Rhythm Pharmaceuticals Inc (RYTM) 2023 Q1 法說會逐字稿

Good day and thank you for standing by. Welcome to the Rhythm Pharmaceuticals Q1 2023 Earnings Conference Call. (Operator Instructions) Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your speaker today, Dave Connolly, Executive Director of Investor Relations and Corporate Communications, please go ahead.

Thank you, Billy. I am Dave Connolly here at Rhythm Pharmaceuticals. For those of you participating on my conference call, our slides can be accessed and controlled by going to the investor section on the Investors page via our website at ir.rhythmtx.com. This morning we issued a press release that provides our first quarter 2023 financial results and a business update, which is available on our website -- which is available on our website.

And as listed on Slide 2 is our agenda. Here with me today in Boston are David Meeker, Chair, Chief Executive Officer and President of Rhythm Pharmaceuticals; Jennifer Chien, Executive Vice President, Head of North America; Hunter Smith, our Chief Financial Officer; and Yann Mazabraud, Executive Vice President, Head of International is on the line joining us from Europe.

And I'll remind you that this call contains 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 represents our views only as of today it should not be relied upon as presenting our views as of any subsequent date. We specifically disclaim any obligation to update such statements.

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

Thank you, Dave. And thank you all for joining this morning as we recorded another strong quarter as we will keep iterating this company is built on strong well understood biology that is the impairment in the MC4R pathway which governs calorie intake, i.e. the hunger and energy expenditure, a clear unmet medical need in the patients who suffer with these rare diseases and a simple solution.

IMCIVREE is a replacement therapy restoring function in that pathway. The near term value in Rhythm resides in our ongoing global launch of IMCIVREE for patients living with BBS and updates through trial and hypothalamic obesity, which is now up and running. As we grow the organization we continue to attract outstanding talent when a small company executing a global program working in a challenging space continue to execute. We are well capitalized with funding into 2025 with IMCIVREE revenues now beginning to make a meaningful contribution to the overall picture.

So looking at Slide 5, these are 3 strategic pillars. Commercial launches are off to a strong start. Our conviction in the value we are bringing with IMCIVREE particularly with regard to the less well appreciated and less well understood hyperphagia part of the disease continues to grow. Obesity is not one disease, it is many diseases. Our educational efforts helping healthcare providers recognize these diseases and their need for a targeted solution on making a difference.

Our personalized approach to supporting patients and their healthcare providers is working. We see each patient for who they are, we need them where they are and we don't give up. In the US scripts continue to be written by a growing number of physicians and we are making continued progress and expanding pair approvals, particularly in patients covered by Medicaid as Jennifer will explain.

Internationally. We have launched IMCIVREE for BBS in Germany, the largest European market, following a second exemption from the German Federal joint committee which recognized that IMCIVREE is a therapy for a devastating rare genetic disease and not a lifestyle medical.

As Yann will describe the team is moving and we look forward to updating on the progress. The HO trial has initiated with the first patients treated, we expect to continue enrolling, as we had previously guided in Q1 of 2024. We look forward to providing updates on the 12 month data at a medical meeting in Q4.

And we are continuing to make progress on our expansion opportunities for the M&A trial and rolling, pediatric trial finishing, the weekly switch study finishing, and DAYBREAK trial -- one data to be presented later this year. The Xinvento integration has gone extremely well as we work towards candidate selection for the lead indication of congenital hyperinsulinism. We'll provide further updates on all of these programs in the fourth quarter.

On Slide 6, Slide 6 is biology slide which will probably show on every earnings call and this is to remind you that this is a differentiated pathway which when impaired requires a targeted solution. These diseases are quite distinct from general obesity. The early onset obesity is severe and the obesity is lifelong. The common thread across these diseases is hyperphagia that insatiable, pathologic hunger drive that leads to abnormal food seeking behaviors.

On Slide 7, you see the 2 foundational opportunities BBS and HO effect meaningful numbers of patients with a BBS prevalence of 4000 to 5000 and an HO prevalence of 5000 to 10,000 in the US with comparable numbers in Europe. The major difference between the BBS and HO opportunity is that the vast majority of HO patients are diagnosed and actively engaged with the healthcare system. Specifically the doctors we are working with. The additional opportunities represented in the Phase 3 M&A trial offers significant potential upside from there.

As a reminder, no therapies are approved for HO and no therapies have been shown to consistently work. The GLP-1 question is important. Earlier generations of GLP-1 did not show benefit. While we do not have trial data on the newer GLP-1 or combo therapies anecdotally as Dr. Abuzzahab described on our first HO call last year, she believes 20% or so of HO patients may have some response to GLP-1 and the magnitude of that response might be on the order of 10% or less. These drugs are different. They work through different receptors on different pathways. It makes sense that some patients may have some response to other medications, including GLP-1s because obesity is a complex disease and more than one factor maybe affecting any given patient.

What we thought was most noteworthy about the Phase 2 cohort is how consistently setmelanotide worked in those patients who are compliant with a therapeutic dose. The 18 patients had a mean BMI decrease of 14.5% at 16 weeks associated with meaningful decreases in their hunger scores. The consistency of those results strongly suggests that setmelanotide is targeting the underlying cause of the disease. As with each of the diseases caused by impairment in the MC4 pathway, it is critical to correct the basic defect before deciding on the need for additional therapy. The obvious and most simple of those interventions is a diet and exercise program, which these patients have universally failed when tried in the presence of an MC4 pathway defect, but find greater success once function in that pathway is restored.

And moving to Slide 8, we are excited to have our Phase 3 trial underway with the design as shown here on Slide 8. As a reminder, this trial on HO is a double-blind randomized control trial enrolling 120 patients randomized 2:1 treatment and placebo. Patients will be dose-escalated over 4 to 8 weeks and then follow-up for 52 weeks for the primary endpoint of percent BMI reduction as compared to baseline. This challenging -- it is a challenging time to be running clinical trials, but the team has done a great job working with our CRO and we expect to have all of our sites up and enrolling by the end of Q3.

On Slide 9, the MCR pipeline of approved indications and trials in progress. Overall, we have worked with over 100 clinical sites in 15 countries, which in addition to testing our therapy creates awareness, builds experience with the therapy and most importantly helps build a community of patients and physicians working to improve the lives of patients living with these MC4 pathway disease.

With that, I'll turn the call over to Jennifer.

Thank you, David. I will be turning on Slide 11 today. We are pleased with the continued demand and uptake we are seeing with our US launch of IMCIVREE for BBS. At launch we felt good about our starting point and our strategic plan to identify patients, to engage with physicians, and educate them on the hyperphagia and severe obesity of rare MC4R pathway diseases and to support both patients and physicians through the journey.

Now, 3 full quarters into launch we are excited by our progress and our team is thrilled by the success stories we're hearing from patients and their treating physician. We continue to hear from patients, caregivers and physicians experiencing the benefits of not only weight loss, but also improvements in social activity and engagement, better sleep and more confidence.

Since IMCIVREE was approved for BBS by the FDA on June 16, 2022 and through the end of the first quarter of 2023, we have received more than 300 new prescriptions for BBS patients with more than 100 of them in Q1. The more than 300 new prescriptions since approval comes from more than 175 physicians. Importantly, we have received pair approval for more than 160 of these prescriptions since launch. The demand for IMCIVREE is strong. Physicians are writing prescriptions, patients are experiencing benefit on drugs and payers are increasingly recognizing the value of this therapy.

Next slide. Looking at the prescribers of IMCIVREE endocrinology, both pediatric and adult remain the top specialty at a combined 44% since launch. Pediatricians remain second, accounting for 20% of prescribers. Approximately 27% of all IMCIVREE prescribers since launch are new to Rhythm, meaning that our territory managers had not called on them directly prior to writing a prescription. That's your increasing Q1 versus prior quarters as 37% of prescribers, who wrote in the first quarter of 2023 were new to Rhythm. This trend continues to give us confidence in our non-personnel promotion efforts, which supplements our field team by educating a broader physician and patient population.

Next slide. For our paramedics for BBS prescription, the majority comes from commercial clients and Medicaid, and a small percentage or less than 10% come from Medicare. We have mentioned in the past that commercial coverage for IMCIVREE is good, with payers representing the vast majority of covered lives have a policy in place to cover IMCIVREE.

We are also pleased with Medicaid coverage and the progress we're making in securing approval. I have outlined on prior calls that there is variation in coverage status as some states covered IMCIVREE, some states do not and others decide on a case-by-case basis through the appeals process. In an effort to provide more granularity on Medicaid coverage we outline on the next slide some data based on Medicaid covered by relative to every coverage.

Next slide. According to Medicaid, there were approximately 85 million individual enrolled in Medicaid in all 50 states plus Puerto Rico and the District of Columbia as of December 2022. Looking at the left hand side of the pie chart, approximately 75% of Medicaid covered lives are in states with a positive IMCIVREE policy in place or in a state where we have been able to get at least one positive coverage decision in the absence of an IMCIVREE policy.

Within this latter category, which represents about half of that 75% there are some states where we have been able to consistently gain positive coverage decision whereas other states could be mixed with one or more approval along with one or more denials.

Now moving to the right hand side of the pie chart, the remaining 25% of Medicaid covered by is a mix of states with no policy yet for IMCIVREE coverage and 1. We have not yet had a prescription for IMCIVREE that would trigger a coverage decision. Or 2. We have received a prescription and we're still working to secure access. Or finally3. Well we have received a prescription and have not been successful in gaining access through and for IMCIVREE through the appeals process. This last category represents less than 10% of cover size.

We remain committed in our payer education and outreach efforts to help them recognize CVS as a distinct disease that requires a targeted therapeutic approach. And we continue to work persistently to explore reimbursement opportunities for all of our patients. For example, even when we have denials through the appeals process we have had success in gaining Medicaid coverage through EPSDT, or Early and Periodic Screening, Diagnostic and Treatment benefits. This program provides comprehensive and preventative health care services for all children under age 21 who are enrolled in Medicaid. So this dynamic is constantly evolving.

Next slide. The age breakdown of BBS patients for whom we have prescriptions is here. Adults count for approximately 50% of prescriptions received since launch, while prescriptions for adults -- for children and adolescents continue to account for the other half. And nearly all or 97% of patients with prescription have consented to receiving direct connection and education from our Patient Services team, which we call Rhythm InTune. This allows our team to work side by side with patients and their families to help them gain insurance coverage and to support them through our education efforts from initiation and maintenance on therapy.

Next slide. Based on the information available to us today, we know there are physicians who prescribed IMCIVREE for 1 or more patients who have additional BBS patients for whom they have yet to prescribe, as well as physicians with BBS patients who may require additional education to prescribe IMCIVREE. Our territory managers are actively engaging with each physician to increase a sense of urgency, to treat the hyperphagia and obesity that comes with BBS and to set expectations about IMCIVREE therapy to support pull through a prescription.

In parallel genetic testing, use of ICD-10 codes to narrow our physicians targets as well as digital non-personal promotion efforts. All of which we began well ahead of last June's launch, have driven our patient identification efforts. We are excited by the progress of these ongoing efforts and the opportunity that remains for us to bring moving forward. With that. Let me hand it over to Yann.

Thank you, Jennifer. Slide 18 please. Last week we announced the launch of IMCIVREE in Germany for the treatment of obesity and control of hunger associated with BBS with federal reimbursement. As you can see on the slide, the German Federal Joint Committee or GBA rules that IMCIVREE for BBS is eligible for full reimbursement by statutory health insurances. So GBA unanimously voted to exclude IMCIVREE for the patients with BBS from its lifestyle exemption list as it did previously for biallelic POMC, PCSK1 and LEPR deficiencies, and exactly on time with regard to our plans. As David said, this is a very important recognition of the severity of BBS and further reinforces the distinction between general obesity and rare MC4R pathway diseases.

Next slide. Germany holds a unique place in the history of Rhythm that is very favorable to us and set aside. Our first patients were treated at the Charite University Hospital in Berlin, where the local experts as the longest experience in the world treating patients with setmelanotide more than 10 years.

We are very well positioned in Germany with an experienced team on the ground engaging with healthcare authorities, payers, physicians and patient organizations. Our general manager in Germany comes from Alnylam, has successfully led many orphan drugs and high value therapies launches in Germany, and he is leading a team of 6 people dedicated to the launch.

Genetic testing is well established in Germany, and now programs are supplementing it. Based on our interaction with the centers of excellence, we believe that about half of the patients diagnosed with BDS in Germany have already been genotyped. This is quite important as genetic confirmation is required and are available.

We also have strong starting points. German BBS treatment guidelines are currently in development and will be published soon. There is a very well organized patient advocacy group dedicated to BBS and also to existing academic registries for rare renal diseases and a rare ophthalmological disease.

Next slide. Rare disease launches are difficult to forecast especially the first 12 to 18 months, in Germany in particular, we do anticipate a methodical patient by patients approach. However, we are confident that BBS in Germany represents a significant opportunity for theory, our team has already engaged with physicians in 18 major hospitals across the country in an effort to identify patients with BBS and prepare the launch and have set up a significant number of medical education and disease awareness activities. We estimate that the prevalence for BBS in Germany is approximately 1,200. We believe that there are about 800 patients diagnosed. And of those 800, we have identified physicians carrying for more than 250 of them, and we are focused on identifying more.

Next slide. This slide is a reminder of how important the European market is to our global strategy. For rare genetic disease, we know that new parent countries are (technical difficulty) Sorry? I'm back. Sorry, I had a Wi-Fi issue. So I was saying that the slide is a reminder of how important the European market is to our global commercial strategy. For rare genetic diseases, we know that European countries are more advanced than the U.S. with single payer health care systems, government funded genetic testing, rare disease organizations, center of excellence and referral networks.

For biallelic POMC and LEPR efficiencies, we know that there are about 100 patients identified in the EU4 and the U.K. And for BBS, more than 1,500 patients are identified across those same countries. For PCSK1 and LEPR we have achieved access in 9 countries in addition to the U.S. We are launched in the U.K., Germany, Italy and the Netherlands, and we have achieved an ambition sales in France, Austria and Turkey and early access in Argentina. In summary, we are very pleased with the progresses we are making in Europe in terms of market access.

Next and last slide, please. We are also very pleased with the level of support we are receiving from key experts in MC4R pathway disease including Bardet-Biedl syndrome. Europe is home to many of the world-leading experts and Rhythm is fortunate to enjoy a strong and long-lasting relationship with many of them.

In March, Professor Sasaf Farooqi from Cambered U.K., one of the world's leading experts in MC4R pathway diseases and Professor Philip Beales from London, who helped define how we diagnose BBS, both lead our Rhythm sponsor disease education webinar with Angela Scudder on this with BBS and who is a BBS patients is an officer for BBS UK clinics. On this webinar, the speakers explored hyperphagia, severe obesity, the genetics of rare MC4R pathway disease with a focus on BBS and how to best care for these patients with a multidisciplinary approach.

We are delighted to have more than 125 physicians from 17 countries joined the webinar Live, which speaks to the high level of interest in rare MC4R disease among European physicians. Thank you and we have Hunter.

Thank you, Yann Mazabraud. Turning to Slide 24. With the launch of IMCIVREE in Germany and additional global markets coming online this year, Rhythm is growing into a global commercial rare disease company. And as we do, we approach all our operations and investments in our commercial, R&D and operational programs with the financial discipline that governs our decision-making and focuses on building long-term value for our shareholders. We are grateful for your support.

Let me review the highlights of the Q1 P&L. As mentioned, we recorded $11.5 million in net product revenue during the first quarter versus $1.5 million during the first quarter last year, which was prior to FDA approval for BBS. Compared to $8.8 million in net product revenue from the fourth quarter of '22, that marks an increase of $2.7 million or more than 30% quarter-over-quarter. This growth is driven primarily by IMCIVREE sales for BBS in the United States.

Cost of sales during the first quarter was $1.4 million or approximately 12% of net product revenue, which is consistent with Q4 '22. Cost of sales consisted of approximately $600,000 in royalties due to Ipsen under our original licensing agreement for setmelanotide, approximately $200,000 of amortization of previously capitalized sales-based milestones as well as product costs associated with increased sales of commercial products.

R&D expenses were $37.9 million for the first quarter of 2023. This compares to $32.5 million during the first quarter of last year. Compared to $23.5 million in Q4 of '22, this quarter-on-quarter increase of $14.4 million is driven by several factors. First, there were $5.4 million in costs and fees associated with the Xinvento acquisition.

The remainder of the quarter-over-quarter increase was due to a $6 million net increase in clinical trial expenses. These are mainly start-up costs associated with the HO Phase III trial and a substantial increase in activity associated with the M&A Phase III study. Also in Q4 '22, Rhythm received a $2.5 million credit during the closeout of our GO-ID study during that quarter, which reduced R&D expenses. Overall, clinical trial costs are expected to be higher on a period basis during study start-up and after all trial sites have opened.

Lastly, in Q1, there was a $2.1 million increase in clinical supply costs for these studies and for other programs. SG&A expenses were $24.6 million for the first quarter of 2023 compared to $21.4 million in the same quarter last year. This increase was largely due to the impact of $2.6 million in higher headcount costs, including stock compensation.

Quarter-over-quarter, SG&A declined nearly $1.7 million or nearly 7% from $26.3 million in the fourth quarter of '22. The decrease in SG&A versus Q4 is due primarily to lower marketing expenses in the U.S. For the first quarter, common shares outstanding were 56.7 million, and quarterly net loss per share was $0.92.

Turning to Slide 25. We closed the quarter of 2023 well capitalized to $295 million in cash on hand, sufficient to fund all planned activities into 2025. This cash guidance includes the impact of projected milestones associated with Xinvento acquisition.

We touched on a few other aspects of the quarter of the first quarter net product revenue of $11.5 million, 83% of this revenue was generated from U.S. sales of IMCIVREE as compared to 85% in the fourth quarter of '22. As mentioned, $5.4 million of operating expenses represented consideration associated with Xinvento acquisition, which was included in this quarter.

We accounted for this transaction as an asset acquisition. Q1 operating expenses included total stock-based compensation of $6.4 million as compared to $5.3 million in the fourth quarter of 2022. And our non-GAAP operating expense guidance for 2023, which we disclosed last quarter, remains unchanged at $200 million to $220 million. This guidance excludes the noncash impact of stock-based compensation. And with that, I'll turn the call over to David.

Thank you, Hunter. So in summary, we're excited about the progress we have made, and we look forward to multiple data readouts in addition to continuing to update you on our global commercial launch with BBS in the upcoming quarters. And so with that, we'll open it up for questions. Operator?

(Operator Instructions) Please stand by while we compile the Q&A roster. Our first question comes from the line of Phil Nadeau from TD Cowen.

A couple of commercial questions. First, in terms of reimbursement for BBS in the U.S., are there any new trends in terms of either faster or easier reimbursement as the launch continues? Or is it that the patients are spread among so many insurance plans that it's still Egypt plant evaluating the first patient?

Yes. So Jennifer?

Yes. Thanks for the question. So we're continuing to build the relationships. But as you outlined, there are just so many different payers. So the scripts come in, is dependent on if we've interacted with the payer before or not. I would say that in terms of scripts that we've received through a payer where we've been able to gain reimbursement in that process, also because we know what the process looks like for that particular payer is quicker.

We are also seeing trends through our education efforts that we have a higher percentage of payer approval at the prior authorization stage, which is also a good sign. But once again, it's really one-on-one with these payers as they come in, that our teams to interact with. And overall, the average time in terms of gaining reimbursement still remains within that 1 to 3 month period of time.

In the slides, there was a note that one of the opportunities for expansion in BBS in the U.S. are among those physicians who are treating BBS patients but are not yet ready to prescribe IMCIVREE. What are the objections those physicians have, what do they need to do -- or what do you need to do to convince them that they should be prescribing IMCIVREE?

Yes. So I would say that the gating factors could be either on the patient level or the physician level. For both of them, some of these patients may not be of age and within our label. For patients specifically, the physician they have written those scripts, but the patient could be lost to follow-up. There may be concerns just in terms of injections or a parent just want to get a bit more education in terms of the safety profile before putting their child on a chronic lifelong therapy and many other reasons.

From an HSP perspective, sort of similarly, they may require some additional education to truly appreciate and understand the difference in terms of the hyperphagia and the early onset obesity that these patients have, in rare diseases is not uncommon for a physician to just have one patient. So there may be additional education needs. So there's a lot of different reasons, but I will say that our teams are really on ground interfacing with the customers to try to pull through the script.

And Phil, just to reinforce what Jennifer said, the hyperphagic component of this in terms of the opportunity for education and creating that sense of urgency, not surprisingly. I mean health care providers themselves, I think, just don't understand -- many of them don't understand the full impact of this on both the patient and the family. And so there's still a little bit of -- we understand you're hungry, but they don't understand the pathology and the severity of that hyperphagic component. So I think as Jennifer said, we are making good progress there, but that is a clear opportunity as we go forward.

Great. And then one last question for me. In terms of German reimbursement, can you remind us where you are in negotiating the final price for IMCIVREE and BBS in Germany?

Yann?

Yes. Thank you. So we are still in the midst of the POMC and LEPR pricing negotiation. And so far, the dialogue has been very positive to date. The medical benefit assessment has been positive as well. BBS price negotiation will start in a few months and the process takes approximately 6 to 9 months. So more to come for the German price, probably be yes.

All right. One moment please for the next question. All right. Our next question comes from the line of Derek Archila from Wells Fargo.

Congrats on the progress. Just a couple from us. So I know you said that the BBS launch and these types of rare disease launches can be lumpy. But I guess, can you provide some more color on what's specifically driving the acceleration that we saw in new patient adds from 4Q to 1Q here? And is that something that's going to translate going forward into the following quarters?

And the second question is, do we have enough data yet to really understand the discontinuation rate for IMCIVREE and Bardet-Biedl patients in real clinical practice and just understanding how that's trending right now? And I might have one follow-up.

Thanks Derek, Jennifer.

Sure. I would say that overall, just in terms of the level of demand and interest for this specific therapy for BBS has been really overwhelming and great to see as well as, clearly, there was a need in the patient population as we're hearing the benefit that the patients are actually receiving, once again, a motivating factor for our teams overall. There were existing opportunities that still remain in terms of the patients that were identified through all of our cross-functional team efforts and still remaining opportunity just in terms of pull-through to scripts.

And in the meantime, I feel that in any disease, but particularly in this one, we have identified specific ways of going about to really have targeted approaches of patient signed and identification, one, to get to physicians or patients that have already been diagnosed and lost in the system as well as trying to expedite the path to get patients who are symptomatic to a diagnosis. So all of these efforts are ongoing, which continue to fuel the increase just in terms of number of scripts that we have received.

When we say that rare diseases are "opportunity," I would say that in terms of some of these efforts, you can't predict quarter by quarter, that's going to be the exact same. So I wouldn't necessarily linearize or just make the same assumptions quarter-over-quarter at this point of time. But I would just say that there still remains quite an opportunity just in terms of growth within this patient population for IMCIVREE.

To the next question, I think, around.

Maybe just add one quick follow-on to that Derek. So I think what we can say at this point and just what Jennifer said, is that we are well beyond whatever pent-up demand existed in the system and the like and that you're seeing now a quarter-on-quarter as we would expect. Stability and sort of ongoing strength in the overall opportunity, if you will. And again, I'll reference back to the number of physicians who we had not been in contact with, and that pool is growing. And that's again what we would see and speaks to overall help of, I think, a rare disease opportunity. But again, don't trend, as Jennifer said, I think that's not. It could be less or more in any given quarter, but our confidence that this thing is real and working is very high.

Okay. And there was another question just regarding discontinuation. We continue to be quite pleased. As I outlined in the past, there was a lot of effort -- quite essential team effort, really focused to make sure that the patients were able to go and tolerate the titration phase. So through that process and education, we still remain very, very happy just in terms of the level of maintenance of patients through that phase with the number of discons relating to nausea, vomiting being extremely low. We do have some discontinuation for various different reasons, including a very low number relating to hyperpigmentation. But there's other reasons that a patient may continue that are also opportunities for follow-up.

And I think one of the pieces that continues to be one factor that increases the compliance of this therapy is the hyperphagia because people feel the impact; they also feel the impact of stopping therapy. And once again, we also hear when patient stops therapy that the hyperphagia comes back, and there may be interest to come back on to therapy. So very happy overall in terms of the low discon rate.

Got it. And maybe just one follow-up here on the prelim data that you're going to put out for DAYBREAK. I guess will you be kind of doing an in-depth, kind of presentation on framing those opportunities. And I don't know if you've kind of guided to what those opportunities look like from a commercial perspective? Are they more like a Pompe or more like a Bardet-Biedl or something different?

Thanks, Derek. We haven't guided and not prepared to guide today. What I have said and reiterated is, I expect to report out on 5-ish plus or minus genes where we have enough data. The DAYBREAK trial is designed as an exploratory trial. It's done exactly what we wanted it to do and allows us to sort a relatively large number of genes that we knew had some link to the pathway with the goal of trying to understand which were the ones that have the strongest link versus the others? I will say that some of those, which we discontinued earlier on, we're extremely rare, and we just weren't able to enroll. So back to your question about the Pompe smaller opportunity kind of thing, but others have a much higher frequency and more in the order of SH2B1, SRC1, that we're pursuing in our M&A trial again. So more to come on that, but the expectation we should know is it will be around 5 plus or minus genes where we have enough meaningful data to report out.

One moment, well we compile the Q&A roster. Our next question comes from the line of Karin Jenkins from Goldman Sachs.

Maybe a couple from us. So of the roughly 140 patients that don't currently have reimbursed product and including the 40 in particular, that had a prescription as of year-end '22. What portion do you expect to ultimately get on reimbursed drug versus what portion do you think may just remain on free drug from here?

So within the 140 that you mentioned, that includes patients that are still within the pending category that we're still working through and through queue reimbursement as well as patients that we have put on to our free drug program. I will say that in terms of our free drug program, we have outlined in the past that for reimbursement, Medicare patients have not been a patient population that we've been able to gain reimbursement for at this particular time. So that's approximately less than 10% of scripts to date.

The commercial coverage has always been very strong. The caveat here is, as with other rare diseases, there are very small commercial self-insured plans where cost of a therapy like IMCIVREE can be challenging. So we do have patients that are on small self-insured plans as well that are on path as well as, as I went through today, some Medicaid patients as well.

The event that I will say here is, even though they're on our free drug program, I think the word that you're going to keep on hearing is that we have a persistence just in terms of still working on those patient populations as well, whether it's further education with a payer or just ongoing help for that patient itself. And we have been successful in moving some of these patients off into commercially insured past -- so it's constantly evolving from that perspective, and we are really just still starting and continue to engage with all of our customers on that point.

Thanks Jennifer, maybe just to -- just to add to that. At this point, I think the number I would think about, and as Jennifer said, we're still learning, and it's early, et cetera, but about 20% plus or minus of the total scripts are patients who are likely to be on PAP and again, reminding you of that 20%, plus or minus, you have approximately 10%, a little less than 10% that are the Medicare and they go straight there.

But most encouragingly, and this has been true in our prior experiences as well that patients who go on PAP don't necessarily stay on PAP and you continue to find ways to move them over. And patients themselves actually don't want to be on PAP. They much rather be on a more stable, if you will, a situation where they are being paid through the system.

That's helpful. And then maybe on the clinical side, you highlighted you expect a complete enrollment for the study in HO in 1Q '24. Are there any factors that could shift that time line either to be more rapid or delayed for any reason?

Yes, many. Probably on both sides. I mean -- I think what we've shared and there's 2 parts to this. One is just the practical administrative issues of getting sites up and going. We've identified the sites that we need. You continue to look for the "maybe outstanding sites" to be is back up if something happens at the site. But in general, we have the sites we need. And so it's just a matter of working through contracting with these sites and the IRB approvals and the like.

Again, as we said, we're in a queue, not just with other obesity trials. We're in a queue with any trial going on at that site. So that's been slower than we would have liked. Again, our goal is to have all of these sites open in an operational rolling by the end of Q3. So that's one, and that could vary. I might think we have quite a comfortable guidance there, but I -- you don't know what you don't know.

And then the second is in terms of patient interest. The patient interest is high. So we have our investigator meetings coming up in May, first one in the U.S. I'm followed to later; I'm in Berlin for the European sites. And again, what we've heard and what I expect to see there is a high level of interest. And also, I would think some competitive enrollment.

Again, we know there's patients out there eager to get in and these sites are going to know that if all 25 sites are enrolling there aren't that many patients per site that will have eligible slots and some of the sites are clearly aiming for much higher than even distribution. So we'll see how it goes. But I think I'm pretty confident that once we are up and running at the patient will enroll the path.

Our next question comes from the line of Dae Gon Ha from Stifel.

Congrats on the progress as well. Just reverting back to Derek's question, just hitting it head on, just apologies if I've missed it, but the discontinuation rate, David, you were at other conference recently talking about mid-single digits. I just wanted to confirm that number is still true. And then in terms of the 2 questions I had, one, when you think about the patient dispositions across the 3 dose levels that are in the label, can you comment on any kind of -- I guess, Jennifer kind of went into education to get patients into sort of a more tolerant dose. But any color you can provide across the 3 doses, what kind of disposition we should be expecting going forward? And what work is being done to keep patients off of the 1-milligram and more skewed towards the 3-milligram arm.

And then secondly, on the strategies for the reimbursement. David, you spoke previously a number of times, Gaucher as sort of the analog we should be thinking about for BBS going forward. But just harkening back to your rare disease experience, what kind of reimbursement rate should we be expecting eventually? I mean, is this something that can near into 80%, 90% or hovering in the 70%? And what work needs to be done for IMCIVREE to get there?

Thanks, Dae Gon. So first, on the discontinued patient rates. We previously, as you noted, said, I would characterize we're drifting up a little bit there, not surprisingly as we get more patients on for longer periods of time, so it characterizes higher-level single digits. But as Jennifer said, and this is what's most encouraging overall is, one, I think we've done much, much better than we did in the clinical trials for the reasons she outlined, the close contact with the patient through our system. Second is reason patients are discontinuing, about half are related to side effects of the drug. Again, opportunities will just continue to educate the patients in the right way. And the other are personal issues specific to that individual patient, some of which may resolve over time and not patient being willing to come back on therapy and we have several of those examples. Including others that we're working.

With regard to dosing, the whole strategy behind dosing here is we start low and we're going a little slower than we did in the trial. Not surprisingly, if you go a bit more gradually, the early tolerability is better, number 1. Number 2, the vast majority of patients are getting to 3 mgs. I would say, the balance of the patient population is early and still working their way there. So my expectation is that the truly vast majority of patients will be at or close to 3 mgs.

Younger patients, very young patients may in fact, achieve their desired level of benefit at a lower dose level, but if you go back to our Phase III trial, where we had a number -- about half the patients were under age of 18 and the other half were over in BBS. Again, that was -- those patients were literally virtually all on 3 mg. So if you have tolerability issues, you go down, go a little slower, but you continue to dose yourself back up, you don't just go down and stay as a rule.

Your third question was just on the Gaucher analog. I mean, I just referenced that to remind people that these opportunities in rare diseases, they may ramp somewhat more gradually. You don't have a hockey stick as a rule. But you tend to have them for a long time and in Gaucher, 30-plus years from its original approval is still a $1 billion-plus opportunity. So again, we'll see where it goes.

But BBS has many of the elements of what you want to see in a rare disease opportunity in terms of the overall size of the opportunity, the ability to diagnose that it's syndromic in this case and the strength of the community that's emerging in the patient community and physician community. So we'll see where it goes. That was the analogy there.

With regard to reimbursement, I don't expect to see in the U.S. specifically any decrease in price, including when we expand into HO. Obviously, you don't necessarily take the same price increases that you might take in other parts of our industry here. So there is an implicit decrease if you don't take a price increase in terms of inflationary adjustments. But in terms of actual price, yes, we don't expect any, these are rare diseases, and we think we're very fairly priced.

Our next question comes from the line of Michael Higgins from Ladenburg Thalmann.

Congrats on guys on that continued progress. Just want to follow-up on the HO trial, the pivotal that's enrolling. If you can give us some feedback on how the pace of enrollment, the pace of screening, failure rates and the pace of site enrollment are coming in versus expectations?

Thanks, Michael. Early. We just started. We'll figure out -- we will give you metrics on how that trial is evolving. Today, the communication is we're up and running. But again, it is much too early to have any sense there. I will say, again, probably my opinion as opposed to sort of observe on hard data here. But there are enough patients and enough interest out there that the pre-screening of patients should be pretty good. So patients who actually come to the site to be formally screened. I'm not expecting a high screen failure rate there to be determined. But again, I think this is one of those situations where we're not desperate to enroll just anybody and therefore, you can end up getting higher screen value rates. But we'll see, but I can't give you more information today.

Okay. I appreciate that. And also, you've noted that you're looking for 3 data readouts in the second half. I was curious if you can provide feedback as to the order of those events and if they come in before or after the Obesity Society meeting in mid-October?

Yes. I think -- I mean you're correct in highlighting that they are going to be linked to a meeting. And so abstract acceptance and the like will be a key driver there. We've guided to Q4. I think that's all I can do today. But we will get that information?

All right. Our next question comes from the line of Joseph Stringer from Needham & Company LLC.

Just wanted to get your updated thoughts on the European BBS launch and how could compare to the U.S. launch to date. It looks like European BBS patients, more of them are identified and the community is more organized, but you have the dynamics of the staggered reimbursement process. So how do you anticipate your peer launch playing out and perhaps maybe using Germany as an example, you have the 250 patients IT. Could we expect a similar rate of TRF add relative to what has been seen in the U.S. to date.

Yes. I think, Joe, I'll turn it over to Yann, one second. Just to highlight, you are correct that the European is better experience or situation. It's better organized and more identified. But as Yann highlighted, have a different pace. So Yann?

Yes. Maybe I will start with the German launch versus U.S. and I will -- on the overall European situation. So, Germany and the U.S. So you're right, there are similarities between the 2 countries. And the most important one is the decentralized health care and decentralization of the care.

And as I said in my presentation, we already know more than almost 20 large hospitals where they are diagnosed BBS patients and where patients will be treated. There is a main difference, which is really -- the pace of starting the treatment. The German physicians are well known to be more conservative than the average -- and we know that it will be patient-by-patient decisions like for any other rare disease. So that's Germany versus the U.S.

And then back to the overall question of Europe. It's a bit early to speak in terms of trajectories for IMCIVREE in Europe first, because Germany is our first important launch. And the second -- most of the important European country will launch in the end of the year, Italy, Netherlands, Spain, et cetera, at the end of 2024 for the U.K. So still a bit early.

Thanks, Yann. Joe is that covered?

Our next question comes from the line of Jeff Hung from Morgan Stanley.

For the low number of patients discontinuing due to hyperpigmentation, do you have a sense from those patients how their hyperphagia was? Do they happen to have lower hyperphagia than other BBS patients for the hyperpigmentation overrides that and then I have a follow-up.

Jennifer, just to highlight, again, the number of patients stopping because of hyperpigmentation is extremely low. So one that's been reassuring, but I don't know on those specific cases.

I don't think it's necessarily correlated with the hyperphagia in terms of the reasons for the dis-com. I think that it's patient by patient, just in terms of how problematic the hypersegmentation is for that particular patient. And once again, I think as the patients dis-con they feel the resurgence of the hyperphagia itself, they can also be at a decision point once again just in terms of really deciding whether to discontinue or to reinitiate therapy. So our teams are there regardless to support them as they go on their path forward.

Okay. And then I know it's a bit early, but with the recommended weight loss monitoring after 1 year of treatment, do you have a rough sense for the proportion of patients that started on commercial drug fairly early in the launch that have already seen at least 5% loss in body weight or BMI -- just trying to get a gauge the potential impact of discontinuations based on this recommendation.

Yes. So as you outlined, I would say that for the most part, just in terms of the off periods, the payers are following our guidance or label. And so it's a bit early, just in terms of really reaching that point of time within our bond -- with that said, we feel very good just in terms of the positive feedback and the compliance and persistence on therapy to date, which speaks to the benefit.

And I think that in general, it will -- it will be interesting just in terms of what "clinical benefit" is outlined. I think for the most part, like there just want to be reassured that these patients are actually receiving clinical benefit while being on therapy, and that's something that, once again, our patients continue to monitor baseline themselves versus on therapy. So that can also be translated to the physicians who could translate that as well as to the payer.

And just to remind you, Jeff, the label, as Jennifer referenced, it's 12 months is for BBS when the label suggests you should reevaluate. Payers, of course, can choose to do so earlier. But Jeff said, people tend to be sticking to the label, and we're less than a year out from month?

All right. We do not have any other questions. So I would now like to turn the conference back to David Meeker for closing remarks.

Great. Well, thank you, everyone, again, for tuning in this morning, and we very much look forward to the next quarter update on studies and that will disconnect. Thank you.

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