Apellis Pharmaceuticals, Inc. (APLS) Earnings Call Transcript

All right. Welcome, everyone, to the JPMorgan Healthcare Conference. My name is Anupam Rama. I'm one of the senior biotech analysts here at JPMorgan. I'm joined by my squad, Malcolm Kuno, Priyanka Grover and [ Rati Pinhe ]. Our next presenting company is Apellis. And presenting on behalf of the company, we have CEO, Cedric Francois. Cedric?

Thank you very much, Anupam. What a pleasure to be here again, and thank you so much for joining. These are our forward-looking statements, and we're going to start with our mission statement. We like to combine courageous science and compassion to develop life-changing medicines for some of the most challenging diseases patients face. This has been our credo from the beginning and one that we love to live every day. So where are we as a company? Well, in verified territory because we have 2 potential blockbusters available to us between SYFOVRE and EMPAVELI, and we are on a path to profitability as well. And we've done that and continue to do that by leveraging our expertise in complement where we have changed so many things over the past couple of years. Speaking of, we are now entering a third phase in the growth of Apellis over the years since its inception. It all started from 2009 to 2021 with pioneering a brand-new class of complement medicines and really changing the way the science around complement was understood at the time. Then from 2021 to 2024, we had the great privilege to have 2 approved products. These were first new classes of complement medicines in 15 years that came to market. And with that became leaders in C3 therapeutics. Where we are now is from 2025 onwards, we are going to unlock that blockbuster potential, both for SYFOVRE as well as for EMPAVELI. With EMPAVELI specifically, we are going to go into new kidney indications that we're excited to talk about today. And of course, advancing our innovative pipeline, which has been in the background, but is now getting close to an IND, and we're really excited about that work as well. And this is the right time to say thank you to our venerable Chief Operating Officer, Adam Townsend, who has decided, against my advice, to move on and take a CEO role and run your company in a couple of weeks. Adam, thank you for all you did for us. You've done such an amazing job across both indications. And in his place will come David Acheson, who's here with us as well, leading our commercial organization and taking over the reins from our fearless leader. This is also the right time to introduce Ms. Keli Walbert to you. Many of you may be familiar with her. She was in charge of commercialization at Horizon Therapeutics and of course, did an amazing job there with TEPEZZA in the space of ophthalmology. Beyond that and maybe lesser known to you is that she also has deep knowledge in the rare disease space from her career, and she will help us, of course, with governance, but also with the operations as of -- at Apellis as we continue to grow our story. Speaking of, we are now on track to deliver that long-term profitable growth. And as you can see here, these are the first 9 months from 2023 versus 2024. OpEx are coming close to the revenue numbers in a position where we have cash and cash equivalents of $410 million as of December 2024. At Apellis, we now have 3 strategic pillars. The first one is to truly transform the treatment of geographic atrophy with this exciting product, SYFOVRE, and we'll talk a little bit more about how we go about that. And secondly, to maximize EMPAVELI's impact in rare diseases with a focal point, of course, on the kidney, where we got those remarkable data in the summer of last year in C3 glomerulopathy and immune complex membranoproliferative glomerulonephritis and then to advance our innovative pipeline. We are going to have an R&D Day in the spring. You'll hear more about that in the next couple of months, where we're proudly going to show you what we have been doing preclinically because these are programs that we think will continue to deliver extraordinary value to patients. So diving into the treatment of GA with SYFOVRE. So SYFOVRE is the market-leading treatment for geographic atrophy in the U.S. It only has one competitor on that market and is differentiated on a number of essential features. The first one is that SYFOVRE is approved as the only therapy that can be given as few as 6 times per year. So not 12 times or monthly treatment every other month. And that provides a benefit to patients and to physicians that cannot be underestimated. It is also the only drug that is approved for use beyond 12 months, which is, of course, critical in a chronic condition that affects these patients for many, many years. SYFOVRE also has this seminal and remarkable feature of increasing effects over time. So it's the opposite of tachaphylaxis. The longer you are on treatment with SYFOVRE, the more pronounced the slowdown in this neurodegenerative process becomes reaching as much as 42%. And we are in a preferred position with many payers. You can see here what has happened since our launch in February of 2023. We have so far generated $886 million in total net revenue since our launch to December 31, 2024, making this one of the more successful launches in recent history. We are also at the point where we have crossed the milestone of more than 0.5 million intravitreal injections, kind of really expanding how we understand this product, obviously, not just from our clinical trials, but also from the real-world experience. And that is something that in the year to come, we're going to be able to see a lot more about. So where are we currently? Well, we're just at the beginning of this journey with SYFOVRE. So it's very exciting when you go into new disease indication with a new therapeutic entity completely and a new drug product, fewer than 10% of patients seen by retina specialists have currently been treated with the class, so either of the 2 geographic atrophy therapies. We, as a company and with SYFOVRE have 2 overarching strategic objectives with SYFOVRE this year and in the years to come. Number one is to secure our position as the market leader. And number two is to grow the overall market and making sure that every patient with GA can find a physician that treats that patient and takes care of the progression of the disease. All right. So these are our operational focal points. First of all, of course, the importance of strong execution to show up with this very special and small universe of retina physicians, continuing to educate them. And as you can see from the numbers there, we put an enormous amount of effort into that. It is a new category, a new disease indication. Geographic atrophy patients a couple of years ago, right, I mean, were kind of sitting in the background. I mean there was nothing available for them. They were older, didn't get a lot of attention. This is a very important disease where patients as they grow into their later years can be severely visually impacted, obviously, at the moment where that is critically important to their quality of life. We have a very strong value proposition as is reflected in our reach and confidence from the payers. And also worth noting is we get a question on this once in a while, this is not just based on private equity practices. So we have broad reach with more than 70% of our reach being in nonprivate equity-backed practices as well. And these are the key initiatives that we have this year as it relates to SYFOVRE and reaching more of these GA patients. First of all, we're going to broaden our reach. So we focused understandably and naturally on the retina community. We are now making sure that all these GA patients that are not being seen by retina physicians yet which could be as much as 50% of the overall community who sit with general ophthalmologists, even with optometrists that we can reach them, that we can raise awareness. Then as I mentioned earlier, the real-world data. So we've already seen a couple of presentations, really exciting data coming from these large practices where they have historical progression rates on these patients and where you see that at the time of treatment in the months subsequent to that, the curve gets broken. So essentially, that progression, which is irreversible, gets nicked off. We also have exciting new data from our extension study in GALE that we will be talking about this year. We have more functional data as well. All of these things are going to be coming together. Against that background, we continue to educate the payers on our differentiated value proposition and our best-in-class profile as a GA treatment. And we always aim to connect with the patients now also with a new direct-to-consumer campaign and we are bringing [indiscernible] back. So some of you may have seen the general awareness campaign that we had approximately a year ago. This was incredibly successful for us. So we had many reports from physicians that told us a patient has come into my office [indiscernible] has sent me. This is important, right? I mean these are older patients. They, again, have been neglected for that disease because there was nothing available. Raising the awareness around this is very important. This campaign will launch in the next week to 2 weeks, and I'm sure you will see it on one of your TV sessions. We're very excited about it. It's a very appealing commercial. We do not stop there. So we also believe that we have one of the most exciting innovative programs in this space. You've all heard about our siRNA program. So what we do there is we lower the systemic levels of complement factor C3 so that on the choroidal side of the eye, right? So essentially the blood side of the eye, we can also shut down the faucet of that complement factor from reaching the eye. So we control the convertase activity, the enzymatic activity with the intravitreal injection, while at the same time, making sure that in the background, C3 production is controlled. What you see here are the first presentation of the Phase I data, the dose escalation. And as you can see, we have robust knockdowns of C3 production as measured by the remaining levels of protein in the blood. We expect to initiate a Phase Ib/II study in patients with geographic atrophy in the second quarter. And then moving on to EMPAVELI, our second product. So in 2021, as a company, we discovered the joy, which even in our space is quite rare, right, having that first approved product, which was EMPAVELI in paroxysmal nocturnal hemoglobinuria. In the PNH since then, it has elevated the standard of care, provided a way for these patients to be able to dramatically reduce and often eliminate the need for transfusion dependency, improve their hemoglobin levels. The quality of lives of these patients dramatically improved, and that is something that has provided a stable business for us with a very huge return to patients. Secondly, we then had the readout in C3G and IC-MPGN in the summer of last year. I mean this was really exciting. We'll present the data in a couple of minutes, but truly best-in-class data ever shown in these indications that we hopefully will, this year, be able to capitalize on with an approval first in the U.S. and then through our partner, Sobi ex-U.S. later on as well. And then we have chosen these 2 new disease indications, delayed graft function and delayed graft function and focal segmental glomerulosclerosis as many as 30,000 patients that we believe we can help with EMPAVELI with this product that has shown so well that it can control complement in the kidney in a best-in-class fashion. So touching briefly on PNH then. So we had $23 million in fourth quarter revenues for EMPAVELI. We continue to see this remarkable compliance rate of 97%, which is a reflection of the safety and the efficacy profile of this product. That is something that we know, now want to see happen in C3G and IC-MPGN. These are rare kidney diseases with no approved therapies. This is typically genetically driven. It's typically discovered during adolescence or early adulthood. And these patients are faced with a prospect of 50% of them as many as that losing and going to end-stage renal disease over the course of 10 years. So imagine the impact that this has on these patients. We believe that approximately 5,000 patients in the U.S. alone are affected by these indications. And the readout that we had in the summer of last year is, for me, personally one of the best Phase III readouts that I've been able to witness coming from Kentucky and our horse background, this is the trifecta of C3G and IC-MPGN where we did not only see best-in-class reductions in proteinuria in these patients, but it was combined with this remarkable clearance of C3 deposits that you can see on histopathology when you look at these biopsies. And what you see here is how in 70% of patients over the course of half a year, you go to 0 intensity staining for C3. So to put that in context, these kidneys after 6 months, it's difficult to find the elements of the disease still being present in these kidneys. That is how powerful EMPAVELI performed in these clinical trials. And even at 6 months, which for those of you are familiar, is very rare, we already saw a nominally significant stabilization of the eGFR in our clinical trials, demonstrating the stabilization of the kidney function. And I thought to put the human aspect to it, to share some of these quotes. This is from a patient that came to us and presented to our senior leadership team meeting, but to understand the impact that this has on these patients, right? So this was a very active woman, who would run marathons, climb mountains. Her life was dramatically impacted, affected not only her physical activities, her family life, her relationship. And this drug truly kind of changed all of that for her. She has run marathons since. Also during the clinical trial, she was able to reduce the number of medications she was taking to less than half. And I don't need to explain to you what the impact of this is on these individuals, which are often young patients, right? I mean who have a lot to live for and really need to have that strength. So if you think about C3G and IC-MPGN, it has a progression. It starts in the beginning, obviously, as always, with a mild form. But all of these patients going back to the genetic background will progress to moderate and severe disease, ending in end-stage renal disease, hemodialysis and then the need for a transplant. Together, these represent approximately 5,000 patients in the U.S., split more or less evenly between these 2 separate disease indications. And it's worth mentioning here that one thing that we were very fortunate with in VALIANT is that we studied the entire spectrum of the disease. So we studied C3 glomerulopathy, but also IC-MPGN. We studied patients in a pre-transplant setting, but also a post-transplant setting. We tested it in adolescents as well as adults. We tested in C3 depleted patients, the C3 competent patients. And across the gamut of the entire spectrum, we saw the same efficacy profiles. So this is what I meant with one of the best Phase III readouts because it was so uniformly consistent across all of these phenotypes that we tested. What does that mean for commercialization? So we, of course, have had our presence in the hematology space for a couple of years now through our approval in PNH, and there is quite a bit of overlap. So 25% of the healthcare organizations that provide that care to these PNH patients have overlap with the kidney, but that covers actually as much as 70% of patients with C3G and IC-MPGN and makes it possible for us to be very targeted, very focused on these practices as a lead-in into the first commercialization. And that means that with a footprint of less than 50 sales-based employees, we believe we'll be able to make the difference in the early phases of this launch and then broaden from there later on. Then a little bit about these 2 new indications that I mentioned earlier, FSGS and DGF where we plan to initiate 2 Phase III trials in the second half of this year. So first of all, FSGS in terms of progression and severity, you should think it is quite similar to C3G and IC-MPGN. Here, too, 50% of patients progress to end-stage renal failure within 5 to 10 years. This is also typically a population that is on the younger side. The rationale for complement here is remarkably strong. I would say one of the key features here is that the level of C3 activation correlates with disease severity. And this is an indication that affects as many as 13,000 patients in the U.S. So quite a bit larger than C3G and IC-MPGN. Then delayed graft function, this is, as the name implies, the problems that you can run into when you have a diseased kidney donor, there are approximately 21,000 of those in the U.S. per year and 30% to 35% of these kidneys in the first week have a hard time getting their function properly in place. So that's reflected by hemodialysis in the first week post-transplant, but DGF has long-term ramifications in terms of affecting the long-term progression to rejection, the loss of these kidneys in the long run. There are no treatments available. Complement, again, has a very strong rationale here, and it will be the second indication that we will pursue in the kidney in our new innovative programs. So what does that mean for this year? We plan to submit our supplemental NDA to the U.S. early this year in the next weeks to months. Sobi, at the same time, is very -- working very heavily towards their submission in Europe, and that is going very well as well. That will lead to a second half, we believe, approval and launch in the U.S. And then we anticipate starting these 2 Phase III clinical trials that I just talked about in the second half of this year as well. Then very briefly touching on the innovation that we are bringing to bear. Again, mark your calendars for the spring. We would love to host you at that point in time and talk much more. But one program we wanted to highlight is a novel gene-edited FcRn therapy that we have developed. So many years ago, we came up with the idea of finding potential single nucleotide edits that we could do to eliminate IgG recycling through this brand-new class that many of you are familiar with and that presents so many benefits to patients with autoimmune diseases, the neonatal Fc gamma receptor and we found a way to eliminate IgG recycling while maintaining albumin at its normal levels in the blood. Really exciting data has been shown now through multiple animal models and something that through our partnership with Beam is getting closer to the clinic. So look forward to that in the spring. And if you put all of that together, this is our pipeline at Apellis, our 2 marketed products, but then, of course, also the new indications that we are engaging with for EMPAVELI and our pipeline with the gene-edited FcRn therapy and a couple of others that we'll speak about in the spring. So here we are going into 2025 from a position with 2 blockbuster opportunities between SYFOVRE and EMPAVELI and on a path to profitability, all of that building on our expertise in C3. Thank you.

Thanks, Cedric. Just want to remind everybody, there are a couple of ways to ask a question. You can do it the old school way and raise your hand and I'll call on you. You can send in a question through the portal or you can just e-mail it to me. Maybe I'll just start out with -- when we spoke on the 3Q call, you indicated in the fourth quarter, maybe something more like flattish growth, but you did beat consensus pretty candidly this quarter. Maybe you can walk us through some of the dynamics of what you saw in the quarter on a month-by-month basis because there was a big competitor update in the middle of the quarter as well.

Yes. So we're still very early in the launch of this product, right? I mean a lot of things have happened, but we're not even at the 2-year mark. As I mentioned earlier, fewer than 10% of patients have been treated, and there is a whole dynamic that still needs to find its space of settlement with targeting these patients, getting them to be seen by physicians that will treat them. And then, of course, the competitive dynamic that needs to play out as well. It's very hard to kind of look on a week-to-week basis, right? I mean the CRL you're talking about for our competitor happened right before Thanksgiving. So there were holidays in the middle. So -- but I think that what we are seeing is the CRL possibly may have had an impact, but well beyond that, it is now a better understanding of the differentiation on the efficacy profile that physicians are becoming more familiar with. So I think that it's always been our great advantage to have a substantially larger data package available to us, that allows us to understand the breadth, the depth and the longitudinal impact into many years of being on treatment with SYFOVRE. And that's something that we're truly benefiting from. We'll have to see what happens with our competitor, but that is what we continue to build our progress and growth on.

We have an e-mail question here, which is a quick point of clarification on EMPAVELI sNDA for C3G and IC-MPGN, which is early 2025. So if that's true, you'd be filing on a 6-month VALIANT data set versus a 12-month VALIANT -- 12-month data set that your competitor at Novartis had to file on. Do you have regulatory alignment on this sNDA submission? And is 6 months enough?

So yes, we have regulatory alignment. We had a supplemental NDA meeting scheduled, but everything we asked for was granted. So we didn't actually have it. But part of that, of course, was the ability to file with the 6-month data. We believe it is a testament to the quality of the data, as we talked about earlier. We'll see what happens during the review, of course, but we were -- we got the specific feedback that we are allowed to file with the 6-month data in C3G and IC-MPGN.

Questions from the audience? You talked a little bit about your updated sort of DTC efforts, but maybe you could talk a little bit more about your actual physician efforts, whether it's at medical meetings, -- what -- how is the sales force messaging evolving?

Yes. So I think it's been an interesting launch for us in the sense that, of course, we had to kind of guide through a number of competitive dynamics, real-world experience that emerged. Initially, we were very focused on protecting the overall market. Then recently, really starting in the summer, we started then focusing on establishing that differentiation from an efficacy perspective. So the only messages that we presented to you today, that's very similar to what we actually use in the field with retina physicians as well. And that's becoming more and more recognized. So I think that the evolution here is that we are now in a favorable position to -- based on a deep understanding, right, more than 0.5 million injections to be able to communicate to these physicians what SYFOVRE can do for their patients. And there are many physicians, and I think this is the key thing that is maybe not always well understood. There are many, many physicians that are not necessarily negative towards our product, but they stand on the sidelines until it is better understood what is going on. These physicians are typically very, very busy treating exudative macular degeneration. So here, you have a new -- a whole new category of patients, a new disease, how does that fit into the practice. We now need to help these physicians understand those dynamics, and we look forward to taking that based again on that substantial database that we have that I think this year, we'll be able to take advantage of.

Question from the audience? On C3G and IC-MPGN, just where do you see that product fitting in, in both indications given kind of the competitive landscape?

So as I mentioned during my presentation, it was kind of the breadth of phenotypic exploration that we did in those Phase III clinical trials, in the VALIANT trial. If you take those 5,000 patients with C3G and IC-MPGN, as I mentioned, IC-MPGN is half of that population, which is one that we actually studied in our clinical trials, and we were the first ones to do so. There's also the pediatric population, and as many as 1/3 of these patients we believe that are diagnosed fit into that pediatric category. So again, very important to understand what the drug can do there. Then I think, really important and exciting for us is the impact on the post-transplant segments. So often in the kidney, that segment gets avoided because it's different, it's complex. But it is also a high reward place to be. If you can protect the transplanted kidney, the value proposition for our product is really strong, obviously, right? You want to protect that nugget of gold that sits there in these patients. And that is a place where we really differentiated ourselves, not just in the VALIANT trial. We also looked at that in previous Phase II settings, the NOBLE trial, most notably and one where we continue to make our footprint. So if you think about those 5,000 patients, we believe about 20% of that, 1,000 are transplanted patients between the 2 indications. Again, something where we have a unique advantage to be able to target that. You may also have heard about the xenotransplantation space, which is up and coming and where EMPAVELI in many of these actually, as a matter of fact, I think most, if not all, of the recent xenotransplant are either rescued or proactively protected with EMPAVELI. So another really interesting opportunity within the kidney that we seek to pursue.

Question from the audience? So you disclosed today a couple of new focus indications for EMPAVELI, FSGS, delayed graft function. When you looked at the whiteboard of options where you could take EMPAVELI, what really stuck out to you for both of those?

Well, as you know, it's always an evaluation of many factors, right? I mean there are the medical and scientific considerations, which are always the most important. What is the unmet need? What is the competitive landscape? What can we offer to these patients if and when we get approved there? What is the scientific rationality for complement and specifically, C3 in these indications. And then combined with that, of course, also how long will it take for us to be able to get these therapies into the clinic. So all of these were factored in, and these are 2 indications that really stood out as having a great value proposition for us.

So what are going to be the key sort of pre-commercial activities that you're going to be doing for C3G and IC-MPGN this year, particularly you're going to be filing soon?

Yes. No, thank you, Anupam. So here, as we discussed, right? I mean it's very nice for us to see that there's such a concentration in these healthcare organizations where we already have a presence. We have been hiring top talent within this space, which we could do, I think, thankfully to the data that we have generated. There's enormous excitement, right? I mean some of you may have been at ASN in late October. I mean it was really this palpable excitement about finally being able to do something for these patients. And the deployment is relatively small, right, fewer than 50 reps that will allow us to bring this into a successful launch.

Questions from the audience? Maybe just thinking about the path to profitability that you mentioned. How do we think about R&D and SG&A trends here because you are moving into some new indications, you're also launching, committing to launch?