Earnings call transcript: Rhythm Pharmaceuticals misses Q1 2025 EPS estimates
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Overview
The earnings call shows mixed signals. Financial performance is solid with a 45% revenue increase, but there's no revenue guidance, and a net loss per share is reported. Product development is progressing with new trials and international expansion. However, clinical trial risks and management's vague responses in the Q&A raise concerns. The absence of a share repurchase program is neutral, while cash on hand is positive. The market cap suggests moderate reaction, leading to a neutral sentiment prediction.
Key Financial Performance
Revenue from global sales of Omsivri $37,700,000, an increase of $11,700,000 or 45% year-over-year. The increase was driven by a 14% increase in the number of patients on reimbursed therapy globally.
Inventory swing impact on revenue $8,300,000 inventory swing at the specialty pharmacy, which affected revenue recognition. The specialty pharmacy ordered $4,200,000 less than it dispensed to patients, reducing inventory days on hand to less than nine.
Gross to net for US sales 84.2%, consistent with previous quarters.
R&D expenses $37,000,000, down from $128,700,000 in Q1 2024, primarily due to the absence of costs associated with the acquisition of Bivomelagon.
SG&A expenses $39,100,000, compared to $34,400,000 in Q1 2024, reflecting a modest increase of less than 3% sequentially.
Cash used in operations Approximately $40,400,000, compared to $19,000,000 in Q4 2024, due to seasonal increases from annual bonuses and a $6,300,000 cash consideration for reacquiring rights in China.
Cash on hand $314,500,000, sufficient to cover operations into 2027.
GAAP EPS Net loss per share of $0.81, which includes 8¢ per share for the Rarestone repayment and 2¢ per share from accrued dividends on convertible preferred stock.
Weighted average common shares outstanding 63,100,000, up from 60,100,000 in Q1 2024, reflecting shares sold under the ATM program.
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Operating Highlights
New Product Launch: Rhythm Pharmaceuticals is preparing for the launch of INCIVRI for acquired hypothalamic obesity (HO), with market research indicating a significant need for therapy in this area.
Phase III Trial Results: The Phase III trial for cetmelanotide in acquired hypothalamic obesity showed a 16.5% reduction in BMI, indicating strong efficacy.
Emsivri Demand: Demand for Emsivri, the treatment for Bardet-Biedl Syndrome (BBS), remains strong with a 14% increase in patients on reimbursed therapy.
Market Expansion: Rhythm is executing a country-by-country launch strategy for BBS internationally, with significant contributions to revenue from France and Italy.
Medicaid Coverage Expansion: Rhythm has secured ENSIVRI specific policies in three additional states, now covering over 95% of Medicaid lives.
Operational Efficiency: The company reported a decrease in R&D expenses to $37 million in Q1 2025, down from $128.7 million in Q1 2024, indicating improved operational efficiency.
Inventory Management: An inventory swing of $8.3 million affected revenue, but the company expects more stable inventory management moving forward.
Strategic Shift: Rhythm is focusing on endocrinologists for the HO market, which is expected to streamline patient identification and treatment.
Cash Runway: The company has a projected cash runway extending into 2027, ensuring financial stability for ongoing operations.
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Risk or Challenges
Regulatory Risks: The company has an upcoming in-person Type D meeting with the FDA to clarify elements of their filing, indicating potential uncertainties in the regulatory process.
Supply Chain Challenges: There was a significant inventory swing affecting revenue, with a $8.3 million inventory increase in Q4 followed by a decrease in Q1, highlighting potential supply chain management issues.
Competitive Pressures: The company faces competition in the rare disease market, particularly in the hypothalamic obesity space, which may impact market share and pricing strategies.
Economic Factors: The high price point of $375,000 per year for the drug may limit access and affect the launch trajectory, as prior authorization processes could slow down patient access.
Patient Compliance: There are concerns about patient compliance, with a noted decrease in compliance rates in Q1 compared to Q4, which could impact treatment outcomes and revenue.
Market Access: The company is working to secure Medicaid access, with less than 5% of states lacking positive coverage for their drug, indicating ongoing challenges in market access.
Clinical Trial Risks: The dropout rate in clinical trials was noted to be around 10%, with various reasons for discontinuation, including patient management challenges and adverse reactions.
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Guidance & Outlook
FDA Filing: Rhythm Pharmaceuticals is on track for a Q3 filing for cetmelanotide, with an in-person Type D meeting scheduled with the FDA.
Bivomelagon Phase II Readout: The company anticipates a readout for Bivomelagon Phase II in Q3.
Cash Runway: Rhythm Pharmaceuticals remains well capitalized with a projected cash runway extending into 2027.
International Expansion: The international team is executing a country-by-country launch strategy for BBS, with revenue contributions from France and Italy.
Patient Engagement: The company is focused on engaging endocrinologists, who manage a significant portion of hypothalamic obesity patients.
Revenue Expectations: Rhythm Pharmaceuticals reported Q1 2025 revenue of $37.7 million from global sales of Omsivri, with a 14% increase in patients on reimbursed therapy.
Operational Expenses Guidance: The company anticipates non-GAAP operational expenses of approximately $285 million to $315 million for the year.
R&D Expenses: R&D expenses for Q1 2025 were $37 million, down from $128.7 million in Q1 2024.
Gross to Net Sales: Gross to net for US sales was 84.2%, consistent with previous quarters.
Market Access: Rhythm has secured Medicaid coverage for Emsivri in states accounting for over 95% of covered lives.
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Shareholder Return Plan
Share Repurchase Program: None
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Key Q&A
Q:Can you talk a little bit more about those non responders you highlighted? It sounded like several of them were having good responses but dropped out. So what were the reasons for those discontinuations?
A:A variety of reasons, including patients withdrawing due to inability to keep up with the trial, reactions like GI issues, and one patient with a preexisting seizure disorder who died during the trial.
Q:Can you talk just a minute about real world persistence and understanding of expectations for adverse events and how that understanding keeps patients on drugs or not? What’s the real world experience, and how does that translate from the clinical data?
A:About 30% of patients discontinue treatment, but in the HO world, the discontinuation rate is expected to be lower due to high compliance and the relief patients feel from the treatment.
Q:For Part C for RM718, I know you highlighted enrollment will complete by the end of the year, but we just wanted to confirm whether you actually plan to share any efficacy data for patients reaching sixteen weeks before the end of the year.
A:We hope to have enough patients treated for a long enough period of time to share data by the end of the year.
Q:Can you just talk to us about the importance of these continual data updates that you’re expecting to make now at conferences going forward?
A:Every patient is incremental and news, particularly in rare diseases. The data updates help address important questions and show the drug's efficacy across different patient populations.
Q:Are you expecting to see any seasonality for the remaining quarters of the year?
A:Q1 is typically impacted by insurance changes, but beyond that, we don’t see significant seasonality.
Q:Can you discuss what elements of the filing need to be ironed out with the FDA at this point? Any uncertainties or is the meeting more a formality?
A:The meeting is to clarify what we’re presenting in the filing and ensure alignment with the FDA.
Q:Could you quantify the impact of insurance reauthorizations and the bridging of patients on for drug in the quarter?
A:The impact was about a $700,000 effect.
Q:Can you remind us what the payer mix is for BBS between Medicare and Medicaid and private pay?
A:Commercial and Medicaid account for about 80%, with a roughly equal split between the two.
Q:Can you comment on any qualitative differences that you expect to see and implement in the context of the commercial rollout in hypothalamic obesity relative to the other indications?
A:The trajectory is based on how quickly you can identify patients, and there is a high unmet need in the HO population.
Q:Can you describe the patient mix that you’re seeing among the different pituitary deficiency disorders included, and any learnings on reliably diagnosing congenital HO?
A:We’re too early to provide meaningful insights on the patient mix among different disorders.
Q:Review of Unclear Management Responses
A:Management appeared to avoid giving a direct answer regarding the specific elements of the FDA filing that need to be ironed out, stating it was a meeting to clarify presentation details without providing further specifics.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
CEO President
Chairman CEO
China
FDA
Masabro Executive
Relations Hi
Speaker
ability
bar
cetmelanotide
comment
compliance
consensus
context
course
criterion
difference
endocrinologist
hope
hunger
importance
injury
insurance
kind
launch trajectory
lot
lumpiness
mean
meeting
order
patient population
payer mix
percent patient
phase
piece
placebo patient
prescribers
profile
safety
seasonality
seizure
sense
threshold
world
RYTM Transcript
Rhythm Pharmaceuticals, Inc. (RYTM) Q3 2025 Earnings Call Transcript
Positive11-4
The company shows strong financial performance with a 54% YoY revenue increase and sustainable growth plans for BBS sales. The upcoming launch of IMCIVREE in hypothalamic obesity and positive payer feedback suggest potential market expansion. However, management's lack of clarity on certain aspects and the absence of a go/no-go decision for the PWS Phase III trial may cause some uncertainty. Considering the market cap, the overall sentiment is positive, predicting a 2% to 8% stock price increase over the next two weeks.
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Neutral9-9
Rhythm Pharmaceuticals, Inc. (RYTM) Q2 2025 Earnings Call Transcript
Unknown8-5
The earnings call summary indicates mixed results. The company has strong financial metrics, with a significant cash runway and international expansion. However, the Q&A section reveals uncertainties in clinical trials and a lack of clear guidance, which could dampen investor sentiment. The equity offering and increased expenses may also weigh on the stock. Overall, the market cap suggests moderate volatility, leading to a neutral prediction for the stock price movement over the next two weeks.
Rhythm Pharmaceuticals, Inc. (NASDAQ:RYTM) Q1 2025 Earnings Call Transcript
Unknown5-9
The earnings call presents a mixed sentiment. The company has positive developments, such as the completion of Phase 2 study enrollment and international expansion, but lacks specific revenue guidance, which is a concern. The Q&A reveals some uncertainties, like the FDA filing process and unclear patient mix insights. However, there are no significant safety issues, and the company is exploring new market opportunities, like China. Considering the market cap, these factors suggest a neutral stock price movement over the next two weeks.
RYTM Slides
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