Good morning, everyone. Thank you so much for joining us. I'm Salveen Richter, biotechnology analyst at Goldman Sachs, and we're really pleased to have with us today the Apellis team. Sitting next to me is Cedric Francois, CEO, co-founder, and president. Next to him is David Acheson, Head of Global Commercial, and then Tim Sullivan, CFO. To start here, before we dive into specifics, can you just provide us a snapshot of your business and the outlook for the second half of the year?
Yeah, thank you, Salveen. And thank you for inviting us again. It's wonderful to be here in Miami. So Apellis is a company that is focused on a pathway of immunology called complement. It's a very old part of our immune system that is involved in multiple pathologies. We have two commercial products on the market. One is called Empaveli, which is approved for paroxysmal nocturnal hemoglobinuria and has a PDUFA date for two additional potential indications July 28th, so about a month away, in C3 glomerulopathy and immune complex membranoproliferative glomerulonephritis. Very excited about that launch coming up. And then, of course, the approved product in Syfovre, which was the first approved product for geographic atrophy, which is one of the leading causes of blindness in the Western world, which has been on the market for approximately two years now.
Both of these products, we believe, are on a path to blockbuster status. We have a very stable business where we are on a path to profitability and a pipeline that is maturing as well, where we have several INDs coming up in the next year to two years.
What do you think is underappreciated by the street right now with regard to the company?
I think that the street over the past year has understandably taken a bit of a cautious view of us in the sense that we were finding our bearings on the commercial trajectory for Syfovre, which is now getting in a much more stable state than it was probably a year ago. I think people are trying to understand what the growth trajectory will be for Empaveli, with C3G and ICMPGN representing really meaningful opportunities with approximately 5,000 patients in the U.S. alone, with a high unmet need where we believe we'll be able to make a very big difference. I think it is more a question of kind of assessing what the growth trajectory for Apellis will be in the next couple of years. We'll get answers to that in the very near future.
When can we expect the company to provide product level and expense guidance to inform street expectations?
Sure. So we do already give expense guidance on some level, which is that in, we said in 2025, on a cash basis, our OPEX will be relatively flat versus 2024. From a revenue perspective, we've had, as Cedric had alluded to, some unusual things happen with respect to the copay assistance organizations and other things that have affected our ability to kind of digest what's going on in the market. I think once we do that, we'll obviously consider when is the right time to give revenue guidance on Syfovre. From Empaveli's perspective, it's not typical for us to give guidance in advance of a launch. I think that's something we'll figure out when to do over time. Maybe it's the best thing to do them both all at once. We'll figure that out, but we're evaluating that.
Maybe starting here with Syfovre and the market dynamics. When we look on the back of the first quarter here, there was an impact because of the funding shortages at the copay assistance program, so Good Days. How are you kind of, I guess, absorbing and managing this copay dynamic on the forward? Maybe talk to us separately about whether there are certain patient and physician subpopulations right now where you see stronger uptake for Syfovre versus others.
Yeah. I will have David answer the second part of the question, but I think it's important to maybe give a bit of background on the funding gap that occurred as it relates to these copay assistance programs. Approximately 20% of patients with geographic atrophy were going to a physician's office. When they would go on treatment with Syfovre, had these foundations available to help and assist with paying what is approximately $400 in copay that is required for a treatment with Syfovre. When that fell away at the end of last year and the beginning of this year, four categories of patients kind of were artificially created by that situation. The first one were patients who, sure, they were receiving that assistance, but when confronted with not having it available, still found an ability to pay it out of their pocket. That's category number one.
Category number two were patients who may have had an Advantage plan that would cover the copay or maybe did not have it but could get an Advantage plan to help cover the copay. It is important to bear in mind that the foundational money was easier for physicians to have access to than the Advantage plans. Again, faced with the foundation not being there, a lot of patients were and are finding their way into using their Advantage plans properly to afford that copay. The third category are patients who really do not have that recourse, where the physician and the patient jointly decide to rely on samples or on our assistance program that we have ourselves to be able to provide free drug to these patients.
The fourth category, which is really the one that we want to keep a close eye out for, are patients where the physician says, "Look, this is not a disease where we have to worry that much about a short treatment holiday. Why don't you go home, come back in a couple of months, and let's see if this situation has been resolved?" I give that as background because David, now you can speak a little bit more perhaps on how we navigate that and how we are seeing this find a new place of settlement.
Yeah. So a couple of things. Thank you for the question, by the way. We're really focused post some of the things that Cedric had talked about on making sure that we really educate the offices around how to navigate with the Good Days situation and the foundation situation. At the same time, we're really focused on the population of patients that we believe continue to be opportunities to be treated. We believe the market is quite large and that we've just scratched the surface on what we can do for patients. One of the things that we will see is that we've got physicians who've really taken off with the product, and they use a lot of product with patients today, and we're starting to see bilateral use.
Originally, if you go back to when we launched, you would see physicians that were taking the patient that was already blind in one eye potentially could get there with the second eye. Now we're starting to see them start to treat earlier, and bilateral use has become much more prevalent, which is very good. For the physicians that are still a bit on the sidelines or starting to come into treatment, we're really trying to get them focused on our long-term data. One of the things that you'll see out of the GALE data that we have is that we've got tissue preservation data that is now available.
One of the things the data will tell you is treat early and then treat the patients over a period of time, and you'll see a significant difference in the lesion growth and the reduction in the lesion growth and tissue preservation. Really focused on all of that in the offices that we're in. As far as navigating some of the other things that Cedric talked about, we specifically have our teams to make sure that when these patients are being treated, that can go in and talk about, "Here's the best way for reimbursement. Here's how we make sure the patient has access for reimbursement." Sometimes it's just a misunderstanding on the plan design. We have a group that goes in that's on the reimbursement side of the business that helps educate on that.
We're trying to hit it from all fronts, really focus on the right patients that are coming in and make sure they can get reimbursed on the backside.
Help us understand. There is some, I guess, in certain cases, some physicians or patients that want to understand the impact on visual outcomes in the context of the side effect profile here or what is laid out, the rare risk of that. Can you just speak to your efforts to build physician and patient confidence with this viewpoint of where the benefit takes them over time?
Yeah. This is truly the greatest opportunity for us as far as Syfovre is concerned because if there is one point that I think people need to internalize, or two points, first of all, only 10% of patients more or less have been treated so far, whereas you should expect once the drug has been properly used by the majority of physicians, probably between 30%-40%-50% of patients with GA should be treated. The second point, the more salient one, I believe, is that now that we have a full four-year data set of seeing what Syfovre can do for patients with geographic atrophy, is that Syfovre works really, really well in not just reducing lesion growth, but we now also have very clear evidence as it relates to the functional impact of this drug. What it does for vision.
The element that kind of against the background of the fear that existed around safety in the past couple of years was kind of lost sight of, pun fully intended here, is that best corrected visual acuity, right? I mean, the ability of a patient to be able to read a letter chart in a physician's office is a very poor indicator of the progression in this disease, which takes place in the periphery of vision, not that central point that you need to read these letters. We now have an ability to visualize the impact on function through the work that we did, which shows how bad the disease is for these patients and how much function they lose over time. There is no doubt that there is a lot of education that needs to happen there.
These are very new technologies, even for retina doctors, but the impact is really important. It is a tremendous product that is there for patients, and we have a lot of opportunity to bring this further in the awareness of physicians as well as patients.
Just frame for us here your longer-term outlook. You talked about going from 10%- 30% - 40%, but what are these levers now you have to pull to drive further market expansion to get there? One clearly is copay. The other one is, as you just mentioned, education based on the four-year data, etc. What else do you need to do here?
I think that people should expect kind of a steady cadence and a steady slow growth, but there are catalysts that can really accelerate, and specifically catalysts that will go back to the point that I made earlier. I will give one very specific example that we are focused on and that we aim to bring into the real world as quickly as possible. Currently, if you're a patient on treatment with Syfovre and you are seen by a physician after a year and you ask the physician, "Is this drug working for me?" then the physician does not have a good tool to be able to give that feedback to the patient. There is a lot of trust that it does kind of happening there.
We have the tools and the science available to us to give that feedback to the patient and to the physician to say, "Look how the curve bends." We also have the ability to take an OCT image, so an imaging tool, and translate that into what an image really looks like for that patient. We can literally take a picture, a stock picture or a picture of the family of the patient, and we can pixelate that picture to reflect exactly what that patient actually sees. Super powerful technologies that create connections between the physicians and the patients that allow them to understand the impact that the drug is having on the progression of the disease. The faster we can bring that, actually, this is an engineering job.
The faster we can bring that onto these OCT tools inside the physician office, the more impact we will have on the adoption of the drug and an appreciation of the positive impact that it has on the progression of the disease.
One other aspect that's playing out is clearly competitive dynamics. Maybe help us understand where everything is right now with regard to Astellas' Izervay and your drug and how that's being parsed out in this market.
Yeah. So we're very happy there as well. I mean, the clear differentiation on efficacy is being appreciated more and more and increasingly so by the physician population, something that we've always said and that we expected would happen, and that is materializing right now. Look, in the past couple of years with kind of the, not the safety overhang, but the fear that this very rare side effect that can occur was more prevalent than it may be or whatever. We now know that is not the case, right? I mean, so the last confirmed case of vasculitis dates back already to November of last year, right? I mean, these are very rare events, and physicians appreciate that. I mean, so now the discussion is really shifting towards efficacy. And on efficacy, we have such a powerful story.
I mean, it's the largest data set ever generated within this disease, not just in the number of patients, but also longitudinally, where over the course of four years, you see the dramatic impact that treatment with Syfovre can have on these.
In your experience, just speaking with physicians, what is the determining factor when they're deciding to use Syfovre over Izervay or vice versa?
Again, efficacy, efficacy, efficacy. It is the if you are going to treat a patient with geographic atrophy, you're going to have to do intravitreal injections, which are procedures that inherently come with a risk profile, right? I mean, it is rare, but once in a while, the procedure itself can have side effects for patients. When you expose a patient to that procedure, you want to bring a therapy that's really going to benefit them the most. That is where Syfovre truly shines. What we have seen, I would say I'm looking at data probably since abo ut August, September of last year, is a gradual takeover of Syfovre vis-à-vis its competitor, where on new patients that get treated, we are gaining month after month. Around that time, in the fall of last year, we were at a disadvantage. I mean, our competitor was at about 60%.
We were at 40%, and we have been gaining back. We are now on new treatments at about 55% for us versus 45% for our competitor. We are the leaders again on new treatments. On overall market share, we have continued to be the leader through this whole process, north of 60% versus 40% for our competitor. You could say, "Why did it stay stable there if on first injections you were losing?" We believe that there is better adherence to Syfovre as well. That adherence probably has a lot to do with, number one, again, probably the differentiated efficacy, but also the fact that being able to treat every two months by label is, of course, a huge advantage over having to come in monthly.
Even if some patients may get treated off-label with an unproven every other month pathology, there are a lot of patients that are properly treated every month, and that is a huge burden on these patients. That differentiation on adherence and compliance is also something that clearly benefits us.
Please speak. Let's turn over to Empaveli here. Can you just speak to the competitive landscape here and the differentiation of your asset versus the Novartis asset?
Yeah. So here too for Empaveli, again, the readout that we had in Valiant is probably one of the better phase III readouts that you will see in the sense that it was so consistent across all of the phenotypes where the product was tested. We saw the efficacy in C3G as well as in ICMPGN in adolescents as well as adults in pretransplant as well as post-transplant in C3 depleted patients as well as in C3 competent patients. I mean, across the board, the same efficacy profile for all of these patients. And efficacy in this case really refers to not just one, but three parameters that physicians look at in the context of an efficacy profile for a drug in a kidney disease or a glomerular disease. Number one is, do you have an impact on proteinuria?
We have by far the largest impact on proteinuria ever seen in these conditions. Number two, is there a stabilization of eGFR? We see that stabilization already statistically at six months vis-à-vis placebo. Number three, and this is arguably the most important one, is when you take biopsies from these patients, you can see the C3 deposition that takes place in the kidney. It lights up like a Christmas tree. After six months of treatment, already in 70% of patients, there is no more trace of disease in these kidneys. You cannot see, I mean, the disease is no longer visible to pathologists that are used to seeing these images. We have kind of coined the term the trifecta of efficacy because that is exactly what we got.
It's nice to see because that term trifecta for efficacy is now finding its way into the treater universe as well. Physicians are using that term. We're happy to see that because it reflects the benefit that we believe Empaveli will have for patients with these diseases.
Just frame for us how big the opportunity is here. I think it's hard just given it's a rare disease to really fully size this market, but what is your internal work suggesting?
Go ahead. We've done the way in which our business intelligence unit did the work on this. We estimate there are approximately 5,000 patients in the U.S. alone with either of these two conditions, split approximately 50/50 between the two. That number, 5,000, is based on going back eight years into the past and having patients with at least two diagnostic codes, the last one of which had to have taken place in the last three years. It's quite a rigorous standard, as you can imagine. I think it's worth pointing out here that if a patient does have a diagnostic code, let alone two, it means that this patient is in all likelihood a symptomatic patient, which again, is not important for the identification, but also for the desire to be treated.
If you then think about those 5,000 patients, approximately 20% of these patients are transplant patients. Probably up to 20% of these patients can also be in the pediatric segment. Again, kind of providing a unique opportunity because of all of the phenotypes that were tested to address all that is available there. Competitively, I think it is worth mentioning that we only have one competitor who recently got approved, who does have the advantage of being oral in administration, where the data is clearly differentiated favorably towards us and that is being recognized by prescribing physicians. Again, that breadth of indication setting, right? Our competitor only tested patients with C3G, only tested adults, and only tested the product in a pretransplant setting, not post-transplant.
We have a, kind of, I say, an ideal setup for a launch where competitively we are differentiated on efficacy, but where in addition to that, we have tested the drug in a large segment of patients where our competitor has not been tested and has not been approved. Where we will be competing is probably in 1,500-2,000 patients out of 5,000.
Can we speak to the commercial footprint as well? Are you ready to go here post-PDUFA?
Yeah. Everything is in place commercially. We actually have our teams that are out there today. They started in April, and they're working on profiling the accounts and specifically understanding where the patients are located and the treaters are located. We're learning a lot of things that can help us as we get post the approval timeframe to really launch successfully. I think that we've got access in these offices because they want to talk to us about the potential opportunity of an approval along with our medical team that is able to talk about the data when asked. It's been positive so far, and we're learning a lot. We've got about a little less than 60 days before PDUFA time, so they're busy.
Is there anything else that you want to highlight within the pipeline here that you're excited about? I know you have the SiRNA program targeting C3 as well.
Yes. I think that in terms of developmental programs, this is a program we're very excited about. In a nutshell, what we do there is we have created a SiRNA product that brings the systemic levels of C3 down by approximately 90%. What that does is it provides, in the bloodstream, C3 goes down by 90%, and it provides a stoichiometric advantage to Syfovre, which is injected in the eye. We know that the C3 levels, not just in the bloodstream, but also inside the eye, go down very meaningfully and give Syfovre that extra edge to be able to further slow down lesion growth. We believe that's especially important on the RPE cell layer. On the photoreceptor cells, we know that the effect is in all likelihood already complete.
On the RPE cell layer, our ambition is to have a much more meaningful slowdown of the growth of geographic atrophy, but also the ability to potentially treat patients every three months instead of every two months. The way to envision this is, let's say I have 100 patients on treatment with Syfovre that I treat every two months. I can now bring these patients in every three months, have a much more important impact if all goes according to plan and the drug is approved, a much more important impact on the slowdown of the lesion. All I have to do is have a technician or a nurse give a quick subcutaneous injection when they come in for their intravitreal injection as well.
Tim, maybe you could just remind us where you stand from a balance sheet perspective at this point in light of recognizing you have these launches laying out too.
Sure. From a cash perspective, we ended the quarter with just under $360 million in cash on the balance sheet. We do have our outstanding debt obligation with Sixth Street, which is $375 million in senior notes. We have an outstanding convert that is around $93 million-$94 million on the balance sheet. In terms of where we stand from an OPEX perspective, our net revenue and our net operating expenses are not that far off. We do have to fund working capital, and we do have some interest expense. With some modest growth, we think that we can achieve profitability. We have really already built out what we need from a commercial perspective in nephrology. We already have what we need in ophthalmology. Obviously, we have the ongoing business in hematology, but there is a lot of overlap with the nephrology business there.
Really, from our perspective, we have everything we need to execute on the business plan going forward without a need to go to the capital markets. We feel very good about our balance sheet.
One last question for me. As you look at Syfovre, right, we're clearly going to be monitoring your launch here in these other communications. But with regard to Syfovre, given what played out in the first quarter, do you feel that that has stabilized as we look to kind of second quarter revenue and beyond? Is the have you kind of fully absorbed Good Days to some degree that that is at least level set, and then you can go from there?
Yeah. I mean, from our perspective, we think that we just sort of had a rebasing, I guess. It is a little bit obscured because we had that inventory issue that was fairly common at year-end for this buy-and-bill model in the retina. I mean, Regeneron had that also. If you normalize for that, you would say our revenue was in the sort of $145 million-$150 million range for the quarter. What we saw was with the Good Days impact, we saw a big increase in samples and sample use. We estimated the impact of that was around $10 million in lost commercial revenue for the first quarter. The rate of that that we were seeing has more or less continued, and it is something that we were expecting.
Basically, the base that we talked about, that sort of $145 million-$150 million in normalized quarterly revenue would be the new baseline off of which we would grow the business from here.
Got it. With that, thank you so much.
Thank you.
Thank you.
Thank you.
Appreciate it.