Rhythm Pharmaceuticals Q1 2024 Earnings Call Transcript

Quartr
Provided by Quartr
May 7, 2024

There are 13 speakers on the call.

Operator

Good day and thank you for standing by. Welcome to the Rhythm Pharmaceuticals Q1 2024 Earnings Conference Call. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, David Connolly, Executive Director of Investor Relations and Corporate Communications. Please go ahead.

Speaker 1

Thank you, Stephen. 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 on the Investors page of our website, ir.rhythmtx.com. This morning, we issued our press release that provides our Q1 2024 financial results and business update, and that is available on our website. As listed on Slide 2 is our agenda.

Speaker 1

Here with me today in Boston are David Meeker, our Chairman, Chief Executive Officer and President Jennifer Li, Executive Vice President, Head of North America Hunter Smith, our Chief Financial Officer and Jan Maserough, Executive Vice President, Head of International is on the line joining us from Europe. And 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 only 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.

Speaker 1

With that, I'll turn the call over to David Meeker, who will begin on Slide 5.

Speaker 2

Good morning and thank you for joining this morning. So we're pleased to report another solid quarter as we build out the opportunity in rare MC4R pathway diseases with a larger vision of becoming a leading company in rare neuroendocrine diseases. Now I have 2 slides today and followed by some additional commentary. As listed on Slide 5, Rhythm's value drivers remain unchanged. Near term, it is about BBS commercial execution and making Insuvary the standard of care for those patients suffering from early onset obesity and hyperphagia in our approved indication.

Speaker 2

HO offers a significant expansion opportunity and our MC1R sparing next generation programs offer the potential for much improved therapeutic options for both patients and both provide IP protection beyond 2,040. Recent highlights include the recently completed convertible preferred financing, which extends our runway well into 2026 and fully funds our investment in the LG Chem molecule. Hunter will speak to that in more detail. 2nd, on Slide 6, our Phase 2 HO data was published in Lancet Diabetes and Endocrinology, reminding the world again why we are excited about the difference we can make in this disease. Mean BMI decreased by 14.5% at 16 weeks and 25.5% at 1 year for patients who had 12 months of data.

Speaker 2

The unmet need in hypothermic obesity is significant with an estimated 5000 to 10000 patients in just the U. S. And there are no approved therapies. Our clinical programs continue on track with 120 patient pivotal cohort of our Phase 3 HO trial fully enrolled and Japan set to enroll its 1st patients. We over enrolled the trial with a total of 131 patients excluding the 12 patients expected to be enrolled in Japan and the total number of dropouts remain remarkably low.

Speaker 2

And all that speaks to the commitment and enthusiasm of both patient community and the investigators. The first patients enrolled in the Phase 3 study will be finishing the blinded portion of that trial in the Q2 and moving into the open label extension study. The Phase 1 study of RM718, our next generation MC1 sparing weekly injectable is progressing in normal healthy volunteers with obesity and we look forward to dosing the 1st clinical HO patients in Part C of this Phase 1 study in quarter 3. We also expect to dose the first patients in the Phase 2 HO study with a daily oral MC1R sparing small molecule in quarter 3 of this year. Each of those programs positions us for an exciting set of top line readouts in the first half of twenty twenty five.

Speaker 2

Our commercial teams had another solid quarter with a slow and steady build of the BBS opportunity. U. S. Script volume remained steady with an approximately 100 new scripts written and 70 new patients approved for reimbursement. As Jennifer will speak to, we continue to find new patients, engage new physicians and get strong feedback from the community with regard to how Incyrea is changing their lives.

Speaker 2

Internationally, we are moving to a really exciting time as new countries begin to come online and we'll begin to contribute in the second half of this year. Most encouragingly, as we expand our commercial presence and build out our clinical trial network, we continue to have strong support from leading thought leaders in Europe who are seeing the benefit of cephalanotide in their patients. Jan will provide more color. Last quarter, we spoke to 2 challenges, a change in one state OneState Medicaid plan and patient discontinuations where we have continued to get some questions. I want to reinforce what we communicated on that call.

Speaker 2

With regard to the one state Medicaid plan, we increased the stringency of their approval criteria that state continues to have a policy in place and continues to cover patients. We have been clear that there is no expectation that the 30 patients converted to our bridge program will return to reimburse therapy anytime in the near term. We have removed them from our internal models and suggest you do the same. Importantly, as noted, this experience was limited to a single state. There has been no read through to any other state nor do we expect to have any read through.

Speaker 2

While this was disappointing, we are more than compensating and continue to make good progress in the other 49 states plus Puerto Rico. 2nd, the increase in the number of discontinuations

Operator

we

Speaker 2

have seen recently is in line with our expectations, given that the much larger number of patients, both in the U. S. And internationally, who are now on treatment for a prolonged period of time. We expect the rate of discontinuations to level out in the 20% to 30% range long term as we have highlighted previously. Although the focus will increasingly shift to the revenue number as this opportunity matures, we thought it would be useful to provide a one time deeper dive into some of the reasons why BBS patients discontinued therapy.

Speaker 2

The short summary is that there is no major driver and the majority remain related to patient specific issues. 1st, age is an issue with a discontinuation rate being highest in the adolescents, lowest in the pediatric patients under the age of 12 and in the middle for adults. The adolescent age group can be challenging in general, but particularly when it comes to a chronic daily injectable therapy. Overall, the specific reasons for discontinuation remain relatively unchanged. The most common and consistent are discontinuation is due to hyperpigmentation, which represent about 5% of patients who have initiated therapy and this has crept up a bit as we penetrate more deeply in populations where this is more of a concern such as the Hispanic population in the U.

Speaker 2

S. Approximately 4% of patients have stopped therapy due to a perceived lack of efficacy, which also represents an opportunity as a number of these patients have stopped after only a few weeks on treatment and likely before they have experienced the full effect of the drug. This is an area where expectation setting and education is incredibly important. About 2% of patients stopped because of nausea and vomiting and another 2% stopped secondary to overall life challenges where the burden of a daily injectable becomes too much. There's a longer list of reasons for discontinuing that we have previously grouped together as other, each of which occurs with a frequency less than 1%.

Speaker 2

These reasons include allergic reactions, severe headache, chest pain, back pain, leg numbness, fatigue and an increased frequency of erections among others. The point is that the challenges facing BBS patients are complicated. Those who stop therapy do so for a variety of reasons, some related to the drug, many not related to the drug. Not surprisingly, there are items on this list we cannot do much about, but other areas where we can do something and those are the areas we are investing. These challenges like the payer challenges from last quarter are normal parts of the ups and downs of building out a novel therapy for a complex rare disease.

Speaker 2

Most importantly, the fundamentals of this business continue to strain. Patient identification remains strong and growing number of physicians are writing scripts. Reimbursement continues to be positive with good news on the reauthorization front in the U. S. And we continue to receive positive patient feedback.

Speaker 2

On the clinical front, we look forward to filing our pediatric age 2 to 6 supplemental NDA with the FDA in the Q2 and potentially receiving EMEA approval in quarter 4 of this year. Part 2 of the DAYBREAK study will read out in quarter 3 and we continue to make good progress with our Phase 3 M and A trial enrollment. With that, I'll turn the call over to Jennifer.

Speaker 3

Thank you, David. The consistent steady demand for IMCIVRI we've seen in the recent quarters has continued the Q1 of this year and we are making ongoing progress and positive reimbursement decisions and adding breast and death to our prescriber base. Beginning on Slide 8, through all of our education efforts supported by our cross functional teams, we continue to identify HCPs with already diagnosed BBS patients as well as help to facilitate an earlier diagnosis for additional patients. This provides us the opportunity to educate HCPs about the benefits of ensivre as the first and only precision medicine to target the impairment in the MC4 pathway, the root cause of hyperphagia and early onset obesity in BBS patients. During the quarter, we received approximately 100 new prescriptions for Amcifery to treat patients with BBS here in the United States.

Speaker 3

In addition to gaining approximately 70 approvals for reimbursement. These top level metrics reinforce the confidence we have in the VBS opportunity over the long term as well as our team's ability to execute to pull through the opportunity. On Slide 9, we're pleased to report continued consistent growth with prescribers. We now have more than 425 prescribers for VBS launched to date. The breakdown by specialty remains consistent.

Speaker 3

Adult and pediatric endocrinologists account for 45% of prescribers launch to date, consistent with launch date metrics reported in the last few quarters. More physicians are seeing the potential benefit of MYCITRIA and prescribing for the first time. Among these physicians, we are also seeing consistency with new to Rhythm prescribers or physicians our territory managers had not called on prior to the prescription being received. We are pleased to see this source of growth continue as we find new prescribers through our non personal promotion efforts to supplement our field team efforts. In addition, more of the physicians are becoming repeat prescribers of emceivri, writing new prescriptions for their second and subsequent patients with BBS.

Speaker 3

Launched to date, more than 30% of prescribing physicians have written 2 or more ANSIVARI prescriptions for BBS. We hear stories of patients and the benefits they receive from the weight loss such as an increased level of confidence and ability to participate more in various physical activities. We also hear about the improvements in their ability to focus on other areas in their lives, including developing relationships and friendships, now that the preoccupation with food has been listed. As a team, we are inspired by these stories from patients, families and their HCP. Next slide.

Speaker 3

Overall, we remain quite pleased with what we have been able to achieve with access and reimbursement for Emcivri. The payer mix for BBS remains consistent with what we reported last quarter with approximately 90% of prescriptions since launch falling under a commercial or Medicaid plan. We continue to see incremental improvements by securing an emcivary specific policy with additional state Medicaid programs. Overall, we have either a positive Medicaid reimbursement policy in place or we have gained reimbursement even without an industry specific policy in the vast majority of states, representing more than 85 percent of Medicaid covered lives. With reauthorizations, we continue to see strong success.

Speaker 3

As of the end of the quarter, we have received more than 140 positive reauthorization decisions for patients to continue therapy. During the Q1, we did see 11 denials for reauthorization before these have already been approved through appeal and we are working through the remainder to maintain coverage for patients. Our bridge program is in place to ensure patients maintain therapy at times when they may have lost coverage for reimbursement. Patients may be on bridge because they have either lost insurance coverage, had a change in insurance coverage or they were engaged in the appeals process for reauthorization for therapy. As often happens in Q1, patients may experience changes in insurance providers that impact reimbursement at the start of the new calendar year.

Speaker 3

In Q1, we saw an increase in the number of patients on emcifery entering our Bridge program due to changes in insurance provider. Such changes are similar to any new prescription that comes in as our teams work through the authorization process to regain commercial coverage for these patients. Some of these patients have already secured new coverage and exited Bridge and we are working with the remainder to regain reimbursement. We are very happy with our success in converting the vast majority of BRIDGE patients back as commercial patients. Overall, as we come up on 2 years since approval of Emsivri for BBS in June, we are quite pleased with our progress to date and remain fully confident that we will continue to see steady growth.

Speaker 3

We have ongoing focused efforts to drive patient identification and increase both the breadth and depth of our prescribing physicians. With that, let me hand it over to Jan.

Speaker 4

Thank you, Jennifer. I will start on Slide 12. In the international region, we are seeing steady revenue growth as we continue to advance country by country with IMSI RE, which is now available for POMC, LIPA and DBS in 14 countries, including the United States and Canada. We began laying the foundation with biologic POMC and Lipa and now we are advancing into BBS in close collaboration with the key centers of excellence and experts in the region. In Spain, where we completed pricing negotiation earlier this year, we are seeing the first patients come on commercial therapy as we navigate the access state by state.

Speaker 4

In Italy, we anticipate that the first reimbursed patients will come on therapy in coming weeks. In Turkey, which we have not talked about much, IMCIR is available through named patient cells and we are seeing patients come online there too. This is a typical approach for rare disease drug in Turkey and we have a very experienced team on the ground where we are making significant progresses. Launches in this country built steadily over time and we are pleased with our current pace. We will begin to see an increasing contribution to our net sales from these new launch countries in 2025.

Speaker 4

And we look forward to completing pricing negotiation in Belgium, in the Netherlands and in the United Kingdom, launching in those countries later this year. Next slide. In France and Germany, from where we are generating more than 50% of the revenues for the international region, we are expanding the field teams to meet operational needs that come with increased demand and the decentralization of the care. In France, we now have a number of patients with hypothermic obesity on commercial drug through the pre EMEA approval paid early access program. As we experienced with POMCY and Lipa when we first gained early access in 2022 and then with BBS, we know these programs start slow and build gradually.

Speaker 4

Now we are seeing that steady gradual build with hypothalamic obesity, which formerly got underway late last year. And for POMCILIPA and BBS, we anticipate completing pricing negotiation by the end of this year. In Germany, our launch is progressing well as expected. Our team remains focused on engaging with physicians, caring for patients and with the many centers where they are treated. And the 1st BBS treatment guidelines were published very recently in a major German medical journal.

Speaker 4

17 clinicians from 13 treatment centers did collaborate on this effort led by the University Hospital from Essen. These guidelines discuss in detail diagnosis, patient management and treatment with septalenatide. We are expanding the number of treatment centers and large hospitals we are engaging with. Now that we are almost 1 year into the launch, we have received prescription for 15 treatment centers, which are all within large and very well structured and resourced university hospitals. In addition, our German patient support program, RISM at Home, is performing very well too.

Speaker 4

We provide tailored support for each patient and their caregivers. And since December last year, pre filled syringes have been available for both the BBS and pomcilipe patients. And now I will turn the call over to Hunter.

Speaker 5

Thank you, Jan. Turning to Slide 15, as announced last month, Rhythm raised $150,000,000 in gross cash proceeds through the issuance of convertible preferred shares. We are very pleased by the strong show of support from Perceptive Advisors and their discovery fund as well as by the support of an additional well known life sciences investor who was and continues to be a top Rhythm shareholder. The preferred shares can be convertible into common stock at a price of $48 per share, which represented a 19% premium to the 10 day average trailing volume weighted price at the time of issuance. The preferred shares are perpetual, but Rhythm can require conversion if the price of our common stock exceeds 2 50% of the implied conversion price of $48 for 20 trading days in the 30 trading day period and can redeem the preferred shares after the 5th anniversary of the closing date.

Speaker 5

In addition to the conversion features, Rhythm is also obligated to pay a 6% coupon in cash or in kind, but that coupon does not begin accruing until the 2nd anniversary of the closing date. The result of this financing is that we now have sufficient cash to fund all planned activities well into 2026 potentially beyond multiple value creating milestones, including the top line data readout from our Phase 3 trial in hypothalamic obesity currently planned for the first half of twenty twenty five. Please turn to Slide 16 for a snapshot of Q1 P and L. We recorded $26,000,000 in net product revenue in the first quarter versus $11,500,000 during the same quarter last year. Sequentially quarter over quarter, we saw an increase of $1,800,000 or 7% in net product revenue driven primarily by continued growth in the number of reimbursed patients on emcivri therapy in both our international region and in the U.

Speaker 5

S. Gross to net sales decreased slightly quarter over quarter. Gross to net for U. S. Sales decreased slightly quarter over quarter from 84% to 84% from 85% in 4th quarter.

Speaker 5

Cost of sales during the Q1 was $2,800,000 or approximately 10.8 percent of net product revenue, representing a 2.5% decrease as compared to the Q4 of 2023. The primary driver of COGS was the 5% royalty to Ipsen under our original licensing agreement for cetmelanotide as well as product costs. The latter component was flat in dollar terms quarter over quarter, resulting in the improved percentage margin on higher overall revenue. R and D expenses were 128 $700,000 for the Q1 of 2024 as compared to $37,900,000 during Q1 2023. This increase was primarily due to the consideration for our in licensing of LB54640, the impact of which I will review on the next slide.

Speaker 5

SG and A expenses were $34,400,000 for the Q1 of 2024 versus $24,600,000 for the Q1 of 2023 and a 6.1% increase on a sequential quarterly basis. For the Q1, weighted average common shares were 60,100,000, an increase of approximately 900,000 shares versus December 31. Included in this amount was approximately 432,000 shares issued to LG Chem as partial consideration for the in licensing of LP54640. Quarterly net loss per share was $2.35 versus $0.92 in Q1 2023. Now on to Slide 17.

Speaker 5

Rhythm reported $201,000,000 of cash and cash equivalents as of March 31, 2024. This does not include any of the $150,000,000 in proceeds from the convertible preferred stock that we issued in April. On a pro form a basis, cash and cash equivalents would have been approximately $350,000,000 On the net revenue for this quarter of $26,000,000 74 percent of those revenues were generated in the United States. U. S.

Speaker 5

Revenue of $19,400,000 represented growth of 1,100,000 percent versus Q4. The proportion of revenue generated by our international region increased from 24% to 26% quarter over quarter. This increase primarily reflects the ongoing contribution from the BDS launch in Germany as well as our 2 early access programs in France, including the AP1 program for hypothalamic obesity. The portfolio of markets contributing revenue also continued to grow. Revenue from these other countries is small today, but we expect it will grow into a significant contribution over time.

Speaker 5

1st quarter operating expenses included total shock based compensation of $7,800,000 for the quarter as compared to $6,400,000 for Q1 2023. To review the, LP54,640 impact on the quarter, just to remind as a reminder, we committed $100,000,000 of fixed consideration to LG Chem for the global rights. In January, we paid $40,000,000 in cash and issued LGC more than 430,000 shares of Rhythm stock valued at 18 point $7,000,000 at the time of closing. We also committed to pay $40,000,000 18 months from January. Q1's R and D expenses included $92,400,000 comprised of the cash payment, the equity issuance and the present value of the last payment of $40,000,000 The present value adjustment of $6,300,000 to that payment relates solely to a modeling of time value as required by U.

Speaker 5

S. GAAP and will be recognized as non cash interest expense over the 18 month period. For those of you modeling at home, that means you can expect $1,000,000 of non cash expense per quarter between Q2 'twenty four and Q3 'twenty five related to this accretion. We are reiterating our OpEx guidance of approximately dollars to $270,000,000 in non GAAP OpEx comprised of SG and A, non GAAP operating expense of $105,000,000 to 110,000,000 dollars and R and D non GAAP operating expense of $145,000,000 to $160,000,000 This includes $10,000,000 to $15,000,000 of development costs related to LB54640. With that, I'll turn the call back over to David.

Speaker 2

Thank you, Hunter. So if you look back over the 16 year history of Rhythm, I think it's fair to say we've never been better positioned. In our approved indication, Incybri is establishing itself as a standard of care and we have all the necessary elements required to develop a sustainable, profitable rare disease business. We are executing on the biggest opportunity, which is an HO with all signs suggesting our original excitement was justified. And we are well funded to do what we need to do to get to those value

Operator

first question comes from the line of Derek Archila of Wells Fargo. Your line is now open.

Speaker 6

Hey, good morning and thanks for taking the questions. Just 2 from us. So I guess through some of our KOL checks, we've heard some emerging clusters of BARDA beetle patients treated in the U. S. With Native American and Hispanic kind of heritage.

Speaker 6

So just wanted to kind of understand if that's accurate and if you could kind of shed some light on those clusters. And then secondly, just I wanted to understand the gating factors for 54640 trial and getting it up and running. And I guess how many of the experience sites from your Incybri experience will be incorporated there? Thanks.

Speaker 2

Yes. Jeffrey, do you want to take the out? Sure.

Speaker 3

To your first question, just regarding clusters, I think similar to other rare diseases, there can be sort of pockets of patient populations just based off of how the different folks start to populate and the genetics start to have potentially a different frequency impact, based off of their population style. So we have seen in certain areas, the Native American as well as Hispanic populations having a higher VBS prevalence in certain areas.

Speaker 2

And on the HO side, so we're still adding sites there. I think we anticipate having between 10 to 12 sites to run that HO small molecule trial. The vast majority of these are actually new sites. We have a couple of those centers will be centers that were part of our original trial, but we're running two trials at the same time essentially with our weekly injectable. So we're looking for sites for that for the Part C, where it will enroll HO patients and then of course for the small molecule.

Speaker 2

So but the small molecule itself will have about 12 sites, the vast majority of which are new to the program.

Speaker 6

Got it. And just one follow-up, if I may. Just I want to make sure I heard you right in terms of the cadence of the readout. So obviously, Phase 3 HO in first half twenty twenty five, but I believe you guys said that 718 data as well as the oral data could also be first half twenty twenty five for those HO patients or the HO cohort at least for 718?

Speaker 2

Exactly. That's the expectation. And once we get these trials up and running as always sometimes the biggest variable is the initiation, but so far we look good and that's my expectation. We will read those out in the first half.

Speaker 6

Got it. Thanks so much.

Operator

Thank you. One moment for our next question. The next question comes from the line of Jeff Hung of Morgan Stanley. Please go ahead.

Speaker 7

Thanks for taking my questions. Last quarter, you indicated 30 patients came off in SIVRI because of the one state. Any updates on how many of those patients have had consults for proper documentation and how many are back on commercial drug? And then

Speaker 8

I have a follow-up.

Speaker 2

Yes. No, what we've tried to emphasize there is, so again, these patients are still going through that evaluation. What we've encouraged people to do is to take those 30 patients out. I do think we'll get some back. They are still going through, but we're not going to update sort of patient by patient in terms of that overall process.

Speaker 2

It's been quite laborious to be honest with you. I mean, it's getting these additional consults is not easy. The stringency of what's required is high, which is why, like I said in my comments, I don't expect us to get all 30 and maybe a significant number of those may not be able to reach the thresholds that or requirements that this state has put in place specifically. So, that state is covering, it's covered patients, it's covered patients since we took, these 30 patients off.

Speaker 7

Okay, thanks. And then you guys talked about the bridge program and then how some of the patients exited that program in 1Q. Typically, how many patients enter the bridge program in a given quarter? And then what is the average time that they remain in that program? Thank you.

Speaker 2

I don't

Speaker 1

know if I'll hurry up.

Speaker 3

So So I would say that in terms of the bridge program, that number is variable, also just based off of the circumstances of each of these different patients. And as I outlined, it could be they change job, they change insurance and hence we have to almost go through the authorization process from the start with this new payer. So that number varies over time. And I would say that in terms of time to transition them off of Bridge, that also is variable based off of the reason. But I would say that it's consistent and similar to the time in terms of even getting the authorization or the initial prior authorization in place for patients.

Speaker 2

Yes. And I think to build on that, Jeff, I think what Jennifer said is a good way of thinking about it. If it takes on average 4 to 6 weeks for these patients to get through their initial authorization, that'd be a good way to think about it. And as she highlighted, the BRIDGE program and this has been our historical experience, some of the other rare diseases we've worked on, tends to be very successful, over 90% of the patients, if you exclude the 30 patients who came out of that one state and went on to the BRIDGE program. But everybody else with that exception, about 90% plus of those patients have been able to convert back to or find insurance and coverage in some way.

Speaker 2

So it's been a very successful program.

Operator

Great. Thank you. Thank you. One moment for our next question. The next question comes from the line of Dave Gunholl of Stifel.

Operator

Your line is now open.

Speaker 8

Hey, good morning guys. Thanks for taking our questions and congrats on the progress. Maybe I'll stick with 2 commercial. 1 on the reimbursement or I guess reauthorization for Jennifer. I think you provided 2 statistics I wanted to hone in on the more than 140 reauthorizations and the 11 that were denied or I guess denied.

Speaker 8

Can you give us the denominator of that reauthorization number? And for those 11 specifically, like how workable is it to get them back on therapy? Or is it kind of lost in terms of going forward modeling purposes? And then going over to international, Hunter, if you can clarify, did you mention 26% of this quarter's revenues are comprised of the international sales? And if so, I guess maybe Jan, if you can comment on what's been so beneficial on sort of the France and German launches that perhaps you can implement on the U.

Speaker 8

S. Side to make it a little bit more sticky and compliant?

Speaker 2

So, Dave, let me just clarify. So in your first question on the reauthorization, so as Jennifer said, more than 140 have had approvals, 11 have had denials of which she's worked through. So that's about 150, 51 to be exact. But I don't know, was there additional question behind that?

Speaker 3

Let me just speak to the Levin denials. So one, I will say that in terms of the reauthorizations, we've been very, very successful just overall just in terms of being able to get approvals. The 11 within the quarter, let me just break this down. I would say it's sort of similar to the number that we had outlined, which is last quarter. But they can actually get a denial for a couple of different reasons.

Speaker 3

One, it may be that they may simply be missing some information and we just need to go back to the physician to provide this additional information. That's been an opportunity just in terms of going from a denial to gaining reimbursement back for the patient. Some of it could be because they may not be getting the exact 5% in terms of weight loss. The reauthorizations can happen at less than the 1 year time point. So that may be an opportunity just in terms of follow-up because these patients are definitely gaining clinical benefit, hence they want to as well as their physician wants to maintain them on therapy.

Speaker 3

So I think there's various different reasons just in terms of the 11 denials. But as I mentioned, we already have several of these, 11 that have already been reapproved and we continue to work through the remainder.

Speaker 5

And Dae Gon, to your question on international, I did you're correct. It was 26% of sales came from outside the U. S. During the quarter. And I'll let Jan talk about their experience in Germany and France as well.

Speaker 4

Yes. Thank you, and thank you for the question. So I will start seeing that the U. S. Region and the international region are very different from a rare disease landscape point of view.

Speaker 4

But back to your point, what do we how do we cross fertilize between the two regions? I think there are 3, 4 key activities that are similar for two reasons. So, because Jennifer and I have the same culture and background and good practices in terms of rare disease. And second, because we and our teams areas from my point of view are collaboration with the centers of excellence. As you know that there are there is an important center of excellence in the U.

Speaker 4

S, more to come, more coming. And it is also the case in Europe. So how do we collaborate them? How do we leverage their experience and translate it into the publication plan, for example? That's 1.

Speaker 4

2, I would say, medical marketing activities or medical marketing omni channel activities, field and digital. We also exchange a lot about that. Third thing that I would think about is patient identification program. In the U. S, there is a URO program.

Speaker 4

In Europe, we have the ROAD program, genetic testing program. And the 4 pillar that I'm thinking at is really patient support program. So U. S, they have a very comprehensive patient support program and team dedicated to all the patients. We do the same in Europe when we can.

Speaker 4

It's not always possible from a legal point of view. But as I've said in my presentation, the German one, for example, is also very comprehensive. And this crucial activity for the patients and the patient ventilators is also something that we speak a lot about across the two regions.

Speaker 8

Okay, thank you very much. David, I guess sorry for the confusion. I was just wondering if there were any sort of in the pipeline for reauthorizations beyond the $140,000,000 and the $11,000,000 that you disclosed today?

Speaker 2

Yes. Thanks, Megan. Sorry.

Speaker 3

Yes. So once again, there's always going to be folks who are needing to get reauthorizations. And it depends on when they initiate therapy and when that time frame is for the reauthorization requirements, which can vary, but the majority of these are at the 1 year point. So that's a continued stream just based off of when they initiated, when they got approval and hence when they need to be reevaluated to ensure that they're still garnering benefit from being on therapy.

Speaker 8

Excellent. Thank you very much for the questions. Yes. Yes.

Operator

Thanks. Thank you. One moment for our next question. Next question comes from the line of Phil Nadeau of TD Cowen. Your line is now open.

Speaker 9

Good morning and congrats on the progress and thanks for taking our questions. Just 2 from us. First, on Q1 revenue for IMCIVI, it does seem to be at the increase in revenue quarter over quarter seems to be at the lower end of what you'd expect with 70 reimbursement approvals. Can you speak to those dynamics? Was that simply the timing of the reimbursement approvals?

Speaker 9

Or did some of the issues with insurance reauthorization that you discussed play into the reported revenue in Q1? That's the first question. And then second on Daybreak, can you remind us what you are likely to release during Q3 from that trial?

Speaker 5

Yes, 100%. So let me take the quarter over quarter growth. I think there are some puts and takes as there always are in these elements. Last quarter, for example, we had a GTN impact of about $600,000 on sales that was favorable that related to the release of Medicaid accruals based on actual invoices received. So that sort of sets the quarter down a little bit or adjusted the quarter over quarter growth a little bit.

Speaker 5

The other thing is when we talked about the single state Medicaid program, we did receive shipments early in the quarter for that program. So those patients went off therapy about the middle of October. We did receive shipments from that or did ship to that program for many patients in the first half of October. So that took some non recurring revenue out quarter over quarter. We did have a healthy increase in patients on therapy and we had a healthy increase in vials dispensed.

Speaker 5

And then some of it was offset a smaller amount was offset by the patients going in and out of BRIDGE program during the Q1, which is I think something we expect as a normal Q1 occurrence. So hope that's helpful. That makes sense.

Speaker 9

Yes, that helps. Thank you.

Speaker 2

And Bill, in the DAYBREAK study, so I haven't seen the data yet. What to expect? I think, as I said right from the beginning, this was a basket trial, a signal seeking trial. And so as we presented in our December R and D Day, we were encouraged that out of a large number of genes that we started with, there seemed to be a much smaller number, but a number of genes that were of interest. So my goal is to, we'll give you an update on those 6 genes specifically and tell you how they fared in the double blinded, placebo controlled part of this.

Speaker 2

And then provide some insight as to how we think about going forward, but I'll caveat that expectation with the bar is going to be really high. We're not going to rush into another trial unless there was something that was just so incredibly compelling that it couldn't wait, 1. And then 2, we fully expect any additional developmental work to be done with either the small molecule and or our weekly formulation because for obvious reasons we see that as the long term future of this overall franchise and any additional approvals we would look to get from those specifically. Does that help?

Speaker 9

That's very helpful. Thanks again for taking our questions.

Operator

Thank you. Thank you. One moment for our next question. Next question comes from the line of Corrine Johnson of Goldman Sachs. Your line is now open.

Speaker 10

Good morning, guys. Thanks for the color on all the discontinuation drivers. I guess, can you also help us understand when during the course of treatment patients are most likely to discontinue? And how you think about which of these factors maybe have read through to like the HO opportunity versus which ones might be more BBS specific?

Speaker 2

Yes. Let me start off and Jan or Jennifer can add anything. So I think the majority or not majority, but a significant percentage of these do occur early on. And again, that's in fact part of the goal of providing the level of color that we did today is just to remind people that we're not providing a therapy to a population that only has one illness or challenge that they're facing. I mean these Bartabital syndrome by definition, so they have many challenges.

Speaker 2

For example, in the U. S, there's a higher percentage of discounts in the Medicaid population. And again, the Medicaid population in addition to the health of the patient, they have other challenges in the family that they're trying to deal with. So long story short is again, there are many, many different often as I said, patient specific reasons why these patients just gone. But some of those, we have very specific things we can do to work on and I'll let Jennifer speak to that here.

Speaker 2

In terms of HO, it is a different population. And what's been striking about the HO is, it's cleaner, for lack of a better word. These are patients who were literally nothing's worked and biologically, it seems that septimalanotide is addressing a very specific biologic abnormality. So mechanistically, it seems to be the solution. And that's led to potentially a different level of engagement than we've had in our other populations.

Speaker 2

And I say that simply based on the fact that in running this Phase 3 trial, as we've highlighted, patients seem to be staying on treatment, including whoever is on placebo. We don't know who they are, but they might be guessing. And in today's world, if they truly felt there was another option, they would likely move to there and they're not. And why not? Because if they stay in the trial, then they know they can access the drug and the open label portion of it.

Speaker 2

So I think there are differences with HO. I wouldn't be surprised if the discontinuation rate was lower in HO, but obviously we have a lot more to learn.

Speaker 10

Helpful. Thanks. And then can you help us understand the size of the market opportunity for this under this 2 to 6 year old patient population and how that kind of expands the commercial opportunity for BBS?

Speaker 2

Yes. I mean, what we said about that previously is that when we do our genetic screening, the frequency, the positivity rate in that 0 to 2 specifically, but 2 to 6 tends to be higher than the rest of the other ages, the older age groups. And that's not a surprise because parents who present with a child, who has early onset obesity and uncontrolled hunger, they know something's wrong. Genetic testing perhaps gets to be done a little earlier. And as a result, as opposed to a 20 year old, for example, comes in and you're asking them when their obesity started and the like, it's just a different setting.

Speaker 2

So higher frequency hit rate, but the overall numbers are still quite small. So again, this will not dramatically increase the overall target population, but it does from a signaling standpoint, reinforcing standpoint, when you're treating 2 year olds with your medication, that's really a remarkable indication that A, it's important to do so, B, the drug must be safe. And as you know, most of the other available anti obesity medications have not tested kids as young as 2 to 6. And so we've gotten positive feedback from the field just from our willingness to take that on.

Speaker 10

Great. Thanks.

Operator

Thank you, Prem. Thanks. One moment for our next question. Next question comes from the line of Joseph Springer from Needham and Company. Your line is now open.

Speaker 11

Hi, thanks for taking our questions. Sorry if I missed this, but what were the discontinuation rates through the Q1 of this year? I believe it was around 20% as of the last quarterly update. And just given that the discontinuation rates have ticked up a bit quarter over quarter, what gives you confidence that the rate will level out in that 20% to 30% range.

Speaker 2

Yes. No, it has ticked up. We're not going to break it out further again. I think that was part of the goal of today's comments was we do think it's going to level out in the 20% to 30%. Your question is what gives us confidence?

Speaker 2

I mean, that's consistent, I think with other chronic injectables, daily injectables. I mean, given insulin therapies and the like, don't necessarily have they don't discontinue per se, but compliance can be quite challenging in some of those areas. So in this age group, I think again, it's an estimate, Joy. We don't know for sure, but I think it's a reasonable one based on our experience just working with rare disease populations and some of the challenges associated with this Yes. Does that cover it?

Speaker 2

I mean again, yes.

Speaker 3

Maybe one next year.

Speaker 2

Yes. Actually, Jennifer, it's a good opportunity just to highlight what we're doing.

Speaker 3

Yes. I think like one piece is we also learn as go just as we evaluate different parts of the business and think through if there's opportunities for us to focus a bit more in. As David mentioned, like the first couple of expenses is when there is the highest risk in terms of folks discontinuing and when we look at different reasons. One example I'll give is in terms of injection issues, we saw that that was an issue early on and through discussions have implemented an at home nurse support for patients so that they feel very comfortable initiating therapy and being able to inject them themselves. And this has levels or decreased that particular issue as a reason for DISCONS.

Speaker 3

We also just through that example that sort of high touch just in terms of the beginning to make sure that the patients are doing okay as they initiate therapy, realize it's we thought in terms of the structure that we had in place and the structure we had from a patient support side was that there was one point of contact for the patient, but also was responsible in terms of being able to help through the reimbursement and reauthorization process, which was a lot for one person to be able to juggle both aspects. So we have recently restructured that group. So we have specific team that focuses on the authorizations and maintaining the reauthorizations, while we have a separate patient team, education team that then is able to once again have more time and ability to maintain close contact with the patients.

Speaker 11

Great. Thank you for the detail and thank you for taking our questions.

Operator

Thanks, Troy. Thank you. One moment for our next question. Our next question comes from the line of Michael Higgins of Ladenburg Thalmann. Please go ahead.

Speaker 12

Good morning. This is Farhana on behalf of Michael. Congrats from us on the continued progress this quarter. Two questions from us. The first is, so we believe Daybreak Stage 2 could be read out separately or there was going to be a staggered update.

Speaker 12

So should we look for another update in Q4 than the update in Q3? And the second question is any guidance on the start of the second trial route for LB-five forty six forty?

Speaker 2

Yes. So thanks, Amit. The DAYBREAK study, we'll get the results in quarter 3. We haven't again, depends a little bit on what they are and how long it takes us to sort all this out. So whether we're going to report this in Q3 or Q4, I don't know to be honest with them right now.

Speaker 2

The second is obviously we try to connect these with a meeting and there you have to Smith as a late breaker. And so again, there's just some things I don't quite know yet. So let's say our goal is to get this out this year for sure in terms of reporting it out to all of you. But I don't know the vehicle, I don't know the exact timing. And then second, with regard to the start, we're making really good of the small molecule trial, the LBP5460.

Speaker 2

We're making really good progress. And as I said, the number of sites that we need have virtually all been identified and we're working through the initiation part of that. So, we will beginning in the quarter 3 and hopefully early in quarter 3, but that's as good as I can do today.

Speaker 12

Okay. Thank you.

Speaker 2

Thank you.

Operator

Thank Next question comes from the line of Whitney Ijem of Canaccord Genuity. Please go ahead.

Speaker 10

Hey guys, thanks for taking the questions. First one I guess is just on the kind of steady state dropout rate that you talked about our discontinuation rate. Is that informed at all, I guess, by the age at which patients are starting? I'm just curious if you're seeing patients or a higher discontinuation rate in patients who start when they're older versus younger and maybe, there could be some shift in that average rate over time as patients start when they're younger with the label expansion?

Speaker 2

So short answer, Whitney is yes. And that was breaking out the 3 different age groups there. The key is it's adolescence. So I don't know if disproportionately we have a number of adolescents. I mean, we know we have about 60% adults versus 40% peds overall.

Speaker 2

So the adult group, we're continuing to move to a more normal patient distribution because patients end up a normal lifespan in that sense. But no, it's just a it's additional color, which says, yes, that adolescent group is more difficult and we do see more higher discounts there.

Speaker 5

Got it.

Speaker 10

Okay. And then, in France, and perhaps I just misunderstood, but I think I understood the comments to be that patients with HO have been getting treated via the early access program, but maybe not so much for the BBS program. Did I interpret those comments correctly? And if so, I guess, can you talk a little bit about what you're seeing in, I guess, maybe urgency to treat or process of getting patients through that to get to approval in BBS versus HO in France?

Speaker 2

Yes. No, that's not the case. Jan, do you want to make some comments?

Speaker 4

Yes. No, indeed, that's not the case. So we have currently 3 early access program running, 1 for POMCILIBAR, 1 for BBS and more recently for HO. So those 3 programs move in parallel, and we have been very pleased with the uptake of these 3 programs. And the most recent one is HO.

Speaker 4

It has started at the end of last year. And I can say that it is extremely rare in France to get this early access program based on Phase II data and pre EMEA approval. To be more precise, there are just 2 rare disease therapies with such status in France. And as I have mentioned during the we have now a number of patients which are commercially treated for HO. And back to the maybe the second part of your question, the DBS is moving nicely as

Speaker 5

well. I think, Whitney, what we have said is when the HO program was approved, we had said for a while that it was very slow and bureaucratic to get patients approved within it and that has only recently started. So that may have been the emphasis on the fact that we've started to get patients through the HO program despite it being approved a longer time ago may have caused that impression.

Speaker 10

Understood. Got it. Helpful. Thank you.

Operator

Thank you. I'm showing no further questions at this time. I would now like to turn it back to David Meeker for closing remarks.

Speaker 2

Great. Well, thanks everyone for tuning in this morning. And again, we look forward to our next earnings call and updating you on further progress over the next 3 months. Thanks all.

Operator

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

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Earnings Conference Call
Rhythm Pharmaceuticals Q1 2024
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