Rhythm Pharmaceuticals, Inc.
Q3 2021 Earnings Call Transcript

Published: 2 Nov 2021

[Operator:]

Good day and thank you for standing by. Welcome to the Rhythm Pharmaceuticals Third Quarter Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. Please be advised today’s conference is being recorded. I would now like to hand the conference over to our speaker today, David Connolly with Rhythm Pharmaceuticals. Please go ahead.

[David Connolly:]

Thank you, and good morning. I'm David Connolly, Head of IR and Corporate Communications here at Rhythm Pharmaceuticals. For those of you participating via conference call, the accompanying slides can be accessed and controlled by going to the Events section of the Investors page on our website at ir.rhythmtx.com. This morning we issued a press release that provides our third quarter 2021 financial results and business update, which is available on our website. As listed on slide 2 with me today here in Boston for the conference call are David Meeker, Chair, President and Chief Executive Officer of Rhythm; Linda Shapiro, our Chief Medical Officer; Jennifer Chien, Executive Vice President Head of North America; and Hunter Smith, our Chief Financial Officer. With 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 factors including those discussed in our most recent annual report on file with the SEC. In addition any forward-looking statements represent our views only as of today and should not be relied upon as representing our views as of any subsequent dates. We specifically disclaim any obligation to update such statements. With that, I'll turn the call over to David who will begin on slide 5.

[David Meeker:]

Thank you Dave, and good morning everyone. We're very pleased to report another strong quarter of execution for Rhythm. And I'll remind you that we're building Rhythm piece by piece, gene by gene and like I said very pleased with the progress to date. The first slide is to highlight four areas of high focus for us. One is, of course, the commercial experience with IMCIVREE. Second, is looking forward to the anticipated Bardet-Biedl and Alstrom's launch in 2022; third, is to build out our global presence working with health care systems first and prominently foremost in Europe, but we will increasingly look beyond there. And fourth, to continue to advance a robust clinical development program, which has the ability to meaningfully increase the addressable patient population. Now quarter three is a quarter with multiple highlights and again with continued execution. First the US IMCIVREE launch is progressing and meeting expectations. As we said, we expected to have tens of patients on treatment and that's -- that view of the world has continued to hold. We were pleased with the net sales, clearing $1 million for the quarter but more importantly we're really happy about the learnings that we're beginning to accumulate from this initial commercial experience, which will lay the foundation for our subsequent Bardet-Biedl launch. And in the international markets, Europe specifically reimbursement dossiers have been filed in major markets and some of the smaller markets as well. And we're in advanced discussions with the three major markets; Germany, France and the UK. Second, as we advance toward BBS launch in mid-2022 as you know the regulatory submissions have been filed in both the US and Europe. In the US we've fully hired a highly experienced field team and Jennifer will provide you with more color around that. So a year ahead of anticipated launch, we feel like we are in a good place so I'm looking forward to that event. Third, we had a very strong presence at medical meetings with 22 presentations at three major medical conferences. Positive data was presented from a variety of different clinical data sets with world renowned KOLs presenting setmelanotide data in a noteworthy category. We have our first data on health related quality of life and additional data on hunger and weight scores across a number of different genetic diseases. Linda will provide a little more color on that in her presentation. And finally, the clinical development programs remain on track with EMANATE DAYBREAK pediatrics and weekly trials advancing to first patient in, and I will provide a little more color on our testing program in a slide or two. Before we get to that on the next slide, Slide number 7. I just want to remind you there's an efficiency, to rare disease community building, which we are taking advantage of. And in the rare disease setting, you often -- you have a limited number of centers of excellence, a limited number of KOLs and they serve multiple purposes. And so you can focus your efforts very much around these sites. Not only do they run the trials, service key opinion leaders, they're also the same physicians health care providers, who diagnose and actually treat these patients. And what we're doing is, pursuing a hub-and-spoke model where that center of excellence the clinical trial site, is at the center and then we will work with a surrounding set of treaters, interested parties, who are potential referral sites. I'm referring into that site and over time some will become their own center of excellence depending on the level of interest. Moving to Slide 8. Here's a brief update on our testing program. We've had several generations of our screening -- genetic screening panel. In May, we went from a 40 gene panel that we reported out on, to reporting out on an 80 gene panel and that panel includes all the genes of interest to Rhythm, in terms of, genes we believe are closely linked to the MC4 pathway, but it also includes a number of genes that would be of interest to the obesity treater, at large meaning other genes that might help inform what is the underlying driver of that patient's obesity. So what this pie graph shows is, on the order of 55%, of patients who present with a history of early onset obesity and hunger, are likely to test positive for one of the genes of interest, meaning a gene that would qualify that patient for entry into the EMANATE trial, or the DAYBREAK trial which is an additional 31 genes we've yet to explore but have some reason to believe they may be related to the pathway, or be potentially eligible for commercial therapy, with IMCIVREE. Now of note in that 55%, 1.96% almost 2% of the population, who are biallelic for Bardet-Biedl or the ALMS1 gene, which is the gene that is responsible for Alstrom's syndrome. So that percentage is a noteworthy percentage. There's much more to be learned. We don't know that all of those patients -- their genetic defect is driving their underlying obesity or that they will even go on to develop Bardet-Biedl, but it opens up a whole another avenue, for better understanding this disease and Rhythm is going to play a leading role in driving that exploration. With that we'll move on to Slide 9. So Slide 9, is just to remind you again that we do have a broad pipeline and it underscores the fact that I think we have a legitimate pipeline, in a product and Linda, will provide a little more color on our progress across this portfolio in her section. And with that I'll turn it over to, Linda.

[Linda Shapiro:]

Thank you, David. This is an exciting time for Rhythm, as our efforts around Bardet-Biedl syndrome are coming together on many fronts, putting us in a position to bring to patients, the first ever therapy to address the unmet needs of hyperphagia and severe obesity that affect the lives of patients and families living with this disease. Bardet-Biedl Syndrome or BBS, is a clinical syndrome with many features, including severe obesity from an early age, and an insatiable hunger or hyperphagia, which impact the health and quality of life for parents -- for patients, their families and caregivers. There is currently no effective treatment and we know from interviews and our work on health-related quality of life in patients and families, with BBS that was presented this week for the first time, just how dire the need is to control hunger and to stop thinking about food all the time. This quarter, as David said, we are one step closer, to delivering a transformative new treatment option to patients having completed our regulatory submissions in the US and EU. Setmelanotide has demonstrated clinical efficacy and safety, as well as, meaningful improvements for patients and their families, caregivers and health care providers. And we look forward, to reviewing some of these data today. Slide 13. The severe impact that BBS has on the lives of patients and families, is significant and we've made tremendous strides this quarter in documenting, qualifying and quantifying this impact. But the patients, caregivers and families clearly speak, best for themselves. As their quotes on this slide, from in-depth qualitative interviews that we conducted, with patients with BBS and/or their caregivers point to the stress and guilt of denying food to children with hyperphagia and point to how the world revolve around food which limits their focus on anything else. Pause here for an opportunity for you to read through some of these quotes. During our company all hands meeting, we heard last month from the mother of a child with Bardet-Biedl syndrome and her story reinforced our understanding of the impact BBS has on families and underscore the unmet need that exists in this community. She told us about the significant weight gain evident by two years old that continued as off the chart rate of weight growth and the challenges she faced in school with weight gain including physical, as well as social difficulties. She told us it was very tough. These first-hand accounts reinforced our understanding of the impact BBS has on families and underscore the unmet need that exists in these cases. Slide 14. This quarter we completed regulatory submissions for Bardet-Biedl syndrome and Alstrom syndrome in both the United States, as well as the European Union. In September, we submitted a supplemental new drug application to the FDA for IMCIVREE the branded name of setmelanotide for the treatment of obesity and control of hunger in adult and pediatric patients six years of age and older with BBS or Alstrom syndrome. We requested priority review from the FDA as part of the application. Based on FDA timelines we will know in November if our supplemental NDA has been accepted with priority review. And if granted that would mean a target FDA review period of six months from that date of acceptance. In October, we submitted a Type II variation application to the European Medicines Agency for IMCIVREE for the treatment of obesity and control of hunger in adult and pediatric patients six years of age and older with BBS or Alstrom syndrome. The review timeline in Europe is calendar based and we would expect a decision from the European Commission in the second half of 2022. We are confident in these submissions as they are based on data from the Pivotal Phase III trial in which setmelanotide achieved clinically meaningful and statistically significant reductions in body weight and in the unrelenting hunger associated with these syndromes. And these submissions include a series of comprehensive narratives for each individual patients supporting our belief that IMCIVREE has the potential to offer the first therapeutic option for the early onset, severe obesity and unrelenting hunger that characterize these syndromes. On Slide 15, here's a reminder of the trial design of our Phase III trial evaluating setmelanotide therapy in patients with Bardet-Biedl syndrome and Alstrom syndrome. This trial began with a 1

[Jennifer Chien:]

Thank you, Linda. I start on Slide 26. Our strategy of making IMCIVREE commercially available in the US is meeting our expectations through these first two full quarters. As David said, in the third quarter we reached $1 million in net sales and we are pleased to report that patients are getting access to IMCIVREE with positive coverage decisions and reimbursement. We remain focused on HCP engagement and walking them through the process from start forms and authorizations and if needed support throughout the appeals process. Our corporate accounts and patient service teams which are new this past quarter are making a significant difference. And most importantly, in communications with patients on IMCIVREE, we are hearing positive feedback. An adult man, who was constantly distracted by hunger for as long as you can remember, now forget to eat. And this next report really speaks to what we are providing. Among who told us IMCIVREE therapy resulted in weight loss and reduced her daughter's obsession and constant drive to eat. She was able to tell her 11-year old daughter, see this is not your fault. On Slide 27, looking to BBS, Linda shared some details on how devastating BBS is for patients and families who have no approved therapy. As we have previously communicated, prevalence estimates for BBS are 2,500 in the US and the same in Europe. The community has come together around the need for a therapy and relative to patients with biallelic POMC PCSK1 or LEPR deficiencies, they are known to the health care system. We know there are more than 600 patients in the US-based CRIBBS registry. And in the EU4 and the UK, we estimate there are a total of 1500 diagnosed BBS patients. As we know from experience in rare disease, these initial prevalence estimates are usually low and we consider them a starting point as we actively engage with the community to diagnose and find more. On Slide 28. Our US commercial availability strategy for POMC, PCSK1 and LEPR deficiency obesity enabled us to put the infrastructure in place that allows for access to IMCIVREE now. It also lays the groundwork to set up for success for the BBS launch. Looking ahead, our near-term priorities are clear

[Hunter Smith:]

Thank you, Jennifer. I'm on slide 34. During the third quarter, Rhythm reported product revenue net of $1 million. All revenue came from the United States. There were no revenues during the comparable quarter of 2020. Loss from operations was $44 million, an increase of $10 million over the comparable quarter in 2020, due to increases in both clinical trial activity, as well as higher headcount in our research and development, commercial and general and administrative functions. Operating loss was offset by approximately $9 million tax benefit, reducing the tax provision we made in the first quarter, due to our sale of the priority review voucher. Our share count was 50.2 million basic and diluted shares and loss per common share was $0.70, a decrease of $0.07 versus the third quarter of 2020. We concluded this quarter with cash, cash equivalents and short-term investments of $328 million, which we believe to be sufficient to fund Rhythm's operations into the second half of 2023. And now, I'll turn the mic back over to David, so he can conclude. Thank you.

[David Meeker:]

Thank you, Hunter. And hopefully as you've heard, we had a really good quarter in quarter three. Linda highlighted the significant progress we've made across our clinical development program and look forward to that continuing for the balance of Q4 and into 2022. The large presence that we've had in medical meetings and it's obviously important to share new data and you've heard some of that also a critical component in increasing awareness and drawing further attention to the problem of rare genetic diseases of obesity. And as you heard from Jennifer, we are continuing to make good progress in preparing for a very meaningful opportunity we believe that the Bardet-Biedl launch and I have to say in my years of experience working in the area of rare diseases, I think the team that has been built and is in the process of being built, it has experience with anything that I have worked with and so we have a good challenge in front of us, but we certainly have the team and capabilities -- who have the ability to execute on that. So, the last slide is just again try to put in perspective Rhythm and the opportunity in front of us. As we've talked about the initial approval for POMC, PCSK1, and LEPR biallelic deficiencies, we believe they're on the order of 600 to 2,500 that the data around that we're still learning and beginning to explore it. But over time that number will grow. It starts small and again we're meeting expectations. Nothing's changed in our forecast or guidance there if you will. But the opportunities ahead of us some are much more significant. Bardet-Biedl and Alstrom's because as a syndrome they are more easily identified and therefore, we start with a much larger number of patients who have been diagnosed based on their clinical presentation. We project on the order of 2,000 to 3,000. But this is a group where again based on past experience, epidemiology can often underestimate the number of patients that may be out there. The work that we're doing with the URO testing the genetic screening where patients are presenting with that history of early onset obesity and hunger a not insignificant number of them have genetic defects, biallelic defects for Bardet-Biedl and Alstrom. And as I said whether they will ultimately go on to full-blown presentation remains to be seen but it does provide a bit of a window into perhaps the fact that yes, for sure, there have to be more patients out there who have yet to come to diagnosis. So, we'll continue to push on that. And finally, just to remind you EMANATE trial is five sub studies and each one of them will read out independently. They're independently powered. And any one of them offers a very meaningful increase over our current opportunity you can see the numbers projected here. So, they're all 20,000 individuals US-only opportunities. And then DAYBREAK trial, which is a very efficient as we've explained in the past way of looking at the additional 31 genes we believe are linked to the pathway and we should in a relatively rapid way I hope and even get insights into a number of these genes as to whether they in fact are driving that underlying early severe obesity presentation. So, with that, I'll turn it back to the operator and open it up for Q&A. Thank you.

[Operator:]

Thank you. Our first question comes from the line of Phil Nadeau with Cowen and Co. Your line is open.

[Phil Nadeau:]

Good morning and thanks for taking our questions and congrats on all the progress. Just a few from us. First on the BBS sales force already being deployed. Are there goals for the sales force in terms of number of HCPs contacted or a number of BBS patients engaged by the time of the approval midyear next year?

[David Meeker:]

Jennifer?

[Jennifer Chien:]

For the current BBS territory managers are provided with different targets. The first number of targets starts with the approximately 125 HCPs that were already within our sphere that have BBS patients. So, the engagement of those initial positions will remain a key target for them. In addition to that as we outlined on the call, there's an opportunity in terms of disease educating a broader set of physicians who may have BBS patients. This includes follow-up of physicians who have biallelic patients through – discovered through our URO program. There are – in addition, we have been working through machine learning, to also learn about the histories and journeys of patients, who have BBS. And through these learning's, we are able to do more accurately identify HCPs, who may have BBS patients within their care that can also be a target for follow-up. So they do have a tiered list of physicians that, they are following up with already identified BBS patients, as well as potentially having BBS patients that they can educate and get to a clinical diagnosis.

[Phil Nadeau:]

Perfect. That's very helpful. And then second on the quality of life data, what drove the improvements in quality of life for BBS patients? Was it hyperphagia specifically BMI changes or some combination of the two?

[David Meeker:]

Yeah. Thanks. Linda?

[Linda Shapiro:]

Sure. That's a great question. The way the questionnaires are designed, it does not drive down into that detail, but to your point it likely is a combination of both – and the weight specifically the adult questionnaire the Impact of Weight on Quality of Life is designed about weight, but there is a component where the hyperphagia is – where the hyperphagia could have improved the quality of life as well. Q - Philip Nadeau Perfect. And then – sorry, go ahead.

[David Meeker:]

No, I was just going to say about half of the hunger question here could only be done by those patients, who do not have cognitive impairment and in the BBS world there are some number of those, and so in that smaller subset, where we could link the hunger to the quality of life benefit it did mirror.

[Phil Nadeau:]

Perfect. Okay. And then last question for us. In terms of the EMANATE and DAYBREAK trials, what's limiting to getting those first patients in the door? Is it finding the patients or are there other start up activities particularly at the sites that are gating?

[Linda Shapiro:]

Yes. Great question. So we're going through the standard process of start-ups. So we're completely aligned to our timelines and on track, so there is no limitation per sequential, we're just following through the steps. We have actually a number of patients lined up at the sites. So once we turn on the green light, they'll be ready to go and we anticipate quite a bolus in the beginning for those patients, who are already lined up.

[Phil Nadeau:]

Perfect. Thanks for taking our questions. And congrats again on the progress.

[David Meeker:]

Thank you.

[Operator:]

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

[Joseph Stringer:]

Hi. Good morning, everyone. Thanks for taking my questions. First one is just a general question on comparing the relative launches from – for IMCIVREE initial launch Baine L'Alleud versus Bardet-Biedl and potential launch for Bardet-Biedl and Alstrom's. What are the – do you expect to sort of hit the ground running in terms of if the approval does come in second quarter of next year, would you be ready to sort of launch commercially soon thereafter or what are – are there any gating factors around that? And the second question is around the potential contribution ex-US versus US in terms of sales for Bardet-Biedl and Alstrom's. It seems like the patients are a little bit – there's more identified patients ex US it seems like there's maybe a little bit better infrastructure around patient ID and things like that ex-US. So just curious, if you could compare and contrast US versus ex-US. relative contributions to that? Thank you.

[David Meeker:]

Okay. Jennifer, yeah.

[Jennifer Chien:]

Thanks for the question. So, I think that there are for sure differences just in terms of the initial launch around IMCIVREE for the PPL indication. One of the biggest differences is just in terms of the teams that were in place to really start the process of educating, and also – and are facing with our customers. We didn't really have the teams in place for the initial launch also based off of the very low number of PPL that were also diagnosed and our expectations in terms of sales as outlined in the past has been depends in the first couple of years. Things are very different for the BBS launch. We have hired the team that will be in place to really position us for being able to hit the ground running once we get the approval within the BBS indication. And as aforementioned on this call as well there are a significant more number of BBS patients, because of the fact that they're still in enrollment and more easily identified that we would be able to expect to be able to get on to drug, if we were to get approval next year. As it relates to patient numbers, I would say that in terms of Europe, they are more well-organized just in terms of genetics and getting patients who are suspected of genetic diseases to specific specialty centers to get genetically diagnosed, which also sticks to the volume of patients that have been identified as BBS and Europe or international versus the US, but I'm going to also shift it over to David to provide a bit of more color on that perspective.

[David Meeker:]

Yeah. Thanks, and Joe I think just to maybe add one more thing on the US is we, unlike the first POMC LEPR where the where we had almost no patients in the US, a significant number of the patients in the development program did come from the US and so they'll be available and easier to transition. Second is that the products in the channel. And unlike the initial launch where there was the usual start-up just given the supply chain established and so that's the US. Europe as Jennifer said is absolutely more -- well better organized larger number of patients. We've talked about 1,500 patients being available across the EU4 in the UK, meaning these are patients that are well-identified and sitting with in centers of excellence. The gating factor for Europe as we all know is you work country-by-country in terms of getting reimbursement and establishing pricing. Access may come early in some country and may be quite delayed in the other. So the big issue there will be just the timing of reimbursement. I hadn't mentioned it, but we expect first sales on our first approved indication over there in the first half of 2022, obviously, the BBS and AS filing is running in parallel to the FDA filing of setmelanotide.

[Joseph Stringer:]

Great. Thanks for taking question.

[David Meeker:]

Okay. Thanks Joe.

[Operator:]

Our next question comes from the line of Corinne Jenkins with Goldman Sachs. Your line is open.

[Corinne Jenkins:]

Yeah, good morning everybody. Just curious as you've engaged in the various medical conferences you've attended this fall. What have you learned specifically from the community with respect to BBS either on the clinical need or with respect to the physician's view of the setmelanotide profile?

[David Meeker:]

Thanks Corinne. I think I'll lead off and then I'll let Jennifer or Linda jump in. You know, the very interesting thing is you do clinical trials and they're driven by p-values and the top-line data where -- but that doesn't really tell you the whole story and I think it's become absolutely clear it doesn't tell us the whole story here for BBS and Alstrom's. And what's been most enlightening in the recent data sets have been the interviews. So we had exit interviews done and that will be coming out as a publication in the not too distant future, and I think it is in one of the posters and if you look at the quotes it's in the quote that I think you really begin to understand the devastating impact of this disease. I mean you heard a couple today from both Linda and Jennifer, one that stands out in my mind and that is -- and I think it's in the poster if it's not in the publication but a young child at the age of four who has taken away from his family, because the family was viewed by the social services as overfeeding their child and essentially abusing their child and was put in a facility for 1.5 years for something that was absolutely not his fault. So those are -- that's where the nuance is coming in. And Jennifer did report out the market research data where physicians presented with the profile of this drug, 75% of them said they would prescribe it first line and I think in an area where disease awareness is relatively low and you're educating on both the disease at the same time you're educating on the drug. That's a pretty remarkable recognition again that this is an emerging area and the unmet need is absolutely clear. So I don't know if that helps but that's the kind of thing that we're learning today that we didn't have last time we spoke.

[Corinne Jenkins:]

Yeah, that's helpful.

[Linda Shapiro:]

I'll just quickly…

[Corinne Jenkins:]

Go ahead.

[Linda Shapiro:]

I'll just quickly tag on and support that, whether it's through the market insights from physicians, or patients, or the interactions with physicians themselves. The aspect of the obesity and hyperphagia even in this syndromic indication really pops up, in terms of being one of the key priorities of addressing within this particular patient population simply because of the impact that it has not only on the patient, but as well as the caregiver family. So it is definitely a need out there where physicians are waiting to have something to be able to specifically address the needs of the patient population.

[Corinne Jenkins:]

Thanks. And then as we think about the growth in the URO testing, can you help us understand whether that's primarily driven. And how you expect it to be driven on the forward of new HCPs or just existing HCPs that are already doing testing, testing more-and-more patients?

[Jennifer Chien:]

So…

[David Meeker:]

Yeah. Yeah go ahead.

[Jennifer Chien:]

Look, in addition to the territory managers that are on ground, which are a team that's also supporting the ongoing efforts that were put in place through our MSLs. We also have our -- area development managers. And in terms of testing initiatives, as I outlined in the last earnings call, we have put in place efficiencies around our URO program that should make it easier for physicians to be able to order kits, and test, and see the results. So the initial target will definitely be educating physicians who are already testing, to see if there is interest in terms of increasing the volume, through the efficiencies. But certainly they also have additional targets that are keys just in terms of increasing awareness around RGDO in general, suspecting and then testing as well.

[David Meeker:]

And Corinne, let me just add one other thing. There's a poster in the most recent posters that just went up on our website, which speaks to our URO testing program. And we describe in there the number of kits that have been request -- physicians, health care providers requesting kits and the number of returns. So on the order 1,400 health care providers have returned kits. So for me, that's just a fabulous starting point in terms of physicians' health care providers who are clearly indicating an interest recognizing that genetics may be driving it. The vast majority or the majority if you will are and medical genetics again all of this is in the poster. And the other piece which -- in the top 10, again back to your question and Jennifer's answer, the high utilizers today are driving the bulk and the real opportunity are those health care providers who sent in one test. They've signaled an interest. They've already done it once. And so the ability to scale from there is good. And then last, I just want to -- what's also really interesting in that posters that I'm talking about is the, the number of the age of the patients who are being tested. And fully 20% are less than six years old. And another 30% are between the ages of seven and 12. So 50% are children and for a genetic disease not a surprise. You would expect these kids to be presenting early. The problem essentially arises at birth and parents notice it. And they seek help. So a lot to be learned there, but a lot -- like I said I think, we have a lot of optimism around the opportunity and the role that URO testing is going to play in this overall development.

[Corinne Jenkins:]

Great, thank you.

[David Meeker:]

Thanks, Corinne. Next question?

[Operator:]

There are no further questions at this time. Now I'll turn the call back over to David Meeker.

[David Meeker:]

Great. Well thanks to all of you for tuning in this morning. And we look forward to talking to you again, in three months' time, at the fourth quarter update. That's all. Goodbye. Thanks everyone.

[Operator:]

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