BioCryst Pharmaceuticals Inc

NASDAQ:BCRX

Earnings Call Analysis

ORLADEYO's Strong Growth and Profitability Forecast

ORLADEYO had a robust Q4 and overall 2023 with revenues of $93.4 million for the quarter and $326 million for the year, a 30% increase over the previous year. The management's optimism stems from the growth, driving confidence in achieving $380 million in global ORLADEYO revenue for the current year and an eventual peak of $1 billion. While 2023 saw operating expenses of $379.5 million, they are expected to stabilize in 2024 between $365 million and $375 million. The company anticipates that its revenues will exceed operational expenses in 2024, leading to operating profit. Further, they predict increased profitability as the blended royalty rate drops with revenues over $350 million. By the second half of 2025, they expect to approach profitability on a quarterly basis, and by 2026, they aim for full-year net income and cash flow positivity.

Product Growth and Market Potential

The company has reported substantial growth in the utilization of ORLADEYO, a medication that has seen a remarkable increase in prescriptions, which now total over 2,500 in the United States. This uptick reflects not only fresh diagnoses but also a significant switch from injectable prophylaxis as clinicians forecast that two-thirds of the growth for ORLADEYO will derive from such switches. Intriguingly, over 1,000 healthcare providers in the U.S. have prescribed ORLADEYO, with over 200 new prescribers joining just in 2023.

Revenue and Sales Performance

The company's revenue has been formidable, with ORLADEYO achieving $93.4 million in sales for the fourth quarter, contributing to a notable total of $326 million in net sales for the year 2023, a 30% increase from the previous year. The U.S. market has been particularly strong, generating $79.4 million of the quarterly revenue and $288.4 million of the annual revenue for ORLADEYO.

Operational and Financial Discipline

Operational expenses, notwithstanding certain non-cash stock compensations and onetime expenses, stood at approximately $119.6 million for the quarter. After adjusting for restructuring and partnership expenses, the full-year expenses were aligned with the guidance range. The company anticipates that in 2024, quarterly expenses will normalize between $365 million and $375 million, consistent with the previous year's figures. With a strong cash position ending the year at $390.8 million, and only $8.4 million of net cash utilization for the quarter, the company's financial management is positioning it for long-term profitability. Notably, they forecast operating profits in 2024 and aim for achieving net income and cash flow positivity in 2026 on a full-year basis.

Patient Retention and Treatment Efficacy

Patient profiles for ORLADEYO have been diverse, with the company successfully attracting patients across all backgrounds, thereby confirming the treatment's broad efficacy. Additionally, 2023 showcased a stable patient retention rate, with 60% reaching the 12-month milestone and thereafter experiencing very few discontinuations. This underscores the medication's strong acceptance and enduring value among patients.

Sales Strategy and Market Access Expansion

Sales and marketing initiatives previously implemented in 2023 are expected to continue driving performance. Specifically, team changes and the addition of sales representatives, patient services, and market access staff have been instrumental in last year's success. Moving forward, the focus will be on emphasizing the benefits patients derive from switching from injectable prophylaxis to ORLADEYO. The company's commercial approach includes catering to patients who have been on demand only, and the strategy will incorporate messaging to increase comprehension among patients and physicians of ORLADEYO's advantages. Even as the company has solid market access in major territories like Germany, France, and the UK, efforts are underway to expand in Spain and Italy .

Earnings Call Transcript 2023-Q4

[Operator]

Good day, and welcome to the BioCryst Fourth Quarter 2023 Earnings Conference Call. [Operator Instructions]. After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to John Bluth at BioCryst. Please go ahead.

[John Bluth, executive]

Thank you very much. Good morning, and welcome to BioCryst's Fourth Quarter and Year-end 2023 Corporate Update and Financial Results Conference Call. Today's press release and accompanying slides are available on our website.

Participating with me today are CEO, Jon Stonehouse; CFO, Anthony Doyle; Chief Commercial Officer, Charlie Gayer; and Chief Medical Officer, Dr. Ryan Arnold. Following our remarks, we'll answer your questions.

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

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

[Jon Stonehouse, executive]

Thanks, John. 2023 was another impressive year for ORLADEYO starting with generating $326 million in revenue in just the third year of launch. We continue to make great progress toward our goal of global peak revenue of $1 billion. Let me explain why.

Late last year, we laid out a set of assumptions that would lead us to $800 million in peak sales in the U.S. The first assumption was to exit last year with a base of approximately 1,050 patients on therapy. We actually exited the year with a base of over 1,100 patients on therapy. Second, we added over 300 net new patients, well above the average of 200 per year we need. Third, we improved the percentage of paid therapy in the commercially insured part of the business from [ 77% ] to 79%. And fourth, we made a modest net annual price increase in the U.S.

In all 4 of these assumptions, Charlie's team executed such that we met or exceeded each of these goals. That's great execution and real progress towards our goal. Today, we'll focus our prepared remarks on ORLADEYO in the financials. We'll start with Ryan, who will cover the data presented at [indiscernible] this past weekend and how many patients on ORLADEYO are seeing excellent control of their HAE along with the convenience of once-daily dosing. With that, I'll pass it over to Ryan.

[Ryan Arnold, executive]

Thanks, John. I've had the privilege during my career to work on several therapies that help change the lives of patients who live with chronic life-altering diseases. An important lesson I've learned is that long-term data and particularly evidence from real world experience, especially in rare disease are critical to understanding how a treatment can address unmet needs and change the lives of differing patient populations.

This is an exciting time for ORLADEYO because after 3, 4 years on the market, we are seeing a very consistent picture emerge from the building evidence. [indiscernible] experience and the long-term clinical data are telling a very consistent story on how ORLADEYO can provide meaningful benefits to a variety of HAE patients.

We recently published the final analysis of data from the open-label long-term extension portion of the APeX-2 study of berotralstat. The patients who started on [ blinded ] berotralstat 150 milligrams and completed the full 2 years of the study had an average reduction of 90.8% in HAE tax compared to their baseline rates. But [indiscernible] don't measure their [indiscernible] and percentages. What's most meaningful to people living with HAE is that they get the chance to live a normal life by minimizing their [ attack ] burden and experienced meaningful improvements in their everyday quality of life, all while avoiding the unnecessary potential burdens of treatment.

ORLADEYO treated patients in this long-term study reported rapid and sustained improvements from baseline of 3.3 attacks per month to 0.3 attacks per month after 2 years with the median attack rate of 0 at month 24. These patients also reported meaningful long-term improvements in quality of life, treatment satisfaction and an overall safety profile that is very reassuring for people living with this lifelong disease. That kind of change in the sustained low rate of attacks with just one pill once a day is transformative for many patients.

These long-term data from our clinical program tell an important part of the story which is being consistently reinforced by our expanding base of rural evidence. This past weekend at the [ Quad AI ] meeting in Washington, D.C., we presented 5 posters showing strong real-world evidence with ORLADEYO in a variety of patients with HAE. What patients are experiencing in the real-world is consistent with the 2-year clinical data. Patients with Type 1 or 2 HAE are reporting long-term median attack rates of around 0.5 attack per month after switching from other prophylactic therapies. By their own account, these patients are having fewer attacks on ORLADEYO than on their prior therapies.

Patients report rapid and sustained reduction in attacks or maintaining attack-free status regardless of whether their baseline monthly attack rate was very high or very low prior to starting on ORLADEYO. These data on effect, regardless of baseline attack rate are consistent with evidence we have presented from our clinical trials. Patients diagnosed by their physicians as having HAE with normal C1 inhibitor levels also are reporting rapid and sustained reductions in attack on ORLADEYO.

And we are seeing similar outside of the United States, particularly in countries like France, where patients can be followed in comprehensive programs with the active involvement of health care providers. This real-world evidence demonstrating the long-term safety and effectiveness of ORLADEYO is exciting. Our team has been hearing the stories of ORLADEYO over the past 3 years, and these data further illustrate why it is such a favorable treatment option for people living with HAE. What is even more exciting is that the data we presented at [ Quad AI ] are just the start. We will continue to generate more real-world evidence with ORLADEYO over the coming years, and we look forward to showing again and again how this treatment can help change the lives of patients and families impacted by HAE.

I'll now turn it over to Charlie to describe how this emerging evidence is translating to our commercial efforts.

[Charles Gayer, executive]

Thanks, Ryan. As John noted earlier, we recently described how consistent net patient growth of 200 per year for the next several years puts us on track for $800 million in sales in the United States. Entering our fourth year on the market, we are very much on track because we added 321 ORLADEYO patients in the U.S. in 2023. The real-world evidence that Ryan described helps explain this growth.

Patients would like convenience. There's no doubt about that. But what they demand is efficacy, control of their attacks. The real-world data with ORLADEYO clearly demonstrate that patients can have both, efficacy and convenience, no trade-offs. Our teams have done a very good job of launching ORLADEYO. But in the end, patient experience will dictate how far we go.

Ryan shared that after switching to ORLADEYO from other prophylaxis therapies, patients experienced a median rate of about half an attack per month. What that means for patients is that many or most months are attack-free and attacks that need to be treated are often less severe. Half an attack per month is also an important benchmark.

We do market research with large samples of HAE patients, and we've reported previously at a medical congress that half an attack per month matches the level of attack control reported by patients taking injectable prophylaxis therapies in the real-world. This low and consistent rate of attacks in ORLADEYO meets patients' expectations because they know from experience that perfect control is unlikely with any product.

For many patients, to be able to get that level of control with an oral, once-daily therapy is transforming how they live with HAE. We recently conducted an anonymous market research project with a sizable cohort of patients who have experience with ORLADEYO and asked them as part of an exercise to write a letter to ORLADEYO describing that experience. Themes such as you gave me confidence, you changed my life, and I feel like a normal person again were common.

The strong evidence from patients also continues to shape prescriber expectations and give them confidence. Our large quarterly surveys of allergists in 2023 showed they consistently expected to grow the proportion of their HAE patients treated with ORLADEYO by about 30% over the next 12 months. As we noted in our press release today, the number of patients on paid therapy or our long-term free product program also grew by 30% in 2023, tracking with physician predictions. Currently, about 50% of patients on ORLADEYO have switched from other prophylaxis. But the allergists in our 2023 surveys expect about 2/3 of ORLADEYO growth over the next year to come from switches from injectable prophylaxis.

By the end of 2023, ORLADEYO has been prescribed over 2,500 times in the United States. That means that at least 5,000 diagnosed and treated patients have not yet tried ORLADEYO. Over 1,000 U.S. health care providers have now prescribed ORLADEYO, including over 200 new prescribers in 2023, but clearly, there is an opportunity for HAE treaters for many more of their patients. just as our market research predicts. We have way more opportunity in front of us than behind us, and the growing body of evidence about how ORLADEYO is changing patients' lives is going to help us get there. I'll pass it to Anthony to describe our financial performance.

[Anthony Doyle, executive]

Thanks, Charlie. It was great to see such a strong Q4 and full year 2023 for ORLADEYO. Not just the revenue performance, but the continued underlying strength in net new patient adds, giving us confidence of achieving between $380 million in global ORLADEYO revenue this year on our path to peak sales of $1 billion. You can find our detailed fourth quarter financials in today's earnings press release, and I'll call your attention to a few items.

Total revenue for the quarter came in at $93.4 million, $90.9 million of which came from ORLADEYO and [indiscernible] net sales for full year 2023 at $326 million, an increase of $74 million or 30% year-over-year.

Of the $90.9 million of Global ORLADEYO revenue, $79.4 million came from U.S. sales with the remaining 11.5% or 12.7% coming from ex-U.S. On a full year basis, U.S. ORLADEYO sales contributed $288.4 million of the $326 million global total with the remaining 37.6% or 11.5% coming from ex-U.S.

Operating expenses, not including noncash stock comp for the quarter were approximately $119.6 million. Included in this are significant onetime expenses. These include about $5.4 million attributable to the R&D reorganization, including costs related to the reduction in force and the postponement of the expansion of the Discovery Center in Birmingham, Alabama. The $5 million upfront payment we made to [ Clearside ] related to our [indiscernible] partnership as well as around $7 million in CMC and other trial costs related to our partnership decision for [ BCX-10013], all of which explained the increase in OpEx from Q3 of 2023.

Operating expenses, not including noncash stock comp for the full year came in at $379.5 million, which when excluding the $5.4 million of restructuring onetime adjustments I mentioned blended it within our guidance range. We expect our quarterly expenses in 2024 will normalize in the low to mid-$90 million range, taking us in line with our full year 2024 guidance of between $365 million and $375 million and essentially flat to 2023.

Cash at the end of the year was at $390.8 million, and net cash utilization for the quarter was $8.4 million. In January, we provided guidance on our near-term time line to achieve profitability. For 2024, we expect that revenue will exceed OpEx, not including noncash stock comp, and this will result in us generating an operating profit this year. Additionally, with revenue exceeding $350 million, it puts us into a tier whereby the incremental revenue will be more profitable as the blended royalty rate is reduced.

In the second half of 2025, we expect to be approaching net income and cash flow positivity on a quarterly basis. And then in 2026, we expect to achieve net income and cash flow positivity on a full year basis. Achieving independence from the capital markets, while we also continue to invest in further expanding our global reach for ORLADEYO and expanding our label with the pediatric indication, while also further advancing our exciting early-stage pipeline puts the company in a very strong position moving forward. Operator, we'll now open it up for Q&A.

[Operator]

[Operator Instructions]. At this time, we will pause momentarily to assemble our roster. The first question comes from Tazeen Ahmad with Bank of America.

[Tazeen Ahmad, analyst]

Can you give us a little bit of color regarding the patients that you were able to add last year, they came, as you said, higher than what you anticipated. Was there a particular profile of patients that was added that you weren't expecting? And in general, do you have a sense of what level of baseline attack patients have when they are switching in particular, to your drug from another drug? And then I have a follow-up.

[Charles Gayer, executive]

Sure. Tazeen, there wasn't really a profile that we weren't expecting. We were -- since the beginning of launch, we've been getting patients from all different profiles, as Ryan laid out with some of the data -- sorry. Some of the data that we presented this weekend at [ Quad AI ] regardless of baseline attack rate regardless of background therapy, patients do really well on ORLADEYO.

[Jon Stonehouse, executive]

You want to take the rest of that, Ryan?

[Ryan Arnold, executive]

Yes. Is there any [indiscernible]? I think what she's asking is, is there a baseline attack rate? Is there any phenotype that we're seeing? Any particular group that's going into switching to ORLADEYO.

[Unknown Executive]

Yes. And I'll call your attention to Slide 6 and Slide 8 in our deck. Both of these speak to the background or baseline attack rates. And what you'll see here is despite varying attack rates, be it high or low, patients do very well in ORLADEYO. Slide 8 specifically calls out a baseline attack rate of 1.33 at baseline for those with HAE type 1 or type 2. And again, those patients did very well, achieving an attack rate at day 540. So they had a rapid and sustained reduction in their attack rates. So basically, a variety of patients can benefit from ORLADEYO regardless of what their baseline attack rate is.

[Jon Stonehouse, executive]

Yes. So Tazeen, you really can't predict it. So the goal is to get everybody to try it and see if it works for them.

[Tazeen Ahmad, analyst]

I just want to ask whether in real life, you were seeing something different relative to what you had seen in clinical trials? It seems like the answer to that is no.

And then maybe just as a follow-up, how are you thinking about discontinuation rates on a go-forward basis? How have they been trending? Any changes from the time that you launched?

[Unknown Executive]

So Charlie is alive.

[Charles Gayer, executive]

My asthma attack. The discontinuation has been really steady in 2023 in the last few years. So still, when a patient starts ORLADEYO, we get 60% of those patients to 12 months and then very few discontinuations after that. And I think relating to your earlier questions, too, we see the same retention rate regardless of patients' background. So regardless of their attack rate, regardless on whether they're switching from prophylaxis or coming in from acute only. They're all staying at about that same rate, 60% a year.

[Operator]

The next question comes from Brian Abrahams with RBC Capital Markets.

[Brian Abrahams, analyst]

Congrats on the continued progress. I'm curious if you could talk a little bit about the -- I guess, your sales and marketing strategy this year relative to last year. Do you expect, I guess, continued pull-through from some of the team territory changes that were implemented in 2023 in 2024? What do you expect to be the focus of the additional SG&A investment for this year? And are there any changes to your commercial approach or strategy with an expected greater proportion of the opportunity now coming from the switchers versus those patients who are on demand only?

[Jon Stonehouse, executive]

Charlie, do you want to take that?

[Charles Gayer, executive]

Yes. Brian, so one of the reasons I do think we did so well last year is we did make those adjustments to the team in the beginning of 2023. By the end of last year, the additional sales folks, the additional patient services, market access that we added, everyone was active and really comfortable in their roles and working well together. And I think that, that is a big part of our performance.

And then going forward, to your question about any changes in the kind of data that, again, that Ryan presented, I think is really critical, and we're very

[Audio Gap]

on getting patients and physicians comfortable with the switching from an injectable prophylaxis to ORLADEYO is opportunity for patients to really benefit. And I think we're seeing that our customers are starting to understand that. So we'll focus on that messaging.

[Jon Stonehouse, executive]

One thing I'd add, Brian, is that Charlie mentioned was this increase in comps and one of the things that we're seeing at Quad AI, another place, we had a standing room-only session at Quad AI. And the confidence in the docs is really high. You compare that to a year ago, where people were still kind of on the fence. And it's [indiscernible] because they've had experience, and they're seeing it work extremely well in patients. So that will have an effect on -- that will be really positive for ORLADEYO and for patients.

[Brian Abrahams, analyst]

Got it. And maybe just a quick follow-up. It sounds like you've got some visibility to getting to the goal of a paid rate of 85% by the end of the decade. Where do you think you can get the paid rate this year relative to 2023? What's embedded in your guidance? And how much potential upside could there be versus your guidance if things go better than expected on that front? Then I'll hop back in the queue.

[Charles Gayer, executive]

Brian, what we've said before is that, that 85% number, yes, we're very confident we'll get there, but it's going to take us a few years. And so we announced this morning in the press release that we were -- we ended last year at a rate of 71.5%. So we'll make some incremental improvements to that, but don't expect any major changes. We're not going to jump straight to 85%. We'll get there probably more in the 2026, 2027 time frame.

[Operator]

The next question comes from Jessica Fye with JPMorgan.

[Jessica Fye, analyst]

Can you just talk about the extent to which your near and long-term top line expectations for ORLADEYO reflects the introduction of less frequently dosed injectables and other orals?

[Charles Gayer, executive]

Jess, we take into account all the introductions of new products, including new injectables and possibly in the future, new orals. And what we -- what Jinky Rosselli and I described at the last earnings call is that patients, once they're on a therapy and doing well, tend to be really sticky on that therapy. And when patients are doing as well as they are on ORLADEYO, we don't see them moving to other therapies. The other key part of it is that we have a very differentiated product in a once-daily oral and that's something that patients and health care providers really want. And so a new injectable therapy offers some incremental benefits but it is not highly differentiated the way ORLADEYO is.

[Jon Stonehouse, executive]

Just flip the question around and ask why would they go on to another product? What's the incremental benefit? And I think what Charlie presented today and what Ryan presented is patients aren't sacrificing efficacy for convenience. This drug works spectacularly well in certain patients. And it's a once-a-day drug. So what incremental benefit is going to cause them to switch? And we've seen -- we're getting switches, you have to have some incremental benefit. So the question is, it can't be efficacy, right? Because if you're controlled on our drug, then you can't do any better.

[Operator]

The next question comes from Liisa Bayko with Evercore ISI.

[Liisa Bayko, analyst]

Just a follow-up on that. I mean you do have half [indiscernible] an attack rate per month, right, which is one every 2 months, which is 6 per year after switching from other prophylaxis. So would that not be like those types of patients, would they not be interested in maybe trying something else? That would just be my like one question, but I actually have other questions beyond that.

[Jon Stonehouse, executive]

Ryan, do you want to tackle that one? I mean the bottom line is nobody does better than that. That's kind of the standard. Every drug has breakthrough attacks. And in that number is a mixture of people that aren't having attacks and some that are. And so -- but Ryan, I don't know if there's anything else to add.

[Ryan Arnold, executive]

Yes. As Jon alluded to, I mean, this is -- you're seeing similar attack control with other injectable therapies. And we view this not as a trade-off, but a trade up because again, patients don't want just attack control. They want the added convenience [indiscernible] the quality of life improvements. And again, we've reported all of that, both in our clinical studies as well as the real-world evidence.

So half an attack per month is doing very well. And again, that doesn't include attack severity, which for some, they've shared, these are very manageable. So again, this is a very notable improvement and looks very similar to injectables in terms of attack rate control.

[Jon Stonehouse, executive]

Yes. So Liisa, don't get confused by the numbers of attack rate reduction in a pivotal study because the confidence intervals from those studies overlap. They all work is the bottom line, and they're not perfect. They all have some breakthrough attacks.

[Liisa Bayko, analyst]

Okay. And have you done any convenience analysis like market research on these sort of like very long-acting agents? Because it seems like at some point, you might tip the balance between taking an oral pill and [indiscernible] -- I realize that some people don't like injection too. But is there any, I guess, like elasticity there in a way?

[Jon Stonehouse, executive]

Yes. No, that's a really good question because we're super paranoid and one of the things I asked Jinky is what's the tipping point on frequency of injectable dosing that would make it as attractive as it once daily oral -- found it yet. I mean we've run that research, we haven't found it yet. And so -- but we'll keep looking.

[Unknown Executive]

Sorry to interrupt. I would just add, I think people underestimate the fear of injections that patients experience. And while it can be convenient for some I think that fear and fatigue of injections can be underestimated. So -- and we hear that continuously from our physicians and from patients as well. So they are seeking convenience as well as that aspect of normal -- having a normal life and carrying around a once-a-day oral feels very normal for a lot of patients.

[Liisa Bayko, analyst]

Okay. Great. And then just a quick question for me. Can you kind of go through the math of like how many patients you've treated so far? How many patients like HAE patients are out there? And how many more need to try ORLADEYO given the kind of like stickiness of the product, like maybe whatever half the patients are [indiscernible] end up like sticking to it long term? Kind of like go through from here to get to that sort of $800 million number?

[Jon Stonehouse, executive]

So start with the 7500 -- work backwards.

[Charles Gayer, executive]

Lisa, the -- near the end of my remarks today, I pointed out that there are at least 5,000 patients who have not yet tried ORLADEYO. That's based on our previous estimates that there are about 7,500 diagnosed and treated patients. We've had 2,500 prescriptions to date. So there's at least

[Audio Gap]

1,000 patients. And with what we're hearing from physicians and patients, we expect a lot more trials in that 5,000. So plenty of room to grow.

[Liisa Bayko, analyst]

Okay. And what -- like as you think about what you need to get to that $800 million number? How -- is it like half of those that need to try it? Or what is the amount?

[Charles Gayer, executive]

That's probably a pretty good estimate. What we need to get is to about 2,000 patients who are sticky at peak, and we are more than halfway there at this point.

[Operator]

The next question comes from Stacy Ku with TD Cowen.

[Stacy Ku, analyst]

So first question is around kind of potential implications with the change in the Medicare Part D redesign, due to IRI. So could there be any potential impact to patient volumes with the decrease in the [ max ] out of pocket spend? And what would be the timing of something like this? So that's one.

And then just a follow-up to some of the questions that have been asked. Can you just further characterize your commentary around the clinicians that are prescribing? [indiscernible] more academic, more community? Is it really still just that 50% split now?

[Charles Gayer, executive]

Thanks, Stacy. So on the IRA, particularly next year when the [ MAX ] out-of-pocket shifts to $2,000, we think that will be an advantage for patients in terms of affordability. And very important is that next year, that $2,000 can be paid over the course of the year in the 12-month increments. And so we think that, that will increase affordability and likely increase the rate for ORLADEYO. I don't think it will really change the volume of patients treated. It's just going to affect the rate.

And then as far as clinicians, we see a great mix. Again, we see the academic physicians as well as a lot of community physicians. As I said, over 1,000 health care providers have prescribed so far. And that is really distributed very evenly across the deciles of our health care provider potential index. And it's been very consistent that way every quarter. So we're getting both academic and community.

[Stacy Ku, analyst]

Understood. And just a follow-up. Does that mean that you think as the rate improves for kind of the IRA changes, you do think that you'll be able to kind of switch more patients over to paid drug. Is that a fair way to think about it?

[Charles Gayer, executive]

Yes, we do next year in 2025 and beyond.

[Operator]

Next question comes from Serge Belanger with Needham & Co.

[Serge Belanger, analyst]

I guess the first one for Charlie. Can you just give a little color on the 1Q seasonality this year? Is it similar to prior years? And then second question, I guess, for Jon and maybe the rest of the team. I think you've all been consistent that you do expect competition from an oral prophylactic by the end of the decade. Just curious your thoughts on an oral, on-demand treatment and what impact that could have for the market?

[Charles Gayer, executive]

Sure. Serge, I'll start with that. For 1Q, yes, we expect similar seasonality with the first quarter revenue being down versus Q4. This -- we had a really strong Q4. So we actually think the percentage reduction could be a little bit more this year. So I think 7% or 8% drop from Q4 and probably mid-80s in revenue for Q1.

[Jon Stonehouse, executive]

And with regard to oral competition, specifically on-demand therapy. I mean we certainly can't argue that orals are important. And if you have an oral alternative for a breakthrough attack, we think that's great. And so having that as a choice for patients, we think it's just another benefit. And an all oral option would be fantastic, right? Prophy and when you have a breakthrough attack take an oral on demand.

[Operator]

[Operator Instructions]. The next question comes from Gena Wang with Barclays.

[Huidong Wang, analyst]

I just have one regarding the data report. I think if we look at the Slide 6, 7, 8, when we look at the number of patients, more than 2/3 of patients -- I mean, the beginning of a patient number and the end of the patient numbers, it was about 1/3 of patients continue until the end of the data report. So any color you could give regarding the other 2/3 of the patients?

[Jon Stonehouse, executive]

Yes. And these -- well, maybe I'll let you start, Ryan.

[Ryan Arnold, executive]

Yes. I mean thanks for the question. These are patients that are -- they're reporting, self-reporting their attack rates. So -- and because this is real-world data, there's always limitations in terms of how that is recorded. In some months, patients may not share what their attack rates are. And so -- but that doesn't mean they've necessarily come off therapy. And all of these patients have -- that you've seen in these slides have completed 540 days of therapy. We're still waiting for some to complete that same time frame to include them in analysis.

[Jon Stonehouse, executive]

Keep somebody in a study for 2 years is challenging, certainly. And remember, some patients don't do well in our drug. We've got about a 60% retention. And so it's not uncommon to see people not succeed and you see that in some of these results.

[Charles Gayer, executive]

Just to underline what Ryan said, just to make sure it's really clear. In those -- in this real-world evidence, we measure patients based on the length of time that they have therapy, and some of them just haven't had the opportunity to reach 540 days because they started at a later time point. So it's a dynamic sample. Of course, some patients do drop out, but this represents how well patients when they're doing well in ORLADEYO, they're doing really well and sticking on therapy.

[Jon Stonehouse, executive]

And that's the point, Gena, is that the patients that do well do really well in our drug.

[Operator]

The next question comes from Francois Brisebois with Oppenheimer.

[François Brisebois, analyst]

I was just wondering, in terms of the discontinuation rate, -- so what leads to this discontinuation rate? Is it that for those patients that just aren't doing well? Or is there other -- any other reason out there? And if they do discontinue, what do they usually end up doing?

[Charles Gayer, executive]

Thanks, Francois. The discontinuation rate, there are 2 main reasons for discontinuation and these won't be surprising. The #1 reason is perceived lack of efficacy. So as we've said, no drug is perfect and no one HAE therapy is for everybody and so that's the #1 reason reported. The #2 reason is adverse events, specifically gastrointestinal, which is not surprising given the product label and our clinical trial experience.

What we do know is that some patients give up too early. And so part of our messaging is for physicians and others to set expectations that you can have a breakthrough attack. You might have GI events. The GI events tend to go away after a few weeks of therapy for most patients. And so it's important that patients don't give up too early. We actually see in 2023, about 10% of the patients starting ORLADEYO were actually restarts. There are people who gave up in the past and came back because they knew that they had given up too early.

[Jon Stonehouse, executive]

And Francois, John can send you the slide, but one of the slides we've had in previous decks shows the pattern of discontinuations over 2 years, and it's flat. So I think now we have a pretty good idea of what that pattern is. And if we've got you for up to a year, we've got you.

[Brian Abrahams, analyst]

Understood. And then can you just help me understand a little bit the U.S. versus ex U.S. dynamics in terms of the growth and your assumptions and expectations. Are there challenges, maybe ex U.S. that aren't happening in the U.S.? Just any color there would be helpful.

[Charles Gayer, executive]

Sure. Ex U.S., first of all, once we -- the biggest challenge or the biggest time factor is getting market access in an ex U.S. market. And so that always takes longer, and we have countries rolling on all the time. So a number of countries in Europe, for example, like Germany, U.K. and France, we got market access a few years ago. But we're just now getting market access in others like Spain and Italy. And so that's one factor.

Pricing is a lot lower ex U.S., so it takes 4 to 5 ex U.S. patients to add up to one U.S. patient. So our strategy is very much a volume strategy outside the U.S. And then finally, what we're seeing in the real world in these countries where we have market access and we've launched is the same consistent pattern of patient adds, depending on the market -- the HAE market dynamics. Sometimes that's patients switching from other prophys. Sometimes it's growing the prophylaxis market with a drug like ORLADEYO. At peak, we expect ex U.S. to equal about $200 million of the $1 billion in sales and what we see so far gives us confidence that we'll get there.

[Jon Stonehouse, executive]

And if [indiscernible] is an analog here right at the time that the U.S. starts to flatten out, the ex U.S. continues to grow, so you have overall growth of the brand still. So that's what we're expecting right now.

[Operator]

The next question comes from Maury Raycroft with Jefferies.

[Maurice Raycroft, analyst]

Just wanted to ask a clarifying question on the seasonality this quarter. Is that for the same reason as in first quarter '23, where there were budget issues with external charities which increase the number of patients on free drug program? Or what are you seeing this year so far?

[Charles Gayer, executive]

Sure, Maury. That's one of the situations, the Medicare issue -- we've got a little bit of insight into that. What I'd say is it's not solved yet. It doesn't seem to be worse than.

[Audio Gap]

but it's not solved. We think next year, as I said earlier, with the IRA rolling in fully, we have expectations that, that budget issue will be more solved in 2025. The main reason for the dip in Q1 is the broader percentage of patients getting reauthorizations. And when that happens, we have to drop many patients back temporarily to free product. And then also in the first quarter, it's the highest hit to gross to net because in the commercial market, we're helping pick up patient [ co-pays ] and the majority of that happens in the first quarter. And you'll see a corresponding nice pop in the second quarter when we get those people back to paid. .

[Maurice Raycroft, analyst]

Got it. Makes sense. And one other quick question. what proportion of the 321 new patients are on short-term quick start? And how long on average does it take to convert these patients to long-term pay patients?

[Charles Gayer, executive]

The $321 million was the net growth across the whole year. So what we did say is that we ended the year with 1,000 -- sorry, 1,104 patients on either paid therapy or long-term free product. There was also a sizable chunk of patients on short-term quick start, new patients coming in. And it usually takes us -- we get the product out very quickly. For most patients, we get them to either paid or from free product within about a month.

[Operator]

Your final question today comes from John Wolleben with Citizens.

[Unknown Analyst]

This is [ Catherine ] on for John. I had a question about how you're thinking about profitability versus your earlier pipeline kind of prioritizing those? And then just a question about the data coming? Is it still coming in midyear for the PNH trial?

[Anthony Doyle, executive]

Yes. I think we've been very clear about our past profitability. Very excited to get to the point where we're independent of capital markets. We've been seeing over the past years that convergence of the lines between revenue and OpEx. We continue to see it this year and beyond. So being able to generate an operating profit this year getting towards both cash positivity and EPS at the end of next year and then achieving it in 2026. I think it puts us in a right spot. We do that at the same time as continuing to invest in that early phase pipeline.

So the 2 things coexist and actually the opportunity to be able to invest in whatever we can do to move as fast as we can in those periods because that early phase pipeline that we generated in -- or that we announced in November is, in fact, early phase, puts us in a spot where the expenditure within the next kind of 3 years is not as meaningful as it would be when you get them to pivotal trials. So I think the company is in a great spot. And if there's anything we can do to accelerate, we absolutely will.

[Jon Stonehouse, executive]

And there's nothing to update on 10013, nothing has changed on the time line.

[Operator]

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

[Jon Stonehouse, executive]

So one of the things that we're hearing from investors is they have so many things coming at them, and it's hard to keep up with the opportunities to invest in. And if you're in that camp, a question you may want to stop and ask yourself is how many companies do I have in my portfolio that have a growing product, have a discovery engine that created the growing product, have a pipeline that came from the discovery engine that's going to create another growing product or more and has an accelerated path to profitability, where we're probably going to be cash flow positive or near that in the second half of next year.

And if the answer to that is none or too few and you want to diversify your pipe, your portfolio, reach out to us. We're happy to get you up to speed on our company and answer any questions you may have. So have a great day, and thanks for your interest in BioCryst.

[Operator]

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