RYTM - NASDAQ

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" Morgan Stanley, Research Division

" TD Cowen, Research Division

" Wells Fargo Securities, LLC, Research Division

" Canaccord Genuity, Research Division

" Leerink Partners LLC, Research Division

" Goldman Sachs, Research Division

" Stifel, Nicolaus & Company, Incorporated, Research Division

" Guggenheim Securities, LLC, Research Division

" Jefferies LLC, Research Division

" H.C. Wainwright & Co, LLC, Research Division

" Citizens JMP Securities, LLC, Research Division

Good day, and thank you for standing by. Welcome to the Rhythm Pharmaceuticals Q3 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, David Connolly, Investor Relations at Rhythm. Please go ahead.

Thank you, Heidi. 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 a press release that provides our Q3 financial results and a business update, and that press release is also available on our website. 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 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 us this morning. Rhythm delivered strong growth and continued momentum during the third quarter as we prepare to launch IMCIVREE in acquired hypothalamic obesity pending FDA approval. That is a transformative opportunity for Rhythm. We are finishing strong in 2025, a year in which we delivered robust Phase III data with setmelanotide and HO, presented outstanding Phase II efficacy data with our next-gen oral MC4R inhibitor, bivamelagon, and strengthened our balance sheet with a $189 million equity offering in July. With our PDUFA date next month and additional data readouts coming this quarter and next, we are well positioned to deliver sustained long-term growth. The steady growth in global IMCIVREE revenue driven predominantly by BBS continued this quarter with $51.3 million in sales, representing growth of approximately 10% in the number of patients on reimbursed therapy. We have built a strong global foundation for our business with IMCIVREE, the only therapy that addresses the root cause of hyperphagia and the severe obesity of rare MC4R pathway diseases. The teams continue to engage with physicians and prescribers, identify patients and ensure access to IMCIVREE. Beyond commercial success, we have been executing on the regulatory front as well. For HO, both the FDA and EMEA accepted our regulatory filings this quarter. The EMA validated our type 2 marketing authorization request and the FDA accepted our supplemental NDA filing. The regulatory dialogue has been promising and productive and keeping us on track for a December 20 PDUFA date and potentially European approval in the second half of 2026. Jennifer and Yann will share some details on the quarter as well as the upcoming launch efforts in the U.S. and the timing in the international region. We remain on track to report preliminary results from our exploratory Phase II trial in Prader-Willi syndrome by the end of the year. I have no further updates on today's call, but I will reiterate several of the comments we have made previously. There's a strong biologic rationale as to why MC4R agonism may work in PWS based to a large extent on the involvement of the MAGL-2 gene where patients with isolated MAGL-2 variants have impaired signaling through the MC4R pathway. We also know PWS is an incredibly complex disease due to defects in many genes and a clinical presentation characterized by obesity, hyperphagia, cognitive delay and abnormal behaviors. It is this latter aspect of the disease, which makes clinical studies particularly difficult. Thus, our rather neutral prediction that we have a 50-50 chance of working. Success will be defined by a BMI percent change with the target being results that would give us confidence we could clear a 5% threshold in BMI decrease at 52 weeks in the Phase III trial. We are collecting measures of hyperphagia, specifically the HQCT questionnaire in this trial. But I remind you, it is an open-label trial and absent a control group interpretation will be difficult. We are working with one site with a goal of enrolling 10 to 20 patients followed for 6 months. Obviously, we will not be reporting out on the full cohort in our end of the year release. I know there will be questions on exact timing. There are some practical aspects to that with regard to having as much data entered into the system and quality check as possible, but we can commit that it will be prior to the Christmas break. One comment before we dive into the findings on Slide 6 is that over my career working on a number of rare diseases, one aspect that is invariably true is that when you get a therapy approved, you have only just begun to learn the full impact of your therapy on that disease. In BBS, for example, we had the clinical data from approximately 50 patients at the time of approval. These MC4R pathway diseases are rare and absolutely fit that mold. The paper described here on Slide 6 is a German study that showed 6 months of setmelanotide therapy was associated with clinically meaningful improvements in steatotic liver disease and kidney function. This prospective observational study was conducted at University Hospital Essen in Germany with 26 patients with BBS ages 6 to 52 years, all with metabolic dysfunction-associated steatotic liver disease or MASLD at baseline. These patients were followed for 6 months. And after 6 months of treatment, more than 80% of patients exhibited either resolution of MASLD or stabilization at the lowest grade of disease or S1. We know weight loss can improve liver function in patients with obesity, but these changes did not correlate closely with BMI change, raising the possibility that some other aspect of the melanocortin biology may be mediating these changes. These results were recently published in the Journal of Clinical Endocrinology and Metabolism. On Slide 7, our upcoming launch in HO represents an incredibly important milestone for Rhythm. As you heard from Jennifer at our investor event in September, and we'll hear again from her this morning, we have the pieces in place to execute a successful launch. She and her management team have done a great job expanding our existing commercial teams with the hiring of a group of highly experienced and extremely talented individuals who are excited to get started. With an estimated prevalence of 10,000 patients in the United States, this is, as noted, a transformative opportunity for us. The unmet need is significant and clear and setmelanotide showed strong efficacy in Phase II and III trials. The regulatory dialogue is ongoing, and we appear to be on track for our PDUFA date of December 20. Obesity Week begins this week in Atlanta. Dr. Christian Roth has an oral presentation of the outcome of patients on GLP-1 therapy in our Phase III trials. You have seen this data previously, but it will again be an opportunity to highlight the value of correcting the hormonal deficit in alka-melanocyte stimulating hormone in patients who may not be getting the desired response from other anti-obesity medications. Overall, there is strong buzz in the community and a lot of excitement at Rhythm as we near launch. Lastly, Slide 8 are the upcoming milestones. We covered the first 2, our PDUFA date and potential HO approval and the preliminary data readout in Grader-Willi, both likely coming in December. We aim to complete enrollment of the RM-718 weekly Phase II study in HO patients during the first quarter of 2026. We will also release top line data from the Japanese cohort from our Phase III acquired HO trial in Q1, and we will release top line data from the EMANATE trial in Q1. We aim to complete enrollment of the congenital HO trial in the first half. And finally, we will initiate our Phase III study with bivamelagon in acquired HO next year. We'll further define the timing once we've had feedback from the regulators. It's a busy end of the year. With that, I will turn the call over to Jennifer.

Thank you, David. I'm going to be starting on Slide 10 today. So it's an exciting time as we continue our preparations for launch in acquired hypersonic obesity pending FDA approval by leveraging the strong foundation of our commercial efforts for BBS. BBS and HO are both rare diseases caused by an impairment to the MC4R pathway, which commonly results in hyperphagia or abnormal food-seeking behaviors and severe obesity. IMCIVREE is unique in its ability to address the root cause of hyperphagia and obesity in these patients. And over the last 3 years, we have seen that physicians are prescribing IMCIVREE for their patients with BBS, payers are providing access and patients are benefiting with some now entering their fourth year on treatment. The positive growth in BBS continued during the third quarter. Quarter-over-quarter, we have seen a steady volume in new prescriptions and an increase in number of patients on reimbursed therapy. We continue to see gains in both the depth and breadth of prescribers with approximately a 7% increase in the cumulative total number of BBS prescribers quarter-over-quarter. In the third quarter, the proportion of prescriptions for pediatric versus adult patients began to normalize following the uptick in prescriptions for pediatric patients during the first half of this year, which we discussed in our last quarterly call. For the third quarter, the breakdown of new prescriptions was as follows: 50% of new patients were adults, 22% were adolescents and 28% were pediatrics. And these percentages are trending back to the typical mix prior to the IMCIVREE label expansion to include patients as young as 2 years of age. Next slide. Moving on to our preparations for the acquired hypothalamic obesity launch. We have hired highly experienced professionals to supplement our home office and field organization, and our teams have been actively engaging with customers. As we outlined on our acquired hypothalamic obesity commercial readiness event in September, we are focused on engaging with and educating physicians in order to differentiate MC4R pathway diseases, including acquired hypothalamic obesity from general obesity, expedite patient diagnosis and following approval, establish IMCIVREE as the foundational treatment for acquired HO and educate payers to secure access and support patients long term once they have initiated treatment. Next slide. We also shared some insights into the market and our data-driven approach to this specialty-centric opportunity. We analyzed claims data to narrow down our top physician targets and size our field teams. Let me walk you through that once again. We started with claims associated with brain tumors and treatment. Within these, we looked at those with hypothalamic dysfunction and also obesity. And lastly, within these, we look to patient visits with an endocrinologist within the past 18 months. This claims analysis allowed us to identify approximately 5,000 endocrinologists who potentially have 1 patient or more with hypothalamic obesity under their care. From these 5,000 endocrinologists, we narrowed our initial focus to 2,400 top-tier physician targets who we believe manage a higher volume of patients. Next slide. Throughout this year, our teams have focused on profiling our top targets. Their profiling activity to date has resulted in the identification of more than 2,000 potential patients suspected to have HO or formally diagnosed to have HO. We are still early in the process of profiling identified physicians and our expanded sales organization is now on ground, focused on further penetrating these top-tier targets to identify more potential patients with acquired aspislamic obesity. Next slide. Our teams are in place and as we expanded our organization to support the upcoming launch. Our access team is engaging with payers to educate them on acquired HO and setmelanotide data through pre-approval information exchange presentations to support reimbursement once approved. Our territory managers are in the field engaging with the physician community to increase disease awareness. And once IMCIVREE is approved an acquired HO, they will educate on IMCIVREE's efficacy and safety data to support prescriptions. Our patient service team will engage with patients and their families to educate them on the disease to help them navigate insurance coverage once prescribed IMCIVREE and provide support to help guide treatment expectations and keep them on treatment long term. It's certainly an exciting time with a strong foundation in place with many learnings on the needs of patients and their providers, a clear strategy and experienced teams in place, we are ready to go, pending approval on December 20. With that, let me hand it over to Yann.

Thank you, Jennifer. I begin on Slide 16. We saw continued success with our international business during the third quarter as IMCIVREE is now available for BBS and/or POMC/LEPR deficiencies in more than 25 countries outside the United States. And the number of patients with BBS POMC/LEPR deficiencies or hypothalamic obesity on IMCIVREE continues to grow in the international region. During the third quarter, we reached an agreement with the French Economic Committee for Health Products on reimbursement pricing for IMCIVREE for BBS and POMC/LEPR. We are pleased with the result of the negotiations as the negotiated price is in line with rare disease pricing and also reflects the therapeutic benefit patients receive from with IMCIVREE. We remain very encouraged by our reimbursed early access programs for HO in France and Italy both granted based on our Phase II data, which is very uncommon. The growth of these programs illustrates the important unmet need and setmenotide's potential to provide these patients with significant therapeutic benefit. And in parallel, named patient sales continue to provide access to patients in several additional countries outside the EU4 and the U.K. For example, just recently, we achieved our first commercial patient in Argentina through a named patient sales. Our team continues to execute and remains committed to expanding market access for patients in addressing the unmet need to treat these rare MC4R pathway diseases throughout the international region, establishing foundational relationships with expert physicians and local authorities built on patients benefiting from IMCIVREE. This will help us to be successful as we prepare the next freedom chapter for the international region. Next slide. The next chapter is our international launches in hypothalamic obesity. The global unmet need for HO treatment is high as demonstrated by the growth in our early access programs in France and Italy. During the third quarter, we completed the EMA submission to expand the marketing authorization for IMCIVREE to include acquired HO. The EMA has a set calendar to review such submissions. And if that time frame holds and the review is positive, we anticipate a CHMP opinion and the EU marketing authorization in the second half of 2026. Establishing reimbursement for acquired HO in Europe country by country will take time. Germany will be the first country where we would launch. But as we did for POMC/LEPR and BBS, we will seek an exemption from the German Federal Joint Committee an exclusion list that prohibits reimbursement for lifestyle drugs, such as drugs designed to treat hair loss, smoking cessation and general obesity. This process is necessary in order to secure federal reimbursement. We are confident we can have the same success we had with POMC/LEPR and BBS as IMCIVREE was the first-ever precision medicine to be exempted and therefore, reimbursed. We believe the same approach should hold for acquired HO and that is demonstrating acquired HO clearly is a rare disease that is distinct from general obesity. So we are hopeful for a similar outcome. At the same time, we will engage in access and reimbursement negotiations in the United Kingdom, Italy, Spain, the Netherlands and other countries. Taken together in these countries, we estimate the prevalence of acquired HO in Europe to be approximately 10,000 patients, making Europe a meaningful market for us. Moving to Slide 18. Japan will also be a very important market for us with an estimated prevalence between 5,000 and 8,000 patients, which is 2 to 3x greater per capita than Europe and the United States. We have started to build out a strong local team with a focus on regulatory, quality, CMC, medical affairs, market access and marketing. We have now established a strong leadership team in Japan, and we have already 14 Rhythm employees in place. Notably, our General Manager, who is already well known to the team here from our time together at Sanofi Genzyme, previously led the highly successful launch of Dupixent in Japan. As David said, we anticipate top line data from the Phase III cohort of Japanese patients in the first quarter of 2026, which will be followed by submission of the Japanese NDA to the PMDA. Typically, regulatory review in Japan is approximately 9 months. These ex- U.S. time lines point to launches potentially during 2027. With that, I will turn the call over to Hunter.

Thank you, Yann. Before discussing the specifics of the quarter, let me reemphasize the message of financial strength delivered during our last quarterly call. As we raised approximately $189.2 million in net proceeds from a follow-on equity offering completed early in Q3, we ended the third quarter with $416.1 million in cash on hand. This cash in conjunction with projected revenue from anticipated global sales of IMCIVREE for currently approved indications and including HO pending FDA approval as well as planned R&D and SG&A spending provides us with at least 24 months of runway. Rhythm's balance sheet is as strong as it's ever been. Now looking at Slide 20 and the revenue dynamics during the quarter. Global revenue for the third quarter was $51.3 million, a sequential 6% increase from $48.5 million for the second quarter of 2025. The number of patients on reimbursed therapy increased by 10% globally during the quarter. $38.2 million or 74% of Q3 net revenue was generated in the United States and $13.1 million or 26% of total revenue was generated outside the United States. The U.S. delivered another solid quarter, buoyed by a high single-digit percentage increase in the number of reimbursed patients on therapy. Approximately $3.7 million of the quarter-over-quarter increase in revenue was driven by an increase in IMCIVREE dispensed to patients, a good indication of fundamental growth in demand. As we've seen in prior quarters, there was also an inventory effect Q2 into Q3 with increases in inventory at our specialty pharmacy driving $2.5 million of the sequential variance in quarterly sales. The quarter ended on a Tuesday, the day that our specialty pharmacy takes delivery of product, with the result that their inventory days on hand increased from just under 10 days at the end of Q2 to approximately 16 days at the end of Q3. Outside the U.S., quarter-over-quarter revenue decreased by $3.4 million. Patients on reimbursed therapy increased at a low double-digit percentage during the quarter, indicating continued solid fundamental growth in demand for IMCIVREE. In France, as Jan mentioned, we agreed to a final reimbursement for IMCIVRE for POMC/LEPR and BBS. Since 2022, we have been accruing revenue under the French early access programs and provisioning for this eventual agreement. Based on this agreement, we recorded a onetime $3.2 million charge during the quarter -- third quarter of 2025 to account for the difference between what has been accrued to date and what is owed. Of the $3.2 million, approximately $0.6 million was related to revenue booked in Q3 '25 and $1.5 million was related to year-to-date 2025, with the balance related to periods prior to 2025. Excluding this impact, international revenue was affected by variability in ordering patterns for named patient sales in certain distributor markets. On Slide 21 is the financial snapshot. In the year-over-year comparison to Q3 2024, the net product revenues increased $18 million or 54% and gross to net for U.S. sales was 84%, generally in line with gross to net percentages we've shown in previous quarters. Cost of goods sold this quarter was 10.7% of product revenue, which is mostly attributable to cost of materials and our royalty payment on setmelanotide to Ipsen. We generally expect cost of goods sold to be between 10% and 12% of net product revenue with variation due to how our inventory balances are changing and the corresponding capitalization of labor and overhead costs. R&D expenses were $46 million for Q3 compared to $37.9 million in the same quarter last year. Sequentially, R&D expenses increased $3.7 million or approximately 9% over Q2 2025. This increase was primarily due to chemistry, manufacturing and controls or CMC work related to improving the formulation of bivamelagon and development of an auto-injector for RM-718 as well as increased headcount and stock comp expense. Year-over-year increased spending was partially offset by a reduction in clinical trial costs. SG&A expenses were $52.4 million for Q3 2025 as compared to $35.4 million in Q2 last year. Sequentially, SG&A expenses increased by $6.5 million or approximately 14% compared to Q2 2025. Increased SG&A spend from Q2 to Q3 was due to increased headcount costs and marketing costs associated with the upcoming launch in acquired hypothalamic obesity. For the third quarter of 2025, the weighted average common shares outstanding were 66.3 million. The increase in Q3 was mostly due to the equity offering when we issued nearly 2.4 million shares as well as the exercise of previously issued stock options. Cash used in operations was approximately $27 million during the third quarter. Our GAAP EPS for the third quarter of 2025 was a net loss per basic and diluted share of $0.82, including $0.02 per share from accrued dividends on convertible preferred stock of $1.4 million. We ended the third quarter with approximately $416 million in cash, cash equivalents and short-term investments, which, again, we expect to be sufficient to fund planned operations for at least 24 months. Lastly for me, on Slide 22, there is further detail on our operating expenses for the third quarter and updated full year operating expense guidance. For the third quarter, operating expenses of $98.5 million include a total of $18.8 million in stock-based compensation. For fiscal year 2025, we are tightening our full year guidance and shifting the mix between R&D and SG&A expenses given the resources we have committed to be ready for the anticipated launch of IMCIVREE acquired HO later this quarter. We anticipate approximately $295 million to $315 million in non-GAAP operating expenses comprised of non-GAAP R&D expenses of $150 million to $165 million and non-GAAP SG&A expenses of $145 million to $150 million. With that, I'll turn the call back over to David.

Thank you, Hunter. And with that, we'll go to Q&A.

[Operator Instructions] We will take our first question, and the question comes from the line of Mike Ulz from Morgan Stanley.

Congratulations on all the progress. Maybe just one quick one on bVomeEalon. If you can share your latest thinking on the trial design for your Phase III HO study. And just curious if you received any initial feedback yet from the FDA there.

Yes. At this point, we've run many trials in this MC4R pathway area. Vivo will be -- the HO trial will be similar, and we'll obviously mimic what we did in the HO trial. So our expectation at this point is it will be a double-blind randomized controlled trial. We will have a discussion with the regulators around the duration of the double-blind period. Our expectation is that in some form, they will want a full year of data. This is a new chemical entity and MC. So again, whether we would provide that 6 months of double-blind plus an additional 6 enroll open label will be better the kinds of questions we'll bring forward to regulators. But in terms of primary endpoints and the like, again, we will be a percent BMI change, and we'll be enrolling children and adults in the trial. And then in terms of regulators, so we anticipate at this point, our expected Phase II, post-Phase II meeting with the FDA when we would get this feedback is likely to be in the first quarter next year.

The next question comes from the line of Phil Nadeau from TD Cowen.

On the progress. Our question is to dive into the PWS efficacy endpoints a bit further to understand what you need to see to advance IMCIVREE forward in PWS. So in terms of weight, you suggested something that suggests 5% weight loss at 1 year. Can you give us more of a sense of what that is? Is that 2.5% at 26 weeks? Or is there a different way to think about it? And then in terms of hyperphagia, a similar question. You said it's going to be hard to interpret, but nonetheless, hyperphagia is a major determinant of quality of life in Prader-Willi. So is there any level of hyperphagia change that would be proof of concept and warrant further development?

Yes. Yes. No, and I'll just pre saying. I know there's going to be a lot of questions on Prader-Willi. I'll do the best, but needless to say, I won't have a lot more to add to the color we provided previously. But your question on what constitutes success and how will we interpret it. We talked -- our goal is to get 10 to 20 patients on treatment for 6 months. We'll have some part of that cohort available by the end of the year. Obviously, a very small data set. We'll present patient-by-patient data the way we've done in the past, so you can all see exactly what we're looking at. It's not a mean number again, we highlighted that for the BIVA data. It's going to be very much looking patient by patient. And if patients seem to do well, what's our best understanding as to why they did well. And if another patient didn't do well or have the change, is there some other explanation for that. And you take all that into account. So it's going to be a judgment call, Phil, needless to say. And I don't think it will be -- well, let's put it this way. I mean, you can make these judgment calls in these small data sets, but that's how it will be done. It's not a magic number of we got halfway to the 5% at 6 months. I don't expect necessarily that, that's going to be the metric per se. These things don't tend to be linear, but there will be a level of confidence looking at the individual data points that the drug seems to be working and we run a longer -- a larger trial, we'll be able to get to the 5%. And then just one last thing on the HQCT. Just to remind everybody, our primary endpoint here is BMI percent change. We would not go into a Phase III trial without confidence that, as I just indicated, we could move that BMI. We wouldn't pursue a hyperphagia label only. I know a number of companies are out there, and I'm seeking that approval at this time. However, based on the mechanism of our drug, if we do see BMI percent change, almost by definition, given the biology, we will improve hyperphagia.

Your next question comes from the line of Derek Archila from Wells Fargo.

So first question, just can you discuss some of the drivers behind the changes to the ongoing variability trial for IMCIVREE? It looks like you extended it out to 52 weeks from 26 and what looks like the potential to explore adding sites to the trial? And then the second question, just briefly, can you discuss if you've had any FDA agreements or discussions around the indication statement for HO and whether it could or could not include hyperphagia?

Yes. I'll take the last one first. So on the HO, again, our regulatory interactions have been -- I'd characterize them as routine, which is favorable given a lot of the news certainly in the FDA, but it's been not exactly as we would expect. They come back with specific questions and we answer those. The labeling discussions tend to be late. So with regard to your specific question on indication, we have not entered into that specific dialogue as of this point. In terms of the updates that a number of you picked up on in clinicaltrials.gov for the grader-Willy Phase II study, that's really housekeeping. So there was 2 issues there we updated on. One is in any trial, rare disease trials, we set the 6 months as the endpoint, meaning that's the point at which we would look at the BMI and make this judgment, so to speak, are you seeing success or not. But allowing patients to continue if they feel like they want to beyond 6 months, we needed to update the trial to allow that to happen as opposed to leaving somebody and just saying, okay, we got to stop the drug now. And then the second was in terms of adding an additional site, again, that was just in case we needed, working with a single site, Dr. Miller site in Florida, as you know, she's extremely busy. And so that was just in case we couldn't -- as of this point, we haven't opened a second site. We're continuing to work with Dr. Miller and she's doing well there. So nothing to read through.

Your next question comes from the line of Whitney Ijem from CG.

This is Angela on for Whitney. Maybe switching gears a little bit, a question on the HO launch. Any update you can provide around conversations you're having with payers? Should we assume that most or all patients will be on the free drug program until payers start to finalize their policy updates in 3 to 6 months after approval? Or any color you could provide around the gross to net around launch?

Maybe just one comment before I turn it over to Jennifer. So the patients who have been in the trial will stay in the trial. So the clinical trial patients will stay on drug until they get access, but we will not have an early access program specifically. But beyond that, Jennifer, do you want to comment on?

Yes. So we feel very positive just based off of the feedback that we've received just through our discussions with payers as well as the market research that we've conducted, just gaining payer insights overall. I think from a process of reimbursement post approval, it's going to be a similar process just in general as we receive prescriptions. Even if there's not a specific policy in place by the time we receive the script, we still work through the process just in terms of going back to the payer to try to gain access, and we've been able to gain access even prior to that formal policy being in place. So I don't expect anything to be different. And I don't expect that we have to wait until the actual time of evaluation of this particular drug with that specific payer to actually be able to gain reimbursement and put that patient on commercial therapy.

The question comes from the line of Faisal Khurshid from Leerink Partners.

I wanted to ask about how investors and the Street should be thinking about the launch curve in hypothalamic obesity. I know you guys have put out this kind of -- these metrics of like 2,400 target physicians and 2,000 patients that you believe are kind of your top targets. How should we think about kind of prosecuting that opportunity and like what the shape of the launch curve could look like relative to like Bardet-Biedl or relative to other launches out there like the Prader-Willi launches?

Thanks for the question. I think overall, just in terms of AHO, we have such a solid ground just based off of what we have learned and put in place for the BBS launch, even very specifically, a lot of work just in terms of the payer landscape to have them understand the difference in terms of our patient population and our drug versus general obesity to have that strong foundation in terms of that understanding as we potentially expand to other indications that are rare that also target a similar pathway. We have the right team in place. We feel very confident holistically just in terms of the ACP targeting that we have and are really pleased with the progress. And as outlined -- we outlined that we had about 2,000 potential patients that were suspected or actually diagnosed at this point of time. I think with that said, the things that are similar just in terms of BBS and any rare disease is that without a therapy available, there really isn't that much incentive to get patients to a diagnosis, and there's not a lot of education to also help in terms of getting patients to that diagnosis. And that is very similar to what we have learned in the HO space. Although it's easy potentially to identify potential patients with the background that may have HO, those patients have not necessarily gotten to that specific diagnosis. So that's going to take a bit of time, especially as it takes time for these patients to get back to the endocrinologists to be able to see them, have that discussion, get that diagnosis and then post approval, have that discussion about potentially getting on to IMCIVREE. So we're -- we feel very confident just in terms of our ability to execute, but there are different factors that may impact the ramp in terms of launch.

And 2 things I'll just add in complement to what Jennifer just stated. First, the PWS situation is significantly different because many PWS patients are cared for in group homes and dealt with in very specific specialized centers with the result that the opportunity for them to be prescribed in a more bolus-like fashion is greater. So the -- what we -- our research has indicated that the HO patients are more distributed with community and local endocrinologists as opposed to in specialized centers. And secondly, conversely, versus -- as Jennifer stated, versus BBS with a higher diagnosis rate and the care in a single specialty accounting for much greater patient percentage of the patients, there is more opportunity there in the early days.

Your next question comes from the line of Corinne Johnson from Goldman Sachs.

This is Erik on for Corinne Johnson here. And the question we have is just to double-click a little more on the HO launch that we were just discussing here. How should we think about the process for and the cadence of reimbursement and the anticipated gross to net in HO, spec like relative to BBS. Can you just give us a little more color on that?

You want me to speak to gross to net to start. I think what we anticipate in terms of differences gross to net is -- it's a little hard to say. We've had around a 50-50 Medicare commercial mix for BBS. We don't know how different the HO population will be, but that is the primary driver of our gross to net because we don't rebate in any meaningful way. So it really is just a question of what's the Medicaid share. That, of course, assumes that we still do not have Medicare access. If we are able to get Medicare access, then that GTN mix will shift favorably. Jennifer, on the process, in terms of the flow here, getting that patient from an initial script to treatment?

Yes. So we're already engaging with payers just in terms of giving them that heads up just in terms of time lines and potential approval within HO. So they at least have that preliminary background in terms of expectations. Once we received an Rx, our teams work to be able to work through that reimbursement process and that particular payer may be more prioritized in terms of our payer-facing team in terms of follow-up to educate them that we did get approval and we did get a script to be able to try to get reimbursement for that patient. I think like the timing overall in terms of getting specific policies in place, there are specific timings that different payers have in terms of review of drugs. So that policy timing is a bit different and could be delayed depending on the timing of that particular payer and the review of our drug post approval. But similar to BBS, we didn't necessarily have a policy in place before we got reimbursement for that patient. So we're going to be working both of those through.

Yes. Maybe just to close on that, as Jennifer said, it's a huge advantage to this a follow-on indication. So BBS was basically our first time through and people are learning about the drug for the first time. Here, they know the drug and they got to learn an indication. As Jennifer said, that will take some time, particularly with the policies amazing thing that her team has done is policy or no policy, we can get these patients reimbursed.

Your next question comes from the line of Paul Mattis from Stifel.

This is Julian on for Paul. You talked in the past about how some patients in the PWS study may also be on background VCA. Just based on the mechanism, curious on how you see the potential for additive benefit with setmelanotide.

Yes. No, it's a good question. I mean we're interested in learning more there. As you highlighted, patients who are on VCA are allowed as long as they're stable and stable in the judgment of the treating position, in this case, Dr. Miller, stable on their VCA dose, they are allowed in the trial. Mechanistically, how does diazoxide work with hyperphagia, obviously, by definition, their approval has decreased, behaviors may be somewhat better. What circuits are they working on? I think the one thing we're confident of is we're not redundant. They're not working through setmelanotide, MC4R agonist and exactly however diazoxide working are not working through this MC4R pathway exactly. So there's certainly a possibility for them to be complementary. I think from a side effect profile, there's not overlapping toxicity. So they certainly can be used together with no concerns. So we'll see. Again, we're, like I said, open to learning here, and hopefully, this trial will give us some insight.

Your next question comes from the line of Seamus Fernandez from Guggenheim Securities.

This is Evan Wang on for Seamus Fernandez. Two questions from me. First, on Prader-Willi, just a follow-up on the trial amendment. Curious in terms of the extension out to 52 weeks and the degree of participation anticipated or observed thus far, have there been any dropouts as patients are entering that original 26-week conclusion? And then on HO, curious about the international launch preparations, particularly in Europe. Just wondering if you could comment on how you're preparing for another launch there given existing approvals in BBS and any kind of major dialogues with major reimbursement authorities?

Yes. So I'll go and then Yann let take the international one. So I'm not going to update exactly where we are in the patients in the trial and who's beyond that. That will all be coming shortly. Again, we're targeting -- it will definitely be in December. And as I said, the goal is to put out what data we have prior to the Christmas break. Yann, do you want to talk about the international launch?

Yes, sure. Thank you for the question. So as I said during my presentation, we expect to launch in Europe across various countries during 2027. I think we will follow almost the launch sequence we had for BBS, we have already started to engage with the payers. So the payers have known us for now many years and they know setmelanotide very well. And they also have a lot of experts that they can reach out to better understand the drug and the disease. So we are really confident with our launch preparation. And the last thing is maybe in terms of team. The HO patients population is, of course, larger than BBS. So we will add some staff to make sure that we can adequately cover all the HCPs necessary to make the most of this opportunity, but this will come later, and this will follow the launch sequence.

Yes. Thanks, Yann. And I just want to emphasize something Yann just said, which is a really important part of this international equation is these single payer systems, some many of them, they use local experts. And these are all people, as Yann said, we work closely with. Many of them are trial -- have been part of our trials. And so they're not only experts in the disease, they know the drug well, and they've been incredibly helpful in our prior discussions. And as Yann said, we anticipate them being very helpful in the upcoming HO discussions.

Your next question comes from the line of Dennis Ding from Jefferies.

This is George Ban on for Dennis Ding. We had one on the PWS. When you disclose the initial data in December potentially, should we also be expecting a go versus no-go decision in terms of moving into Phase III? Or is there a scenario where you would wait for a longer follow-up before making that decision?

Yes. No, fair question. Yes, definitely, that's a scenario. I mean, I think this is incomplete data, and we might be in a position to make a call depending on how strongly we feel the data signaling or we may indicate that, look, we want to continue to get the full data set, and then we'll come back to you with that final decision. So yes, all options are on the table.

And the final question comes from the line of Raghuram Selvaraju from H.C. Wainwright.

I just wanted to ask about the German observational study findings and how you expect that to potentially percolate into other indications beyond Bardet-Biedl syndrome? And what impact you anticipate this might have on prescribing decisions in those areas?

Yes. Thanks for picking up on that with the question. I think what we found most interesting about that, a, well, it's just interesting in general, right? I mean these livers improved to a remarkable degree in BBS. And as I highlighted in my comments, it didn't seem to tightly correlate with BMI change. And so it raised the possibility. We know there's MC4 receptors in different places. We know MC4R agonism interacts with the autonomic nervous system, the vagus iterates the liver. There are -- they're not MC4 receptors in the liver. There are MC1 receptors in the liver. So it just -- it's -- as I said, you get a drug approved, KOLs, others start making observations and you begin to learn a lot more. So I think there's a lot -- my point, again, of sharing that was that I think there's a lot more to be learned about this mechanism beyond simply the reduction in hyperphagia and associated increase in energy expenditure and associated BMI weight decrease. So that's it. Like I said, it was -- these are pretty remarkable results, and we thought it was worth highlighting.

We do have a question and the question comes from the line of Jon Wolleben from Citizens.

Just wondering -- and sorry if I missed this earlier, of the 2,000 potential patients, have you been able to identify any more information on them on who may or may not be good candidates for one reason or the other? Or is it simply that you have kind of an identifier through the claims analysis you've done?

So the 2,000 patients are ones that through the discussions of our field organization and just discussions with the physicians, they have outlined that either they have X number of diagnosed HO patients or they have Y number of patients that meet that definition and criteria that they wanted to further evaluate as that patient came through in terms of visiting to get them to an actual diagnosis. So that process is ongoing, and we're very happy just overall in terms of understanding that there is this addressable opportunity in terms of getting patients to a quicker diagnosis. And there's also an interest from the physician perspective with a lot of aha moments to get patients to this particular diagnosis. So that process is ongoing.

This concludes today's question-and-answer session. I will now hand back to David Meeker for closing remarks.

Okay. Well, thank you again for tuning in this morning. As you've heard and hopefully understood, we're really excited about where we are. We made great progress and set ourselves up for some interesting and pretty important milestones in the fourth quarter and a lot that's going to continue to enroll in 2026. So we look forward to the next update. Thanks all.