Rhythm Pharmaceuticals, Inc. Q2 FY2021 Earnings Call

Good day and thank you for being here. Welcome to the Rhythm Pharmaceuticals Q2 2021 Earnings Conference Call. Currently, all participants are in a listen-only mode. Following the presentations, there will be a question-and-answer session. I would like to now turn the call over to our speaker, David Connolly, Head of Investor Relations and Corporate Communications at Rhythm. Thank you. Please proceed.

Thank you. Good morning. I'm David Connolly, Head of IR and Corporate Communications here at Rhythm Pharmaceuticals. With me today for our second quarter financial results and business update conference call are David Meeker, Chair, President and Chief Executive of Rhythm Pharmaceuticals; Murray Stewart, our Chief Medical Officer; Jennifer Chien, Executive Vice President, Head of North America; Yann Mazabraud, Executive Vice President, Head of International, who is dialing in from Europe this morning; and Hunter Smith, our Chief Financial Officer, who's here in Boston with us. 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 of our website, ir.rhythemtx.com. This morning, we issued two press releases, one of which provides an update on our comprehensive expansion of clinical development program, with five new Phase II and III trials planned to evaluate setmelanotide in rare genetic diseases of obesity and a second press release that provides our second quarter financial results and business update. Both press releases are available on our website. On today’s call, on slide two, David will provide an overview and some introductory remarks. Murray will provide an update on regulatory and clinical development plans, Jennifer will provide an update on US commercial, Yann will provide an update on international, and Hunter will provide an update on our finances and balance sheet. Lastly, the team will be available to answer questions. On slide three, I’ll walk you through our forward-looking statement. I’ll remind you that this call will contain 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.

Thank you, Dave. And I'd like to offer my welcome to everyone for Rhythm's first quarterly earnings call. Starting on slide 5, as Dave highlighted, it's been a highly productive quarter. Not a lot of flashy headlines, but we're really pleased with the significant progress that we've made. And I think you’ll hopefully appreciate that, particularly on the clinical development front, which Murray will walk you through. Some of the highlights from the second quarter. On the clinical side, again, many discussions with the FDA and EMA leading to our current state with a newly named Phase III EMANATE trial, our newly named Phase II DAYBREAK trial, and then the Phase III study in pediatrics, children ages two to six, and then two Phase III trials for our weekly formulation. We've been very encouraged by our first full quarter of IMCIVREE availability. We're learning a tremendous amount, which Jennifer will walk you through, and we are making significant strides in building out our infrastructure. We got our European Commission Authorization for IMCIVREE, and we knew this was coming, but an incredibly important milestone, nevertheless. And I'm very happy with the indication, the labeled indication that we've got. We're approved for the treatment of obesity and the control of hunger. We have hunger in the US label, but in the European label, it is included in the indication, and again, signals the importance of that aspect of this disease, given the underlying biology. Yann's going to take you through the progress in Europe and outside. We recently announced our agreement with Medison Pharma to commercialize IMCIVREE in Israel. Again, he’ll go into a little more depth there. But this agreement signals, again, our commitment to go global with this opportunity. The CRIBBS collaboration, again, recently announced, is an important step certainly for the BBS community and Rhythm as we work to learn more about that opportunity and support that community. I firmly believe, in the area of rare diseases, when you get a drug approved, you're truly just at the beginning of understanding that opportunity. By nature, you have very few patients that may have been treated in the clinical development program. So, much of that learning does begin at that point and this collaboration will give us a real opportunity to learn much more about the natural history of this disease. And, of course, we'll continue to track the benefits as patients move on to IMCIVREE. And finally, URO, our gene panel that we support and offer to the community, which is the backbone of virtually everything we do. And we've provided an updated panel now that extends to 80 genes, and Jennifer will walk you through a little more on that aspect.

Great, thank you. Let's go to slide 10. As David said, we've been busy. We've been holding multiple meetings with both the FDA and EMA, and we're pleased to report out today that we've achieved agreement on regulatory submissions and several clinical trial designs, which are important steps as we work to expand the label for setmelanotide. We submitted a briefing document to the FDA and did a pre-SNDA meeting with them to discuss the content of the regulatory for Bardet-Biedl and Alström Syndrome. The meeting was successful, and the FDA has agreed to review the BBS and Alström data independently. And while we're cautiously optimistic, given the totality of the data, we do know that the more limited Alström data will not negatively affect our BBS submission. So, we are on track to complete and submit a regular package for supplemental NDA to the FDA in this quarter. For Europe, we also had a successful meeting. And we're on track to complete our submission seeking a Type 2 amendment to our European Marketing Authorization in the fourth quarter. But we are excited about the transformational expansion of our clinical development program, with five new Phase II and III trials, all of which meaningfully broaden the rare genetic disease of obesity patient population we can help with IMCIVREE. The pivotal EMANATE trial studies five specific genes in the MC4R pathway, representing approximately 100,000 to 200,000 patients in the US who may respond to setmelanotide, with a similar number in Europe.

Thank you, Murray. If you go to slide 23, you'll see that our main focus is building a community and providing educational resources and expertise as well as tools for identifying, testing and supporting the diagnosis of patients. Diagnosis supports the identification of patients who may be eligible for one of our clinical studies, but also supports identification of patients who may be eligible for IMCIVREE. We are leveraging the clinical development program, its growing network of trial investigators, in addition to diagnosing and treating physicians at referral centers to build this community, which in turn will help support our commercialization efforts. Genetic testing, of course, remains at the center of our corporate strategy. For us, that means uncovering rare obesity, or URO, our free genetic test designed to identify and help physicians diagnose patients with rare genetic diseases of obesity. As David mentioned, we extended the panel to test for 80 genes with ties to obesity.

Thank you, Jennifer. And good morning, everyone. It is a very exciting time for Rhythm at the international level. Two weeks ago, we announced that the European Commission granted marketing authorization to IMCIVREE for the treatment of obesity and the control of hunger associated with genetically confirmed loss of function, biallelic POMC, PCSK1 or LEPR deficiency in adults and children six years of age and above. IMCIVREE is the first and only treatment option available for patients in Europe to address the underlying cause of obesity driven by certain genetic defects in the melanocortin-4 receptor pathway. In Europe and many key countries in the Middle East, South America and elsewhere, we are executing on a similar strategy as Jennifer's team in North America, with, first, a focus on community building to support the robust clinical development program already detailed and the commercial efforts. Second, securing market access for IMCIVREE on a country by country approach. And third, planning for BBS launch next year.

Thank you, Yann. And now I'll do a brief review of the second quarter financials. IMCIVREE net revenue was approximately $274,000 in the second quarter, and there was no revenue in the comparable period of 2020. R&D expenses totaled $25 million and SG&A totaled $15.5 million for a net loss of approximately $35.4 million. Shares outstanding were $50.2 million and our net loss per share was $0.70. Rhythm remains very well capitalized. As of June 30, 2021, cash, cash equivalents and short-term investments were approximately $368.2 million, including net proceeds of $98.4 million from the sale of our PRBs and proceeds of $162 million from Rhythm's underwritten public offering which closed in February. This is sufficient to fund our operating expenses and capital expenditure requirements into at least the second half of 2023.

Great. Thanks, Hunter. So, hopefully, what you've appreciated is that we're about halfway through a transformational year for Rhythm. The first half of the year was marked by our announcement of proof of concept data in the het patients, SRC1, SH2B1 deficiency obesity. And we updated you on the genetic sequencing and epidemiology data at that time. Jennifer gave you a little more insight into those efforts, which of course are continuing. We have, as you've heard, made IMCIVREE commercially available and we started our Phase II hypothalamic obesity trial. The second half has even more milestones. The EU decision has already come in. We will present full data analysis from the pivotal Phase III trial in BBS at ESPE in 2021. We will have our US and EU regulatory submissions for BBS and Alström. We're initiating the Phase III trial in peds, the Phase III EMANATE, the Phase II DAYBREAK and two Phase III trials for the weekly formulation, as you heard from Murray, and we will be presenting initial data from the Phase II ongoing basket study in the MC4, our rescuable patients and initial data from the Phase II trial in hypothalamic obesity in the first half of 2022.

Congratulations on all the progress. Just a few clarifying questions on the new trial designs that were announced this morning. First, on the EMANATE trial, are you enrolling variants, pathogenic, likely pathogenic or VUS for all six genotypes or are those specifically for POMC and LEPR with the other genotypes enrolling just pathogenic variants?

Starting in reverse order with the last one. So, the last one, by definition, is just one variant, so it's a deletion in N221. So that stands alone. Regarding SRC1, SH2B1, we will include people with pathogenic variants. But we don't need to stratify for them, for most those will be pathogenic variants. It's particularly important for the hets to stratify by the pathogenic and VUS. So, it's just two that we're particularly stratifying for.

This is Avatar Jones on for David this morning. We have two questions. First, on the CRIBBS registry collaboration, do you anticipate this partnership will have an impact on, one, patient identification or a launch trajectory in Bardet-Biedl syndrome? And our second question is on market access. Can you possibly provide any quantitative metrics to date?

The CRIBBS registry has approximately 625 BBS patients within their registry, with a goal of having approximately 675 patients by the end of the year, and the vast majority of these patients are from the US. So, a credible source of information just in terms of launch preparation. In parallel with that, as I outlined, we are working with our already existing MSL team and are currently recruiting BBS territory manager team. And because BBS is syndromic, we have the opportunity to be even more targeted in terms of our disease education efforts and also patient identification efforts. In parallel with this, through our just broad RGDO disease education efforts, we are also uncovering biallelic patients that have BBS genes. So, there's already existing patients in the hundreds in the US that have been identified to support a robust launch. And we will be, of course, moving forward just in terms of supplementing that with additional patient finds through our field efforts.

Congrats on the progress for me as well. I have a few focused on commercial. As of right now, can you give us an idea of what the distribution is? Just based on what percent are commercial payers versus what percent are government payers? And then, as you look forward to enrolling the EMANATE trial, you've given us an idea of basically when you expect to file. And so, how have your patient finding efforts resulted in you getting confidence at the rate of enrollments of the study?

Yeah, I think, on the commercial side, Jennifer, just you want to – if we provide, we can't provide full – probably a lot more detail here, Tazeen. But the majority of the payers that we've talked to and have enrolled so far have been commercial payers, by far. And we have been in the Medicaid population, the majority of the Medicaid that we have been working with, we have enrolled to date, again, have been positive, not 100%. But I don't know if that helps.