Good afternoon, everyone. Thank you so much for joining us. Really pleased to have with us the Apellis team. We have Cedric Francois, CEO and President, as well as Tim Sullivan, CFO. Perhaps to start here, before we delve into specifics, can you provide a snapshot of the Syfovre relaunch as it stands today and how it's evolving this quarter?
Yeah, thank you, Salveen, and thank you, Miami. It's really a pleasure to be here. Look, the Syfovre relaunch is one of the best launches in recent memory, and that is driven by the patient need that exists for this disease. I think nobody can imagine the feeling of going blind and how terrifying that is, and the desire to be able to slow down that process. And that is what's really reflected in our launch, and I think is now reflected also in the launch of the competing drug, Izervay. The way we look at the market is that we have a product that is differentiated on efficacy. It is also a product where the safety is now very well understood on a total number of injections that at the end of Q1 stood at 250,000, a quarter of a million.
The risk of these rare events that last year kind of dominated the noise is now firm at one in 4,000, more or less, only on the first injection. And when treated aggressively, that promotes also favorable outcomes where these patients don't have to have severe vision loss. On the efficacy fronts, things have evolved really in a good direction as well. In the Gale extension study between month 24 and 36, what we already saw as a trend in terms of a visual benefit continued to mature. And as you may have seen last weekend, or Monday, I should say, we did the press release where, for the first time in geographic atrophy, on a pre-specified endpoint, we now have something that reached nominal statistical significance for the monthly arm after 36 months of dosing.
Really exciting, supported by the many sensitivity and other post-hoc analyses and giving color to the fact that slowing down lesion growth is in the company of also preserving vision.
We're awaiting the EU decision as well, which is expected no later than July. Can you discuss where in the process Apellis stands at this point and just your thoughts on the outlook here?
Yeah. So we had, as we've discussed, we had the unfortunate reset of the timeline, which was driven by outside factors. So at the end of the day, we ran into meaningful delays. As we've said a couple of times since, we do not expect that to change the ultimate odds of approval, but it will, of course, delay the time to getting to that final decision. Right now, we are in the process where we were initially more or less at the end of November, beginning of December. We're going to, well, around that time, so this month or next month, we're going to find out what that initial decision is again. I don't think we should expect a different outcome. Then we will go through the appeal process, and that will then lead, at the latest, towards the end of this year with a final decision.
You've also noted that a positive or negative scenario would not meaningfully impact the profitable timing outlook here. Maybe help us understand how that would play out?
Yeah, sure. So thanks. So at least from the perspective of our infrastructure in the US, which is obviously where we're approved right now, we're fully loaded. We're investing in DTC fully right now, and we also have our full commercial infrastructure for both Syfovre and Empaveli. And obviously, we're funding the Valiant trial and our other research and development initiatives. So our ongoing expenses in the US are fully loaded at this point, and we don't have any massive growth factor in expenses right now for the year. The one swing factor, as you mentioned, is Europe. Now, if we get approved in Europe, we will be doing some investment in order to build out that infrastructure, but we have a lot there already. And really, depending on what happens in Europe, we'll understand how that cost structure goes.
But the difference in investment isn't vast, but the revenue for that is delayed a bit. But really, the main source of profitability is growth in the US and the US infrastructure. So it shouldn't impact it too much in the short term.
Help us to understand the expectations for operating expenses as we look over the course of this year into next?
Yeah. So as I mentioned, it is a fully loaded US infrastructure. I think the swing factor, again, is Europe. What we did say, and we haven't given guidance, and we'll think about whether and when we do that from an expense perspective, but what we have said is that we expect operating expenses to be lower than they were last year. We obviously went through the reduction in force that we had in the third quarter of last year and our hiring, and internal infrastructure really hasn't grown much since then. So we fully expect to have a lower cost structure this year compared to last year, but that's really the only guidance we've given so far.
I guess before we walk into Syfovre trends here, what part of the Apellis story do you think is underappreciated by the street?
I think the sheer overall size of the market in Geographic Atrophy. So initially, we thought it was million patients. We then realized that there are lots of patients not being seen by retina doctors. So we revised that estimate to 1.5 million patients. We believe that more or less half of those are being seen by retina doctors. And of those with a confirmed diagnosis being seen by retina doctors, at the end of the first quarter, when we did the estimate back then, it was, we think, we're about at 12% penetration of that segment. So only scratching the surface, we see overall that market really growing. And I think what's very gratifying to see is that in the first, pros a lot of cons, a lot of swirl around the story.
But when we think about a year from now, we are going to have SYFOVRE in a market with a very well-understood profile for this drug. And we're prescribing this drug to patients with Geographic Atrophy is going to be a well-understood and calm standard of care. So that is, I think, something really important where it's just the beginning of what we believe is a really important story for these patients that are losing vision. The second piece that is probably not receiving a lot of attention, understandably, but it probably should, is the readout in Valiant and the market opportunity and the patient opportunity that exists in C3G and IC-MPGN. These are very important indications. There is no treatment available to these patients.
In the US, there's approximately 5,000 of these patients that currently are on an irreversible path to end-stage renal disease, which happens for 50% of patients in approximately a decade. When you're diagnosed as an adolescent, that's not a lot of time. Of those 5,000 patients, 1,000 to 1,500 are transplanted. And in a post-transplant setting, based on biopsy evidence, we know that we have tremendous impact on removing the C3 product that is the hallmark of this disease. So hopefully, that will be associated with a positive primary endpoint readout, which will come in the late summer, and then be able, as quickly as possible, to provide this product to patients.
Just going deeper into Syfovry here, walk us through the growth levers at play with regard to the launch. What are they, and can you describe where you're seeing the most growth? Is it new prescribers? Is it smaller practices?
It's pretty much across the field. I think from the beginning, there was a belief that it would be initially primarily private equity and then moving towards I think the segment where we haven't seen as much uptick yet as we would like to is the academic segment. I think that is a segment where the functional data that we have now will also be very helpful. But yeah, it's not driven by one particular constituency.
What are you seeing now with regard to market share given the competitor entrance? Astellas had a J- code or received a J- code recently, and there's been some questions as to how to think about the breakdown between markets. Where do you ultimately think this will play out long term?
Yeah. So I think that, look, I mean, the narrative on both sides is a little bit different, right? I mean, we differentiate ourselves on efficacy. Our competitor tries to differentiate itself on safety. I think at the end of the day, where things will settle is a very good and thorough understanding of the risk. I think not understanding or knowing the risk is a much bigger problem when you understand what it is, which in this case is very small, right, compared to what the fear was. Then the discussion will shift towards what is actually the benefit that these patients receive from these therapies.
And there we believe that we are meaningfully differentiated, both in the amount of data that we have, and then in terms of what the benefit is to patients, both in terms of lesion growth as well as in terms of the functional benefit. So again, looking a year forward, we believe that we will be the market leaders in this duopoly. This will be a duopoly for the foreseeable future, at least probably five years. And again, a place where patients will benefit. A year from now, it will be a much more quieter place where, as a retina doctor, you can prescribe our drug or Izervay, knowing exactly what it is that you have and knowing the benefit that it provides to patients.
Is there any context you can provide on how your launch has progressed since Izervay received it's J- code?
Yeah. So we continue to grow. Izervay this quarter has been appropriately aggressive, as you would after you get your J- code. So they've had good new starts, which is good for them. We also continue to have our new starts. And we're going to see how the rest of the year plays out. But I think this is going to be a healthy dynamic, one that will benefit both products. And we're, I think, in the long run we are the market leaders. We think we will continue to be the market leaders. And we're, I think, in the long run, the efficacy story will carry the day.
How are you thinking about the potential impact of the November 19th PDUFA for Izervay in which they could be allowed for 24 months of administration to be added to the label?
Look, I think from our perspective, we operate everything from kind of a focus on what our drug provides to patients and the risk-benefit that exists there, which we believe heavily weighs towards the benefit. Some of these benefits are, of course, the increasing effects over time with as much as 42% slowdown by the third year. There's also the fact that you can give as few as six injections per year, right? We'll have to see if the label will allow for every other month to be in that label. I'm not sure that that makes a difference with physicians, but I think payers will pay attention to that. And so again, it's going to be an evolving dynamic. Regardless of what it is, I think we are in prime position to continue our leadership within this market.
I'm very excited again about 2025, where I think it will be much more of a stable place than all of the dynamic factors that are still kind of in front of us.
Fair point. With regard to safety, since you talked about the risk-benefit profile and needing to understand the risk side, what are conversations looking like at this point with physicians and patients around safety and vasculitis?
Yeah. So this is something I'm very excited about because we see there are still a lot of physicians that need to be properly informed. And I think at ASRS, we have an opportunity to do that. But the reality is that this risk that was unknown last year and where there was a fear that it would be something that would explode in our faces is not at all that. The risk is only increased, we believe, on that first injection. It is one in 4,000. And again, if treated aggressively, a good outcome can be promoted in these patients. And that is something that provides an easy discussion with patients because the risk of an intravitreal injection by itself every single time is also associated with infectious endophthalmitis, which has a risk of one in 3,000-5,000, which can also have a poor outcome.
So we think that in the long run, this will become part of the overall risk profile of the drug. Retina doctors are incredibly diligent and well-informed on all of these things. And I think once everybody kind of understands, based on a very large denominator, where that sits, that it will provide an easy discussion with patients. So I'm personally incredibly happy with how the last year has evolved and the stages that we've gone through.
In your experience with speaking with physicians, what is the determining factor here when they look to prescribe your drug over the other drug, but just even in the context of your drug by itself? Help us understand the nature of the conversations between physicians and patients that determines which treatment they administer.
Yeah. So that's an interesting question. So I think that you have physicians that will prefer one drug, physicians that prefer the other, physicians that will provide a bit of a neutral narrative. But the one narrative that will lead a physician to kind of have a preferential treatment for Izervay is efficacy looks more or less the same, right? But I think it's a very early to make that determination, but that would be a narrative that, of course, is going to lead the patients to choose that drug. The interesting part about that is that even physicians that fall in that category, when challenged, they know, of course, that Syfovry is differentiated from an efficacy perspective. And I had one physician that I had a very interesting conversation with that only prescribes Izervay.
And I said, like, "If you were the patient, what would you do?" And he said, "I would take one injection with Izervay and then switch to Syfovre." Right? So of course, these are things that individual physicians may say and think about. But what it reflects, I think, is that it's an evolving landscape. We have work to go through. I think towards the end of this year, we will have answers on all of the elements that are still outstanding and then see where the division between the two ends up. But again, against the backdrop that this is an enormous market and enormous unmet need in this disease.
Can you put that comment, that physician made in context? Why would that physician do that?
So that was basically, again, that was not at all our opinion or used in any way. But that was kind of an opinion of on that first injection, that physician believes that the safety for Izervay would be better. But then afterwards, the efficacy data that has been established for Syfovre creates a preference for that product. So it's of course something that is entirely that physician's comment, but an interesting one.
How, I guess, maybe speak to the economics of prescribing these drugs right now? And it seems like in some cases, maybe the physician choice is driven by economics rather than by the profile of the drug. Help us understand how that's playing out on a state-by-state basis.
Sure. Well, obviously, the physicians get a fee for the actual procedure, and that's the same for both of these drugs. And then obviously, there can be some discounting or volume purchase discounts that one or another company can institute. So there can be an economic difference for the physician. And we know that that's something that they can do. And we could do it as well. I think our position so far has been that's not something we want to be too aggressive on. But everything's a decision, and we'll see how things unfold.
How big do you think this market is at this point?
How big is the market?
How big this market is and speak to the penetration rates right now of the drugs on the market.
Well, historically, we've said that it was 1 million patients. And as you know, we've revised that to 1.5 million. That's more in line with some historical companies' discussions. So Roche, when they had their Lampolizumab program, I believe they said it was a 1.5 million. I think we were a little conservative based on using academic research and not wanting to sort of make too much about the size of the market, which is big enough at a million. But 1.5 million is currently what our thinking is. And we believe roughly half or a little less than half are both diagnosed and being seen by a retinal specialist. And I think we've stated publicly that we think roughly 12% of that is penetrated at this point.
So not only is the market very large for those that are within that 12%, right, in that 100% that's being seen by a retinal specialist and diagnosed, but we think it's much bigger than that. And we're just sort of guessing at the amount beyond that, but it could be bigger.
Perfect. Anything else we need to discuss about this launch that we're not addressing that we haven't addressed so far?
No. I think a really interesting time for us. We have the ASRS meeting next month. It'll be the one-year anniversary of the safety events that were discovered. And we now really understand what it is that we have and are ready to move on beyond it. So very happy with that.
So moving beyond, you've got a pipeline with data sets coming. We're expecting the phase III Valiant data shortly. Can you frame expectations of what will be released, what the bar for success is, and the overall commercial opportunity?
Yeah. So there are two products in late-stage development and close to hopefully an approval. In this indication, there is Fabhalta, the drug by Novartis, and then Empaveli, of course. I think that Novartis' readout has kind of set the bar. They showed a clear reduction in proteinuria in the neighborhood of 30%. On the secondary endpoints, statistical significance wasn't met, but those matter as well for context. And I think that's kind of the backdrop against which we will be looking to have our readout as well and our competitive positioning. Strategically for us, as I mentioned earlier, the post-transplant segment is a very important one. It is one that we have prioritized. It is one where we believe we can establish a profile for the drug that is differentiating. Something that is good for a transplanted organ, I think, will be rightfully viewed as potentially the better drug.
And that is a path that we would like to pursue. It's also an audience. If you have a drug that can work in a post-transplant setting, the value proposition is very clear. Protecting a transplanted organ is something that everybody wants to do. And a path to adoption would be arguably much more rapid than it would be on an overall native kidney population.
Speak to the unmet need in these markets.
As we talked about earlier, 5,000 patients, all of whom we believe would be candidates for treatment. 1,000-1,500 of those are transplanted patients already. And I think, again, there's a differentiation between the early disease, teenager, newly diagnosed versus patients that are on a path to end-stage renal disease or transplantation, and then the post-transplant segment. So how we navigate those three populations is going to be important as well.
Can you speak to competitive dynamics between Empaveli and Novartis' drug in PNH and where you're seeing differential uptake between the two?
Yeah. So in PNH, Empaveli has been a fantastic product where, again, we've seen kind of a very interesting differentiation also on the safety front. We have in our label the risk of meningococcal infection. That is not something that we've seen materialize the way it does with C5 inhibitors typically. So really a product that has done very well with very high compliance and patient satisfaction. Of course, we've had some patients that have chosen to switch over to the oral product based on its convenience. We've also seen patients switch back to Empaveli after they did that. So not very much unlike GA in evolving landscape still as to where it ends up. PNH is not a big market opportunity for us. It's highly competitive. Lots of clinical trials going on.
But it was a fantastic place to kind of establish the safety and the efficacy profile for our product. For us now, C3G, IC-MPGN, kidney indications is the next frontier. In line with that, the early work that is now happening in xenotransplantation that we believe is really exciting and where Empaveli is starting to take a prominent role as well.
You have a drug APL-3007, which is a siRNA targeting C3. Are you on track to provide phase I dose escalation data for that asset this year? And what is this data expected to demonstrate?
Yeah. So we are going to have an investor day towards the end of this year where kind of the overarching objective will be to let you know where SYFOVRE stands within this very large and emerging market and the competitive dynamics and how they will have played out. We will talk about EMPAVELI and how we believe that is a drug that could potentially have blockbuster potential if the readout in Valiant is positive. And then, of course, our pipeline, which indications with siRNA, the first data, and then some of our pipeline work, which we're very proud of and will be nearing towards an IND at that point in time as well.
Can you also speak to your partnership with Beam and the kind of indications that you're targeting through this partnership?
Yeah. So that has been a fantastic collaboration that we have, again, which we will talk more at the end of this year. The purpose there was really to become the global leader in gene editing within the complement pathways, targeting the liver, the eyes, as well as the brain. And a partnership that has done very well for us. So we have identified several target edits. We have identified target indications. And we'll talk more about that at the end of this year as well.
Could you speak to how adequately capitalized you are at this time point?
Well, this is a question I love because now I can say we're adequately capitalized and we're no longer reliant on the capital markets to fund the business, which is very exciting. It's not something we could say with great confidence a few months ago. But at the beginning of the year, actually sort of towards the end of last year, we decided we really wanted to take that part of the conversation off the table. We designed a bit of a balance sheet optimization process that involved, one, unwinding our cap call. So we did that and raised $100 million non-dilutively. Then we had this SFJ obligation, which had really run its course. We had about $200 million in principal payments over the next 18 months, which is money we wanted to keep as much of as we could.
We refinanced that with a great capital provider, one of the top capital providers in the space, which is Sixth Street. We raised $375 million. That was balance sheet neutral because we took a $366 million obligation and switched that out for $375 million from Sixth Street. Now that's interest only with principal due in 2030. We really took the bulk of that cash usage off the table. The other problem with SFJ was that it didn't allow us to have a working capital line of credit. As you probably can tell from our balance sheet, one of our main uses of cash beyond SFJ was building up inventory and also accounts receivable because we extend payables to the channel and everything. That was growing quite dramatically. We're financing that. Now we can have an accounts receivable line of credit.
We also have a little bit more in capacity on the Sixth Street facility if we want that. When you put all that together, it really amounted to about $700 million in non-dilutive flexibility, which we implemented over the last three, four months. That's put us in a position where we can now say we're not dependent on the capital markets. That's a good place to be.
Can you quantify for us the ex-US OpEx associated with SYFOVRE?
I don't know that I would break that out necessarily. But from a personnel, so we've been steady state since we got the first negative opinion. We've kept the personnel. And we haven't really increased our external expenses. But we haven't said, I think, exactly. But we have, I'd say, roughly 10% of our employee base is ex-US. That gives you an idea.
How are you thinking about just given all these programs that you have in the pipeline and you're executing on the launch? How do you think about capital allocation and in the context of resource allocation?
Well, I think if Cedric has a good idea, I think we have to consider it. I think the key for us is we're not relying on the capital markets. If we have high ROI projects, we'll fund those. We are and always have been an innovative company, even though there is that gap right now between our commercial assets and the earlier research. If it's got promise, that's incumbent upon us to keep pursuing the next chapter, so.
Any questions from the audience?
No. So I think ASRS is a very important meeting for us to make sure that the safety knowledge is spread so that people feel confident using our product. And then shifting the attention towards the efficacy profile, which has stood a little bit in the shadow of the safety message in the past half year, which is really tremendous, right, especially in that third year of dosing in Gale. I think it's important for physicians to know and understand that. So that will be the focal point for us. And we're really looking forward to it.
Great. If I ask one last question, you used to give us metrics interquarter to help understand how this trajectory is going. How easy is it, A, for us to kind of follow script data and really understand the market dynamics? And B, are there any metrics you can provide us or anything to kind of understand how things are going so far?
I'll start with the metrics you have. Those are partial data. It's very hard to extrapolate the stuff that we see as doesn't always comport well with what you guys have available to you. I think there are a couple of different sources. Some you may be able to get. Some others, I mean, people put them together and try to get a story. But it doesn't always align with what we have internally. That's challenging. Look, one of the reasons, just to be clear, the reason we did give those was it was important for the doctors. The reason we no longer give them is because everything we want to know or need to know, the doctors already know at this point.
So, from an interim data perspective, I think the last thing we said was on our earnings call, Adam said had great growth and great April. And things look great. So I think that's as much as we're going to get right now. But we'll consider any kind of more granular guidance later in the year and see if that's something we want to do for the next year.
On that note, thank you so much, Cedric and Tim. Really enjoyed the discussion.
Thank you, Salveen.
Appreciate it, Salveen. Thank you.