BioCryst Pharmaceuticals, Inc.

Good morning and welcome to the BioCHRIST Q1 2023 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then or your telephone keypad. To withdraw your question, please press star then too. Please note this event is being recorded. I'd now like to turn the call to John Bluth at Biochrist. Please go ahead.

Thank you very much. Good morning and welcome to Biochrist's first 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 John Stonehouse, CFO Anthony Doyle, Chief Commercial Officer Charlie Geyer, and Chief R&D Officer Dr. Helen Thackeray. Following our remarks, we'll answer your questions. Before we begin, please note that today's conference call will contain forward-looking statements, including those statements regarding future results on audited 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 are accessed on our website. I'd now like to turn the call over to John Stonehouse.

Thanks, John. The launch of Orladeo remains very strong now entering the third year. Charlie will share the details, and when you hear the total number of patients on therapy and the growth rates of adding new patients both year over year and quarter over quarter, you should understand why we remain very confident in our guidance of no less than $320 million this year and $1 billion at peak. The large base of patients on therapy and the consistent number of new patients starts each quarter reflect a steady upward trajectory. And this is just the beginning as there's so many more patients yet to try Orladeo. We have a once a day therapy in an injectable marketplace. It makes sense that more and more patients are wanting to try it, and many see great benefit and tell us it's changed their lives. Beyond this, we will continue to invest in Orlodeo R&D to reach more patients and create even greater value. We will do this by adding more countries around the world where patients gain access to Orlodeo and by expanding the label like we're doing with the pediatric program. We will also continue to invest wisely and find the next Orladeo through our pipeline and discovery efforts. Our goal is to find another rare disease target where we're able to bring a best-in-class medicine to patients while balancing the risk inherent in drug development. Lastly, we have improved our already strong financial position by the recent refinancing. This was hard to do in the current environment, but Anthony and team got us better terms on our debt and push the repayment out to a time where we should be much closer to peak sales. This dramatically reduces our dependence on the capital markets and allows us to focus on the execution of our plan by growing Orladeo and finding another molecule where we can repeat the Orladeo success. That will lead to adding real value today and even more value in the future for patients and shareholders. Now I'll turn the call over to Anthony.

Thanks, John. Q1 was a great quarter for Orladeo, with revenue up $18.7 million, plus 38% compared to Q1 of last year. Additionally, for us to see the kind of underlying patient growth that John mentioned and to overcome the reauthorization headwinds with revenue just slightly below the prior quarter gives us a lot of confidence as we move forward to what we believe will be a strong Q2 and onwards to our full-year goal of no less than $320 million. You can find our detailed first 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 came in at $68.8 million, $68.4 million of which came from Orladeo, putting our trailing 12-month revenue at over $270 million. We expect Q2 revenue to be strong, and we should see our 2023 quarterly rhythm play out similarly to prior year. We are making a change to our approach to revenue segmentation. Moving forward, we will segment our revenue into Orlodeo and non-Orlodeo revenue. And for Orlodeo revenue, we will be segmenting into U.S. and ex-U.S. To that end, of the 68.4 million of global Orlodeo revenue, 60.8 came from U.S. sales with the remaining 7.6 coming from ex-U.S. This ex-U.S. revenue represents approximately 11% of global sales for the quarter, And while this percentage for ex-US is higher in Q1 than we expect for the remaining quarters of the year because of the gross-to-net headwinds in Q1 for the US, we do expect ex-US revenues for 2023 to come in at or above 10% of the global total. Operating expenses not including non-cash stock compensation for the quarter were approximately $83 million. This is a decrease of $7 million from Q1 of 2022 and down 27 million compared to Q4 of 22, most of which is in the R&D area due to reduced clinical investment following the termination and ongoing close out of the 9930 program. We reiterate our full year OPEX guidance at 375 million flat to prior year as we continue to invest in maximizing the Orladeo launch globally and continuing to invest in R&D. For R&D, we are investing mainly in three key areas, continuing to develop Orladeo by identifying opportunities to expand the label, such as the pediatric trial, while also continuing to invest in real-world evidence generation. Our Oral Factor D Program 10013 continues to move forward to determine if we can get to a safe and effective dose with a potential once-daily best-in-class profile. And lastly, we continue to invest our discovery and early development capabilities with the goal of developing differentiated treatments in selected rare diseases. Cash at the end of the first quarter was at $403 million. Following the debt refinance deal that we closed last month with Pharmacon, net proceeds of that deal bring pro-pharma cash up to $429 million. I think it's helpful to add some extra color around that deal and process. It was a very competitive process with more interested parties than any deal that we have done before. The strength of our execution throughout the launch of Orlodeo to date and the belief in our plans to get to a billion dollars at peak was the main driver for that interest, and it was great to secure such a strong deal and a lender of the caliber of Pharmacon. This deal helped us to achieve a number of goals that we had set out in advance of the process. Firstly, and for me most importantly, It enabled us to delay the bullet payment from 2025 to 2028, at which point we'll be much closer to Orlodeo Peak South. Next, in a very tough environment, we were able to secure significantly reduced margin spread on the loan to much more competitive rates. Then we're able to pay interest in kind for 50% of the interest for the first six quarters, which preserves cash as that option had expired in our prior agreement with Ethereum. We also have the ability to draw an additional $150 million up to September of 2024. These funds are committed and the decision to draw them or not is ours. We will only draw the funds if we can generate value by doing so, but access to it gives us additional flexibility and continued optionality. Lastly, it significantly reduces our reliance on the capital equity markets. This is our third refinancing or third financing event in a row not to be centered around equity. At current prices, the equity markets do not reflect what we believe to be the true value for risk. A company with a product on its way to a billion dollars in peak sales, a discovery and development engine capable of bringing additional drugs to market behind it, and a strong balance sheet. And so being able to use non-equity instruments is the best option for us. With this refinancing, growing Oral-A-Dayer revenues, and our continued disciplined approach to capital allocation all moving us closer to profitability, we have the financial strength to allow us to unlock greater value for the company and for our shareholders. And now I'll pass it over to Helen.

Thanks, Anthony. The Oral-A-Dayer launch is succeeding because we have delivered to patients a best-in-class oral, once-daily medicine that is differentiated in the marketplace. We are making R&D investments both to reach more patients with Orlodeo and to deliver our next best-in-class molecule to the market. This is the standard we have set with Orlodeo, and our goal is to develop and commercialize more highly differentiated products for the treatment of rare disease. As we've shared before, we are studying the use of Orlodeo in children with HAE under the age of 12. We have initiated dosing in the pediatric registration trial. And in fact, we've had tremendous support and excitement for this pediatric program in the medical and patient communities. Enrollment is off to an excellent start in the initial dose groups, and we are pleased to be on our way to building the data set for the evaluation of Orlodeo in children under 12 with HAE. In complement mediated disease, our once daily oral factor D inhibitor, BCX10013, has an opportunity to be our next differentiated best-in-class molecule. While this program is still early and therefore has risk, if we succeed, it would bring a unique therapy with substantial benefit to patients. Also, in the complement system, we are investigating both single target and combined target approaches to address diseases mediated by any of the pathways, the classical, lectin, alternative, and terminal pathways of complement. This includes our oral C2 inhibitor program, currently in lead optimization. As we look ahead, we are investing so we can deliver additional best-in-class medicines in the future for targets within the complement system as well as for other select rare diseases outside the complement system. Our approach is to bring multiple candidates and programs forward through discovery, spreading risk across an early pipeline with a variety of targets, modes of therapy, and diseases. We are focusing our efforts where we believe our structural biology-based discovery capability provides an advantage so we can do what we do best, develop potent, selective, and bioavailable molecules against difficult targets. We look forward to sharing more detail on these additional programs at an R&D day later this year or early next year. In the meantime, we continue to make disciplined investments in the compounds we believe can offer best-in-class differentiation. just as we have done with Orladeo. Now I'll turn the call over to Charlie.

Thanks, Helen. The trajectory of the launch continued in Q1, keeping us on track for no less than $320 million in revenue this year. I'll provide more specific patient metrics today than I will in most updates because Orladeo has reached a significant milestone. We recently surpassed 1,000 patients on active therapy in the U.S. after just over two years on the market. The number of US patients taking Orlodeo at the end of Q1 was up 46% over the same point in 2022 and up over 8% since the end of Q4. There is even more opportunity in front of us because most of the 7,500 US patients have not yet tried Orlodeo. The strong and steady growth that we're seeing gives us confidence that the majority of those remaining patients will try Orladeo by the time we reach peak sales. Continued customer demand also supports our confidence. Our U.S. team got off to a great start this year, with new prescriptions in Q1 up 20% year over year. We generally expect new starts in the first quarter to be softer because there is so much focus on payer reauthorizations. But Q1 starts were greater than three of the four quarters in 2022. Prescribing was again balanced across all death aisles with about 50% of new starts coming from the top 500 physicians. And patient retention remained consistent. We retained 60% of patients through their first year on treatment and lose very few patients after that. What this means is that we add many more patients than we lose each quarter. and we see this consistent growth pattern continuing for years to come. As expected, revenue was down slightly from Q4 because many patients moved temporarily to free product during Q1 reauthorizations, and commercial patient copayment assistance and Medicare donut hole obligations are always larger in the first quarter of the year. I've commented before that the percentage of patients on free product, particularly long-term with our patient assistance program, crept up in the second half of 2022. We're starting to reverse this trend through increased focus on high-quality prior authorization and appeal submissions, and we exceeded our Q1 goal for moving commercially insured patients who had been on long-term free product over to paid therapy. As you've seen, we are reporting ex-US revenues for the first time. The great majority of these sales in Q1 were from Europe, where our initial launches are progressing well as physicians continue to move toward modern prophylaxis as the standard of care for patients with HAE. Once Orlodeo gains access in international markets, we are seeing steady, consistent growth in patients on therapy, similar to the pattern in the U.S. We expect international markets will drive slightly over 10% of sales this year, and this early growth gives us confidence that ex-U.S. markets will account for about 20% of peak revenue. Based on the strong demand and consistent growth we are seeing in the U.S. and globally, we remain confident that peak revenue for Orlaneo will reach $1 billion. Now, operator, we'll be happy to open up the Q&A.

We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you're using a speakerphone, please pick up your hands up before pressing the keys. To withdraw from the question queue, please press star then two. At this time, we will pause momentarily to assemble our roster. Our first question will come from Chris Raymond with Piper Sandler. You may now go ahead.

Hi, good morning, guys. This is Allie Bratzel on for Chris. Thanks for taking our questions. So first, just on the pipeline, apologies if I missed this in the prepared remarks, but just what is the current status on the BCX10013 program? I think the latest update was chronic tox work is underway and should complete this year, but just curious if you had... Any other visibility on timelines or next steps towards the clinic? Yeah, sure.

Thanks for the question. There's not much to update at the moment. We are preparing to initiate a trial in patients with PNH, and that's to assess the ability to dose once daily. So we're currently working through the regulatory process, and we'll have more on this later in the year.

Great. And then I think you had discussed the opportunity for Orladeo in pediatric patients. Could you just remind us on the development path there and just how we should think about the pace of enrollment and potential timeline to SNDA filing? I think ClinTrials was the primary completion date for that trial in mid-25, but we're just curious if that's accurate or what your expectations are there.

So our pediatric trial, as we said, is enrolling. We've had good interest and excitement amongst patients and investigators. It's too soon to predict the pace of enrollment there and the timing for that, so we'll update as we have more as this trial proceeds.

But this is a really important unmet need. I mean, think about it. Kids and injecting them with therapy, we have a formulation that's granules that you can sprinkle on yogurt or applesauce. So patients are, and their parents in particular, are really excited about this program, and so are we.

Great. Well, thanks for taking my questions.

You're welcome.

Our next question will come from Jessica Fye with J.P. Morgan. You may now go ahead.

Hey, good morning. This is JL for Jess. So we have a couple of questions. First, is there any update on the percentage of patients on free drug in 1Q that you can provide to us? And how should we think about the percentage of free drug patients for the remainder of the year? And then secondly, is there anything regarding the authorization process you can share with us? For example, does the reauthorization process require the same or similar lab tests, right, that are required for the STAR forms? And then lastly, regarding your four-year guidance, does it imply a substantial step up in terms of revenues for 2Q and beyond? And can you expand on or can you elaborate on your conviction over there? Thank you.

Charlie, you can start. Yeah, I'll start with the first two questions and have Anthony cover the third one. So on the percentage of free drugs I'd mentioned in our last update, we were trending up towards 30% of patients on free drug, and we think long-term we can bring this down into the lower 20s and eventually down into the teens. So we actually, in the first quarter, as I mentioned in my prepared remarks, We're ahead of the game in terms of converting patients from commercially insured patients who are on long-term free product over to paid. So we're doing well on that. We are a little bit over 30% of total patients on free drug. And the reason for that is that we had an unanticipated headwind in the quarter, which was the external charities that help Medicare patients afford their co-payments for drugs like Orladeo ran short of funding. And so they had, so some patients who otherwise would have been on paid therapy, we're not able to afford their copayment insurance. And thus we've made the decision to convert those patients over to patient assistance because that's something that we can control. So what that means is those patients will be on free products for the rest of this year, but they're doing great on Orladeo and we expect that in, in 2024, we'll be able to convert many of these patients back over to paid therapy. So right now we're a little over 30% of patients on free drug, but we expect that percentage to come down over the year because the team's making really good progress with getting people to paid therapy overall.

Yeah, Charlie, just to add, I mean, this was a real crisis in the first quarter for these patients because you can imagine a senior and all of a sudden they don't have access to their medicine anymore. And so with our free drug program, we were able to step in very quickly and and take care of a good number of patients. We even got some switches as a result of that. But this is an investment by our company because, as many of you know, with the Inflation Reduction Act, the co-pays are capped at, Charlie, help me again, $3,200 or something like that next year, and then $2,000, I think, in 2025. That's right. And so, you know, we believe that we're going to get these patients back to paid. And, in fact, Medicare are some of our best-paid patients ever. in the population of paid patients. So it was a move that we thought was a smart one for patients and a good one for our business long-term.

So, JL, had this Medicare issue not been there, we would be under 30% of patients on copay or on free product at this point. Your second question on just the re-auth process, yeah, there's nothing new there. It's just the standard reauthorization for patients. Sometimes this means reconfirming lab tests Sometimes it's just reviewing clinical history, but it's standard stuff, nothing new there. It always is a time-consuming process, and so that's why across our overall patient base, a lot of patients step back to free product temporarily while we were helping them through that process.

And, Charlie, because we had a bigger base, we had more people switch to Quick Start as a result of that in the first quarter, correct?

That's right. And, you know, it was a busy quarter overall, so the impact of free product – it definitely depressed Q1 revenue. And so maybe Anthony, turning over to the pace.

I think I'd use 2022 as a surrogate for how we'd expect the curve to play out. So there will be a step up in revenue in Q2. And then in Q3 and Q4, I would expect revenue to continue to increase. So I wouldn't just take the remaining year divided by three. I think the step up in Q2 will be a healthy step up, and then Q3 and Q4 I'll see steady growth from there on out.

And our conviction is that the reauthorization process is going fine and that these patients will be switched to paid in the second quarter. That's why we're very positive around the 320.

Our next question will come from John Wolben with JMP Securities. You may now go ahead.

Hey, thanks for all the color and congrats on the progress. A couple for me. Very helpful to have the number of patients on OroLadeo today. Wondering if you could tell us, you know, what number of patients have started OroLadeo in total? And then also as we're looking throughout the year with the step up in SG&A spending, You know, where do you think that additional investment needs to go to continue the growth you're seeing today?

Sorry, John, I missed the last. Can you repeat the last part of your question?

Yeah, if you guys are spending additional SG&A this year to maintain the growth, where are you investing that capital?

Okay. So on the total, we haven't disclosed the latest number, but in the fourth quarter of last year, actually, it's something we use in our promotion report. and we disclosed at the College of Allergy meeting in November. At that point, we'd had over 1,500 prescriptions. And so with 1,000 patients roughly at this point, it's consistent with what we've talked about with patients. We retained 60% of patients at a year, and then a year on therapy, and then very few drop off after that. And So that's why we're growing so consistently quarter after quarter. And as far as SG&A, I can start on that, and Anthony can add color. So the investments on the Orla Deo side commercially that we've made this year, we've talked about before, we made some expansions into our U.S. field team just to add more regions in particular, just a couple new territories, and then supporting team to help with market access and patient services. And so that's something, you know, we do to just improve our efficiency and our ability to reach customers. And we may make incremental investments like that in the future. And then, of course, international expansion. We're building out our Wave 2 countries like Italy and Spain in Europe, and we'll continue to make those kind of international investments.

Before we go to Anthony, Charlie. You said in your comments that one of the biggest challenges we have is switching patients from long-term free drug to paid. And you said that we exceeded the progress of our goal for the quarter. Can you just talk about, you know, that's an investment that we made. Can you talk a little bit about what you're seeing and why you're confident?

Yeah. So, you know, the main thing that I've talked about in this is just focusing on really making sure that the healthcare practices and the patients provide all the information that the insurance companies want. And so as we've expanded our market access and patient services team, that's allowing us to put a greater focus on educating our customers and making sure that all that information is collected and then helping them in the case of writing the right prior authorization or appeals letters and making the proper case to the insurance companies, we've got the team there ready to help with that process. And so that is the investments we've made there in the people is directly correlated to the improvement that we're seeing in moving people from free product to paid product. And we expect to keep getting better as the year goes on.

I think the only thing I'd add to Charlie's comment is the increase in investment that we'll see in the SG&A side will be incremental. It'll be mostly driven by the areas Charlie talked about and international growth. The step type increase that we had between Q3 and Q4 of last year, predominantly driven by the larger investment that Charlie's team made here in the U.S. But at the moment, I think it's just going to be incremental as opposed to anything of kind of major significance like that.

Got it. Very helpful. And one more for Anthony, if I may. Are you guys taking the option to pay that 50% of the interest on the Pharmacon facility?

I'd say at the moment it's highly likely. We did take advantage of it while we had it for the A quarters with Ethereum. It's something that we do have to select on a per quarter basis. But I think given what it does for us in terms of cash preservation, as we have the opportunity to see that net cash utilization kind of start to converge between revenue and OPEX, I think it's safe to assume that at least in the short term, yeah, we would likely take advantage of it.

Great. Thanks again, guys. Our next question will come from Tazine Ahmad with Think of America.

You may now go ahead.

Hi. Good morning. Thanks for taking my question. Just wanted to have a little bit more color maybe, John, about your long-term view of oil and gas sales. We've talked about that target of achieving about a billion in peak What's your assessment, I guess, from where you stand today? You had a great initial launch from here on in. What do you really need to achieve in order to get to that target? Is it a matter of just having a lot of patients on drugs cycling through, or is it also needing to have a certain amount of compliance and a certain dropout rate in order to achieve that target? Thanks.

Yeah. I think on the discontinuation piece, I think we're getting really comfortable that the pattern is and the rate have stabilized. Just to remind you of the pattern, 50% of the people that discontinue, discontinue in the first few months. If you make it out to a year, we got you. The discontinuation rate after that is really, really low. The discontinuation rate drops from three months to six months and six months to 12. That has not changed now, Charlie, for what, almost a year, maybe even more now. And so I think we feel very comfortable with that. So then it's about adding more patients. And I think a really important point is that we crossed this 1,000 patient threshold of patients on therapy and that we grew from last year almost 50%, which is remarkable in a couple years of launch. And so... And the consistency of new patient ads quarter after quarter is just unbelievable. So there is no slowing down. There's no low-hanging fruit here. This is fighting it out in the marketplace. It's a very competitive market. But we have an oral drug where everything else is injectable. And so it's a steady upward trajectory. The one problem we had was, you know, free drug to paid, and we're seeing that change now. with the changes that Charlie made in the team. And so very confident in our ability to get to the billion dollars. And we think this is a fantastic molecule for patients and therapy for patients. So when you have that, your chances of doing well is high.

Our next question will come from Stacy Koo with Cohen. You may now go ahead.

Hi, thanks for taking our questions. We did have a few. So first, You've kind of discussed the stabilization, but can you clarify where exactly you see the retention for Orladeo beyond 12 months? Is it very close to that 60%? Are you willing to provide some more details there? We're just hoping to get a sense of how sticky these patients might be for Orladeo very long term since they can kind of be toggled on and off that free drug program. So that's the first question. The second question is your guidance for Q2 is that you expect to see a step up Will it be similar quarter-over-quarter in terms of the percentage growth from last year, which would imply Q2 could be close or even exceed that consensus number around 80 million? So curious to get your thoughts there. And then the last question, Helen, it sounds like the timing for any pipeline update is going to be around year-end or early 2024. Is that correct? And if you could, are you planning on having any discussions with the FDA around the non-clinical tox findings for 10.013? And if so, what are the major factors that you'd like to have covered? Higher doses, duration treatment, any additional color would be appreciated. Thank you.

Yeah. So, Charlie, let me start because I want to make sure that people get this point because this is really important, that if you've been on our drug for a year, there's not a 60% fallout post a year. It's like 1% or 2%. Post a year and so if we you know, that's why I say if we got you to a year We've got you so that base just keeps getting bigger and bigger and bigger and that is a really important point for people to remember yeah, no, I can make the same point and then just kind of add that You can you can do the math with the numbers we gave you today.

We're at about a thousand patients. We grew 46% so what we're adding consistently on a 12-month basis because of the demand and that really stable retention is is we're adding 300-plus patients every 12 months. And so that's what we, based on all the signs that we see in the market, our forward-looking market research, the trends that we see, we're still in the early stages of growing demand in this market. And so we have a lot of confidence based on the demand and the retention that we're going to keep this same pace of growth towards the billion dollars.

Yeah, I think in terms of Q2, you know, we're not going to give specific guidance. We've talked about how we looked at last year. Bear in mind, last year, there were some different dynamics, right? We were still in the last throes of figuring out the contracting on the PBMs and the insurers and getting all of that in. I think in terms of last year also, Charlie talked about the significant growth that we have seen. So with the base... significantly higher now than it was at that point in time. I wouldn't assume that the percentage will be as high as it was last year. What I will say is what I said in the remarks. We expect for Q2 to be a step up, and we do expect Q3 and Q4 to grow on top of what we'll see in Q2, all within the confines of metering exceeding the 320 guidance for the year.

And then Helen on timing.

Stacy, thanks for the question. So on R&D Day and an update on the pipeline, we think we'll be talking about something late in the year, early next year. We'll certainly have more color on what's going on in the discovery part of our pipeline then. In terms of 10.0.13 and any discussions, so we are always in discussions with regulators around the program that's coming in from the program. With this non-clinical program and study, that's ongoing. And so for that, we'd need to complete the study to understand what we would conclude from it. The focus at the moment in our regulatory process and discussions is going through the regulatory process to start the P&H study. And so we have what we need for this in terms of the data set to get started, but that's the focus of where we're looking at for our regulatory interactions with the goal of moving into patients to assess if this drug can be safe and effective with one's daily dosing.

Thank you very much.

You're welcome.

Our next question will come from Justin Kim with Oppenheimer and Company. You may now go ahead.

Hi, good morning. Thanks for taking the questions. Maybe just on the 320 million guidance, in terms of reaching at least that number, how much of the assumptions rely on conversion of patients who are on free drug beyond sort of the seasonality of Q1 to Q2?

Yes, Justin, there's some of that built into our assumptions, but the major part of this is just organic growth in our patient base. So it's the continued demand and then the constant gradual improvement. We always expect to make the biggest improvement in getting people to paid therapy in the first quarter just through the re-offs, but then we'll make incremental improvements over the years. So we expect the percentage of paid patients to drop into the 20s as the year goes on. But the biggest part, again, is new patients coming in and then that base constantly growing that John described.

Okay. And could you provide any color on the background of these new patient ads, whether they are switch patients, prophylaxis naive, or coming from community versus academic, low volume versus high volume prescribers?

Yeah, sure.

Really, I'll sound very repetitive here, but it's great to see the consistency. So we're still getting about 50% of the patients who are prophy switches, the other 50% mostly from acute only. And then the mix of prescribers, I mentioned we're getting half the prescriptions from top 500 docs. Those are the bigger treaters that cover about half the patients in the marketplace. And so the other half is coming from the, not so much the community doctors, but the smaller HAE treaters, so the ones who have one, two, three patients in their practice. Our team is able to reach both those segments and even more effectively with some of our team increases this year. And so we've seen this pattern continue over the last couple of years, and we expect those same patterns to continue going forward.

Yeah, and I think another piece that's really important that we haven't fully tapped into is the patient word of mouth spread, and Charlie said this a bunch of times before, but the patient summit that takes place in the U.S. every two years hasn't taken place since 2019 due to COVID and occurs in July, and we're really excited. This will be the first time we actually have a booth with a product that's on the market, and it's just a great opportunity place where patients are talking to each other and an opportunity for that word of mouth to spread. So we're looking forward to that.

Okay, great. Maybe just a final one. As you think about breaking out the XUS numbers, I'm sort of curious, should we expect the XUS sort of growth rate to outpace our percentage basis? the U.S., and so just wondering, you know, whether we might see that line item reach sort of the peak potential before U.S.

Yeah, no, so I think for kind of an indefinite period of time, more of our growth is still going to come from the U.S. It's the bigger market, but ex-U.S. is a little above, as Anthony said, it's about 11% now. we expect it to be in just a little over 10% for the year. At peak, it will get to 20%, but it's going to evolve more slowly because it's all about launching in new markets, getting market access, and building in those markets. But what we're seeing in the places we've launched in Europe in particular is the same kind of steady growth. Once we're launched... we're adding more patients and growing steadily just as we're doing in the U.S. But U.S. is going to dominate in both pace and sales for the next few years.

Yeah. And the other dynamic is it takes three to four patients outside of the U.S. to make up the value of a patient inside the U.S. And we haven't, you know, for example, in Europe, we haven't gotten to Spain, Italy, Benelux, Portugal, and, you know, we expect to start to launch next year in those countries. But It just rolls out slower, but at peak, we're really confident that we'll get to the 20%, and we're really pleased with how Europe has performed, even if it isn't a big chunk of the business yet. It's still important.

Okay, great. Thanks so much for taking the question.

You're welcome.

Our next question will come from Serge Bellinger with Needham & Company. You may now go ahead.

Good morning. A couple questions, I guess, for Charlie. First one, was the impact of patients on free drugs in the first quarter larger than it was in 2022? Just trying to reconcile the difference between the 38% year-over-year increase in sales, I think you had a 46% increase of patients on drugs, and a 5% price increase starting in January. And then secondly, it looks like you had a stronger level of new patient starts in the first quarter of 23 at 20%. Is that a significant uptick from prior quarters in 2022? And do you think that's sustainable for the rest of the year?

Sure. Thanks, Serge. So on your first question in the free product in the quarter, yeah, the The overall impact of free product was greater this first quarter than in 2022, even considering the relative size of the patient bases. And so that was for two reasons. One is as our base was bigger and the reauthorization process, it's always a complicated, time-consuming process. And so patients, on average, were on free drug just a little bit longer as we were doing the reauthorizations. So that's the first factor. The second factor is what I mentioned earlier around the Medicare patients not being able to afford their copayments and not having as much access to outside help doing so. And so that was something new that happened this year that did not happen last year. So you put those two things together. If the Medicare had not happened, our revenue growth would have been comparable to the patient growth at about 46%. um and you know then the price increase we expect the net for the price increase we took a five percent price increase at the start of the year we expect to over the course of the year to net out at about a four percent um improvement in asp that just doesn't all show up in in q1 um and then as far as the new starts yet we were really pleased to have the 20 growth over last year in q1 because as i mentioned This re-auth process keeps everyone, particularly the healthcare providers, busy. And so the fact that they prescribe that much in Q1 is a great sign. I don't think it necessarily means we're going to be 20% up for the rest of the year, but we will do our best to try that. But with many new members of the team, as we went through our expansions, I'm really pleased with how the team's doing and how well they started in Q1.

And just one last one on the pediatric, ongoing pediatric clinical trial. So is the goal here to expand Rolodeo's IP with this pediatric label extension, or it's really just an additional market opportunity for Rolodeo?

Yeah, I mean, we have incredibly long IP, so, you know, the pediatric piece is not critical to that, in our opinion. I mean, this is a high unmet need. You know, when you think about kids six, seven years old having to get injections for their therapy, instead you can sprinkle something on, an oral sprinkles on yogurt or applesauce. It's just... And Bill shared, I mean, going way back when he and I would attend these patient summits, we had parents just like, when is the pediatric formulation coming? And so there's a pent-up demand there. It's not a huge market, but it's a patient for life, right? And, you know, we think it's an important segment of the market to serve. But this was really all about high unmet need and serving that high unmet need.

Thank you. Again, if you have a question, please press star then 1.

Our next question will come from Lisa Baco with Evercore ISI. You may now go ahead.

Hi there. Thanks for squeezing me in. Aside from the free drug, what was the gross to net on the rest of, you know, X free drug?

Yeah, higher. So... In Q1 is always going to be the highest from a growth perspective as it relates to the reimbursed part of it. So we've previously guided to 15 to 20% for the year. I would say that Q1 is right at the top end of that range and then we continue to get better as we move through the year to get towards that 15 to 20%. But again, driven by reauthorizations, co-pay, assistance, a lot of the things that by the time you hit the end of Q1, you're starting to normalize and they'll have minimal effect in Q2. And then as you go through the year, even less again. Okay, that's helpful.

And why, for the Medicare issue you're facing, you said that for the rest of the year, these patients will be on free drugs. Why will next year they... they no longer be on free drug? I guess I'm trying to understand what changes.

Give her some sense of the copay now versus the copay in the future.

So based on the way Medicare Part D is right now for a rare disease product like Orladeo, depending on the person's plan, their copayment responsibility for the year is going to be north of $10,000, often north of $20,000. So for a senior citizen, that very few can actually afford to pay that out of pocket. So these outside charities help them afford this because we as manufacturers by law are not allowed to do that. When the Inflation Reduction Act rolls in, part of it recognizes this challenge for patients. So next year, the maximum that a Part D patient will pay is around $3,200 across all the drugs that they take, not just individual drugs. And then in 2025, that number is capped at $2,000. And so what it means is the overall copayment burden goes down, which means more patients will be able to afford out of pocket. And also it may mean that these outside charities will be able to help more patients because the average assistance that they provide will be much lower. And so that's why we're optimistic and we're very much supporters of that part of the IRA.

Okay, and so why then would that Medicare piece, why will they be on free drugs for the rest of this year? Because won't they kick in above?

That's just by law that once we put a patient on long-term patient assistance, for the rest of the calendar year, we have to keep them on it. And so it's all part of kind of the complicated rules around government insurance.

That's helpful. Okay. And then just like more broadly, what percentage of the 7,500 patients are now on prophylaxis? Like what does your market research tell you?

North of 70% in the U.S., And we still see that growing to 80%, maybe even 90% over time.

Yeah, and one of the reasons for that is you've got three companies now promoting it. As each new entrant of injectable prophy comes out, you're going to have more companies. We think that will go to 80% or even higher when everybody's talking about, you know, why wouldn't you put somebody on prophylactic therapy?

Okay. Any inventory changes for the quarter?

No, and, you know, again, inventory is really not an issue for us because of the sole source pharmacy. Every patient shipment is, you know, every sale is a direct flash sale to patients, so we don't have an inventory factor.

We also have, you know, strong coverage from an inventory perspective up and down the channel with dual supply to make sure we're only a supply.

Okay. And what kind of compliance are you seeing these days with the general rate?

Yeah, so overall compliance remains strong. It's 90% plus. It's going to be some smaller percentage of patients that struggle a little bit more, but with some of the team expansions that I described, part of their job, too, on the patient services side will be to help identify patients who are having compliance challenges. and help educate them and make sure that they do their best to take one pill once a day. But overall, we see compliance very high, 90% plus.

Okay, great. And then just one point of clarification on the PNH study. Are you clear to start phase two in PNH or are you just kind of having a conversation with FDA now? What's exactly the status?

So, again, we're looking at countries where the benefit-risk where patients don't have access to other therapies, and so the U.S. has plenty of other therapies for patients to have access to, so we're looking outside the U.S., and we're working through the process. We can't give you more of an update than that. Our goal is to start a study, and we'll announce that when we do and if we do, but at this point, can't give you an update.

And, Helen, you might want to clarify again why PNH, why we're going there first.

So we're pursuing PNH as the fastest path to be able to assess, the drug to understand if we have a safe and effective drug that can achieve once daily dosing. And that's an opportunity to do that first before we then move into the renal diseases.

Right. Okay.

Thank you.

Welcome.

Our next question will come from Brian Abrams with RBC Capital Markets. You may now go ahead.

Hi. Good morning. Thanks so much for taking my questions. Two from me. First off, as you've been able to gather more and more longitudinal data here, anything you can take from the learnings around this really high retention rate after patients are through a year and apply it to potentially reducing the dropout rate within that initial year? And then secondly, it sounds like the newer patients being added are quite consistent in terms of the switchers versus naives and the where they're coming from with regards to prescribers. But I guess I'm curious, those who are starting Orlodeo at this point in the launch, is there anything different about them versus those who started earlier just in terms of region, insurance coverage, time on existing therapy that might make it more or less challenged going through the free drug process onto paid drug or more or less likely for them to stay on therapy longer term? Thanks.

Sure. Good questions, Brian. So first on the long-term data, yeah, I mean, we collect a ton of data. And I think the biggest learning, and this isn't really surprising in HA, but the biggest learning is it's about patient confidence and physician confidence. Fortunately, patients have so many more therapies today than they did a decade or more ago. So they want to know that now that they've got access to these therapies that their drug is really working for them. And so switching is something that stress is a trigger for HAE attacks, and switching can be stressful. So what we've learned is the biggest thing to do is set expectations of this is how the drug works, Here are things that could happen, side effects or breakthrough attacks. That's normal, but you need to give this a period of time, three to six months, to really figure out if this drug is working for you. So that's a big part of our promotion and educational message, and that we just have to keep repeating, and we're seeing over time that that's that is improving and stabilizing our retention rate.

Yeah, and I would just add, Charlie, you know, you asked the question, Brian, why is the retention rate so high after a year? Because they're doing great, right? I mean, they're taking one capsule once a day. It's controlling their disease, and they're tolerating it really well. And so it's almost the ideal therapy, right? So that's why.

And we're absolutely learning from our data that when patients who are doing well, low attack rates, rarely with breakthrough attacks on other injectable therapies, when they switch over to Orladeo, they're having the same kind of outcomes on Orladeo. And so making sure that patients and physicians understand that is part of the education. Then your question on just the types of patients, you know, I mentioned the mix of switching has been similar. I think the difference, there's really no difference from getting patients to insurance. That's been consistent. Probably the biggest difference is, you know, these are, as we're getting further into the market, there are patients who have been taking more of a wait-and-see approach. You know, they've been well on other therapies, as we were just describing. So we need to just keep pushing and educating and sharing data. And John mentioned word of mouth, driving word of mouth before. The biggest challenge is getting someone who's doing well on another product to take the chance of switching. And we see that happening, but we haven't gotten to everyone. We haven't convinced everyone. But we will convince them over time, and that's what's leading to the steady growth of this product.

Great. Thank you.

You're welcome.

Our next question will come from Jenna Wang with BART, please. You may now go ahead.

Thank you. I have three quick questions. The first one is regarding the new prescribers, you mentioned that 50% from Tier 1, 50% from the other parts, and also for the switcher, you said 50% switched from other profiles and a 50% from acute or naive patients. So does this apply to the 1,000 patients that are currently on Oladainu? That was the first question. My second question is the Guidance. Regarding guidance of the $320 million, now you expect about 10%, 11% is from ex-U.S. Was that consistent with your prior assumption, you know, when you initially give a guidance beginning of this year? And then lastly, any plan to achieve profitability any time soon?

Sure. I can do the first one, and then I'll turn it over to Anthony. So I'm not The 50-50, the two 50-50, so half of the prescribers being top 500, half being lower tier, and then roughly half the patients being prophy switches, half from acute only, and then how that relates to the 1,000 patients. So of the 1,000 patients, it's all very consistent all around. So retention amongst our patients is very similar, whether they came from another prophy therapy or whether they came from acute only. Okay. whether they were prescribed by a top KLL or whether they were prescribed by a smaller HAE treater. So across the board, it's really, really consistent in all of these different segments, no matter how you slice it. And as far as the 320 guidance, I think it's consistent. The XUS split, XUS has been growing consistently. And this year we've been consistent with our plans. And so we see it being consistently above 10%, and that's why we're splitting it out at this point.

Yeah, it's in line now with when we initially put out the 320 guidance, kind of same assumptions. For your question on profitability, I mean, we're in a much better spot than we have been previously, right? So the combination of revenue growth – on our way to 320 and then up to a billion. I think flash guidance that we gave for OPEX and the control that we've put in place there, and then the deal that we signed with Pharmacon last month, I think puts us in a great spot to be able to achieve it. I think our focus continues to be on not just the speed that we get there, both the longer term level of profitability. And so making sure that we continue to invest in Oradeo in the label, in real-world evidence generation, and then in the pipeline, such that when we get there, it's as significant as we can make it be. I think we're financially in a great spot to be able to achieve profitability. When it'll come will depend on those variables, but this is the best financial position the company has been in.

Yeah, it's so different from the past. I mean, our... reliance on the capital markets has dropped dramatically. And what that allows us to do is execute our plan and not worry about, oh, God, when's the next raise? You know, where are we getting the money from? And we're in such a strong spot now compared to where we were before. And we can make smart investments and have growing revenue. I mean, it's like night and day compared to where we were.

Thank you.

You're welcome.

Our last question will come from Mari Raycroft with Jefferies. You may now go ahead.

Hi. Thanks for taking my question. I was going to ask about the new loan optionality to draw another $150 million. Can you provide perspective on your decision tree and what would trigger pulling down more of the loan and talk about some potential ways you can create value with the additional capital?

Sure. So we have up until September of 2024, so the guts of a year and a half, give or take. I think during that time period, we'll obviously expect revenue to continue to pace. We'll have, I think, additional clarity as to where we are for 10-0-13. We'll also continue, like we've talked about previously, to invest in the pipeline. We that we're investing in I think it gives us that time to see those dynamics play out as in when we get there if we see value and where would we create value and we're constantly creating value in Orladeo so if there's something that we could do to accelerate growth whether it's here in the US or international If there's something that we could do to accelerate one of the clinical trials that we think will continue to generate value, then that's another area that we could use it. Or if it was to bridge ourselves to profitability, I think that would be another value creation opportunity for the company. So it's fully at our option as to whether we do it. It's committed funds. So, you know, I... I think the optionality and the flexibility that it gives us, Maury, is huge for us, and only if we can kind of meet some of those targets will we draw those funds.

Yeah, and remember, too, I said that we're investing in R&D for Orladeo, and the pediatric trial is just one thing that we're investing in. There's other ideas that we have that are too early to share with you, but we're looking at ways of expanding the label, getting more patients on therapy. And as Anthony said, and then the pipeline. And those things can create real value. There's a real return on investment there. So that's how we look at it.

Got it. That makes sense. Maybe just one quick clarification question. For the patients going back to a free product temporarily for the re-auth process, Charlie, you mentioned they were on drugs a little bit longer in first quarter 23 versus first quarter 22. Are you providing more specifics on whether it was one, two, or three months of the quarter on free drug, and should we expect the metrics around this to change or stay the same in future calendar cycles?

Yeah, I'm not providing specifics. Just on average, there was just more use of free product, but the vast majority of the patients are through the re-auth process now, and As I mentioned, we're actually ahead of our plan in the commercial segment of the market, which is over 60% of our patients. And so those patients will be on paid therapy for the rest of the year. And then as we go through the year, we'll just keep making incremental improvements on getting people to paid therapy. So with the patient base that we have, with the continued demand and the retention, and then doing better and better on getting people to paid therapy, we're just really confident in the year and particularly the long term based on what we see now.

Yeah, when you have a bigger base of patients that have to go through the re-auth process, it can take longer. So next year it might take longer as well, right, with a bigger base next year. Got it.

Okay, thanks for taking my questions.

You're welcome.

Thanks, Mark.

This concludes our question and answer session as well as the conference. Thank you for attending today's presentation. You may now disconnect.