It's our pleasure to have all of you with us this morning here in Las Vegas. Our first presenting company is Apellis Pharmaceuticals. I'm Tazeen Ahmad, I'm one of the senior mid-biotech analysts. Sitting next to me are two members from the Apellis management team, Cedric Francois, who is, of course, President and CEO, as well as Tim Sullivan, who is Chief Financial Officer. Gentlemen, good morning, and thanks for making the trip over.
Thank you.
Good morning.
Great to be here.
So, we'll start with you, Cedric, about a little bit about the company, a broad overview. What does the company focus on? Some of the things that have been occurring, and then we'll talk to Tim about some news that you guys announced this morning.
Yeah. Thanks. Thank you so much, Tazeen. Thank you for inviting us. Love being here in Vegas. This is a really exciting time for us as a company, right? And we are in this exciting transition phase. We have two marketed products that came on the market in the last three years, EMPAVELI and SYFOVRE. SYFOVRE is on its track for one of the strongest launches in recent memory. Two products that make an incredible difference in the lives of patients. What we have in front of us is, of course, the continued growth of SYFOVRE. We are now one year in and north of $400 million in sales, of course, but it addresses this incredible unmet need in this blinding disease for patients.
And then EMPAVELI, which I like to call the little train that could, 'cause in PNH, you know, it made an incredible difference for the lives of patients, but this is the moment where it will blossom into new indications. We are looking forward to the VALIANT trial. That's a phase III readout this summer, where we are hoping to have the, first approved product in C3 Glomerulopathy and IC-MPGN, and other indications that we'll be talking about, in the future as well. And then, of course, our pipeline.
We have an siRNA product that is currently in early clinical development, and then pre-clinically, we continue to work on this complement pathway that we know so well and have gotten to appreciate so much, and where we have our Beam collaboration alongside other new technologies that will come to bear, and that we will talk about more in the second half of this year.
Okay. We'll go into a lot more detail in a minute about all those things that you talked about. But, Tim, I think it's probably a good time to talk about the press release that you guys issued this morning. Can you talk about the refinancing of the SFJ debt arrangement through Sixth Street that you announced? Maybe some details around it, how it came about, and what does it mean?
Yeah. Thank you. So this is big news for us, right? We just announced a $475 million financing with Sixth Street. This facility is initially a $375 million draw, and that was used to replace, almost entirely used to replace the SFJ Pharmaceuticals debt. The important thing about that is that over the course of the next few years, we had $366 million in payments to SFJ, and we took that out on a debt-neutral basis with $375 million from Sixth Street, which is fantastic. And these terms were phenomenal, and they did a couple of things for us.
We previously messaged that Sixth Street was a great instrument for its time, but it has certain constraints, including the fact that it had these, you know, over the next 19 months. Sorry? Sorry, SFJ. Sorry. SFJ required over $200 million in payments, cash payments, over the next 19 months. So we felt that was obviously something we needed to address, and the Sixth Street facility helped us do that. In addition, these are incredible terms, right? So what that did was it allowed us to get an interest-only debt vehicle where the payment of principal is delayed until 2030. And these are very also very exceptional terms, so probably the best credit spread seen in a biopharma deal, debt deal, in the last five years. So the SOFR + 5.75 are really phenomenal terms.
So we're really proud of the deal. Actually, the genesis of this was sort of six months ago. We really looked at how we could increase our financial flexibility and bring in capital and do so non-dilutively. That started with the, I think, the well-misunderstood capped call unwind, which got us $100 million, removing these $366 million in near-term payments to SFJ. We also brought in $32 million in this deal, so that together is $500 million non-dilutively, we brought in just with this deal and with the capped call. We also have the flexibility to bring in $100 million with an accounts receivable line and $100 million more from Sixth Street. So when you put all that together, that's $700 million in flexibility we've gotten non-dilutively.
What's really nice about this is that we can say we're no longer relying on the capital markets to fund the business, right? And that's something that's a huge milestone for any company, and it's really, honestly, a great day for Apellis to be able to say that.
Okay. So yes, for sure, the terms that you announced seem really attractive. I think one question that folks are gonna ask is: What are your finance needs for the next few years? Cedric started out by talking about the run rate for SYFOVRE in particular, which has been spectacular. So knowing that you do have cash flow coming in, how does that impact your view of the need to have this kind of flexibility and access to cash?
Well, that's the wonderful thing about this deal, is that we don't need to, right? And so, with the strong growth of SYFOVRE and with EMPAVELI, the contributions of those, you know, excellent products and strong launches, we pretty much will be covering our operating expenses in the near future. And then the cash items really were the fact that we're financing these, accounts receivables. So we extend payables to these retinal specialists, and that's something that we financed, right? And we couldn't access that capital. But with this new facility, they're allowing us to access some of that. And also we took away these, these SFJ payments, which were substantial. And in fact, the first one of which, the first one of this, the payments of $200 was meant to be today, so we took that out, too.
So it's actually phenomenal for us, really.
So you have extra money to spend here in Vegas, is what you're saying?
Sorry, what was that?
You have extra money to spend here today.
Yeah.
So with that in mind, how should we be thinking about a couple more items, and then we'll go back to the metrics of the launch, about where you feel the sales force size is? Do you need to invest any more money, either in DTC, and you've done a ton of DTC. Everybody knows the Henry Winkler ad by now on television. And how are you thinking about what's gonna be needed in order to make this a billion-dollar-plus product, just in terms of resources?
Well, I think it's on its way already to the billion-dollar-plus product, but DTC has been a fundamental component of that. We've never held back from doing DTC, and it's honestly been something that's, I think been, you know, one of the core arrows in our quiver in terms of this launch. We continue to invest, and we're looking. We actually just began. I think some of you may have seen, we've had a branded campaign that's just begun. You'll start to see a little more of that over time, but that, that's never been something we've taken off the table in any of our projections. So yeah, that's been phenomenal.
Then in terms of the sales force size, I think the one thing that probably is the variable there is Europe, and I know we'll probably talk about that later, Cedric will.
Mm-hmm.
But right now we're at steady state, and we've always offered our Head of Commercial, Adam, whatever he needed to build out that sales force. It's currently 100 people when you include, you know, field reimbursement executives, representatives, salespeople, med affairs. That's not very big, so you increase that by 20%, it's not gonna cost that much.
Mm-hmm.
So, you're getting tremendous leverage out of your sales force in this particular indication. So I wouldn't look at that as a future expense that's, you know, massive.
Okay. So let's transition back to SYFOVRE and the launch metrics. So you reported another very strong quarter last week, I believe. And inclusive of, I think, the 5,000 or so free vials-
Correct
... you would've been trending to close to $150 million, which if, if my math is correct, was a, you know, double-digit, once again, double-digit quarter-over-quarter growth. Questions that have been coming in to us that I'm hoping you can give some color to are: how are you thinking about the dynamics of Q2? Without giving specific guidance, of course. You do now have a competitor that received a J-code on April first, and that's been front and center, in the minds of investors. So maybe, Cedric, can you, can you talk through, you know, I guess qualitatively, what you're hearing and seeing, and any changes if you feel are needed to your strategy for marketing?
Yeah. Thank you. Look, what, what is amazing about-
Your mic's not on.
Hello? Hello. Thank you. There you go. So what has been the biggest surprise, even to us, is how many patients have this disease and how driven these patients are to find treatment, right? I mean, we are currently only at about 12% of patients with a confirmed diagnosis being seen by eye care professionals that are on treatments between our competitor and us. And that is, of course, something that, you know, is reflected in that growth that I don't think anybody had predicted, when we sat here last year. That will continue, right? I mean, the notion that somehow we're at the end of the ropes here, and that is gonna stabilize.
It has just started, and that is something that we look forward to being there for these patients for many years to come. Another aspect is that, you know, in Q1, the % growth in Q1 may have been less than in Q4. It was, quote unquote, “only 20%.” Normally, Q1 for anti-VEGFs is pretty much flat, and the reason for that is you have recertifications, but also older people typically don't go and start on new treatments in the winter. There's dynamics like that that are at play. The first quarter for us was phenomenal. I mean, month after month after month, we see that growth continue, and that is really what stands out, and again, it's a reflection of the need that exists there.
I think also that there's we're coming more and more in a place of stability, where with 250,000 injections done, I mean, a quarter of a million, right? I mean, it's, it's massive. We really understand the benefit and the safety profile of this drug to patients. Physicians are becoming very comfortable with this product as well, and that's something that we will continue to build on. So, you know, we are in a very happy place right now, and, you know, I understand that after the past couple of years, that people think like, "where, where is this going? What does this market mean? Are there patients?" This is a, an enormous unmet need that we, feel privileged to address.
Do you feel that based on the trends you're seeing so far, using your word, "phenomenal," that that phenomenal trend will continue through the rest of the year?
Yeah. I think the... You know, not the rest of the year, I think for years to come. I mean, the next product in geographic atrophy, should there be another successful product, is not gonna be earlier than 2028. I mean, so in terms also of competitive dynamics, the need that exists and the ability to address that market, it's a very privileged situation to be in. So yeah, it's
I think one other metric that's worth mentioning is that, you know, by our math anyways, roughly only 12% of patients who have been diagnosed and seen by a physician are being treated.... Right? That's today. That includes both treatments. So there is a tremendous amount of room to just continue with those patients who haven't even been brought into a doctor's office and haven't been diagnosed. So that's, you know, less than 1.5-- the 1.5 million, far less than the 1.5 million we believe are out there.
Yeah, so that's a good point, Tim. But for the patients who are already diagnosed, where the doctor has not prescribed, let's say, SYFOVRE yet, what's been the reason that they've given?
Well, obviously, there were, there were the safety events last year, right? And I think always when you have a new product that comes out, I mean, a new disease with the first treatment, with a new modality, a new drug, you are gonna have forces like that at work. I always give the example of 2005, when the anti-VEGFs came out. You would be surprised how many retina doctors at the time said that they would never do an intravitreal injection. They'll all deny it today, but back then, that was kind of not, not a rare concept. And, you know, when you go into a new disease like this, you're gonna find these forces where you're sitting with a physician, and a physician's gonna tell you, "Look, yeah, there's these new products. You don't have an acute disease.
Why don't we wait a couple of months, maybe a year? Let's see how this all pans out, what's really going on, and then we'll put you on treatment." And that's something that we see with a lot of practices and a lot of patients. And, you know, whenever I speak about this with physicians or in the company or outside entities, it's that balance, right? Between people standing on the sidelines, you know, wanting to be uber conservative, which is understandable, right? I mean, not really understanding what the benefit is, how it works, what the risks are, et cetera, and then people that really drive the product. At some point, right, you have to just make sure that the balance is always in favor of the latter ones.
At some point, the other ones are gonna come along because, you know, the reality on the ground is also that people that do not prescribe the drug lose patients to other physicians that do, so.
On the point of safety, is there any reason to believe that safety events would just suddenly stop?
No. So look, I think we are thinking about mitigation strategies around it. It's an extremely rare event, right? And this is something else that I think got a little bit lost in translation the last year, maybe. Intravitreal injections once in a while will give this phenomenon, right? It's associated with it. There's kind of this extremely rare event that happens with the first injection, right? About 1 in 4,000. You know, more than half of those have partial or even, or even full recovery. The notion was, at the time, the uncertainty. You know, is it more frequent than that? Are we just scratching the surface? Well, that's not the case. We know that now.
Yeah. So how long...? Just remind us, when did the drug launch, and how much real-world safety data has been collected since then?
Well, I mean, we do continuous monitoring, right? I mean, that is, it's part of our very thorough pharmacovigilance program. I think we have about 20 people working on this full time.
It launched just over a year ago.
It launched just over a year ago, yeah. 250,000 injections. And again, with kind of a very good understanding now that there's a risk of about 1 in 4,000 on the first injection. After that, it goes back to the baseline of what you would get with anti-VEGFs, et cetera. And important to note is that with an intravitreal injection, every injection, there is a risk of developing infections and endophthalmitis that is very similar to this. So it's kind of like having one extra injection. That is a knowledge that we very well understand now, and that just is a matter of communicating and making it part of life.
Okay. So maybe let's just talk about continuing patients versus new patient starts. There was a comment that I think your Chief Medical Officer, Caroline, made on your earnings call about a question regarding switching, and I think maybe you can clarify this for us, Cedric, that her answer was that at this stage, it would be very uncommon for a doctor to switch a patient from one drug to another. So can you elaborate on that a little bit?
Yeah. I think we're in this phase right now where everything is very new still. When you have a patient on SYFOVRE or IZERVAI, you know, and you wanna switch that patient over, you're gonna have to explain to that patient why you want to do that. I mean, that's the simple answer to that. It's not an easy. And, you know, if you wanted to switch one versus the other, you can focus on the efficacy profile maybe versus the other. You know, you know, they make the story around safety. I mean, it's like. But it's, it's just, it's not an easy conversation, you know? I think in the long run, what will really stand out is: what is the best drug to slow down the progression of GA?
Of course, you know, with up to 42% slowdown in extrafoveal patients in the third year of dosing, that is a massive benefit, right? It's a neurodegenerative condition slowing, slowed down almost in half. More and more we see that in the field with physicians and with patients becoming the prevailing narrative.
Okay. And then as far as new patient adds, I think you had talked about, you've been consistently talking about, you know, double-digit accounts being added since launch pretty consistently, except for that maybe couple of weeks when the news of the safety events occurred. But can you give us color on what type of accounts those are? Like, what are those practices like?
Oh, it very varies. I mean, you know, at this stage of the launch, the accounts that typically come on board are going to be, you know, not the bigger private equity practices, but a lot of smaller practices that come on board. Academic practices that have much more red tape to put things on formulary, you know, those can be straggling along as well. So it's a bit of a blend of many.
Do you know what it takes for that particular practice to write a script? Does it take a certain number of touch points with your sales force? Does it take, you know, education in some form? What is the driver of, you know, a practice finally making that decision, and how confident are you that you will continue to see that pace of new additions?
Yeah, there's a whole standardized process, right? In which we bring accounts on board and, make them familiar with the product, assign our field force to them, et cetera. So, again, it's like, you know, it's hard to believe, but it's only been a year, right? I mean, that we've been into this launch. We're only scratching the surface in terms of the number of patients that have been treated, in terms of the number of physicians that are prescribing. And again, I mean, we see that momentum continue to build, so.
Okay. Then just in terms of market share between Apellis and Astellas, I think it's important to know, we've talked about this a couple of times, but just to make it clear, Astellas is saying that by year-end, they expect to have a 40% market share. Can you talk to how you're calculating market share and what some of the differences might be, and why it may not necessarily be an apples-to-apples comparison?
Yeah, I mean, for us, the Apellis for us are patients, right? So, not number of injections. So that is the... That's, I think, very important. And, you know, again, I think that there will, of course, be fluctuations between these two entities, but this will be a very powerful duopoly. Where the balance ends up between these two, we'll find out, but, you know, we're unquestionably both going to win. The big advantage we have, of course, is this, what we believe, a very big difference in terms of the efficacy profile, which will become more clear as time progresses.
Do you feel that that efficacy advantage is still as robust today as it was in September when IZERVAI launched, in favor of Apellis?
I think the efficacy difference is larger now than it was back then. You know, we continue to gather data, and the data is remarkable, right? I mean, every year the percentage slowdown becomes more pronounced. I would say the headwind that our competitor has, more than, you know, I would say disappointing data in the second year of dosing, to put it mildly, is the lack of data, right? I mean, they only had 280 subjects, more or less, on active treatment for their entire NDA, right? And only, you know, about 200 of those patients were in that second year of dosing, did not perform well, and then after that, there is a big treatment holiday, and then a handful of patients that went in an extension study that's not really an extension study.
So we're not gonna get more, and I think that's something that's gonna benefit us a lot, right? We have the GALE extension study, where we have a very large number of patients. This is in the fourth year now. We're gonna have all the way up to five-year data to communicate. So we know a lot about this drug, both on efficacy and safety, and that's gonna, I think, win in the end.
Okay, so maybe let's move on to Europe. I think that's also been a journey for Apellis over the last couple of years. So I think, it's safe to say we were all surprised, and I'm assuming you were as well, when basically it seems like everything just got reset, and it's as if you're being reviewed for the first time. So can you just give us a little bit of color on how that happened?
Yeah, that's a very accurate description, actually. So, what happened is that there was a lawsuit that had nothing to do with us, between the company and the European Union, that led the European Union to become- to kind of really revisit what were already very strict standards, but even stricter on what the rules were for a scientific advice meeting. And, all of the scientific advice meetings that were under review, where they thought that these new rules may not fully be compliant with those scientific advice meetings, they decided to put the clock back to before that. So that's what happened. So we're gonna have a new scientific advice meeting. We're gonna do that with the same countries that we had in the first review. You know, it will continue to be an uphill battle.
We think that the odds of approvability have not changed compared to where they were a month ago. There's of course, potentially important delay here. That CHMP opinion now is going to come at the latest in July. Should it be negative, then, of course, we have to go through the appeal again, so.
Because it's, "a first review again," have you been able to submit new real-world data on SYFOVRE?
Yes, we have. So that's of course, an advantage, right?
How are you thinking about, I guess, steps that would be needed in order to... 'cause it's the same rapporteurs as the, as the first round?
Mm-hmm.
You know, some folks have said, "Well, if the rapporteurs didn't like it the first time around, why would they, why would they like it the second time around?
First of all, I think that's a fair comment, right? I mean, there will be some inherent bias there. On the other hand, there is new data. I think there's also been a lot of attention to this program that was drawn because of the first negative opinion. I think it depends a little bit on how people are predisposed, right? I mean, if they're open-minded, I think hopefully there is a dialogue there. We're just going to go through the motions and do the work that's in front of us.
You would have the ability to appeal if the decision was negative?
That's correct.
Okay. So one other question I wanted to ask on Europe was about excitement of physicians to want to use the product there. I think there's the impression that because of how doctors are reimbursed in the U.S. versus how doctors are compensated in Europe, that even if you were to get an approval eventually in Europe, that that market size is potentially much smaller than what you're seeing so far in the U.S. But can you comment on what your feedback has been when you have spoken to physicians there and their desire to want to use SYFOVRE or related products?
... Very, very positive. I think it's kind of funny because on the regulatory end, of course, you have kind of a bureaucratic process, you know, that we're kind of a little bit falling victim to right now maybe. But, on the other hand, the retina community is, you know, they've also kind of seen the enormous growth that we had in the U.S., the need that is here. You have to remember that publications are starting to come out now, not from us, but independent third parties looking at the slowdown and the benefits that this drug can have for patients. Combine that with, again, the unmet need and the desire of patients to find treatment or to have treatment. I think Europe is going to be a very important unmet need for us and, and, secondary with that, an important market opportunity.
Okay. So we talked about what you think the potential opportunity is, but I did wanna talk about a topic that is very frequently coming up in conversation that I have with investors, and I'm sure you're getting the same question, which is: you're having a great launch. You might even have a great launch year, but who's to say that the trajectory of that launch can, can continue beyond this year? What if this is a, a billion-dollar product? And a billion dollars is, is a, is a, a healthy sum, but, you know, folks want it to be much higher than that. We've comped you to the, the VEGF market with AMD market. What's giving you the confidence that you'll be able to have a multi-billion dollar product?
The number of patients and their desire to be treated, you know. That's kind of the simple answer. I mean, as Tim alluded to earlier, I mean, 12% of patients that are being seen by eye care professionals, that's it. Those are the patients on treatment right now. So there's an enormous number of patients within the practices and then those that haven't seen eye care professionals yet. Because remember, until a year ago, there was not really a point in seeing a retina specialist because there was nothing to give them.
Yeah, you talked about ophthalmologists who are not retina specialists now becoming involved in finding and recommending patients. How is that gonna work?
Yeah, I think it is more kind of the awareness around the fact that there is a treatment available. You know, that can be at the optometrist level, at the ophthalmologist level, I mean, quite frankly, the general practitioner's level, right? I mean,
What's your level of detailing to those types of physicians right now?
We take a very broad view of kind of our target audience in terms of making sure that patients become aware that there is a treatment, and that they should go see a retina doctor. So we're not just limiting that to the retina practice.
Yeah, but we don't actually have a bunch of salespeople going to those right now. Those, the salespeople are primarily focused on the retinal docs themselves.
Maybe, Tim, on that point, for the practices that have prescribed at least one patient to take SYFOVRE, do you have a sense of if they're prescribing once, they're likely to prescribe again?
Well, I think everybody's different, right? If you say one, I don't know what one means necessarily. That may be a patient that's, you know. It may be a doctor that's reluctant, but still does it once in a while. But most, you know, doctors who are prescribing SYFOVRE, for the most part, have continued to prescribe SYFOVRE, right? Some prescribe both. Some prescribe only IZERVAI. We've seen all of those. But what we also have seen, and these are conversations we have as management with certain docs, but also the sales force, is that the conversation has really started to center, you know, after the aftermath of last year, has now really settled down and started to focus on the efficacy. And we're hearing that reflected back to us as something that's very different. These are not the same.
C3 and C5 are not the same. So.
Okay. We only have a couple of minutes left, so I did wanna at least touch upon the Phase III VALIANT study, that's upcoming. What's the expectation for that? Can you talk about the addressable patient population that would become available to, to you if that study were to be positive, and what would be the next steps if the study is positive?
Yeah. Thank you, Tazeen. So C3G and IC-MPGN are two rare indications that we are very excited about being able to address. So about 5,000 patients in the US between those two indications, between 1,000 to 1,500 of those are transplanted individuals. And what we did in the VALIANT trial, which is 124 subjects, I mean, as far as I know, the largest Phase 3 program ever done in this disease. We took, again, a broad view, pre-transplant, post-transplant, and then both patients, 28 subjects with IC-MPGN, and then the remaining patients with C3G in its native form. The primary endpoint is a percentage reduction in proteinuria from baseline. If that meets significance, that is something that retina... sorry, sorry, that nephrologists-
Mm-hmm.
tell us they would consider clinically meaningful. But you know, we have a lot of data. I'd say the most important data, again, that we correlate to the proteinuria that we have been able to see in our discovery study, is then the NOBLE data where we had transplanted subjects, 13 of them, and we're able to see how that C3 product, kind of like, like snow in the sun, melts away from these glomeruli, providing us a solid anatomical underpinning for what we also see on the proteinuria finding.
If that data set is positive, you would presumably seek a label add?
That is correct. So it would be a new NDA within this indication.
an NDA.
Mm-hmm.
So how long of a review would that be, and would that qualify for any kind of priority review, do you think, just based on need?
Well, we will, we will of course, apply for a priority review. You know, if, if it gets awarded, considering that it is the same molecule-
Mm-hmm
... the review times would be a little bit shorter than-
Right
... than typically would be the case. So it would be six months from the time of the filing.
So technically, it's possible that, that you could have this approved and being marketed by the end of next year or the-
Yeah, we're not, we're not guiding on that, but that is, would technically be possible.
Technically, yeah. In terms of infrastructure changes or adds that you would need to make, how are you thinking about that?
We are currently kind of using our rare disease infrastructure that we have for PNH, focused on hematologists, and redirecting that now towards the nephrology space. Within nephrology, it's pretty remarkable to see how this product, even in a pre-approval context, is gaining traction, right?
Mm-hmm.
I mean, we spoke about it in our earnings call. In xenotransplantation, the last three xenotransplants that were done, all these patients received EMPAVELI to control C3 in that setting. It's a drug that does remarkable things in these patients, and I think it's gonna continue to grow.
Okay, great. With that, we're out of time, so thank you so much for joining us this morning.
Thank you.
It was a pleasure to catch up again.
Thank you.
Thanks, everybody, for coming in and listening.
Thank you, Tazeen. Thank you.