Rhythm Pharmaceuticals - Earnings Call - Q2 2025

Executive Summary

• Q2 2025 net product revenue was $48.5M, up 29% QoQ and 67% YoY, driven by BBS demand and international growth; U.S. revenue was $32.0M and ex-U.S. $16.5M.
• Revenue beat Wall Street consensus ($43.64M*) by $4.86M; EPS missed (-$0.75 vs -$0.6625*). Bold: revenue beat; EPS miss [Q2 consensus and actual]*.
• Non-GAAP operating expense guidance for FY25 was maintained at $285–$315M, with SG&A $135–$145M and R&D $150–$170M.
• Strategic catalysts: sNDA/Type II variation filings for setmelanotide in acquired hypothalamic obesity (HO) on track for Q3; positive Phase 2 bivamelagon BMI reductions; $189.2M net equity raise strengthens liquidity to at least 24 months runway.

Note: Estimate values marked with * are from S&P Global.

What Went Well and What Went Wrong

What Went Well

• Strong commercial execution: Q2 global IMCIVREE revenue $48.5M; U.S. $32.0M (66%), ex-U.S. $16.5M (34%), with international early HO access programs contributing.
• Clinical momentum: TRANSCEND Phase 3 in acquired HO showed -19.8% placebo-adjusted BMI reduction with consistent efficacy across age/sex subgroups; bivamelagon Phase 2 met primary endpoint with -9.3% BMI at 600mg and -7.7% at 400mg over 14 weeks.
• Management confidence and regulatory progress: “We are on track to complete U.S. and European regulatory filings in Q3” — CEO, and cash runway of “at least 24 months” post offering — CFO.

What Went Wrong

• EPS loss widened YoY with Q2 net loss per share of -$0.75 vs -$0.55 in Q2 2024, reflecting higher SG&A and R&D to support pipeline and launch readiness.
• Other income (expense) swung negative (-$1.0M) vs $8.7M in Q2 2024 due to non-recurring prior-year gain and non-cash interest expense on deferred royalty and LG Chem liability.
• Stock-based compensation increased, driving higher OpEx; CFO cautioned future stock comp is elevated and “beyond our direct control because it’s driven by the stock price”.

Transcript

Speaker 10

Good day, and thank you for standing by. Welcome to the Rhythm Pharmaceuticals Q2 2025 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 *11 on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press *11 again. In the interest of time, please limit yourself to one question. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, David Connolly, Investor Relations. Please go ahead.

Speaker 0

Thank you, Tanya. I'm David Connolly here at Rhythm Pharmaceuticals. For those of you participating on the conference call, our slides can be accessed and controlled by going to the Investors section of our website, ir.rhythmtx.com. This morning, we issued our press release that provides our Q2 financial results and a business update, and that press release is available on our website. Our agenda is listed on slide two. On the call today are David Meeker, our Chairman, President and Chief Executive Officer; Jennifer Lee, Executive Vice President, Head of North America; Hunter Smith, Chief Financial Officer; and Yann Mazabraud, Executive Vice President, Head of International, joining us from Europe. 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 in our most recent annual or quarterly reports on file with the SEC. In addition, any forward-looking statements represent our views as of today and should not be relied upon as representing our views as of any subsequent dates. We specifically disclaim any obligation to update such statements. With that, I'll turn the call over to David Meeker, who will begin on slide five.

Speaker 9

Thank you, Dave. Good morning, everybody. Thank you for joining. Today marks the first earnings call where we can truly start mapping the long-term future of Rhythm Pharmaceuticals. Early startups, beyond the simple struggle to survive, often don't have the luxury of looking longer term. At Rhythm Pharmaceuticals, we have more than survived, and in quarter two, we laid the foundation for significant future growth. I'll briefly review those elements on this call. We had another solid quarter of IMCIVREE sales growth. Why is that important? We're now three years post-launch of an extremely promising but very challenging opportunity. Our North America and international teams have entered a classic ultra-rare disease community with all the challenges they face, from lack of disease awareness, difficulty getting to a diagnosis or finding an expert, through to gaining access to the only approved medication. The projected epidemiology seems right.

The patients are benefiting, and the healthcare system is working with us. All of that translates to sustainable, steady growth, which is what you are seeing this quarter. We expect IMCIVREE will be an important part of these quarterly earnings calls for the next 15 years. In terms of significance, I don't think we have had a more impactful quarter. The phase 3 readout of setmelanotide in acquired hypothalamic obesity, and the phase 3 readout of the first of our two next-generation compounds sets us on course for our next phase of growth. Although we previously reported those results, I will briefly review them. They are worth revisiting. We had a productive meeting with the FDA, the first in-person meeting in five years, and we are on track to complete U.S. and European regulatory filings in Q3. We will update you upon acceptance of the filings.

Finally, we're very well capitalized following our recent oversubscribed $189 million raise. On slide six, I remind you again of the meaningful opportunities ahead of us. IMCIVREE, with an estimated 5,000 patients in the U.S. and similar numbers in Europe, acquired hypothalamic obesity with 5,000 to 10,000 patients in the U.S., and as noted, a growing level of confidence in the upper range of that number, with similar numbers estimated for Europe. The Japan opportunity looks equally promising. Finally, we look forward to the RM-718 readout in the first quarter of next year. Importantly, we have the time to fully develop these opportunities. Setmelanotide composition of matter patent is up in 2032, but importantly, the formulation patents extend to 2034 in the U.S. Our next-generation compounds will extend that protection to 2040 plus.

On slide seven, I want to share a little more color as to what the patients are experiencing. 30 patients, or their caregivers, who participated in our phase 3 trial of setmelanotide in acquired hypothalamic obesity, participated in a qualitative one-hour interview. These results were presented at Endo last month. I encourage you to read the representative quotes on the slide. I'm not going to read them, but these individuals who may have been living a relatively normal life prior to their injury, brain tumor, in most of these cases, suddenly were confronted with rapid weight gain, increased hunger, a severe preoccupation with food, all accompanied by a lack of control. Once on treatment, they could, as they described it, feel good and find joy in their lives again.

On slide eight, you can see that of the 30 patients participating in the interviews, they almost all experienced the increase in hunger, the increase in fatigue, and a decrease in their physical activity. This disease is not about simply adding a few additional kilograms. Moving to slide nine, the setmelanotide phase 3 acquired hypothalamic obesity results we reported out in April were hugely validating, both in terms of the underlying biology. This is a disease driven by impaired MC4R signaling and the effect of setmelanotide, a functional analog of the endogenous hormone alpha-MSH, which had a consistent and meaningful impact on the primary and key secondary endpoints. As shown here, the placebo-adjusted difference was a 19.8% reduction in BMI. Importantly, this result was consistent across all age groups and in both male and female patients. We were equally excited to get the results of the phase 2 bivamelagon trial.

These were the first results in patients, and we are learning. As shown on slide 10, the placebo cohort gained weight. There was a clear dose response, and the 600 milligram cohort decreased their BMI by more than 9%. On slide 11, as you remember, we made our best attempt to draw an apples-to-apples comparison with the setmelanotide data at 12 and 16 weeks from the phase 2 and 3 trials in acquired hypothalamic obesity in patients age 12 and above. As you can see, the patients decreased their BMI by 9.7% and 10.1% at 12 and 16 weeks, respectively, as compared to 9.3% for the 600 milligram dose cohort at 14 weeks in an intent to treat analysis. We expect 600 milligrams will be our target dose going into phase three trials.

We will request an end of phase two meeting with the FDA and request scientific advice from the CHMP of the EMEA to share the data and gain alignment on the design of the phase three trial and a path to registration. Finally, Algar Field, our CSO, and I had the privilege of joining Yann and his team at the IMPROVE meeting in Prague. He will describe in greater detail, but it is a unique event focused on MC4R pathway diseases. While the prior meetings were more genetically focused, this meeting had significant discussions about HO and a sharing of some of the early real-world treatment experience in Europe. The fact that approximately 150 physicians from around Europe would attend a Rhythm-sponsored meeting speaks to the quality of the science, which was shared, and the level of trust Yann and his team have built with that community.

Finally, slide 13 highlights a number of the upcoming milestones. We remain on track for U.S. and EMEA filings this quarter for setmelanotide and HO. Our goal is to disclose preliminary results from the phase two Prader-Willi trial before the end of the year. We aim to complete enrollment of the RM-718 weekly phase two study in HO patients in 2026. We'll also release top-line data from the Japanese cohort from our phase three acquired HO trial in Q1, and we will release top-line data from the MNATE trial in Q1. We aim to complete enrollment of the congenital HO trial in the first half of 2026. Finally, we will initiate our phase three study with bivamelagon in acquired HO in 2026, and we'll further refine the timing once we have feedback from regulators. I will now turn the call over to Jennifer.

Speaker 3

Thank you, David. I'm going to be starting today on slide 15. June 2025 marked the launch of IMCIVREE in BBS. The community continues to grow at a steady pace, and we have delivered consistent and steady progress in establishing IMCIVREE as the first and only therapy that addresses the underlying cause of hyperphagia, a pathological hunger that leads to abnormal food-seeking behavior and severe obesity in patients with rare MC4R pathway diseases like BBS. We had a strong second quarter, and we continue to see solid growth in new prescriptions and new patient starts, driven by our fine-tuned patient identification efforts. We are seeing steady growth in new first-time prescribers, and repeat prescribers are writing prescriptions for second patients and more, following a positive first experience with IMCIVREE.

With the label expansion down to two years of age received late last year, we are now seeing more patients younger than 18 come on therapy the last two quarters. Importantly, our teams are preparing to launch IMCIVREE in hypothalamic obesity pending FDA approval. I'll touch on each of these positive themes from the quarter. Next slide. First, prescribers. In the second quarter, we saw continued growth in the number of IMCIVREE prescribers for BBS patients. We recorded a 38% growth in the cumulative number of BBS prescribers from Q2 2024 to Q2 2025, as well as a 9% growth in the cumulative number of BBS prescribers from Q1 2025 to Q2 of 2025. Next slide. The FDA-approved label expansion down to two years of age enabled us to renew engagement across physicians who treat younger patients.

We leveraged the expanded indication to amplify a strong message that IMCIVREE, due to its efficacy and safety, can be used in patients as young as two years of age, differentiating MC4R diseases and the early-onset obesity from the population with general obesity. This focused messaging resulted in a growth in prescriptions coming from both the pediatric and adolescent patients in Q2. 40% of prescriptions in the quarter were for patients under 12 years of age, up from 27% in Q1. 27% of prescriptions in the quarter were for patients between 12 and less than 18 years of age, up from 23% in Q1. These positive trends stem from a combination of patients younger than six, potentially waiting on their label expansion, as well as moving older children and adolescents onto treatment.

Though we saw a positive contribution of prescriptions from younger patients due to our focused messaging around the label expansion, we expect this label expansion to be a minimal incremental opportunity for us moving forward. Over these last three years, BBS commercial performance has continued to be strong, with improved understanding throughout the community of the impact of early-onset hyperphagia and severe obesity. BBS has been differentiated from general obesity. Physicians are engaged, diagnosing patients, and writing prescriptions for IMCIVREE. Payers also appreciate the difference. While we face similar challenges faced by any rare disease therapy, payers are providing coverage of IMCIVREE for these patients. Most importantly, patients are starting and staying on therapy and seeing benefits. Next slide. We are excited about the next stage of Rhythm's potential growth in hypothalamic obesity, leveraging what we have learned and put in place since the BBS launch.

As David outlined, we are confident that the number of U.S. patients with acquired hypothalamic obesity is in the upper bound of our 5,000 to 10,000 prevalence estimate. We are approaching this as a specialty launch focused on endocrinologists, both adult and pediatric. Our ongoing physician profiling and patient identification efforts are underway, and we remain excited to launch upon approval. We will look forward to providing you more details on the HO launch readiness efforts on September 24th during our in-person event in Boston, which will also be webcasted. Stay tuned for registration details, and feel free to contact David Connolly. With that, I'll turn the call over to Yann.

Speaker 6

Thank you, Jennifer. I begin on slide 20, and we are pleased to report that IMCIVREE is now available for BBS and/or POMC/LEPR deficiencies, either as fully reimbursed therapy or in-patient sales in more than 20 countries outside the United States. This also includes two countries where we have achieved pre-EMA approval, paid early access for patients with hypothalamic obesity. We are seeing a steady increase in the overall number of patients on IMCIVREE in the international region, as we are very pleased with the results of the second quarter. The main growth drivers for the international region this quarter were IMCIVREE sales in approved indications, BBS and POMC/LEPR deficiencies, as they made up the larger increase in patient numbers, and paid early access for HO patients in France and Italy, which drove the largest % increase in sequential quarterly growth.

Reimbursed HO patients now account for a meaningful % of total reimbursed patients in the international region. As a reminder, in France and Italy, these early access programs allow patients to gain access to federal reimbursement before the approval in Europe. Both programs are progressing well and seeing increases in patient and therapy, and the patients appear to be benefiting as well. Last but not least, we are seeing additional countries come online in terms of in-patient sales. We have talked about Turkey and Greece previously, and new this quarter, we are seeing patients from Poland and the Czech Republic. In Japan, we are building out our team with a focus on regulatory, medical affairs, marketing, and market access. Next slide. On slide 21, are more details on the third IMPROVE meeting where approximately 150 physicians, scientists, and researchers gathered to learn from one another.

Attendees came from 19 countries, including Japan. Rhythm supports this conference, but the scientific agenda is built by a panel of leading experts, co-chaired this year by Professor Jesús Arrente from Spain and Professor Sadaf Farooqui from the UK. The scientific agenda is built on plenary lectures, peer-to-peer scientific exchange, and sharing of best practices. The scope of the agenda has grown over the years, too. Initially, it focused on genetic pathway diseases and BBS, and now it includes HO. There were also 43 poster presentations and three impactful workshops. Participants attended two of these three workshops, which covered optimal care for rare MC4R pathway diseases, multidisciplinary care and treatment perspectives for patients younger than six, and comorbidities and communications for patients with acquired HO.

Of the poster presentations, the committee selected three winners: the results from a European retrospective study on monogenic obesity, the DICANS hyperphagia questionnaire as a screening tool for monogenic obesity, and an assay for variants in the ASIP gene. As the only medical and scientific conference focused on MC4R pathway diseases, IMPROVE has turned into an important opportunity for so many experts to get together. Nearly 40% of attendees were practicing endocrinologists, and more than 25% were pediatricians, and the feedback was overwhelmingly positive. Important themes emerged as discussion points this year: the uniqueness of MC4R pathway disease, the early onset of obesity in these patients at a young age as a key for diagnosis, and of course, hyperphagia. These face-to-face discussions are helping these physicians to change their clinical practice when it comes to how they identify, diagnose, and treat these patients.

With IMPROVE and many additional efforts, Rhythm Pharmaceuticals is playing an important part in growing the international committee of MC4R pathway disease experts. I will now turn the call over to Hunter.

Speaker 1

Thank you, Yann. Today's business update is positive based on a strong quarter for global commercial revenue, successful data readouts, as well as an upsized and oversubscribed equity offering in July. Let's start with the balance sheet on slide 23. We ended the second quarter of 2025 with $291 million in cash on hand, and last month we completed the equity offering in which we sold approximately 2.4 million shares of common stock at $85 per share, resulting in net proceeds to Rhythm of $189.2 million. We are grateful to have received so much support from many existing, but also several new, long-only and healthcare-dedicated investors in this transaction and on an ongoing basis. We note here that we paid $40 million to LG Chem in July, the second of two tranches associated with the licensing agreement for bivamelagon that was announced in January of 2024.

This cash payment in July is not reflected in our cash on hand at June 30th. The remaining obligations to LG are post-approval milestones and royalties. The fixed consideration component of the agreement is fully satisfied. Rhythm's cash on hand, combined with the net proceeds from last month's stock offering, forecasted revenues from the anticipated launch of IMCIVREE in acquired HO, as well as ongoing revenue from approved indications and currently planned R&D and commercial activity, provides cash runway of at least 24 months. This level of liquidity indicates that Rhythm's balance sheet is the strongest in its history. On slide 24, global revenue for the second quarter was $48.5 million, an increase of 29% quarter over quarter. 66% of Q2 revenue, or $32 million, was generated in the U.S., and 34%, or $16.5 million, was generated outside the U.S.

Quarter over quarter, the global number of patients on therapy, reimbursed patients on therapy, increased by approximately 12%. U.S. revenue increased $7.6 million, or 31% over the prior quarter. The number of reimbursed patients on therapy in the U.S. continued to grow at mid-single-digit % rates. Recall that in Q1, Rhythm's specialty pharmacy dispensed $4.1 million more product to patients than it ordered from Rhythm, and inventory days on hand dropped below 10 days. In the second quarter, the difference between product shipped to our specialty pharmacy exceeded product dispensed to patients by approximately $0.5 million, a more modest but positive effect on revenue in the quarter. The specialty pharmacy carried approximately 10 days of inventory on hand at June 30th. Excluding these inventory factors, sequential U.S. revenue growth for patient demand in Q2 was approximately $3 million, or roughly 10.5%, from $28.5 to $31.5 million.

Outside the United States, quarter over quarter growth was approximately $3.2 million, or 24%. Appreciation of the euro and other currencies contributed approximately $1.2 million of this increase. Geographically, revenue growth was primarily driven by increased sales in France, the UK, and Italy, as well as increased in-patient sales in various countries, the latter of which is more variable quarter to quarter. Looking at growth by indication, as Yann mentioned, our approved indications of BBS, POMC, and LEPR provided the larger increase in patient numbers in the quarter. Yet early access programs for patients with hypothalamic obesity in France and Italy drove the higher percentage increase in patient growth. Reimbursed hypothalamic obesity patients now account for a meaningful percentage of total reimbursed patients in Rhythm Pharmaceuticals' international region. On slide 25, in comparison to Q2 2024, net product revenues increased $19.4 million, or 67% for 2024.

Gross to net for U.S. sales was 83.9%, in line with levels we have experienced historically. Cost of sales this quarter was 11.4% of net product revenues. We generally expect cost of sales to be between 10% to 12% of net product revenues for the foreseeable future, with variation due to how our inventory balances are changing and the corresponding capitalization of labor and overhead costs. R&D expenses were $42.3 million for Q2, compared to $30.2 million in the same quarter last year. Sequentially, R&D expenses increased $5.3 million, or 14% over Q1 2025. This increase was primarily due to CMC work related to the formulation for bivamelagon and autoinjector development for RM-718. Increased headcount and stock compensation also contributed to this increase in expenses. Clinical trial costs were relatively flat quarter over quarter.

SG&A expenses were $45.9 million for Q2 2025, as compared to $36.4 million in Q2 last year. Sequentially, SG&A expenses increased by $6.9 million, or approximately 18% compared to Q1 2025. Increased spending in SG&A from Q1 to Q2 is due to increased headcount and marketing costs. The headcount costs are inclusive of stock compensation. For the second quarter 2025, there were $63.7 million weighted average common shares outstanding. Cash used in operations was approximately $22 million during the second quarter. Our GAAP EPS for the second quarter of 2025 was a net loss per basic and diluted share of $0.75, including $0.02 per share from accrued dividends on convertible preferred stock of $1.3 million. On slide 26, there's a little more detail on operating expenses for the quarter and guidance for the full year.

For the second quarter, operating expenses of $88.2 million include a total of $15.9 million in stock-based compensation. Non-GAAP operating expense guidance for the full year of 2025 remains unchanged. We anticipate approximately $285 to $315 million in non-GAAP operating expenses, comprised of non-GAAP SG&A expenses of $135 to $145 million and non-GAAP R&D expenses of $150 to $170 million. With that, I'll turn the call back over to David.

Speaker 9

Thanks, Hunter. I think, as you've heard, we're pleased, really pleased to report out a good quarter and incredibly excited about the future ahead of us. With that, we'll open it up for questions.

Speaker 10

Certainly. As a reminder, to ask a question, please press *11 on your telephone and wait for your name to be announced. To withdraw your question, please press *11 again. In the interest of time, please limit yourself to one question. Please stand by while we compile our Q&A roster. Our first question will be coming from Tazin Ahmad of Bank of America. Your line is open.

Hi, guys. Good morning. Congrats on a good quarter. I wanted to maybe ask a question on what I think is your next upcoming pipeline catalyst. That's the Prader-Willi data. David, can you just frame for us what this study is? Is it an exploratory study, or is this a high-conviction study? Because there is a history of setmelanotide being looked at in this indication before, and I think people would just appreciate getting a sense about how you're feeling about what data would be good data and what the next step would be if it is good data. Thanks.

Speaker 9

Yeah, thanks, Tazin. I would characterize this as exploratory. As you noted, our initial study done back in 2019, quote-unquote, was negative, meaning it did not show a positive result. As we've explained, that was a difficult trial design, and we thought the dose was too low, the timing was too short, and there was good reasoning based on the underlying biology of Prader-Willi to believe that the MC4R pathway plays an important role. The current trial, open-label study, the dosing, as in our last study, had a maximal dose of 2.5. This study goes up to all patients are dose-escalated to 5 milligrams as tolerated. The duration, that trial patients were on for a maximum of sort of four to eight weeks on a certain dose. This trial will go out six months, and we'll look at the data at that point.

What would be good, and the reason I characterize it as exploratory, I've characterized and will continue to characterize it as a 50/50, a very legitimate 50/50. The reason for that is I think we have high conviction about the underlying biology and the importance of the MC4R pathway in the disease, but we know the disease is challenging, and a lot of drugs have failed, and there's a behavioral component to this disease which can often create noise or obscure a potential beneficial effect. Those are things that give me pause, and this is why I would characterize this as exploratory.

How many patients with the data would that be?

Yeah, the trial is we can enroll up to 30. It's an open-label trial. We won't enroll up to a full 30 patients. Our goal is to get north of 10 patients, so 10 to 20 patients, and hopefully have a meaningful or ability to say something meaningful by the end of the year. In a disease like this, you don't start talking after two or three patients. There's just too much noise in the system, and you can't be confident in what you're seeing. Our goal is to say something by the end of the quarter, which hopefully will be based on data we can have confidence in. It was, sorry, end of the year. Apologies.

Okay, thank you.

Yeah.

Speaker 10

One moment for our next question. Our next question will be coming from Mike Olt of Morgan Stanley. Mike, your line is open.

Good morning. Thanks for taking the question, and congratulations on all the progress. Maybe just a quick follow-up on the Prader-Willi question. Appreciate the color on the number of patients, but can you give us a sense on what sort of level of follow-up you're expecting? Thanks.

Speaker 9

In all these many diseases, but certainly in rare diseases, if patients are benefiting, you keep them on treatment. You don't tend to run even an early-stage study and just stop at the end of it. That's challenging for these patients and doesn't make sense. Some of the most valuable data you gain is follow-up of these patients, and your ultimate submission is a totality of the evidence approach. You may have your phase 3, but it's strongly supported perhaps by one-year to two-year data out of your early-treated patients. These patients, six months is the point at which we will look at the data and begin to try to determine what we have, but those patients will continue on beyond six months, and they'll continue on indefinitely as long as we believe that there is an effect and we are proceeding with overall clinical development for Prader-Willi.

Got it. That's helpful. Maybe I could just ask a quick follow-up. You know, assuming if the data is positive, you know, how do you think about some of your next-generation MC4Rs like bivamelagon? Is that something you consider taking forward in this indication as well? Thanks.

Yeah. Again, as many of you know, I think historically we've said that most, if not all, of our subsequent development work would be done with our next generation. It just makes sense for multiple reasons, potentially better drugs, longer patent life, etc. However, if the data is compelling and we're convinced, the possibility of going immediately with RM-718 is absolutely on the table. We'll see how we do with timing getting RM-718 up through this initial proof of concept period and how that matches up with the proof of concept data we get on Prader-Willi in our current trial, and then we'll make final decisions. We'll certainly be, if we're going forward, we will for certain be doing it with our next gen, I think one or both of our next-generation molecules. The question is, do we go rapidly with RM-718?

Yep, thanks very much.

Speaker 10

Our next question will be coming from Phil Nadeau of TD Cowen. Your line is open, Phil.

Good morning. Congrats on the productive quarter. A follow-up from us on Prader-Willi too, just circling back on what is good data. It seems like there's a few elements to the data we'll all be looking at: BMI decreases, reductions in hunger, as well as the consistency across the patient population. David, could you give us some sense as to what you want to see to move forward? What would be good data in terms of weight loss effects on hunger and consistency?

Speaker 9

Yeah, yeah, thanks. Sorry, I didn't mention that or answer that earlier. I think the primary endpoint here, aside from safety and tolerability, is weight. As we all know, Slano's drug was approved on a hyperphagia endpoint, and that was a huge breakthrough for the community because it was the first drug approved, and it did, in a sense, define a pathway for hyperphagia as an endpoint to be approved. We know our drug, by definition, the way the biology works is we provide a satiety signal, so we decrease the hyperphagia and we increase the energy expenditure. If we get weight loss, BMI decrease, almost by definition, we should have an improvement in hyperphagia. The magnitude we're looking for here is different than in our other MC4R pathway diseases, and that's, I think, because of the overlay of all the other challenges with this disease.

Nothing gives you weight loss in this disease. Anything 5% or greater is approval based on FDA guidelines for obesity drugs. That would be our target, and that's at a year. Our goal would be to have confidence that we were seeing a change in BMI that either was at or moving consistently and steadily toward, at minimum, a 5% decrease in BMI. The one caveat on the hyperphagia data, we're collecting all of that data. We also use an HQCT, which was the endpoint that Slano got approved on. It's an uncontrolled study, and those kind of patient-reported outcomes are a little more challenging to interpret, perhaps, in that setting, but we will have that data as well.

Great. One quick housekeeping question for Hunter, if I might. In terms of OpEx, your guidance for the non-GAAP operating expenses is very clear. In terms of stock comp, there's $15.9 million in Q2. I think you have like $30 million in stock comp for all of 2024. How should we think about stock comp going forward in the second half of 2025?

I think it's a fair question, Phil. Obviously, we've seen a significant increase in stock comp due to the change in the price of the equity of Rhythm Pharmaceuticals. I don't think we're in a position to give full-year guidance, but obviously, an increase of essentially $3 million quarter over quarter is significant and beyond our direct control because it's just driven by the stock price.

Got it. This is a good baseline to use as we think of.

It's a fair baseline as we move forward, yeah.

Perfect. Thank you.

Speaker 10

Our next question will come from David Arcola of Wells Fargo. Your line is open, Derek.

Hey, good morning. It's Derek on. Just had one question for David here and then one for Hunter. David, will you be providing updated estimates for HO prevalence during the commercial day in September? What gets you confident that they're at the higher end of the range, as you said in the prepared remarks? Just a quick one for Hunter, in terms of the growth that you've been reporting ex-U.S. for the past two quarters, how should we be thinking about that moving forward? Thanks.

Speaker 9

Derek, I'm going to plead needing a little more time. We haven't defined the exact agenda. Our goal is to give you as best sense we can about our current understanding of HO. Obviously, a lot of work's being done. Jennifer's team's doing a lot of work now in the field. I think on the epi side of it, as we've said, we've moved from sort of our initial estimates of 5 to 10 to quote-unquote being more confident that we're at the higher end of that 5 to 10 thousand. It's comprised of a number of things. I mean, you start out as you do with rare diseases. You've got whatever is out there in the literature. We've done claims data work now in the U.S. and Germany most specifically, but Japan. I mean, we have more than one country that's informing that.

A big part, and this was a big part of our BBS revised estimate when we did it, was teams being out in the field and validating some of those numbers. It's not so much that you validate it on a number-by-number standpoint, but there's a gestalt that you know this feels about right. I'm not sure. It's a long way of saying I'm not sure we're going to update our assessment at that point. We'll give you, you know we can reconfirm where we are, but we are learning a lot, and we'll try to give you a sense at that day where we are in terms of what the field teams are learning. Probably that's the biggest piece which will be new.

Derek, with respect to revenue growth, I think you know we did highlight the currency effect during the quarter, which was responsible for about 36% of the growth, so $1.2 million of $3.2 million. That's obviously something that we can't predict, and I certainly wouldn't model. Separate from that, I would say we have had a strong run in the past two quarters in international. Q3, in general, can be a little quieter in terms of new patient starts in Europe, just the vacation effect that people have, and that has an effect on growth. Non-name patient sales are also less predictable. Some countries take a shipment for a few months at a clip, and there was certainly some effect of that in Q2. It's not as clear when those types of countries come back in for another set of shipments.

Overall, we're pleased with the growth in international, and we expect it to continue.

Great. Thank you very much, guys.

Okay. Thanks, Eric.

Speaker 10

As a reminder, in the interest of time, please limit yourselves to one question. Our next question will be coming from Corinne Johnson of Goldman Sachs. Your line is open.

Good morning, everyone. Maybe on the other clinical update expected later this year, you don't have that first patient enrolled in Part C. Could you provide any clarity on the nature of the data you could possibly share later this year, recognizing that enrollment is going to continue into next year? On the HO use, I think you said that there is meaningful ex-U.S. utilization, but do you have any visibility on whether there are HO patients getting IMCIVREE off-label here in the U.S.? Thanks.

Speaker 9

Yeah. On the Part C piece of this, what we've said, and you know we've moved our, my goal originally, as you know, or many of you know, was to say something about RM-718 by the end of the year. It's taken us longer to get up and running, and we are up and running now, but that's delayed us a bit. We've moved the completing enrollment to "first quarter." That means that it's extremely unlikely that we'll have anything to say about, it is an open-label study, but that we would say anything about RM-718 by the end of the year. It's more likely that we'll be into 2026.

Regarding the HO off-label usage within the U.S., I would say that right now we do have a couple. It's like a handful, very minimal, just in terms of what we have received from our ex-perspective to date in that indication.

It's fair to say in rare diseases in the U.S., off-label use is, the good news is they're very allegiance payers, very allegiance to the label. On the flip side, there isn't the kind of off-label use you might see in some other diseases.

Speaker 10

Thank you. Our next question will be coming from Paul Matisse of SIFU. Your line is open, Paul.

Hey, good morning. Thanks for taking my question. Just one question on RM-718. You guys did a good job with the bivamelagon study on preparing us for the caveats to comparison and some of the demographic differences between trials that will sort of inform how you can stack up these drugs. For the RM-718 study, I know you're getting started with the HO portion now, but what are you expecting for the patient mix? What are some of the things you should keep in mind as you sort of gauge whether or not this is matching the efficacy of your other drugs? Thank you.

Speaker 9

Yeah, it's a good question, Paul. I mean, it's similar. I think, again, it's a 12 and older trial, so you can expect us to present the data in a very similar way. You've already got now the reference points because we've done that work. You know, are hopeful that we'll be in range, again, recognizing very small numbers of patients, relatively short duration, so that you can have noise around it. We're looking for 718 to be in a similar range. I'll just remind people, again, the biggest question about 718 is not, is it a good MC4R agonist? I mean, we know that. The question is, do we have the right dose? You know, because again, we're moving into a weekly pharmacokinetic profile here, and so that's different.

I think, you know, that's the part that hopefully this trial will sort out and give us a good feeling for.

Do you think you've maxed out the efficacy of this mechanism at this point, or could greater exposure actually drive more benefit?

I do think we've maxed it out. I mean, we've now done enough. We've treated enough different populations. I'm not convinced. There's occasional patients who may need a higher dose, and we don't dose based on weight. Obviously, there's a very big difference from a 50-kilogram pediatric patient and a 200-kilogram adult patient. Those are the kind of differences where dose may, on the margin, make an issue. I think your basic question is, have we maxed out? Yeah, I think we've likely maxed out. This is.

Fair enough. Thank you.

Speaker 10

Our next question will be coming from Seamus Fernandez of Guggenheim. Your line is open.

Oh, thanks for the question. David, I think in the past, we've talked about the opportunity for Rhythm Pharmaceuticals to become quite a bit more important in the overall scheme of the specialty market. Can you just help us understand a little bit better the opportunity that you see? You've talked about Bardet-Biedl syndrome (BBS) as a 15-year opportunity for growth. Acquired hypothalamic obesity (AHO), in the mix, how do you think about the opportunity there? You're talking about 10,000 patients, but it seems like over time, as you expand the market opportunity, we could see numbers north of that over time, and obviously, the company potentially becoming more important from a strategic perspective.

I just wanted to get a better sense of how you're thinking about the overall launch characteristics in acquired hypothalamic obesity (AHO) and the markets that you're going to most urgently reach into, but the opportunities that you see beyond just the standard Japan, Europe, and U.S. opportunity. Thanks so much.

Speaker 9

Yeah, thanks, Yann. That is a bit of the theme of today's call in the sense of, you know, how does Rhythm grow? You started where I would start is on BBS. We have, you know, by now a lot of confidence in the BBS numbers. It will grow over time. I think the biggest variable for me is not so much will we get to some projected peak kind of revenue, and maybe, you know, these kind of rare disease opportunities often don't peak, but they just tend to grow, which is why I picked 15 years out of the year. Of course, I don't have any insight that it's going to be 15. What I do know about rare diseases, and this is from my past history, is they do go for decades, and they do tend to continue to grow for decades.

They grow both inside the markets where you started, but then you also continue to add markets. We have been very focused from the beginning of being global. We realized that it was going to be hard, and you start slow. Yann highlighted this morning, we have a new patient or patients. There are a handful of patients in the Czech Republic and in Poland. That's how it works. You start with one or two, and those first patients are incredibly important because they signal a willingness of the system to start paying and to work with you and the like. It just builds over time. That's BBS. Acquired HO, bigger epidemiology. We've had questions this morning, and we'll continue to get a lot of questions about how big could this be. I think where we are now, a lot of confidence in our current projections. Could it be bigger?

Absolutely. Will it have some of the same dynamics as these kind of ultra-rare diseases? AHO sits a little bit in the middle. It's absolutely a rare disease, quite rare, 5,000 to 10,000 puts it in the very rare category, but it's very specialty-like in the concentration, more patients diagnosed, you know, an attentive specialty by definition. AHO may have a slightly different ramp, if you will, steeper than BBS because of those factors. The other aspects of AHO are going to be very similar, which is think about steady growth over time. Don't think about inflecting, you know, this is something going to explode out of the gates in the way some of these quote-unquote specialty opportunities do. That is going to be more rare-like, but it will be steeper, and it will grow for a very long time.

We may be wrong on the epidemiology, meaning that it could be larger, and given enough time, I think that's likely. Finally, back to HO, again, opening up new countries. We're in Japan, but we're still early in terms of assessing Asia and other markets like that. We will get there. That's how you grow an opportunity like this.

Speaker 10

Thank you. One moment for our next question, which will be coming from Dennis Ding of Jefferies. Dennis, your line is open.

Hi, good morning. Thanks for taking my question. I had one on Prader-Willi. Just given the availability of VICAT and the fact that your phase 2 is being done at a single center, what sort of guidance are you giving Dr. Miller in terms of who to enroll in the study versus maybe who she uses VICAT? Specifically, like what types of patients would go onto the study? Do you think that would make it more difficult potentially for Saponanotide to show an efficacy signal there? Thanks.

Speaker 9

Yeah, and Dennis, it's a really good question. The guidance is just the inclusion criteria. The inclusion criteria is it's Prader-Willi patients, six and above. There's no exclusion for the use of VICART. If patients are stable on that drug, they're allowed in that trial, and we will have some of those patients. One is we were interested in what that combination would look like. Two, it's standard of care now, and you know that's the world we'd be moving into to develop this drug. That's not uninteresting. I think, you know, that's the guidance. I think who she's enrolling, there's a group of patients who, so diabetics, for example, it's more challenging to use VICART in that population. It inhibits insulin release, and it can make your diabetes worse. I already know we have some patients with diabetes in this, you know, open-label study.

Your point is, could those be more challenging patients? We know, by definition, yeah, diabetics can be more challenging, particularly in a weight loss study, and they have other stuff going on, which makes them difficult to manage. That's it. It's going to be much more of a mix, and you know, we'll have to analyze it with that context.

Okay, got it. Understood. Thanks.

Thank you.

Speaker 10

Our next question will be coming from Raghuram Selvaraju of H.C. Wainwright & Company. Your line is open.

Speaker 9

Thanks very much for taking my question. This pertains to CMC. I was just wondering if you could comment on the status of the development of the smaller pill for bivamelagon and also the key objectives in your autoinjector development work for RM-718, including but not limited to the possibility of developing a formulation that might be dosable less frequently than once weekly. Thank you. Yeah. In terms of the smaller pill, that's not a big challenge right now in the sense that the bigger challenge, which the CMC group has, I think, surmounted, was getting the formulation changed. Our current 200-milligram pill, we can now get 600 milligrams in a single pill. Basically, a 90% drug load in that single pill. Going down to 400 and 200-milligram pills with 90% drug load just means you're going to have a smaller pill, and technically, in a sense, that's done.

The autoinjector goal, it's for a weekly formulation. We do not have any plans at this point. Everything's possible, and that's a natural path to continue to try to extend your frequency of injection. For the moment, this is all completely aimed at our weekly program.

Thank you.

Speaker 10

Our next question will be coming from Fazai Khurshid of Lee Rank Partners. Your line is open.

Hi, this is Heidi Jacobson on for Fazai Khurshid. Thanks for taking our question. Can you share any updated thoughts on the phase three study design for bivamelagon in acquired HO, including dose, study size, and what is left to get done before that study can get rolling? Thanks.

Speaker 9

Yeah. What's left to get done is we need to submit our meeting request to the FDA and EMEA, and then we submit a briefing package with a synopsis or proposed trial design that they react to. We may or may not get a meeting or a call. We'll see what happens with that. That's step one in terms of the regulatory process. I think in terms of design, we've learned a lot about studying HO, so we'll draft off that. You can think about a design that's highly similar. I've talked about my wish list in the past, which is, I would like to see if we don't have to do a double-blinded study. I mean, we have a historical control group now from our current phase 3 study, which we'll propose as a potential comparator. We'll see whether the FDA accepts that or not.

Lots of advantages to that. We may also go back in asking for a readout at an earlier time point. You'll definitely need to provide data on patients treated for a year, but we'll propose an earlier readout. Those are the kind of things. I think that's clearly wish list. The FDA has been pretty standard in terms of their responses to this kind of thing. We may well end up with a study that looks more like our current HO trial. Those are the things we're thinking about.

Got it. Thank you.

Speaker 10

I would now like to turn the conference back to David Meeker for closing remarks.

Speaker 9

Thank you, everyone, again, for turning in. Like I said, we're really pleased where we are. We're making good progress. We have a lot to do, so we look forward to our next update. Thank you.

Speaker 10

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