Apellis Pharmaceuticals, Inc. (APLS) Earnings Call Transcript

Alright. Welcome, everyone, to the 42nd Annual JPMorgan Healthcare Conference. My name is Anupam Rama. I am one of the senior biotech analysts here at JPMorgan. I'm joined by my squad, Malcolm Kuno, Priyanka Grover, [ Gloria Hall]. Our next presenting company is Apellis. And presenting on behalf of the company, we have CEO, Cedric Francois.

Thank you so much, Anupam, and thank you for inviting us again to speak here. It's great to see many familiar faces. Let's dive straight into what is a special year that we have in front of us after 2023, which all of you know had quite a bit of tumultuous events in it. I will be making some forward-looking statements. And I want to start off with this slide, which reminds us of what we really do at Apellis, where we combine courageous science with compassion. And that has resulted in 2 approved drugs since our time when we went public in 2017, Empaveli and SYFOVRE. Empaveli, as a reminder, was the very first therapy to target complement factor C3. And as you all know, has done very well in PNH as the first and leading indication. SYFOVRE was the first treatment available for the leading cause -- for the leading cause of blindness in geographic atrophy approved in February of last year. In the meantime, we have a pipeline that is growing, focused on complement and specifically the special target of C3. So for 2024, we have 4 priorities. Number one is to maximize access to SYFOVRE to patients in need in this country. Secondly, we aim to bring SYFOVRE to patients with geographic atrophy worldwide. Of course, in the European Union, we've had a little hiccup. We're going to continue to work diligently towards an approval there as well. Third, we aim to maximize Empaveli in PNH and then to expand in this new indication in C3G and IC-MPGN, 2 important kidney indications that are rare, but very important in terms of unmet need for which no therapies again, are approved at this point. And then we have our early pipeline and our collaboration with beam on which you should expect to hear much more this year as well. So let's dive right in, first of all, into geographic atrophy. So what is geographic atrophy. I'd like to make the comparison to a forest fire in your retina, where patients that have this disease are on a relentless progression towards blindness where more and more retinal cells are lost. More than 1 million patients in the U.S. are affected by this disease, more than 5 million patients globally. And to give you a sense of what this disease really means, nearly 7 in 10 people with geographic atrophy believe that the impact on independence and quality of life due to this disease is actually worse than they had expected at the start of their diagnosis. This is a really important health problem, affects elderly people with what is arguably their greatest source of joy towards the end of their lives and something where we feel we have a great responsibility to contribute to slow that disease down. Then this morning, we announced the Q4 numbers. We had $114 million in sale in the fourth quarter -- in the fourth quarter, we had $275 million over the first 10 months of the launch, making this one of the strongest launches in the past 10 years in our industry. During that period, 160,000 vials were distributed, of which we believe approximately 150,000 were administered to patients. So here we are with SYFOVRE being the market-leading treatment for GA in the U.S., with approximately 95% of patients in this country being treated with SYFOVRE within that market segment. And that is because this is a drug that shows more efficacy over time, where we have more experience and where we can create more vision for patients. So let's start with what more efficacy means. This is a drug with a very unique feature. And that is the fact that patients with geographic atrophy that go on treatment. The longer they are on treatment, the more profound, the slowdown and the loss of photoreceptor cells is. So when you have patients with what we call nonsubfoveal lesions which are the patients that we believe can probably benefit most from this treatment. In the third year, the slowdown of the degenerative process is 42%. That means when you are affected by this disease, you have an opportunity to slow down the loss of these photoreceptor cells almost in half, something really important that we see both with monthly as well as with every other month treatment. And then I want to take a brief moment to look at this slide. We all know what happened in the summer of last year. I mean in the real world, things like that can happen. This particular extremely rare finding is one to which physicians in the retina space are sensitive. But it is one where we made a determination in the summer of last year to hold physicians by their hands to be fully transparent and to guide them through that and make them understand that this was and continues to be an extremely rare phenomenon, which by the way, affects also other complement inhibitors in this area as well as anti-VEGF agents. It was all a matter of kind of going through it and making sure that we were fully transparent through the process. I can tell you that since I've had the privilege of leading this company, I've never been prouder of the team that we have and the integrity with which this was done. So here we are, 95% of total patient share more than 150,000 injections, double-digit numbers of new sites, each week's strong access and reimbursement. And this growth, which is now again on a track where it was in the spring. And you have a little dip, of course, because of Thanksgiving, Christmas, New Year's. This last week, we had our biggest day by far since the launch as well. So this is a drug that we believe is there to stay, to be available to these patients with this devastating disease. And what does this mean for vision? So we always get the question, okay, this drug slows down the degenerative process. Why don't you show a functional improvement? The problem in geographic atrophy is that showing a functional improvement in any disease in the retina is very difficult to do, and takes a long period of time and takes a lot of patience because we do not have the tools to do it. Now thankfully, in the OAKS trial, we did have a tool that is intensive takes a lot of time, but we did it in all of these subjects called microperimetry. And what we do there is we use a laser, and we individually interrogate 68 dots in the retina for light sensitivity. And when we do that, we get a pretty good picture of what goes on. Now within this context, you could argue that the 4 central dots within that grid are the ones that are most important for things like reading, like recognizing faces. It is what contributes to the central vision, which is the one that you use when you read, for example, is not in chart at your optometrist, right? So when we analyze these 4 central dots in the microperimetry, the results that we get is, first of all, an association with that best corrected visual acuity, that central vision, where patients that lose all of these 4 central dots have about a [ line more ] loss overall than patients that do not. And when you do that analysis, you see clear correlation to that functional improvement in patients from monthly as well as every other month. This is, by the way, something that can be repeated when you take the central 16 points as well. The feedback from physicians has been overwhelmingly positive. I think especially in the last summer, when we went through what we went being able to communicate, being able to tell physicians and patients over time, how this was being updated, continuously being there with our Chief Medical Officer, Caroline Baumal, who's sitting here with us guiding us through that, has been really rewarding. And the retina community at large right now has trust and confidence. And that is something that I think was essential in the summer of last year and which contributed to our very impressive recovery. Okay. Then SYFOVRE ex U.S. What does this mean for patients ex U.S.? Just in Europe, more than 2.5 million patients are affected by this disease. There are no approved treatments available outside of the U.S., as was the case before February last year here as well, and 84% of European eye care professionals are convinced that early GA treatment is essential. As most of you know, we had a hiccup in that process in Europe, mostly based on the fact that the functional analysis that we have in DERBY and OAKS are post hoc analysis. Again, going back to the point that we made earlier, there is a reason while measuring photoreceptor cell loss anatomically is the primary endpoint in all of these studies is because we can actually very easily measure it. Correlating it to function requires post hoc analysis, and that requires a lot of education, a lot of eye care feedback. And that is what we are going to go through now. At the end of this month, we will have a negative opinion from the CHMP. We will appeal that. And then in the second quarter of 2024, we will have a final answer. Now there is no doubt that this will be an uphill process, but one that we are firmly committed to for the benefit of patients and physicians. Then moving on to Empaveli in PNH and C3G IC-MPGN. So Empaveli continues to elevate the standard of care in PNH. We had $91 million in sales last year with $24 million in the last quarter. And importantly, since we have the PRINCE -- naive, the PRINCE trial treatment-naive data included as well now, 10% of demand in 2023 was from those treatment-naive patients. So really kind of stepping into that first-line concept. We also have 97% patient compliance rates. There's not a lot of drugs that can show numbers like this. And that is, of course, correlated to the following: that we have an unprecedented safety profile for Empaveli in these patients with PNH combined, of course, with remarkable efficacy that we showed in the trials as well as in the real world. What does that mean? There are more than 1,400 patient years of data available to us now. We have yet to see a first case of meningococcal infection. On C5 inhibitors, you should expect to see meningococcal infection every 200 patient years. Had I told you 10 years ago that we believed that our drug was going to be potentially safer than C5 inhibitors, nobody would have believed it. But by the mechanism by which pegcetacoplan works, these numbers are starting to look like that. Also with a very impressive thrombosis rate of only 0.51 events per 100 patient years. And then we had a third FDA approval, not for a drug, but for a device in the Empaveli injector. This is something that dramatically improves the patient experience. So what it means is that you can take the vial and without having to manipulate any needles, you can self-administer this drug at home over the course of 30 to 45 minutes very comfortably and without too much hassle. This is, of course, important because we are going to see now the entry of the orals in PNH. This is great for patients to have that available to them, but I think it's important to bear in mind that the convenience of taking a pill twice a day with a very strict posology. I mean you can really not afford to lose a dose, right, versus something that you can do twice a week, where you can have a day or two where you forget it or whatever being more comfortable around that we believe is going to be important. And especially with this -- with the convenience of this injector, we think we are well positioned to take on this competitive landscape. And then C3G and IC-MPGN. This is something that I'm personally incredibly excited about, as you will see in the next couple of slides. These are diseases in which we're talking about adolescents, young adults that are -- that have a 50% chance of progressing to end-stage renal disease or kidney transplantation over the course of 5 to 10 years, think about that. There are approximately 5,000 potential patients in the U.S. between these 2 indications. And why are we so excited? Well, at the American Society for Nephrology meeting last year, which co-incidentally was at the same time as the ophthalmology meeting, which is why not a lot of people paid attention to it, but we presented these data from the 13 subjects that were treated in the so-called NOBLE study. And what we did there was take patients with these kidney diseases, take a biopsy before receiving pegcetacoplan and then take a biopsy 3 months later. And what you see here is on the left panel, C3 deposition in the glomeruli, which goes away over the course of 3 months. And why is this important? Because within these indications, C5 inhibitors very often get prescribed off-label. It's common to do because it does have an impact on, for example, proteinuria, but that C3 deposition never goes away. And every nephrologist in this field knows that. So when we presented this data at ASN, first of all, what stood out was that in only 12 weeks, we reduced disease activity that we showed that both in C3G and IC-MPGN that is correlated with the other key clinical measures and, of course, that it was again well tolerated. In the weeks after ASN, every week we receive requests now for patients to be treated with this drug product, even though, of course, we have to still read out the Valiant trial, speaking of which, this Phase III clinical study has enrolled 124 subjects. It's fully enrolled. We'll have a readout in the middle of this year. We equally split this between an active and a placebo group over the course of 26 weeks. Then an off-label period in which 26 weeks, all patients received the drug, follow up by 8 weeks washout or extension periods. The primary endpoint here is to look at the change in proteinuria at week 26, where the study is powered to show a 50% reduction. This is something that we are really looking forward to and where, again, we think we will be able to make a major difference in the lives of these patients that currently have nothing available to them. And then there is, of course, the early pipeline and the beam collaboration. So in the past couple of years, we've been very focused on our commercial products, the launch, but we have more things coming for you in this next year. Most notably the siRNA program, which is now in the dose escalation phase on which you will receive data in the months to come. And then the gene editing program with Beam on which you should expect to see more this year as well. So to recap, our 2024 priorities are to reach more patients in the U.S. with SYFOVRE to bring SYFOVRE to patients globally with a focus on Europe initially to maximize Empaveli in PNH and to broaden that into the indication of C3G and IC-MPGN and to advance our early pipeline and the Beam collaboration. Thank you for your attention.

Thanks, Cedric. I just want to remind the audience of a few things. So there are 3 ways to ask a question, right? Old school, right? Raise your hand, I'll call on you. I guess new school, which is you can submit a question in the portal, and I'll show up on this iPad. I don't know, like an intermediate school where you can like e-mail to me, and I will ask your question. So with that, I just want to maybe just talk about SYFOVRE. You guys' big consensus estimates this morning. What impacts have you seen from the implementation of the J-code on the SYFOVRE growth on a weekly or a monthly basis?

Yes. Thank you, Anupam. So look, the J-code makes it easier for physicians to be paid for this product in this buy-and-bill model that we implement. And certainly has an impact, especially on smaller practices as well as academic practices. But I think really that the numbers that we have shown in the fourth quarter are related to an important extent to the data that we presented at the American Academy of Ophthalmology. Again, that third year of dosing and the super impressive slowdown that we see on the disease progression. That is something that resonates with physicians. This is the only drug in geographic atrophy that has ever shown these types of effects by a factor of 2. And that is, of course, something that makes it a much easier decision for physicians and patients to make their decision. The other aspect is that the vasculitis as kind of a background side effect that can very rarely occur is also something that physicians now understand is not kind of the tip of an iceberg or something. It is well understood to be something that is very rare with the last confirmed case at this point, still stemming back to September. It will happen again as it will with other drugs, but it is now much more considered to be something of life.

Questions from the audience? Yes.

Just with the European appeal -- what do you think you could do differently once you appeal? And what data will you be able to show that gives you confidence that this isn't just over time that you'll see it, and that's what needs to play out, but the imaging that you'd be able to show that there is some improvement? And there is -- this is not just a stepping stone?

No, no, of course. I think look, I think through this process, I mean, I'm European, I'm used to this, right? It's usually much more involved. I mean, it goes through multiple steps. And I think the voice that was not really heard yet is the specialist voice. So the way in which this process goes is initially kind of being more technical about these aspects. And I believe -- I mean, we hope that the physician voice will be heard in this appeal. I think we also have more data and we can kind of narrow in on aspects or patient populations potentially where the impact of the drug is very clearly seen. So we're hopeful, but there's no doubt that it will be an uphill battle.

Maybe expanding on the question, my understanding is pending a negative CHMP opinion, you will appeal and then you will get new repertoires, right?

Of course.

And -- but you just mentioned about the physician appeal. Where does that process come into the regulatory discussions? Is it with the repertoires? Is there a committee, like how does that work?

No. I think what I tried to say about that is that there's just more time available to kind of really understand the impact on patients, the impact on physicians. And again, I think just having a little bit more time in what is at the end of the day, a very complex disease and a very complex way of measuring things, right? So European agency, and that's not -- that was always known, wants to understand the functional impact and that is something that takes a lot of understanding and going through the process.

Questions from the audience? I have an e-mail question here. Can you talk a little bit about the next generation of compounds, one from Annexon where they recently disclosed a head-to-head study versus SYFOVRE, looking particularly at sort of like [ 15-line ] declines?

Yes. So look, I mean, it's good for patients when drugs get developed and we wish Annexon good luck with that. I think the challenge, I believe, is how do you explain the best corrected visual acuity benefit without kind of seeing the anatomical correlation to that. I think that is hard to understand. Also bearing in mind that the impact on BCVA of GA is very tenuous, right? You always go back to just a handful of patients, where the lesions are close enough to the center to involve really that ability to read a chart and where the lesions actually grow in the right direction. So look, let's see where it goes, but I think it will be a difficult study to run.

Questions from the audience? Okay. At AAO, you talked about the 3-year GALE data. There did seem to be some amount of physicians still kind of on the sidelines when you watch the presentations and they showed the scans and how do you overcome that? And what are the key levers to driving use in those that are still on the sidelines?

Data, transparency and communication, right? So we have an amazing commercial and med affairs team that -- especially our med affairs team is there to educate physicians in terms of understanding what is happening with this drug. Again, it's complex, right? Understanding how this disease works, how this drug affected is complex. And with every new indication and every new drug, I mean, it's always an uphill battle, but I think one that we have managed -- that our team has managed very well. In the months to come, we're going to keep on talking about these extraordinary reductions in lesion growth. We're going to keep on talking about the visual function benefits that we see, especially as you go longer into GALE and that's something that I think will resonate well.