Good day and thank you for standing by. Welcome to the Rhythm Pharmaceuticals Q2 2023 Earnings 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 that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Dave Connolly, Executive Director of Investor Relations and Corporate Communications. Please go ahead.

Thank you, Bella. 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 a press release that provides our second quarter 2023 financial results and a business update, which is available on our website. As listed here on Slide 2 is our agenda. Here with me today in Boston are David Meeker, Chair, Chief Executive Officer, and President of Rhythm Pharmaceuticals; Jennifer Chien, Executive Vice President, Head of North America; Hunter Smith, our Chief Financial Officer; and Yann Mazabraud, Executive Vice President, Head of International is on the line joining us from Europe. And 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 presenting our views as of any subsequent date. We specifically disclaim any obligation to update such statements. With that, I'll turn the call over to David Meeker, who will begin on Slide 5.

Thank you, Dave, and good morning. Thank you all for joining today. Q2 was a very good quarter. We will delve into the details of the quarter in our presentation, but first, let me provide some broader context for these results. Rhythm has two primary drivers of value creation: BBS commercial execution and HO clinical development. Additionally, we have various efforts that may offer significant potential upside. The fundamentals we have discussed many times remain strong. The biology is well understood. Impairment and signaling through the MC4 pathway results in hyperphagia, which is uncontrolled hunger due to a lack of a fullness signal, combined with reduced energy expenditure, leading to obesity. There is a growing recognition that not all obesity is the same, and patients with impaired signaling through this pathway have a distinct condition that requires a specific approach. Also, the unmet medical need is clear. Treatments for general obesity may have limited effects on individual patients. For instance, while my craving for ice cream may decrease on a GLP-1, it does not address the underlying issue. Impairment in MC4 pathway signaling results in lower levels of the endogenous hormone alpha-melanocyte stimulating hormone. Setmelanotide acts as an analog of alpha-MSH. We represent a precision medicine that serves as a hormonal replacement. Why wouldn't you replace the hormone if it's deficient? Furthermore, our drug is effective. Having been approved for multiple genetic disorders and with strong proof of concept data in hypothalamic obesity, we are now seeing meaningful real-world impact. Patients are choosing to initiate treatment and are largely remaining on it. Moving on to the quarter, we are now one year post-approval for BBS in the U.S. We have previously discussed whether it's appropriate to trend quarter-on-quarter script numbers, and the answer remains the same. No, don't trend these numbers. However, you can now view a full year of data and conclude that BBS is developing into a significant rare disease opportunity. The patient community is engaged, the number of doctors prescribing continues to grow, and the payer community is recognizing this as a unique rare disease rather than a mere extension of general obesity. Our teams are executing well, and our confidence is growing. We hope yours is too. We are making good progress on our Phase 3 study for hypothalamic obesity and have expedited our enrollment timeline to the end of the year due to progress at our sites. I wish fewer vacations were taken, but patients are ready and waiting. Our six-month long-term extension data demonstrate continued reductions in BMI at six months, and we anticipate updating you on the 12-month data in the fall. I will briefly discuss our Phase 2 long-term extension data shortly. Additionally, we have several trials reporting results in the second half of this year, including DAYBREAK, pediatric, and weekly switch studies. We will showcase these results in an upcoming R&D session in Q4, and we are eager to introduce our next-generation program, RM-718, which I will discuss in the next slide. Our RM-718 is a more specific and potentially more potent molecule, uniquely targeting MC4R without impacting MC1R, thus eliminating the hyperpigmentation effect associated with MC1R agonism. It is also a weekly formulation with patent protection extending to 2041. We are maintaining the option to continue our current weekly program but will defer the initiation of the weekly study until 2024, when we will finalize our strategy pending further development of 718. Our goal is straightforward: to develop a better drug with significantly longer patent protection. We look forward to sharing more details at the upcoming R&D Day. On the following slide, we are reminded of the overall opportunity. We initially focused on POMC and LEPR, with BBS and HO representing meaningful rare disease populations that can be diagnosed more easily, particularly since the HO population is largely diagnosed today. Furthermore, a significantly larger world potentially opens up with the M&A trial population. In the next slide, we remain fully committed to launching our global Phase 3 trial. As discussed earlier, the challenge is not patient interest, but navigating the bureaucracy at clinical trial sites. We are overcoming these hurdles, with one-third of the sites now open and about a quarter of the patients screened. Screening progress is promising because very few patients fail to meet screening criteria. Physicians have their patient lists, understand the entry criteria, and invite patients accordingly. Based on our current progress, we are adjusting our targeted enrollment completion date from Q1 2024 to the end of this year. On the next slide, we revisit the six-month data presented at ENDO, which shows continued BMI reductions over time in the majority of patients. The blue bars illustrate the data from 16 weeks, while the red bars reflect the six-month results. In summary, on the next slide, we present increasingly robust indications that are progressing well. More updates will come later this year on our pediatric program, the weekly program, DAYBREAK open label results, and the 12-month data from HO patients in long-term extension studies. I will now hand the call over to Jen.

Thank you, David. We are now one year into our BBS commercial launch for IMCIVREE, which was approved by FDA in June 2022. We are very pleased with how the launch has progressed, and I am proud of the team for all we have accomplished and most importantly, IMCIVREE is now making a positive impact on the lives of hundreds of patients and families in the United States. Now beginning here on Slide 13. Throughout the year since launch, we have heard from many patients with BBS who have benefited from IMCIVREE therapy. Just last week we hosted in our office a patient summit to formally launch our patient ambassador program. We welcomed eight patients and/or their caregivers, all who are active participants in our live or virtual speaker programs designed to continue building the BBS community and offer peer-to-peer support. Hearing and learning from other patients with BBS or their caregivers can be tremendously powerful as each patient and family is on their own journey with BBS in IMCIVREE therapy. On this slide, you see a picture of Kathryn, who was diagnosed as BBS when she was six years old and struggled throughout her teens and early 20s with hyperphagia, that pathological hunger that leads to abnormal food-seeking behaviors and severe obesity. She tells us how she was hungry all day long and snuck food every night. Now at age 28, having been on IMCIVREE since last September, that hunger no longer consumes her energy, and she is able to enjoy life more. She learned about IMCIVREE through our digital non-personal promotion effort, attended one of our programs to learn about IMCIVREE and began participating in our InTune patient support service program. Almost one year in, she tells us how she is sleeping better, able to focus more and participate in a number of activities, and is currently writing a book about her experiences. She is a remarkable young woman, a truly inspiring and powerful advocate. And we are very grateful to her and others who continue to share their stories and voices. Next slide. Our experienced teams continue to execute at a high level and we couldn't be more pleased by all the progress we have made throughout this first year of launch. We are seeing strong continued demand for IMCIVREE, the first and only approved precision medicine for BBS patients with hyperphagia and severe obesity. Throughout the launch from June 16, 2022, through the end of the second quarter of 2023, we now have received more than 425 new BBS prescriptions, which includes robust growth through the second quarter where we received more than 125 prescriptions. In addition, more than 250 physicians have written prescriptions and we have received approval for reimbursement for more than 250 prescriptions. We continue to identify more BBS patients and work to speed diagnosis. Physicians continue to recognize the benefits of IMCIVREE and prescribe it for their patients. Additional patients continue to initiate and maintain on IMCIVREE and payers see the value and differentiation of IMCIVREE as they approve reimbursement. Moving to the next slide with some details on physicians who are writing IMCIVREE prescriptions. The specialty breakdown remains consistent with what we have reported at the end of the first quarter of this year. Launched to date, endocrinology, both pediatric and adult, remained a top specialty at a combined 45% since launch. Pediatricians and general or primary care combined come in at just under 40%. Also, the portion of new to Rhythm prescribers for physicians our territory managers had not previously called on directly prior to prescription accounts for about 26% of our prescriber base. This continues to give us confidence in our non-personal promotion efforts as an effective supplement to our field team by educating a broader physician and patient population. Lastly on prescribers, since launch, more than 25% of them have written two or more prescriptions, which is a growing percentage of repeat prescribers. This is our goal to have greater breadth in prescribers over time, as well as more and more HCPs who identify additional patients and prescribe because they see the value of IMCIVREE for their patients through their own experiences. Next slide. On access and reimbursement, last quarter, we shared a similar slide showing the breakdown of states where we've had success on IMCIVREE Medicaid coverage, as well as those we have not had success based on covered lives. I'm pleased to report that we have seen incremental improvement in gaining access over the last quarter. Launched to date, approximately 80% of Medicaid covered lives are in states with a positive IMCIVREE policy in place or in a state where we have been able to get at least one positive coverage decision in the absence of an IMCIVREE policy. The remaining 20% of Medicaid lives represents a mix of states in which we either have not yet had a prescription for IMCIVREE that would trigger a coverage 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. This marks a 5% shift in our favor over the last quarter, where we reported a 75%-25% breakdown. Additionally, the payer mix for BBS does remain consistent as almost 90% of prescriptions since launch fall under commercial or Medicaid plans. The average timeframe for approval is approximately one to three months, with some tails extending out several months consistent with our previous report. Overall, we are pleased with achievements to date and securing approvals. Next slide. Here's some details on patients with BBS with prescriptions and on drugs. Adults now account for approximately 54% of prescriptions received since launch. This speaks to an opportunity identified upfront. In the CRIBBS registry, we knew approximately 80% of participants were 18 years of age or younger, which is not representative of the age distribution of the overall BBS population. We believed many older patients may have been lost to follow up or lost in the system. So we put plans in place to find them through non-personal promotions, educational webinars, engagement with the BBS foundation and more. Kathryn, the woman on my opening slide today, is a prime example of this. She found us with a little digital help after IMCIVREE was approved. Lastly, on access, and this becomes more important as we look ahead to coming quarters is our re-authorization rate. While the majority of the re-authorization decisions are made at 12 months on therapy, some plans do have three or six-month re-authorization requirements. We are very pleased to report that launched today, we have seen 50 re-authorization approvals with only one patient who did not meet criteria. This was a patient who was not compliant on medication. Next slide is my final slide on patient identification. With our bolster confidence and the need for a targeted therapy like IMCIVREE and the benefit it can provide, we remain focused on educating the community to find already diagnosed patients while expediting the identification of individuals with BBS who do not yet have a diagnosis. Our efforts over the last several quarters have shown to be effective, and we continue our engagement with all key stakeholders, along with our overall community building efforts. We are excited about our progress over the last year and the opportunities we have ahead of us. With that, I'll hand it over to Yann.

Thank you, Jennifer, and good morning. Slide 20, we start with a reminder. Europe is a key market for rare diseases. As we have spoken before, European countries typically are better organized for rare diseases and more centralized in their approach to care than the United States, with single payer healthcare systems, government-funded genetic testing and more established networks of experts and referral patterns, multiple centers of excellence and patient advocacy groups. Even though these diseases are quite rare, the opportunity is meaningful for us in both POMC or LEPR deficiencies and Bardet-Biedl syndrome. In the EU4 plus UK, we estimate the prevalence for biallelic POMC/LEPR to be between 600 and 2,500 patients, and we have identified approximately one of the patients being cared for in these countries. For Bardet-Biedl syndrome, our estimated prevalence in the EU4 plus UK is 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 this country. With our growing international team, we remain focused on identifying more patients and continuing to collaborate with country-level authorities and centers of excellence to gain more investment and access for these patients. Next slide. Overall, we're a global leader in IMCIVREE, now available in more than 10 countries outside the United States. We are now approved and available for both POMC and BBS in Germany. In France, we are available for the same indications under paid early access program. We also have full coverage for IMCIVREE for POMC in England, Italy, and the Netherlands. And we are currently conducting pricing negotiations for BBS in the UK, Italy, Spain, and the Netherlands, with BBS launches planned in Italy and Spain for this year, and in 2024 in the UK and in the Netherlands. We also have achieved early access sales in Spain, Austria, Turkey, United Arab Emirates and early access in Argentina. And we have initiated reimbursement processes in Belgium and the Nordic countries. Next slide. Lastly, an update on our launch for BBS in Germany, where the G-BA, which is the German Federal Joint Committee, did recognize the fact that IMCIVREE is precision medicine, excluding IMCIVREE from its lifestyle exemption list and made it eligible for full reimbursement by the statutory health insurances for patients with BBS and POMC, PCSK1 and LEPR deficiency. Our launch in Germany, which kicked off in late April 2023, is off to a strong start and our focus remains on collaborating with leading experts to educate the physician community on the MC4 pathway and overcome the typical joint physicians' conservative mentality when it comes to new drugs. Patient identification also is a key focus. We estimate that the prevalence for BBS in Germany is approximately 1,200 patients. We believe that there are about 800 patients diagnosed and of those 800, we have identified physicians caring for more than 250 of them. And we're focused on items playing a role. Now physician engagement and MC4 pathway education efforts are focused initially on major university hospitals across the country, and we have already received many prescriptions from several of them. Lastly, similar to the recent InTune patient support program in the United States, we have a new patient support program in Germany called Rhythm at Home. This program is tailored to each patient, designed to educate patients and caregivers to set expectations for IMCIVREE and to maintain adherence.

Thank you, Yann. With robust demand for IMCIVREE in the United States and our growing international business, our focus remains on building long-term value for our shareholders through excellence and execution alongside a strong commitment to financial discipline. Here on Slide 24 are the highlights of the Q2 P&L. Rhythm recorded 19.2 million in net product revenue in the second quarter versus 2.3 million during the same quarter last year, an increase of 16.9 million. We received FDA approval for BBS on June 16 last year at the tail end of Q2, so that quarter preceded the BBS launch. On a sequential quarterly basis, product revenue increased by approximately 77.8 million or 68% over the first quarter. The primary driver of this growth was the increase in reimbursed BBS patients on IMCIVREE therapy in the United States. In addition, inventory at our specialty pharma partner increased both due to the larger number of patients on therapy and an increase in days on hand. Days on hand ended Q1 at a lower than normal level of five days and then in Q2 at a more normalized level of 12 days. This impact contributed 1.6 million to Q2 revenue. Gross-to-net for U.S. sales improved slightly quarter-over-quarter to 85% versus 83% in the first quarter. Growth in international sales contributed approximately 0.8 million to the quarter-over-quarter increase. While the German launch began late in the quarter, we began to have more of an impact in future quarters. Cost of goods sold during the first quarter was 2.2 million or approximately 12% of net product revenue, representing a slight decrease versus Q2 '22 as well as versus the first quarter of this year. 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 33.5 million for the second quarter of 2023. This compares to 31.5 million during Q2 '22. Compared to 37.9 million in the first quarter of this year, there was a decrease of 4.4 million. Most of this decrease was driven by the 5.7 million in one-time costs and fees associated with the Xinvento acquisition recognized in the first quarter. There also was a decrease of 2.8 million associated with a reduction in CMC expenses, given the shift to commercial product. These decreases were partially offset by increased clinical trial expenses to 1.8 billion and expenses of 1.3 million were related to our RM-718 program. SG&A expenses were 30 million for the second quarter this year versus 22.3 million for the second quarter of '22. On a sequential basis, SG&A increased by 5.4 million versus Q1 '23. This increase was primarily due to an increase of 2.4 million in U.S. marketing spend as well as a $1.9 million increase in stock compensation. For the second quarter, common shares outstanding were 56.7 million and quarterly net loss per share was $0.82. Turning to Slide 25. We closed the second quarter of 2023 well capitalized with $278.0 million pro forma cash on hand. This amount includes the anticipated net proceeds of $24.4 million from the third and final tranche of our royalty financing agreement with Healthcare Royalty Partners. This cash on hand is sufficient to fund all planned activities into 2025. On the $19.2 million in reported revenue, 86% of revenues were generated from sales of IMCIVREE in the United States, a slight increase from the 83% of net revenues in Q1. International sales growth continues to be robust, albeit from a smaller base than the growth rate of IMCIVREE sales in the U.S. Of note, none of our international markets had full reimbursement for BBS throughout Q2. Germany's first full quarter of launch is Q3. Q2 operating expenses included total stock-based compensation of $8.9 million as compared to $6.4 million in the first quarter of '23. The quarter-over-quarter increase is primarily due to recognition of stock-based compensation associated with company performance awards. Finally, our non-GAAP operating expense guidance for 2023, which we initiated last quarter, remains unchanged to $220 million. This guidance excludes the non-cash impact of stock-based compensation. With that, I'll turn the call back over to David.

Thank you, Hunter. And as you hopefully have heard, we're really excited about the progress we're making. Slide 27 highlights that we have a lot coming up and we look forward to updating you on those events in subsequent calls. Our last Slide 28 is simply a reminder of our strategic priorities which remain unchanged, and we will continue to focus on execution. With that, we'll open the call up for Q&A.

Our first question comes from Divya Rao with TD Cowen. Your line is now open.

Good morning, guys. Thanks for taking our question. I'm Divya on for Phil. Just two footmarks, one on DAYBREAK. Could you provide any color on the scope of the presentation that's coming in the second half, maybe like how many cohorts you expect to present and also patients per cohort?

Yes. Thank you, Divya. Regarding DAYBREAK, I want to reiterate that we will only be sharing the open label results for now. The blinded randomized withdrawal segment is still in progress. I expect that we will report on approximately four to five different genes. Not all of these genes will necessarily show positive results, but we will share data on those where we have sufficient evidence to determine whether they are effective or not. The number of patients in each gene cohort will vary significantly, as you'd expect in a basket trial. I anticipate that we'll have around 10 patients, give or take, for the genes we report on.

That's helpful. And then just one more question from us. In terms of the patients who have yet to be reimbursed, how many of those are on the free drug program in BBS?

So we do have a free drug program available for patients. To be eligible for the free drug, they have to go through several steps in terms of the reimbursement process. To date, the number of patients who are on a free drug still remains at approximately 20% of scripts.

And how do you expect that to change in the long term? Do you expect to be relatively consistent?

We have made progress in securing access for IMCIVREE related to Medicaid. Our ongoing work involves educating each payer and distinguishing our patient population as well as IMCIVREE, and we have experienced success. We are committed to these efforts. Currently, about 10% of prescriptions are for Medicare patients who do not have access. We are exploring potential options to increase access for these patients, which will involve a longer-term discussion with CMS. For commercial patients in our free drug program, the coverage from large commercial plans for reimbursement is quite good, similar to other rare disease therapies. The challenge lies with smaller self-insured plans, which often struggle to provide reimbursement for the cost of therapy for rare diseases.

Got it. Thank you so much.

Thank you, Divya. Next question.

Your next question comes from the line of Derek Archila with Wells Fargo. Your line is now open.

Good morning. Thanks for taking the questions. Congrats on the progress. Just first question from us, just any updates on the overall discontinuation rates you're seeing with IMCIVREE, I guess across all indications, but maybe Bardet-Biedl specifically? And then secondly, I know the amount of sales currently OUS is small and growing. But I guess how should we think about the sales ramp in Germany now that you're there? And just curious, like, is that going to mimic the U.S., or should we think about it differently? Thanks.

Overall, we're very pleased with the discontinuation rate, which is now approximately 10% of patients who have started therapy. There was an incredible amount of cross-functional team effort just in terms of really getting patients through the initial titration stage and through the initial nausea, vomiting, and we have had very, very low discontinuities from that perspective. And I think that there are a variety of different reasons that patients do discontinue, some due to ease, others for other personal reasons, and we continue to monitor those patients. And some of these patients may be interested in getting back on therapy as their situations may evolve over time as well.

Great. And Yann, you want to comment on the expected German ramp or how you think about that?

Sure. Thank you. We had a strong start in Germany with a very experienced team in the field. It's a bit difficult to project the next quarters. What I can tell you is that first, we did add many prescriptions from several major centers, which will continue. The second thing is that back to your questions, we don't expect a fast ramp up as we have in the U.S. because of the German conservative mindset. But for sure, we are all signals that are telling us that we will build a solid growth on the long run.

All right. Thank you.

Next question.

One moment. And your next question comes from the line of Corinne Jenkins with Goldman Sachs. Your line is now open.

Good morning, everyone. Maybe a couple from me. First, just how quickly post an IND can you move forward with that weekly formulation you announced today? And should we look for you guys to move directly into Phase 3 studies with that asset?

So again, the timing on how quickly you move after filing an IND is dependent on regulatory input, of course. So all we're communicating today is we're filing the IND and we will obviously meet with the regulators and get further input. The strategy for developing the drug, again, all we'll say today is that we will start with a Phase 1/2 type of effort which will be initially in healthy volunteers. I think we have a big advantage here. And that having developed setmelanotide and understanding the populations we're studying and what needs to be done to successfully get a drug through for these indications. So we'll leverage that learning as we go forward. But step one is pretty conventional with a Phase 1 coverage.

Okay. And then in terms of the epidemiology, just overall what portion of patients would be expected to be adults with BBS versus children or pediatric population?

I'll take that. I think these are the things we know. One is if you look at the CRIBBS registry in the U.S. on the order of 80% plus of those individuals were pediatric. That doesn't mean that 80% of the patients are pediatric. It just means that of those patients who stay engaged with the registry, often probably with the help of their families, their disproportionate peds. That's number one. Number two, we have been focused disproportionately on the pediatric call point, if you will. So that also would skew us to perhaps finding more peds. What's been really encouraging mainly as the last thing before I get to the encouraging part is that these patients, they don't die. They may die early, the mortality. We don't have good, good data on overall life expectancy here. But they certainly don't die necessarily at a young age and therefore, there's no reason not to expect a significant number of patients who are now adults. And if you look at the population distribution overall, a quarter peds, three-quarters adults, what's really encouraging about the information that Jennifer presented is that we are penetrating to a significant degree that adult population, they're finding us, they want to go on therapy, and they're staying on therapy.

Great. Thank you.

Next question.

Your next question comes from the line of Dae Gon Ha with Stifel. Your line is now open.

Great. Thanks very much for taking our questions and congrats from us as well on a strong quarter. Just looking at the overall strategy as you continue to roll out BBS in the U.S., I guess how much more confidence do you now have towards the estimated prevalence on BBS that you initially projected some couple of months ago that was realized up? And I guess given this strong ramp up this quarter, I guess how are you kind of projecting the rest of the year? You mentioned no quarter-over-quarter trend line drawing, but there seems to be a little bit of an inflection this quarter. So does that portend anything in your view or any color on that would be great? And then in terms of the HO trial timeline, recognizing there is approximately a third that you've activated right now, is the one-third still out of the 35? Do you still anticipate 35 to be activated? Or do you think you can kind of muster with maybe two thirds of that 35 to satisfy your overall 120? Thanks so much.

Maybe I'll take the last question first. So on the number of sites, I think the number of sites will probably end up opening given the strong patient interest and the like getting the full 35. So we expect it will be somewhat less than 30. So that's the answer to that. And Jennifer?

Just relating to the projections for the rest of the year, what I will just say right now is that we are extremely excited about the opportunity and feel that there's still a lot of room just in terms of growth for this product, and just the feedback we're receiving in terms of patients benefiting on therapy just gives us so much more energy in terms of really moving forward with finding these patients. We have been pleased overall in terms of the targeted ways that we have identified patients and feel like there's still a lot more that we can do there in addition to the breadth as well as what I outlined in terms of the depth of physicians writing more than one script, because of the conviction they have around the drug itself. I will say though that things take time in rare disease. It takes time for patients to go and see their physician. It takes time for some of these physicians and patients to have that conviction to initiate therapy. Some of these scripts that we saw come in, it was many, many months of interaction and education that our Territory Managers had before that script actually came through. And even like physicians who are now educated, it will take time for the patients to come in so that they can actually suspect and then test and get patients to an accurate diagnosis. So overall, like I said, it's rare disease. It really is dependent in terms of what happens within that quarter. But we are very, very happy in terms of what we've achieved, and we have a lot more to do.

Great.

And I think maybe just to amplify one short thing on Jennifer's answer there is the overall prevalence numbers, all those things that Jennifer highlighted and the progress we've made to date, it does, not surprisingly, increase our confidence in the overall epidemiology, this 4,000 to 5,000. Again, we're learning more and more. We know much, much more than we did, of course, when we first launched, so confidence there is extremely high. And that's an over beat this horse said too much. The quarter-on-quarter piece, given the nature of rare diseases, which is why we keep reiterating this, it is going to be variable. It'll be up, it'll be down, but that's not what we hope you're looking at. We hope what you're looking at is a slightly longer view. Again, we've got a one year view here, and our confidence that this is going to continue to grow meaningfully over the next subsequent quarters is very high.

Sounds good. Congrats.

Thanks.

Thanks. And your next question comes from the line of Michael Higgins with Ladenburg Thalmann. Your line is now open.

Thanks. Good morning, guys. Thanks for taking the questions. And I'll share my congrats on the continued success with the launch of BBS enrollment progress in HO. DAYBREAK is one of the bigger drivers here this back half. You got a lot of things going on, of course, but just wanted to poke in a bit, somewhat of a follow up from a previous question, and understand what we are to be looking for. I assume at some efficacy readings, whether that's BMI, BMI-Z scores, hyperphagia scores. We're curious if we're going to see this as an overall means, any patient-specific data, and also your decision to advance specific genetic patient types. Does it matter by the prevalence of that specific patient type? Thanks.

Yes, Michael, more information will be available soon. The data we are currently examining is still preliminary and not finalized, so please keep that in mind. We will decide the best way to present the data. If there are only a few patients in a specific group, we will likely present that data specifically. For larger groups, we may present averages. However, this is still to be determined. The decisions on our next steps will depend on the strength of the data. We need to consider how strong the response is and how common the condition is. If we are only able to identify a very small number of patients for a particular gene, even if it appears interesting, we may find it challenging to recruit enough participants to conduct a trial due to low prevalence. We will take all of these factors into account. I want to emphasize that the criteria for moving forward with trials are stringent. Just seeing a signal is not enough; we need to be confident it is strong and that we can effectively carry out the trial alongside our other commitments. As you heard today regarding the 718 program, we are focused on advancing that initiative as well.

Yes, you are still on.

Sorry, is there another question?

Just one follow up here. And really once the new data is given the state of the markets here, slightly improving, but still assets are relatively cheap. I wanted to get your sense for, in your appetite for expanding the pipeline. Obviously, you've got 718 going forward, you've got Xinvento activity, but curious to hear your appetite for expanding the pipeline? Thanks.

Yes. Again, the answer will be the same at this point, very, very high bar to do anything. We are not actively looking, but we will be opportunistic in the sense that if our engagement with the world outside of things are of particular interest and we see a real opportunity to add value, then of course, we would look. But basically we're just very focused on executing on these near-term value drivers. And we'll continue to assess other opportunities as they might arise, but no specific focus on additional acquisitions.

I appreciate that. Thanks, again.

Thank you. Next question.

Your next question comes from the line of Joseph Stringer with Needham & Co. Your line is now open.

Hi. Good morning. Thanks for taking our questions. Just curious, what percent of patients on IMCIVREE have titrated back down to the lower daily dose, down either to the 1 mg or the 2 mg dose and how has that evolved over time?

Yes, BBS in the U.S. is probably our best shot at that. Jennifer?

So overall, in terms of the doses, the majority of these patients are getting to the target remake dose. I will say that just in terms of the percentages that you break down, the different segments, whether adults versus pediatric patients, there is a slightly higher percentage of adults that get to the 3 mg. It may be also because there's basically one titration step from 2 to 3 to get to the next dose of adults, but overall even within each of the segments, the majority of the patients are getting to the 3 mg dose. And we want them to also be able to work with their physicians to take the time to titrate appropriately so that they can manage through and maintain on drug and receive the benefit.

Great. Thanks for the additional color and thanks for taking my question.

Thanks. Next question?

Your next question comes from the line of Jeffrey Hung with Morgan Stanley. Your line is now open.

Hi. This is Michael Riad on for Jeff Hung. Thank you for taking our questions and congrats on the quarter. Can I just ask for a little bit more color on a previous comment for the one to three months period for translating scripts to sales, you had said that there was a tail end for some patients that it could extend out several months. What factors come into play there? And what makes those patients more likely to have a longer process? Thanks.

So the reasons just in terms of the length of time to gain reimbursement is not always related to the payer itself. Sometimes it's just also delays in terms of HCP side, from a process standpoint, whether they're working through multiple patients, and doing things a bit sequentially or for other reasons. With that said, we have definitely gotten approvals, even within those groups of tail end patients in the patient support group as well as our access group, remaining persistent in terms of working that process through.

Okay. Thank you. That's very helpful. And then maybe just a follow up, maybe more of a housekeeping question. Your reiterated guidance on OpEx and it seems like for SG&A, it would have to somewhat lower in the second half to stay within guidance. How should we be thinking about expenses in the second half, particularly SG&A, given the launches happening in EU?

Very good question. And we certainly have factored that in. I think there are a variety of factors that can be a bit lumpy within SG&A, particularly in the compensation area. So we're quite comfortable that we will still be on track to meet our guidance.

Thank you very much and congrats again on the quarter.

Great. Thanks, Michael.

And we have a follow-up question here from Michael Higgins from Ladenburg Thalmann.

Thanks, operator. Can you hear me guys?

Yes.

Fantastic. Just to follow up on 718, it's still early and IND has not been cleared yet. However, looking ahead at the development process, based on your experience with setmelanotide, it's reasonable to think the control arm will be different. How do you plan to conduct the 718 study? Will it compete with setmelanotide, given its current approval? After testing the healthy volunteers, if the results are positive, can we assume that you would initiate a broad basket study including all the patient types you've evaluated as well as possibly additional patients?

Michael, all good questions. Don't have the answers today. Those are things we'll think about. The number of choices, you've highlighted some of them about how you develop an asset that says this. But first step again is there's not much to negotiate there. We'll just get through that. And while we're doing that, we'll evaluate the tests that you've highlighted. As I said, those are good questions in terms of stress.

I appreciate it. Thanks, guys.

Thank you, Michael.

And I see no further questions at this time. I will now turn the call back over to David Meeker.

Thank you. Thank you all for joining in. Early day of August here and we as you hopefully you've heard today a really good quarter, a lot of momentum here in Rhythm and very much look forward to the next earnings call and updating you further on the progress we can make. Thank you.

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