Rhythm Pharmaceuticals, Inc.

Good day and thank you for standing by. Welcome to the Rhythm Pharmaceuticals Q1 2023 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 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 1 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, Benny. I'm Dave Connolly here at Rhythm Pharmaceuticals. For those of you participating on the conference call, our slides can be accessed and controlled by going to the Investors section on the Investors page of our website at ir.com. This morning, we issued a press release that provides our first quarter 2023 financial results and a business update, which is available on our website. 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 Earthen 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, on slide three, 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 represents our views only as of today. It should not be relied upon as presenting our views as of any subsequent date. We specifically disclaim any obligation to update such statements. With that, I'll turn the call over to David Meeker, who will begin on slide five.

Thank you, Dave, and thank you all for joining this morning as we record another strong quarter. As we will keep reiterating, this company is built on strong, well-understood biology, that is the impairment in the MC4 pathway, which governs calorie intake, i.e. the hunger, and energy expenditure. A clear unmet medical need in the patients who suffer with these rare diseases and a simple solution. Incivary is a replacement therapy restoring function in that pathway. The near-term value and rhythm resides in our ongoing global launch of Incivri for patients living with EBS and our phase three trial in hypothalamic obesity, which is now up and running. As we grow the organization, we continue to attract outstanding talent when a small company executing a global program working in a challenging space continue to execute. We are well capitalized with funding into 2025, but Incivri revenue is now beginning to make a meaningful contribution to the overall picture. So looking at slide five, these are our three strategic pillars. Commercial launches are off to a strong start. Our conviction in the value we are bringing within Sivri, particularly with regard to the less well-appreciated and less well-understood hyperphagia part of the disease, continues to grow. Obesity is not one disease, it is many diseases. Our educational efforts helping healthcare providers recognize these diseases and their need for a targeted solution are making a difference. Our personalized approach to supporting patients and their healthcare providers is working. We see each patient for who they are, we meet them where they are, and we don't give up. In the U.S., scripts continue to be written by a growing number of physicians, and we are making continued progress in expanding payer approvals, particularly in patients covered by Medicaid, as Jennifer will explain. Internationally, we have launched Incivri for DBS in Germany, the largest European market, following a second exemption from the German Federal Joint Committee, which recognized that Incivri is a therapy for a devastating rare genetic disease and not a lifestyle medication. As Jan will describe, the team is moving, and we look forward to updating on the progress. The H.O. trial has initiated with the first patients treated. We expect a complete enrollment as we have previously guided in Q1 of 2024. We look forward to providing updates on the 12-month data at a medical meeting in Q4. And we are continuing to make progress on our expansion opportunities for the M&A trial enrolling, pediatric trial finishing, the weekly switch study finishing, and Daybreak Part 1 data to be presented later this year. The Shinbento integration has gone extremely well as we work towards candidate selection for the lead indication of congenital hyperinsulinase. We will provide further updates on all of these programs in the fourth quarter. On slide six. Slide six is our biology slide, which we will probably show on every earnings call. And this is to remind you that this is a differentiated pathway, which when impaired requires a targeted solution. These diseases are quite distinct from general obesity, The early onset obesity is severe, and the obesity is lifelong. The common thread across these diseases is hyperphagia, that insatiable pathologic hunger drive that leads to abnormal food-seeking behaviors. On slide 7, you see the two foundational opportunities, BBS and HO, affect meaningful numbers of patients with a BBS prevalence of 4,000 to 5,000 and an HO prevalence of 5,000 to 10,000 in the U.S., with comparable numbers in Europe. The major difference between the BBS and HO opportunity is that the vast majority of HO patients are diagnosed and actively engaged with the healthcare system, specifically the doctors we are working with. The additional opportunities represented in the Phase III M&A trial offer significant potential upside from there. As a reminder, no therapies are approved for HO and no therapies have been shown to consistently work. The GLP-1 question is important. earlier generations of GLP-1 did not show benefit. While we do not have trial data on the newer GLP-1 or combo therapies, anecdotally, as Dr. Abouzahab described on our first HO call last year, she believes 20% or so of HO patients may have some response to GLP-1, and the magnitude of that response might be on the order of 10% or less. These drugs are different. They work through different receptors on different pathways. It makes sense that some patients may have some response to other medications, including GLP-1s, because obesity is a complex disease and more than one factor may be affecting any given patient. What we thought was most noteworthy about the Phase 2 cohort is how consistently supplemented work in those patients who are compliant with a therapeutic dose. The 18 patients had a mean BMI decrease of 14.5% at 16 weeks, associated with meaningful decreases in their hunger scores. The consistency of those results strongly suggests set melanotibes targeting the underlying cause of the disease. As with each of the diseases caused by impairment in the MC4 pathway, it is critical to correct the basic defect before deciding on the need for additional therapy. The obvious and most simple of those interventions is a diet and exercise program, which these patients have universally failed when tried in the presence of an MC4 pathway defect, but find greater success once function in that pathway is restored. And moving to slide eight, we are excited to have our phase three trial underway, but the design is shown here on slide eight. As a reminder, this trial in HO is a double-blind, randomized controlled trial enrolling 120 patients, randomized two-to-one treatment and placebo. Patients will be dose escalated over four to eight weeks and then followed for 52 weeks for the primary endpoint of percent BMI reduction as compared to baselines. It is a challenging time to be running clinical trials, but the team has done a great job working with our CRO, and we expect to have all of our sites up and enrolling by the end of Q3. In slide nine, you can see our pipeline of approved indications and the trials. Overall, we have worked with over 100 clinical sites in 15 countries, which in addition to testing our therapy, creates awareness, builds experience with the therapy, and most importantly, helps build a community of patients and physicians working to improve the lives of patients living with these MC4 pathway diseases. With that, I will turn the call over to Jennifer.

Thank you, David. I will be starting on slide 11 today. We are pleased with the continued demand and uptake we are seeing with our U.S. launch of MC4 for BVS. At launch, we felt good about our starting point and our strategic plan to identify patients, to engage with physicians, and educate them on the hyperphagia and severe obesity of rare MC4 pathway diseases, and to support both patients and physicians through the journey. Now, three full quarters into launch, we are excited by our progress, and our team is thrilled by the success stories we're hearing from patients and their treating physicians. We continue to hear from patients, caregivers, and physicians experiencing the benefits of not only weight loss, but also improvements in social activity and engagement, better sleep, and more confidence. Since Obsivery was approved for BBS by the FDA on June 16, 2022, and through the end of the first quarter of 2023, we have received more than 300 new prescriptions for BBS patients. with more than 100 of them in Q1. The more than 300 new prescriptions since approval comes from more than 175 physicians. Importantly, we have received payer approval for more than 160 of these prescriptions since launch. The demand for MCIPRI is strong. Physicians are writing prescriptions, patients are experiencing benefit on drugs, and payers are increasingly recognizing the value of this therapy. Next slide. Looking at the prescribers of MCFRI, endocrinology, both pediatric and adult, remain the top specialty at a combined 44% since launch. Pediatricians remain second, accounting for 20% of prescribers. Approximately 27% of all MCFRI prescribers since launch are new to RISM. meaning that our territory managers had not called on them directly prior to writing a prescription. That share increased in Q1 versus prior quarters as 37% of prescribers who wrote in the first quarter of 2023 were new to Rhythm. This trend continues to give us confidence in our non-personal promotion efforts, which supplements our field team by educating a broader physician and patient population. Next slide. For a payer mix for BDS prescriptions, the majority come from commercial plans and Medicaid, and a small percent, or less than 10%, come from Medicare. We have mentioned in the past that commercial coverage for MCIVRI is good, with payers representing the vast majority of covered lives have a policy in place to cover MCIVRI. We are also pleased with Medicaid coverage and the progress we are making in securing approvals. I have outlined on prior calls that there is variation in coverage status, as some states cover MCVRI, some states do not, and others decide on a case-by-case basis through the appeals process. In an effort to provide more granularity on Medicaid coverage, we outline on the next slide some data based on Medicaid-covered lives relative to MCV coverage. Next slide. According to Medicaid, there were approximately 85 million individuals enrolled in Medicaid in all 50 states plus Puerto Rico and the District of Columbia as of December 2022. Looking at the left-hand side of the pie chart, approximately 75% of Medicaid-covered lives are in states with a positive MCFRI policy in place or in a state where we have been able to get at least one positive coverage decision in the absence of an MCFRI policy. Within this latter category, which represents about half of this 75%, there are some states where we have been able to consistently gain positive coverage decisions, whereas other states could be mixed. with one or more approvals along with one or more denials. Now moving to the right-hand side of the pie chart, the remaining 25% of Medicaid covered buys is a mix of states with no policy yet for MCIVRI coverage and one, we have not yet had a prescription for MCIVRI that would trigger a coverage decision or two, we have received a prescription and we're still working to secure access. Or finally, three, where we have received a prescription and have not been successful in gaining access through the appeals process. This last category represents less than 10% of covered lives. We remain committed in our payer education and outreach efforts to help them recognize CVS as a distinct disease that requires a targeted therapeutic approach. and we continue to work persistently to explore reimbursement opportunities for all of our patients. For example, even when we have denial through the appeals process, we have had success in gaining Medicaid coverage through EPSBT, or Early and Periodic Screening, Diagnostic and Treatment Benefits. This program provides comprehensive and preventative healthcare services for all children under age 21 who are enrolled in Medicaid. So this dynamic is constantly evolving. Next slide. The age breakdown of BBS patients for whom we have prescriptions is here. Adults account for approximately 50% of prescriptions received since launch, while prescriptions for children and adolescents continue to account for the other half. And nearly all, or 97%, of patients with prescriptions have consented to receiving direct connection and education from our patient services team, which we call Rhythm in Tune. This allows our team to 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. Next slide. Based on the information available to us today, we know there are physicians who have prescribed Incivri for one or more patients who have additional BBS patients for whom they have yet to prescribe, as well as physicians with BBS patients who may require additional education to prescribe Incivri. Our territory managers are actively engaging with these physicians to increase a sense of urgency to treat the hyperphagia and obesity that comes with VBS, and to set expectations about incivary therapy to support pull-through of prescriptions. In parallel, genetic testing, use of ICD-10 codes to narrow our physician's targets, as well as digital non-personal promotion efforts, all of which we began well ahead of last June's launch, have driven our patient identification efforts. We are excited by the progress of these ongoing efforts and the opportunity that remains for IMSIVERY moving forward. With that, let me hand it over to Yann.

Thank you, Jennifer, and good morning. Slide 18, please. Last week, we announced the launch of IMSIVERY in Germany for the treatment of obesity and control of hunger associated with DBS with federal reimbursement. As you can see on the slide, the German Federal Joint Committee, or GBA, ruled that MCV for BBS is eligible for full reimbursement by statutory health insurances. The GBA unanimously voted to exclude MCV for the patients with BBS from its lifestyle exemption list, as it did previously for biallelic, POMC, PCSK1, and LIPAR deficiencies, and exactly on time with regard to our plans. As David said, this is a very important recognition of the severity of BBS and further reinforces the distinction between general obesity and rare MC4R pathway diseases. Next slide. Germany holds a unique place in the history of RISM that is very favorable to us and St. Melanotide. Our first patients were treated at the Charité University Hospital in Berlin. where the local experts have the longest experience in the world treating patients with sepsis more than 10 years. We are very well positioned in Germany with an experienced team on the ground engaging with healthcare authorities, payers, physicians, and patient organizations. Our general manager in Germany comes from Alilam, has successfully led many orphan drugs and high-value therapies launches in Germany, and he is leading a team of six people dedicated to the launch. Genetic testing is well established in Germany, and our own programs are supplementing it. Based on our interaction with the Centers of Excellence, we believe about half of the patients diagnosed with BBS in Germany have already been genotyped. This is quite important as genetic confirmation is required under our label. We also have strong starting points. German BBS treatment guidelines are currently in development and will be published soon. There is a very well-organized patient advocacy group dedicated to BBS, and also two existing academic registries for rare renal diseases and rare ophthalmological diseases. Next slide. Rare disease launches are difficult to forecast, especially the first 12 to 18 months. In Germany in particular, we do anticipate a methodical patient-by-patient approach. However, we are confident that BBS in Germany represents a significant opportunity for MCV. Our team has already engaged with physicians in 18 major hospitals across the country in an effort to identify patients with BBS and prepare the launch, and have set up a significant number of medical education and disease awareness activities. We estimate that the prevalence for BBS in Germany is approximately 1,200. We believe that there are about 800 patients diagnosed, and of those 800, we have identified physicians caring for more than 250 of them, and we are focused on identifying more. Next slide. This slide is a reminder of how important the European market is to our global strategy. For rare genetic disease, we know that European countries are Sorry, okay. I'm back. Sorry. Sorry. I had a wifi issue. So I was saying that the slide is a reminder of how important the European market is to our global commercial strategy for rare genetic diseases. We know that European countries are more advanced than the US with single payer healthcare systems, government funded genetic testing, rare disease organizations, center of excellence and referral networks. For bioanalytic POMC and LIPAR deficiencies, we know that there are about 100 patients identified in the EU, EU4, and the UK. And for BBS, more than 1,500 patients are identified across those same countries. For POMC and LIPAR, we have achieved access in nine countries in addition to the US. We are launched in the UK, Germany, Italy, and the Netherlands. And we have achieved name patient sales in France, Austria, and Turkey, and early access in Argentina. In summary, we are very pleased with the progress we are making in Europe in terms of market access. Next and last slide, please. We are also very pleased with the level of support we are receiving from key experts in MC4R pathway disease, including body-middle syndrome. Europe is home to many of the world leading experts, and RISM is fortunate to enjoy a strong and long-lasting relationship with many of them. In March, Professor Sadaf Farooqi from Cambridge, UK, one of the world's leading experts in MC4R pathway diseases, and Professor Phil Bills from London, who helped define how we diagnose BBS, both led a rhythm-sponsored disease education webinar with Angela Scudder, who is with BBS, and who is a BBS patient liaison officer for BBS UK clinics. On this webinar, the speakers explored hyperphagia, severe obesity, the genetics of rare MC4R pathway disease with a focus on BDS, and how to best care for these patients with a multidisciplinary approach. We are delighted to have more than 125 physicians from 17 countries join the webinar live, which speaks to the high level of interest in rare MC4R disease among European physicians. Thank you. And with that, enter.

Turning to slide 24, with the launch of MCIVRI in Germany and additional global markets coming online this year, Rhythm is growing into a global commercial rare disease company. And as we do, we approach all our operations and investments in our commercial R&D and operational programs with a financial discipline that governs our decision-making and focuses on building long-term value for our shareholders. We are grateful for your support. Let me review the highlights of the Q1 P&L. As mentioned, we recorded $11.5 million in net product revenue during the first quarter versus $1.5 million during the first quarter last year, which was prior to FDA approval for BBS. Compared to $8.8 million in net product revenue from the fourth quarter of 22, that marks an increase of $2.7 million, or more than 30% quarter over quarter. This growth is driven primarily by insidious sales for BBS in the United States. Cost of sales during the first quarter was $1.4 million, or approximately 12% of net product revenue, which is consistent with Q4-22. Cost of sales consisted of approximately $600,000 in royalties due to Ipsen under our original licensing agreement for Sentinel Anitide. Approximately $200,000 of amortization, previously capitalized sales-based milestones, as well as product costs associated with increased sales of commercial product. R&D expenses were $37.9 million for the first quarter of 2023. This compares to $32.5 million during the first quarter of last year. Compared to $23.5 million in Q4 of 2022, this quarter-to-quarter increase of $14.4 million is driven by several factors. First, there were $5.4 million in costs and fees associated with the Cervento acquisition. The remainder of the quarter-over-the-quarter increase was due to a $6 million net increase in clinical trial expenses. These are mainly startup costs associated with the HO Phase III trial and a substantial increase in activity associated with the M&A Phase III study. Also in Q4-22, Rhythm received a $2.5 million credit during the closeout of our GoID study during that quarter, which reduced R&D expenses. Overall, clinical trial costs are expected to be higher on a period basis during study startup and after all trial sites have opened. Lastly, in Q1, There was a $2.1 million increase in clinical supply costs for these studies and for other programs. SG&A expenses were $24.6 million for the first quarter of 2023 compared to $21.4 million in the same quarter last year. This increase was largely due to the impact of $2.6 million in higher headcount costs, including stock compensation. Quarter over quarter, SG&A declined nearly 1.7 million or nearly 7% from 26.3 million in the fourth quarter of 22. The decrease in SG&A versus Q4 is due primarily to lower marketing expenses in the U.S. For the first quarter, common shares outstanding were 56.7 million and quarterly net loss per share was 92 cents. Turn to slide 25. We closed the quarter of 2023 well-capitalized at $295 million in cash on hand, sufficient to fund all planned activities into 2025. This cash guidance includes the impact of projected milestones associated with Shinbento acquisition. To touch on a few other aspects of the quarter, of the first quarter net product revenue of $11.5 million, 83% of this revenue was generated from U.S. sales and in Sivri as compared to 85% in the fourth quarter of 22. As mentioned, $5.4 million of operating expenses represented consideration associated with CINVENTO acquisition, which was included in this quarter. We accounted for this transaction as an asset acquisition. Q1 operating expenses included total stock-based compensation of $6.4 million as compared to $5.3 million in the fourth quarter of 2022. And our non-GAAP operating expense guidance for 2023, which we disclosed last quarter, remains unchanged at $2,200 to $220 million. This guidance excludes the non-cash impact of stock-based compensation. With that, I'll turn the call over to David.

Thank you, Hunter. So, in summary, we're excited about the progress we have made, and we look forward to multiple data readouts, in addition to continuing to update you on our global commercial launch with BBS in the upcoming quarters. And so, with that, we'll open it up for questions. Operator?

Thank you. 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 the line of Phil Nadeau from TD Cowen. Please proceed with your question.

Good morning. Congrats on the progress, and thanks for taking our question. A couple commercial questions. First, in terms of reimbursement for BBS in the U.S., are there any new trends in terms of either faster or easier reimbursement as the launch continues, or is it that the patience is spread among so many insurance plans that it's still each plan evaluating their first patient? Yeah, so Jennifer, yeah.

Thanks for the question. So we're continuing to build the relationships, but as you outlined, there are just so many different payers. So the scripts come in is dependent on if we've interacted with the payer before or not. I would say that in terms of scripts that we've received through a payer where we've been able to gain reimbursement, that process also because we know what the process looks like for that particular payer is quicker. We are also seeing trends through our education efforts that we have a higher percentage of payer approvals at the prior authorization stage, which is also a good sign. But once again, it's really one-on-one with these payers as they come in that our teams interact with. And overall, the average time in terms of gaining reimbursement still remains within that one to three-month period of time.

In the slides, there was a note that one of the opportunities for expansion in BBS in the U.S. are among those physicians who are treating BBS patients but are not yet ready to prescribe MCIVRI. What are the objections those physicians have? What do they need to do or what do you need to do to convince them that they should be prescribing in Sivri?

Yeah. So, I would say that the gating factors could be either on the patient's level or the physician's level. You know, for both of them, some of these patients may not be of age and within our label. For patients specifically, the physician may have written a script, but the patient could be lost to follow-up. There may be, you know, concerns just in terms of injections or a parent just wants to get a bit more education in terms of safety profile before putting their child on a chronic lifelong therapy and many other reasons. From an HCP perspective, sort of similarly, they may requires some additional education to truly appreciate and understand the difference in terms of the hyperphagia and the early onset obesity that these patients have. In rare diseases, it's not uncommon for a physician to just have one patient, so there may be additional education needs. So there's a lot of different reasons, but I will say that our teams are really on ground interfacing with the customers to try to

And just to reinforce what Jennifer said, the hyperphasia component of this in terms of the opportunity for education and creating that sense of urgency, not surprisingly, healthcare providers themselves just don't understand, many of them don't understand the full impact of this on both the patient and the family. And so there's still a little bit of, you know, we understand you're hungry, but they don't understand the pathology and severity of that hyperphagia component. So I think, as Jennifer said, we are making good progress there, but that is a clear opportunity as we go forward.

Great. And then one last question from us. In terms of German reimbursement, can you remind us where you are in negotiating the final price for Incivri and BBS in Germany? Thanks. Yeah. John? Yeah.

yes uh thank you so we are still in the midst of the policy lipas pricing negotiation and so far the dialogue has been very positive to date the medical benefit assessment has been positive as well bbs price negotiation will start in a few months and the process takes approximately six to nine months so more to come for for the german price for videos perfect thanks again for taking our questions

Thank you. All right, one moment please for the next question. All right, our next question comes from the line of Derek Archila from Wells Fargo. Please go ahead.

Hey, good morning everyone and congrats on the progress. Thanks for taking the questions here. Just a couple from us. So I know you said that the BBS launch and these types of rare disease launches can be lumpy, but I guess You know, can you provide some more color on what's specifically deriving the acceleration that we saw in new patient ads from, you know, 4Q to 1Q here? And is that something that's going to translate going forward into the following quarters? And then the second question is, do we have enough data yet to really understand the discontinuation rate for MCIV and Barta-Beetle patients in real clinical practice and just understanding how that's trending right now? And I might have one follow-up. Thanks. Thanks, Derek. Jennifer?

Sure. I would say that overall, just in terms of the level of demand and interest for this specific therapy for BBS has been really overwhelming and great to see, as well as clearly there was a need in the patient population as we're hearing the benefits that the patients are actually receiving. Once again, a motivating factor for teams overall. There were existing opportunities that still remain in terms of the patients that were identified through all of our cross-functional team efforts, and still remaining opportunity just in terms of pull-through to Scripps. And in the meantime, I feel that in any disease, but particularly in this one, we have identified specific ways of going about to really identify have targeted approaches of patient find and identification, one to get to physicians or patients that have already been diagnosed and lost in the system, as well as trying to expedite the path to get patients who are symptomatic to a diagnosis. So all of these efforts are ongoing, which continue to fuel the increase just in terms of number of scripts that we have received. When we say that rare diseases are quote-unquote lumpy, I would say that in terms of some of these efforts, you can't predict quarter by quarter that's going to be the exact same. So I wouldn't necessarily linearize or just make the same assumptions quarter over quarter at this point of time, but I would just say that there still remains quite an opportunity just in terms of growth within this patient population for MCIVRI.

to the next question, I think, around... May I just add one quick follow-on to that, Derek? So I think what we can say at this point, and this is what Jennifer said, is that we are well beyond whatever pent-up demand existed in the system and the like, and that you're seeing now a quarter-on-quarter, as we would expect, stability and sort of ongoing strength in the overall opportunity, if you will. And again, a reference back to the you know, the number of physicians who we had not been in contact with, and that pool is growing. And that's, again, what we would see and speaks to overall health of, I think, a rare disease opportunity. But, again, don't trend, as Jennifer said. I think that's not, you know, it could be less or more in any given quarter, but our confidence that this thing is real and working is very high.

And there was another question just regarding discontinuations. We continue to be quite pleased. As I outlined in the past, there was a lot of effort, quite functional team effort, really focused to make sure that the patients were able to go and tolerate the titration phase. So through that process and education, we still remain very, very happy just in terms of the level of maintenance of patients through that phase with the number of discons relating to nausea or vomiting being extremely low. We do have some discontinuations for various different reasons, including a very low number relating to hyperpigmentation. But there's other reasons that a patient may continue that are also opportunities for follow-up. And I think one of the pieces that continues to be one factor that increases the compliance of this therapy is the hyperphagia. people feel the impact. They also feel the impact of stopping therapy. And once again, we also hear when patients stop therapy that the hyperficient comes back and there may be interest to come back onto therapy. So very happy overall just in terms of the low discount rate.

Got it. And maybe just one follow-up here on the prelim data that you're going to put out for Daybreak. I guess, will you be kind of doing an in-depth, you know, kind of you know, presentation on framing those opportunities. And I don't know if you've kind of guided to, you know, what those opportunities look like from a commercial perspective. Are they more like a POMC or more like a barter beetle or something different? Thanks.

Thanks, Derek. We haven't guided and not prepared to guide today. I think what I have said and reiterate is I expect to report out on five-ish plus or minus genes where we have enough data. The Daybreak trial is designed as an exploratory trial. It's done exactly what we wanted it to do and allows us to sort a relatively large number of genes that we knew had some link to the pathway with the goal of trying to understand which were the ones that had the strongest link versus the others. I will say that some of those which we discontinued earlier on were extremely rare, and we just you know, weren't able to enroll. So, you know, back to your question about, you know, the POMC smaller opportunity kind of thing, but others have a much higher frequency and more in the order of SHTB1, SRC1 that we're pursuing in our M&A trial again. So more to come on that, but the expectation we should, you know, set is it'll be around five plus or minus genes where we have enough meaningful data to report out. Got it. Thanks so much. Next question.

Thank you. All right, one moment while we compile the Q&A roster. Our next question comes from the line of Corinne Jenkins from Goldman Sachs. Your line is now open.

Yeah, hi, good morning, everyone. Maybe a couple from us. So of the roughly 140 patients that don't currently have reimbursed product, and including the 40 in particular that had a prescription as of year end 22, what portion do you expect to ultimately get on reimbursed drug versus what portion do you think may just remain on free drug from here?

So within the 140 that you mentioned, That includes patients that are still within the pending category that we're still working through and through two reimbursements, as well as patients that we have put onto our free drug program. I will say that in terms of our free drug program, we have outlined in the past that You know, for reimbursement, Medicare patients have not been a patient population that we've been able to gain reimbursement for at this particular time. So that's, you know, approximately less than 10% of scripts to date. The commercial coverage has always been very strong. The caveat here is, as with other rare diseases, there are very small commercial, you know, self-insured plans where, you know, cost of a therapy like Insivri can be challenging. So we do have patients that are on small self-insured plans as well that are on PATH as well as, you know, as I went through today, some Medicaid patients as well. The caveat that I will say here is even though they're on our free drug program, I think the word that you're going to keep on hearing is that we have a persistence just in terms of still working on those patient populations as well, whether it's further education with a payer or just ongoing help for that patient itself. We have been successful in moving some of these patients off into commercially insured paths. It's constantly evolving from that perspective, and we are really just still starting and continuing to engage with all of our customers on that point.

Thanks, Jennifer. And maybe just to add to that, at this point, I think the number I would think about, and as Jennifer said, we're still learning and it's early, etc., but About 20% plus or minus of the total scripts are patients who are likely to be on PAP, and again, reminding you that of that, you know, 20% plus or minus, you have approximately, you know, 10%, a little less than 10% that are the Medicare, and they go straight there. But most encouragingly, and this has been true in our prior experiences as well, that, you know, patients who go on PAP don't necessarily stay on PAP, and you continue to find ways to move them over into Patients themselves actually don't want to be on PATH. They'd much rather be on a more stable, if you will, situation where they are being paid through the system.

Thanks. That's helpful. And then maybe on the clinical side, you highlighted you expect a complete enrollment for the study in HO and 1Q24. Are there any factors that could shift that timeline either to be more rapid or delayed for any reason?

Yeah, many. Probably on both sides. I think what we've shared, and there's two parts to this. One is just the practical administrative issues of getting sites up and going. We've identified the sites that we need. You continue to look for other quote-unquote maybe outstanding sites to have as backup if something happens at a site, but in general, we have the sites we need. It's just a matter of working through contracting with these sites and the IRB approvals and And the like, again, as we said, we're in a queue, not just with other obesity trials. We're in a queue with any trial going on at that site. So that's been slower than we would have liked. Again, our goal is to have all of these sites open in an operational enrolling by the end of Q3. So that's one, and that could vary. I think we have quite a comfortable guidance there, but, you know, you don't know what you don't know. And then the second is in terms of patient interest, and patient interest is high. So we have our investigator meetings coming up in May, first one in the U.S., followed a week or two later in Berlin for the European sites. And again, what we've heard and what I expect to see there is a high level of interest and also, I would think, some competitive enrollment. Again, we know there's patients out there eager to get in, and these sites are going to know that. If all 25 sites are enrolling, there aren't that many patients per site that will have eligible slots. And some of the sites are clearly aiming for much higher than an even distribution. So we'll see how it goes. But I think I'm pretty confident that one's going to be running with the patient enrollment.

Great. Thank you.

Thank you. One moment, please. All right, our next question comes from the line of Daegun Ha from Saipho. Please go ahead.

Hey, good morning, guys. Thanks for taking our questions and congrats on the progress as well. Just reverting back to Derek's question, just hitting it head on, just apologies if I've missed it, but the discontinuation rates, David, you were at a conference recently talking about mid-single digits. I just wanted to confirm that number is still true. And then in terms of the two questions I had, one, when you think about the patient dispositions across the three dose levels that are in the label, can you comment on any kind of, I guess Jennifer kind of went into education to get patients into sort of the more tolerant dose, but any color you can provide across the three doses, what kind of disposition we should be expecting going forward and what work is being done to keep patients off of the one milligram? and more skewed towards the 3 milligram arm. And then secondly, on the strategies for the reimbursement, David, you spoke previously a number of times, Gauche, as sort of the analog we should be thinking about for BBS going forward. But just hearkening back to your rare disease experience, what kind of reimbursement rate should we be expecting eventually? I mean, is this something that can near into 80%, 90% or hovering in the 70%? and what work needs to be done for MCIVRI to get there. Thank you so much.

Thanks, Dagon. So first on the discontinue patient rates, we previously, as you noted, said mid. I would characterize we're drifting up a little bit there, not surprisingly, as we get more patients on for longer periods of time. So it characterizes high-level single digits. But as Jennifer said, and this is what's most encouraging overall, is one, I think we've done much, much better than we did in the clinical trials for the reason she outlined, the close contact with the patient through our rhythm. Second is recent patients are discontinuing. About half are related to side effects of the drug. Again, opportunity to just continue to educate and set expectations in the right way. And the other are personal issues specific to that individual patient. some of which may resolve over time, and another patient being willing to come back on therapy, and we have several of those examples, including others that were working. With regard to dosing, The whole strategy behind dosing here is we start low and we're going a little slower than we did in the trial. Not surprisingly, if you go a bit more gradually, the early tolerability is better, number one. Number two, the vast majority of patients are getting to 3 mg. I would say the balance of the patient population is early and still working their way there. So my expectation is that the truly vast majority of patients will be at or close to 3 mg. Younger patients, very young patients may, in fact, achieve their desired level of benefit at a lower dose level. But if you go back to our phase 3 trial where we had a number, you know, about half the patients were under age of 18 and the other half were over and then on BBS, again, that was, you know, those patients were literally virtually all on 3mg. So if you have a tolerability issues, you go down, you know, go a little slower, but you continue to dose yourself back up. You don't just go down and stay as a rule. Your third question was just on the negotiate analog. I mean, I just referenced that to remind people that, you know, these opportunities and rare diseases, they may ramp somewhat more gradually. You don't have a hockey stick as a rule, but you tend to have them for a long time and negotiate, you know, 30 plus years from its original approval is still a billion dollar plus opportunity. So again, you know, we'll see where it goes, but BBS has many of the elements of what you want to see in a rare disease opportunity in terms of the overall size of the opportunity, the ability to diagnose that it's syndromic in this case, and the strength of the community that's emerging, the patient community and physician community. So we'll see where it goes. That was the analogy there. And with regard to reimbursement, I don't expect to see in the US specifically any decrease in price, including when we expand into HO. Obviously, you don't necessarily take the same price increases that you might take in other parts of our industry here. So there is an implicit decrease if you don't take a price increase in terms of inflationary adjustments. But in terms of actual price, we don't expect any. These are rare diseases, and we think we're very fairly priced. Great.

Thanks for taking our questions. Oh, yeah. Thank you.

Thank you. One moment, please, as we compile the Q&A roster. Our next question comes from the line of Michael Higgins from Leidenberg Thalmann. Your line is now open.

Thanks, operator, and congratulations, guys, on that continued progress. Just want to follow up on the HL trial, the pivotal that's enrolling. if you can give us some feedback on how the pace of enrollment, the pace of screening failure rates, and the pace of site enrollment are coming in versus expectations. Thanks.

Yeah, thanks, Michael. Early. We just started. We'll figure out. We will give you metrics on how that trial is evolving. Today, you know, the communication is we're up and running, but again, it is much too early to have any sense there. I will say, again, partly my opinion as opposed to sort of jerk on hard data here, but there are enough patients and enough interest out there that the pre-screening of patients should be pretty good. So patients who actually come to the site to be formally screened, I'm not expecting a high screen failure rate there to be determined, but again, I think this is one of those situations where You're not desperate to enroll just anybody, and therefore you can end up, you know, getting higher screen failure rates. But we'll see. But I can't give you more information today.

Okay. I appreciate that. And also, you've noted that you're looking for three data readouts in the second half. I'm curious if you can provide feedback as to the order of those events and if they come in before or after the obesity society meeting in mid-October. Thanks.

Yeah, I think, and you're correct in highlighting that they are going to be linked to a meeting, and so abstract acceptance and the like will be a key driver there. We've guided a Q4. I think that's all I can do today, but we will get that information.

Okay, I appreciate it. Thanks, guys. Thank you, Michael. Next question.

Thank you. One moment, please. All right. Our next question comes from the line of Joseph Stringer from Needham and Company, LLC. Your line is now open.

Hi. Good morning. Thanks for taking our questions. Just wanted to get your updated thoughts on the European DBS launch and how it could compare to the U.S. launch today. It looks like European DBS patients, more of them are identified and the community is more organized, but you have the dynamics of the staggered reimbursement process. So, you know, how do you anticipate European launch playing out? And perhaps maybe using Germany as an example, you have the 250 patients ID'd. Could we expect a similar rate of TRF add relative to what has been seen in the U.S. to date?

Yeah, I think, Joy, I'll turn it over to Jan one second. Just to highlight, you are correct that the European is better experience or situation is better organized and more identified, but as Jan highlighted, may have a different pace. So, Jan?

Yes, maybe I will start with the German launch versus U.S. and I will end on the overall European situation. So, first, Germany and the U.S. So you're right. There are similarities between the two countries and the most important one is a decentralized healthcare and decentralization of the care. And as I've said in my presentation, we already know more than almost 20 large hospitals where they are diagnosed BDS patients and where patients will be treated. There is a main difference, which is really the pace of starting the treatment. The German physicians are well known to be more conservative than the average. And we know that it will be patient by patient decisions, like for any other rare disease. So that's Germany versus the US. And then back to the overall question of Europe. It's a bit early to speak in terms of trajectories for in Europe. First, because Germany is our first important launch. And second, most of the important European countries will launch at the end of the year. Italy, New Zealand, Spain, et cetera, and at the end of 2024 for the UK. So it's still a bit early.

Thanks, John.

Joey, is that covered? Great. Thank you for taking our questions.

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

Thanks for taking my questions. For the low number of patients discontinuing due to hyperpigmentation, do you have a sense from those patients how their hyperphagia was? Do they happen to have lower hyperphagia than other BBS patients, so the hyperpigmentation overrides that? And then I have a follow-up.

Sarah or Jennifer, just to highlight again, the number of patients stopping because of hyperpigmentation is extremely low, so one that's been reassuring, but I don't know on those specific cases.

I don't think it's necessarily correlated with the hyperphase in terms of the reasons for the discons. I think that it's patient by patient just in terms of problematic the hyperpigmentation is for that particular patient and once again I think as the patient's disc on and they feel the resurgence of the hyperphasia itself they can also be at a decision point once again just in terms of you know really deciding whether to discontinue or to reinitiate therapy. So our teams are there regardless to support them as they go on their path forward.

Okay, thanks. And then I know it's a bit early, but with the recommended weight loss monitoring after one year of treatment, do you have a rough sense for the proportion of patients that started on commercial drug fairly early in the launch that have already seen at least 5% loss in body weight or BMI? just trying to gauge the potential impact of discontinuations based on this recommendation. Thanks.

Yeah. So as you outlined, I would say that, you know, for the most part, just in terms of the three-off period, the payers are following our guidance or label. And so it's a bit early just in terms of really reaching that point of time within our launch. With that said, we feel very good just in terms of the positive feedback and the compliance and persistence on therapy to date, which speaks to the benefits. And I think that, in general, it will be interesting just in terms of what, quote, unquote, clinical benefit is outlined. I think for the most part, like, peers just want to be reassured that these patients are actually receiving clinical benefit while being on therapy. And that's something that, once again, our patients continue to monitor baseline themselves versus on therapy. So that can also be translated to the physician who can translate that as well to the payer.

And just to remind you, Jeff, the label, as Jennifer referenced, it's 12 months. It's for BBS when the label suggests you should reevaluate. Payers, of course, can choose to do so earlier, but as Jennifer said, people tend to be sticking to the label, and we're less than a year out per month. Great. All right.

Thank you.

All right. Thank you. We do not have any other questions, so I would now like to turn the conference back to David Meeker for closing remarks.

Great. Well, thank you, everyone, again, for tuning in this morning, and we very much look forward to the next quarter update.

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