Building Rhythm into the Leading Orphan Obesity Treatment Company

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Phil Nadeau:
Hi, I'm Phil Nadeau, one of TD Cowen's biotech analysts, and we're live at TD Cowen's 46th Annual Healthcare Conference. I'm with the management team of Rhythm Pharmaceuticals. We have with us David Meeker, the president, chairman, and CEO, and Hunter Smith, the chief financial officer. Guys, could you give us a brief state of the company? What are Rhythm's biggest strengths, its biggest challenges, and what needs to happen to create shareholder value over the next year or two?
David Meeker:
Yeah, big question. We'll tag team this, Phil. Great to be here.
So Rhythm, what we're working on, I'd say, starting with biology, which is very well established, decades old biologies. And Rhythm was founded around a molecule which worked Melanocortin-4 pathway, it's an analog of the hormone that's missing when that pathway is impaired. So we think about what we do as hormonal replacement. So one of the major strengths is well-understood biology. And it's now with established efficacy around our lead compound or our first compound, setmelanotide.
So we're approved in two genetic indications now, and we're coming up on approval for our third indication. We think about this whole biology area as a platform and a product. And there are a pretty long list of opportunities here, and we can talk about that in a minute that we look forward to pursuing. And I think for a company that's about 400 employees, we're well capitalized. And maybe I'll let Hunter just say a couple words about how you thought about putting us in this position.
Hunter Smith:
Sure. So we are at a point now where we spent about $300 million in the last year. It's going up to 400 next year. We've got just under 400 million in cash. And our guidance is that we have more than 24 months of cash runway.
And I think what the market and what we are super excited about is the hypothalamic obesity indication, which is coming up. Obviously, we'll talk more about that. And that indication has a much higher prevalence than our existing indications. And the patients are in very close touch with the medical system. So the opportunity is really exciting.
Phil Nadeau:
You both mentioned opportunities that Rhythm faces. What is your long-term strategic vision for Rhythm? Can you describe the pillars on which the company is being built?
David Meeker:
Sure. Back to my platform and a product comment, and we like to think about Rhythm as exactly that, three pillars. So the first pillar is the genetic causes of impaired signaling through this pathway. Those were the basis of our original approvals, POMC and leptin receptor being two of the genes.
There's a long list of genes and we have a phase three trial coming up, which is actually studying four different genes. And we recently completed a DAYBREAK study where we looked at 30 genes, which potentially could be associated with a pathway. So that genetic pillar, there's a ton of work to do there. And we'll do that over time. A lot of elements to being successful there and some challenges.
The middle pillar is hypothalamic obesity, which Hunter just mentioned. That's our PDUFA date coming up on March 20th. That opportunity is related to anatomic impairment, meaning that the hypothalamus is either injured, often due to these benign tumors, which get resected. And so either the tumor itself or the surgery used to treat it, damaged the hypothalamus. Or some patients have congenital disorders where the hypothalamus just doesn't develop. So we think about that as the anatomic hypothalamic dysfunction.
And then the third pillar, which is also genetic, but it stands alone. It's a very well-known disease, Prader-Willi syndrome, a huge unmet need, devastating disease. A lot of companies are pursuing treatments there. But the need is great and we think we have a unique angle there. So those are the three main pillars.
With any valuable company, you need to be thinking about the lifecycle management, and we have from the beginning. And so we have two next generation products, an oral therapy and a weekly injectable. Both of those extend our patent life out to 2040 plus. So it gives us a very good runway.
And the last thing I'll say is we don't have wet labs, but we have a very strong scientific group. And we are very interested in understanding other ways we can work on this pathway, things we could do to potentially complement our existing approach.
Phil Nadeau:
Maybe to dive into the HO launch in a bit more detail, you have successfully launched IMCIVREE BBS. But HO is arguably even more important given the prevalence that Hunter mentioned. But what are Rhythm's key priorities today to be ready for a successful launch into an orphan disorder such as HO?
Hunter Smith:
So we have first and foremost expanded our sales force from 16 territory managers in the US to 42 in anticipation of the March 20th PDUFA date. So a big significant expansion of coverage. We've also in advance expanded our patient education managers who support the administration and the caregivers as the therapy is brought on and work with the patients to make sure that the process is going well and that they're administering the therapy properly. So both those field forces are significantly larger in anticipation of the opportunity.
With an estimated prevalence of greater than 10,000 patients in the US, and the vast majority of those patients having some form of pituitary insufficiency means that they're in contact with an endocrinologist. So we've estimated about 5,000 endocrinologists that are caring for an HO patient. Of which about half of them are in the first and second tier. And so our priority has been to get in front of as many of those endocrinologists as possible to the extent that they are aware of HO, then we work with them to figure out how many HO patients they have under their care and what level of willingness they may have to prescribe post-approval.
And then separate from that, there are many endocrinologists who actually don't really know HO. They understand it when educated about it, but they don't know it as a disease. And so working with claims analysis, we often talk to them about patient profiles and they will then say, "Yes, I think I have a patient like that in my practice and I'll bring them back in for potential differential diagnosis."
So just before the end of the year or in the fourth quarter of last year, we talked about, we had identified over 2,000 patients who were either suspected of having HO or had been diagnosed of having HO. And our priority has been to increase that number and get more of the patients who are suspected into the diagnosed category in advance of launch.
Phil Nadeau:
Hunter, how should the investors think about their trajectory of the uptake in HO? Well, how will the trajectory compare to IMCIVREE BBS or Vykat in PWS?
Hunter Smith:
So we think it will be a stronger trajectory than BBS simply because the number of identified patients out of the gate will be larger. And the care points will be much more concentrated in the endocrinology space. At BBS, they were all over the place. A lot of them, frankly, were in primary care. And so it was a much more scattershot approach where it was harder to figure out where they were and the treatment paradigm formed over time.
By contrast, the Vykat launch, I mean, it's been a nice successful launch for Soleno. Prader-Willi patients have some significant challenges that make the patients, caregivers, and physicians very relative to prescribe something that might modify potentially violent and/or very, very aggressive behavior that's associated with their hyperphagia. And many of these patients are also in a group home setting.
So those two factors make for a lot of initial prescriptions out of the gate, which we don't think is the case with HO. The patients are more distributed. There's plenty of urgency to treat among people with high awareness of the disease. But that rollout is going to take time.
I think the other thing we want to think about is scripts may be one thing, and the best indication of demand will be that. But we do deal with weight loss exclusions in the case of Medicare and some Medicaid plans draft off of that. And then there's also the time with a new indication to get through P&T Committees and things like that. That may take time for scripts to convert into reimbursed patients.
David Meeker:
I'll just add one thing to build on what Hunter said.
One of the ways we think about the difference between BBS and hypothalamic obesity is they're both rare entities, meaning 5,000 prevalent patients for BBS in the US and 10,000 for HO. But as Hunter said, the concentration in endocrinologists for the HO patient makes this very much specialty light. And I think when rare disease companies, as we did when we were building out for BBS, you cannot knock on every door. These patients are often with primary care and the like. And so it makes no sense to put a large force on the ground.
What you're really trying to do is to build a level of awareness so that the patients have a good chance at getting to a diagnosis and then they find you. But in especially opportunity, you want to knock on every door. And so we're building out to put ourselves in a position to do that, and that'll be a big difference.
Phil Nadeau:
Maybe turning to lifecycle management, can you discuss the expected commercial life of your franchise? How do IMCIVREE patents, VIP and the next generation candidates and the nature of the orphan disorder market translate into an expected duration of commercial life? And maybe in addition to that, what is Rhythm doing to stay ahead of the competition? We do see some HO programs now entering early clinical development.
David Meeker:
Yeah, I think ... So with regard to the patents themselves, starting with setmelanotide, our composition of matter for setmelanotide is up in 2032 in the US, 2034 in Europe. There's a key element to that. That's the composition of matter.
The formulation itself ... And that patent is up in 2034 in the US and 2036. And when the FDA puts out guidance, when you get your drug approved, they put out guidance so that a generic will know what they need to do to get their drug approved as a generic under that program. And that guidance takes you right through the formulation. So we would argue that our actual patent coverage for setmelanotide or IMCIVREE here in the US is 2034 and two years longer in Europe. So that's the starting point.
As I briefly indicated before, for our next generation products, both of those with patent term extension take us to 2040 plus. So from a composition matter, we think we have a long runway and we're very well protected. And then we do what every company does, which is every time we have a novel finding, we're in a new indication, you're filing methods patents. And so we're doing that very systematically and the like. And we think we have quite a strong patent portfolio at this point between composition matter and those methods.
Phil Nadeau:
That's great. Thanks for joining us for the podcast. We appreciate your time.
David Meeker:
Thank you.
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