter.

Thank you so much, Yann. Turning to Slide 24. Rhythm begins 2023 well capitalized with $333 million in cash on hand, sufficient to fund all planned operations into 2025 as we continue to grow as a global commercial-stage biopharmaceutical company. This cash guidance includes the impact of projected milestones in R&D spending associated with the Xinvento acquisition.

We recorded $8.8 million in net product revenue from IMCIVREE in the fourth quarter and $16.9 million for the calendar year 2022. Quarterly revenue marked an increase of $4.5 million, or 105%, over the third quarter of 2022, driven primarily by IMCIVREE sales for BBS in the United States as well as increased POMC and LEPR sales in our international region. U.S. sales represented 84% of total Q4 net product sales and 85% for the full year.

Cost of goods sold for the fourth quarter was $1 million, or about 11.7% of product revenue. Cost of goods sold consisted of $440,000 royalties due to Ipsen under our original licensing agreement, $400,000 product costs related to commercial sales and product distributed under patient assistance programs, about $200,000 related to the amortization of our previously capitalized sales-based milestones. R&D expenses were 23.5 and $108.6 million for the fourth quarter and calendar year '22, respectively. On a quarter-over-quarter basis, R&D expenses decreased by $8 million. On a sequential quarterly basis, this represented an increase of $2.4 million as compared to the third quarter of '22, primarily driven by increased spending on clinical supply materials.

Clinical trial costs remained largely unchanged as decreases in older studies offset increases in costs associated with the ramp-up of activity. For our pivotal Phase III hypothalamic obesity and EMANATE studies. SG&A expenses were $26.3 million for the quarter and $92 million for the year. Compared to Q4 2021, SG&A increased by $5.3 million. Sequential quarterly basis versus Q3 '22, the increase was 4.4%. The latter increase is primarily due to increased marketing costs related to BBS, increased special fees related to commercial, regulatory, and international operations. For the fourth quarter, weighted average common shares outstanding were 56.3 million in quarterly net loss per share was $0.75. For the full year, average common shares were $50.3 million for the net loss of $3.47 per common share.

Turning to Slide 25 for some comments about the outlook for the coming year. We entered the year well capitalized, and we are executing our global strategy with disciplined investments in our programs designed to maximize benefit for patients while delivering shareholder value. That was our strategy. That was the example we set in 2022, and we expect 2023 to be no different. We have not offered revenue guidance in the past. We have no plans to do so in the future. Projecting rare disease launches is a challenging exercise, and we don't expect quarterly growth to be linear. We expect long-term success based on Rhythm's ability to bring potential IMCIVREE patients to diagnosis. Our success to date increases our confidence in the long-term opportunity in BBS and other potential indications. As such, we remain focused on commercial execution to maximize the opportunity for IMCIVREE globally.

Having said that, I will offer a few comments and some context for how to think about the drivers of revenue growth in the coming year. BBS is the primary driver of IMCIVREE revenue. So it's worth reemphasizing the POMC and LEPR biallelic patients on drug in the first 2 years will number in the 10s. In the last full quarter prior to the BBS launch, for example, the first quarter of '22, net sales of IMCIVREE totaled $1.5 million, reflecting the ultra-rarity of POMC and LEPR patients. We expect the percentage contribution from our international region to increase over time, but the timing of this increase is largely dependent upon country-level reimbursement decisions associated with the BBS indication. Yann outlined this timeline earlier in the call. At present, the only country in which we expect full reimbursement for BBS for a significant portion of this year is Germany. The Netherlands and potentially Canada will come on in the second half of the year. Full reimbursement in other major markets such as France, Spain, Italy, and the U.K. are expected in 2024. We will plan to keep you up to date on the projected timing of these reimbursement decisions as our visibility increases. Excluding the German BBS launch, therefore, the POMC and LEPR indication will remain the main driver of revenue in our international region in 2023.

We also thought it would be helpful to give you more perspective about our forecast for operating costs given all the activity going on at Rhythm. We expect approximately $200 million to $220 million in non-GAAP operating expenses in 2023. This projection includes $120 million to $130 million for R&D expenses and $80 million to $90 million for SG&A. Both projections exclude stock-based compensation. R&D will represent an increase of approximately 22% over 2022, using the midpoint of the range. This increase is driven primarily by our pivotal Phase III trial in hypothalamic obesity, a global trial for which we expect to open more than 20 sites; enrollment in our Phase III EMANATE trial as we anticipate the vast majority of patients entering the trial this year; and costs related to our Phase III de novo trial for the weekly formulation of setmelanotide.

On the SG&A side, we expect an increase -- we expect expenses between 80 and $90 million for an increase of about 9% over 2022, again, using the midpoint of the range. Our U.S. commercial operations are now at full strength. So the increase is driven primarily by annualization of these costs as they were growing during 2022, where the headcount was growing during 2022, as well as headcount increases in the international region and other support functions. All of these non-GAAP estimates include noncash stock compensation, which totaled $20 million in 2022.

Lastly, we're very excited about the Xinvento opportunity. Rhythm is paying a $5 million upfront fee and taking over development costs for the company's portfolio of preclinical assets. In addition to the upfront, we agreed to pay $6 million in preclinical development milestones. There are no near-term clinical milestones. The remaining milestones sale to Shenvento shareholders are based largely upon FDA and EC regulatory approval and successful future commercialization totaling up to $125 million. There's a potential for an additional $75 million in the event a second molecule with selected, developed, and approved. The economics of this transaction are success-based and we, at Rhythm, are very excited to have Claudine and Piet join us on this high-impact opportunity in a disease with a high unmet medical need.

Now I will return the call over to David. Thank you.

Thank you, Hunter. So I'll quickly share these last 2 slides before moving to questions. So Slide 27, as noted, we have several trial starts and top line data readouts this year, which we talked about as well as several market access milestones in a number of ex-U.S. markets which Yann detailed.

On Slide 28, just reminding you, we have 3 main foci areas for this year, maximizing the BBS commercial opportunity globally, executing on our Phase III trial in hypothalamic obesity and continued expansion through clinical development for setmelanotide and these other trials, and now our assets from the Xinvento acquisition, which again we look forward to moving forward as rapidly as possible.

And with that, we'll open it up for questions, and back to you, operator.

(Operator Instructions) Our first question comes from Phil Nadeau with Cowen.

Congrats on a successful quarter. First question is on the BBS launch. The pace at which you're adding prescriptions is impressive with 200 at year-end and adding 80 a quarter, the simple math would say you'd be over 500 by the end of 2023, which is the vast majority of people who are in the BBS registry. Can you tell, one, whether you're adding new patients to the prescriptions? Are you giving patients prescriptions who are not currently in the registry? And two, can you talk about new patient identification more broadly? Is it possible for this rate of prescriptions to continue even beyond 2023?

Jen?

Phil, you asked about the CRIBBS registry. One, we have great relationships with the folks at the Marshfield Clinic. They are incredibly dedicated to the BBS patients and their care. When we think about the CRIBBS registry, however, there are privacy policies in place. So we, at this point, really don't have any visibility in terms of the overlap of the patients that are in the registry versus the patients and HCPs that we have within our view at Rhythm. So that's one piece.

To your point, in terms of the prescriptions, I will say that [we are] very happy with the level of the demand for this product. It speaks to the need and the differential impact in terms of the hyperphagia on the patient population for them to be seeking treatment, not only for their obesity, but the underlying hyperphagia as well. And so we are very much focused in terms of pull-through of opportunities. There still remains opportunity in terms of the physicians that we already have identified with patients that they are treating with BBS and pulling through those patients onto therapy through our interactions and education efforts.

And to your point, we continue to be ultra-focused in terms of identifying additional patients to add to our view. These include patients that are already diagnosed with BBS that are lost in the system, and we have different mechanisms that we're going about in terms of finding those patients as well as educating both potential patients out there as well as the HCPs on the differential diagnosis of BBS that we can get and expedite additional patients to get to a proper diagnosis. So there just remains a lot of opportunity out there.

And is there any sense internally whether what we saw in the second half of last year was a bolus? Or do you think that rate of prescriptions could continue actually even through 2023, given its impressive rate?

Yes. I would say that there were certainly [excess] demand. For any disease area, where there is no therapy that's available for years and years and years, when something becomes available, it's quite interesting for patients who were really trying to find a therapeutic option. We also had about 20 clinical trial patients that converted to commercial scripts, but that was more in Q3. So with that said, I think the growth that we saw in Q4 was quite exciting to us. And as we move forward, we just have continued conviction about [the needs]. And once again, our focus is just around getting those patients to a quicker diagnosis as the journey -- the diagnostic journey oftentimes is so long for these for these patients.

So Phil, just to reinforce a couple things that Jennifer said there. I want to remind everyone of our common themes, again, rare disease world don't trend it in a linear fashion, so that certainly goes for revenues early on, and it also goes for the scripts. So whether it will be 80 per quarter and the like, almost for sure not, it will continue -- that will also be lumpy. But as Jennifer said, we remain incredibly encouraged by the strength of the demand here. And the one other piece I'll refer you to, which Jennifer highlighted was the 22% of physicians who were not engaged with who were writing. And these are patients who are not on our radar. So back to the different ways patients are coming into the system: a, we may find them; or b, they may find us. So again, a lot of conviction still.

That's very helpful. Then one last question on the pipeline. On the DAYBREAK data that we're going to get in the second half of the year, do you think you'll be in a position to release results from all the gene types in the study? Or will it be a snapshot as to the most mature data that you have at that time?

Probably a blend of that answer in the sense that, as you know, remember, we started off looking at 30 genes. And then during the course of the trial, we amended that based on some early results of, a, genes not being so interesting, and also some of the genes were just so rare that we really couldn't enroll them, so we stopped looking for them, which doesn't mean they're not out there. It's just that they will not be part of DAYBREAK.

So we'll try to give you a sense of -- we will give you a sense of the larger landscape and how we narrowed it down, but the areas of interest will be those genes for which we focus down on, we're able to enroll enough patients to draw some conclusions, which will be a number much smaller than the 30 (inaudible) expectation that it'll be probably on the order of 5 plus or minus maybe as much as 10, but that's going to be the kind of data and the focus you'll hear.

Our next question comes from Derek Archila with Wells Fargo.

Congrats on all the progress here. Just a couple of questions from us. I guess maybe first, as we are now in 2023, maybe just any commentary on more recent trends for scripts and particularly around BBS patients. And is there any seasonality as we should think about kind of this first quarter relative to the rest of the year?

And then second question, given that you have 100 reimbursed scripts, I guess, simple math, does that kind of imply like a $30 million kind of annual rate here in terms of if all those patients stay on therapy? And I guess if that's true, I guess, how does that impact your thinking on where current consensus is, which is like $35 million to $66 million for 2023?

So what we'll do is I'll let Hunter take the consensus question.

Yes. I don't think we want to get into the business of commenting on consensus. It's inconsistent with our not giving guidance. Having said that, the spread is quite wide, and we expect as we continue to execute, I do expect the range of estimates to narrow.

Jennifer, several questions there, one on just the overall trend again and seasonality quarter-on-quarter in the rare disease world, this one specifically.

So speaking to the seasonality, I would say it's not unusual for the fourth quarter to potentially be light as there's November holidays as well as the seasonal holiday in general. What is interesting is for this particular therapy, oftentimes there's family gatherings that are surrounded by food, and it's also a potential opportunity as children are out of school for patients to be initiated on therapy during a period where they are on break. And so we did see some of that happening as well or heard some of the parents who wanted to actually initiate therapy during this time that may have been a downtime in other areas. But with that said, I don't think that there's going to be much seasonality. I think it's really more based in terms of the physician when they see the patients and getting through the reimbursement process to then be able to initiate therapy, so it's an ongoing process there.

Does that answer your question, Derek?

Yes. No, that's very helpful. And then just on Germany, I know you guys are prepping for launch, so maybe you can discuss what you're doing there. And then I think you said there's 1,500 BBS patients that are identified in Europe. I guess how many of those are in Germany?

Yann, can you take that?

Yes, sure. So I will not mention the exact number because, first, we don't know it exactly but, of course, it's a significant portion of it. And as often in Europe, I would say that these patients are localized in centers of excellence, so many centers with a lot of patients in each...

Yes. We're optimistic about Germany obviously, and I think just to reinforce on Hunter's comments, part of our goal in trying to give you a little more insight in terms of the breakdown between U.S. and Europe is, as we learn and we try to help you understand how Europe evolves, is we do a tremendous amount of groundwork to get through the market access, get pricing established, and the like, and we have the advantage of better organized patient communities and centers of excellence, if you will. But there is this steady gradual startup. So it's not a world where you tend to get a large bolus and you have a very big quarter. We expect this to build very steadily over time with Germany leading us as we get approval for BBS here.

Our next question comes from Corinne Jenkins with Goldman Sachs.

You mentioned this earlier, but can you just expand on the degree of whitespace that remains among those 125 current prescribers for IMCIVREE based on maybe the additional patients that are under their care and might be appropriate for the drug?

Yes. So Jennifer, of the 125 physicians who have written prescriptions, how many do you think are holding other patients that they may be acting on or going to be acting on?

So of the prescribers, I would say, approximately 1/4 of them or so have -- sorry, there are around 20% or so that have written more than 1 script. So, we do have already physicians who have written more than one script. Within the area of rare disease, I would say that a lot of physicians only have 1 patient, so it's not abnormal that they would only have one patient at this point of time. But there's still -- once again, remains opportunity within other physicians who have yet to prescribe for very different reasons just in terms of going through and once again identifying additional physicians who have patients as well.

Okay. And then maybe on the Xinvento acquisition, should we expect that asset to be developed in a distinct mechanism of action? Or are you looking to develop more like a best-in-class against what are some of the known targets in that disease?

Yes. I think we'll -- like I said, we have said in our press release and I commented, we'll provide an in-depth -- greater in-depth presentation of where that program is and what we're going after. So we're not going to reveal the target today. But I will say -- and again apologies for the sort of being a little bit (inaudible), if you will, here. The biology was incredibly compelling. And why was this a good opportunity for us. And as with all things, you start with is there an unmet medical need, and is the biology and the approach to the problem does it make sense and it's a progress that they've made sufficient to give you confidence that you could have a reasonable probability of success here. So Xinvento checked all 3 of those boxes. We know it's a competitive area, and I think that speaks to the unmet medical need, and we didn't enter into this blindly. We entered it with a full recognition of what else is out there and how this approach might compete, and we feel really good about that. So apologize for leaving it there for the moment.

Our next question comes from Dae Gon Ha with Stifel.

Congrats on the progress. One question on the BBS launch. Just going back to the sequential announcement, I believe, in the first 6 weeks, you had 50 prescriptions, followed by 120 in the third quarter, and then 200 in fourth quarter. So can you maybe walk us back to that initial 6 weeks? That 50 within 6 weeks seems to be fairly robust there. What happened there? And is there any chance that we could see another kind of picture like that emerge in 2023 at some point? Or should we expect going back to Phil's point, another 70 to 80 per quarter?

And then a question on Xinvento. I realize a lot of details are under wraps at this point. But just looking at the Board composition, it does seem eerily like it might be more ASO oriented. Am I on the right track there or is it more small molecule or even injectable biologic? Any kind of insights there would be helpful.

Jennifer, you want to take the...

Sure. So you were asking about the number of scripts in the first couple of weeks. So I think that's definitely because of that anticipated demand as patients were waiting to get onto the therapy. Also, a reminder just in terms of we had patients already ready that were part of our global studies that we were converting into commercial scripts. So that's part of the explanation in terms of the number of scripts that we received quite early on.

But moving forward, I think it's always a bit difficult to project, but I will outline that we still have quite an opportunity just in terms of, as we move forward, the scripts that we receive that we are still working through the reimbursement process, getting those patients onto therapy, it's an area of focus. We're continuing to educate the physicians that do have the BBS patients just around the need to treat the hyperphagia and the early onset with a targeted therapy. And [the third pillar] definitely is to find additional patients, which I have in the past outlined, that we have very targeted mechanisms at this point in time in terms of how we're going about our efforts there.

And I think all the questions, and Dae, your question, of course, specifically, which we totally are sympathetic to, and we have the same questions as we seek to understand -- better understand this opportunity. All rare diseases, as most diseases, including rare diseases, have some frontloading as you go through development, there's patients who are tracking this and expecting that moment of approval and looking to go on. So there's always a bit of that frontloading.

I think what's been incredibly reassuring about this opportunity in BBS is that, as we've now gone deeper into the launch in the fourth quarter, I think, is a good standalone quarter in that sense. The demand is clearly there. And what we hoped is, one is, you have to continue to work to find more patients, which we're doing. We're doing successfully. Second, as you build the system, meaning you get more centers, more individual physicians who are writing prescription and taking an interest, you begin to build an ecosystem which those patients who are seeking care and/or think they might have BBS start to find us. And so that process will continue.

And again, there's nothing about the BBS opportunity to date that doesn't -- that changes our view that this isn't a very meaningful opportunity and ways to track some of the other well-established, well-known examples of where to see success stories. So we'll keep you updated and try to give you as much insight as we can. But we are learning with you.

And then, David, what about the Xinvento if there's anything...

Yes, yes, sorry. Yes. And again, as I said to Corinne, apologies on not being more specific. So we're not going to reveal the modality that we're chasing. Just to remind you again, I think, the unmet need here, there's a tolerability issue with the current standard of care, there are some safety issues related to the current standard of care, and then we think there's suboptimal efficacy. And so this solution we would hope would address all 3 of those. But again, stay tuned on the exact modality and target.

Our next question comes from Whitney Ijem with Canaccord.

Another kind of, I guess, type of runway question for you on scripts. Any early color on compliance rate or refill rate, just as we think about that new prescription number you're giving versus kind of total prescriptions headed into 2023?

Sure. So, of course, in several different rare diseases in the past and one thing that was interesting to observe, maybe not so interesting, but if and when the patients actually feel a difference while being on the drugs that tended to lead to a higher persistence as well as a compliance rate. So when you think about a patient population, the hyperphagia here is a key factor. It's something that just impacts them like really day-to-day hour-to-hour. And feeling a lift of that or release of that would then lead to the weight loss is something that they can feel in terms of benefit of being on drugs.

And so we have seen a very high compliance rate even with a daily injectable because of this. And once again it's due to the benefits that they receive. From a discontinuation of persistence rate, it is early days, but I will say that we are quite happy just in terms of what we have seen. There was a lot of education on both the HCP as well as the patient side around expectation setting as well as ongoing engagements with our customers so that we could get them through the titration process and maintain them on drugs. So I would say that the discontinuation rate is quite low, and we're very pleased with that.

Awesome. And then one on HO. Can you remind us, are there any patients in an ongoing long-term extension study from the Phase II? Or is there any additional longer-term follow-up in HO that we should be thinking about either being collected or being presented in 2023?

Yes. So 14 patients entered the long-term extension. And yes, you should be paying attention to that. Our goal will be to update that experience. Some of this later in the year. (inaudible) we have identified the meeting in [ER] specific abstract submission, but that would be our goals to link it to that. But no, that's very important, as with all of these, the original 12 to 16 weeks is a very short period of time and what everybody, including regulators, are looking for is durability. And so we're looking forward to being able to update further experience.

Our next question comes from Michael Higgins with Ladenburg.

Congrats on the quarter, including the ongoing launch. A couple questions for Jennifer, if I could. I believe in your remarks, you noted that there is some state Medicaid programs that have decided they will not cover IMCIVREE at this point. Is that something that can be revisited within this next year?

Yes. So to your point, yes, I did outline that there are certain states that we have patients already on the path. We are very ongoing in terms of our efforts to continue the education process, not giving up in terms of really seeking authorized reimbursement. And I would say that through our education efforts, we get more and more coverage decisions made for IMCIVREE as we move forward into -- from launch through this first year through in terms of approval.

There are certain opportunities that we have that are perhaps more low hanging, for example, for Medicaid program, they have an EPSDT program that's available for more pediatrics and adolescents, which is an opportunity for us to follow up in terms of gaining reimbursement. But once again, the follow-ups and efforts just in terms of opening up access state-by-state is ongoing.

Michael, that's just really a critical point in the sense that aside from something like Medicare where there's a statute and there's sort of no way to work that until the statute's changed and other companies are trying to get that change. But everything else, there's sort of never a definitive no, and we've organized it in a way where we recognize, at some point, it's (inaudible) immediate near term, but there's never no. You just keep working the system. And in a surprising way, some of those, gosh-no-way opportunities become yes, and it opens up and that patient gets covered.

I appreciate that. Is this something that is in the single-digit rate? Is this something that's really infrequent? Or is it something that's maybe kind of a 25%, 50% of program scenario, which once you release that lever, you've got another avenue of patients. So just trying to characterize the degree of this impact thing.

Yes. I would think, as we've looked at this, and Jennifer's team, I mean right now, and this is, again, a dynamic scenario, I would put on the order of 20% of the states would have that relatively harder line. And those are the ones where some of those patients will move on to PAP as we continue to fight that battle. But the vast majority, about 80%, are either what we call the green category and patients are moving through with an unimpeded path or in a mix category where the state is still working through its response, but we've had patients through. And then there's a smaller segment that we still haven't put a patient in front of that [statement]. So they remain [unconfirmed]. But it is a relatively small percentage of the states today, which, again, I think is, as a starting point, 6 months and is, from my view, pretty amazing.

Appreciate that. One last one, if I could. How many prescriptions are coming in outside of BBS? Can they include on label as well as off? You've got some great data in HO obviously. I'm curious if there's any prescriptions there that you're aware of?

No. So none that we're aware of. Again, we have the Phase III trial up and running. We're actively screening as we indicated. So there's an opportunity for patients to engage there, but we don't have any insight into patients we may be "seeking off-label" for HO today. For the other, again, I want to apologize, it's just the POMC and LEPR world, again, we believe there's 10s of patients today, and that's a world particularly in the U.S., we'll see how Europe continues to open up a slightly different dynamic, as Yann described, but that in the 10s is what you should expect for POMC and LEPRs.

Congrats again.

Our next question comes from Joseph Stringer with Needham.

Just going back to persistence rates for patients that have started on commercial drug and have discontinued. What are some of the main reasons that you're hearing for that? Is there any particular reason that stands out?

For the discons, any particular reasons?

Yes. At this point in time, there's a variety of different reasons that are more like onesie-twosie, I'm going to say at this point of time, it could be hyperpigmentation, it could be based off of sort of loss to follow-up opportunities. What I do find interesting is there are several that discontinued for personal reasons that are opportunities for potential reinitiation of therapy moving forward. So our teams remain in contact with the patients even after discontinuation in case there is an interest in terms of reinitiating and we've heard this also from several physicians as well that there may be opportunity in the future for reinitiation.

And just to provide a little more context because an important issue, which obviously we follow closely. So the current discount rate is in the mid-single-digit percentage range. And as Jennifer highlighted, what's really, I think, been highly reassuring is that the percentage of patients that are stopping because of known side effect profiles characterized on the order of 1/3 of that, if you will, plus/minus. And so I think that speaks to the job [that sort of highlighted] 95% of these patients consent into Rhythm InTune. So we, as a company, and our team has the opportunity to engage individually, and there's a high level of touch there, and that's incredibly valuable as people both getting expectations set in a way and say, look, you're going to experience some nausea and potentially vomiting in the early phase, but it will end. And you can walk patients through and that's working. So we feel really good about the overall tolerability and persistence in general here. And then as she said, you've got a handful of patients who are discontinuing for personal reasons, which seems unrelated to the drug and the problem that happens in any disease area.

(Operator Instructions) Our next question comes from Jeff Hung with Morgan Stanley.

This is Michael Riad on for Jeff Hung. First, regarding the 22% of prescribers that weren't called on by territory manager, were they in any particular region of the country? And what is Rhythm learning from these interactions? And how could that be applied to bring in additional prescribers?

Yes. We're actually very happy seeing this percentage just in terms of patients that are coming through, not directly through the efforts of our territory manager. I think it speaks to a couple of different things in terms of our more broader-based efforts, our nonpersonal promotion efforts that get to a broader set of those patients out there as well as physicians, which may be why there could be more of a skew in terms of the physician populations doing more towards like primary care physicians. But these patients are in the hands of so many different physicians as they go through their journey, so we have to be both targeted in our field efforts but also broad-based in terms of outreach through other supportive mechanism.

Things that would fall into that category, of course, also relate to our presence at conferences, our ongoing dialogs and relationship with the BBS Foundation and such. But I would say that if there's a motivated physician who is willing to prescribe, this is a drug that can be prescribed and managed by various different specialty backgrounds. So we continue our education efforts with each physician who have an interest and who has put in a prescription.

Okay. And maybe a second follow-up. For the Phase III in hypothalamic obesity, what factors would push enrollment closer to the 12-month mark, given diagnosed patients are well known? Is it more the logistics of getting sites up and running? And finally, what would you see as the biggest hurdle for this study?

Yes. It is the logistics. So I think we talked about on some of the earlier calls, the trial network or infrastructure globally, for us, for sure, as well is challenged coming out of COVID, and so a number of these sites have personnel challenges in terms of study nurses, getting things through pure logistics, as you noted. So that is the issue. The patient demand is there. All patients are -- every site that we've talk to, who's signed up to be part of this trial was enthusiastic and has a surprising number of patients relative to my experience in other trials in these areas. So that would be it.

And then your question was anything that could make it go faster. (inaudible) so we can get them set up. We'll highlight the sites as we have already that we expect enrollment to be competitive, and that can be a useful dynamic as sites have a number of patients who may want to participate and they'll be hopefully pushing to get them in. They're limited only by maybe their study nurses' ability to process them all. So that will be the balance.

I show no further questions at this time. I would now like to turn the conference back to David Meeker for closing remarks.

Great. Well, thanks, everyone, for tuning in. As you've heard us, again, we remain incredibly encouraged by initial experience on BBS. The R&D programs are up and running now and executing. So I feel good about that area and then I'm excited about a new opportunity, a expanded opportunity for Rhythm with Xinvento and look forward to updating you on that. So with that, we'll sign off. Thanks again.

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