VSE Q3 2024 Earnings Call Transcript

Quartr
Provided by Quartr
November 5, 2024

There are 12 speakers on the call.

Operator

Please be advised that today's conference is being recorded.

Operator

I would now like to hand the conference over to your speaker today, David Connolly, Head of Investor Relations and Corporate Communications. Please go ahead.

Speaker 1

Thank you, Shannon. 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 of our website, ir. Rhythmtx.com. This afternoon, we issued our press release that provides our Q3 2024 financial results and business update, and that press release is available on our website.

Speaker 1

We are coming to you today from San Antonio, the site of Obesity Week, the annual meeting of the Obesity Society. Listed on Slide 2 is our agenda. On the call today are David Meeker, our Chairman, Chief Executive Officer and President Jennifer Li, Executive Vice President, Head of North America Hunter Smith, Chief Financial Officer and Jan Mauserbro, Executive President, Head of International is on the line joining us from Europe. On Slide 3, I'll remind you that this call contains remarks concerning future expectations, plans and prospects, which constitute forward looking statements. Actual results may differ materially from those indicated by these forward looking statements as a result of various important factors, including those discussed in our most recent annual or quarterly reports on file with the SEC.

Speaker 1

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

Speaker 2

Thank you, Dave. So thank you all for joining today. We realize we're probably not the lead story today, November 5, Election Day, but we are really pleased with both the quarter and the progress we have made in 2024. We recognized at the start of 2024, this would be a year of execution with the highly anticipated readouts coming in 2025. We have executed.

Speaker 2

And in addition to the expected readouts, we have one unexpected readout, which was presented today at the TOS meeting, an early look at the real world data in French hypothalamic obesity patients. I'll say a little more about that shortly. As shown on Slide 5, we remain focused on our 3 main value drivers. First, the team continues to drive results through strong execution of our global commercial strategy. 2nd, we are positioned to expand this patient opportunity to include hypothalamic obesity, and we have increased confidence in the potential for this indication based on the new real world data efficacy data from the early access program in France.

Speaker 2

We remain on track to report top line data from our Phase III trial and acquired hypothalamic obesity in the first half of twenty twenty five. 3rd, we continue to make progress with our MC4R agonist pipeline with DAYBREAK data presented at the Obesity Society's Obesity Week demonstrating potential new expansion opportunities in genetic indications. And we continue to progress our next generation MC4R agonist, the weekly RM718 and the oral daily small molecule bivomellagon. Steady growth continues with Incybri revenues for the 3rd quarter coming in at $33,300,000 driven primarily by PVS sales globally. We continue to identify patients, physicians continue to prescribe Incybri and payers are supporting access.

Speaker 2

We have an experienced rare disease team executing in challenging environments. And of note, we are only 2 years post approval in the U. S. And continuing to introduce new markets internationally. It is early in the commercial lifespan of this opportunity.

Speaker 2

Our clinical programs are progressing as we remain on track to report top line data from the Phase 3 HO trial in the first half of twenty twenty five. The dropout rate remains less than 10%. We are targeting full enrollment of the Japanese cohort of patients by year end. Our small molecule program has 50% of the targeted number of patients dosed or in screening. For the RM718 study, we are completing the rat and non human primate toxicology studies and will submit those along with an amendment to allow dosing patients with hypothalamic obesity for more than 4 weeks to the FDA.

Speaker 2

We are targeting dosing the 1st hypothalamic obesity patients with 7/18 in the Q1 of 2025. We are doing this call, as Dave said, from Obesity Week, and I want to highlight 2 of our poster presentations. First are the full results from the DAYBREAK trial. This was an ambitious undertaking where we sought to enroll patients with genetic variants in any one of 30 genes, which literature suggested may be linked to the MC4ART pathway. On Slide 6, you can see the design of the 2 part trial and the open label Part 1 we reported out last December.

Speaker 2

Patients who lost 5% or more after 16 weeks were eligible to enter the double blind randomized withdrawal Part 2, where patients were randomized 2:one to either continued septmelanotide therapy or placebo for 24 weeks. On Slide 7, you can see the patient demographics. 49 responder patients entered Part 2 and 39 patients completed this part of the trial. We had equal numbers of adults and pediatric patients. On average, they live with severe obesity based on their BMI or BMI Z measurements.

Speaker 2

Slide 8 shows the summary results with a mean decrease in BMI 12.4% in the 32 patients on continuous setmelanotide therapy for a total of 40 weeks. And 84% of patients on setmelanotide maintained or further decreased their BMI beyond the initial 5% as opposed to only 29 percent of patients randomized to placebo during the 24 week Stage 2 of the trial. Overall, we were quite pleased with the results. The trial design worked. The open label trial period identified patients who seem to be true responders and that those randomized to continue treatment continue to respond, whereas those randomized to placebo mostly regressed towards baseline.

Speaker 2

On Slide 9, you can see the individual spaghetti plots for the 4 of these genes or gene groups. The blue lines represent septmelanotide, whereas the green lines represent the placebo patients. Also note that scales on the graph for each gene are different and were adjusted to accommodate those patients with the greatest decrease in their BMI for that gene group. I won't go through each of the panels, but if you look at the PHIP gene in the upper left, you can see the adult patients on the left and the pediatric patients on the right. In general, those continuing onset melanotide had a good response, whereas the 3 patients randomized to placebo regained weight.

Speaker 2

The PHIP gene was the gene with the highest overall percentage of responders, particularly in those who completed Part 1. The key learnings from this trial is that there are patients who seem to have a clear response to septalantinides suggesting their variant is impairing signaling through the MC4R pathway. The challenge for future development will be identifying those patients with true loss of function variants, recognizing for many of these genes relatively little work has been done in the different variants, leaving most variants classified today as VUS or variants of unknown significance. Our expectation is that we will do additional research on 1 or more of these genes, but that work will be done with 1 or both of our 2nd generation programs. Now I want to finish my introductory comments talking about HL.

Speaker 2

We know there's a significant unmet medical need with no approved therapies and believe the prevalence is in the range of 5000 to 10000 patients in each of the U. S. And Europe as we've described previously, and we believe there may be similar numbers of patients in Japan. Importantly, unlike BBS, most of these patients are diagnosed and under the care of endocrinologists. We reported out Phase 2 data in mid-twenty 22 and moved directly to the randomized placebo controlled 60 week Phase 3 trial.

Speaker 2

Both France and Italy, in recognition of the significant unmet medical need, the absence of approved therapies and the strength of the Phase 2 data and an unusual move, have made cephalanotide available through paid early access programs. Patients from France began enrolling late last year and Italian patients are just beginning to receive treatment under the program. Real world data from the initial French patients, which was presented today at TAS is shown on Slide 10. 8 adult patients with a mean age of 31 who had undergone brain surgery 12 years earlier at the mean age of 19 have been followed for 3 to 6 months on semilaniptide. As you can see from the slide, they were severely affected with a mean BMI of 44.

Speaker 2

On average, these 8 adult patients had a mean BMI decrease of 5.6% and 12.8% at 1 3 months, respectively, after initiating treatment. Patients have continued to lose weight, with 5 patients who have reached the 6 month time point experiencing a 21.3 percent on average decrease in their BMI. We see this data as important for multiple reasons. It is the first new data we have presented since the original Phase II readout in 2022. We had relatively few adult patients in the Phase 2 trial and almost no adults in the long term extension, leaving us with an important unanswered question.

Speaker 2

Would adults be less responsive than children who are being treated in closer proximity to the onset of their HO? This data set goes a long way in answering that question. These patients were adults with a mean age of 31, as I said, who are on average 12 years out from the time of their injury. The response to date has been consistent, and that's one of the most remarkable things is the consistency of the response and robust, further strengthening our conviction in the importance of the MC4R pathway in this disorder and the potential role semilantide may play in the management of hypothalamic obesity. So finally, on Slide 11 is a summary of our upcoming milestones.

Speaker 2

The PDUFA date for our U. S. Incyberia label expansion to include patients ages 2 to up to 6 years. Old is December 26, and Jennifer will touch on that. Based on the progress of initial enrollment and sites opening, we expect to complete enrollment in the 12 patient Japanese cohort of our Phase III acquired hypoglymical obesity trial by the end of this year.

Speaker 2

We also expect to complete enrollment in 2 of the M and A sub studies, PALM C PCSK1 HETs and SH2b1 by the end of the year. We do not anticipate being able to achieve a full enrollment in the other 2 sub studies, LEP R and SRC1. In the Q1 of 2025, we anticipate we will complete enrollment in the 28 patient Phase 2 trial evaluating vivameligone and also in the Q1 begin dosing patients with acquired hypokalemic obesity in Part C of our Phase 1 trial with weekly MC4R agonist RM718. And as we have said many times, our top line data readout from the pivotal 120 patient cohort in our global Phase 3 trial of sepsilonotide and acquired hypoplimab obesity is on track for the first half of the year. And with that, I'll turn the call over to Jennifer.

Speaker 3

Thank you, David. I will start today on Slide 13. We are continuing to see growth in prescriptions, approvals for reimbursement as well as increased breadth and depth amongst prescribers. In the Q3, we received approximately 100 new prescriptions and approximately 80 approvals for reimbursement, resulting in a steady increase of commercially reimbursed patients. We are pleased with the sustained growth and the continued demand for a therapy that addresses the root cause of hyperphagia and severe obesity in BBS patients.

Speaker 3

This growth is driven by increases in both the number of first time prescribers as well as repeat prescribers. With positive experience with patients on Emcivri, the number of physicians with 2 or more prescriptions continues to increase. At any point in time in the future, this quarter or prior quarters first time prescribers may become a repeat prescriber as they are now more in tune to recognizing the symptoms of VBS and diagnosing additional VBS patients in their practice. As you would expect to see in rare diseases, these patients are these physicians are becoming experts in their city and region, which helps to create a network of VBS disease experts throughout the nation to support the optimal care of VBS patients. The breakdown by specialty remains consistent with about half of prescribers falling into the endocrinologist bucket and about half in the primary care or pediatrician bucket with a small number of prescribers in other specialties, including medical geneticists, nephrologists and ophthalmologists.

Speaker 3

We remain pleased with the consistency of payer approvals as initial approvals for reimbursement continue at a steady pace, as have reauthorizations, which allow patients to maintain on therapy. Consistent with prior quarters, there remain a small number of denials for reauthorization, and we continue to work with patients and providers through the appeals process to regain reimbursement. Next slide. The recognition of the differentiation of BBS patients from the population with general obesity as well as the differentiation of ensivory as a targeted therapy for BBS patients is appreciated by both HCPs and payers. To further support this differentiation, we are looking forward to potentially expanding the label from Sivri to include patients as young as 2 years of age in the U.

Speaker 3

S. In our current indication. Early onset obesity that goes untreated can lead to multiple comorbidities and negatively affect quality of life and life expectancy. We believe that treating patients at an early age will positively impact the lives of these children and their families. Last quarter, Jan reported the European Commission expanded the marketing authorization for ANSIVRI to include children as young as 2 years of age.

Speaker 3

And the FDA has accepted with priority review, our sNDA, for the same expansion and assigned a PDUFA date of December 26, 2024. Our submission was based on our Phase 3 data in children that demonstrated a 3.04 mean reduction in BMI z score, a measure of body mass index deviation from what is considered normal, and an 18.4 percent mean reduction in BMI in 12 patients at 12 months on setmelanotide therapy. Approval in the U. S. On top of EMA authorization would reinforce Insivri's unique position in the market and recognize and differentiate where MC4 pathway diseases and associated hyperphagia and severe early onset obesity from general obesity.

Speaker 3

While the overall patient numbers may provide modest growth, we are excited about what this potential opportunity means for patients and their families. Early onset obesity and hyperphagia driven behaviors are more identifiable in children than in adults, and their caregivers are often more engaged and actively seeking answers. This will be an important and meaningful milestone for the BBS community. On to my final slide. We are preparing for a positive outcome in our Phase III trial in acquired hypothalamic obesity and are investing to prepare for the next potential launch.

Speaker 3

We are engaging in market research to gain insights from physicians, payers and patients and families and actively engaging with patient advocacy group. Also, we are planning to expand our different field and support teams in 2025 as we anticipate increasing physician engagement efforts to provide education on acquired hypothalamic obesity. The unmet need in hypothalamic obesity is significant and there are no approved therapies. We look forward to sharing more details with you next year as we prepare for top line data and get closer to a potential FDA submission and launch. I'll now turn it over to Jan to provide an update on the international region.

Speaker 4

Thank you, Jennifer. I will start on Slide 17. The international region is an important contributor to Horizon's success. In this quarter, we delivered a strong revenue growth. Incyberia is now available for pump CD, parabolic or BBS or both in more than 15 countries outside the United States with reimbursement through various government administered programs on inpatient cells.

Speaker 4

The initial months for the BBS launches in Spain and Italy have started well, but the main drivers of revenues for the ex U. S. Countries continue to be France and Germany. In Germany, our BBS launch is steady and mirrors the consistent growth pattern of the U. S.

Speaker 4

And we are benefiting from expanding the number of centers that are now treating DBS patients. As Jennifer mentioned, this summer, the EMA expanded the marketing authorization for Imsilvary to the treatment of children as young as 2 years old in approved indications. And last month, in Germany, the Federal Joint Committee or GBA voted to exclude incillary for children 2 to 6 years old from the country's lifestyle exemption list and thereby make it eligible for full reimbursement for both PPL and BBS. While this was expected, we are pleased that the committee entertained very little debate on this topic, which illustrates that Germany recognizes the need to treat patients with MC4 pathway disease because these rare diseases are distinct from general obesity. Talking about Germany, I would like to share an IMC release success story from a German patient, one of several.

Speaker 4

1 12 years old girl with BBS with pronounced hyperphagia, a BMI Z score of +1.5 and the fear of needles began therapy more than 6 months ago. At first, she refused injection, but our ResMedHome Nursing team helped her overcome her fears and developed within a few weeks a routine for injection. After 1 month, she started to inject herself and now we see a normalized hyperphagia, normalized to what is considered LC by her treating physician. She has lost 9.1 kilos and has now a normal body weight for her age. And importantly, her family reports that she has a new sense of independence she did not have before.

Speaker 4

And it does like this from Germany and elsewhere in the international region and this cause a difference we can make in many lives with M Series and also our patient support program. In France, the reimbursed early access plan for BBS has been ongoing for more than 1 year now, while we continue to negotiate reimbursement with the authorities. Once we complete negotiation, we will be able to promote McRi through physician engagement activities. We will be in a strong position to build on the success of the early access program as we are extending the number of clinical centers with positive McRi experience. Next slide.

Speaker 4

We also have in place paid early access programs in both France and Italy for patients with hepatolamic obesity. In France, we began treating patients earlier this year and we're already seeing positive data reports, as David shared. We are quite pleased that patients with hypothermic obesity have access to septaminophen are responding well to the therapy and that treating physicians are reporting positive outcome. The uptake of septalenatide through this program has been increasing with an approval decision process led by a joint federal multidisciplinary committee, which meets monthly, a process that is similar to how access is allowed for patients with BBS. In Italy, we are seeing the first patients with epotelamic obesity begin therapy with septmanalutide under the law 648 early access program.

Speaker 4

The process is a little different than France as a physician directly asks the Ministry of Health to enable his or her patients to participate in the program. Also this program is limited to patients between 6 years old and 24 years old whose hypothalamic obesity was caused by cryopharyngeal. Next slide. Our BBS launch is beginning this quarter in England and Wales following the positive recommendation from NICE. We expect to start the 1st BBS patients on the reimbursed therapy during the Q4.

Speaker 4

We anticipate the uptake for Incybri in the U. K. To be more measured than Germany as the NICE recommendation limits reimbursement to patients who are younger than 18 years old when they begin therapy. In the U. K, there are 4 National Health Service BBS specialized clinics that provide care for patients with BBS, 2 centers that treat adults and 2 centers that treat children.

Speaker 4

Each center sees a handful of patients with BBS each month and we know that the treating physicians will discuss IMCIRI therapy as a new option with these patients and families. If they decide to proceed, they will be dedicated on IMCIRI and trained on the daily administration. Following on the positive experience from our launch in Germany, we have commissioned a very comprehensive patient support program with nurses visiting homes, assisting in the administration and addressing any questions or concerns. The BBS community of patients, families, physicians and other members of the clinical care team have been very supportive of one another and supportive of reason in our approval and launch efforts in England. We are very excited to bring them in silvery.

Speaker 4

Next slide and my last slide. One of our strategic priorities is to continue engagement with and support for the growing network of physicians who are becoming experts in rare MC4 pathway diseases. With that, I want to further details on 2 events where we are focused on supporting and building up this network. On October 30 31, we sponsored Transform, a scientific meeting designed to engage with and educate the experts of tomorrow or physician in the early part of their career on rare MC4 pathway diseases. It was attended by 44 physicians from 14 countries.

Speaker 4

This event was endorsed by the European Association For Society of Obesity, the European Society For Pediatric Endocrinology and the European Society of Endocrinology and co chaired by Professor Volkan Jumuk, the President of the European Association For the Study of Obesity himself. And next week, we will have a strong presence at the 62nd Annual Meeting of the European Society for Pediatric Endocrinology, which is from November 16 to 18 in Liverpool. We are expecting strong attendance at our satellite symposium entitled Early Treatment of Hyperphagia and Early onset Severe Obesity in Children with Rare MC4R Pathway Diseases with a focus on BBS and other rare MC4R Pathway Diseases. Professor Sadaf Farooqi of the University of Cambridge is the event chair and she will be joined by Professor Philip Bills of the University College of London among others. We also have 3 abstracts accepted for our presentation, all on our sequencing data and analysis from ROAD, our European genetic sequencing program as well as real world data from the French early access program for hypodynamic obesity.

Speaker 4

These new pediatric data are from pediatric patients with hypothalamic obesity following 3 to 6 months onset monotype therapy. And now I turn the call over to Hunter.

Speaker 5

Thank you, Jan. Turning to Slide 22. Net revenue from global sales of Obsivri continued to grow steadily and came in at $33,300,000 in Q3 as compared to $22,500,000 during the Q3 of last year. On a sequential basis, Q3 revenue represents 14% growth over the Q2 of this year. U.

Speaker 5

S. Revenue in the Q3 was $23,300,000 accounting for 70% of product revenue during the quarter and an increase of 8% in U. S. Sales on a sequential basis over the 2nd quarter. Driving this growth was an increase in the number of reimbursed patients on therapy and corresponding increase in volume of vial dispensed patients.

Speaker 5

Gross to net for U. S. Sales in the 3rd quarter decreased slightly quarter over quarter to 85% from 86% in the Q2 of the year. International revenue was $10,000,000 which accounted for 30 percent of product revenue and represented an increase of 35% over Q2. More than half of ex U.

Speaker 5

S. Sales continue to come from the commercial launch in Germany in the early access programs for both BBS and HO in France. We are also seeing solid revenue contributions from named patient sales in several countries and the launches in Italy and Spain, which are still in their early phases but progressing well. We are now generating revenue in more than 15 countries outside the United States. Some of these countries receive shipments on a more intermittent basis once or twice a quarter, and hence, we believe some of our Q3 revenue represented a pull forward of demand from Q4.

Speaker 5

Nonetheless, we're excited that we hit the $10,000,000 mark on international quarterly revenue in Q3. Cost of sales during the quarter was $3,800,000 or approximately 11.5 percent of net product revenue versus 10.1% of net product revenue in the Q2 of this year and 10.7% during the same quarter last year. The primary driver of COGS continues to be the 5% royalty to Ipsen under our licensing agreement for cephalanotide as well as higher labor and overhead costs capitalized to inventory based on high production in Q2, which was expensed to COGS in Q3 based on shipments. R and D expenses were $37,900,000 for the Q3 compared to $33,600,000 during the quarter of last year. Sequentially, we experienced a 25% increase from R and D expenses of $30,200,000 in the 2nd quarter due to a $3,000,000 benefit recorded for changes in scopes to the Daybreak and M and A trials during Q2.

Speaker 5

Plus, there were additional cost increases in both of those trials this quarter and increased manufacturing development work related to bivimelagon, formerly known as LV54640. SG and A expenses were $35,400,000 for the 3rd quarter compared to 30,500,000 dollars for the same quarter last year. Q3 SG and A expenses represent a $1,000,000 decrease sequentially versus $36,400,000 for the Q2 of 2024. The quarter over quarter decrease was largely driven by a reduction in payroll taxes. Payroll tax expense based on changes in French equity tax loss for non qualified options this quarter.

Speaker 5

For the Q3, weighted average common shares outstanding were 61,200,000. Now let's move to Slide 23. As of September 30, 2024, we reported $298,400,000 in cash and cash equivalents. Cash used in operations was approximately $22,600,000 in Q3. This was the 1st quarter as a public company in which Rhythm used less than $25,000,000 in cash for operations, another significant milestone.

Speaker 5

The trailing 12 months quarterly average cash burn was approximately $28,700,000 So we continue to generate improvements in operating leverage as revenues grow. On a year to date basis, cash used for operations was $89,300,000 a reduction of 11% versus the comparable period of 2023. 3rd quarter operating expenses included total stock based compensation of $11,000,000 for the quarter compared to $10,400,000 in the previous quarter. Reported GAAP EPS for the 3rd quarter was a net loss per basic and diluted share of $0.73 which includes accrued dividends on convertible preferred stock of $1,300,000 As a reminder, this ongoing dividend accrual will be $1,300,000 per quarter or $0.02 per share at the current share count. No cash dividends are payable prior to the end of the Q2 of 2026.

Speaker 5

Turning to Slide 24. Today, with only 1 quarter remaining in the year, we have reduced our 2020 4 OpEx guidance to a range of $245,000,000 to $255,000,000 from the prior guidance range of $250,000,000 to $270,000,000 This updated guidance is comprised of R and D non GAAP operating expenses of approximately 137,000,000 dollars and SG and A non GAAP operating expenses of approximately 113,000,000 both of which represent midpoint numbers of these components in our updated estimated guidance range. Lastly, we continue to expect cash on hand to be sufficient to fund planned operations well into 2026 potentially beyond multiple value creating milestones including the top line data readout from our Phase 3 trial in hypothalamic obesity currently planned for the first half of twenty twenty five. With that, I'll turn the call back over to David.

Speaker 2

Thanks, Hunter. So in summary, I think you've heard a very good quarter, and we're entering finishing the year and entering 2025 with a lot of momentum. So we look forward to future updates. With that, we'll open the call for Q and A.

Operator

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

Speaker 6

Good afternoon. Thanks for taking our question and congrats on a strong quarter. Hunter, first question for you. In the prepared remarks, you mentioned there was some pull forward of demand from Q4 into Q3. Would you be able to quantify what the impact was on Q3 from that pull forward and any other lumpy items included in the MSAV revenue number?

Speaker 5

It's a little imprecise and it depends obviously on the timing and the nature of these orders. But sometimes if they come late in the quarter, we think it's more attributable to the future quarter. So that's we estimate that could be around $500,000 in Q3.

Speaker 6

Okay. That is very helpful. Thank you. And then second question on the Daybreak trial. Congrats on the data.

Speaker 6

They continue to look strong. Can you talk about what you need to see to advance one of those populations to a pivotal study? And when you think you might be in a position to make a go, no go decision on those populations? Thanks.

Speaker 2

Yes. Thanks, Phil. So I think the general answer to that is, for each of these genes, the better we can understand the variance, as I said in my remarks, in terms of defining which of the variants are true loss of function, because to the extent that we can do that post hoc, you do improve the results. In other words, the and right now, many of those LOUIS patients, I'm sure have benign variants, in which case they're we wouldn't expect that to be driving their underlying disease. So that's the general comment is we've got to understand that better.

Speaker 2

A gene like PHIP, we have not a bad sense today. I think there's more work that can be done. That's a gene that has on the order prevalence numbers, which again are soft, but sort of BBS like in the order of 4,000. That's a gene we might look to go earlier on, but I would earlier would mean we would do it with a next generation program. So one or both of those would need to have cleared Phase 2 in HMO.

Speaker 5

Got it.

Speaker 6

That is very helpful. Congrats again on progress and thanks for taking our questions.

Speaker 2

It depends. That moves that out. That's a 2026 kind of activity, not a 2025, if we were to do that.

Operator

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

Speaker 7

Hey, guys. This is Adam on for Derek. Thanks for taking our questions today and congratulations on the quarter. Maybe just a couple on HO from us. Do you think real world data from France HO patients will be predictive of what we can see in the Phase 3 study in terms of BMI reduction?

Speaker 7

And then also of the 5 patients who experienced weight loss at 6 months, can you let us know which patients had previously been on GL1Ps? Thank you.

Speaker 2

Yes. So do I think this will be predictive? I think what we would say the reason this data I think is so incredibly helpful, a, the original Phase 2 was only 18 patients, one patient who didn't take the drug, so 17 patients who took the drug. Now we have another 8 patients. And what's most reassuring is literally every patient who has taken the drug with this diagnosis has had a good response.

Speaker 2

So in terms of reading through to Phase 3, consistency in any clinical trial is incredibly reassuring. The magnitude of the decrease now, I think remarkably, we're seeing very good percent decreases in the BMI, but we've discouraged a bit trying to stay out of the arms race around percent decrease. For these patients that have nothing, simply not gaining weight would be victory for them. So again, we're seeing good percentage decrease, but the more important part of this is consistency and I think that predicts well for a positive outcome in the Phase III trial. And then for the 5 patients, I don't have the breakout which of the patients were on the GLP-one specifically.

Speaker 2

So I can't answer your question whether they were on it, but the doses they are on, of the 4 patients, one of the patients stopped the GLP-one before they started the trial. So only 3 of them, of the 8 were actually on a GLP-one during. And they were on, as I understood, for the treatment of their diabetes more than a specific attempt for, to get an obesity weight reduction. But to be on the drug, they if they were losing actually losing weight, they would not have been enrolled in this early access program.

Speaker 7

Got it. And then maybe just one more from us. At our dinner at Obesity Week, we had KOLs that noted that they believe that the HO population may be close to 5000 to 10000 or even above in the U. S. And they contributed that somewhat too many patients who have brain tumors who receive radiation may also end up with HO over time.

Speaker 7

Is this the patient population you've been aware of? And if so, do you have any estimates on how many of these patients may exist? Thank you.

Speaker 2

Yes. I think so this whole area of HO injury and how do you get it is part of the evolution. We focused on those who have the benign tumors, which are very well defined group and they have this very specific moment of injury, if you will, when they go to surgery. There are other ways you can injure the hypothalamus. We hear anecdotally from physicians that they see a similar picture in some of those patients, including radiation patients.

Speaker 2

So I think there's more to be learned there. We're very interested in obviously in learning more about that. I have no estimate as to what number of patients there might be. And I think there there's more to be learned about their response. But the anecdote you're describing, we've heard that.

Speaker 8

Got it. Thank you.

Speaker 2

Thank you.

Operator

Thank you. Our next question comes from the line of Corinne Johnson with Goldman Sachs. Your line is now open.

Speaker 3

Hi, good afternoon guys. Maybe a couple of questions from us. First, how should we think about sort of the contribution from Europe as we look into 2025? And do you anticipate that it will become sort of a larger share of overall revenue as we get further into that launch? And then could you also provide us some updates on what you're seeing with respect to adherence and compliance in the BBS patient population?

Speaker 3

Thanks.

Speaker 5

So I'll take this first question. Karen, I think we've built a solid base in international and we continue to foresee growth there. But the degree to which it keeps pace with the U. S, which is starting from a larger base, I think is going to be variable quarter to quarter. Okay.

Speaker 2

Okay. And the second question was on adherence. So are you talking about the discount rate? Is that what you're focusing on?

Speaker 3

Yes, exactly.

Speaker 2

Yes. So that's remained as we said last time, we've ticked up closer to 30% in general and that hasn't changed. Maybe Jennifer can provide a little more color on what we're doing to continue to work that problem because I think we have some good insight and can do something. So Jennifer?

Speaker 3

Hi, Gren. To answer your question, I think like when we take a look at the discounts, there's different things that we have learned. Many of these are coming early. And with this insight, we have continued to really focus a lot of our efforts just in terms of educating and really setting clear expectations. Initially, it was more on the AE profile of the drug, but we also recognized that we needed to provide more expectation around the timing of efficacy impact in patients as well.

Speaker 3

So we learn as we go just in terms of being able to maintain those patients on therapy. And I think one other piece that is also important is that there are a lot of different reasons that patients discount. There may be different reasons from a life perspective that may make them potentially interested in coming back. The vast majority of these patients are consented. So our patient support teams are able to maintain engagement with them and we have seen patients who have been interested in getting back on therapy as well.

Speaker 3

Thank you.

Operator

Thank you. Our next question comes from the line of Seamus Fernandez with Guggenheim Securities. Your line is now open.

Speaker 9

Thanks so much. So just wanted to talk a little bit more about HO and the pipeline assets. Just to start with the data coming out of the 8 patients in France, obviously an impressive result in the adult population. Wanted to just get a little bit more color on the opportunity to continue expanding the early access opportunity in Europe with that data. Is that something that you're able to mobilize and then bring more patients onto therapy sooner with that result?

Speaker 9

And then the second question is really on the pipeline. Obviously, I know there's a strong view that Incybri or semilantide will continue to be very durable. But I think the opportunity to avoid the MC1 receptor is certainly quite compelling from our conversations with physicians. So just wanted to get a better sense of how those trials are progressing, and when you would hope to really share those data? I believe you said mid year in the past, but didn't know if there are any updates from a recruitment perspective and execution.

Speaker 9

Thanks so much.

Speaker 2

Yes. So Jan, do you want to provide a little color on how the HO process is working and your expectation? Is that going to ramp or stay steady? What would you say?

Speaker 4

Thank you, yes. So for sure, in France, it will help. I think local physician always like to have local data on top of global data. So it will help. For sure, it will also help the takeoff in Italy as well.

Speaker 4

French and Italians experts talk a lot and look at their data, respectively. And on top of that, I can say that there are not so many countries with large early access program like France and Italy, but there are also other smaller countries where we have named patient cells, which will look at this data and likely decide to start some patients which are currently already identified and in need.

Speaker 2

Great. And with regard to your second question Seamus on the next generation programs, which we agree with you are incredibly important. So for the weekly, the 7/18, as we've said previously, there's no new update there in the sense that we need to submit the rodent, the 6 month rodent and the 9 month non human primate. Those studies are ramping up. We need to submit those reports to the FDA.

Speaker 2

And also at the same time, an amendment, which will allow us to treat patients for more than 4 weeks, which is how the original protocol was written. And as we said, we had trouble The physicians didn't think they could recruit if patients could only get the drug for 4 weeks because it's the 1st 4 weeks are quite intense. So the bottom line is, obviously, we want to be able to provide longer term treatment for those patients. So that's the 718 program. Our goal, we've moved it out a bit is based on the timing of that amendment submission is to dose the first patients in that program in 7/18.

Speaker 2

The bivomellagon, we had a very slow start. We got it early back mid year, I think, 1st patient in and then had a tough summer and just getting sites open. I won't go through all the laundry list of reasons, but we have the sites open now and we're up and rolling. And so the update today is that we've got more than 50 just about a little more than 50% of the patients either dosed or in screening. So there it's always hard to give a firm date while you're still recruiting, but our expectation is that we will for sure complete enrollment of that trial in the Q1, which means that a midyear readout is still possible for the small molecule program.

Speaker 9

Great. Thanks so much for the update. And then maybe just as one final question. The opportunity for HO in Japan is something that you've talked about in the past.

Speaker 6

Can you just give us

Speaker 9

a sense of how the HO opportunity is likely to emerge there? And is it something that you still feel confident that it is something that Rhythm can take on its own?

Speaker 2

Yes. So we said we're at Obesity Week. I met with Doctor. Tanaka, who's a lead investigator in Japan today. As I highlighted in my script, our expectation is that we'll complete enrollment of the 12 Japanese patients required by the end of this year.

Speaker 2

He was very positive again about how this is going. The sites are working well together. So if you're asking about our optimism about Japan, I think it's not at all diminished. If anything, it's increased. Can we handle it?

Speaker 2

Again, I think rare diseases, if you have the right people, again, it's not so much a function of the size of the country necessarily, but if you have the right people, and I think we do as a starting point, you can go it alone. And so that's still our plan today.

Speaker 4

Thanks so much. Congrats on the quarter.

Operator

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

Speaker 8

Hey, good afternoon guys. Thanks for taking the questions and congrats on all the data this week. I guess I'll just focus more on the hypothalamic obesity side. Just a couple of questions there. For 718 Part C data, before you go in there, is there any intention from you guys to share the Phase 1 healthy volunteer just so we can get a sense for the PK as well as the hyperpigmentation side of the profile?

Speaker 8

As we think about the bivomelegon, I guess when you think about the trial itself, how much of an overlap is there between the trial participating in that, I guess, sites participating in that bivomellagon signal trial versus the Phase 3 hypothalamic obesity. I recall it was over enrolled and so I would imagine some of that could bleed into if you will and perhaps fast track the bivomellagon enrollment. And then I guess lastly, just thinking about the broader opportunity, going back to Phil's question, Daybreak and M and A, just wanted to get your sense on sort of the commercial opportunity here. Are you guys thinking about hypothalamic obesity and maybe going after something like a profitability goal first? Or would you be looking after more expansion opportunities by going after M and A and Daybreak subsets that might be promising?

Speaker 8

Thanks so much.

Speaker 2

Okay. I may have to come back to the last one just to clarify. So your first question is route 718 Part C, where we share the A and B parts. We haven't made any plans for that. I'm not saying we won't.

Speaker 2

I have to think a little bit about where we would do that in terms of the meeting. But given the delay, I think it's perfectly given the delay in Part C, it's perfectly reasonable question. So I'll defer and come back to you on that. On your second question, for the BIV and the overlap of the sites, I'm going to plead ignorance here. We have a number of sites which were not part of the original or not part of our Phase III HO trial.

Speaker 2

As you said, we did overrule. But most of these sites are new, but I can't tell you for sure that we don't have some overlap there. So maybe we can get back to you offline. And then your

Speaker 5

I can probably take that Thursday, Ghans. I think the question of a trade off between investments in a registrational strategy for M and A and Daybreak and profitability, It's a little early to speculate on because it presumes both that we've established a firm time line for when we would invest in those and what the revenue that we would be generating from HO at that time would be. So there's a lot of moving parts. We consistently try to evaluate them prospectively, but I think it's a little too early to say. What I would say is, as we've said repeatedly, we are very dilution sensitive as a company.

Speaker 5

We're all shareholders here. And at the same time, we recognize that the biggest opportunity for the company is to maximize the area under the curve in terms of generating cash flow for our shareholders. So we're trying to optimize all those parts the best we can.

Speaker 8

Great. Well, congrats again. Yes. Yes. Sounds good and have a safe trip back home.

Operator

Thank you. Our next question comes from the line of Whitney Ijem with Canaccord Genuity. Your line is now open.

Speaker 10

Hey, guys. Thanks for taking the question.

Speaker 11

Just one follow-up on the can

Speaker 10

you guys still hear me okay?

Speaker 2

Perfect. Yes, yes.

Speaker 11

Okay. Sorry. Follow-up on the Japan opportunity. Can you remind us, I know you said the filing in Japan is based on the analysis of the overall study plus the Japanese cohort. Is it the full Japanese cohort out to a year of follow-up or is there potential for an interim cut with less follow-up of the Japanese cohort in particular?

Speaker 2

Yes, it's the former. So it's what we've been clear about is the first 120 patients will form the basis for the EU and the U. S. Filing. And then there's an additional 11 patients, which was the over enrollment plus the twelve Japanese patients.

Speaker 2

When they finish and the Japanese patients will be gating in that, that will be so it's the last Japanese patient out at a year. That's the filing.

Speaker 3

Understood. Okay, great. Thank you.

Operator

Thank you. Our next question comes from the line of Jeff Hung with Morgan Stanley. Your line is now open.

Speaker 8

Thanks for taking my questions. The French real world study suggests that patients who had a resection over a decade ago can still derive a benefit from setmelanotide. Are you seeing any patterns on BMI or hunger score that correlates with time since resection? And if not, do you think that setmelanotide would be an ideal therapy regardless of time since resection? And then I have a follow-up.

Speaker 2

Yes. No, thanks, Jeff. You're highlighting what I think is the most amazing part about this. It's I do think it's exactly what you said, which is the time doesn't seem to make a difference. The drop in hunger and the BMI changes are perfectly consistent with what we saw in the HO trial despite the fact that the original Phase II trial was 13 pediatric patients out of the 17.

Speaker 2

So yes, I think it says it doesn't matter. It's the defect. It's the biology of the defect, no matter when you had it, you've interrupted somehow impaired signaling through this MC4 pathway, and MC4 agonist seems to be the solution.

Speaker 8

Great. And then a few weeks ago, you announced the partnership with Exovia in BBS. Can you just talk about what you hope to gain from it? And will that help you gain greater access to the UK registry to reach additional BBS patients? Thanks.

Speaker 2

I'm going to let Jan comment on the access to the UK registry. What we announced a week ago is a so we know Phil Bils very well. We work closely with him. Obviously, he's one of the leading experts in the world and he's doing work now trying to develop a treatment for the eye findings in Bartleby. So one, we want to support that.

Speaker 2

2, we have a shared interest in terms of understanding the epidemiology of BBS. So it made sense to work together. And yes, he's got deep data, which I don't think he would deny us, but this is an opportunity to put it together. But Jan, maybe a couple of comments just on your thoughts on that.

Speaker 4

No, I can just add that we already support

Speaker 2

Speak up a little bit, Jan.

Speaker 4

Can you

Speaker 11

hear me?

Speaker 2

You're very you're going to speak into your phone.

Speaker 4

Okay. Is it good now? Yes. Sorry. No, I just I can add that we already support the BBS registry.

Speaker 4

Phil Bill and his team have worked on it for many years in collaboration with BBS UK Patient Association, and we have started to support this effort maybe, I would say, 1 year ago now, and we will continue to do so.

Speaker 8

Great. Thank you.

Speaker 2

Thanks, Jeff.

Operator

Thank you. Our next question comes from the line of Tazeen Ahmad with Bank of America Securities. Your line is now open.

Speaker 10

Hi, thanks for squeezing me in. In terms of the Phase 3 data that you're expecting for H. O, I think you've given a little bit of a broad guidance for the first half of twenty twenty five. Should we be expecting that timeline to be condensed, maybe early next year sometime? Or is that the guidance that you're going to maintain?

Speaker 10

What's going to need to happen in order for that timeline to condense? And then secondly, as you think about HO and the use of that melanotides there, what have doctors told you about the desire to be able to combine GLP-1s with that drug? And I know you're not doing studies on that per se, but commercially speaking, would that be a good thing? Thanks.

Speaker 2

Yes. So your first question, which is totally fair, I mean, what we've said, which is just we've given you as best we could the math. So last patient dosed literally at the 1st day of February. It's a 60 week trial, last patient last out. So you can do the math on 60 weeks from then.

Speaker 2

And then you've got to close the trial out and the like. So we'll be working as aggressively as we can to close it out efficiently, but it's not an instantaneous. So I don't think we're going to be able to update it a lot better than that. I think we it's not going to be June 30. I think you can all do the math on that and conclude that's not the case.

Speaker 2

I'm not sure we'll be able to refine it publicly much more than that, but I don't know, I'm not helping you very much there beyond the math, to be honest. Your second question was on the H0, the combination therapies and there is interest. I mean, the whole world is focused on combos in general. In our world, as we've discussed, I think, we gain weight for different reasons. So any given patient who has a deficit in their MC4 pathway signaling and does well on setmelanotide, they may plateau.

Speaker 2

They may also have gained weight for other reasons, which may be amenable to another drug GLP-one, for example. And anecdotally, we know that GLP-1s have been added, to patients who have been on cephalanotide. And in some of those cases, they've had incremental weight loss, which I think is consistent with that hypothesis. So I think your last question was, is that a good thing? To me, a good thing is anything that gets the patient a better outcome.

Speaker 2

And we know that the medications can be used together. We know in a mouse model, they were additive. So it makes sense in that from that standpoint. There's a little bit of overlap in the toxicity. They both have nausea, GI complaints as part of that.

Speaker 2

And so using the 2 drugs together, it's a little more work maybe the case, but it can be done.

Speaker 3

Okay. Thank you.

Operator

Thank you. Our next question comes from the line of Joseph Stenger with Needham and Company. Your line is now open.

Speaker 8

Hi. Thanks for taking our question. Just back on the BBS launch, you're seeing pretty steady growth in new patient adds, another 100 U. S. TRx in the quarter.

Speaker 8

Just wondering if you can describe the BBS patients that are new to drug at this point in the launch. Are the vast majority newly diagnosed? Where and how are they being identified and or diagnosed? Any color on this would be helpful.

Speaker 2

Okay. So we'll start with Jennifer and then Jan, if you have any thoughts on international, you can go there. But Jennifer?

Speaker 3

Yes. So, I think it's a mix, in general. I think that our teams overall are doing a lot of outreach to physicians they have been in contact with, over time and through the education and back and forth. There's physicians for a rare disease, it's being aware and heightened just in terms of as patients come their way to actually get that patient's back understanding the very different symptoms and actually getting that patient to a diagnosis. So as these patients are more educated and they're more in tune, it becomes easier for them also to potentially suspect patients that get to diagnosis.

Speaker 3

So this is how, as I explained, we have some initial first time prescribers, where they have finally gotten to a patient diagnosis and understand the value of the Zifri as well as repeat prescribers as well. Both are contributing.

Speaker 2

Thank you. Anything yes, maybe we'll leave it there. Joey, is that good?

Speaker 8

Yes, great. Thank you for taking our question.

Operator

Thank you. Our next question comes from the line of Raghuram Selvaraju with H. C. Wainwright and Company. Your line is now open.

Speaker 8

Thanks so much for taking my questions. Just wanted to see if you could comment at all on activities that are planned in congenital hyperinsulinism over the course of 2025, if we should expect any updates on that front? And also if you could give us some additional color on where you anticipate there might be additional reimbursed early access programs instituted for setmelanotide over the course of 2025? Thanks.

Speaker 2

Okay. So for the second part of your question, Jan, I don't know if you've got any other countries where you would want to highlight at this point, but I'll come back to you in just a minute. The first question was on congenital causes. And I think I would put this in the category, the earlier question we got about CHI. CHI.

Speaker 2

I just got clarification. Apologies on that. So on our CHI program, which we have not spoken about, as I said, and we are waiting to develop a molecule, get our lead molecule identified. We've made good progress. And so I will commit to updating in 2025.

Speaker 2

We won't have further updates here in 2024, but we are making good progress and our interest remains high in the CHI. With that, Jan, any other sort of additional early access countries where we would be looking at?

Speaker 4

I am very close for my laptop. Is it better now?

Speaker 2

Yes.

Speaker 4

Okay. Sorry. So yes, thank you for your question. So not so many countries, in fact, but for good reasons. First, we are, as I said earlier already, in more than 15 countries ex U.

Speaker 4

S. And a good chunk of these countries are countries where we have early access programs or paid early access. 2, we pick our countries very carefully. So we could be in much more countries, but it would come with less time on more important countries first. And we also want to make sure that when we start somewhere, there will be some sustainability.

Speaker 4

So we pay really attention to where we go. So based on that, and back to your questions, we will likely be in 2 or 3 additional countries in the next 12 months, but not more than that, again, by choice and by design.

Speaker 2

Okay. Thank you very much.

Speaker 3

Thank you. Okay.

Speaker 5

Next question.

Operator

Our next question comes from the line of John Wallobin with Citizens JMP. Your line is now open.

Speaker 11

Hi. This is Catherine on for John. I just have a few questions on reimbursement. The first question is, kind of what's the current paid rate? And how much more how much room is there to kind of improve upon this?

Speaker 11

And what can be done to improve upon this? And the cause of denials currently in the U. S? And then just any color on early discussions with payers regarding HO and reimbursement there and just kind of how to identify which patients can get the drug early since you did have shown that it works in patients that have had diagnosis for years now. So just to add

Speaker 2

it. Andrew, do you want to comment on the paid rate or jump in?

Speaker 5

By the paid rate, are you speaking to what our our coverage among payers where we've been pretty consistent is that we get essentially no coverage from Medicare by statute because we are an obesity med indicated for weight loss. We have a high level of coverage from commercial close to full coverage from commercial, although there are many small commercial plans, which do not cannot afford or do not have coverage for expensive therapies. And then we have very high levels, 80% plus of covered lives in Medicaid. So that's kind of where we've been saying. We've said that the number of scripts that go to free sorry, the number of patients that transition to free drug has been running about 20% of scripts.

Speaker 2

And maybe one other thing, if I understood the question was, we don't A, we don't discount and B, the price of the drug per se has not been the issue for denial. It's been more policy related. Do they cover obesity drugs in general, for example, Medicare, that's the reason we don't get covered by Medicare. So does that answer your question or?

Speaker 11

No, that does answer my question. Thank you so

Speaker 2

much. Okay.

Operator

Thank you. I would now like to turn the conference back over to Doctor. Meeker for closing remarks.

Speaker 2

Okay. Well, thanks again to everybody for tuning in here on a busy day and an unconventional end of the day earnings call. And as I said, we're excited about where we are and look forward to our next update. Thanks, all.

Operator

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

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