Welcome to the Rhythm Pharmaceuticals First Quarter 2022 Earnings Conference Call. My name is Hilda and I'll be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. I would now turn the call over to David Connolly, Investor Relations and Corporate Communications. You may begin.

Thank you, and good morning everybody. I'm Dave Connolly, Head of IR and Corporate Communications here at Rhythm Pharmaceuticals. For those of you participating via the 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 first quarter 2022 financial results and business update, which is available on our website. As listed on Slide 2, today here with me in Boston for the conference call are David Meeker, Chair, President and Chief Executive Officer of Rhythm; Jennifer Chien, Executive Vice President, Head of North America; Linda Shapiro, our Chief Medical Officer; Hunter Smith, our Chief Financial Officer; and Yann Mazabraud, Executive Vice President, Head of International, who is on the phone joining us from France. With Slide 3, I'll remind you 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 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.

Thank you, Dave, and good morning, everyone. Thank you for tuning in this morning, and we look forward to updating you on the progress we’ve made in quarter one. But before I do that, I'd like to start on Slide 5 with a bit of an unusual start here. This is a cartoon of our biology; many of you know this slide well. And as we all know, it's been a particularly difficult moment in the markets generally, and it's been particularly difficult for small and midcap biotechnology companies. And I think at moments like these, it's worth looking at fundamentals, which are always important but particularly so at these kinds of moments. So I want to spend a couple of minutes just reviewing Rhythm's fundamentals. So number one, there is a clear unmet medical need that we are pursuing here. Patients who have a genetic variant that impairs the MC4 pathways suffer from hyperphagia and decreased energy expenditure and, consequently, onset obesity and all the comorbidities associated with that. Two, the biology is incredibly strong as highlighted on this slide. It's been well-studied. The pathway that we are pursuing, the MC4 pathway, along with the endogenous ligand, alpha MSH, interacts with the MC4 receptor. When it engages, it decreases the appetite, increases energy expenditure, and achieves a reduction in weight. We have shown in multiple trials that that’s associated with other benefits as well. Third, we have a precision medicine solution to this problem. Setmelanotide is an analog for alpha MSH, and when it engages the receptor, you get all those benefits. We are essentially a replacement therapy; it's very simple conceptually and biologically. We are working in a world where other approaches to try to manage this problem have not been reliably successful. In bariatric surgery, you can get weight loss but you get it reliably and sustainably. That’s the same for other approaches to weight loss management. We have de-risked most things that fail in this industry, and we are fortunate enough to get setmelanotide through the regulatory process in both FDA and EMEA. We have an approved drug with another one or two indications imminent coming up. From a pure risk standpoint, this is a company that's passed one of the major hurdles that we all aspire to. Five, we know what we need to do commercially, clinically, and financially. We have the team to do it. What you are going to hear as we continue to update you is that we are executing, and as I said, I feel really good about the fundamentals that we're standing on. So with that, let's go to the quarter. On Slide 6, we are on-track. Let's talk about the US first. We are very much looking forward to our PDUFA date on June 16th. We have used the time well, as you can imagine, with continued active patient identification and disease education efforts, and Jennifer will highlight and provide a little more color around that effort. The current commercial opportunity is playing out exactly as we had hoped. We have tens of patients on therapy. We continue to learn more about the market access situation. We are able to educate payers, and those interactions are laying a strong foundation for a BBS launch. Importantly, as we have highlighted in the past, we continue to interact with patients who have consented into our patient services group, now called In Tune, and that is hugely valuable insight as we think about how we can provide the best service for those patients and how we can help them manage through the early part of beginning therapy like this, the daily administration, the early side effects, and that can all be significantly benefited by that strong interaction. The international markets are an incredibly important part of our whole story. I'll spend a little bit more time talking about that in the next slides coming up. But suffice it to say, as we look at Europe, we have highlighted this many times for all rare diseases, and it's certainly the case in the areas that we are working. Europe is better organized, a single-payer healthcare system where patients get referrals, centers of excellence get set up, and true KOLs or thought leaders emerge out of that. They have the opportunity to see many patients and can do research. As a result, there tend to be many more patients identified. Once you get approval through the healthcare system for access, the process of getting patients on therapy is much more straightforward. In our third bucket, we have a broad clinical development program, which we have put in a tremendous amount of work to get these trials up and running, and they're now running. EMANATE, DAYBREAK, hypothalamic obesity trial, pediatric weekly formulation trials, all ongoing. We’re generating a lot of data and we're publishing that data. Just had abstracts released at the Pediatric Endocrine Society this past weekend and we announced on Monday new additional abstracts which will be presented at ENDO, and Linda will highlight those in more detail. Finally, as you know, we're looking forward to providing updates on our hypothalamic study and our MC4R respirable interim data; that will happen mid-year.

Thank you, David. So beginning on Slide 11 here. We last shared details of our BBS commercial readiness efforts in February. With PDUFA and launch coming June 16th, we aim today to provide some more details on the tremendous progress our teams have been making. As we outlined before, the estimated prevalence of BBS in the US is 1,500 to 2,500 patients. We know approximately 70% to 90% of these patients have obesity. We consider these patients in four distinct categories. The first are those who remain undiagnosed. Similar to other rare genetic diseases, the vast majority of patients remain under the care of health care providers who have not yet suspected or clinically diagnosed the patient. This remains a large opportunity. The second category includes those patients under the care of health care providers who have suspected BBS, but may not have yet definitively diagnosed them. Physicians may continue with additional evaluation before verifying a clinical diagnosis. In disease states where there is no approved therapy, there may be less urgency to come to a specific diagnosis. Having an approved therapy often aids in raising awareness of the disease and some urgency towards making a diagnosis. The last two segments consist of diagnosed patients; our territory managers have validated more than 150 physicians who are managing over 350 BBS patients under their care, and we continue to find additional BBS patients through our efforts.

Thank you, Jennifer. We're now on Slide 16 to discuss a brief update on our regulatory progress. Our PDUFA goal date for Bardet-Biedl and Alström syndrome is about six weeks away on June 16th, and labeled discussions are anticipated to begin in the coming weeks leading to the final step. In Europe, we anticipate the CHMP will make its recommendation on our Type 2 amendment for BBS this summer with the full decision to come from the European Commission in the fall. We do have a recent update to report that last week CHMP provided a positive opinion on a modification to the SmPC, the EU label, with recommendations to expand the use of IMCIVREE in patients with moderate and severe renal impairment and biallelic POMC, PCSK1, or leptin receptor deficiency. The final EC decision on this amendment is anticipated in July, and the same amendment modification request is being considered as part of the scheduled review for BBS.

Thank you, Dr. Shapiro. Turning to Slide 25, as David mentioned at the start of the call, we are pleased to report product revenue of $1.5 million from the first quarter of 2022, compared to approximately $35,000 in the first quarter of 2021. While sales during the quarter included our first sales from outside the US, sales volumes did not significantly affect the quarter's results given how late they occurred during the quarter and the limited number of initial prescriptions involved. Cost of goods sold was $230,000 in Q1, with the largest portion of this figure being amortization of sales milestones paid to Ipsen. Rhythm previously paid Ipsen a milestone of $5 million for the first US sale, and during Q1 paid a $4 million milestone covering the first sale in Europe. These milestones will be amortized quarterly. COGS also include the 5% royalty payment payable to Ipsen. The loss from operations was $52.7 million in the quarter, an increase of $18.3 million over the first quarter of 2021. R&D expense increased by $12.6 million to $32.5 million, primarily due to higher clinical trial expenses involving the startup of our EMANATE, DAYBREAK, and weekly formulation switch studies. In addition, Rhythm purchased $3.8 million of clinical supply material during the quarter. SG&A expense was $21.4 million in Q1, an increase of $6.9 million versus the first quarter of 2021. The increase was largely the result of increased headcount costs in our U.S. and international commercial organizations, as well as increased marketing spend. Consistent with the results in Q1, we expect our full year 2022 operating expenses to increase over 2021 due to increased clinical development activities.

Thank you, Hunter. I think as you've all heard, we have a lot underway. In the box on the left, what's most noteworthy is that we had a very daunting task of getting all these clinical trials up and running, and they're all basically up and running. We look forward to many upcoming events including the PDUFA date, EMEA approval, as you've heard, lots of data that we are reporting out, some of that in the first half, launching in Europe, and starting in France, Germany, and the UK, with Italy to follow and also getting that last de novo study as part of our weekly overall development plan in the second half. So again, very much looking forward to those events; it will be a very important year for Rhythm. And now we welcome your questions. So with that operator, we can go to Q&A.

And we have a question from Phil Nadeau from Cowen and Company.

This is Layla on for Phil. Thank you so much for taking the question and congrats on the progress. Maybe really quickly on the Phase 2 data expected in hypothalamic obesity. Can you maybe just give a brief overview of what you might consider for the concept there, and in terms of the proportion of patients achieving a reduction in BMI? What would you need to see to progress development?

So the endpoints are focused on changes in body weight, BMI, and other BMI related measures in the pediatric population, along with hunger and hyperphagia scores. I don't think at this time we can comment on what we would need to progress. However, in the middle of the year, we will be announcing the data and plans if appropriate thereafter.

The FDA has very clearly outlined that a 5% threshold for weight loss and BMI change is clinically significant from a regulatory standpoint. We would need to see at least that. We're looking to make a meaningful difference here. As Linda said, when we evaluate that data, we won’t be looking to just barely clear the hurdle. So again, I’d be looking for something north of that 5% improvement.

Just a couple of questions from us. First on the BBS launch, I'd love to get a sense of how you think the trajectory could go and if there are any good analogs you could point to. Is this something we expect more of a slow trickle or a bolus of patients, given the outreach you've done? Second, regarding the Germany sales, how many patients have you actually identified in that country now that you're starting to sell?

I’ll go to Jennifer first on the US launch and then Yann, I’ll turn to you for some comments on Germany.

In any rare disease, especially when there's no therapy available, it's difficult to accurately project the trajectory of any response. That said, the BBS launch will be different in terms of expectations versus what we saw with the PPL approval. We feel very good about the strong number of patients that have already been identified today. Once again, in an area where there’s no therapy available, the starting point and where we are is quite strong. With the territory managers in the field, we have a corporate accounts team in place. Rhythm in Tune actively sets expectations, and we have a team that is quite anxious and ready to support the launch and get patients on drug and stay on IMCIVREE. So we are confident about a successful launch here, and there is a lot of excitement that we hear from the community, patients, caregivers, and physicians.

In Europe, we have more than 100 patients already identified as biallelic patients, and Germany represents roughly more than one sale of this number.

Just one follow-up if I can squeeze it in. In terms of the US and the moving parts around payer and reimbursement for BBS, any update on ensuring the indication will get paid for?

From a commercial payer perspective, we have had very strong reimbursement across the board in terms of coverage of IMCIVREE. There are a couple of different plans that have not made decisions and are opportunities for our corporate accounts team to educate and follow up as they move forward in their dialogs with various payers. From a Medicare perspective, because of the CMS statute on weight loss medications, we expect that we will not be successful in terms of coverage there at this point. That said, the BBS patients we have identified are primarily younger and more likely to have commercial and/or Medicaid coverage. On the Medicaid side, we see states that are covering IMCIVREE, those that have not yet made a decision, and those that have weight loss exclusions. The latter two are opportunities for our teams to educate and differentiate our target populations from the broad obesity population. We do not expect to achieve 100% coverage across the board. However, we feel positive about our ability to change the current landscape. We are already seeing a positive reception to our value story. Even in states that have outlined excluding IMCIVREE, we have been able to get patients through the process on drug. It's an evolving process where there are numerous opportunities to continue to educate.

Are you able to comment on whether you have already started engaging the FDA on the labeling discussions for BBS? How much of an overlap is there between those physicians that take care of BBS versus the biallelic PPL? Just wondering about the COVID impact, as we’ve heard certain KOL institutions still restricting in-person sales rep meetings.

On the engagement with the FDA, as we've said previously, we expect that engagement at some point roughly a month ahead of time, and that’s all we’ve had; no further updates there.

In terms of the overlap for physician engagement between the PPL patient population, many of the physicians we were already engaging were also managing BBS patients. We have identified some new physicians through our outreach who have not previously prescribed for PPL, and we are actively engaging them now.

We came to identify the genes by consulting with key opinion leaders who are experts in this field as well as looking into our preclinical data to identify those that are likely to have the greatest potential impact of impairing the pathway and being responsive to setmelanotide. Those two genes, which are part of the SISTEMA 3 family, were identified because of their strong relevance to MC4R pathway.

If neither one of those show any effect, then we’re done with the pathway. Conversely, if we see a significant effect, we’ll dive more deeply into the pathway. So the de-risking will occur through that. I think your question is how tightly those two are linked to all the others; there isn’t a short answer.

First one is on the CVS Alström. Did FDA request any additional data analysis since you initially announced an update in February? On EMANATE, do you anticipate the SRC1 and SH2B1 subsetting to proceed faster just given the higher prevalence relative to the other sub-studies?

Yes, we do anticipate faster enrollment of SRC1 and SH2B1 due to their higher prevalence compared to the other studies. Regarding the FDA, we haven’t received any new additional requests for data other than what we had spoken about previously. We submitted our periodic benefit-risk evaluation report as part of our regular requirements, and they may have asked follow-Up questions after that. Otherwise, we’re on track.

What led to the modification concerning moderate and severe renal impairment on dose escalation and lower max dose? Is that based on post marketing data, and how is it affecting the FDA review?

We conducted a trial in patients with renal impairment, mild, moderate, and severe, and assessed the pharmacokinetics. Based on that data, we submitted it to both the FDA and EMA, addressing the different regulatory pathways.

I want to thank all of you for tuning in. If there are any questions that we did not get to, please submit those to Dave Connolly, and we'll work to respond to those individually. Thank you for tuning in.

Thank you. Ladies and gentlemen, this concludes today's conference. Thank you for participating. You may now disconnect.