Q1 2024 Rhythm Pharmaceuticals Inc Earnings Call

Participants

David Connolly; Executive Director, IR and Corporate Communications; Rhythm Pharmaceuticals Inc

David Meeker; Chairman, President & CEO; Rhythm Pharmaceuticals Inc

Jennifer Lee; Executive Vice President, Head of North America; Rhythm Pharmaceuticals Inc

Yann Mazabraud; Executive Vice President, Head of International; Rhythm Pharmaceuticals Inc

Hunter Smith; Chief Financial Officer; Rhythm Pharmaceuticals Inc

Derek Archila; Analyst; Wells Fargo Securities, LLC

Jeff Hung; Analyst; Morgan Stanley

Dae Gon Ha; Analyst; Stifel, Nicolaus & Company, Inc.

Phil Nadeau; Analyst; Cowen and Company, LLC

Corinne Jenkins; Analyst; Goldman Sachs & Company, Inc.

Joseph Stringer; Senior Analyst; Needham & Company LLC

Whitney Ijem; Analyst; Canaccord Genuity Securities LLC

Presentation

Operator

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

David Connolly

Thank you, Steven. I'm Dave Connolly here at Rhythm Pharmaceuticals. For those of you participating on the conference call, o ur 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 of 2024 financial results and business update, and that is available on our website.
As listed on slide 2 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.
And on slide 3, I'll remind you that this call contains remarks concerning future expectations, plans, and prospects, which constitute forward-looking statements. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed on our most recent annual or quarterly reports on file with the SEC. In addition, any forward-looking statements represents 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 5.

David Meeker

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 (technical difficulty), with a larger vision of becoming a leading company in rare neuro endocrine diseases. Now I have two slides today, followed by some additional commentary.
As listed on (technical difficulty), near term, it is up 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 n ext-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 6, our Phase 2 HO data was published in Lancet Diabetes and Endocrinology, reminding the world a gain why we are excited about the difference we can make in this disease. M ean BMI decreased by 14.5% at 16 weeks and 25.5% at one year f or patients who had 12 months of data. The unmet need in hypothalamic obesity is significant, with an estimated 5,000 to 10,000 patients in just the US. And there are no approved therapies.
Our clinical programs continue on track, with the 120-patient pivotal cohort of our Phase 3 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 remain remarkably low. And all that speaks to the commitment and enthusiasm about patient community and the investigators. The first patients enrolled in the Phase 3 study will be finishing the blinded portion of that trial in the second quarter and moving into the open-label extension study.
The Phase 1 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 1 study in quarter three. We also expect to dose the first patients in the Phase 2 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. US 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 a re 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's 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, it will increase the stringency of their approval criteria. That state continues to have a policy in place and continues to cover patients. We have been clear that there is no expectation that the 30 patients converted to our bridge program will return to reimburse therapy any time 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 t his was disappointing, w e 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, g iven that the much larger number of patients both in the US and internationally who are now on treatment for a broader period of time. We expect the rate of discontinuations to level out in the 20% to 30% range long term, as we have highlighted previously.
Although the focus will increasingly shift to the revenue number as this opportunity matures, we thought it would be useful to provide a one-time deeper dive into some of the reasons why BBS patients discontinue therapy. The short summary is that there's no major driver and the majority remain related to (technical difficulty) adolescents, lowest in the pediatric patients, (technical difficulty) 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. 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 i n the US. Approximately 4% of patients have stopped therapy due to a perceived lack of efficacy, which also represents an opportunity, as a number of these patients have stopped after only a few weeks on treatment, and likely before they have experienced the full effect of the drug. This is an area where expectation setting and education is incredibly important. About 2% of patients stopped because of nausea and vomiting, and another 2% stop secondary to overall life challenges, where the burden of a daily injectable becomes too much.
There is a longer list of reasons for discontinuing that we have previously grouped together, at 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 tha t stop therapy do so for a variety of reasons, so me related to the drug, many not related to the drug. Not surprisingly, there are items on this list w e cannot do much about, but other areas where we can do something, and those are the areas we are investing. These challenges like the payer challenges from last quarter are normal parts of the ups and downs of building out a novel therapy for a complex rare disease.
Most importantly, the fundamentals of this business continue straight. Patient identification remains strong, a growing number of physicians are writing scripts, reimbursement continues to be positive, with good news on the reauthorization fund in the US, and we continue to see 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 Q4 of this year. Part 2 of the DAYBREAK study will read out in quarter three, and we continue to make good progress with our Phase 3 M&A trial enrollment.
With that, I'll turn the call over to Jennifer.

Jennifer Lee

Thank you, David. The consistent study demand for IMCIVREE we've seen in the recent quarters has continued the first quarter of this year, and we are making ongoing progress and positive reimbursement decisions and adding breadth and depth to our prescriber base.
Beginning on slide 8, through all of our education efforts supported by a cross-functional team, we continue to identify [HTPs] with already diagnosed BBS patients, as well as help to facilitate an earlier diagnosis for additional patients. This provides us the opportunity to educate HTPs 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 9, 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 to 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, or physicians our territory managers have not called on prior to the prescription being received. We are pleased to see this source of growth continue as we find new prescribers through our non-personal promotion efforts to supplement our field team efforts.
In addition, more physicians are becoming repeat prescribers of IMCIVREE, writing new prescriptions for their second and subsequent patients with BBS. Launch 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 life, including developing relationships and friendships, now that the preoccupation with food has been lessened. As a team, we are inspired by these stories for patients, families, and HTP.
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 buys. With reauthorization, we continue to see strong success. As at 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. Before, these have already been approved to 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 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

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, which is now available for (inaudible) and BBS in 14 countries, including the United States and Canada. We began laying the foundation with (inaudible) and now, we are advancing into BBS in close collaboration with key centers of excellence and experts in the region.
In Spain, where we completed price negotiation 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 soon in patient sets, and we are seeing patients come online there too. This is a typical approach for rare diseases in Turkey, and we have a very experienced team on the ground where we are making significant progress. Launches in this country build steadily over time and we are pleased with our turn base, who will begin to see an increasing contribution to our medicines from these new launch countries in 2025. And we look forward to completing pricing negotiation in Belgium, in the Netherlands, and in the United Kingdom, launching in those countries later this year.
Next slide. In France and Germany, from where we are generating more than 50% of revenues for the international region, we are expanding the field teams to meet operational needs that come with increased demand and the prioritization of the care. In France, we now have a number of patients with hypothalamic obesity on commercial drug through the pre-EMA approval paid early access program. As we experienced with (inaudible) when we first gained early access in 2022 and then with BBS, we know these programs start slow and build gradually. Now, we are you've seen that steady gradual build hypothalamic obesity, which formally got underway late last year. And for (inaudible) BBs, we anticipate completing pricing negotiation by the end of this year.
In Germany, our launch is progressing well, as expected. Our team remains focused in engaging with physicians caring for patients and with the many centers where they are treated. And the first BBS treatment guidelines were published very recently in a major German medical journal. 17 commissions on 13 treatment centers did we collaborate on this effort, led by the University Hospital from (inaudible). These guidelines discuss, in detail, diagnoses, patient management, and treatment with (inaudible). We're expanding the number of treatment centers and hospitals we're engaging with.
Now that we are almost one year into the launch, we have received prescription for 15 treatment centers, which are all within (inaudible) and very well structured and resourced university hospitals. In addition, our German patient support program, (inaudible), is performing very well too. We provide payload support for each patient and their caregivers. Until this time last year, prefilled syringes have been available for both BBS and (inaudible) patients.
And now I will turn the call over to Hunter.

Hunter Smith

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 a 30-trading-day period and can redeem the preferred shares after the fifth anniversary at 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 3 trial with hypothalamic obesity currently planned for the first half of 2025.
Please turn to slide 16 for a snapshot Q1 P&L. We recorded $26 billion 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 US. Gross to net for US sales decreased slightly quarter over quarter to 84% from 85% in 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 cost. The latter component was flat in dollar terms quarter over quarter, resulting in 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 '23. This increase was primarily due to the consideration for our in-licensing of LB54640, the impact of which I will view 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 31. 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 '23.
Now on to slide 17. Rhythm reported $201 million of cash and cash equivalents as of March 31, 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. US revenue was $19.4 million, representing growth of $1.1 million or 6% versus Q4.
The proportion of revenue generated by our international regions increased from 24% to 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 '23.
To review the LB54640 impact on the quarter, 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 include $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 uptime value as required by US GAAP, but will we 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 '24 and Q3 '25 related to this accretion.
We are reiterating our OpEx guidance of approximately $250 million to $270 million in non-GAAP OpEx, comprised of SG&A, non-GAAP operating expense of $105 million to $110 million, and R&D non-GAAP operating expense of $145 million to $160 million. This includes $10 million to $15 million of development costs related to LB54640.
With that, I'll turn the call back over to David.

David Meeker

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 in HO, with all signs suggesting our original excitement was justified. And we are well funded to do what we need to do to get to those value-inflecting points.
And with that, we'll now open it up for Q&A.

Question and Answer Session

Operator

(Operator Instructions) Derek Archila, Wells Fargo.

Derek Archila

Hey, good morning and thanks for taking the questions. Just two from us. So I guess, to solve our KOL checks, and we've heard some emerging clusters of Barnett beetle patients treated in the U.S. with Native American and Hispanic kind of heritage. So just wanted to kind of understand on 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 54 six 40s trial and getting it up and running. And I guess how many of the experience sites from your ancillary experience all will be incorporated in there? Thanks.

David Meeker

Yes, the temporary when taking out share. And to your first question, just regarding clusters and thank similar to other rare diseases. And there can be at sort of pockets of patient population is based FF & E now or how at that defense set up in our stock to populate. And the genetics has had to have a potentially a different frequency impact and a half as population staff we have seen and, you know, in certain areas and Native American S-Class Hispanic population having a higher VBS. app prevalence and certain areas and you're going to a dose item. So we're still adding sites there. I think come we anticipate having between probably 10 to 12 sites to run that HO. one small molecule trial. And the vast majority of these are actually on new sites. We have will have a couple of those centers will be some 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, um, we're exploring all age of patients and then of course, for the small molecule so on. But the small molecule itself will have about 12 sites, the vast majority of which are new the program.

Derek Archila

Got it. And just one follow-up, if I may. Just I want to make sure I heard you right in terms of the cadence of the readouts, obviously, Phase three HL. in first half 25, but I believe you guys said that.

David Meeker

Yes, seven, one eight data as well as the oral data could also be First Half 25 for those Asian patients or the age cohort at least seven one eight. Exactly. That's that's the expectation. And once once we get these trials up and running as always, and seven in terms of the biggest variable is the initiation of. But so far, we look good, and that's my expectation we will read there those out in the first half.

Derek Archila

Got it. Thanks so much. Thank you.

Operator

Jeff Hung, Morgan Stanley.

Jeff Hung

Thanks for taking my questions. On last quarter, you indicated 30 patients came off in February because the one state on any updates on how many of those patients that had consults for proper documentation and how many are back on commercial drug? And then a follow-up.

David Meeker

Yes, I know what we've tried to emphasize there is some. So again, these patients are still going through that evaluation on what we've encouraged people to do is to take those 30 patients out. I do think we'll get some back from they are still going through, but we're not going to update sort of a patient by patient in terms of that over our process has been quite laborious, to be honest with you. I mean, it's getting these additional consults is not easy on the stringency of what's required is high, which is why like I said in my comments, I don't expect us to get out of 30 and maybe a significant number of those may not be able to reach the threshold set of requirements at this state has put in place specifically. So from that status covering it's covered patients. It's covered patients since we took some of these 30 patients off. But again, we're not going to break out more specific details on those 30 patients.

Jeff Hung

Okay. Thanks. And you guys talked about the Bridge program and and then how some of the patients actually did that programming more acute, 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?

Jennifer Lee

So and I would say that in terms of the best practice and that number is variable and also just spaced out for the circumstances of each of these different patients. And in our and as I outlined, it could be as they change jobs, a change insurance. And hence, we have done let's go through that Bay and authorization at the process from the start with this new pack. That number say, every time I would say that in terms of time to transition them off at back at it also is variable based off of their reason. And that average say that it's a consistent and similar to the time in terms of even getting the authorization or the financial and path and recession price per patient.

David Meeker

Yes. And I think to build on that then, Jeff, I think what Jennifer said, it's a good way of thinking about it takes on average four to six weeks for these patients, some to get through their initial authorization and be a good way to think about it and actually highlighted on the Bridge program. And this has been our historical experience, some with road other rare diseases. We worked on tends to be very successful. I'm over 90% of the patients, if you exclude the 30 patients who came out of that one state and went on to the Bridge program. But Tom, everybody else with that exception, um, now about 90% plus of those patients have been able to convert back to Tom in our buying insurance coverage in some way. So so again, it's been a very successful program.

Jeff Hung

Okay. Thank you.

Operator

Dae Gon Ha, Stifel.

Dae Gon Ha

Hey, good morning, guys. Thanks for taking our questions and congrats on the progress of maybe I'll stick with two commercial one on the reimbursement, I guess, reauthorization for Jennifer. Tom, I think you provided two statistics I wanted to hone in on the more than one 40 reauthorizations and 11 that were denials ligase denied. Can you give us the denominator of that reauthorization number and fittings 11, specifically, like how workable is it to get them back on therapy? Or is it kind of lost in terms of our going forward modeling purposes?
And then going over to international contracts, you can clarify, did you mention 26% of this quarter's revenues are comprised of the international sales? And if so, I guess maybe, Yann, if you can comment on what's been so bad beneficial on sort of the plants in German launches that perhaps you can implement on the US side to make it a little bit more sticky and compliant.

Yann Mazabraud

So Dae, on that, let me just clarify. So your first question on the the the reauthorization. So as Jennifer said, more than 140 have had approval, 11 add on denials of which she's worked through. So that's about 150 and 51 to be exact on, but I don't know. Was there additional question behind that?

David Meeker

Let me just add to the that Lefeng denials and why now say that in terms of the reask MS patients, we've been fairly successful. Jeff, are all just in terms of being able to add yet apparent falls and the lead then within the quarter? Let me just break this down. Advocates are similar to at the number that we had outlined, which is less out last quarter and that they can actually get it done now for a couple of different reasons. And one, it may be that they may simply be missing something information and we just need to go back to the physicians to provide this additional information.
That's been an opportunity just in terms of and going from a denial to and gaining reimbursement that for the patient. And some of it could be some because they may not be getting the exact 5% in terms of weight loss and at the reauthorization can happen at less than the one year time points to that may be an opportunity just in terms of follow-up, because these patients are definitely gaining clinical benefit and hence, they want to as well as our physician wants to maintain them onto eBay and Amazon, various different reasons just in terms of the 11 denials. But as I mentioned, we already have enough several days, 11 that have already been approved and we continue to work through the remainder and they go on to your question on international, I but you're correct. It was 26% of sales came from outside the U.S. during the quarter. And I'll let John talk about their experience in France and Germany and France as well.

Yann Mazabraud

Thank you for the question. So I will start seeing that to the US region into international who are very different from a rare disease landscape point of view. But to back to your point, what do we look out in cross-fertilize between the two regions, I think they'll be for the key activities that up similar for two reasons field because the initial analysis in country on back to Ron and good practices in terms of revenue and signaling because we and our teams also speak a lot. So those are areas, for my point of view, a collaboration with the Centers of Excellence that you know that there are there is an important center of excellence in the U.S. More to come coming into oh six is also the case in Europe.
So how do we collaborate then how do we leverage the experience and translated into the publication done? For example? That's one and two, I would say, maybe co-marketing activities of medical marketing, omnichannel activities, the field and digital rooms, which is a lot about that. So seeing that I would think abilities of patient identification program in the U.S. There is a ULO. program in Europe. We have the loperamide, it's a genetic testing program and therefore, a P&L hit them thinking at this early patient support program. So U.S., you have a very comprehensive patient support program and team of dedicated towards efficiency. 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, there's a gentleman when for example, is also very comprehensive and is this crucial activity for the patient is efficient, Ventas and is also something that we speak a lot to build across the two regions.

Dae Gon Ha

Okay. Thank you very much, Dave. And I guess I'm sorry for the confusion. I was just wondering if there were any sort of in the pipeline for reauthorizations beyond the one for the end of the 11 that you've disclosed.

David Meeker

Okay. Separately, I think they got. So I too am once again, there's always going to be fair to say, needing to get Reauthorization Act. And it depends on when they initiate therapy. And when that time frame is for I think we are as rotation requirements, which can vary. But the majority of these are at the one-year point. And so that's a continuous stream just based off of when they initiated when they got a profile, I'll announce when they need to be reevaluated to ensure that they're still garnering and in our benefit from being on therapy.

Dae Gon Ha

Excellent. Thank you very much for the questions.

Operator

Phil Nadeau, Cowen.

Phil Nadeau

Your line is now open. Good morning and congrats on progress, and thanks for taking our questions to from us. So first on Q1 revenue for ancillary, just going to be at the the increase in revenue quarter-over-quarter transmit 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 some of the some issues with Insurance Reauthorization maybe discuss play into reported revenue and Q1? This first question. And then second on Daybreak, can you remind us what you are likely to release during Q3 from that trough?

David Meeker

Yes. So let me let me take the quarter-over-quarter growth. I think there are some puts and takes as there always are in these elements. From last quarter, for example, we had of GTN impact of about $600,000 on sales that was favorable that related to the release of Medicaid accruals base on actual invoices received. So that's sort of sets. The quarter are down a little bit adjusted for the quarter over quarter growth a little bit. The other thing is is when we talked about the single state Medicaid program, we did receive shipments early in the quarter for that program.
So no doubt that it will we receive shipments from that proportion did shift to that program for many patients in the first half of October. So that took some nonrecurring revenue out quarter over quarter. We did have a healthy increase in patients on therapy and we had a healthy increase in vials dispensed. And 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 will next week, expect a normal first, the first quarter occurrence. So hope that got pulled the metrics.

Phil Nadeau

Yes, that helps. Thank you. In filling the debris outcome study? I'm sorry, I haven't seen data yet on what to expect.

David Meeker

I think come, as I said, right from the beginning, this was a a basket trial, a signal-seeking trial on. And so as we presented in our December R&D day in and we were encouraged that out of a large number of genes that we started with There seem to be a much smaller number, but a number of genes that were of interest. So my goal is to will give you an update on those sixteen's 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 bars can be really high.
We're not going to rush into another trial unless some 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, I see that as the long-term future of this overall franchise and any additional approvals we would look to get from those specifically that help.

Phil Nadeau

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

Operator

Corinne Jenkins, Goldman Sachs.

Corinne Jenkins

On 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 repair day it like the retail opportunity versus which ones might be more specific some.

David Meeker

Yes, let me start off and the owner, Jennifer can add anything on. So I think the the the majority are not majority, but a significant percentage of these do occur early on. And again, that's in the back part of the gold, providing the level of color that we do today is just to remind people that we're not providing a therapy to a population that only has one illness or challenge that they're facing. I mean, these, you know, Bardet-Biedl syndrome syndrome by definition. So they have many challenges on, for example, in the U.S., some there's a higher percentage of discounts in the Medicaid population.
And again, the Medicaid population in addition to the health of the patient and I have other challenges in the family that they're trying to deal with. So long story short is, again the there are many, many different often, as I said, patient specific reasons why these patients some discount, but some of those, um, we have very specific things we can do the work on, and I'll let Jennifer speak to that here.

Jennifer Lee

In terms of HOM., it is a different population, um, and what's been striking about the HO. is Tom. It's cleaner from for lack of a better word on these are patients who were literally nothing has worked in biologically, um, you know, it seems that, you know, certainly monetized is addressing a very specific biologic abnormality. So mechanistically, it seems to be the solution, and that's lead 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 three trials we piloted the patients seem to be staying on treatment, including whoever's on placebo. We don't know who they are, but they might be guessing And in today's world that they truly felt there was another option they would likely move there and they're not why not because they stay in the trial than they know they can access some the drug in 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 each of you know, obviously we have a lot more to learn.

Corinne Jenkins

Helpful thing. And then can you help us understand the size of the market opportunity if it is under the two to six year old patient population and how that screen and expand the commercial opportunity for DBS?

David Meeker

Yes. And what we said about that previously is that when we do our genetic screening, the the frequency, the positivity rate in that zero to two specifically, but two to six tends to be higher than the rest of the other agents, the older age groups. And that's not a surprise because parent to present with a child who has early onset obesity and uncontrolled hunger, they know something's wrong. Genetic testing perhaps gets to be done and you know a little earlier. And as a result, um, as opposed to a 20 year old, for example, comes in and you're asking them what their obesity started and the like. And that's just a different term setting, so higher frequency 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 old son with your medication, that's really a remarkable indication that A., it's important to do so be the drug must be safe. And as you know, most of the other available anti-obesity medications have not kids as young and some to six. And so we've gotten positive feedback from the field just from our willingness to take that on.

Corinne Jenkins

Great. Thanks. Thank you.

Operator

Joseph Stringer from Needham & Co., your line is open.

Joseph Stringer

Hi, thanks for taking our questions. I'm sorry if I missed this, but what were the discontinuation rates through the first quarter of this year and 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 down the rate will level out in that 20% to 30% range?

Jennifer Lee

Yes, no, it has ticked up. We're not we're not kind of break it out further again, I think that was part of the goal of today's comments was that we do think it's going to level out in the 20% to 30% of your question is what gives us confidence? I mean, that's consistent, I think with other chronic injectables, some daily injectable them into human insulin therapies like come, not necessarily how they don't discontinue per se, but no compliance can be quite challenging and in some of those areas. So, um, in this age group, we think, again, it's an estimate, Joy, I 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.
From the second part of that question. So yes, it does that cover. And I mean, again, yes, but anyway, that's had for a key area and it actually generates a good opportunity just to highlight what we're doing. I think likewise pieces, we view ourselves as weak as suggests that we evaluate different parts of the business and think that there's Apokyn interest to and, you know, focus a bit more. And as David mentioned, the first couple of sentences is plan. There is the highest risk in terms of FX discontinuing. And when we look at different retail, one example, I'll give a chance and Jackson issues, and we saw that that was an issue early on in Ireland through discussion have implemented at it at hand, nurse support as for patients that they feel very comfortable initiating therapy and they have to inject them themselves.
And this has an level decreased adding, you know, that particular issue as a reason for this Conn's. And we also announced yesterday example, that sort of high tax testing cancer that beginning to make sure that patients are doing okay, as we initiate therapy real assets. And you know, we thought in terms of structure that we had in place and the structure we had some patient support side was that there was one point of contact for the patient, but also was responsible and transit and being able to help through the reimbursement and reauthorization process, which was a lot for one person to be able to juggle those aspects that we have recently and restructure that group. So we have specific the team that focuses on a and you know, authorizations and maintaining the reauthorizations. While we have a separate patient at team education at team that is able to once again have more time and an ability to maintain close contact with the patients.

Joseph Stringer

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

Operator

Michael Higgins, Ladenburg Thalmann.

Good morning, Mr. Han, on behalf of Michael, congrats from us on the continued progress this quarter of two questions from us on the forecasted. So we believe Daybreak stage to could be that out separately on the was going to be a standard staggered updates for should we look for another update in Q4 than the update and QC? And the second question is any guidance on the start of the second trial?

David Meeker

So for MB 5.610, but yes, so it makes on the on the Daybreak study, we'll get the results in quarter three. We haven't done and depends a little bit on what they are in Allen, Texas disorder all this out. So whether we're going to report this in Q3 or Q4, I don't know to be honest, I'm right now.
The second is obviously we're trying to connect these with a meeting and there you have to in our Smith as a late breaker. And so again, there's just some things I don't quite know yet. So I would 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 that will be five, four, six. So we're making really good progress and not the number of sites zone that we need them for virtually all been identified. And we're working through the initiation part of that. So we will beginning in the quarter three and hopefully early in grocery with pets as good as I can do today.

Okay, thank you.

Operator

(Operator Instructions) Whitney Ijem, Canaccord Genuity.

Whitney Ijem

Thanks for taking the questions. And the first one, I guess, is it on the steady-state dropout rate that you're talking about? Our discontinuation rate yet I had is that inform that all against by the age at which patients are starting? And just curious if you're seeing patients are at a higher discontinuation rate in patients who start when they're older versus younger and maybe and there could be some shift in that average rate over time as patients start when they're younger at with debt and label expansion?

David Meeker

So short answer is yes. And that was breaking out the three different age groups there. The key is it's adolescence. So, you know, I don't know disproportionately. We have a number of adolescents. I mean, we know we have about 60% adults versus 40% feeds overall. So the Enel Group bummed, we're continuing to move to a more normal patient distribution because patients and our normal lifespan in that sense. But no, it's just a it's additional color which says, yes, that adolescent group is is more difficult and we do see more higher discount there.

Whitney Ijem

Okay. And then and in France and perhaps I 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 DBS. program. Did I interpret your 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 a process of getting patients through that and to get to approval in DBS versus HO in France?

David Meeker

Yes. No, that's not the case of Jan. You want to make some cuts? No, I think this is not the case or is it early access program running one for Tom, Siebel, wonderful biggest new. We have been very pleased with the uptake of these three programs and the most recent one to say that it's a it is extremely rare in friends to get this is the union approval to be more precise down trends.
And as I mentioned during the quarter, we have now a number of patients which now commercially nicely as well. I think Whitney, what we have said is when the eight we had said for a while, that it was very slow and bureaucratic ticket certainly started. So that may have been the emphasis on the fact that we've started to get patients through the HL. cause that impression.

Whitney Ijem

I understand kind of helpful. Thank you.

Operator

I am showing no further questions at this time. I would now like to turn it back to David.

David Meeker

I look forward to our next earnings call and updating you on that further progress over the next three months. Thanks all.

Operator

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