Rhythm Pharmaceuticals, Inc.

Good day and thank you for standing by. Welcome to the Rhythm Pharmaceuticals fourth quarter and full year 2022 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. 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, Michelle. I'm Dave Connolly. I are here at Rhythm Pharmaceuticals. For those of you participating on the conference call, our slides can be accessed and controlled by going to the investor section on the investors page of our website at ir.rhythmtx.com. And this morning, we issued a press release that provides our fourth quarter and year end 2022 financial results and business update, which is available on our website and as listed on slide two. And as listed on slide two is our agenda. Here with me today in Boston are David Meeker, Chair, Chief Executive Officer and President of Rhythm Pharmaceuticals, Jennifer Chen, Executive Vice President, Head of North America, Hunter Smith, our Chief Financial Officer, and Jan Mazzebro, Executive Vice President, Head of International, is on the line joining us from Europe. And 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 on 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 representing 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, who will begin on slide five.

Thank you, Dave, and good morning, everyone. Thank you for joining the fourth quarter earnings call, and we are going to talk about earnings, which were good, and this week's announced acquisition of Zinvento. However, before we do that, I want to reflect for a moment on this company's journey. It was almost a decade ago when we published the first case reports in the New England Journal of Medicine describing the remarkable effect of stepmelanotide in two patients with palm seed deficiencies. Since then, we have learned so much about the MC4 receptor pathway, the associated genetic deficiencies, the importance of hyperphagia and energy expenditure in the development of obesity. At the same time, we started to learn about what it means to live with one of these rare diseases, complete lack of awareness on the part of the healthcare system, the relative shortage of experts, the almost complete lack of genetic testing, all compounded by a societal and medical bias which confronts the individual and family living with obesity. As the mother of one child with BBS said when asked, how bad can hyperphagia and obesity be when your child may be losing their sight? Her response, people are kind to blind people. So slide five, the challenges of living with a rare disease were further highlighted this week as we mark Rare Disease Day at Rhythm of the Guest Speaker, a mother of two children with BBS who described the incredible challenges of living with the hyperphagia. The severe preoccupation with food and the associated abnormal food-seeking behaviors and how her child and her family's life has been changed since starting in chivalry. And Rare Disease Day reads into Obesity Care Week and World Obesity Day on March 4th, which brings obesity to the forefront as a disease that requires a new way of thinking and new therapeutic options at work. Rhythm is at the center of these awareness events, as we know obesity is not just one disease, but many diseases, some of them rare, and each disease deserves a careful evaluation and the right treatment. Slide six. 2022 is a transformative year for Rhythm as we now embark on our next chapter as an established commercial stage company expanding geographically and now further diversifying our pipeline. The DBS launch, as you will hear from Jennifer and Jan, continues to go extremely well. Since FDA approval in June through the end of the year in the U.S., we have received more than 200 new prescriptions from 125 prescribing physicians with more than 100 patients approved for reimbursement. Our confidence in this opportunity continues to grow. Internationally, Incivry is now available in eight ex-U.S. markets for POMC and LEPR. France also includes BBS through paid early access. The success to date in both regions speaks to the quality of the teams we have. And we're continuing to execute on our strategy to expand the overall opportunity for set melanotype. With strong proof-of-concept data in our Phase II hypothalamic obesity trial in 2022, Phase 3 trial sites are now being initiated, and we have begun screening patients. This year, we'll also have data readouts in our Phase 3 Pediatrics Trial and Phase 3 Switch Study, evaluating the weekly formulation of cefalantide and preliminary data from the open-label Stage 1 portion of the Phase 2 Daybreak Trial. Monday, we were excited to announce the acquisition of Zinvento, a preclinical Dutch company with a suite of drug candidates for congenital hyperinsulinism. which we believe represents an outstanding fit with RILM and our expanded focus looking at rare endocrinology. This fits perfectly with our concentration of pediatric endocrinologists, and we've already heard from some of them how they are excited about this development and look forward to working with us as we develop those compounds. We're targeting being in the clinic in 2024, and as noted, we are well capitalized into 2025, and this inventory acquisition will have no impact on that forecast. Slide seven. So CHI is a disease where the available treatments are suboptimal, both in terms of safety, tolerability, and importantly, effectiveness. The unmet need is clear. I had the opportunity to get to know Claudine Benesendi, the CEO, and Pete Wigernink, the CSO, as one of their scientific advisors. I was incredibly impressed by Claudine's personal story, the thoughtful way she has pursued her mission, and the great progress she and Pete have made in a short period of time. The fit with rhythm was obvious. CHI is a genetic disease with patients presenting during the neonatal period with hypoglycemic episodes, which may trigger seizures, loss of consciousness, and with repetitive insults, brain damage, and death. Biologically, in a normally functioning beta cell, an increase in glucose levels triggers insulin release, and as glucose levels drop, insulin release is suppressed. In CHI, this process malfunctions, and insulin release continues in the presence of low glucose levels, resulting in further lowering of the blood glucose for life-threatening levels. The emergency treatment is dextrose and glucose infusion. We know from patient and family surveys conducted by the International Patient Organization that these hypoglycemic low blood sugar levels are occurring one or more times per day in 25% and one or more times per week in an additional 20% of patients despite being on standard of care. This is an ultra-rare disease with an incidence of approximately 1 in 30,000 individuals in the U.S., EU, and Japan, respectively. Approximately 70 to 80% of these patients need medical treatment. In addition to patients with chronic hyperinsulinism, there's another population of patients potentially twice as large with transient hyperinsulinism in the neonatal period, who we will potentially target as well. We look forward to providing a more in-depth presentation on the science and our development plans later this year. Slide eight. The A3 trial for HO is actively screening patients. This is a double-blind randomized controlled trial of 120 patients randomized two-to-one to set melanotide or placebo. Patients will be dose escalated over eight weeks and then followed for an additional 52 weeks. The primary endpoint is percent change in BMI. We expect it will take six to 12 months to enroll, probably skewing closer to the 12-month time frame. Slide 10, as you know, this is a fundamentally different opportunity for rhythm with an estimated 5,000 to 10,000 patients in the U.S. and the EU, respectively, largely already identified based on their history of injury to the hypothalamus with associated impairment of the MC4 pathway and their need for ongoing hormonal replacement related to pituitary injury. We look forward to providing an update on the patients in the long-term extension before the end of the year and anticipate that will be tied to an abstract presentation at a fall meeting. Slide 11. Multiple trials ongoing. These other programs are progressing well. Both the PEDS and weekly switch trials, as noted, will read out top line data in the second half of this year. We'll provide an initial look at the phase two daybreak open label portion in the second half of this year. And Emanate is enrolling patients in each of its four independent sub-studies. Slide 12. Before I turn it over to Jennifer, we are formally updating our BDS prevalence numbers, which we talked about previously. As we have described, When we look at the identified patient numbers in Europe where the diagnostic rated ahead of the U.S. and extrapolate that to the U.S. population, combined with the frequency of patients with a biallelic pathogenic variant for BDS being identified in our URO testing program and our initial experience with launch, all of this gives us increased confidence that the target population is larger than originally anticipated. It's on the order of 4,000 to 5,000 patients in the U.S. and similarly in Europe. With that, I'll turn it over to Jennifer.

Thank you, David. I'm going to be starting on slide 13 today. We are excited about the current status of our U.S. MCIVRI BDS launch. We remain focused on our efforts to feed the diagnosis of patients with BDS and educate them on the availability of MCIVRI, the only FDA-approved therapy that charges an entire MC4 pathway, a root cause of hunger and obesity in people living with BDS. Through all the efforts of our cross-functional team, we have seen continued progress and success across the journey, from diagnosis of BDS patients through to securing access and maintaining patients on therapy due to the benefits they receive. Next slide. We are pleased with the progress and achievements made in the second full quarter of launch. As we did last quarter, we will share with you today key metrics we believe reflect the progress of our launch. focusing on prescriptions, prescribers, and payer approvals for reimbursement. Symptom Sivri was approved for BVS by the FDA on June 16, 2022, and through the end of the fourth quarter of 2022, we have received more than 200 new prescriptions for BVS patients, coming from more than 125 physicians. This breaks down to more than 120 new prescriptions between June and the end of September and more than 80 in the fourth quarter. Given that 20 clinical trial patients have converted to commercial prescriptions during the third quarter, we are pleased to see the continued growth in quarter-over-quarter prescriptions. Importantly, we have received payer approval for more than 100 of these prescriptions since launch. The demand for MCIVRI is strong. Physicians are writing the prescription, and patients are experiencing benefit on drugs. On the next slide, we'll take a closer look at MCIVRI prescribers' response. Not surprisingly, endocrinology, both pediatric and adult, remains the top specialty amongst our prescribers at a combined 47%. Pediatricians remain second, accounting for 24% of prescribers. On the small pie chart on the right, you can see that approximately 22% of all MCV prescribers since launch are new to Rhythm. By this, we mean they had not been called on by a Rhythm territory manager prior to writing a prescription. Interestingly, these new-to-Rhythm prescribers skew towards primary care or general pediatrics. We believe this speaks to the success of our non-personal promotion effort, which educates a broader physician and patient population, as well as motivated patients who likely became aware of NCIFRI through our relationship with the BDS Foundation. Next slide. Getting more than 100 payer approvals for reimbursement is quite a meaningful milestone for us at the end of the fourth quarter. Our payer mix for BDS prescriptions still remains with a vast majority coming from commercial plans and Medicaid, and a small portion, or 9%, coming from Medicare. Time to payer approval remains approximately one to three months. There are certainly outliers, but this range represents the average, and we are starting to see subsequent prescriptions submitted to payers that have already approved reimbursement for MCIVERY move faster to approvals. While the majority of the remaining prescriptions are in the prior authorization and appeal stage, we have moved patients to free drug or PAC, our patient assistance program. By statute, Medicare does not cover anti-obesity medication, so those patients are transitioned to PAC. Similar to other rare diseases, there are patients with small self-insured plans that are not providing coverage for MCFRI. Finally, Medicaid continues to be a mixed bag, as some states offer coverage for MCFRI, and others will make a decision on a case-by-case basis through the appeals process. Both of these categories make up the majority of Medicaid plans. There are, however, some states that currently outline they will not cover MCFRI, and hence, we do also have some Medicaid patients on free drugs. We continue to work this system persistently and explore alternative venues for reimbursement for all of our patients. and have experienced early success transitioning patients off of PACT. We remain committed in our payer education and outreach efforts to help them recognize BDS as a distinct disease that requires a targeted therapeutic approach. Next slide. On this slide, we show the age breakdown of BDS patients for whom we had prescriptions in hand since launch. Adults account for 46% of prescriptions received. while prescriptions for children and adolescents account for over half the prescriptions received. And the vast majority, 95% of patients with prescriptions, have consented to receiving direct connection and education from our patient services team, which we call Rhythm in Tune. We are proud to offer this program. Our teams work side-by-side with patients and their families to help them gain insurance coverage and to support them through our education efforts from initiation and maintenance on therapy. We are so pleased and inspired by the overwhelmingly positive feedback from patients and their positions of rhythm and tune. Next slide. While we are happy with the results of the launch to date, we still have more opportunity ahead of us, and we are focused on optimizing our execution moving forward. Last month, we held our 2023 North America team meeting in Dallas to align on our strategy for this year. We have a great foundation in place to build on as 2022 really set the stage for patient identification, prescriptions, and therapy initiation and maintenance as exhibited by the results from the first two quarters of commercial launch. And this year, we remain focused on accelerating hope for patients and their families by continuing to engage with our customers around the need to treat hyperphagia and severe early onset obesity caused by an impaired MC4 pathway. Educate that MCIV is the right treatment option for patients with VBS. With a tremendous team in place with deep experience in rare diseases, we are focused on ensuring our engagement with customers cultivates a positive experience with rhythm and MCFRI. And lastly, with the conviction we have of the benefits that patients are receiving on therapy, we remain focused on expediting the identification of more patients with DBS who may benefit from MCFRI. With that, let me hand it over to Yann.

Thank you, Jennifer, and good morning. I will start with the slide 20. So in the international regions, we had a very strong year and a very strong fourth quarter as well, making significant progress in securing access for Incivary for POMC and Lipar indications, and in parallel, working intensely at market access execution for Barde-Wiedel syndrome. Incivary is now available in eight countries outside the United States, and we are looking forward to continued execution this year. As you can see on the picture, the international team came together mid-January to kick off the year with a focus on market access, patient identification, launch plans, and operational excellence. Next slide. For POMC, PCSK1, and NIPAR patients, we have identified approximately 100 patients being cared for in medical centers in EU4 in the UK, and the estimated prevalence is approximately 600 to 2,500 patients in Europe. For POMC and LIPAR, we are now fully launched in the UK, in Germany, in the Netherlands, and in Italy. We achieved paid early access in France, same in Australia and Turkey, and we also have an early access program in Argentina in place. Compared to the United States, we know that the community and referral networks in Europe are better organized for these patients. While the numbers are still small, we are in positions to leverage that existing rare disease infrastructure, and we are already doing so. Next slide. For BBS, we have made significant progress since we received the marketing authorization from the EUC in September last year. And like for POMC and Lipar indications, we are in positions to leverage the existing rare disease healthcare structure. BBS is a larger population. We believe the EU prevalence estimate of 4,000 to 5,000 patients, as David has detailed. We know of approximately 1,500 patients who are diagnosed and being cared for in EU4 and the UK. In France, we achieved paid early access for BBS last year. This paid early access program called AP1 allows reimbursed early access for therapies where a positive risk-benefit balance is recognized and when no other therapeutic alternatives are available. With approximately 700 patients with BBS diagnosed in France, there is a clear unmet medical need there. In Germany, we are progressing in our discussion with the Joint Federal Committee, the GBA, with very positive interaction so far. We are seeking the exemption from the lifestyle drugs reimbursement exclusion list, as we successfully did for POMC and Lipar. And we are looking forward to launching in the second quarter of 2023. In addition, we look forward to launching in the Netherlands in Q4 2023, in Italy and in Spain in the first half of 2024, and in the UK in the second half of 2024. We are very excited about all the progress we are making in Europe. We are making steady progress with Ponzi and Lipar, and with BBS we are making tremendous strides with securing access. We look forward to launching in Germany this year and bringing several other countries online in 2024, like, for example, Belgium and some Nordics countries. With that, I will pass the baton to Hunter.

Thank you so much, Jan. Turning to slide 24, and it begins 2023, well capitalized, with $333 million in cash on hand sufficient to fund all planned operations into 2025 as we continue to grow as a global commercial stage biopharmaceutical company. This cash guidance includes the impact of projected milestones and R&D spending associated with the Shinbento acquisition. We record $8.8 million in net product revenue from Sivri in the fourth quarter and $16.9 million for the calendar year 2022. Quarterly revenue marked an increase of $4.5 million or 105% over the third quarter of 2022 driven primarily by IMSIBRI sales for BBS in the United States, as well as increased POMC and LEPR sales in our international region. U.S. sales represented 84% of total Q4 net product sales and 85% for the full year. Cost of goods sold for the fourth quarter was $1 million, or about 11.7% of product revenue. Cost of goods sold consisted of $440,000 royalties due to Ibsen under original licensing agreement, $400,000 product costs related to commercial sales and product distributed under patient assistance programs, and about $200,000 related to the amortization of our previously capitalized sales-based milestones. R&D expenses were $23.5 million and $108.6 million for the fourth quarter and calendar year 22, respectively, on a quarter-over-quarter basis. R&D expenses decreased by $8 million. On a sequential quarterly basis, this represented an increase of $2.4 million as compared to the third quarter of 22, primarily driven by increased spending on clinical supply materials. Clinical trial costs remained largely unchanged as decreases in older studies offset increases in costs associated with the ramp-up of activity for our pivotal Phase III hypothalamic obesity and MNA studies. SG&A expenses were $26.3 million for the quarter and $92 million for the year. Compared to Q4 2021, SG&A increased by $5.3 million. Sequential quarterly basis versus Q3 2022, the increase is $4.4. The latter increase is primarily due to increased marketing costs related to BBS, increased professional fees related to commercial, regulatory, and international operations. For the fourth quarter, weighted average common shares outstanding were $56.3 million, and quarterly net loss per share was $0.75. For the full year, average common share is for $50.3 million. for the net loss of 3.47 per common share. Turning to slide 25 for some comments about the outlook for the coming year. We enter the year well capitalized, and we are executing our global strategy with disciplined investments in our programs designed to maximize benefits for patients by delivering shareholder value. That was our strategy. That was the example we set in 2022. and we expect 2023 to be no different. We have not offered revenue guidance in the past. We have no plans to do so in the future. Projecting rare disease launches is a challenging exercise, and we don't expect quarterly growth to be linear. We expect long-term success based on RITM's ability to bring potential and civil patients to diagnosis. Our success to date increases our confidence in the long-term opportunity in DBS and other potential indications. As such, we remain focused on commercial execution to maximize the opportunity for MCIVRI globally. Having said that, I will offer a few comments and some context for how to think about the drivers of revenue growth in the coming year. DBS is the primary driver of MCIVRI revenue, so it's worth reemphasizing that POMC and LEPR biallelic patients on drug in the first few years will number in the tens. In the last full quarter prior to the DBS launch, for example, the first quarter of 22, Net sales and delivery totaled 1.5 million, reflecting the ultra-rarity of POMC and LEPR patients. We expect the percentage contribution from our international region to increase over time, but the timing of this increase is largely dependent upon country-level reimbursement decisions associated with the BBS indication. Jan outlined this timeline earlier in the call. At present, the only country in which we expect full reimbursement for BBS for a significant portion of this year is Germany. The Netherlands and potentially Canada will come on the second half of the year. Full reimbursement in other major markets such as France, Spain, Italy, and the UK are expected in 2024. We will plan to keep you up to date on the projected timing of these reimbursement decisions as our visibility increases. Excluding the German BBS launch, therefore, the POMC and LEPR indication will remain the main driver of revenue in our international region in 2023. We also thought it would be helpful to give you more perspective about our forecast for operating costs given all the activity going on at Rhythm. We expect approximately $200 to $220 million in non-GAAP operating expenses in 2023. This projection includes $120 to $130 million for R&D expenses and $80 to $90 million for SG&A. Both projections exclude stock-based compensation. R&D will represent an increase of approximately 22% over 2022 using the midpoint of the range. This increase is driven primarily by our pivotal Phase III trial in hypothalamic obesity, a global trial for which we expect to open more than 20 sites. Enrollment in our Phase III M&A trial, as we anticipate the vast majority of patients entering the trial this year, and costs related to our Phase III de novo trial for the weekly formulation of setmelanotide. On the SG&A side, we expect expenses between $80 and $90 million for an increase of about 9% over 2022, again, using the midpoint of the range. Our U.S. commercial operations are now at full strength, so the increase is driven primarily by annualization of these costs as they were growing during 2022, or the headcount was growing during 2022, as well as headcount increases in the international region and other support functions. All of these non-GAAP estimates include non-cash stock compensation, which totaled $20 million in 2022. Lastly, we're very excited about the Shibental opportunity. Rhythm is paying a $5 million upfront fee and taking over development costs for the company's portfolio preclinical asset. In addition to the upfront, we agreed to pay $6 million in preclinical development milestones. There are no near-term clinical milestones. The remaining milestones payable to Shinbento shareholders are based largely upon FDA and EC regulatory approval and successful future commercialization, totaling up to $125 million. There's a potential for an additional $75 million in the event a second molecule is selected, developed, and approved. The economics of this transaction are success-based, and we at Rhythm are very excited to have and Pete join us on this high-impact opportunity in a disease with a high medical need. Now I will return the call over to David. Thank you.

Thank you, Hunter. So I'll quickly share these last two slides before moving to questions. Slide 27, as noted, we have several trial starts and top-line data readouts this year, which we talked about, as well as several market access milestones in a number of ex-U.S. markets, which Jan had detailed earlier. Slide 28, just reminding you, we have three main foci areas for this year, maximizing the PBS-BBS commercial opportunity globally, executing on our Phase III trial in hypothalamic obesity and continued expansion through clinical development for set melanotide in these other trials, and now our assets from the SimPento acquisition, which, again, we look forward to moving forward as rapidly as possible. And with that, we'll open it up for questions and a few operators.

As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from Phil Nadeau with Cohen. Your line is now open.

Good morning. Thanks for taking our questions, and congrats on a successful quarter. First question is on the BBS launch. The pace at which you're adding prescriptions is impressive. With 200 a year end and adding 80 a quarter, the simple math would say you'd be over 500 by the end of 2023, which is the vast majority of people who are in the BBS registry. Can you tell one whether um you're adding new patients to the prescriptions are there are you giving patients um prescriptions who are not currently in the registry and two can you talk about new patient identification um more broadly uh is it possible for this this rate of prescriptions to continue even beyond 2023 i think so jim it's another question um so

You asked about the CRIBS registry, and one, we have great relationships with the folks at the Marshall Clinic. They are incredibly dedicated to the VBS patients and their care. When we think about the CRIBS registry, however, there are privacy policies in place, so we, at this point, really don't have any visibility in terms of the overlap of the patients that are in the registry. versus the patients and the ATPs that we have within our view at Rhythm. So that's one piece. To your point in terms of the prescriptions, I will say that we've been very happy with the level of the demand for this product. It speaks to the need and the differential impact in terms of the hyper-facial in the patient population for them to be seeking treatment. not only for their obesity, but the underlying hyperphagia itself. And so we are very much focused in terms of pull-through of opportunities. There still remains opportunity in terms of the physicians that we already have identified with patients that they are treating with BBS and pulling through those patients onto therapy through our interactions and education efforts. And to your point, we continue to be ultra-focused in terms of identifying additional patients to add to our view. These include patients that are already diagnosed with CVS that are lost in the system, and we have different mechanisms that we're going about in terms of finding those patients, as well as educating both potential patients out there, as well as ACPs, on the differential diagnosis of BDS so that we can get additional patients to get to a proper diagnosis. So there just remains a lot of opportunity out there.

Is there any sense internally whether what we saw in the second half of last year was Ebola or do you think that rate of prescriptions could continue actually even through 2023 given its impressive rate?

Yeah. I would say that there was certainly a demand for any disease area where there's no therapy that's available for years and years and years. When something becomes available, it's quite interesting for patients who were really trying to find a therapeutic option. We also had about 20 clinical trial patients that were converted to commercial scripts, but that was more in Q3. But with that said, I think the growth that we saw in Q4 was quite exciting to us. And as we move forward, we just have continued conviction about the needs, and once again, our focus is just around getting those patients to a quicker diagnosis as the journey The diagnostic journey oftentimes is so long for these patients.

So, Bill, just to reinforce a couple of things that Jennifer said there, I want to remind one of our common themes, again, rare disease world, don't trend it in a linear fashion. So that certainly goes for revenues early on, and it also goes for the script. So whether it will be 80 per quarter and the like, almost for sure not. It will continue. That will also be lumpy. But as Jennifer said, we remain incredibly encouraged by the strength of the demand here. And one of the pieces I'll refer you to, which Jennifer highlighted, was the 22% of physicians who were not engaged with were writing. These are patients who were not on our radar. So back to the different ways patients are coming into the system. A, we may find them, or B, they may find us. So again, a lot of convictions still.

That's very helpful. And one last question on the pipeline. On the daybreak data that we're going to get in the second half of the year, do you think you'll be in a position to release results from all the gene types in the study, or will it be a snapshot as to the most mature data that you have at that time?

Probably a blend of that answer in the sense that As you know, remember, we start off looking at 30 genes, and then during the course of the trial, we amended that based on some early results of A, genes not being so interesting, and also some of the genes were just so rare that we really couldn't enroll them, so we stopped looking for them, which doesn't mean they're not out there. It's just that they'll not be part of Daybreak. So we'll try to give you a sense of, we will give you a sense of sort of the larger landscape and how we narrowed it down, but the areas of interest will be those genes for which we focused down on we're able to enroll enough patients to draw some conclusions which will be a number much smaller than the 30 that the expectation that'll be probably on the order of five plus or minus maybe as much as ten but it's that's going to be the kind of data and the focus still here that's very helpful thanks again for taking our questions thank you please stand by for our next question

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

Hey, good morning, everyone, and thanks for taking the questions. Congrats on all the progress here. Just a couple of questions from us. I guess maybe first, as we are now in 2023, maybe just any commentary on more recent trends for Scripps and particularly around BBS patients. And is there any seasonality, as we should think about, you know, kind of this, you know, first quarter, you know, relative to the rest of the year? And then second question, you know, given that you have 100 reimbursed scripts, I guess, you know, simple math, does that kind of imply like a 30 million, you know, kind of annual rate here in terms of if all those patients stay on therapy? And I guess if that's true, I guess how does that, you know, you know, impact your thinking on where current consensus is, which is like 35 to 66 million for 2023. Thanks.

I'll have it. Thanks, Derek. Thanks a lot. So, what we'll do is I'll let Hunter take the consensus question just to... Yeah, I don't think we want to get into the sort of

Commenting on consensus, it's inconsistent with our not giving guidance. Having said that, the spread is quite wide and we expect as we continue to execute, I do expect the range of estimates to narrow.

Jennifer, several questions there. One on just the overall trend again in seasonality, quarter on quarter in a rare disease world, this one specifically.

Just speaking to the seasonality, I would say that it's not unusual for the fourth quarter to potentially be light if there's November holidays as well as seasonal holidays in general. What is interesting is for this particular therapy, oftentimes those family gatherings are surrounded by food, and it's also a potential opportunity as children are out of school for patients to be initiated on therapy during a period where they are on break. We did see some of that happening as well or heard some of the parents who wanted to actually initiate therapy during this time that may have been a downtime in other areas. With that said, I don't think that there's going to be much seasonality. I think it's really more based in terms of the physician, when they see the patient, and, you know, getting through the reimbursement process to then be able to initiate therapy. So, it's an ongoing process there.

Got it. Just one follow-up. Yes, no, that's very helpful. And then, just on Germany, I know you guys are prepping for launch, and maybe you can kind of discuss what you're doing there. And then, I think you said there's 1,500 BBS patients that are identified in Europe. I guess, how many of those are in Germany?

Jan, can you take that?

Yeah, sure. So I will not give the exact number because first we don't know it exactly, but of course it's a significant portion of it. And as often in Europe, I would say that these patients are localized in centers of excellence, so many centers with a lot of patients in each.

Thank you very much. I think, yeah, I mean, we're optimistic about Germany, obviously. And I think just to reinforce Hunter's comments, part of our goal in trying to give you a little more insight in terms of the breakdown between U.S. and Europe is, as we learn and we try to help you understand how Europe evolves, is you do a tremendous amount of groundwork to get through the market access, get pricing established and the like. You have the advantage of better organized patient communities and centers of excellence, if you will. But there is this steady gradual startup. So it's not a world where you tend to get a large bolus and you have a very big quarter. We expect this to build very steadily over time with Germany leading us as we get approval for BPS here. Got it. Helpful.

Thank you, Eric.

Please stand by for our next question. Our next question comes from Corinne Jenkins with Goldman Sachs. Your line is now open.

Yeah, good morning, everyone. You mentioned this earlier, but can you just expand on the degree of white space that remains among those 125 current prescribers from Sivri based on maybe the additional patients are under their care and might be appropriate for the drug.

Yeah, so Jennifer, so the 125 physicians who've written prescriptions, how many do you think are holding other patients that they may be acting on or are going to be acting on?

So of the prescribers, I would say approximately a quarter of them or so have written, sorry, There are around 20% or so that have written more than one script. So we do have already physicians who have written more than one script. Within the area of rare disease, I would say that, you know, a lot of physicians only have one patient. So it's not abnormal that they would only have one patient at this point in time. But there's still, once again, remains opportunity within other physicians who have yet to prescribe for very different reasons, just in terms of going through and, once again, identifying additional physicians who have patients as well.

Okay. And then maybe on the, is it Genvento acquisition? Should we expect that asset to be developed in a distinct mechanism of action, or are you looking to develop more of like a best-in-class drug against what are some of the known targets in that disease?

Yeah, I think we'll, like I said, we have said in our press release, and I commented, we'll provide an in-depth, greater in-depth analysis presentation of where that program is and what we're going after. So we're not going to reveal the target today, but I will say, and again, apologies for sort of being a little bit screwed, if you will, here. The biology was incredibly compelling. And, you know, why was this a good opportunity for us? And, you know, it's all things that You start with, is there an unmet medical need, and is the biology and the approach to the problem, does it make sense, and is the progress that they've made sufficient to give you confidence that you could have a reasonable probability of success here? And so Zinvento checked all three of those boxes. We know it's a competitive area, and I think that speaks to the unmet medical need, and we didn't enter into this blindly. We entered it with a full recognition of what else is out there and how this approach might compete, and we feel really good about that, so. I apologize for leaving it there for the moment.

Yes. Okay. Thank you.

Please stand by for our next question. Our next question comes from Daganha with Stifel. Your line is now open.

Great. Good morning. Thanks for taking in my questions and congrats on the progress. One question on the BVS launch. Just going back to the sequential announcement, I believe the first six weeks you had 50 prescriptions followed by 120 in third quarter and then 200 in fourth quarter. So can you maybe walk us back to that initial six weeks? That 50 within six weeks seems to be fairly robust there. What happened there, and is there any chance that we could see another kind of picture like that emerge in 2023 at some point, or should we expect kind of going back to Phil's point, another 70 to 80 per quarter? And then a question on Zinvento. I realize a lot of details are under wraps at this point, but just looking at the board composition, it does seem purely like it might be more ASO oriented? Am I on the right track there, or is it more small molecule or even injectable biologic? Any kind of insights there would be helpful. Thanks so much.

Yeah, got it. Jennifer, do you want to take the... Sure.

So you were asking about the number of scripts in the first couple of weeks. So I think that's definitely because of some of that... anticipated demand as patients were waiting to get osteotherapy. Also, a reminder just in terms of we had patients already ready that were part of our global study that we were converting into commercial scripts. So that's part of the explanation in terms of the number of scripts that we received quite early on. But moving forward, I think it's always a bit difficult to project, but I will outline that we still have quite an opportunity just in terms of As we move forward, the script that we've received that we are still working through the reimbursement process, getting those patients onto therapy is an area of focus. We're continuing to educate the physicians that do have the BDS patients just around the need to treat the hyperphagia and the early onset with a targeted therapy. And the third pillar definitely is to provide find additional patients, which I have in the past outlined that we have very targeted mechanisms at this point in time in terms of how we're going about our efforts there.

And I think, you know, all the questions, and, Dagan, your question, of course, specifically, which we totally are sympathetic to, and we have the same questions as we seek to understand, better understand this opportunity. All rare diseases, most diseases, including rare diseases, have front loading as you know go through development there's patients who are tracking this and you know expecting that moment of approval and looking to go on so there's always a bit of that front loading i think what's been incredibly reassuring about this opportunity in bbs is that as we've now gone deeper into the launch in the fourth quarter i think is a good standalone quarter in that sense the demand is clearly there and what we hoped is you know one is yes you continue to which we're doing and we're doing successfully. Second, as you build the system, meaning you get more centers, more individual physicians who are writing prescription and taking an interest, you begin to build an ecosystem which those patients who are seeking care and or think they might have BBS start to find us. And so that process will continue. Again, there's nothing about the BBS opportunity to date that changes our view that this isn't a very meaningful opportunity and ways to track some of the other well-established, well-known examples of rare disease success stories. So we'll keep you updated and try to give you as much insight as we can, but we are learning with you.

And then, David, what about the Zinvento? If there's anything... Oh, sorry.

Yeah, yeah. Oh, sorry. Yeah. Yeah, and again, as I said to Corinne, apologies for not being more specific. So we're not going to reveal the modality that we're chasing. Just remind me again, I think the unmet need here, there's a tolerability issue with the current standard of care. There's some safety... you know, issues related to the current standard of care, and then we think there's some optimal efficacy. And so this solution, we would hope, would address all three of those. But again, stay tuned on the exact modality and target. Great. Thanks so much.

Please stand by for our next question. Our next question comes from Whitney Adjim with Canaccord. Your line is now open.

Hey, guys. Good morning. Excuse me. Another kind of, I guess, type of runway question for you on Scripps. Are any early color on compliance rate or refill rate, just as we think about that new prescription number you're giving versus kind of total prescription headed into 2023? Sure.

I've worked in several different rare diseases in the past, and one thing that was... you know, interesting to observe, maybe not so interesting, but if and when the patients actually feel a difference while being on the drug, that tended to lead to a higher persistence as well as a compliance rate. So when you think about our patient population, the hyperphagia here is a key factor. It's something that just impacts them like really day to day, hour to hour. And feeling a lift of that or a relief of that, which then leads to the weight loss, is something that they can feel in terms of benefit of being on drugs. And so we have seen a very high compliance rate, even with a daily injectable because of this. And once again, it's due to the benefits that they receive. From a discontinuation of persistence rate, it is early days, but I will say that we are quite happy just in terms of what we have seen. You know, there was a lot of education on both the ACP as well as the patient side around expectation setting as well as, you know, ongoing engagements with our customers. so that we could get them through the titration process and maintain them on drugs. So I would say that the discontinuation rate is quite low, and we're very pleased with that.

Awesome, thanks. And then, excuse me, one on HO. Can you remind us, are there any patients in an ongoing long-term extension study from the phase two, or is there any additional longer-term follow-up in HO that we should be thinking about either being collected or being presented in 2023?

Yeah, so 14 patients entered the long-term extension, and yes, you should be paying attention to that. Our goal would be to update that experience some, as I said, later in the year. Again, we haven't identified the meeting in the specific abstract submission, but that would be our goal is to link it to that. But, no, that's very important. As with all of these, you know, the original – 12 to 16 weeks is a very short period of time. And what everybody, including regulators, are looking for is durability. And so we're looking forward to being able to update further experience.

Excellent. Thanks so much.

Please stand by for our next question. Our next question comes from Michael Higgins with Leidenberg. Your line is now open.

Thanks, guys, for taking the questions, and congrats on the quarter, including the ongoing launch. A couple questions for Jennifer, if I could. I believe in your remarks you noted that there's some state Medicaid programs that have decided they will not cover in Sivri at this point. Is that something that can be revisited within this next year? Thanks.

Yes. So to your point, yes, I did outline that there are some certain states that we have patients already on path. You know, we are very ongoing in terms of our efforts to continue the education process, not giving up in terms of really seeking positive reimbursement. And I would say that through our education efforts, we get more and more coverage decisions made for MCIFERI as we move forward into, you know, from launch through this first year through in terms of approval. There are certain opportunities that we have that are perhaps more low-hanging. For example, for Medicaid programs, they have an EPSDT program that's available for, you know, more pediatric and adolescents, which is an opportunity for us to follow up in terms of getting reimbursement. But once again, the follow-up and, you know, efforts just in terms of opening up access state-by-state is ongoing.

Michael, that's really a critical point in the sense that aside from something like Medicare where there's a statute and, you know, there's sort of no way to work that until the statute's changed and other companies are trying to get that changed. But everything else, there's sort of never a definitive no. And we've organized it in a way where we recognize at some point it may not be immediate near term, but but there's never a note. You just keep working this system and in a surprising way, some of those, gosh, no way opportunities become, yeah, and it opens up and that patient gets covered.

I appreciate that. Is this something that is in the single digit rate? Is this something that's really infrequent or is it something that's maybe kind of a 25, 50% of programs scenario, which once you lift that, release that lever, you've got another avenue of patients. So just trying to characterize the degree of this impact thing.

Yeah, I would think, you know, as we've looked at this and Jennifer's team, I mean, right now, and this is, again, a dynamic scenario, I would put on the order of 20% of the states would have that relatively harder line And those are the ones where, you know, some of those patients will move on to PAP as we continue to fight that battle. But the vast majority, 80%, are either, you know, what we call the green category and patients are moving through an unimpeded path or in a mixed category where, you know, the state is still working through its response, but we've had patients through. And then there's a smaller segment that, you know, We still haven't put a patient in front of that state. But it is a relatively small percentage of the states today, which, again, I think is, as a starting 0.6 months in, from my view, pretty amazing.

I appreciate that. One last one, if I could. How many prescriptions are coming in outside of EBS? It can include on-label as well as off. You've got some great data in HO, obviously. I'm curious if there's any Any prescriptions there that you're aware of?

No, so none that we're aware of. Again, we have the phase three trial up and running, actively screening as indicated, so there's an opportunity for patients to engage there, but we don't have any insight into patients who may be quote-unquote seeking off-label for HO today. For the other, again, I won't apologize, it's just the POMC-LEPR world and Again, we believe there's tens of patients today, and that's the world, particularly in the U.S. We'll see how Europe continues to open up, slightly different dynamic, as Jan described, but that in the tens is what you should expect for pharmacy and left bars.

I appreciate the feedback. Thanks, guys, and congrats again.

Please stand by for our next question. Our next question comes from Joseph Stringer with Needham. Your line is now open.

Hi, thanks for taking our question. Just going back to persistence rates, for patients that have started on commercial drug and have discontinued, what are some of the main reasons that you're hearing for that? Is there any particular reason that stands out?

For the discontinued, any particular reason?

Yeah, at this point in time, like, you know, there's a variety of different regions that are more like onesies, twosies, honestly, at this point in time. It could be hyperpigmentation. It could be based off of sort of loss to follow-up opportunities. What I do find interesting is there are several regions discontinued for personal reasons that are opportunities for potential reinitiation of therapy moving forward. So our teams remain in contact with the patients even after discontinuation in case there is an interest in terms of reinitiating. And we've heard this also from several physicians as well, that there may be opportunity in the future for reinitiation.

Just to provide a little more context, it's an important issue, which obviously we follow closely. So the current discount rate is in the mid-single-digit percentage range. And as Jennifer highlighted, what's really, I think, been highly reassuring is that the percentage of patients that are stopping because of known side effect profiles characterize on the order of a third of that, if you will, plus, minus. I think that speaks to the job that, um, several, I like 95% of these patients consent into rhythm and tune. And so they, you know, we as a company and that team has the opportunity to engage individually and there's a high level of touch there. And that's incredibly valuable is, you know, people both getting expectations set in a way, look, you're going to experience nausea and potentially vomiting in the early phase, but it'll end. Um, and you can walk patients through and that's working. So, so we feel really good about, uh, the overall tolerability and sort of persistence in general here. And then, you know, she said you've got a handful of, you know, patients who are discontinuing for personal reasons, which are in a sense unrelated to the drug and the problem that happens in any disease area.

Great. Thanks for taking our question.

As a reminder, to ask a question, please press star 1-1 on your telephone. Please stand by for our next question. Our next question comes from Jeff Hung with Morgan Stanley. Your line is now open.

Hi, this is Michael Riad on for Jeff Hung. Thank you for taking our questions. First, regarding the 22% of prescribers that weren't called on by a territory manager, were they in any particular region of the country? And what is rhythm learning from these interactions and how could that be applied to bring in additional prescribers? Thanks.

Yeah. We're actually very happy, you know, seeing this percentage just in terms of patients that are coming through not directly through the efforts of our surgery manager. I think this speaks to a couple of different things in terms of our more broader-based efforts, our non-personal promotion efforts that get to a broader set of those patients out there as well as physicians. which may be why there could be more of a skew in terms of this physician population skewing more towards primary care physicians. But these patients are in the hands of so many different physicians as they go through their journey. So we have to be both targeted in our field efforts, but also broad-based in terms of outreach through other supportive mechanisms. Things that would fall into that category, of course, also relate to our presence at conferences, our ongoing dialogue and relationship with the BDS Foundation and such. But I would say that, you know, if there's a motivated physician who is willing to prescribe, this is a drug that can be prescribed and managed by, you know, a very different specialty background. So we continue our education efforts with each physician who has an interest and who has put in a prescription.

Okay. Thanks. And maybe a second follow-up. For the phase three in hypothalamic obesity, What factors would push enrollment closer to the 12-month mark, given diagnosed patients are well-known? Is it more the logistics of getting sites up and running? And finally, what would you see as the biggest hurdle for this study? Thanks so much.

It is the logistics that I think I talked about on some of the earlier calls. The trial network or infrastructure globally, U.S. for sure as well, is challenged coming out of COVID. And so a number of these sites have personnel challenges in terms of study nurses, getting things through, you know, pure logistics, as you noted. So that is the issue. The patient demand is there. Patients are, you know, every site that we've talked to who's signed up to be part of this trial is enthusiastic and has a surprising number of patients relative to my experience in other trials in these areas. So That would be it. And then your question was anything that could make it go faster. As soon as we can get them set up, we'll highlight to sites, as we have already, that we expect enrollment to be competitive, and that could be a useful dynamic because sites have a number of patients who may want to participate, and they'll be hopefully pushing to get them in, limited only by maybe their study nurse's ability to process them all. So that'll be the balance.

Thank you.

I show no further questions at this time. I would now like to turn the conference back to David Meeker for closing remarks.

Great. Well, thanks, everyone, for tuning in. As you've heard, again, we've been incredibly encouraged by our initial experience on DBS. The R&D programs are up and running now and executing, so feel good about that area, and I'm excited about a new opportunity, expanded opportunity to rhythm with Invento and look forward to updating on that. With that, we'll sign off. Thanks again.

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