Good afternoon, and welcome once again to TD Cowen's 44th Annual Healthcare Conference. I'm Phil Nadeau, one of Cowen's biotech analysts, and it's my pleasure to moderate a fireside discussion with Apellis. We have with us today, Cedric Francois, the President, CEO, and Co-Founder, as well as Adam Townsend, Chief Commercial Officer. Guys, first off, I'll hand it to you. Can you give us a brief state-of-the-company overview? What are the strengths, challenges? What does Apellis need to do to create value over the next year?
Yeah. Well, thank you so much, first of all, for inviting us. Thank you all for attending. So last night, we had the great pleasure of having a little dinner together, and I told Phil that last week was one of the best weeks that I've had running Apellis because we came out of a very boring year in which nothing happened. And no, but all kidding aside, of course, we had to deal with the safety events and the messaging that came along with it. But we feel very much that we are at the tail end of that and in a situation right now where we can confidently represent to physicians what the state of affairs is. The fact that these events were, and are, and continue to be very rare, we understand the incidence.
We understand that this is very much a first injection phenomenon as well, which leads us to also have a better understanding of what may be behind this. But against this backdrop, where, of course, we had to navigate choppy and complicated waters stands the extraordinary efficacy profile that continues to mature behind SYFOVRE and something that I think will really carry the day in the months and the years to come. In the GALE extension study, which is where we took the patients, the 1,200 patients from the DERBY and OAKS studies after 2 years, and had 800 of them enroll in a 3-year extension study, so 5 years in total, with the first patient, by the way, last week, having rolled out of that 5-year period.
We have a full data set from the second year to the third year of dosing, where we can slow down the lesion size growth in patients with extrafoveal lesions by as much as 42%. So needless to say, that's a, you know, an extraordinary benefit to patients to be able to do that. And now that we know where vasculitis stands, we will be able to continue to build on that. The last six months very much stood in the context of building trust with the retina community, so that we could continue to have prescriptions happen, continue to evaluate what was going on. Now that we really understand when these events are a risk, what the risk is of these events occurring, which the best patient populations are, also certain ideas around mitigation, we can build on confidence, right?
So essentially, at the end of the day, the retina physicians that are still kind of on the ledge of, "Should I enroll patients on this drug or not?" Mostly are there because they don't really know everything exactly the way we do yet. So education is important, and we're very excited about going into the spring and the summer and the fall, I think from a very different perspective than where we were last year in the summer and the early fall, of course. So really excited about what's in store for SYFOVRE in the months and years to come. And then, of course, there's EMPAVELI.
EMPAVELI has in PNH had, you know, a difficult job to do in a very crowded field where a lot of patients are in clinical trials, but also where by now we are well north of 1,500 patient-years of dosing, and where we have a very good sense of the safety profile of EMPAVELI in these patients, combined with the efficacy that we see in PNH, which is, of course, a disease where it's kind of very gratifying to evaluate that efficacy profile. Based on that, we are looking forward to the readout of the so-called VALIANT trial this summer. This is in patients with C3 glomerulopathy and IC-MPGN, a trial where we enrolled 124 subjects.
The primary endpoint reads out after six months, where, you know, after a 1:1 randomization, all subjects then continue for another six months on full dosing. This is a trial where we believe we will be able to make an important difference in the lives of these patients. As a reminder, the market for this is about threefold what it is for PNH, with currently no competition in there. So this is something where we think the difference that we can make to patients will be remarkable. We also say that based on the histopathology evidence that we have in this disease that was presented at the American Society of Nephrology last year in the beginning of November. So lots to look forward to this summer.
Then this year, we're also going to be talking much more about what we have been doing pre-clinically and in our early clinical development. We have an siRNA program, where we are lowering the C3 levels systemically. What we are going to do with that, we will be talking about later this year. But that, again, is a program that we're very excited about, with a very clear strategic purpose that will become public again later this year. Pre-clinically, we also have several programs that are now coming towards maturity and in the second half of this year. We look forward to sharing that with you. On the corporate side, needless to say, last summer was a very difficult period for us.
We had our RIF in August, but then a rebuild throughout the fall and a cohesion and a tightness and an inter-functional collaboration that really stands out, that brought us to this place, and with kind of a whole workforce that is reinvigorated by what is in front of us. So that is, in a nutshell, where we stand with Apellis, and happy to answer any questions, Phil.
Yeah, sure. So maybe we'll start by digging into SYFOVRE in a bit more detail. You mentioned what you did to earn the trust of physicians over the past year, and now it's about building confidence to let the launch continue to reaccelerate. Where do you think the physician mindset is today, if you compare it to maybe the bottom during the summer, right after vasculitis got disclosed, versus where the enthusiasm had been maybe 8 weeks prior, when SYFOVRE's launch was on a huge trajectory. But where in the process of recovery do you think physicians are today in building confidence in adopting SYFOVRE, versus where they maybe had been last summer?
Adam?
Sure. Yeah, thanks for the question, Phil. So obviously, we were thrilled with the launch last year, delivering $275 million worth of revenue in the US. And, you know, Cedric mentioned that in the middle of that, we went through some drama. So I have to say, from what we've seen in January and February, demand continues to grow. January and February have been two of our strongest months, the two strongest months since launch. And we're starting to see that the benefit risk profile of our drug is being, you know, understood, and physicians are starting to respond to that knowledge, right?
So prior to launch, our first full quarter, we saw great usage straight out the gates, and then vasculitis impacted that, and a lot of physicians paused and stopped using. We found that there were three segments of the market. You know, we could segment the market based on that time period during vasculitis, where a third of the market said that, you know, they understood vasculitis, nothing changed for them, they could manage it, continued usage. The second segment, the second third, where I'm going to pause first injections in new patients, and I'm going to just maintain my patients that have got past that. Then the final third, where I'm going to sit, and I'm going to wait, and we'll see what happens. I'm not going to use your product for the foreseeable future.
So now we're back on the demand growth ramp, and we're starting to see use across all of those segments, right? So our J-code unlocked the prescribers that were waiting for reimbursement issues. We have been totally transparent on the benefit risk profile, and I think our efficacy profile of increasing effects over time is really resonating, and it drives that new demand. So we're making inroads in ground usage of all of those metrics within those SYFOVRE segments. Yeah, I'm very positive. I think we've done a tremendous job of execution, and I expect us to continue to be super focused on pushing that into this year and beyond.
We put out a note after last night's dinner, which we thought we discussed a lot of strategy, long-term looking, some of the more long-term strategic thinking that you discussed last night. The number one question we got back this morning is: What did Apellis say on Q1? So I think there's still some controversy about what you said on the Q4 call, in regards to January, February, and seasonality, and how that relates to Q1, the Q1 revenue number. Maybe you could just discuss that a bit.
Yeah. Yeah. My bad. I apologize. Looks like I overcomplicated things a little bit. So, we continue to see growth from Q4 to Q1. As I said, January and February are our two highest demand months. So the path to growth continues, and again, it comes down to the benefit risk of the drug and physicians understanding that, and great execution from the team. We mentioned seasonality as it was our first January and February, where recertifications of payer coverage is a real thing. So we actually managed that process incredibly well. But it's, it changed the ramp of that growth, but to see 60,000, you know, 60,000 vials delivered in Q4, already mid-February, 40,000 vials delivered January to mid-February. You can tell by those metrics alone that that demand is continuing.
One data point you also mentioned on the Q4 call was share. I think you said 90% share of overall of the market, and last night you said 70%-80% share of new patient starts. How has SYFOVRE been so successful at maintaining share despite the vasculitis?
Yeah. So, yeah, great question. So what, what we did, obviously, at the initial phases of the launch, we went out there, and we quite rightly communicated the efficacy profile of the drug. And what happened when we had the first rare cases of vasculitis is we actually stopped, you know, selling SYFOVRE. What we did was we were incredibly patient with the physician set, and we said: What information do you need to hear from us on vasculitis? How can we help you understand vasculitis? We were super transparent, and we took our time. We met with, with physicians regularly. We met in group settings, practice settings, and we just responded to their questions and helped them get comfortable with the benefit-risk profile.
I think that was a core piece of our success, so that when physicians started to get comfortable, they started to prescribe again, and that's when you saw the increased ramp, as you went into Q4, and that ramp continues into Q1.
How did you make them comfortable? What rate of vasculitis did you cite, both in terms of new patient starts as well as overall, and what other strategies did you have to alleviate their concerns?
Yeah. So obviously, we always were clear on the rate being very rare, 0.01%, and that helps those patients have a benefit-risk discussion with their patients. You know, they would then discuss the efficacy profile, and they would say there is this very rare rate, 0.01%. It looks like it is a first injection phenomenon. So it was a relatively clear story. It just took a little bit of time to get to. So we can now double down on that story and really start to push through that.
Last night, management noted that the first injection rate is 1 in 4,000-5,000. Is that right? And how do physicians feel about that?
Yeah. So this is part of what I mentioned earlier, with the confidence in how you communicate with your patients, right? So, when you take-
Other side effects of intravitreal injections, there are risk at every single injection. For example, infection and uveitis is 1 in 3,000, but it is there every time you do an injection. The rate of 1 in 10,000 that we had on vasculitis was based on the full denominator, but the fact that it is only there at that first injection, right, makes it very focused. So you can tell a patient, when you see that patient as a physician, the first injection is very important. Be vigilant, right? There is a risk of 1 in 4,000-5,000 that you develop vasculitis, and half of these cases, the outcome of that can be severe. And after that first injection, when we're done, you're in the clear, right? So that is something very important to, again, to build that confidence, right?
It's very different to have that first injection discussion and knowing that after that, everything is fine, versus every time you do an injection, having to wonder, is something going to happen or not? So I think that's really going to benefit us in the long run. It also means that kind of the majority of patients that get treated now and that really will take that treatments, you know, knowing that risk, are patients who have typically bilateral disease. They have a bad eye, where they've already experienced what vision loss can look like. Another eye that is at risk, the bad eye will be tested first. A month later, if nothing has happened, then, you know, the other eye gets treated or bilateral treatment gets initiated. So that is really where, you know, the bulk of these new treatments come from.
We are going to be working now on hopefully, you know, in the future, being able to predict which patients are at risk. If somehow we could tell the 1% of patients that have a 1% risk of a bad outcome, for example, then the other 99, who may have better seeing eye than are earlier in the disease, you know, will feel much more comfortable getting treatment as well. So in many ways, kind of it, it smoothens the ramp. You know, it's, it is kind of a, I think, a very nice growth story, where, in this new indication, with this new modality, you know, we are gradually going to get, I think, in a very good place. It's worth mentioning that if we go back to 2005, when the anti-VEGFs came out, right?
Even at that point in time, it was not smooth, right? I mean, these are very controversial things always. In 2005, I know many retina docs who will deny this today, right? That they would never do an intravitreal injection and the risk that that entails. Well, we all know where that led, right? So it takes a bit of time, it takes physicians getting used to it. The most important fact is to know what you have in front of you. In the summer, the problem was never the rate of 1 in 10,000, right? The problem was: Is this the tip of the iceberg? Is this something where, like with another drug in the past, you know, things would get worse over time, et cetera? And, you know, that is definitively proven to not be the case.
I think that is the most important fact, and that needs to be communicated as efficiently as possible to the retina community.
Over the last few weeks, maybe a couple of months, it seems like Apellis' confidence that they have that you have an understanding of the etiology has grown. It seems like you're fairly confident now that the issue is a pre-existing allergy to PEG in patients. How did you derive that understanding, and how do you prove it out from here? What, what work can you do to kind of more definitively show that that's, that's really what's happening?
Yeah. So it's at the end of the day, it's a kind of the combination of all of the pieces, of evidence that we have in front of us, right? It's worth noting that it is remarkable that we never see or have seen sensitization happening against the drug, either in the trials or in the real world, right? So the drug has an amazing, you know, non-immunogenic profile in that sense. Now, polyethylene glycol, conversely, is something that probably most people in this room have antibodies against, especially after the COVID vaccines were administered to, I hope the majority of you. But still there, you know, it is not as simple as you have anti-PEG immunity.
You know, it is, we believe, some weird combination of a Type III and a Type IV reaction, so T cell immunity in combination with probably very high titers of antibodies, in combination with a breakdown of the immune privilege of the eye. If you're the wrong person at the wrong time, in the wrong place, then something like this can happen. We have done a lot of work with patients that were kind enough to collaborate with us to look at these immunological profiles. We also know that other PEGylated intravitreal agents have the same issue. That also tells you that there is something that is going on there.
And so it's really kind of the combined element of all the pieces of evidence that we have that give us, I'd say, greater than 90% confidence that this is what's going on.
Where do you go from here? You mentioned determining who's at risk. Is it possible to develop an assay or a test that could say somebody is in the clear and they won't have a risk?
Yeah. So that, that's an excellent point, right? So the understanding what is going on, right, is not a necessity based on the rarity of these events and based on the communication that can happen between the physician and the patient. But at the end of the day, if we were to be able to do something, again, with the benefit of just this first injection, right? You wouldn't have to test people all the time, right? It's before that first injection you do—if you could do a quick test and give confidence, confidence to the 99% of patients, it would break open probably a next segment of patients. We're gonna be working hard on that. We cannot promise that we will ever be able to deliver that. But, you know, with what we currently know, it's not impossible.
On the Q4 call, you also updated the prevalence figures for GA. Apellis now estimates 1.5 million people, whereas the prior estimate was 1 million. What led you to raise the estimate to 1.5 million? And ultimately, what penetration in that market is possible?
Yeah. So, you know, we prior to launch, we looked at all of the epi and all of the prevalence data out there, and one thing we found that when there wasn't an approved treatment for geographic atrophy, a lot of patients were lost to follow-up, right? So they went to see their optometrists or an ophthalmologist, and that doctor said, "I've got nothing I can give you. Take some vitamins and go home." And they tend to get lost to follow-up. And what we found, a large piece of our analysis comes from our disease state education that we did with Henry Winkler on TV. We can track those metrics incredibly well, and we found that that's driven patients to go and get their eyes checked by either an optometrist or an ophthalmologist.
And then those patients are referred to an injection, injecting physician, and those physicians will comment to us and say, "Hey, I saw 20 new patients that weren't in my computer system that were referred, who are all, you know, cases of geographic atrophy." It also drove patients who needed wet AMD, administration as well. So it's a really, really sizable market. Now, one thing I think is critically important in this market is I'm a true believer that this is a market where the efficacy of the drug wins. If you're a patient, you're gonna go on this drug for the impact that it can have on your vision, the efficacy of how-- what it does to lesions. And, I actually think, you know, this market is huge.
It's a very sizable market, and I think that profile of having an incredibly strong efficacy profile is gonna really, really help us push and become and remain the number one GA treatment.
Do you think ultimately, a visual acuity benefit needs to be demonstrated in some way for the market to reach its full potential? Or is the conviction that lesion will translate to vision, is that conviction strong enough among physicians that the BCVA benefit is not necessary?
You want to start? Yeah. So I think, look, I always like to say that the term best-corrected visual acuity may be the worst term ever used for a very simplistic measure in the eye, right? If you look through your fist like this and ask you to read a Snellen chart, you will have 20/20 vision. But then if I ask you to run through this building looking through a little peephole in your fist, then you know what it's like to be a patient with geographic atrophy, with very good best-corrected visual acuity. And there is a phenomenon called foveal sparing that you have in geographic atrophy that preserves that central portion of the vision. This is why BCVA in geographic atrophy is such a poor measure of efficacy.
This is why the FDA, of course, decided to not have this be the endpoint in GA studies. Now, I think the majority of physicians very much understand this. The majority of physicians, you know, are not, you know, understand that a living photoreceptor cell is better than a dead photoreceptor cell. By the way, that is the case with the physician corps here as well as in Europe. You will always find people that, you know, are going to be skeptical. I think the ask to better understand the structure-functional relationship is a fair one. And again, you know, the tools are improving over time. Maybe now we're in a better position to prospectively do that. I think we are. But it goes well beyond best-corrected visual acuity, right? It goes against microperimetry.
It goes against using AI to really map out function across the retina to understand this in this, in this disease. I'm very excited. I'm convinced that we will be able to show these things. Even in the OAKS and DERBY trials, in OAKS, we did microperimetry, where you take 68 dots in the back of the eye, not just that central peephole, right? But 68 dots, where you shine a laser of increasing intensity, and then the patient determines, "Do I see that dot or not?" And if you then look in the border zone, right, outside of your lesion itself, which is where the lesion is supposed to grow, that's where you see a clear signal in terms of a benefit.
Importantly, and this is something that I'm personally very, very fond of, is that we see that benefit not just in the active versus the sham control, but we also see that exact same benefit in the actively treated eyes compared to the untreated fellow eyes. So even though, yes, these are all post-hoc analyses, it's hard to imagine those findings to be random. So more work to be done, but we're very excited with where we stand right now and as well as with the work that's in front of us.
I think if you look at the metrics of the launch, right, the increased demand, double-digit new accounts signing on to prescribe SYFOVRE every week since launch, tells you that these physicians in the U.S., they understand that this will have an impact, not only on lesion, but will have a functional impact, too. So all of the metrics point towards what Cedric's described, that, physicians are seeing that. And that's why the, the efficacy and, and the benefit of that efficacy is why they're using the drug.
Pivoting to Europe, where you've got a negative CHMP opinion, can you remind us where you are in appealing that process? In the past, you've suggested it's gonna be an uphill battle to change the CHMP's opinion. Is that still your view?
Yes. So look, going through an appeal process in Europe is very complicated. There are 27 countries. Two CHMP members are chosen to do your review. If those CHMP members provide a negative opinion at that point in time, you have to expect that two new rapporteurs, who everybody knows, right, in that room as well, are going to change that opinion. So of course, it's an uphill battle. I think that the review in the previous round was kind of heavily influenced by the fact that post-hoc analyses, you know, were not deemed to be acceptable, in spite of what we believe were, you know, strongly indicative features of those analyses. Hopefully, the new rapporteurs will look upon that more favorably.
I think, again, what we know now is that the retina community, in other words, both the retina doctors as well as the patient advocacy groups, have voiced the unmet needs, have provided a different kind of opinion of the data that may not have been that apparent last year, and hopefully, that will make a difference.
You suggested that the rapporteurs you had the first time didn't actually treat patients. I think not only were they not ophthalmologists, but one was like a statistician, the other one maybe a veterinarian. Are you more confident in the characteristics of the second group? Obviously, don't tell us anything that will unblind who they are, but are they more likely to understand the importance of post-hoc analyses and the correlation between preserving retina and saving function?
Yeah. Well, so first of all, the all of these rapporteurs are very qualified individuals, right? I mean, they're trained scientists, physicians, so there's absolutely, in my opinion, nothing wrong with the viewpoint that was adopted, right? I mean, you can make a very strong argument that a post-hoc analysis should be discarded and not be looked at, right? I think, however, in the context of a disease as complex as geographic atrophy, it is worth having a different viewpoint, and hopefully, we will get this from these new rapporteurs.
Can you remind us of the timelines?
In the second quarter, we will receive, you know, the appealed opinion, and hopefully, we will be able to get to a better outcome.
Moving to EMPAVELI in the last few minutes, you noted the IC and PGN data is coming up mid-year. Doesn't seem like investors are paying a lot of attention to that. So what are people missing about the unmet need as well as the market opportunity?
Well, it's kind of set in the shadow of SYFOVRE, right? I mean, first of all, the data that we have already generated in these indications is worth taking a look at, especially the histopathology data that we disclosed in the beginning of November. Those data are unprecedented in terms of how the complement factors are removed over the course of a three-month period from these kidneys. You know, we receive more requests for treatment, at this point in time for these kidney diseases than we even do for PNH, right? I mean, this is something that is really an important unmet medical need, with strong data that are indicative that we may have a therapy that ultimately will be proven to be efficacious. And we have a Phase 3 clinical trial that will read out this summer.
We are excited about that trial. Of course, Phase III trials, you know, you can never be sure of what you're going to get, but, I would say the proof of concept indications that we have are promising.
In terms of market size, I think you said it's four times larger than, than PNH. Did I, did I hear that correctly? Would that translate to about $750 million market, maybe a $1 billion market, give or take?
Yeah, we believe it's three times larger-
Three times larger.
— than PNH, not four. But of course, there is no kind of incumbent drug like was the case for Soliris or Ultomiris in PNH. Also not, I'd say, kind of the very high trial, clinical trial backdrop against which our commercialization had to happen in PNH. But yeah, these are patients that typically get this disease during adolescence. They have a 10-year path in which about 50% of these patients will end up having to receive hemodialysis. Once you are transplanted, which we believe could be as many as 1,500 out of these patients, you are at very high risk of relapsing because this disease is caused, in the majority of cases, by genetic mutations within the complement pathways.
So again, kind of a very attractive, disease, which happens to carry the name of our target as well, right? So the fact that a C3 inhibitor could treat C3 glomerulopathy seems intuitive.
So just add about 5,000 patients in the U.S. and 8,000 patients in Europe.
Perfect. Then in the last minute, one more short-term question, but we've been getting a lot. So on the capped calls that you're calling, can you first of all describe why you're doing the transaction, what you expect to get out of it, and why now? Our own desk has estimated that it's about 1 million shares that effectively will be sold over the 7 days due to this transaction. That's what's pressuring the stock. Is that a fair analysis?
Yeah, I think. Look, first of all, you know, we did a convertible instrument in 2019, and we did this capped call instruments to essentially be kind of a vehicle to reduce the dilution at that point in time. At this point in time, we came to the conclusion that considering you know how well the launch is going and the runway that we have, shoring up our balance sheet was a good idea. These are not newly issued shares, to be clear.
These are preexisting shares that, in all fairness, you know, can be thrown into the float, and I don't know if your number is spot on in terms of what the pressure is there or not, but we believe that over the course of seven days that all gets integrated into the market, so we should be at the tail end of that. But again, from our perspective, just something that we thought was a wise decision, and we believe is a wise decision, to set us up for success in the months and years ahead.
Why get the $125 million now versus waiting, maybe getting more money later? What's the strategic benefit to doing it today?
Yeah, I mean, you know, these are always kind of judgment calls that are not black or white, right? I mean, for us, I think at this particular moment in time, we start to have a good sense of what the trajectory looks like. You know, and kind of having that added piece in there and kind of knowing where the dust settles is, is good for us and important for us. So we're very happy that we did it, and look forward to the next steps for us.
While Cedric and Tim and Meredith were doing that, January and February were the two highest demand months for SYFOVRE so-