Good morning and welcome once again to TD Cowen's 45th Annual Health Care Conference. I'm Phil Nadeau, one of the biotech Analysts here at Cowen, and it's my pleasure to moderate a fireside chat with Apellis. We have with us today Cedric Francois, the Co-founder, CEO, and President, as well as Tim Sullivan, CFO. First, guys, maybe I'll kick it to you. Can you give us a brief state of the company? What are the biggest strengths, biggest challenges for Apellis, and what do you need to do over the next year to create shareholder value?
Thank you, Phil, for inviting us once again to this conference. Thank you, everyone, for attending. This is a great year for us, right? I mean, we came out of 2024 where we had to work hard to make SYFOVRE the drug that it is. We are now in a situation where we can really be strategic going into this year. What that means for the SYFOVRE franchise is that we can focus on growing the overall market while growing our market leadership there as well. I think what's important is that in the retina, we are now in a position where we can focus on efficacy and simplified messaging.
Two weeks ago, we had The Macula Society, which I think was one of the better conferences we've had, if not one of the best ones, where the four-year data, the two-year extension from GALE, which is four years of full treatment with SYFOVRE, was presented, and where we showed that you can preserve as much as three square millimeters of retina in patients that have been on dosing for four years. When you put that on the back of an eye in terms of real estate, it is incredibly telling to retina doctors and something that provides us with a lot of excitement to move forward from. Competitively as well, of course, we went through lots of back and forths in the past couple of months as it relates to our positioning and especially the positioning of our competitor.
We ended up in a situation now where I think everything is exquisitely clear, right? I mean, we have a safety profile that is similar, but on the efficacy side, which is now taking the prime focus of conversation, we are meaningfully differentiated with increasing effects over time as being the only product that can be given every other month to patients with geographic atrophy and the only product that has a preferred standing with many payers as well. So lots of things to look forward to. In terms of innovation, then we have our siRNA program where we're going to start a phase II clinical trial in the spring where we combine a subcutaneous injection together with the intravitreal injection with SYFOVRE. That subcutaneous injection is an siRNA product. It brings down the C3 levels by approximately 90%.
The idea is that by turning down the faucet, so the amount of C3 that comes through the blood to the back of the eye by approximately 90%, you give SYFOVRE an extra level of stoichiometric advantage to better target the retinal pigment epithelial cells, which sit obviously at the back of the eye. We're going to explore whether we have an efficacy benefit there, and we're very excited about being able to do that, but also the ability to dose every three months potentially instead of every two months. So also a dosing frequency advantage that we will be exploring in that proof of concept study. And then, of course, there's EMPAVELI, where we had the VALIANT data that came out in the summer of last year, providing us with an opportunity to do something truly unprecedented for these patients with C3G and IC-MPGN.
The value of VALIANT was not just the quality and the depth of the data. It was also the breadth of patients that we studied in VALIANT. So we did not only look at C3G. We also looked at IC-MPGN. We looked at pre-transplant, post-transplant, pediatrics, and adult patients. And we did it regardless of what the baseline levels of C3 were, which can vary in these patients with these diseases. So we're talking in the United States about approximately 5,000 patients between these two indications, split more or less evenly. And this is a launch where, based on the KOL feedback and the patient need and demand that is there, we believe provides a kind of a remarkable opportunity for EMPAVELI to launch into these very exciting second and third indications after PNH, of course.
There too, we are working on innovation where with a new product that has the benefit of the efficacy and the safety of EMPAVELI, we are going to do something to improve the convenience. We're not talking more about that now, but that's something to look forward to as we go through this year, and then our pipeline, of course, is maturing as well, so that's in a nutshell where we stand. Very excited about going into this year in a world where we came through a lot, but we're in a position of calm where the benefit of SYFOVRE is very clear and where the opportunity for EMPAVELI in these two new indications also really stands out.
Before diving into SYFOVRE's commercialization in a bit more detail, I did want to ask a broader financial question. Tim, the guidance that you recently issued is for your cash balance to fund operations through profitability. Seems like some investors are either skeptical of that guidance or they worry it's too dependent on SYFOVRE growth. What are these investors missing? Can you talk a little bit more about the cash growth?
Yeah, sure. So a couple of things. We ended the year with a little over $400 million in cash, which is a strong cash balance given the fact that when you look at our revenue and our operating costs, they are more or less offsetting. So we're not cash flow positive right now. We still have interest payments, but if you look at our fourth quarter, they were more or less offsetting. So from a steady state perspective, things are looking pretty good. And certainly in the short term, so the next few quarters, SYFOVRE growth will be the main factor that allows us to eventually cover that interest expense and more. But ultimately, with the launch of C3G and IC-MPGN, we have a whole other leg of the stool.
And when you look at our cost structure, we've guided the fact that our operating expenses will be more or less in line with where they were in 2024. So really, we are, like anybody would expect, top-line sensitive in terms of becoming profitable. And we don't guide, but we do have a great deal of confidence in what we're seeing already in Q1 with respect to SYFOVRE demand and on the ground with injections, right, as you measure it. And then looking forward to the C3G launch to further contribute.
Diving into SYFOVRE's commercialization, you had a very strong Q4 with revenue up 10% quarter-over-quarter, which beat consensus when it was pre-announced back in January. What drove the strength in this quarter? How much was it organic demand versus other things like inventory stocking or gross-to-net?
Thank you. So look, I think the most important message in geographic atrophy for SYFOVRE specifically is that the number of patients that get treated month after month continues to grow. This is a market where we're treating so far fewer than 10% of patients with a disease that inevitably leads to blindness and where we have a product that, again, can slow down that progression in highly clinically meaningful numbers. We have the GALE extension study to also kind of bring that to bear and show that to physicians and patients. And that is reflected in the pickup in terms of injections. There's always some stocking that happens at the end of the year. It happened last year as well. The spread in revenue that can be driven by sampling and by external factors like these co-pay organizations that work with retina doctors, those are things that can fluctuate.
But the injection rate month over month and the growth that we see in the overall market is very encouraging.
Yeah, maybe I'll just comment on the gross-to-net. I will make one comment on the growth specifically as you asked it for the fourth quarter. We've said roughly half of that was an increase in inventory at the wholesaler. The rest, there could have been some inventory increase at the ECP level, but there was also increased demand. And obviously, there was a sense that there was going to be increased demand in Q1. So again, all of those are positive signs for us. We don't have any say in what the wholesaler gets. They tell us what they want, and we give it to them. So that's how it works. With respect to gross-to-net, it was quite in line with where it was in the fourth quarter, sorry, in the third quarter. So it really didn't change very much.
At the end of the third quarter, we did guide that we would have a gross-to-net range of low to mid-20s through 2025. And as you can expect, that degrades over time kind of more or less ratably. It's not exact, but it bounces around but heads down in a sort of a natural slope. But we did take a price increase in the first quarter, at the beginning of the first quarter, of 1% to help offset that ASP erosion. And we're sticking with that guidance of low to mid-20s through 2025.
Astellas recently had a label update where they had the duration restriction removed, but every other month dosing was not added to the label. How would you assess SYFOVRE's competitive position today versus IZERVAY?
Yeah, I think what transpired in the last couple of months was truly important as far as competitive dynamics in GA are concerned. We are the only product that has shown to be efficacious with every other month dosing with efficacy that is quite similar and comparable to what you get with monthly injections. We have these increasing effects over time, meaning that the longer you dose, the more the benefit is there that helps these patients, and I think as we went through the first two years of launch, competitively, there was a bit of a misconception, I think, that everything SYFOVRE did, our competitor would do as well, and with the CRL that occurred in November, that kind of took off the veil. I mean, a lot of physicians did not know that there was a label limitation for our competitor of 1 year of dosing.
A lot of physicians, some of whom may have been prescribing off-label every other month or outside of the window that is inside the label for our competitor's dosing, did not know that there was a lack of data and not something included in the label. And I think that trust factor is really important with the retina community, and we're seeing that clearly manifesting itself now. So even though the CRL obviously got lifted at this point in time, I think that the benefit to us has been established. And now the conversation is squarely in the efficacy camp where there's no comparison.
We surveyed physicians ahead of the conference asking where they thought share would be in a few years. And as we projected this morning, the weighted average answer was about a 50/50 share split between SYFOVRE and IZERVAY, which is actually recovery from, say, a year ago when it was more 40/60 or even a little bit worse with most of the share going to IZERVAY. So it seems like the concerns over safety issues have really subsided. Where is your share today and what's Apellis's goal to where it could be in a few years?
Yeah, so we are the market leaders with more than 60% share in the overall market. We are at about 50/50 in terms of first injection treatments. But what's interesting also is that in terms of persistence and sticking with the treatment, we think there may be differentiation as well. So we have a competitive position where, again, the long-term benefit and the clear efficacy profile of the product, which we invested heavily in with these extension studies like GALE, are really starting to pay off. And I think to your point, the direction is very much in our favor right now and something that we intend to continue.
Can you talk about trends in Q1? I think you had a couple notable comments on the earnings call. One was there is some seasonality. And two, there's the issue with the third parties who are helping with co-pays. I guess talk a bit more about the trends and what specifically is that issue at the co-pay assistance providers?
Yeah, so there are third-party organizations that help with the payments, the co-pays for patients that are on Medicare. And companies like us or others that are active in the retina can contribute to these organizations. This is done, we do this at the beginning of the year. We make these contributions. Other companies may or may not do that. Once we make those donations, we have absolutely no involvement or say or anything to do with that. So when these funds run out, it's difficult for the physicians and the patients because, first of all, of course, there is the fact that an injection may not be paid for and how do you solve for that? Second, there is chair time lost, right? I mean, as a physician, you have to spend time explaining to that patient what's going on, how can this be solved?
So these are stressful situations for everyone involved. They have happened before. They typically get resolved within a few months. And they typically get resolved when new funds become available from sources that may provide them.
Is this something that all the companies are aware of so they could accelerate the timeline in providing new funding? Or is the funding sources, are they typically locked into a certain time of year where they make their donations?
Yeah, we don't know how other parties handle this. We make our donations at the beginning of the year, and we do it in a blind fashion, irrespective of any expectations.
Last question on SYFOVRE before moving to C3G. What is your long-term vision for SYFOVRE? You mentioned the 1.5-2 million people with GA in the U.S. Ultimately, what penetration is possible for complement inhibitors? What share do you think you could achieve?
Yeah, so I think it's interesting when you go back to the anti-VEGF launches in the early days of wet AMD, right? I mean, today we may think of that as very easy markets to target, but they were not, right? I mean, at the time, there was a lot of controversy around doing intravitreal injections, even for something that may seem as self-evident today as wet AMD. When you have a new market, a new mode of action, a new drug, these are the motions that you go through. I think it's also important to understand that kind of incorporating the treatment of GA into your practice. If you're a retina doctor, right, take some training, take getting used to, how do I talk to a patient? What do I tell them? How do I guide them along? How do I make sure that they stay compliant?
All of these things have to find a way. That's an incredible opportunity, right? I mean, we're just two years into this launch with the sales that we've had, one of the best launches in recent memory, and we've only just gotten started. I think now it is a matter of streamlining everything. I think streamlining the messaging so it's easy for retina doctors to understand the benefit of treatment and communicate that to their patients, so as I mentioned earlier, for example, three square millimeters, this is what it looks like on the back of the eyes picture, right? Huge amount of real estate. That's what you're investing your time in, then also the benefits that we get in terms of function. We're getting more and more work done there, better establishing what the functional visual benefit is to these patients associated with saving the retinal tissue.
So really kind of a wonderful opportunity rooted in data to expand from that early base. I think something else is that the expansion now will come from treat early and treat long, right? I mean, this is not a rescue therapy for somebody that has very far advanced geographic atrophy. This is a treatment where the most reward is going to come from starting very early. The first signs of having issues in the back of your eye, you make that investment on trying to save as much retinal tissue over the long term. So all of this has to find a place of settlement. I think depending on the surveys that you look at, between 30% and 40% are the numbers that are out there in terms of what percentage of GA patients would ultimately like to be treated. Again, starting now at less than 10%, right?
With only about 50% of patients actually being seen by eye care professionals, that's a summary of the opportunity.
Great. Let's turn to C3G. And IC- MPGN recently filed to extend EMPAVELI's label to include those indications based on the VALIANT data. Can you walk us through the highlights of the VALIANT data and what in particular do you think will be most persuasive to physicians?
Thank you, Phil. So the VALIANT data is one of the best phase III readouts I've seen at least in the kidney. And what stood out is that we had what we like to call the trifecta with our roots in Kentucky horse racing. First of all, the fact that we had unprecedented proteinuria reductions, right, of about 67%. Secondly, that we saw, again, this unmatched eGFR stabilization, which was even nominally significant after only six months of treatment. And then last, but certainly not least, the impact that we have on the histopathology in these kidneys. So when you take a biopsy from a patient with C3G and you stain that kidney for C3 deposition, it lights up like a Christmas tree.
When you take sequential biopsies, you see that staining go away over time, so much so that after six months in 70% of patients, you can no longer detect the disease. When that was shown at ASN in November, it was actually a beautiful moment. Carla Nester, one of our KOLs, who arguably the KOL in C3G, who presented our data, paused, looked at it. It was a very impressive piece of feedback for physicians to see, to be able to communicate to their patients. It means that if you take this drug, especially if you, again, if you take it early on, the benefit that you get as a teenager or in your 20s, where previously you were looking at a 50% chance of kidney failure over 10 years only, now you may extend that by many, many factors.
We'll see how much, but so far we see near complete stabilization of the disease in these patients. So truly rewarding and something that we look forward to launching later this year.
Novartis has also filed for approval of Fabhalta in C3G. Can you compare and contrast the profiles of the two drugs as well as the likely indications for both?
Yeah, thank you. Well, I think there's two important points of differentiation. The first one is as it relates to efficacy. First of all, on the proteinuria reduction, with EMPAVELI, we saw reductions more or less twice as profound as with our competitor's drug. Also on the eGFR, but that's in smaller numbers, you see "better stabilization." I mean, we were nominally significant at six months. So again, really telling. But what stands out, again, more than anything, is these biopsies on these kidneys. I mean, those data have not been released for our competitor, but those are the data that speak most to the imagination of these physicians. So as far as quality of the data is concerned, meaningfully differentiated. But then again, going back to the types of patients that were studied, we studied patients with C3G, but also with IC-MPGN and saw the same results.
We studied patients pre-transplant and post-transplant and saw the same result. Our competitor only studied C3G, only studied pre-transplant. We also included the pediatric population, which in these conditions is obviously very important considering the genetic background. Our competitor has only been studying adult patients, and then finally, something less tangible than that is the fact that in about half of patients with these conditions, you get consumption of complement, so you get low depleted C3 levels, and that is specifically what our competitor was focused on. We decided for evident reasons, right? I mean, because there's a link to biology, we decided to test both phenotypes, so depleted or non-depleted, and saw the same results again in both, so those are all very important elements as we go into detailing this now. We think there are about 5,000 patients in the U.S., which we believe is a conservative estimate.
We did that by looking 8 years in the past and used a standard of two diagnostic codes over the last 8 years. The last of one had to have happened in the last 3 years. So that's our starting point in these indications. And again, as soon as we know the PDUFA, we'll be able to get better as to when we're going to start the launch in these diseases.
Skeptical investors suggest that the magnitude of proteinuria reduction isn't important, that I think they suggest that if you get to a certain level of proteinuria reduction, you're stabilizing the kidney, and therefore, yes, you get a better one for EMPAVELI than Fabhalta, but it doesn't really matter. What do you think these investors are missing?
What KOLs are thinking. So that is clearly not factual, right? I mean, there are many publications and it's well known in the kidney world that a reduction in proteinuria is associated with an extension of the length to ultimate kidney failure. So that is the metric that matters more than anything. And that association is well established.
In terms of convenience, the skeptics also point out Fabhalta's oral. In a condition like C3G or IC-MPGN that's so serious, does oral convenience matter?
Oral is easier than subcutaneous. If I'm a person in my 20s and I'm looking forward to losing my kidneys with all of the symptoms that are associated with this disease, I'm going to want to take the best drug. I think that's the evaluation that will really matter in the end.
I'll also mention that we have done surveys with doctors where they have said that that pales in comparison to efficacy.
Who do you think will be the early adopters in this market? Will be the most severe patients who are already having a decline in kidney function, or will be kids or patients earlier in the course of the disease to preserve their kidneys. How do you see the adoption progressing?
Yeah, I think you said it well, right? I mean, the typical way to think about it is that patients that are more advanced, more at risk, and understandably more afraid of ending up on hemodialysis or having to require a kidney transplant are going to be very motivated. I also think that the post-transplant segment is really important and interesting. The transplantation world is a very small one. That's actually where my background is in. They speak a lot to each other. They're highly informed, and a transplanted organ is a nugget of gold in your body. You want to protect it as much as you can.
Synergistically, with what we're trying to do in transplantation in C3G and IC-MPGN, and soon in other indications as well, is the fact that in the world of xenotransplantation, all of the last xenotransplants either were rescued with EMPAVELI or proactively treated now with everyone that is doing these transplants. They are using EMPAVELI to proactively protect the kidneys against rejection. So these are all elements that help and go hand in hand with establishing this remarkable profile of efficacy for EMPAVELI.
TD Cowen projects approximately $675 million in 2030 sales in the U.S. in C3G and IC-MPGN in 2030. That equates to about a 30%-35% penetration in the market. How does that estimate strike you? Are we being conservative, aggressive.
Can I take that one?
Yeah, thank you. So just looking at that number, that suggests somewhere between 1,400 and 1,500 patients treated. I'm not sure exactly. But to the extent that our epidemiology is right, which suggests there are about 5,000 or more patients with C3G and IC-MPGN in the United States, this is just a U.S. projection, we think 20% or more of those are post-transplant. And from our perspective, I mean, I can't comment on what we think of the projections, but from our perspective, that leaves a lot of patients untreated with a drug that can essentially normalize to the extent possible their kidney function and clear their kidneys of C3 deposits. So it is hard for us to believe that the large majority of transplanted patients would not receive EMPAVELI. And then on top of that, a large number of the remaining patients.
So again, that's just the way we think about it, but I can't specifically comment on that number.
You've recently announced two additional phase III trials in kidney indications, one in FSGS and the other in delayed graft function. Can you talk about those programs and the rationale for EMPAVELI working there?
Yeah, so these are two very exciting indications for us that were the product of a deep and thorough analysis of what we believe we could do in the kidney with EMPAVELI. Because the one thing that stood out from VALIANT is how good the target engagement is of C3 in the kidney, right? I mean, which I think we can argue is best in class. And pegcetacoplan, time and again has shown that it is one of the best, if not the best complement controlling molecule out there. So as we did that analysis, there were several elements that factored into it. Of course, the unmet need, the competitive landscape, pricing, time to patent, et cetera.
What we found, there were two indications that I think we can really invest in, move straight into phase III clinical trials with a high probability of success and get results and be on the market relatively soon within the bigger picture. So those were the elements that went into it. FSGS is about 13,000 patients in the U.S., high unmet need where we think we can make a big difference. Delayed graft function, again, something that affects about 1/3 of allogeneic transplant, which is about 21,000 kidneys in the U.S. every year. And again, something where we think we can really provide an advantage in protecting these kidneys in the long run.
Moving on to the pipeline in the last couple of minutes, you referenced APL-3007 in your opening remarks. What's the goal of that program? Ideally, when you combine that with SYFOVRE, what do you hope to accomplish?
We're hoping to show superiority for the combined product over SYFOVRE. Superiority in this case will mean that we can more meaningfully slow down the lesion growth, especially as it relates when we look at RPE cells. It means that we can also, using the new tools that we now finally have available, establish a correlation with function. And because it is something that gets layered on top of SYFOVRE, it is something that we believe is highly synergistic with the market that we will have established by the time this product gets on the market, assuming, of course, that everything goes according to plan.
So if you are a retina doctor in several years and assuming that APL-3007 does what we hope it does, then you can get this product, bring it online, you have your patient coming in every two months, and you can start giving that patient a subcutaneous dose, either bring them back every two months or, depending on the data, maybe now every three months, getting paid that extra money for that subcutaneous injection on top of what you're already getting for the intravitreal injection. So again, this is not just a scientific story. It's one that was carefully thought through all the way through development as well as commercialization.
Can you give us some idea of the timing of the milestones in that development plan? When could we see the first data? When could it move into pivotal studies?
Yeah, we're not guiding on that yet. All we've said so far is that we will start that phase II clinical trial in the spring. It is going to be on SYFOVRE experienced patients. So hopefully that will enable us to enroll that trial quickly. And as soon as we have a better sense of what exactly that means, we'll communicate it.
Great.