Apellis Pharmaceuticals, Inc. (APLS) Earnings Call Transcript

All right, everyone. I think we'll get started with our next session. My name is Derek Archila. I'm one of the senior biotech analyst here at Wells. Very excited to have Apellis with us here for our next fireside discussion. We got Tim Sullivan, the Chief Financial Officer; as well as David Acheson, the Chief Commercial Officer. Gentlemen, thank you so much for coming and looking forward to the discussion here.

Thank you, Derek.

Awesome. Well, maybe let's just kick things off in terms of just kind of state of affairs. Maybe Tim or David, you guys want to just kind of give us a sense of where the business is today, and then we can start delving into some of the key questions here.

Perfect. So for those who are not familiar with Apellis, it's a commercial biopharmaceutical company that's focused on the complement biology system. And for those of you who are not familiar, complement is part of your innate immune system, it's sort of your original old immune system. And when it's dysregulated, it can cause a number of serious diseases. And so Apellis was founded with the idea of targeting diseases within the complement system, but doing so at the center of the complement system target called C3. And this is the central point of the complement system in the way our drug -- so we have 2 commercial drugs, 1 is called SYFOVRE, which targets geographic atrophy in the eye or treats geographic atrophy in the eye. And then also EMPAVELI, which is for a number of rare diseases we'll discuss in a minute. But both of those drugs have the same active ingredient, which is pegcetacoplan, which targets the central component of the complement system. And as a result, it sort of acts as the either the Swiss army knife or the NVIDIA chip or whatever, exactly in the [indiscernible] system. And is really as far as we know, almost the litmus test for whether a disease is a complement-related disease. So there are tons of drugs being developed in the complement system. And we believe pegcetacoplan is sort of the most effective in the sense that it can treat pretty much all diseases within complement because it -- it's centrally located right below all 3 of the activation pathways. So that's what makes pegcetacoplan different and what makes our 2 products unique. And so we obviously, as I mentioned, we have these 2 commercial products. And in terms of where we stand today, we have 3 approvals, 3 approvals in the last few years, which is a great accomplishment. We have, again, for SYFOVRE, this is a product that was approved for geographic atrophy. It was the first product approved for geographic atrophy and is also the market leader in the geographic atrophy market. And then we have EMPAVELI, which was approved for PNH in May 2021 and has subsequently as of this year, been approved for 2 other diseases of the kidney -- 2 diseases of th kidney, excuse me. First one is C3G or C3 glomerulopathy and then IC-MPGN, which is a related disease, which expands our market by approximately 5,000 patients. These are rare diseases. It's a rare disease drug, both PNH as well as C3G and IC-MPGN, rare disease opportunities. And then, of course, in our pipeline, we have -- we're developing a drug called APL-3007, which is an siRNA, which is being used to also improve the characteristics of SYFOVRE in combination. So we have a kind of a combination of geographic atrophy targeting approach, which we're hoping to kind of increase the durability and effectiveness of SYFOVRE. And then we have some other earlier stage programs, which we'll talk about at some point in the future. And then very recently, we just did a financing deal. It was a royalty deal with our partner, Sobi. They have the ex U.S. rights to EMPAVELI. And we did a royalty deal -- really royalty monetization with them where we added $275 million to our balance sheet. So we come into this conversation with a very strong balance sheet with 2 commercial products that are strong and growing. And we feel very good about where we are. I don't know if you have anything else.

All right. Well, thanks, Tim. Well, maybe let's discuss the recent launch of EMPAVELI and C3G and IC-MPGN. Obviously, as you stated, it's a rare disease market. So maybe either if you guys want to start just in terms of what are we seeing in the early innings since approval? And how do you guys think that launch will ramp over the next couple of quarters?

Yes. Yes, sounds good. Thank you, Derek. First of all, we're super excited about what we've seen for a label from the FDA for both C3G and IC-MPGN, it's a very broad label, and it gives us both pediatric as well as adults in both disease state, which is really, really good. Also, there's post-transplant data in the label for patients that have gone through transplant that could also, C3G patients in particular, could be utilized for those patients as well. So it's a very broad label, which is positive. We're 4, which is a little over 4 weeks into the launch of those 2 indications. And I can tell you, I think things are going extremely well, at least from a connection to the right customers, the KOLs. And there's a lot of interest because of the broad label and what we've seen in our data. I think it's important to remember that we hit what we call the trifecta. So proteinuria reduction of 70%, which is the lead endpoint in the studies. We also showed that 71% of the patients after the studies actually had 0 C3 staining left in the kidney. So that's a very big number and hugely impressive. And we were able to show stabilization of eGFR. And if you talk to a nephrologist, proteinuria is key, but it's not the only factor they're looking for. We cover off on the other 2, which is staining as well as eGFR stabilization. So it's exciting. I can tell you that we are -- as soon as we got the label, we we're in the process of trying to move our EAP patients over, which is going to take till the end of the year. And we're in the process now of getting folks REMS-certified and putting our opportunities for patients to get start forms in and get on the product. So it's still very, very early, as you can imagine. But the news is exciting in the space and we're excited to be able to help patients in the 2 disease states.

Can you just remind us in terms of the number of EAP patients? And I guess, again, you said by the end of the year, what are some of the factors that would dictate that being faster?

Yes, that's great. So in our EAP program, we have 50 patients that are in the process of moving over. The program, obviously, was one of those things that was available for patients because there was a high unmet need. So now what we're working on is making sure that those patients move over to the commercial products. It takes a little bit of time to do that. In general, once a patient is identified and they go through vaccinations in the process for start forms and all of the prior auth work and those types of things that happen in rare disease, it takes about 4 to 6 weeks to move most patients over. We anticipate it will take -- to get those 50 patients moved over, it will take some time into Q4. And at the same time, we've got new patients that are coming into the process as well. So excited to see it, and we'll see how things continue to move.

Can you discuss the REMS certification? And like how long -- is that mostly just kind of like paperwork? Or like what's that actually entail for some of these centers?

REMS certification for a physician is actually -- it's by doctor, and it's actually a fairly simple attestation. They need to read through what needs to happen from a labeling perspective, in particular, the vaccinations for these patients, which there's 3, and then you need to attest to the fact that the patient is indicated in the process of the label and that they're being vaccinated or have been vaccinated and then they sign off on it. So it takes 15 to 20 minutes. It's actually not that hard. The work really comes into start forms and working with the payer and the specialty pharmacy and all of the logistics with the patients. So that's really where the work is.

Got you. And can you just remind us in terms of that vaccine requirement. Obviously, this is something that EMPAVELI had prior with PNH as well. But typically, what's the length in terms of getting those vaccines. And I guess, I think a lot of people are trying to understand, is there going to be a bolus of patients that just come on beyond the EAP? And is there really kind of a slight waiting period because of the vaccination requirement here?

Yes. No worries. Let me address the vaccination process first. So there's 3 vaccinations that every patient needs to have, one of which is meningitis that has 2 vaccinations that have to occur. We -- in our label, as long as you've been vaccinated for influenza B strep pneumo and the first meningitis injection or vaccination, 2 weeks post those injections or those vaccinations, a patient can start product. And they can also go on prophylactic oral antibiotics, if that's what's needed, especially for the distance between the first and second injection for meningitis. So that in a nutshell is kind of how that works, right? And that's super important because we obviously -- it's a safety event that we want to keep from happening. And that process takes a little bit of time, and we can help facilitate that through our specialty pharmacy and through processes that we have in place. So we can speed that process up if a patient is having a hard time finding a way to get vaccinated and we can work with their offices and their physicians to do that. And once that's done, then the start forms go in, all the information is sent into the specialty pharmacy, and then it just takes time with the payers and what processes and logistics to make sure we get the patients, the product within the window of time that -- and is paid for by a payer, okay? From a bolus perspective or what we see for patient uptake, I definitely, I think, Derek, one of the things that you're going to find in any space like this that hasn't had a lot of options until recently they had no options, right, these patients are being -- are they waiting. We've got some patient advocates that we work with to help educate our internal teams as well as some work that they do externally for us. And they've been anxiously waiting for a product like this to come through that will keep them from actually going to dialysis or post potentially transplant. So it's super important to them. So I do anticipate like any disease like that, that you're going to have some bolus of patients that come through in the front end of the launch. But we anticipate that it's going to be a typical ultra-rare disease launch. After that where you're going to see nice, good, steady growth. There's about 5,000 patients that we see in the U.S. And all of them, for the most part, should qualify for treatment depends on where they are in their treatment kind of processes in the disease state. But at some point, they should all be educated at least on the product and the availability of it.

Would you see any like centers of excellence or kind of KOLs start to vaccinate and prepare these patients prior to approval, like just assuming that it would get approved because of the data?

Sure. Yes. We actually had a number of REMS enrollments that came through from physicians before we actually had approval. All of our EAP patients for the most part were vaccinated because they're on product, and we had some patients that were already starting to go through the process to be able to get connected to the physician and to education on the product before the label was actually available. So all of that started to happen early on, and it continues as now that we're launching as well.

Got you. I guess do you think of the 2 opportunities different like pre post transplant, obviously, like adult children like pediatrics, how do you think about kind of all these opportunities and ultimately like where physicians see kind of the greatest unmet need?

Yes. It's interesting you asked that because if you go through our label, you can see pediatric patients for C3G. You can see adult patients for C3G, IC-MPGN. You can see post-transplant patients for C3G for adults. You've got the whole gamut, right? Probably the most -- the 2 areas of the highest unmet need that we're interested in and have concerted efforts around is to make sure that the pediatric patient nephrologists are well educated and know about this product early because that's a super high unmet need with kids, right, that are potentially in a situation where over their lifetime, they end up having to have a transplant or certainly go to dialysis if this thing is not taken care of. So that's one. And then post-transplant patients because one of the things that we know is that in a post-transplant patient, 90% of these patients within 30 days see recurrence of staining of C3 in the new kidney, which, because it's a genetic disease, it's always going to reoccur, right? So those patients should be high unmet-need patients, they are high-unmet patients with some urgency to make sure that, that group of physicians is also well trained on the product, so they know how to identify when and how to put patients through the process to get to product and treatment. And then the rest of it is C3G patients that are adults, which are super important, but a little better understood on how to manage because they've been adults with the disease for quite some time. And now they have options to be treated that they didn't have before.

Now that you're in the market, like what are you seeing from Novartis in terms of iptacopan like any sort of counter detailing. Obviously, you have a more extensive label. So like maybe you could just give us some of the dynamics as you see it a couple of weeks in the launch.

Yes. So look, I think one of the biggest advantages we have is our label because of the broad spectrum number of patients and the age range that we can treat, right, for both indications, which really separates us. What we get told by physicians and by the KOLs is what we'll separate us is the efficacy. I think it goes along with those broad indications, which we can see in those 3 areas I talked about, which is proteinuria, C3 staining reduction and eGFR stabilization, and they're super tuned in to the fact that we can bring them all 3, and that's not necessarily the case in other situations, right? I think the other thing that's super important is most people would say, we've got an oral versus what would be a subcu injectable product. We have a very easy-to-use wearable device that goes on when the patients use it, they get dosed twice a week. They put the device on, they hit the button, they never see a needle and the product delivers -- the device delivers the product over a window of time of about 30 minutes, right? Oral has to be taken twice a day. And so there's areas there where the physicians are saying 2 things. Efficacy will always outweigh the path that the patients will take the product. And the second thing is they're very intrigued with the fact that we've got something that's simple to use for these patients with the product that can treat these diseases.

How important is compliance? I mean, you just kind of maybe outline that a little bit, but maybe just in terms of both of those, like if you miss a dose of iptacopan, is that a major issue relative to -- for this type of disease?

Look, I think in these disease states, these patients have been living with these situations in the nephrology space for their lives, right, at least since they've been diagnosed. Obviously, the best thing to do is to stay on treatment and make sure that they can continuously be treated. If they happen to miss a dose actually in these disease states, they can go right back to treatment. For us, though, the good thing is that we've got -- we know that it's a lot fewer times that they have to take this product. Twice a week is significantly different than what you'll see patient compliance when you have to take it twice a day.

Got you. So maybe just a higher level question in terms of just the market opportunity here. I think there's a debate whether is this very niche and small, a couple of hundred million, to -- could be $1 billion plus. I guess how do you guys think about this market opportunity? And what peak penetration could really look like across C3G and IC-MPGN?

So I think if you take -- I'm actually going to add PNH into it, too, right? So you had in PNH, you have C3G and IC-MPGN. We absolutely believe we have a blockbuster product. If you take a look at the 5,000 patients that are out there, they're diagnosed through -- all of them are diagnosed through a biopsy. So we know that those patients exist, especially on C3G because the ICD-10 code exists for us to be able to track. IC-MPGN is actually an epi model to get to that. And so we've got some learning to do, right, on the number of patients that exist now that there's a treatment out there like this that can actually modify the disease versus treat the symptoms. We actually think there's probably more patients that could surface as diagnosed moving forward, which is typical in most rare disease situations where there haven't been options before. So we're very confident in the 5,000 patients. We think there's probably more out there that could come to the table at some point in time as a result of a product that can treat what their needs are that wasn't there until recently.

Got you. And how do you think about EMPAVELI's broader across the 3 indications in terms of IP life cycle management. Is this something that's kind of on the radar? I think the patents are up in like, I don't know, late 20s or early 30s, but finite like nonetheless. But how do you kind of think about that, given that you want to continue to expand in some other renal indications based on the data you've seen?