Rhythm Pharmaceuticals Inc (RYTM) 2023 Q3 法說會逐字稿

Good day. Thank and standing by and welcome to the Rhythm Pharmaceuticals Third Quarter 2023 Earnings Conference Call. (Operator Instructions). Please be advised today's conference is being recorded. I would now like to hand the conference over to your speaker today, David Connolly, Investor Relations and Corporate Communications. Please, go ahead.

Thank you, Victor. 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 on the Investors page of our website at ir.rhythmtx.com. This morning, we issued our press release that provides our Third Quarter 2023 financial results and a business update, which is available on our website.

As listed on Slide 2, 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 joining us on the line from Europe.

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 only as of today and should not be relied upon as representing our views as of any subsequent dates. We specifically disclaim any obligation to update such statements. With that, I'll turn the call over to David Meeker, who will begin on Slide 5.

Thank you, Dave, and good morning, everyone. Thank you for joining the call. So we're pleased to report out another very strong quarter with continued execution across all parts of our business. The 2 near-term drivers of Rhythm value, building the BBS commercial opportunity globally and enrollment into our Phase 3 HO trial remain on track. I'm incredibly impressed by the performance of our North American and International Organizations. BBS and the monogenic forms of MC4R pathway diseases, we are approved to treat RM, as we have discussed multiple times, highly meaningful rare disease opportunities. But they do fall in the ultrarare category, with all of the challenges these patients face getting to a diagnosis and then accessing the appropriate therapy.

The sheer volume of noise around the management of obesity as a disease and the use of GLP-1 specifically, has both aided the cause. Health care providers are looking more closely at patients who present with obesity and doing the appropriate workup and hinder the cause where the availability of powerful therapies, such as GLP-1 medications, has led many to believe that all obesity is the same and GLP-1s represent the universal solutions. As we know, that is not correct.

Obesity is not one disease, but many diseases and as with most forms of medical therapy, the more targeted and specific the solution, the better. The medical community continues to learn more about the factors which control hunger, the role of the different pathways and the effect of different drugs play in modulating those pathways. Our story remains relatively simple. We're replacing or supplementing a hormonal signal which is deficient. So if you're managing a patient, why won't you start there.

Revenues in the quarter came in at $22.5 million, showing exactly the steady growth we had hoped to see. We're pleased with the script volume in the U.S., where the team is doing a great job educating on the MC4 pathway and the value of precision therapy, and we're incredibly excited to cross the 100-patient threshold in Europe, where in addition to the usual challenges facing rare disease communities, market access across the different health care systems can be particularly challenging. We have experienced teams in all geographies were remarkably skilled at navigating these challenges. So although it will never be easy, patient by patient, we find solutions.

As you know, we do not provide financial guidance, but for those of you building models, my experience working in rare diseases with many similarities to our current world has taught me, and never gets easier, the revenue trajectory does not inflect, but these opportunities continue to grow over time.

HO Phase 3 enrollment continues on track with 2/3 of the patients screened, that's our proxy for enrollment as almost none of these patients screened failed. The majority of patients needed to complete enrollment have their screening visits already scheduled, and we still have sites who are just opening or scheduled to open and who are eager to get their patients enrolled. We did get early access approval for HO in the third quarter in France based on the 18 patient phase 2 data alone. This is an incredible recognition about the unmet medical need in this population and the potential significant impact treatment may have. The first patients, as Yann will outline should be treated before year-end.

Finally, we look forward to providing additional updates at our R&D Day, particularly with prior to our next-generation weekly formulation, the DAYBREAK trial and our pediatric results.

So moving to Slide 6. We recently had a separate analyst call following a very successful TOS meeting in Dallas with multiple presentations, which are outlined here. What's particularly gratifying about these meetings, it's the opportunity to meet with the community in person and feel literally the growing interest in learning more about the different forms of obesity, including MC4R pathway diseases.

On Slide 7, I want to take you through all of the 12-month HO data that we reviewed on the last call, 14 patients entered the long-term extension, and results for all 14 are shown in this slide. We saw a robust mean 25% BMI decrease across the 12 patients who had 12 months of data. And I remind you that this is a blend, this trial is a blend of ages with 11 out of 12 of the patient's pediatric patients. And the pediatric patients are growing where you would expect the BMI to actually increase with that growth. The 2 panels on the right are the 2 patients who are off treatment for some period of time. The short message here is if you take the therapy, most patients respond and when you stop treatment, i.e., you stop this hormonal replacement therapy, your BMI weight increases.

Finally, there's growing interest in the quality of the weight loss, meaning losing fat mass is good but losing large amounts of lean mass is not good. Our early results suggest we did pretty well in that category, as shown on the DEXA scan results, which we presented on the poster. And one other graphic on the poster shows the shift in obesity class experience by the patients with 3 of the pediatric patients actually getting back into the normal BMI range for their age.

Slide 8, this is just to remind you of the trial design, where we are targeting 120 patients and as noted, 2/3 of the patients have been screened and the majority of the balance of patients needed to complete the trial have already scheduled their screening visits. And importantly, and I think this is -- is kind of still early here but quite more worthy, of the patients treated, we've had almost no trial discontinuations.

So finally, on Slide 9, on the slide is to remind you that we are working on meaningful opportunities. You can build a very profitable company around BBS and the POMC and LEPR monogenic opportunities we are approved for today. However, we are investing significantly in R&D because those opportunities that we are pursuing are even greater. And as you know, for example, the HO opportunity itself represents a large, well-identified patient population with no approved therapy today. And with that, I'll turn the call over to Jennifer.

Thank you, David. We are pleased with the continued progress we are seeing with our BBS commercial launch. Hundreds of patients with BBS in the U.S. are now realizing the benefits of IMCIVREE therapy. We continue to hear the positive life-changing impact we are making to the lives of patients and families.

Recently, we heard from one mother, whose son is on IMCIVREE therapy, and IMCIVREE has had a profound effect on his weight and his hyperphagia. He is full for the first time, leaves the dinner table before everyone else in the family and for the very first time he told his mother he does not like certain foods like lima beans, tomatoes, and pickles. In the mother's words, we are experiencing him as a kid, not a hungry kid. IMCIVREE is the only therapy approved specifically to treat obesity due to BBS, and we are thrilled to hear these stories from patients and families who now have access to therapies.

Beginning on Slide 11. We are pleased with the growth and consistent strong demand for IMCIVREE over the first 5 quarters. Throughout the launch from June 16, 2022 through the end of the third quarter of 2023, we now have received more than 545 new BBS prescriptions coming from more than 300 prescribers. Of these prescriptions, we have greater than 330 approvals for reimbursement from payers.

On the next slide, I will cover results within the third quarter. We received greater than 120 prescriptions with 80 approvals within the Third Quarter. Several of these approvals were from prescriptions received within the quarter, while others were written in prior quarters. We continue to identify more BBS patients and work to speed diagnosis. Our active engagement with physicians remains focused on disease awareness, diagnosis, and the benefits of IMCIVREE. And our Rhythm InTune team continues to deliver for to provide both to patients and families and health care providers every step of the way.

Next slide. Here is a snapshot of the patients with BBS behind these prescriptions. We continue to see an upward trend in terms of prescriptions received from adult patients. As we touched on before, this trend diverges from the age distribution in the CRIBBS registry, a global registry having data on BBS patients where approximately 80% of registered participants are 18 or younger. We believe this trend is representative of adult patients who simply aimed at a participating in this annual survey or who were lost to follow up. Once IMCIVREE was approved through our education efforts, many of these patients were reengaged with their physicians. This is not uncommon ever disease. We're the first approved therapy for a disease, causes not only increased awareness of the disease but also allows for increased reengagement of the broader diagnosed patient population.

Next slide. On to prescribers. Endocrinology, both adult and pediatric remains consistent over the last few quarters as our top specialty accounting for 45% of prescribers. We are seeing an increase in the portion of new to Rhythm prescribers or physicians our territory managers had not previously called on directly prior to prescription, which now accounts for 28% of our prescriber base. This reinforces the conviction we have in our nonpersonal promotion efforts.

Lastly, we are seeing an increase in the depth of prescribers as 28% of them have written more than 1 prescription launch to date, which is up from 25% as reported on the last quarterly call. We remain focused on our greater breadth of prescribers over time as well as more and more physicians to identify additional patients and prescribe IMCIVREE for the second or more patients based off their own positive experience.

Next slide. Access and reimbursement remained consistent with regard to overall coverage by state Medicaid and the overall payer mix. If we look at Medicaid coverage through covered lives, launched to date, approximately 80% of Medicaid covered lives are in states with either a positive IMCIVREE policy in place or in a state where we have been able to gain positive coverage in at least one instance in the absence of an IMCIVREE policy. The remaining 20% of Medicaid live represents states where we either have not yet had a prescription for IMCIVREE that would trigger a covers decision or we are still working to secure access for a prescription or finally, where we have not been successful in gaining access through the appeals process.

The payer mix for BBS remains consistent at almost 90% of prescriptions, since launched, fall under commercial or Medicaid plans. The average time frame for approval is approximately 1 to 3 months with some tills extending out several months, consistent with our previous report. Overall, we are pleased with achievements to date in securing approvals.

Next slide. Now more than 1 year into launch, we are seeing a very strong rate of re-authorization for continued IMCIVREE coverage with approximately 75 positive reauthorization decisions. The vast majority of these re-authorizations are approved initially, and we have seen roughly a half dozen positive re-auth decisions come upon appeal. Most of these positive appeals had required additional clinical documentation to allow for a re-authorization approval.

We have had a few denials to date and we are in the process of appealing. To provide some color on these, we have patients who have experienced overall clinical benefit but have not achieved 5% body weight loss. For example, one had a re-authorization within 4 months of its IMCIVREE initiation, while our label outlines a 12-month efficacy touchpoints. Another patient saw other clinical benefits and was just shy of the 5% weight loss requirement. In both cases, we are working with the advocating physician and patients through the appeals process.

Next slide and final slide for me. We were very pleased to announce that a new ICD-10 diagnosis code was established for BBS. This is a long-term positive for the BBS community and for Rhythm, as this improved understanding of the diagnostic and treatment journeys of patients and may enhance access to physicians with BBS patients. We remain focused on engaging with the community to find already diagnosed patients while expediting the identification of individuals with BBS who do not yet have a diagnosis. We are excited about our progress and the opportunities in front of us.

With that, I'll hand it over to Yann.

Thank you, Jennifer, and good morning. Slide 19. Today, we are very pleased to announce that we have achieved a significant international milestone with more than 100 patients from 11 countries outside of North America on reimbursed therapy as of the end of October. Our first patients on reimbursed drug started with the AP2 program in France for POMC/LEPR efficiencies in March of 2022, and it has been a gradual and steady built since then as new countries came online for POMC/LEPR and that continues as new countries come online for BBS beginning with reimbursed early access in France and now fully launched in Germany.

Regarding the French AP1, pre-EMA approval reimbursed early access program for hypothalamic obesity, we are now working through the process to get it started. This program often starts slow because of the administrative requirements. We have not treated any visions yet under this program but we may be in a position to treat a few patients during the fourth quarter.

Overall, Europe is a key market for rare disease for Rhythm. European countries typically are better organized and more centralized in their approach to rare diseases compared to the United States. Even though these diseases are quite rare, the opportunity is meaningful. As a reminder, in the EU focus U.K., we estimate the prevalence for Bardet-Biedl syndromes to be 4,000 to 5,000 patients, which is a prevalence similar to the U.S. And we have already more than 1,500 patients identified in these countries. We are pleased with the progress to date in achieving market access for IMCIVREE in a large number of international markets.

Next slide. Our launch in Germany is off to a solid start following the unanimous decision of the German Federal Joint Committee, or G-BA, to exclude IMCIVREE from Germany's lifestyle exemption list and thereby, make it eligible for full reimbursement for BBS. Our team is focused on engaging with physicians caring for patients with BBS and with the many centers where they are treated. Building off our initial launch in POMC/LEPR, we have very well-established relationship in place as a handful of key experts already had positive experience with IMCIVREE. In addition, we benefited from a full commitment from key treatment centers and in parallel, our German team continued engaging with additional large academic centers in Germany's decentralized health care system.

We are seeing a strong average to therapy, thanks to our Rhythm@Home patient support program. Similar to the U.S. Rhythm InTune program, we provide support tailored specifically for each patient and their caregivers. For some, our support may come via phone call, others may receive at home visits and in genius report. Based on what we know about typical rare disease drug launches in Germany, we expected a steady and methodical start. With a strong foundation in place based on our POMC/LEPR experience, continuously increasing numbers of BBS treatment centers, and the positive impact of Rhythm@Home, we are very well positioned to achieve continued success in Germany.

Next slide. More broadly, we are making tremendous progress in engaging physicians throughout Europe. We had a very strong presence at the European Society for Pediatric Endocrinology in September with 4 oral presentations. 2 presentations showcase data that demonstrate setmelanotide's potential to reduce risk of metabolic syndrome, cardiovascular disease, and Type 2 diabetes in pediatric patients with POMC/LEPR deficiency or Bardet-Biedl Syndrome. We also presented data from our role genetic testing program through which we have collected more than 2,000 sequencing samples from individuals with severe obesity and hyperphagia.

In addition, we hosted a symposium titled, Hyperphagia and the early onset, severe obesity: and the role of precision medicine in the treatment of MC4R pathway disease. As you can see on this slide, it was very well attended, well, in fact, 400 physicians in the room. We look forward to continuing this momentum at our second international meeting on pathway-related obesities, the IMPROVE conference in December in Paris. We are looking forward to a series of presentations, discussions, and engagement focusing on rare MC4R pathway diseases, monogenic 1, syndromic like BBS and hypothalamic obesity with more than 150 leading physicians and scientists coming from more than 10 countries.

With that, I will turn the call over to Hunter in Boston.

Thank you, Yann. Rhythm remains tightly focused on global execution of commercial strategy across both our North America and International regions and continued development of the potential of IMCIVREE and our pipeline, all else staying committed to financial discipline and delivering shareholder value. Let's start with a snapshot of the Q3 P&L on Slide 23.

We recorded $22.5 million in net product revenue in the third quarter versus $4.3 million during the same quarter last year, an increase of $18.2 million. Q3 last year was our first full quarter of BBS commercial sales in the United States, which followed FDA approval on June 16, 2022. Quarter-over-quarter, we saw an increase of $3.3 million or 17% in net product revenue driven by continued growth in the number of patients on IMCIVREE therapy in both the U.S. and international regions.

In last quarter's results, we highlighted that $1.6 million of our revenue resulted from shipments to our specialty pharmacy in excess of amounts that if dispensed to patients, resulting in an increase in inventory days on hand at quarter end. This quarter, shipments to the DSP and dispenses to patients were very closely matched resulting in a de minimis difference in value because of the larger number of patients on IMCIVREE therapy at the end of the third Quarter, inventory days on hand at DSP decreased but remained within a normal range.

Gross to net for U.S. sales quarter-over-quarter decreased to 83% from 85% in the second quarter, primarily due to a Medicaid rebate adjustment in that quarter. Our practice is to accrue for Medicaid rebates based upon expected payer mix and when actual Medicaid invoices are received this may result in differences versus accrued amounts. Cost of sales during the third quarter was $2.4 million or approximately 10.7% of net product revenue, representing a slight percentage decrease quarter-over-quarter. Cost of sales consisted primarily of product costs, our 5% royalty to Ipsen under our original licensing agreement for setmelanotide as well as amortization of previously capitalized sales-based milestone payments.

R&D expenses were $33.6 million for the Third Quarter of '23 compared to $21.1 million during Q3 '22 and essentially flat compared to Q2 2023 R&D expenses of $33.5 million. SG&A expenses were $30.5 million for the third quarter of this year versus $21.9 million for the Third Quarter of '22 and also essentially flat quarter-over-quarter versus $30 million in the second quarter of 2023. In the Third Quarter, weighted average common shares outstanding were $57.9 million, an increase of approximately 1 million shares over last quarter, resulting primarily from our equity issuance under the ATM program during the quarter. Quarterly net loss per share was $0.76.

Now on Slide 24. With the third and final investment tranche of $25 million from our capped royalty financing agreement with Healthcare Royalty Partners and gross proceeds of approximately $50 million from our ATM program during the quarter, we are very well financed with $299.3 million in cash on hand. This cash on hand is sufficient to fund all planned activities into 2026. On the net revenue for this quarter of $22.5 million, 80% of these revenues were generated in the United States. The proportion of revenue generated by our international region increased from 14% to 20% quarter-over-quarter.

Year-to-date, net revenue was $53.2 million and North America sales account for 83% of that total. International sales growth continues with much of the quarter-over-quarter increase due to sales in Germany following the BBS launch with this third quarter being the first full quarter of BBS sales in Germany, as well as an increase in patients with BBS in France receiving commercial drug as part of the French AP2 program for reimbursed early access.

Third quarter operating expenses included total stock-based compensation of $8.5 million for the quarter, which represents $23.9 million in OpEx year-to-date. Lastly, we have narrowed the range of our non-GAAP operating expense guidance for 2023 to between $210 million and $220 million. Please note that this amount excludes stock-based compensation.

With that, I'll turn the call back over to David.

Thanks, Hunter. So I think hopefully, you've heard -- we're really happy with how the commercial opportunity is beginning to develop here, obviously, in the U.S., and now you've heard international is becoming an increasingly important part of this overall picture as it will continue to do going forward.

And on the HO side, just to highlight a moment of thanks here. I think thanks to our investigators and the patient community who have been incredibly engaged here in supportive of getting this trial going. Not an easy trial. It's a double-blind placebo-controlled to one, but you sign up with a chance you'll end up for a year on a placebo therapy. So again, I've been really pleased with the reaction from the community and their engagement here. And a final note, thanks to the Rhythm team, and not an easy trial is a complicated trial with (inaudible) information will be one of the -- perhaps our last chance to get this kind of robust information in a controlled trial setting. So they've done a great job, again, getting us to this position and putting us in place to be able to meet our end of the year enrollment targets.

So with that, we'll open it up to questions.

Our first question comes from the line of Corinne Jenkins from Goldman Sachs.

I guess a couple from us. Maybe first, how should we think about the development for RM-718 as compared to the way you developed IMCIVREE, will it largely mirror others or are there some kind of faster paths that you can take on that asset?

And then as a follow-up, kind of a separate question. Where are the bulk of these 100 international patients, both with respect to region as well as BBS versus the PPL indication? And how does that kind of compare to where you were at the end of September?

Thanks, Corinne. So I'll take the first one, and then Yann I'll turn it over to you. So on 718, there is a faster path. I mean you remember the very first trials that were done were IMCIVREE, we done in POMC/LEPR, leptin receptor biallelic patients. Again, we were learning about dosing, there was a lot of -- just we had to learn about the mechanism. So we benefit from all of that prior learning. HO, we had no clue of at that point and HO, as we have seen looks like a very sensitive model here. So again, a great place to start.

So the strategy for 718 will be after we've done our normal volunteer SAD/MAD, the single ascending dose and multiple ascending dose portions, of that volunteer study will have a cohort of HO patients, which hopefully will give us the insight that we need for dosing to then go to the additional indications. So it should go faster. It will go faster. There's no question we'll go faster. Yann, on the 100 patients?

Yes. So first of all, in terms of geographic repartition, 2/3 of the patients are in France and in Germany and the rest spread across 4, 5 countries; Turkey, Italy, Netherlands, U.K. The split between POMC/LEPR and BBS right now it's about 50-50, which is the reason because we did launch POMC/LEPR first but given the more important prevalence BBS, we will catch up quickly and BBS will outpace POMC/LEPR soon.

Our next question comes from of the line of Phil Nadeau from TD Cowen.

Congrats on the progress. 3 from us, 2 pipeline and 1 commercial. On the pipeline, in terms of the HO pivotal study, should we look at the 25.5% mean BMI reduction that was shown in the 12-month extension as a reasonable proxy for what could be seen on the primary endpoint in the HO Pivotal? That's the first question. Second, any update on the M&A enrollment?

And then third, in terms of commercial, curious to hear your most recent estimates of how penetrated the U.S. diagnosed BBS market is, any sense of the number of diagnosed patients that are out there today?

Sure. So let me take the first 2. So is the 25% a good proxy? I mean, obviously, that's an incredibly robust result. We're very happy. I've said many times, it's a little bit less about the magnitude of the change because we have a heterogeneous group of patients. We have very young kids, we have older adults, we're mixing them all together. So that confounds a little bit, that number going to read through. But what is remarkable is the consistency of the response. I mean, literally, every patient in that trial if they took the medication is having a response. So we're powered for a 10% difference. I think there's little risk, knock on wood, that we wouldn't do better than that, and the 25% speaks to that level of it. We're highly powered, 99% better powered to show the (inaudible). So a long way of saying, I don't think you can take the 25% necessarily as a read-through, but it's highly (inaudible) in this patient group.

And then M&A, so we're making progress there again. We haven't highlighted it so much because we're still -- it's still a work in progress. But I think we sorted out the issues which put us well behind here on that trial, and that trial is now and running, enrolling strongly. A couple of the cohorts are enrolling ahead of 2 of the other cohorts, which is not unexpected, we didn't expect all 4. So I think what we'll do is we'll be reading out in '24 -- or sorry, we'll announce in '24 that we fully enrolled this year study once we're fully enrolled for -- when at least 2 of those cohorts have been rolled.

And then on the commercial side, in terms of penetration, Jennifer, I mean, again, we make these epidemiologic estimates of 4,000 to 5,000 and there's uncertainty in those numbers. But how do you think -- penetrating against that?

Yes. So we have not updated the number of patients that have been diagnosed. I would just say that -- and we've been targeting more in terms of those 2 have had a prescription -- but with that said, the teams are doing an amazing job just in terms of their education efforts, and we continue to get more and more patients or find HCPs that have BBS patients who are educating to have them also diagnose additional patients. I would say that in terms of opportunity that remains, there still remains a large opportunity in terms of not only defined but also the pull-through in terms of diagnosed patients to an IMCIVREE prescription. So lots of opportunities that still remain ahead.

Our next question will come from the line of Derek Archila from Wells Fargo.

Congrats on the progress here. So just 2 from us. So I guess of the physicians that have written more than 1 script for BBS, I guess how long between the first script do they write the second? And I guess, do you find the driver being them going out and finding more patients or just getting more experience with the drug and they already had patients that they're treating and then they start treating those? So that's question one.

And then the second, I guess, what is left to be done to get HO patients on IMCIVREE under the AP1 system in France? And I guess how do we think about the magnitude of the impact next year on new patients on therapy from that?

So I would say that the timing is variable because the situation is also variable physician by physician. Some were physicians that had more than 1 patient, even prior to our launch. And that could take time just in terms of that patient coming back in to have a dialogue with the physician, just in terms of interest to get on to therapy. And then there's also others that through our education efforts, they diagnosed the first patient.

And similar to rare disease, once you find that first patient it's no longer this unicorn that's not in your practice, but something that you need to pay attention to, just in terms of differential diagnosis of additional patients that have come to them in the past or will be coming to them in the future. To remember that understanding the different symptoms to get to a clinical diagnosis is important to bear in mind. So it's a bit of a mix of both of them, and both of those also impact the timing in terms of the first to the next prescription.

Okay. And Yann, maybe just a little bit more color on the process for the AP1 HO and then how should we think about 2024?

Yes, sure. So first of all, of course, we are very pleased with this achievement. It's very rare. And to get such a pre-EMA approval in France based on Phase 2 data. And to be more precise, there are just 2 rare disease therapies with such status in France. So as mentioned, we are now working through the process and to answer your question, these programs have administrative requirements so we get it granted and now we have to go through a few steps. One is agreement in terms of data collections with the centers of reference and the French FDA. And the second is also the center of reference like setting up multi-disciplinary mid-decision-making meetings to review the patient cases. So and that's usual and we have been through that with POMC/LEPR and also with BBS, so we know how it works and it is the same for all the rare disease drugs. So those steps are currently -- we are working on them.

For your second question, in terms of number of patients, it's a bit difficult to say today what we know because we have been -- it has been known and we have been reached out by a lot of experts, and we are working also with experts. There are a lot of patients who are in need, and we have a lot of physicians interested to treat these patients. So as soon as we will have this administrative requirements ready, we will have the first prescriptions and the first patients will be treated, still difficult to say how much in 2024.

Our next question from the line of Dae Gon Ha from Stifel.

2 from us, one on the commercial and one on HO. So on the commercial front, I thought it was interesting you pointed out the divergence between your experience versus CRIBBS. Since you do have a significant proportion of prescribers being (inaudible). I was wondering what kind of strategy are you thinking in terms of penetrating that segment of the market, I guess, a little bit more aggressively and have more representation in your prescriber base?

And just to clarify on the nomenclature, is it your going guidance is going to be on prescriptions? Because you've previously talked about start forms. I just want to make sure that's what we should be looking at next.

And then on HO, if you can maybe go into the screen failure commentary a little bit more, David. I guess, what are the dynamics you're seeing with regards to enrollment? And how are you balancing rapid enrollment to reach that 4Q completion date and ensuring you avoid any compromises along the way?

Sorry, for clarification. The metric is the stat forms that we are focused on, and they're new stat forms do not repeat scripts for the same patient. And regarding your question regarding the CRIBBS piece, for sure, the pediatric endocrinologist that is a treater and prescriber for IMCIVREE remain a key specialty focus of our teams. And that's one that our territory managers are calling on but we also supplement their efforts just with a lot of nonpersonal promotion efforts.

We knew upfront that when we took a look at that CRIBBS distribution of 80% less than 18 years of age, that these patients do not die at 18 years of age and so we knew that there were a lot more patients either that were diagnosed and lost in the system and oftentimes, they may stop going to specific physicians. So there was quite a breadth in terms of different specialties that we wanted to educate to get to those adults, which I think has been helpful in addition to the on-ground field team efforts in terms of getting to the human distribution of patients that feels a bit more right just based off of the base distribution of BBS patients in general.

Great. And then Dae Gon Ha, on the HO screen failure rate -- so just to put that number a little more specifically, I think we've had 4 screen failures with over 2/3 of the patients screened are actively in screening. And even in that small number of screen failures we've had at least one patient who's been brought back in to rescreen -- there was a minor issue, and so they may ultimately turn out to be not a screen failure.

And the reason it's so low is when we started this effort, and we're looking at picking the sites, we probably had a total -- the sites themselves had their list of patients, which were easily more than 2x the number of patients we needed to enroll in this trial. So they were all starting with a list of patients. They weren't looking and as we said, they knew the entry criteria, they don't want to disappoint patients. So they're bringing in patients who they feel, based on their knowing the patient that they meet entry criteria and therefore, the risk of screen failure is low. So in pushing to enroll this trial, I have no fear, if you will, that we're going to have a low-quality patient enrollment, meaning people are working on the edges. I think we're going to have patients who very much meet entry criteria because there's, like I said, a good selection of patients who are eager to get in.

And our next question will come from the line of Jeff Hung from Morgan Stanley.

You talked about a couple of patients that didn't meet the 5% weight loss who are going through the appeals process. Do you have a sense for the proportion of BBS patients that discontinue based on the 1-year recommendation? And then how does that compare to what you've seen for the other approved mutations and then I have a follow-up?

So the patients that I referred to just in terms of not meeting the re-auth requirements for the 5% weight loss is really at this point just a had pool of patients. There are not many that fall into that category, but even so because of the belief from the physician as well as the desire for the patient to remain on therapy, we are helping them through the appeals process just in terms of trying to maintain with them in terms of authorization there.

You were asking a separate question, I believe, on the discontinuations on therapy overall. So we now do have a larger number of patients who have been on therapy for a longer period of time since our launch. And the discount rate to date has crept up a bit from the 10% that we had outlined to 13% of our Xs. The reason why have not really changed just in terms of why they are discounting, I would characterize it as almost half of them for more personal reasons and about half of them for adverse event reasons. It is still an opportunity, though, for our teams just in terms of follow-up because the hyperphagia for those who are responding does come back quickly and they may consider coming back on therapy in the future.

Great. And you mentioned that about half or upwards of half of discontinuations are for personal reasons. Do you have any data indicating the proportion of those who discontinued for coming back to be treated again? And then my follow-up question was that for the prescribers who have not written more than one prescription, are the main reasons because they are relatively new to prescribing setmelanotide or they don't have additional BBS patients or maybe something else?

Yes. So I'll answer the last question first. So the reasons are variable, they may only have 1 patient. Just in terms of a lot of our scripts also is patients who have been on therapy for a shorter period of time. So that may be the case, just in terms of the recent for the one script. And it may also be the case just in terms of physician having 2 patients where that patient either has not come in or is not ready to initiate therapy. In terms of the other question...

Personal patients and the personal reason group and have any of those come back or likely to come back.

I see. We don't have enough data right now in terms of that point, just to outline or I don't have it on me right now. I do know that there have been a couple of patients who discontinued and wanted to restart therapy because of the hyperphagia, but it's only a handful at this point of time.

The other thing, Jeff, just on the 5% in general in terms of how people experience some benefit. This is a group because of their underlying mechanism, their inability to respond to some of the other therapy, certainly diet and exercise, and some of the other medications isn't there. And so simply stopping the weight gain is a major advantage. And then as Jennifer said, the overwhelming story we've heard as we recounted on all these calls is just the acquiring of their hyperphagia ability to 'leave the table, leave food on the table' is a pretty significant change for them.

And our next question is from the line of Whitney Ijem, from Canaccord Genuity.

Going back to France and thinking particularly about BBS, can you remind us, I guess, where you are in the conversations for sort of regular way reimbursement? I know the logistics of the early access are slower than presumably it would be once you can flip over to regular reimbursement. Just curious where you are in the timing around that?

Well, yes, sure. So we have started the pricing negotiations with the pricing committee. It usually takes between 9 months to 2, 3 years. We think that we will have an end mid-next year, something like that. So we are in the third round technically and so far it has been good, from both an understanding of the unmet medical need and the benefit from IMCIVREE and also the relationship and the openness and the transparency in the discussion. So we are at the beginning for something that should end mid- next year.

Perfect. And then on 718, I guess, can you remind us, I know you've talked about it being more potent in terms of its activity at the receptor. Is the idea behind the TPP there better weight loss kind of efficacy picture or lower dosing, safety profile or just how you're thinking about that?

Yes. It's actually not -- I think Whitney it's not more potent technically in terms of activity at the receptor, but it's more specific. So that's the major feature here, which is our current setmelanotide as you know, we hit both the MC4 and the MC1, which contributes to the hyperpigmentation and so we've removed that -- it's very specific. So the probability we will have hyperpigmentation is low, and we have animal data to support that. So that's the major advantage here. And then, of course, it's weekly so we have convenience and of course, we have an IP protection that goes out to 2041. And so those are the major elements that make this a really critical program for us.

And our next question will come from the line of Joseph Stringer from Needham.

With regards to the upcoming Phase 3 readout in the 2- to 6-year-old BBS patients, just curious, do all the patient identification work that you've done for BBS to date in the U.S., how many do you estimate are in that 2- to 6-year-old range? And would you expect to see sort of a bolus or how do you think that would impact the launch if and when the label is expanded to include those patients?

Yes. So maybe I'll lead and Jennifer can add anything here. I think, it's not a large number of patients. What we see is a higher hit rate when a 2- to 6-year-old group is screened, that very early onset -- obviously, the history is very good there. They have true early onset obesity and so the screening hit rate is a little bit higher in that group and so that's an important part of this, number one. But it's not a large number of patients, so there won't be a big impact to the overall patient population.

But I think what's really important about this, A, it's a genetic disease, you want to treat all patients getting in early, it's hugely important. So medically, I think this is very important. And it also builds, I think, an increasing recognition about what differentiates these diseases and the need to manage and think about them differently. So it will help us in different ways, but the absolute number will not be large.

I'm not showing any further questions in the queue. I'd like to turn the conference back to David Meeker, Chairman, CEO, and President for close remarks.

Thanks, Victor. So thanks again, everybody, for tuning in and excited about the progress we're making, as you've heard, and we very much look forward to seeing everybody or hopefully, people will be able to either show up in person or call into our R&D Day on December 6, where we have updates.

We'll have a hypothalamic KOL from our hypothalamic obesity world. So that will be interesting in addition to the data updates on our 718 program, the Daybreak trial and we will provide the data on the pediatric trial at that time. So with that, we'll sign off. Have a good day.

This concludes today's conference call. Thank you for participating. You may now disconnect. Everyone, have a great day.