Good day, and thank you for standing by. Welcome to the Rhythm Pharmaceuticals Q2 2025 Earnings Conference Call. [Operator Instructions] 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, Investor Relations. Please go ahead.

Thank you, Tanya. I'm Dave Connolly here at Rhythm Pharmaceuticals. For those of you participating on the conference call, our slides can be accessed and controlled by going to the Investors section of our website, ir.rhythmtx.com. This 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 listed on Slide 2 -- our agenda is listed on Slide 2. On the call today are David Meeker, our Chairman, Chief Executive Officer and President; Jennifer Lee, Executive Vice President, Head of North America; Hunter Smith, Chief Financial Officer; and Yann Mazabraud, Executive Vice President, Head of International is on the line joining us from Europe. On Slide 3, I'll remind you that this call contains remarks concerning future expectations, plans and prospects, which constitute forward-looking statements. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed on 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 5.

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. Early start-ups beyond the simple struggle to survive often don't have the luxury of looking longer term. At Rhythm, we have more than survived. And in quarter 2, we laid the foundation for significant future growth. I'll briefly review those elements on this call. We had another solid quarter of BBS sales growth. Why is that important? We are now 3 years post launch of an extremely promising but very challenging opportunity. Our North American 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 health care system is working with us. All of that translates to sustainable, steady growth, which is what you are seeing this quarter. We expect BBS 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 III readout of setmelanotide in acquired hypothalamic obesity and the Phase III readout of the first of our 2 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 5 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…

Thank you, David. I'm going to be starting today on Slide 15. June 2025 marked the launch of IMCIVREE in BBS. 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 behaviors 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 2 years of age received late last year, we are now seeing more patients younger than 18 come on therapy the last 2 quarters. And 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 2 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 2 years of age, differentiating MC4R diseases…

Thank you, Jennifer. I'll 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 named patient sales in more than 20 countries outside the United States. It also includes 2 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 percentage increase in sequential quarterly growth. Reimbursed HO patients now account for a meaningful percentage 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 patients on therapy, and the patients appear to be benefiting as well. Last but not least, we are seeing additional countries come online in terms of named patient sales. We have talked about Turkey and Greece previously. And new this quarter, we are seeing patients from Poland and the Czech Republic. And 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. Reasons support…

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 health care 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 -- 2 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 30. 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 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 United States and 34% or $16.5 million was generated outside the United States. Quarter-over-quarter, the global number of patients on therapy -- reimbursed patients on therapy…

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

[Operator Instructions] And our first question will be coming from Tazeen Ahmad of Bank of America.

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 the 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, Tazeen. Yes, I would characterize this as exploratory. As you noted, I mean, our original -- our initial study done back in 2019 "was negative" and meaning it did not show a positive result. But 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. So 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. And the duration of that trial, patients were on for a maximum of sort of 4 to 8 weeks on a certain dose. This trial will go out 6 months, and we'll look at the data at that point. What would be good and the reason I characterize it exploratory, I characterize and we'll continue to characterize it as 50-50, a very legitimate 50-50. And the reason for that is I think we have high conviction about the underlying biology and the importance of the MC4 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. So those are things that give me pause and this is why I would characterize this as exploratory.

And how many patients worth of data would that be?

Yes. So we -- so the trial is we can enroll up to 30. It's an open-label trial. We won't enroll up to the 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. Again, in a disease like this, you don't start talking after 2 or 3 patients. There's just too much noise in the system, and you can't be confident in what you're seeing. So our goal is to say something by the end of the quarter, which hopefully will be based on data we can have confidence in -- sorry, end of the year, apologies.

Our next question will be coming from Mike Ulz of Morgan Stanley.

Congratulations on all the progress. Maybe just a quick follow-up on the Prader-Willi question. I 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?

So, again, with 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 in the long-term follow-up of these patients. And your ultimate submission is a totality of the evidence approach. So you may have your Phase III, but it's strongly supported perhaps by 1-year to 2-year data out of your early -- early treated patients. So these patients -- 6 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 6 months. And they'll continue on indefinitely as long as we believe that there is an effect, and we are proceeding with the overall clinical development for Prader-Willi.

Got it. That's helpful. Maybe I could just ask a quick follow-up. Assuming if the data is positive, 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?

Yes. 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, et cetera. However, if the data is compelling and we're convinced, the possibility of going immediately with setmelanotide is absolutely on the table. And so we'll see how we do with a timing getting 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 and our current trial, and then we'll make final decisions. But 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 setmelanotide.

And our next question will be coming from Phil Nadeau of TD Cowen.

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 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 how you -- what you want to see to move forward? What would be good data in terms of weight loss effects on hunger and consistency?

Yes. Thanks. Sorry, I didn't mention that or answer that earlier. So I think the primary endpoint here, aside from safety and tolerability is weight. As we all know, Soleno'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. But -- and 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. So 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 this disease, but nothing gives you weight loss in this disease. So anything 5% or greater is approval based on FDA guidelines for obesity drugs. So that would be our target, and that's at a year. So 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 HQ-CT, which was an endpoint that Soleno got approved on. It's an uncontrolled study. And so 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. And one quick housekeeping question for Hunter, if I might. In terms of OpEx, your guidance for the non-GAAP operating expenses is very clear. But in terms of stock comp, there's $15.9 million in Q2. I think you had like $30 million in stock comp all of 2024. So 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 for the -- due to the change in the price of the equity of Rhythm. And so 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. So this is a good baseline to use as we think.

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

And our next question will come from [ Derek ] Archila of Wells Fargo.

Just had one question for David here and then one for Hunter. So David, just will you be providing updated estimates for HO prevalence during the Commercial Day of September? And I guess what gets you confident that they're at the higher end of the range, as you said in the prepared remarks? And then just a quick one for Hunter. Again just in terms of the growth that you've been reporting ex U.S. for the past 2 quarters, how should we be thinking about that moving forward?

So 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 is being done. Jennifer's team is 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 5,000 to 10,000 to "being more confident" that we're at the higher end of that 5,000 to 10,000. And 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 more specifically, but Japan. I mean so we have more than one country that's informing that. And then 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, and it's not so much that you validate it on a number-by-number standpoint, but there's a [ gestalt ] that this feels about right. And so 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 -- 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.

And Derek, with respect to revenue growth, I think 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. So that's obviously something that we can't predict, and I certainly wouldn't model -- and then -- but separate from that, I would say we have had a strong run in the past 2 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. And named 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. So it's not as clear when those types of countries come back in for another set of shipments. But overall, we're pleased with the growth in international, and we expect it to continue.

[Operator Instructions] Our next question will be coming from Corinne Johnson of Goldman Sachs.

Maybe on the other clinical update expected later this year, you now have the 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? And then 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.?

Yes. So on the Part C piece of this, what we've said and we've moved our -- my goal originally, as you know or many of you know, was to say something about 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. So we moved the -- completing enrollment to "first quarter." So that means that it's extremely unlikely that we'll have anything to say about -- it is an open-label study, but that we will say anything about 718 by the end of the year. It's more likely that will be into 2026.

And regarding the HO off-label usage in 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 an Rx perspective to date in that indication.

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

And our next question will be coming from Paul Matteis of Stifel.

Just one question on 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 set up these drugs. For the 718 study, I know you're getting started with the HO portion now, but what are you expecting for the patient mix? And what are some of the things we should keep in mind as we sort of gauge whether or not this is matching the efficacy of your other drugs?

Yes, 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 and are hopeful that we'll be in range, again, recognizing very small numbers of patients, relatively short duration, so you can have noise around it. But we're looking for 718 to be in a similar range. And I'll just remind people, again, the biggest question about 718 is not -- is it a good MC4 agonist. I mean we know that. And the question is, do we have the right dose because, again, we're moving into a weekly pharmacokinetic profile here. And so that's different. And I think that's the part that hopefully, [ this 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 -- we've done enough. We've treated enough different populations. I just -- I'm not convinced there's occasional patients who may need a higher dose, we don't dose based on weight. And obviously, there's a very big difference from a 50-kilogram pediatric patient and a 200-kilogram adult patient. And so those are the kind of differences where dose may on the margin make an issue. But I think your basic question is, have we maxed out? Yes, I think we've likely maxed out. And so this is...

And our next question will be coming from Seamus Fernandez of Guggenheim.

Thanks for the question. So David, I think in the past, we've talked about the opportunity for Rhythm to become quite a bit more important in the overall scheme of the sort of specialty market. Can you just help us understand a little bit better the opportunity that you see? You've talked about BBS as a 15-year opportunity for growth. 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. So just wanted to get a better sense of how you're thinking about the overall launch characteristics in AHO and the markets that you're going to most urgently reach into, but the opportunities that you see beyond just the sort of standard Japan, Europe and U.S. opportunity.

Yes. Thanks, Seamus. That is a bit of theme of today's call in the sense of how does Rhythm grow. So you started where I would start is on BBS. And we have, by now, a lot of confidence in the BBS numbers. It will grow over time. And I think the biggest variable for me is not so much will we get to some projected peak kind of revenue and maybe 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 air, of course. I don't have any insight that's going to be 15. But 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. And they grow both inside the markets where you started, but then you also continue to add markets. And we've been very focused from the beginning of being global. And we realized that it was going to be hard and you start slow. And Yann highlighted this morning, we have a new patient or patients. There are a handful of patients in the Czech Republic and Poland. That's how it works. And you get -- you start with 1 or 2. 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. And so -- and it just builds over time. So that's BBS. Acquired HO, bigger epidemiology. I mean we've had questions this morning, and we'll get -- 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…

And one moment for our next question, which will be coming from Dennis Ding of Jefferies.

I had one on Prader-Willi. So just given the availability of VYKAT and the fact that your Phase II 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 VYKAT? Specifically, like what types of patients would go on to the study? And do you think that would make it more difficult potentially for setmelanotide to show an efficacy signal there?

Yes. Dennis, it's a really good question. So the guidance is just the inclusion criteria. And the inclusion criteria is it's Prader-Willi patients 6 and above. There's no exclusion for the use of VYKAT. So 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. And two, it's standard of care now, and that's the world we'd be moving into to develop this drug. So that's not uninteresting. I think -- so 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 VYKAT in that population. I mean it inhibits insulin release and so it can make your diabetes worse. And so we -- I already know we have some patients with diabetes in this open-label study. And that's -- yes, your point is could those be more challenging patients? And we know, by definition, yes, diabetics can be more challenging, particularly in a weight loss study, and they have other stuff going on, which makes them difficult to manage. So yes, that's it. It's going to be much more of a mix, and we'll have to analyze it with that context.

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

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 auto-injector 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.

Yes. So in terms of the smaller pill, I mean, 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 change. So our current 200-milligram pill, we can now get 600 milligrams in a single pill. So 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 that technically in a sense, that's done. The auto-injector goal -- it's for a weekly formulation. We do not have any plans at this point. Everything is possible, and that's a natural path to continue to try to extend your frequency of injection. But for the moment, this is all completely aimed at our weekly program.

And our next question will be coming from Faisal Khurshid of Leerink Partners.

This is Heidi Jacobson on for Faisal Khurshid. Can you share any updated thoughts on the Phase III study design for bivamelagon in acquired HO, including dose, study size and what is left to get done before that study can get rolling?

Yes. So what's left to get done is we need to submit or submit a meeting request to the FDA and the 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. But 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. We'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 III 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 will definitely need to provide data on patients treated for a year, but we'll propose an earlier readout. So those are the kind of things. I think that's clearly a wish list. I mean, the FDA has been pretty standard in terms of their responses to this kind of thing. So we may well end up with a study that looks more like our current HO trial. But those are the things we're thinking about.

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

Okay. Well, thanks, everyone, again, for tuning in. We're really pleased where we are. We're making good progress. Had a lot to do. So we look forward to our next update. Thank you.

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