BioCryst Pharmaceuticals Inc (BCRX) 2023 Q3 法說會逐字稿

Good morning, and welcome to the BioCryst Pharmaceuticals' Third Quarter 2023 Earnings Conference Call. (Operator Instructions). Please note, this event is being recorded.

I would like now to turn the conference over to John Bluth at BioCryst. Please go ahead.

Thank you, Maria. Good morning, and welcome to BioCryst's Third Quarter 2023 Corporate Update and Financial Results Conference Call. Today's press release and accompanying slides are available on our website. Participating with me today are CEO, Jon Stonehouse; CFO, Anthony Doyle; Chief Commercial Officer, Charlie Gayer and Chief Data and Insights Officer, Jinky Rosselli. Following our remarks, we'll answer your questions.

As a reminder, tomorrow at 1:00 p.m. Eastern Time, we'll be hosting an R&D Day where we plan to describe our drug discovery process and introduce additional therapies from our pipeline. So today, we'll focus on ORLADEYO, and tomorrow, we'll take a deep dive and answer your question on our pipeline programs.

Before we begin, please note that today's conference call will contain certain forward-looking statements, including those statements regarding future results, unaudited and forward-looking financial information as well as the company's future performance and/or achievements. These statements are subject to known and unknown risks and uncertainties, which may cause our actual results, performance or achievements to be materially different from any future results or performance expressed or implied in this presentation. You should not place undue reliance on these forward-looking statements.

For additional information including a detailed discussion of our risk factors, please refer to the company's documents filed with the Securities and Exchange Commission, which can be accessed on our website. In addition, today's conference call includes non-GAAP pro forma financial measures. For a reconciliation of these non-GAAP measures against the most directly comparable financial measures, please refer to the earnings press release posted in the press release section of our Investor Relations website at biocryst.com.

Now I'd like to turn the call over to Jon Stonehouse.

Thanks, John. Third quarter ORLADEYO revenue of $85.7 million was another strong quarter of performance and gives us a high degree of confidence we will achieve our goal of no less than $320 million for the year and remain on track for the $1 billion at peak. This growing revenue, along with discipline around our capital allocation, put us in a very strong financial position heading into the end of the year.

Since we have more time today to discuss ORLADEYO, will go deeper into what we see in the market and how we see the market changing over time. As John mentioned, you will also hear from another member of the team today. Jinky has been with BioCryst for over 8 years. Jinky's title is Chief Data and Insights Officer, but to simply explain her role, Jinky gathers data and insights across the company and in the marketplace to help us understand the truth of what's really going on, not to look for data supporting what we hope to be true.

This is a very important distinction. She will share the data and insights. She and her team have gathered around the HAE market and ORLADEYO, both today and what we see that will impact the future. We hope this will help you understand what we see and why we remain confident in our current growth trajectory and the path to peak revenue of $1 billion.

Now I'll turn it over to Charlie to talk about the quarter's performance.

Thanks, Jon. Patient growth in the third quarter continued at the consistent pace we have described before. The net growth in U.S. patients benefiting from ORLADEYO in Q3 was nearly identical to what we saw in each of the first 2 quarters this year, and our global growth continued to gain strength. As Jon noted upfront, we are excited to describe our expanding pipeline and its future promise tomorrow. Today, we are excited to describe the future we see for ORLADEYO. With Q3 revenues of $85.7 million and the consistent patient dynamics we are seeing, we repeat our guidance of no less than $320 million this year and are as confident as ever that ORLADEYO is on a path to $1 billion in peak global revenue.

I'm going to describe the pattern of growth that we have seen and show you how we believe this pattern will translate to that peak. Jinky will describe in more depth how we validate these forecasts. As a side note, I first worked with Jinky at another company starting in 2007. She is the main reason I joined BioCryst right behind her in 2015. I joined not only because I enjoy working with her and her team, but because they do objective, insightful, patient-focused work that I believe tells the truth about the future for ORLADEYO as closely as could ever be predicted.

Let's look at the data. We included 2 slides in our earnings deck that described ORLADEYO growth. The first, Slide 4 shows the monthly pattern of U.S. patient prescriptions and patient discontinuations graphed on the same Y axis. You can see that months bump up and down over the last 8 quarters, but the range is tight. New starts to date have been well above discontinuations, we had good months, great months, just okay months, leading to trend lines of start forms and discontinuations over the past 2 years that are essentially flat.

That means the growth of net patients on therapy remains very linear. Net Patients on the secondary Y axis. We have not shown the numbers on the chart, but we crossed 1,000 U.S. patients on ORLADEYO in early May and are well above that point now. This U.S. patient growth, combined with reimbursement dynamics, shipping days and other factors create variable revenue patterns, you can see on the right slide of Slide 4. Q1 tends to be down because of reauthorization. Q2 jumps up after reauthorization is complete and Q3 and Q4 tend to go up more gradually.

However, the long-term revenue trend follows the patient growth trends. So where is ORLADEYO heading? Slide 5 shows you what we expect based on what we see today. I'll walk you through some simple numbers that are representative of our data and our view. I've simplified and approximated the numbers, but precision is not important because the long-term view does not change. We expect to end 2023 with roughly 1,050 patients who have reached a state of either paid therapy or long-term free product or PAP.

We also have a population of newly prescribed patients on short-term quick start free product at any given time. And when you include them, the proportion of patients on paid product is just under 70%. I'm going to exclude the quick start patients because the coverage for them is still pending. That leaves us with a paid patient ratio of about 73%, which is what I will use for this analysis. The 1,050 year-end patient base multiplied through a compliance rate of just over 90% and a gross to net reduction of 15% to 20% off WAC list price on paid patients gets to an annualized rate of about $310 million per year. Our patient growth history plus forecasting methods that Jinky will describe, give us confidence we will average around 200 net patient additions per year through 2028.

We have averaged a bit above that rate for the past 2 years, and I've shown you the consistency. Growth could be more some years, less others, but we expect to add 1,000 net patients by the end of 2028, which adds up to an additional $295 million in annualized revenue. By the end of 2028, we are looking at a minimum of just over $600 million annualized U.S. revenue without any other changes. But we also expect the 73% paid ratio to grow to 85% based on the work we are doing and the trends we are seeing. Most of that percentage improvement plus the revenue growth impact will not happen in 2024. The percentage growth will accrue over the next 3 to 4 years. With over 2,000 patients, that improvement would be worth at least $100 million per year by 2029, making steady-state U.S. revenue around $700 million per year.

Now assume a very modest average annual price increase through early 2029. And you can see how U.S. revenues are likely to reach $800 million or more in 2029. The early trends we see outside the U.S. give us confidence that ORLADEYO will reach around $200 million in the rest of the world, completing the path to $1 billion in global revenue around the turn of the decade. The results that we have seen and the path we are on are not surprising to us. ORLADEYO is a highly differentiated product that HAE patients wanted back in 2020, and they continue to want today. Jinky will tell you more about how we use robust insights on patients and health care providers to predict where ORLADEYO is heading. Jinky, welcome to today's earnings call.

Thanks, Charlie. We truly believe that robust and thoughtful methods are critical in providing and understanding of not only the drivers of demand for ORLADEYO, but a complete unbiased reflection of the overall HAE market. Charlie mentioned in past calls, our quarterly market research studies showing consistent strong demand for ORLADEYO. These quarterly studies serve a robust and generalizable example of HAE prescribers and HAE patients.

A key question we asked consistently in these studies is potential prescribing over the next 12 months. We feel this question is a good metric to keep us informed of on-demand and shifts in that demand. Latest studies show that HAE physicians anticipate prescribing ORLADEYO to about 25% of their patients in the next 12 months. These data on future prescribing of ORLADEYO have been consistent study over study, reinforcing our assumptions, the demand remains strong.

We do recognize that the HAE market is competitive and is likely to get more competitive. Our market research shows that products with a strong value proposition are sticky, meaning prescribers and patients are loyal. Across our volumes of research over the years, HAE patients have consistently expressed how grateful they are for every new therapy available to them which is totally understandable given HAE is a rare disease with historically limited options. These patients have also indicated a high level of satisfaction with their treatments. When our quantitative data prelaunch showed this level of satisfaction, I admit, I did have a moment of panic.

In past market type studies when customers are highly satisfied, the implication is that there are no remaining unmet needs. But digging further into the research in these highly satisfied HAE patients, we're offering the promise of an oral therapy. Over 50% were willing to switch from their existing prophylactic therapy to ORLADEYO. Patients' willingness to switch to ORLADEYO signal that there are still unmet needs, namely controlling their attacks as no treatment is perfect and treatment burdens associated with their current injectables. The core insight here is that these patients are expert covers and will, therefore, always indicate high levels of satisfaction. Simply stated these HAE patients are seeking a freedom and an improved quality of life.

As we continue to mine our actual ORLADEYO data and study our sources of business, we do see this intent stated in research proving out in our population. Top 3 reasons our actual patients have stated as reasons to switch to ORLADEYO include wanting to reduce number of attacks, wanting to reduce severity of attacks and wanting to reduce the burden of current treatment. Their motivation for switching is wanting more. The reason for staying on therapy based on research with current patients is essentially the same. Less frequent and severe attacks in addition to the convenience of an oral, which reduces the treatment burden. Assumptions for our forecast rely heavily on insights from market studies, our conduit work and ultimately, a simulation model. Collectively, these approaches helped us quantify demand, an uptake not only to ORLADEYO, but also impact of the competition.

Unlike traditional mass market, rare disease markets really have prescription data to build forecasts upon. Hence, we supplement and collect as much data as possible through primary methods to fill these gaps. In our most recently completed conjoint study, our sample included 175 HAE treaters and 100 HAE patients. We ask stakeholders to allocate brand preference in terms of current use and the potential future use including the competition in their choice sets. We then analyze these preference data and incorporate them into market models driven by Monte Carlo simulation. Our simulation models can provide the most probable estimates of patient numbers, market shares and ramp to peak for ORLADEYO.

Monte Carlo simulations allow us to run hundreds of iterations in the simulator and the models continue to reinforce confidence in reaching 2,000 patients at peak in the U.S. even with competition entering the market. In the near term, the model confirmed by actual has shown strong ORLADEYO uptake with its source of business from prophy naive and prophy switches. In the outer years to peak, assuming a conservative scenario that all investigational products reach the market, our research consistently shows that new injectable products will take share mainly from current injectables by claiming the convenience of less frequent injections. Despite that, our model see TAKHZYRO remaining as the leading injectable products because less frequent injections are an incremental benefit that will not be sufficient to drive many patients to switch.

Switching from an injectable to oral, however, offers a much more dramatic benefit to many patients. Our model anticipates that ORLADEYO will most likely be insulated from these new injectable entrants. Likewise, our research and model anticipates minimal switching away from ORLADEYO to any new oral because any new product is unlikely to offer a meaningful benefit over what they already experience with ORLADEYO. Similar to how TAKHZYRO remains sticky -- as a sticky market-leading injectable in the outer years, our research and data show that ORLADEYO will be equally sticky as a market-leading oral. We strongly believe in continuous optimization of our forecasting methods. Post launch, our models will evolve with additional levels of sophistication, including actual ORLADEYO data like patient adds, discontinuations, overall patients on therapy and other market dynamics that could affect near-term revenue performance.

We have found historically that our models correlate strongly with actuals and have predicted ORLADEYO patient numbers and corresponding revenues reliably. Forecasting year 1 of launch is always difficult. But a year prior to launch of ORLADEYO, our model showed U.S. revenues approaching $100 million, and our actual year 1 revenues came in at $122 million.

Beyond forecasting, our team also study these data in depth to help better understand the needs of our patients, our physicians and points to opportunities for optimization of our patient services in real time. With availability data on a granular level, coupled with robust market insights, our team can proactively partner with the commercial teams with a full story of ORLADEYO. Our commercial teams are always ready to action on the truth from these data, ready with strategies and solutions to address any of the findings. Quantitative evidence direct from our customers from the basis of all our assumptions. Full market context, including the competition are always incorporated into our thinking, having a strong commercial team ready to action on the data and intake also key. Because we anchor in all these variables collectively, we have a strong level of confidence in our views of future ORLADEYO performance and our path to $1 billion.

Anthony, I'll turn it over to you.

Thanks, Jinky. With Q3 ORLADEYO revenue coming in at $85.7 million, we are well positioned to achieve our 2023 guidance of no less than $320 million. Longer term, Charlie and Jinky outlined the growth factors that we expect in the coming years, giving us great confidence in getting to $1 billion in peak revenue. You can find our detailed third quarter financials in today's earnings press release, and I'd like to call your attention to a few items.

Total revenue for the quarter was $86.7 million, $85.7 million of which came from ORLADEYO, putting ORLADEYO trailing 12-month revenue at approximately $306 million. Of the $85.7 million of global ORLADEYO revenue $75.3 million came from U.S. sales with the remaining $10.4 million coming from ex-U.S. Operating expenses, not including noncash stock compensation for the quarter were approximately $85.9 million. We are revising our full year guidance for OpEx to $365 million to $375 million based on current trending and as we continue to be disciplined in our approach to capital allocation.

Cash at the end of the third quarter was $399.2 million, and net cash utilization for the quarter was approximately $16 million. One of the areas that investors and analysts have been asking for additional information related to debt and royalties. So let me go into a little bit more detail on them.

Looking high level at our balance sheet, total long-term debt is listed at approximately $833 million. However, only around $300 million of that is traditional debt and the remainder relates to future royalty obligations. Earlier this year, we refinanced our term loan with Pharmakon. This $300 million is traditional debt with traditional characteristics, a 5-year term interest-only payments during the loan period, like financial covenants and Apollo payment due in 2028. Separately, between 2020 and 2021, we secured an aggregate of $425 million for Royalty financing from Royalty Pharma and from owners. For this instrument, we forecast future revenue and based on that future royalty is payable, which we then use to calculate an effective interest rate.

On a quarterly basis, we accrue interest expenses related to this effective interest rate on the P&L, while between periods, the balance sheet movement is the delta between the interest expense accrued and the actual royalties paid. The amount currently on the balance for this is $533 million, meaning we have accrued more interest expense than we've actually paid in royalties. At the future point, these balances should decrease as revenues increase and as royalties payable should, at that point, be higher than interest expense.

GAAP reporting, this is considered to be a debt instrument. However, this is not traditional debt. These payments are based entirely on securing ORLADEYO revenue, i.e., no revenue, no royalties. Additionally, there's no recourse. The balances are not callable, and there is no bullet payment. Hopefully, this additional detail helps. We look forward to sharing more exciting information on our pipeline with you at the R&D Day tomorrow, and I hope you can join us then.

Operator, we would now like to open the call up for Q&A.

(Operator Instructions) The first question is from Tazeen Ahmad of Bank of America.

I have a couple. Thanks so much for providing that really detailed analysis of how you see the market evolving. I think in some of my discussions with investors, I often get asked about the benefits of ORLADEYO versus the ramp rate for the launch itself. So while you're feeling a high sense of confidence that by the end of the decade, you'll be looking at $1 billion, what do you think would need to happen to speed up that launch in order for the steepness of uptake to increase relative to where you are now? And then I have a follow-up.

Charlie, you want to take that?

Sure. So first of all, we're really happy with the ramp rate and the consistent ramp rate and where it's headed. So we're always looking for ways to make it go a little bit faster. And we've talked about patient activation before. That's definitely one. We don't see any one thing that can be done that's going to meaningfully bend it up. But we just -- we plan to keep executing really consistently. And we're going to get there. I think when you look at the ramp rate of 200 patients adds per year that is very realistic and very achievable over the next 5 years. So we're happy to keep it just at the ramp it's at.

Yes. One the other thing I'd add to Tazeen and Jinky stressed this a lot in her remarks, is remember that there's a lot of competition and patients are very satisfied with their therapy. When we talk to patients, they'll tell us, "Oh, my god, this saved my life, this changed my life" and they're on the injectable therapy. So that stickiness is just takes time to break and get people to understand that they could do better with an oral. But then on the flip side, that's going to work to our advantage when other competitors come out. So I think the ramp rate is considering the competition in a rare disease is phenomenal.

Okay. And then as a follow-up, when you talk about the 2,000 patients as your target, what type of a discontinuation rate is assumed in that? Are those 2,000 patients taking the drug continually or 2,000 patients that will touch the target?

And Charlie talk about the pattern as well.

Yes. Yes. No, absolutely. So Tazeen first of all, the pattern that we've described before has been it's still the same. And the slide I showed today I think demonstrates that. So when a patient starts on ORLADEYO, 60% of those patients make it through the first year. And then we see very little discontinuation after that. There's always a little bit, but those are the sticky patients really once they make it to a year. And so once we get to the 2,000, we see a base of about 2,000 patients being sticky and staying on ORLADEYO. And then as we've talked about before, we have patent protection out to 2039. So it's a long ramp potentially at peak sales of $1 billion with those 2,000 patients. And that's just the U.S., the same dynamics will apply in other markets.

Yes. So you should think that the -- when we get to the 2,000, we mean they've been on for at least a year or much longer and you're going to lose a percentage or 2 each year, but you're going to get that back in.

We're going to replace it.

The next question is from Stacy Ku of TD Cowen.

Congratulations on the progress, and we really appreciate the detailed analysis of ORLADEYO. So first, we have a question. Could you further elaborate on your expectations for consistent linear growth Specifically, how are you thinking about 2024? What are your thoughts on $410 million roughly for consensus? That's the first question. And then one more on this year. So do you have any updated thoughts on your guidance of at least $320 million. If there is any potential for outperformance, what factors you expect could drive better sales? Is it ex U.S.? Any kind of detailed thoughts around this year would be appreciated.

Yes, we don't comment on consensus and we haven't guided yet for next year, but I do think Charlie made some comments in his prepared remarks, that should set expectations so I'll let him talk.

Yes. I think for next year and for the next 5 years, we expect average about 200 patient adds and that could be a little more, some years a little less, it won't be exactly that every year, but with consistent growth, it's going to be pretty close. And on the $320 million we're very confident in the 320. We've been saying for multiple quarters now put 320 in your model, and I think we'd say do the same right now.

I think the challenge with next year is the cap to paid that were not completely sure how the IRA is going to impact the Medicare patients. There's still infrastructure that Charlie is putting in place and executing on where he's making great progress on the front end of making sure Quick Start gets to paid on a higher frequency, but we still have those long-term path folks that we've got to get switched over to paid. So in the -- I think it was around $100 million, Charlie, that you said over the next 5 years will benefit from those switch...

Yes, $100 million would come in 2029 after we move the paid ratio to 85%.

So you shouldn't expect much progress on that, next year is the point I'm trying to make.

Okay. And then on ex U.S., what are you thinking there? You've given kind of some guidance around the breakdown, but it looks like there's some nice sales there. So any comments on that would be appreciated.

Yes. I mean ex U.S. is going really well. We continue to get -- have market access wins. We continue to launch in new markets. We continue to grow in the first wave of markets where we're at. As we've commented before, the price is lower. So it's a volume game. It's longer term. That everything that we see ex U.S. tells us it will contribute that additional $200 million by about the turn of the decade.

Like Charlie said about the link between patient growth and then revenue similar in ex U.S., there will be some puts and takes, right? There'll be some peaks and troughs for each quarters that are bigger quarters that are smaller, depending on which territories we're selling into. But overall, the trend continues to be really strong.

Next question is from Maury Raycroft of Jefferies.

This is (inaudible) on for Maury. Congrats on a successful quarter. I guess our first question is on patients on free drug program, which went down from 34% in Q1 at peak to about 30% by the end of Q2. Can you maybe provide more color on what you saw in Q3? And where do you think that will be by year-end?

Charlie?

Yes. So good question. And we said we were at 30% at the end of Q2. I noted on the prepared remarks today that essentially, that number is a little over 30% in Q3. What we saw in Q3 is a couple of factors that affected that. And these kind of wobbles are going to happen as we make that long-term progress towards 85% paid. But in Q3, we saw some Medicaid patients moving temporarily, we think, to free product as some of the COVID release funding ended. We also saw -- it's re-enrollment season insurance companies. And so some patients actually moved as their switching plans moved temporarily to free product.

And then the other piece that is driving up just a little bit, the percentage of free product is that as we're improving our processes to get people to pay, we're actually slowing down a bit to get better results. So when new patients come in, we're keeping them on the Quick Start program for a little bit longer to make sure that we've got a really comprehensive case for the insurers so that we actually improve the percentage of paid. And we're seeing that paying off. So amongst our commercial segment, which is about 60% of our patients, we now see that over 80% of them are on paid therapy. And so that's one of those trends that gives us confidence in the long term that we're going to get to 85%.

As far as where we're going to end the end of the year, I don't even want to make a prediction. I think it's -- this is all about that longer-term progress. And as Jon noted, we don't expect a meaningful change in 2024, but the percentage changes will start to improve in 2025, '26 and '27, that's when we'll start to notice it.

Got it. That makes sense. I guess a quick follow-up on the third quarter sales. We -- are you now seeing more patients coming from prophy naive patients or converted patients in the U.S. And should we assume maybe more of a revenue growth ex U.S. are from prophy naive patients?

So in the U.S., the trends are really the same. It's that roughly 50-50 split between patients coming over from prophy or prophy naive at least most recently that they're not on prophy. That has been -- it's not exactly the same every quarter like anything else, but it's been really consistent over time. Ex-U.S. yes, we get a lot more patients who are prophy naive because the prophy market in general has trailed the U.S. ex U.S., but that's starting to change. And so we get some switches from other prophy ex U.S., but most of it is people coming on to prophy for the first time now that they can do it with a targeted oral therapy.

The next question is from Brian Abrahams of RBC Capital Markets.

Everyone, this is [Nevin] on for Brian. Congrats on the quarter. And we really appreciate some of the color that you gave around some of the sales trajectory that you expect for the coming years. On that, I just wanted to ask in Slide 4, some of the data that you had regarding net patient growth and also some of the discontinuations. It seems that perhaps some of the discontinuations are leveling off or perhaps maybe changing dynamics. Could you maybe speak to whether you are seeing improvements in the retention rate and whether that's affected by your kind of push to better educate patients? And then I have a quick follow-up as well.

Sure. No. So good analysis of the data. Yes, I think we have seen it improve certainly from what we experienced very early in the launch and it is exactly that. It's setting expectations. We do that all the way through everything that we can do with health care providers to make sure they talk to their patients, when our patient services teams talk to patients they set expectations. And we think that, that has really paid off. The market is getting very familiar now with ORLADEYO. Physicians and other health care providers know the drug. They have confidence in it. Patients now know a lot more and they have confidence in it. And in a condition like HAE, where stress can cause attacks, having confidence in your therapy is important. So we think that's all part of the pattern settling out, and we're very confident in this pattern going forward.

So and kind of like a follow-up to that, can you also speak a little bit to the trial progress for ORLADEYO in pediatric patients with the sprinkle formulation? And is there perhaps anything you could tell us about what those retention metrics might look like within the pediatric patients so far? And if any differences in the GI tox that you might be seeing in this population?

So the trial enrollment is going well. I'll defer other questions to tomorrow. In our R&D Day, we will be addressing that amongst our other programs. But what I'll say is the trial is going well, and there's a huge need. There's a need for an oral therapy across the market, as you can imagine, in pediatrics, no parent or caregiver likes to inject their child and no child likes to be injected. And with HAE, fortunately, a lot of the kids don't become symptomatic until puberty, but about 4 in 10 patients actually have their first attack by age 5. And so there's a huge need to have an oral therapy that can prevent attacks so that these kids can live a normal life. And that's what we're shooting for. And we think we're optimistic we're going to have a great product to do that.

Nevin, a really good indicator of you've got something of real need for patients is when your enrollment goes really well and enrollment is going really well in this trial.

The next question is from Jon Wolleben of JMP.

This is Catherine on for Jon. I just have a quick question about kind of just what's been working well in the ex U.S. launch of ORLADEYO, I know you kind of hit upon the thought that you're gaining ground with reimbursement dynamics. But any other color you could provide?

I think, sure, a couple of things. I'll touch on the reimbursement first because that ex U.S. anywhere getting access to products, having someone pay for it is really critical for patients to be able to get their therapy. So an example that I've cited before in the United Kingdom, where ORLADEYO is covered, NICE approved ORLADEYO for patients with 2 attacks, HAE attacks or more per month. Whereas other modern prophy therapies like TAKHZYRO were limited to patients with 2 attacks a week or more, which is a very small segment of the market. And so our team has been able to take advantage of that and really help a lot of patients with ORLADEYO.

And then I think the other factor is just what I mentioned on one of the earlier questions, which is until a few years ago, there were -- there was very little availability of modern prophylaxis outside of the U.S. And so the patient community, the physician communities in these different markets were just not used to using prophylaxis. All they had were androgen steroids or some other very nonspecific drugs. Now they have access to those drugs. And so it's changing how they view treatment and everyone is aligning around the global guidelines, which says that one of the modern prophylaxis therapy should be considered for all product -- all patients and that's what we see happening.

I think one other thing is like the U.S., Charlie and the GM, Abid Karim and Europe have done a great job of building a really good team, really experienced team that hits the ground running and while data access and there's some challenges in Europe. They work closely with Jinky's team, and they're -- just like in the U.S., when they see a challenge, they adapt and adjust and it's been really impressive to watch the European team.

And then I just have one more question about the pediatric opportunity. I know that you're going to kind of save the developmental pipeline for tomorrow, but just a comment on that.

Sure. Just to add a small piece to what I said earlier. The pediatric market in the U.S., I think we've said this before, we think there in the neighborhood of 500 patients who are probably with HAE and symptomatic. And not all of those will need prophylaxis right away. But the real key with where HAE therapy has evolved is that now there are options, what the experts -- they really see patients growing up without -- in a very different environment than even 10 years ago.

So kids today can grow up, they can get control of their attacks. They can do all normal school activities, everything else. But the goal is to be completely normal. And that just hasn't happened with previous generation. So just the availability of prophylaxis for pediatric population. And we hope soon an oral prophy product is what's really going to change the lives of these kids and these families, frankly.

Yes, I can remember, and this isn't that long ago, 10 years ago, when you would talked to young women that had HAE and they weren't even sure if they wanted to have children and now you can live with HAE at a very young age and manage your HAE. So we're so excited about this formulation. [Bill Sharon] and I have chased that patient meetings for a decade from mothers that are saying go faster, and it's really exciting that we're on the cusp of getting there.

The next question is from Liisa Bayko with Evercore ISI.

Sorry about that. I just want to follow up on an earlier question regarding the linear growth of 200 patients per year. What kind of underlies your confidence that you can continue growing at that rate? How many patients would have cycled through by I guess, '29. Would all patients have touched ORLADEYO at some point? Are there benchmarks you can point to? Is that pretty typical to see discontinued new patient adds at a consistent level from like launch. It seems like at the early launch period, you might have a different trajectory. So that's why I was just curious about the kind of 200 patients being added per year.

Charlie is going to answer the first part, but I want Jinky to dive in as well because she's got insight into the future as well to the data she has gathered.

Yes. And Liisa, we realized that the ORLADEYO launch is not like your classic rare disease launch of the past. And I think it's a point Jon made earlier, this is -- and Jinky was making in her comments, it's a crowded market. And I may steal some of Jinky's thunder, but she said it, but these patients are sticky. And so it's this is a slower moving but consistently moving launch. And then I think, Jinky, maybe can you comment on again, reiterate how we use the data. It really comes down to the insights and the data that we get from Jinky and her team.

Yes. I mean we triangulate, right, because it's imperfect in every way in terms of the rare disease market and data availability. So we take the market insights and the research that we do all the methods that I described in the remarks, and basically model that out. And so our physicians and our patients are telling us the demand is -- they're still saying that they want more. And so the minute that changes, that landscape changes, we're all going to know about it because we consistently follow it every quarter. I say that demand and the numbers that Charlie are using in this model are our numbers, right? So essentially, we're triangulating based on what the market is telling us and then marrying it with the actual ORLADEYO and that ramp within our sort of database of ORLADEYO patients to give us that confidence.

I'll come back to one other point, which is to address your question, Liisa, about are we -- are all patients going to cycle through. That ultimately is our goal. But if every patient cycles through ORLADEYO, we'll come back and talk to you about how this has changed. It's more than $1 billion. We don't need every patient to go through to get to $1 billion. On a monthly basis, any given month, 5% to 10% of the patients with new start forms are actually patients who dropped off at some point in the past and are coming back, so there is that component. But if we reach 4,000, 5,000 patients in the U.S., we will easily get to 2,000 steady state sticky patients by 2029.

Okay. Great. And then just a question on the pediatric, how many pediatrics would be eligible per your calculation?

So we think the number in the U.S. market, the number of kids could be in the 500 patient range who could be eligible for prophylaxis. That doesn't mean 500 will be on ORLADEYO or any other prophy. But the pediatric side of the market is one that is still going to evolve because it's only been in the last few years that prophy has even been available. It's all injectable right now. And so we think that our views on that could change, but we think 500 patients is a pretty decent estimate right now.

And Liisa, one other thing I'd add, it's hard to quantify, but I think we've seen this with the adolescent population is this halo effect that happens in families. Remember, it's a hereditary disease and what see is when adolescents have done really well in a family, all of a sudden, the mother or the father who has HAE is like, well, maybe I should try that. And I think the same thing is going to happen with pediatric patients.

Okay. And then just a quick question just on the expense side. It looks like you're kind of higher towards the end of this year in the fourth quarter per your guidance. Is that how we should sort of think about the run rate going forward into next year? Maybe you could just provide some color on the kind of the expense trajectory into the fourth from the...

Yes. We've given a revised range based on what we see. And so based on where we are and what we will share with everybody tomorrow at the R&D Day, we'll give some additional flavor specifically around R&D expenditure. But I think we're well positioned to see growth in revenue. I think we will see some additional growth in that OpEx line. But we are always going to be very careful, very thoughtful around capital expenditure and making sure that the things that we invest in I think that we think will create value. We will give some more additional details more.

I would add to that, that when you combine growing revenue with discipline around capital allocation, you're getting a lot closer to a situation where your cash needs to the company are self-sufficient, right? And we're getting there. Tomorrow, really excited about what we're going to share with you. But another really important piece is having clear go-no decisions and being disciplined about the bar we've set and when we continue to invest or when we stop. And we've got a track record of that and we'll continue that.

The next question is from Serge Belanger of Needham and Company.

Appreciate the additional detail on ORLADEYO trends. I guess 2 for Charlie. We saw the percentage of patients on free product creep up late in the year last year. Just curious what you're seeing on that front. And then I think earlier this year, there was an issue with the lack of funding for co-payment support programs that led you to start the year on I guess, with a higher base of patients on free product as we get closer to 2024, is that an issue that could replicate itself?

Sure. Thanks, Serge. So first on the percentage creeping up at the end of last year. I think as I made a couple of comments on an earlier question, its reauthorization -- not -- sorry, re-enrollment season right now and so there are some patients who are switching around plans. Things did creep up a little in Q4. I don't know what will happen -- or Q3. I don't know what will happen in Q4, but it's not likely to get better. I'd point you to what I said earlier, which is this is a long multiyear game in terms of how we see this improvement in paid happening. But it's probably not going to get better in Q4, but we have confidence in the long term.

As far as the co-payment assistance in the Medicare from earlier this year. That issue is still going on. It's been going on all year. We don't know what's going to happen next year. Also, the IRA starts to kick in next year. So that's going to lead to some different dynamics. And so I would assume kind of similar dynamics, but we don't know at this point. We'll just have to wait and see how the early part of next year plays out outside of our control.

Yes. I think the realistic way of looking at it is we're going to plan for a conservative case of there's going to be headwinds next year. So that's why we're saying don't expect a lot of progress on free to pay next year.

Okay. And then on your path to $800 million in U.S. revenues in 2029, what assumptions do you make for the competitive landscape during that time frame?

I think let's have Jinky answer this one because I think she's got the best insight into this and some of the comments you made are really important to reinforce.

Yes. So we talk about the modeling, right, and sort of how we do the research, the quantitative work with our base of patients and physicians. We share the profile of the competitive landscape, right? So for each competitor coming into the space, we present them with the opportunity to allocate patients to those competitors. And so what Charlie is using as sort of assumptions are all built out of those simulations, right, or the preference shares which then kind of pushed into the simulator. And the simulator then gives you a sense for where ORLADEYO is going to land within the contact with the competitors. So all the competitive -- like all the competitive dynamics are built into the assumptions.

Yes. So just a couple of other things to stress that you might not have caught. She is assuming everybody succeeds, right, which is probably not going to happen, but we're being really conservative and we're seeing everybody gets to the market. And the other thing that she emphasized was injectables are going to take from injectables, right? And orals aren't going to take from ORLADEYO because there's not an incremental benefit if you're controlled on a once a day therapy.

Yes, it's not meaningful enough. It's not worth to switch for them.

So while we're factoring it in, the impact to ORLADEYO is minimal.

That's right.

The next question is from Gena Wang with Barclays.

This is Harshita on for Gena. I had a couple of quick ones on ORLADEYO. And then one on Factor D, I guess I'll ask the factor D one first. Are you going to give an update tomorrow if so I'll defer the questions tomorrow on Factor D. If not, I was wondering if you could give a quick update on that program today.

Save it for tomorrow.

Okay. Perfect. So on ORLADEYO, I think one metric you haven't talked about yet was the new prescription starts. How do you see the -- how was it in this quarter versus in the future? Is it still -- do you still expect 50% of new prescriptions from Tier 1? I just wanted some color on that.

Yes. No, you're right. I did not talk about the physician source. It's really consistent with what it's always been. So we're getting about half from the Tier 1 that covers about half the market and half from everyone else. And our team has done a fantastic job of really reaching far doing a great job of moving the big prescribers and some of that, it's hard work that is gradual progress, as Jon, Jinky and I have been describing, but then also seeking out patients in even a practice that might have one patient, they are there. And for a small team, they've covered a lot of ground and do it really efficiently.

Perfect. That's really helpful. And the next quick clarification question is, in Jinky's prepared remarks, I think you mentioned a comment on 25% of HAE prescribers are going to prescribe ORLADEYO. I can't remember what was the comment. I just wanted a quick clarification on that. And what was the sample size of the HAE docs?

Yes. So that's the quarterly measure of demand that we use. So we ask sort of what they're currently prescribing and then we ask future prescribing in the next 12 months, and that's the 25%. And that's been consistent way -- sorry, study over study and that level of demand. So they are anticipating growth in their prescribing over the next 12 months.

Yes. Let me just put a fine point on that. That's 25% of their patients they'll prescribe ORLADEYO. Not 25% of the docs and then the sample size, Jinky.

Yes. The sample size for the quarterly pulses are 65 allergy and immunologists, in our larger studies, which we do once a year, they're what I said 175 [ACPs].

The next question is from Jacqueline Lu of Oppenheimer.

This is Jacqueline on Justin's team. Could you provide a little bit more insights for tomorrow. So you guys specifically, could you comment on the complement therapeutics and the landscape. Where the unmet need exists for 10013 and particularly data insight and (inaudible) factor D inhibitors.

Yes. I'm not going to get into the details today. All I'm going to tell you is don't miss it. This is going to be different from other R&D days that you participated in, and you're going to get insight into our pipeline and how we discover drugs that I think is we're paying attention to.

You will get a lot more than 10013.

This concludes our question-and-answer session. I would like to turn the conference back over to Jon Stonehouse for any closing remarks.

Yes. Thank you. So today, it was all about ORLADEYO and our goal to give you better insight into what we see both today in the marketplace and the trends that we see in the growth and then also how we see the market shaping up in the future. So hopefully, you found that very helpful. Tomorrow is all about the pipeline. And as Charlie said, it's about how we're expanding the pipeline and also how we're discovering first-in-class and best-in-class molecules, and then how we'll be very careful and have clear go, no-go decisions around capital allocation. So please tune in. We're really looking forward. We appreciate those of you that are making the trek here to Birmingham, Alabama, and look forward to talking to you tomorrow.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect. Thank you.