Rhythm Pharmaceuticals - Q1 2024
May 7, 2024
Transcript
Operator (participant)
All right, good day, and thank you for standing by. Welcome to the Rhythm Pharmaceuticals Q1 2024 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, David Connolly, Executive Director of Investor Relations and Corporate Communications. Please go ahead.
David Connolly (Executive Director of Investor Relations)
Thank you, Stephen. I'm Dave Connolly here at Rhythm Pharmaceuticals. For those of you participating on the conference call, our slides can be accessed and controlled by going to the Investors section on the Investors page of our website, ir.rhythmtx.com. This morning, we issued our press release that provides our first quarter 2024 financial results and business update, and that is available on our website. As listed on slide two is our agenda. Here with me today in Boston are David Meeker, our Chairman, Chief Executive Officer and President; Jennifer Lee, 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. On slide three, I'll remind you that this call contains remarks concerning future expectations, plans, and prospects which constitute forward-looking statements.
Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed on our most recent annual or quarterly reports on file with the SEC. In addition, any forward-looking statements represent our views as of only today and should not be relied upon as representing our views as of any subsequent dates. We specifically disclaim any obligation to update such statements. With that, I'll turn the call over to David Meeker, who will begin on slide five.
David Meeker (Chairman, CEO, and President)
Good morning, and thank you for joining this morning. So we're pleased to report another solid quarter as we build out the opportunity in rare MC4R pathway diseases with a larger vision of becoming a leading company in rare neuroendocrine diseases. I only have two slides today, followed by some additional commentary. As listed on slide five, Rhythm's value drivers remain unchanged. Near term, it is about BBS commercial execution and making IMCIVREE the standard of care for those patients suffering from early onset obesity and hyperphagia in our approved indication. HO offers a significant expansion opportunity, and our MC1R sparing next-generation programs offer the potential for much-improved therapeutic options for both patients and both provide IP protection beyond 2040. Recent highlights include the recently completed convertible preferred financing, which extends our runway well into 2026 and fully funds our investment in the LG Chem molecule.
Hunter will speak to that in more detail. Second, on slide six, our phase II HO data was published in Lancet Diabetes and Endocrinology, reminding the world again why we are excited about the difference we can make in this disease: mean BMI decreased by 14.5% at 16 weeks and 25.5% at one year for patients who had 12 months of data. The unmet need in hypothalamic obesity is significant, with an estimated 5,000-10,000 patients in just the U.S., and there are no approved therapies. Our clinical programs continue on track with the 120-patient pivotal cohort of our phase III HO trial fully enrolled and Japan set to enroll its first patients. We over-enrolled the trial with a total of 131 patients, excluding the 12 patients expected to be enrolled in Japan, and the total number of dropouts remained remarkably low.
All that speaks to the commitment and enthusiasm of both the patient community and the investigators. The first patients enrolled in the phase III study will be finishing the blinded portion of that trial in the second quarter and moving into the open-label extension study. The phase I study of RM-718, our next-generation MC1R-sparing weekly injectable, is progressing in normal healthy volunteers with obesity, and we look forward to dosing the first clinical HO patients in part C of this phase I study in quarter three. We also expect to dose the first patients in the phase II HO study with the daily oral MC1R-sparing small molecule in quarter three of this year. Each of those programs positions us for an exciting set of top-line readouts in the first half of 2025.
Our commercial teams had another solid quarter with a slow and steady build of the BBS opportunity. U.S. script volume remained steady, with an approximately 100 new scripts written and 70 new patients approved for reimbursement. As Jennifer will speak to, we continue to find new patients, engage new physicians, and get strong feedback from the community with regard to how IMCIVREE is changing their lives. Internationally, we are moving to a really exciting time as new countries begin to come online and will begin to contribute in the second half of this year. Most encouragingly, as we expand our commercial presence and build out our clinical trial network, we continue to have strong support from leading thought leaders in Europe who are seeing the benefit of setmelanotide in their patients. Yann will provide more color.
Last quarter, we spoke to two challenges: a change in one state Medicaid plan and patient discontinuations, where we have continued to get some questions. I want to reinforce what we communicated on that call. With regard to the one state Medicaid plan, who increased the stringency of their approval criteria, that state continues to have a policy in place and continues to cover patients. We have been clear that there is no expectation that the 30 patients converted to our Bridge program will return to reimbursed therapy anytime in the near term. We have removed them from our internal models and suggest you do the same. Importantly, as noted, this experience was limited to a single state. There has been no read-through to any other state, nor do we expect to have any read-through.
While this was disappointing, we are more than compensating and continue to make good progress in the other 49 states plus Puerto Rico. Second, the increase in the number of discontinuations we have seen recently is in line with our expectations, given that the much larger number of patients, both in the U.S. and internationally, who are now on treatment for a prolonged period of time. We expect the rate of discontinuations to level out in the 20%-30% range long term, as we have highlighted previously. Although the focus will increasingly shift to the revenue number as this opportunity matures, we thought it would be useful to provide a one-time deeper dive into some of the reasons why BBS patients discontinue therapy. The short summary is that there is no major driver, and the majority remain related to patient-specific issues.
First, age is an issue, with a discontinuation rate being highest in the adolescents, lowest in the pediatric patients under the age of 12, and in the middle for adults. The adolescent age group can be challenging in general, but particularly when it comes to a chronic daily injectable therapy. Overall, the specific reasons for discontinuation remain relatively unchanged. The most common and consistent are discontinuations due to hyperpigmentation, which represent about 5% of patients who have initiated therapy, and this has crept up a bit as we penetrate more deeply in populations where this is more of a concern, such as the Hispanic population in the U.S.
Approximately 4% of patients have stopped therapy due to a perceived lack of efficacy, which also represents an opportunity as a number of these patients have stopped after only a few weeks on treatment and likely before they have experienced the full effect of the drug. This is an area where expectation setting and education is incredibly important. About 2% of patients stop because of nausea and vomiting, and another 2% stop secondary to overall life challenges, where the burden of a daily injectable becomes too much. There's a longer list of reasons for discontinuing that we have previously grouped together as other, each of which occurs with a frequency less than 1%. These reasons include allergic reactions, severe headache, chest pain, back pain, leg numbness, fatigue, and an increased frequency of erections, among others. The point is that the challenges facing BBS patients are complicated.
Those who stop therapy do so for a variety of reasons, some related to the drug, many not related to the drug. Not surprisingly, there are items on this list we cannot do much about, but other areas where it can do something, and those are the areas we are investing in. These challenges, like the payer challenges from last quarter, are normal parts of the ups and downs of building out a novel therapy for a complex rare disease. Most importantly, the fundamentals of this business continue to straighten. Patient identification remains strong. A growing number of physicians are writing scripts. Reimbursement continues to be positive, with good news on the reauthorization front in the U.S., and we continue to receive positive patient feedback.
On the clinical front, we look forward to filing our pediatric age two to six supplemental NDA with the FDA in the second quarter and potentially receiving EMA approval in quarter four of this year. Part two of the DAYBREAK study will read out in quarter three, and we continue to make good progress with our phase III HO trial enrollment. With that, I'll turn the call over to Jennifer.
Jennifer Lee (EVP and Head of North America)
Thank you, David. The consistent, steady demand for IMCIVREE we've seen in the recent quarters has continued in the first quarter of this year, and we are making ongoing progress in positive reimbursement decisions and adding breadth and depth to our prescriber base. Beginning on slide eight, through all of our education efforts supported by our cross-functional teams, we continue to identify HCPs with already diagnosed BBS patients as well as help to facilitate an earlier diagnosis for additional patients. This provides us the opportunity to educate HCPs about the benefits of IMCIVREE as the first and only precision medicine to target the impairment in the MC4 pathway, the root cause of hyperphagia and early onset obesity in BBS patients. During the quarter, we received approximately 100 new prescriptions for IMCIVREE to treat patients with BBS here in the United States, in addition to gaining approximately 70 approvals for reimbursement.
These top-level metrics reinforce the confidence we have in the BBS opportunity over the long term, as well as our team's ability to execute to pull through the opportunity. On slide nine, we're pleased to report continued consistent growth with prescribers. We now have more than 425 prescribers for BBS launched to date. The breakdown by specialty remains consistent. Adult and pediatric endocrinologists account for 45% of prescribers launched to date, consistent with launch date metrics reported in the last few quarters. More physicians are seeing the potential benefit of IMCIVREE and prescribing for the first time. Among these physicians, we are also seeing consistency with new-to-Rhythm prescribers, where physicians or territory managers had not called on prior to the prescription being received. We are pleased to see this source of growth continue as we find new prescribers through our nonpersonal promotion efforts to supplement our field team efforts.
In addition, more of the physicians are becoming repeat prescribers of IMCIVREE, writing new prescriptions for their second and subsequent patients with BBS. Launched to date, more than 30% of prescribing physicians have written two or more IMCIVREE prescriptions for BBS. We hear stories of patients and the benefits they receive from the weight loss, such as an increased level of confidence and ability to participate more in various physical activities. We also hear about the improvements in their ability to focus on other areas in their lives, including developing relationships and friendships, now that the preoccupation with food has been lifted. As a team, we are inspired by these stories from patients, families, and their HCPs. Next slide. Overall, we remain quite pleased with what we have been able to achieve with access and reimbursement for IMCIVREE.
The payer mix for BBS remains consistent with what we reported last quarter, with approximately 90% of prescriptions since launch falling under a commercial or Medicaid plan. We continue to see incremental improvements by securing an IMCIVREE-specific policy with additional state Medicaid programs. Overall, we have either a positive Medicaid reimbursement policy in place, or we have gained reimbursement even without an IMCIVREE-specific policy in the vast majority of states, representing more than 85% of Medicaid-covered lives. With reauthorizations, we continue to see strong success. As of the end of the quarter, we have received more than 140 positive reauthorization decisions for patients to continue therapy. During the first quarter, we did see 11 denials for reauthorization. Four of these, have already been approved through appeal, and we are working through the remainder to maintain coverage for patients.
Our Bridge program is in place to ensure patients maintain therapy at times when they may have lost coverage for reimbursement. Patients may be on Bridge because they have either lost insurance coverage, had a change in insurance coverage, or they were engaged in the appeals process for reauthorization for therapy. As often happens in Q1, patients may experience changes in insurance providers that impact reimbursement at the start of a new calendar year. In Q1, we saw an increase in the number of patients on IMCIVREE entering our Bridge program due to changes in insurance provider. Such changes are similar to any new prescription that comes in, as our teams work through the authorization process to regain commercial coverage for these patients. Some of these patients have already secured new coverage and exited bridge, and we are working with the remainder to regain reimbursement.
We are very happy with our success in converting the vast majority of bridge patients back as commercial patients. Overall, as we come up on two years since approval of IMCIVREE for BBS in June, we are quite pleased with our progress to date and remain fully confident that we will continue to see steady growth. We have ongoing focused efforts to drive patient identification and increase both the breadth and depth of our prescribing physicians. With that, let me hand it over to Yann.
Yann Mazabraud (EVP and Head of International)
Thank you, Jennifer. I will start on slide 12. In the international region, we are seeing steady revenue growth as we continue to advance country by country with IMCIVREE. It is now available for POMC, LEPR, and BBS in 14 countries, including the United States and Canada. We began laying the foundation with biallelic POMC and LEPR, and now we are advancing into BBS in close collaboration with the Key Centers of Excellence and experts in the region. In Spain, where we completed pricing negotiations earlier this year, we are seeing the first patients come on commercial therapy as we navigate the access state by state. In Italy, we anticipate that the first reimbursed patients will come on therapy in coming weeks. In Turkey, which we have not talked about much, IMCIVREE is available through named patient sales, and we are seeing patients come online there too.
This is a typical approach for rare disease drugs in Turkey, and we have a very experienced team on the ground where we are making significant progress. Launches in this country built steadily over time, and we are pleased with our current pace. We will begin to see an increasing contribution to our net sales from these new launch countries in 2025. We look forward to completing pricing negotiations in Belgium, in the Netherlands, and in the United Kingdom, launching in those countries later this year. Next slide. In France and Germany, from where we are generating more than 50% of the revenues for the international region, we are expanding the field teams to meet operational needs that come with increased demand and the decentralization of the care.
In France, we now have a number of patients with hypothalamic obesity on commercial drugs through the pre-EMA-approved paid early access program. As we experienced with POMC and LEPR when we first gained early access in 2022 and then with BBS, we know these programs start slow and build gradually. Now we are seeing that steady, gradual build with hypothalamic obesity, which formally got underway late last year. And for POMC, LEPR, and BBS, we anticipate completing pricing negotiations by the end of this year. In Germany, our launch is progressing well as expected. Our team remains focused and engaging with physicians caring for patients and with the centers where they are treated. And the first BBS treatment guidelines were published very recently in a major German medical journal. 17 clinicians from 13 treatment centers did collaborate on this effort led by the university hospital from Essen.
These guidelines discuss in detail diagnosis, patient management, and treatment with setmelanotide. We are expanding the number of treatment centers and large hospitals we are engaging with. Now that we are almost one year into the launch, we have received prescriptions for 15 treatment centers, which are all within large and very well-structured and resourced university hospitals. In addition, our German patient support program, Rhythm at Home, is performing very well too. We provide tailored support for each patient and their caregivers. And since December last year, prefilled syringes have been available for both the BBS and POMC, LEPR patients. And now I will turn the call over to Hunter.
Hunter Smith (CFO)
Thank you, Yann. Turning to slide 15. As announced last month, Rhythm raised $150 million in gross cash proceeds through the issuance of convertible preferred shares. We are very pleased by the strong show of support from Perceptive Advisors and their Discovery Fund, as well as by the support of an additional well-known life sciences investor who was and continues to be a top Rhythm shareholder. The preferred shares can be convertible into common stock at a price of $48 per share, which represented a 19% premium to the 10-day average trailing volume weighted price at the time of issuance. The preferred shares are perpetual, but Rhythm can require conversion if the price of our common stock exceeds 250% of the implied conversion price of $48 for 20 trading days in the 30 trading day period and can redeem the preferred shares after the fifth anniversary of the closing date.
In addition to the conversion features, Rhythm is also obligated to pay a 6% coupon in cash or in kind, but that coupon does not begin accruing until the second anniversary of the closing date. The result of this financing is that we now have sufficient cash to fund all planned activities well into 2026, potentially beyond multiple value-creating milestones, including the top-line data readout from our phase III trial in hypothalamic obesity currently planned for the first half of 2025. Please turn to slide 16 for a snapshot of Q1 P&L. We recorded $26 million in net product revenue in the first quarter versus $11.5 million during the same quarter last year.
Sequentially, quarter-over-quarter, we saw an increase of $1.8 million, or 7%, in net product revenue driven primarily by continued growth in the number of reimbursed patients on IMCIVREE therapy in both our international region and in the U.S. Gross-to-net sales decreased slightly quarter-over-quarter. Gross-to-net for U.S. sales decreased slightly quarter-over-quarter from 84% to 84% from 85% in the fourth quarter. Cost of sales during the first quarter was $2.8 million, or approximately 10.8% of net product revenue, representing a 2.5% decrease as compared to the fourth quarter of 2023. The primary driver of COGS was the 5% royalty to Ipsen under our original licensing agreement for setmelanotide, as well as product costs. The latter component was flat in dollar terms quarter-over-quarter, resulting in the improved percentage margin on higher overall revenue.
R&D expenses were $128.7 million for the first quarter of 2024 as compared to $37.9 million during Q1 2023. This increase was primarily due to the consideration for our in-licensing of LB54640, the impact of which I will review on the next slide. SG&A expenses were $34.4 million for the first quarter of 2024 versus $24.6 million for the first quarter of 2023, and a 6.1% increase on a sequential quarterly basis. For the first quarter, weighted average common shares were 60.1 million, an increase of approximately 900,000 shares versus December 31st. Included in this amount was approximately 432,000 shares issued to LG Chem as partial consideration for the in-licensing of LB54640. Quarterly net loss per share was $2.35 versus $0.92 in Q1 2023. Now on to slide 17. Rhythm reported $201 million of cash and cash equivalents as of March 31st, 2024.
This does not include any of the $150 million in proceeds from the convertible preferred stock that we issued in April. On a pro forma basis, cash and cash equivalents would have been approximately $350 million. On the net revenue for this quarter of $26 million, 74% of those revenues were generated in the United States. U.S. revenue of $19.4 million represented growth of $1.1 million, or 6%, versus Q4. The proportion of revenue generated by our international region increased from 24%-26% quarter-over-quarter. This increase primarily reflects the ongoing contribution from the BBS launch in Germany, as well as our two early access programs in France, including the AP1 program for hypothalamic obesity. The portfolio of markets contributing revenue also continued to grow. Revenue from these other countries is small today, but we expect it will grow into a significant contribution over time.
First quarter operating expenses included total stock-based compensation of $7.8 million for the quarter as compared to $6.4 million for Q1 2023. To review the LB54640 impact on the quarter, just as a reminder, we committed $100 million of fixed consideration to LG Chem for the global rights. In January, we paid $40 million in cash and issued LGC more than 430,000 shares of Rhythm stock valued at $18.7 million at the time of closing. We also committed to pay $40 million 18 months from January. Q1's R&D expenses included $92.4 million, comprised of the cash payment, the equity issuance, and the present value of the last payment of $40 million. The present value adjustment of $6.3 million to that payment relates solely to a modeling of time value as required by U.S. GAAP and will be recognized as non-cash interest expense over the 18-month period.
For those of you modeling at home, that means you can expect $1 million of non-cash interest expense per quarter between Q2 2024 and Q3 2025 related to this securitization. We are reiterating our OpEx guidance of approximately $250 million-$270 million in non-GAAP OpEx, comprised of SG&A, non-GAAP operating expense of $105 million-$110 million, and R&D non-GAAP operating expense of $145 million-$160 million. This includes $10 million-$15 million of development costs related to LB54640. With that, I'll turn the call back over to David.
David Meeker (Chairman, CEO, and President)
Thank you, Hunter. So if you look back over the 16-year history of Rhythm, I think it's fair to say we've never been better positioned. In our approved indication, IMCIVREE is establishing itself as a standard of care, and we have all the necessary elements required to develop a sustainable, profitable, rare disease business. We are executing on the biggest opportunity, which is an HO, with all signs suggesting our original excitement was justified. We are well-funded to do what we need to do to get to those value-inflecting points. With that, we'll now open it up for Q&A. Steven.
Operator (participant)
Thank you. At this time, we will conduct the question-and-answer session. As a reminder, to ask a question, you will need to press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Derek Archila of Wells Fargo. Your line is now open.
Derek Archilla (Senior Small and Midcap Biotechnology Analyst)
Hey, good morning, and thanks for taking the questions. Just two from us. So I guess through some of our KOL checks, we've heard some emerging clusters of Bardet-Biedl patients treated in the U.S with Native American and Hispanic kind of heritage. So just wanted to ki.nd of understand if that's accurate and if you could kind of shed some light on those clusters. And then secondly, just wanted to understand the gating factors for LB54640's trial and getting it up and running. And I guess how many of the experience sites from your IMCIVREE experience will be incorporated there? Thanks.
David Meeker (Chairman, CEO, and President)
Yeah. Jen, or do you want to take the share?
Jennifer Lee (EVP and Head of North America)
To your first question, just regarding clusters, I think similar to other rare diseases, there can be sort of pockets of patient populations just based off of how the different folks start to populate and the genetics start to have potentially a different frequency impact based off of their population style. So we have seen in certain areas the Native American as well as Hispanic populations having a higher BBS prevalence in certain areas.
David Meeker (Chairman, CEO, and President)
Derek, on the HO side, so we're still adding sites there. I think we anticipate having between probably 10-12 sites to run that HO small molecule trial. The vast majority of these are actually new sites. We'll have a couple of those centers will be centers that were part of our original trial. But we're running two trials at the same time, essentially, with our weekly injectable. So we're looking for sites for that, for the part C, where it will enroll HO patients and then, of course, for the small molecule. But the small molecule itself will have about 12 sites, the vast majority of which are new to the program.
Derek Archilla (Senior Small and Midcap Biotechnology Analyst)
Got it. And just one follow-up, if I may. I want to make sure I heard you right in terms of the cadence of the readouts. So obviously, phase III HO in first half 2025, but I believe you guys said that 718 data as well as the oral data could also be first half 2025 for those HO patients or the HO cohort, at least for 718.
David Meeker (Chairman, CEO, and President)
Exactly. That's the expectation. Once we get these trials up and running, as always, sometimes the biggest variable is the initiation. So far, we look good, and that's my expectation. We will read those out in the first half.
Derek Archilla (Senior Small and Midcap Biotechnology Analyst)
Got it. Thanks so much.
Operator (participant)
Thank you. One moment for our next question. Our next question comes from the line of Jeff Hung of Morgan Stanley. Please go ahead.
Jeff Hung (Equity Research Analyst in Biotechnology)
Thanks for taking my questions. Last quarter, you indicated 30 patients came off IMCIVREE because of the one state. Any updates on how many of those patients have had consults for proper documentation and how many are back on commercial drugs? And then I have a follow-up.
David Meeker (Chairman, CEO, and President)
Yeah. No, what we've tried to emphasize there is so again, these patients are still going through that evaluation. What we've encouraged people to do is to take those 30 patients out. I do think we'll get some back. They are still going through, but we're not going to update sort of patient by patient in terms of that overall process. It's been quite laborious, to be honest with you. I mean, getting these additional consults is not easy. The stringency of what's required is high, which is why, like I said in my comments, I don't expect us to get all 30. And maybe a significant number of those may not be able to reach the thresholds or requirements that this state has put in place specifically. So that state is covering. It's covered patients. It's covered patients since we took these 30 patients off.
Jeff Hung (Equity Research Analyst in Biotechnology)
Okay. Thanks. You guys talked about the Bridge program and then how some of the patients exited that program in Q1. Typically, how many patients enter the Bridge program in a given quarter, and then what is the average time that they remain in that program? Thank you.
David Meeker (Chairman, CEO, and President)
I don't know for you.
Jennifer Lee (EVP and Head of North America)
So I would say that in terms of the Bridge program, that number is variable, also just based off of the circumstances of each of these different patients. And as I outlined, it could be they change job, they change insurance, and hence we have to almost go through the authorization process from the start with this new payer. So that number varies over time. And I would say that in terms of time to transition them off of bridge, that also is variable based off of the reason. But I would say that it's consistent and similar to the time in terms of even getting the authorization or the initial prior authorization in place for a patient.
David Meeker (Chairman, CEO, and President)
Yeah. I think to build on that, Jeff, I think what Jennifer said is a good way of thinking about it. If it takes on average four to six weeks for these patients to get through their initial authorization, that'd be a good way to think about it. As she highlighted, the Bridge program, and this has been our historical experience with other rare diseases we've worked on, tends to be very successful. Over 90% of the patients, if you exclude the 30 patients who came out of that one state and went on to the bridge program. Everybody else, with that exception, about 90% plus of those patients have been able to convert back to or find insurance and coverage in some way. Again, it's been a very successful program.
Jeff Hung (Equity Research Analyst in Biotechnology)
Great. Thank you.
Operator (participant)
Thank you. One moment for our next question. Our next question comes from the line of Dae Gon Ha of Stifel. Your line is now open.
Dae Gon Ha (Director and Equity Research Analyst in the Biotechnology Sector)
Hey, good morning, guys. Thanks for taking our questions and congrats on the progress. Maybe I'll stick with two commercial. One on the reimbursement or, I guess, reauthorization for Jennifer. I think you provided two statistics I wanted to hone in on: the more than 140 reauthorizations and the 11 that were denied or, I guess, denied. Can you give us the denominator of that reauthorization number? And for those 11 specifically, how workable is it to get them back on therapy, or is it kind of lost in terms of going forward modeling purposes? And then going over to international, Hunter, if you can clarify, did you mention 26% of this quarter's revenues are comprised of the international sales?
If so, I guess maybe, Yann, if you can comment on what's been so beneficial on sort of the France and Germany launches that perhaps you can implement on the U.S. side to make it a little bit more sticky and compliant?
David Meeker (Chairman, CEO, and President)
So Dae, let me just clarify. So in your first question on the reauthorizations, so as Jennifer said, more than 140 have had approvals, 11 have had denials, of which she's worked through. So that's on about 150, 151 to be exact. But I don't know, was there an additional question behind that?
Jennifer Lee (EVP and Head of North America)
Well, let me just speak to the 11 denials. So one, I will say that in terms of the reauthorizations, we've been very, very successful just overall, just in terms of being able to get approvals. The 11 within the quarter, let me just break this down, I would say it's sort of similar to the number that we had outlined, which was less last quarter. But they can actually get a denial for a couple of different reasons. One, it may be that they may simply be missing some information, and we just need to go back to the physician to provide this additional information. That's been an opportunity just in terms of going from a denial to gaining reimbursement back for the patient. Some of it could be because they may not be getting the exact 5% in terms of weight loss.
The reauthorizations can happen at less than the one-year time point. So that may be an opportunity just in terms of follow-up because these patients are definitely gaining clinical benefit. Hence, they want to, as well as their physician wants to maintain them on therapy. So I think there's various different reasons just in terms of the 11 denials. But as I mentioned, we already have several of these 11 that have already been reapproved, and we continue to work through the remainder.
Hunter Smith (CFO)
Dae Gon, to your question on international, you're correct. It was 26% of sales came from outside the U.S. during the quarter. I'll let Yann talk about their experience in Germany and France as well.
Yann Mazabraud (EVP and Head of International)
Yes. Thank you, Hunter. Thank you for the question. I will start saying that the U.S. region and the international region are very different from a rare disease landscape point of view. But back to your point, how do we cross-fertilize between the two regions? I think there are three, four key activities that are similar for our teams first because Jennifer and I have the same culture and background and good practices in terms of rare disease. And second, because we and our teams also speak a lot. Those areas, from my point of view, are collaboration with the centers of excellence. You know that there is an important center of excellence in the U.S., more to come, more coming. It is also the case in Europe. How do we collaborate with them?
How do we leverage their experience and translate it into the publication plan, for example? That's one. Two, I would say medical marketing activities or medical marketing omnichannel activities, field and digital. We also exchange a lot about that. Third thing that I would think about is the patient identification program. In the U.S., there is a URO program. In Europe, we have the ROAD program. It's a genetic testing program. And the four pillars that I'm thinking at is really patient support program. The U.S., they have a very comprehensive patient support program and team dedicated to all the patients. We do the same in Europe when we can. It's not always possible from a legal point of view. But as I've said in my presentation, the German one, for example, is also very comprehensive.
This crucial activity for the patients and the patient mentors is also something that we speak a lot about across the two regions.
Dae Gon Ha (Director and Equity Research Analyst in the Biotechnology Sector)
Okay. Thank you very much. David, I guess, sorry for the confusion. I was just wondering if there were any sort of in the pipeline for reauthorizations beyond the 140 and the 11 that you disclosed today.
David Meeker (Chairman, CEO, and President)
Yeah. Thanks, Dae Gon. Sorry.
Jennifer Lee (EVP and Head of North America)
Yeah. Once again, there's always going to be folks who are needing to get reauthorizations. And it depends on when they initiate therapy and when that time frame is for the reauthorization requirements, which can vary, but the majority of these are at the one-year point. So that's a continuous stream just based off of when they initiated, when they got approval, and hence when they need to be reevaluated to ensure that they're still garnering benefit from being on therapy.
Dae Gon Ha (Director and Equity Research Analyst in the Biotechnology Sector)
Excellent. Thank you very much for the questions.
David Meeker (Chairman, CEO, and President)
Yep.
Dae Gon Ha (Director and Equity Research Analyst in the Biotechnology Sector)
Yep. Thanks.
Operator (participant)
Thank you. One moment for our next question. Next question comes from the line of Phil Nadeau of TD Cowen. Your line is now open.
Phil Nadeau (Managing Director and Senior Research Analyst in Biotechnology)
Good morning. Congrats on the progress, and thanks for taking our questions. Just two from us. So first, on Q1 revenue for IMCIVREE, it does seem to be at the increase in revenue quarter-over-quarter seems to be at the lower end of what you'd expect with 70 reimbursement approvals. Can you speak to those dynamics? Was that simply the timing of the reimbursement approvals, or did some of the issues with insurance reauthorization that you discussed play into the reported revenue in Q1? That's the first question. And then second, on DAYBREAK, can you remind us what you are likely to release during Q3 from that trial?
David Meeker (Chairman, CEO, and President)
Yeah. 100%.
Hunter Smith (CFO)
Phil, let me take the quarter-over-quarter growth. I think there are some puts and takes as there always are in these elements. Last quarter, for example, we had a GTN impact of about $600,000 on sales that was favorable that related to the release of Medicaid accruals based on actual invoices received. So that sort of sets the quarter down a little bit or adjusted the quarter-over-quarter growth a little bit. The other thing is when we talked about the single-state Medicaid program, we did receive shipments early in the quarter for that program. So those patients went off therapy about the middle of October. We did receive shipments from that or did ship to that program for many patients in the first half of October. So that took some non-recurring revenue out quarter-over-quarter.
We did have a healthy increase in patients on therapy, and we had a healthy increase in vials dispensed. Then some of it was offset. A smaller amount was offset by the patients going in and out of Bridge program during the first quarter, which is, I think, something we expect as a normal first-quarter occurrence. I hope that's helpful.
Phil Nadeau (Managing Director and Senior Research Analyst in Biotechnology)
Got it. That makes sense. Yeah. That helps. Thank you.
David Meeker (Chairman, CEO, and President)
And Phil, in the DAYBREAK study, so I haven't seen the data yet, what to expect, I think as I said right from the beginning, this was a basket trial, a signal-seeking trial. And so as we presented in our December R&D Day, we were encouraged that out of a large number of genes that we started with, there seemed to be a much smaller number, but a number of genes that were of interest. So my goal is to we'll give you an update on those six genes specifically and tell you how they fared in the double-blinded placebo-controlled part of this, and then provide some insight as to how we think about going forward. But I'll caveat that expectation with the bar is going to be really high.
We're not going to rush into another trial unless there was something that was just so incredibly compelling that it couldn't wait. One. And then two, we fully expect any additional developmental work to be done with either the small molecule and/or our weekly formulation because for obvious reasons, we see that as the long-term future of this overall franchise. And any additional approvals, we would look to get from those specifically. Does that help?
Phil Nadeau (Managing Director and Senior Research Analyst in Biotechnology)
That's very helpful. Thanks again for taking our questions.
David Meeker (Chairman, CEO, and President)
Thank you.
Operator (participant)
Thank you. One moment for our next question. Our next question comes from the line of Corinne Johnson of Goldman Sachs. Your line is now open.
Corinne Johnson (Managing Director)
Good morning, guys. Thanks for the color on all of the discontinuation drivers. I guess, can you also help us understand when, during the course of treatment, patients are most likely to discontinue and how you think about which of these factors maybe have read through the HO opportunity versus which ones might be more BBS-specific?
David Meeker (Chairman, CEO, and President)
Yeah. Let me start off, and Yann or Jennifer can add anything. So I think the majority or not the majority, but a significant percentage of these do occur early on. And again, in fact, part of the goal of providing the level of color that we did today is just to remind people that we're not providing a therapy to a population that only has one illness or challenge that they're facing. I mean, Bardet-Biedl syndrome, syndrome by definition, so they have many challenges. For example, in the U.S., there's a higher percentage of discontinuations in the Medicaid population. And again, the Medicaid population, in addition to the health of the patient, they have other challenges in the family that they're trying to deal with. So long story short is, again, there are many, many different, often, as I said, patient-specific reasons why these patients discount.
But some of those, we have very specific things we can do to work on. And I'll let Jennifer speak to that here. In terms of HO, it is a different population. And what's been striking about the HO is it's cleaner, for lack of a better word. These are patients where literally nothing's worked. And biologically, it seems that setmelanotide is addressing a very specific biologic abnormality. So mechanistically, it seems to be the solution. And that's led to potentially a different level of engagement than we've had in our other populations. And I say that simply based on the fact that in running this phase III trial, as we've highlighted, patients seem to be staying on treatment, including whoever is on placebo. We don't know who they are, but they might be guessing.
And in today's world, if they truly felt there was another option, they would likely move to there. And they're not. And why not? Because if they stay in the trial, then they know they can access the drug and the open-label portion of it. So I think there are differences with HO. I wouldn't be surprised if the discontinuation rate was lower in HO. But obviously, we have a lot more to learn.
Corinne Johnson (Managing Director)
Helpful. Thanks. And then can you help us understand the size of the market opportunity for this two to six year-old patient population and how that kind of expands the commercial opportunity for BBS?
David Meeker (Chairman, CEO, and President)
Yeah. I mean, what we've said about that previously is that when we do our genetic screening, the frequency, the positivity rate in that zero to two specifically, but two to six, tends to be higher than the other ages, the older age groups. And that's not a surprise because parents who present with a child who has early-onset obesity and uncontrolled hunger, they know something's wrong. Genetic testing perhaps gets to be done a little earlier. And as a result, as opposed to a 20-year-old, for example, comes in and you're asking them when their obesity started and the like, it's just a different setting. So higher frequency hit rate. But the overall numbers are still quite small. So again, this will not dramatically increase the overall target population.
But it does, from a signaling standpoint, reinforcing standpoint, when you're treating two year-olds with your medication, that's really a remarkable indication that, A, it's important to do so, B, the drug must be safe. And as you know, most of the other available anti-obesity medications have not tested kids as young as two to six. And so we've gotten positive feedback from the field just from our willingness to take that on.
Corinne Johnson (Managing Director)
Great. Thanks.
David Meeker (Chairman, CEO, and President)
Thank you, Corinne.
Operator (participant)
Thanks. One moment for our next question. Our next question comes from the line of Joseph Stringer of Needham & Company. Your line's now open.
Joseph Stringer (Senior Analyst in Biotechnology)
Hi. Thanks for taking our questions. Sorry if I missed this, but what were the discontinuation rates through the first quarter of this year? I believe it was around 20% as of the last quarterly update. And just given that the discontinuation rates have ticked up a bit quarter-over-quarter, what gives you confidence that the rate will level out in that 20%-30% range?
David Meeker (Chairman, CEO, and President)
Yeah. No, it has ticked up. We're not going to break it out further. Again, I think that was part of the goal of today's comments was we do think it's going to level out in the 20%-30%. Your question is, what gives us confidence? I mean, that's consistent, I think, with other chronic injectables, daily injectables. I mean, think even insulin therapies and the like. They don't discontinue per se, but compliance can be quite challenging in some of those areas. So in this age group, I think, again, it's an estimate, Joey. We don't know for sure, but I think it's a reasonable one based on our experience just working with rare disease populations and some of the challenges associated with this injectable, chronic daily injectable. What was the second part of that question? Yeah. Does that cover it? I mean, again, yeah.
Jennifer Lee (EVP and Head of North America)
Maybe one.
Joseph Stringer (Senior Analyst in Biotechnology)
No, that's helpful.
David Meeker (Chairman, CEO, and President)
Yeah. Actually, Jennifer, it's a good opportunity just to highlight what we're doing.
Jennifer Lee (EVP and Head of North America)
Yeah.
So, I think one piece is we also learn as we go, just as we evaluate different parts of the business and think through if there's opportunities for us to focus a bit more in. As David mentioned, the first couple of dispenses is when there is the highest risk in terms of folks discontinuing. And when we look at different reasons, one example I'll give is in terms of injection issues. We saw that that was an issue early on. And through discussions, have implemented an at-home nurse support for patients so that they feel very comfortable initiating therapy and being able to inject them themselves. And this has leveled or decreased that particular issue as a reason for discontinuations.
We also, just through that example, that sort of high touch, just in terms of the beginning, to make sure that the patients are doing okay as they initiate therapy, realize it's we thought in terms of the structure that we had in place. The structure we had from the patient support side was that there was one point of contact for the patient, but also was responsible in terms of being able to help through the reimbursement and reauthorization process, which was a lot for one person to be able to juggle both aspects. We have recently restructured that group. We have a specific team that focuses on the authorizations and maintaining the reauthorizations, while we have a separate patient team, education team, that then is able to, once again, have more time and ability to maintain close contact with the patients.
Joseph Stringer (Senior Analyst in Biotechnology)
Great. Thank you for the detail, and thank you for taking our questions.
David Meeker (Chairman, CEO, and President)
Thanks, Joseph.
Operator (participant)
Thank you. One moment for our next question. Our next question comes from the line of Michael Higgins of Ladenburg Thalmann. Please go ahead.
Farhana Sakloth (Equity Research Analyst)
Good morning. This is Farhana on behalf of Michael. Congrats from us on the continued progress this quarter. Two questions from us. The first is, so we believe DAYBREAK stage two could be read out separately, or there was going to be a staggered update. So should we look for another update in Q4 than the update in Q3? And the second question is, any guidance on the start of the second trial route for LB54640?
David Meeker (Chairman, CEO, and President)
Yeah. So thanks, Farhana. The DAYBREAK study, we'll get the results in quarter three. Again, it depends a little bit on what they are and how long it takes us to sort all this out. So whether we're going to report this in Q3 or Q4, I don't know, to be honest, right now. The second is, obviously, we try to connect these with a meeting, and there you have to submit as a late breaker. And so again, there's just some things I don't quite know yet. So let's say our goal is to get this out this year for sure in terms of reporting it out to all of you. But I don't know the vehicle. I don't know the exact timing. And then second, with regard to the start, we're making really good of the small molecule trial, the LB54640. We're making really good progress.
As I said, the number of sites that we need have virtually all been identified, and we're working through the initiation part of that. We will be beginning in the quarter three and hopefully early in quarter three. That's as good as I can do today.
Farhana Sakloth (Equity Research Analyst)
Okay. Thank you.
David Meeker (Chairman, CEO, and President)
Thank you.
Operator (participant)
Thank you. As a reminder, to ask a question, you'll need to press star 11 on your telephone and wait for your name to be announced. One moment for our next question. The next question comes from the line of Whitney Ijem of Canaccord Genuity. Please go ahead.
Whitney Ijem (Managing Director and Senior Biotechnology Analyst)
Hey, guys. Thanks for taking the questions. First one, I guess, is just on the kind of steady-state dropout rate that you talked about or discontinuation rate. Is that informed at all, I guess, by the age at which patients are starting? I'm just curious if you're seeing patients or a higher discontinuation rate in patients who start when they're older versus younger, and maybe there could be some shift in that average rate over time as patients start when they're younger with the label expansion?
David Meeker (Chairman, CEO, and President)
So short answer, Whitney, is yes. And that was breaking out the three different age groups there. The key is it's adolescents. So I don't know if disproportionately we have a number of adolescents. I mean, we know we have about 60% adults versus 40% peds overall. So the adult group, we're continuing to move to a more normal patient distribution because patients tend to have a normal lifespan in that sense. But no, it's just additional color, which says, yeah, that adolescent group is more difficult. And we do see higher discounts there.
Whitney Ijem (Managing Director and Senior Biotechnology Analyst)
Got it. Okay. And then in France, and perhaps I just misunderstood, but I think I understood the comments to be that patients with HO have been getting treated via the early access program, but maybe not so much for the BBS program. Did I interpret those comments correctly? And if so, I guess, can you talk a little bit about what you're seeing in, I guess, maybe urgency to treat or process of getting patients through that to get to approval in BBS versus HO in France?
David Meeker (Chairman, CEO, and President)
Yeah. No, that's not the case. Yann, do you want to make some comments?
Yann Mazabraud (EVP and Head of International)
Yes. No, indeed, that's not the case. So we have currently three early access programs running, one for POMC, one for BBS, and more recently for HO. So those three programs move in parallel. And we have been very pleased with the uptake of these three programs. And the most recent one is HO. It has started at the end of last year. And I can say that it is extremely rare in France to get this early access program based on phase II data and pre-EMA approval. To be more precise, there are just two rare disease therapies with such status in France. And as I have mentioned during the call, we have now a number of patients which are commercially treated for HO. And back to maybe the second part of your question, no, BBS is moving nicely as well.
Hunter Smith (CFO)
I think, Whitney, what we have said is when the HO program was approved, we had said for a while that it was very slow and bureaucratic to get patients approved within it. That has only recently started. That may have been the emphasis on the fact that we've started to get patients through the HO program despite it being approved a longer time ago may have caused that impression.
Whitney Ijem (Managing Director and Senior Biotechnology Analyst)
Understood. Got it. Helpful. Thank you.
David Meeker (Chairman, CEO, and President)
Thank you.
Whitney.
Operator (participant)
I am showing no further questions at this time. I would now like to turn it back to David Meeker for closing remarks.
David Meeker (Chairman, CEO, and President)
Great. Well, thanks, everyone, for tuning in this morning. Again, we look forward to our next earnings call and updating you on further progress over the next three months. Thanks all.
Operator (participant)
Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.