Apellis Pharmaceuticals, Inc. (APLS) Earnings Call Transcript & Summary

All right. We'll go ahead and get started. So welcome to the Tuesday afternoon session of the 2020 JPMorgan Healthcare Conference. My name is Anupam Rama. I am joined by Matt Bannon, Tessa Romero and Julie Murphy from the team. Our next presenting company is Apellis, and presenting on behalf of the company is Cedric Francois. Cedric?

Thank you very much, Anupam, and thank you for inviting us for the third year in a row, and all the hard work that you and the team do for us. And thank you all of you for attending. This is a special JPMorgan for us where we are presenting to you the data from our PEGASUS study in paroxysmal nocturnal hemoglobinuria. And we are going to start with this slide, where of course, today, a lot of time will be spent on those positive data in our Phase III clinical trial, but also on the platform that we believe we are unlocking around this fascinating target of complement factor C3, where paroxysmal nocturnal hemoglobinuria, we believe, it's only the beginning of a special journey, where we think we can do a lot of goods for many, many patients worldwide, hopefully, in many, many indications. So why C3? Well, this is a highly simplified slide of the complement cascade. And we're honored here today to have with us Dr. John Lambert, the father of the field of C3, who also gave us the building block for APL-2. He knows this cascade better than any of us. But this is a way for us to understand really what is going on and how we can target the special elements within there and get the maximum effect in the disease. But what I want you to remember is that there are 3 pathways that converge on complement factor C3. Three sources from which complement this 400-year old complex cascade can be activated, and where all the downstream effects of complement cascade from. One of the important pathways leads to the activation of complement factor C5, and we'll talk much more about that later. We are the first company in late-stage developments targeting complement factor C3, and we have taken that forward across 3 fields. One of those is quite familiar to you. One of those maybe a refresher to you since our IPO in the field of ophthalmology. And the third one is one, on which we hope to give you much more news this year. So let's start at the top with subcutaneous pegcetacoplan. This is a product that we give subcutaneously twice per week in a subcutaneous infusion. This is the product that was tested in PEGASUS in paroxysmal nocturnal hemoglobinuria. And in hematology, we will also move this forward in another indication called agglutinin disease, where we presented proof-of-concept data last year at the European Hematology Association. In nephrology, we also presented proof-of-concept data in C3 glomerulopathy at the ASM Conference in the beginning of November, and on that 2 more news will follow. We then also had a large Phase III clinical program in geographic atrophy, the advanced form of dry macular degeneration. 1,200 patients in 2 Phase III clinical trials that will be fully enrolled in the months to come. And we're in the middle of next year, we will have, of course, a very important readout in this condition. And then, again, last but not least, another molecular entity called APL-9, which works via the exact same mechanism as APL-2, but it's smaller, and it allows us to in an acute fashion intravenously very quickly control -- out of control complement activation and that we are exploring in gene therapies. But let's start with the subject of the day subcutaneous pegcetacoplan, the new name that we used for the formerly known APL-2. And what you see in that little circle is the device that we are also developing to deliver pegcetacoplan subcutaneously. To be clear, this particular device is not the one that we will launch with. It will come 1 to 2 years after the initial launch, but we believe that it will make it ultra-easy for patients to self-administer themselves at home. So let's start with this slide. And quite frankly, I feel like spending 5 minutes on this slide, but I will let you read what is on this slide because this is what PNH represents. This is a terrible condition, which when left untreated is lethal in about 1/3 of patients over the course of 5 years. It's a disease of the bone marrow, where a clone in the bone marrow that is mutated gives rise to red blood cells that are overexposed to complement activation, leading to the destruction of these red blood cells and all the consequences that, that entails. But what you see at the bottom there is really what this disease entails for patients like Erin. And what we did in our Phase III clinical trial is on top of the standard of care that we've now had for 15 years, more or less. We wanted to see if we could give patients like Erin a better quality of life. And that is reflected ultimately in the hemoglobin levels of these patients, which means how much better can they function, can we solve some or many or all of the things that Erin describes at the bottom of this slide. And what we found in our Phase III clinical trial was that over the current standard of care, eculizumab, Soliris, we found superiority of 3.8 grams per deciliter on the hemoglobin scale. Again, what that means is that patients like Erin, hopefully, in the future, will be able to get across the staircase and not have to wait for a couple of minutes and sleep better and live better. And if we take a step back to what PNH really is? Well, this is in the first place, a rare, and as I mentioned, a life threatening blood disorder. And in historically untreated patients, also, as mentioned, 35% of patients passed away over the course of 5 years. It affects approximately 15,000 patients worldwide. And over the past 15 years, we've been extremely fortunate to have eculizumab, and more recently, ULTOMIRIS as C5 inhibitors to at least make this a less lethal disease. So in terms of controlling the most draconian consequences of this disease, we've been happy to have these agents among us. But in spite of being life-saving therapies, the C5 inhibitors still are associated with a significant unmet need that is summarized here. First of all, up to 70% of patients continue to have low hemoglobin in spite of being on treatment with C5 or C5 inhibitors. 36% of patients require at least 1 transfusion per year. 100% of patients in our testing have evidence of C3 opsonization of PNH red blood cells, and in a minute, we'll talk about why that is important. And last but not least, the average reticulocytosis, meaning the number of red blood cells that patients need to produce in the bone marrow in order to try to compensate for the lack of coverage by C5 inhibitors is 1.9x the upper limit of normal. So why is this happening? So we go back to our very simplified slide of the complement cascade. Complement factor C5, which is the target for eculizumab, sits downstream from complement factor C3, and it protects red blood cells against the explosion that happens within a matter of days in an untreated patient when red blood cells go into circulation. And when you give eculizumab or other C5 inhibitors to these patients, you can control the "explosion of red blood cells." Again, very important for the survival of these patients. But what you do not control is the unbridled C3 activation that takes place on the surface of these red blood cells. And what that does is the cells very quickly become overloaded with C3. And when they then pass-through the liver or the spleen, they become eaten by macrophages. And so instead of living 4 months, which is the normal expected life span of the red blood cell, these cells only live a couple of weeks. And all of the consequences, what happens in the lives of these patients that we discussed before, we believe stems from that. So what we did is we ran a trial called the PEGASUS study. This was a head-to-head trial designed to show superiority over eculizumab in patients with PNH. And we decided to implement quite a special design. And why did we do this? Well, we imagine patients sitting in our office on treatment with eculizumab or other C5 inhibitors in the future, still suffering from the consequences of that lack of complement control and we wondered how can we make it really easy for that patient to embark on a C3 journey to know whether it will help them in a minimum risk fashion. And what does that mean? Well, there is a physician who can tell the patient, you can try this on top of your existing drug, don't change anything. And after a month, if you feel better, you can change. Or if you don't feel better, that's fine too. Within a month, you'll be back to where you were before. We thought that would be extremely valuable. That is why we did this study in which we gave actually pegcetacoplan to our control group for 1 month. So all 80 patients that we enrolled that were on historical treatment with their best doses of eculizumab for 1 month received pegcetacoplan on top of eculizumab. And we expected all of these patients to get better during that 1 month period. And then after 1 month, unfortunately, half of the patients had to go back to being where they were before on monotherapy with eculizumab, the other half would continue with pegcetacoplan on monotherapy. And what we read out last week and communicated to you is the primary endpoint that we had after 4 months of monotherapy treatment. 77 of the 80 subjects enrolled at the end of that period decided to continue with monotherapy on pegcetacoplan and 39 of the 39 patients in the control group who knew they were in the control group stayed in the study, so that after 4 months, they would have the opportunity to continue or go back to being on pegcetacoplan in monotherapy. And here is the readout of the primary endpoints. So what's important to understand this primary endpoint is that not only did we want to show the improvement in hemoglobin levels that we had on pegcetacoplan, we also wanted to understand the contributions of transfusions to the baseline hemoglobin levels that you may find in an average eculizumab-treated population. And to do that, we had a baseline level of approximately 8.7 grams per deciliter in these treated patients. During the 4 months of the randomized period, if a patient needed a transfusion was that all the hemoglobin levels after that were "contaminated" by that transfusion, so we only took the data up to that transfusion and carry that forward. And some of you have asked me, well, why do we have a 1.5 gram per deciliter drop in the eculizumab arm? Well, that's not really a drop. That is more or less the amount of hemoglobin that otherwise gets contributed by transfusions and that we corrected for in the readout here. And if you wonder what we did with pegcetacoplan really on the baseline in the presence of those transfusions, this is what you can see here, where with pegcetacoplan after 4 months, we had a hemoglobin level that was 2.9 grams per deciliter higher than the eculizumab arm in the presence of transfusions. And what I want to point out here as well is that at baseline, they were at 8.7. At the end of the 4 months, they were at 8.6. So again, we believe that these patients basically went back to where they were before. Then talking about the key secondary endpoint analysis. These were endpoints that we included in this study, primarily for the purpose of safety. Now we had the opportunity to take the alpha from our primary endpoint and carry that forward. So we did that first went through non-inferiority would then have gone through superiority and look what we did on non-inferiority, we met transitional avoidance, we met reticulocytes. All of the green areas here favor pegcetacoplan over eculizumab. But with the LDH values, the variability on LDH in the eculizumab arm was too large. And that led us to miss the primary -- or the secondary endpoint in spite of the numerical value being better. So really, we could unfortunately not test the subsequent values, but I want to, again, really make the point here that from the purpose of our regulatory path forward and our commercial path forward, these were safety endpoints. And the primary endpoint showing the hemoglobin difference was what we were interested in. Now let's look at transfusion avoidance. Green is good, red is not good. So as you can tell, our transfusion avoidance was really spectacular. The impact of that on patients is dramatic, and we couldn't be happier. And then looking at the observed data that we have here as well in reticulocytes, LDH and FACIT-fatigue score, they follow what we sell on the hemoglobins, but I would like to call out lactate dehydrogenase LDH levels here. Observed data, obviously, have missing data in them. But with 77 of 80 patients included in the observed data, this is an interesting graph for you to look at. And I want you to pay attention, after 4 months of monotherapy, the LDH average values on pegcetacoplan being in the normal range with a standard error that is tightly controlled compares to what you can find on eculizumab monotherapy. On the safety, we were also extremely happy. We saw a well-balanced safety profile between eculizumab and pegcetacoplan. One element that I would like to point attention to are the cases of diarrhea that we had here, 9 patients out of 41. Those cases of diarrhea were all mild, grade 1 cases. And none of those led to a discontinuation at EHA and soon we will talk more about that, but this is not a point of concern for us. So in the meantime, in the last year and the run-up to what was hopefully going to be spectacularly read out, we prepared to meet the needs of PNH patients. So we are very fortunate to have Adam Townsend, who joined us, who launched Spinraza that was a launch that we were particularly impressed with and he honored us with his presence to make sure that we can make pegcetacoplan available to as many patients as possible -- and as many patients and as many places as possible globally. We then also, as mentioned earlier, are developing this in cold agglutinin disease and C3 glomerulopathy. We have promising data that we presented at those conferences last year. In the second quarter, we will tell you more as it relates to the C3 development of these products and the timing on that, the design of these studies. But these are next in line indications as well as others that we are thinking about where we can piggyback on the safety that we have seen in the PEGASUS study and again, hopefully, deploy the benefits of pegcetacoplan to as many patients and as many diseases as we can do. And then finally, I would like to show you how -- oops, spend a little bit too faster. How this device that I mentioned earlier is going to work? So what we have here is the PNH patients, who is going to show to you how this new device, which will come, again, after the initial launch gets administered. There were 3 points that were important for us for the subcutaneous administration. Number one, we wanted a liquid product, not like [indiscernible]. You don't want to be in the kitchen and move product around. We wanted to have good room temperature stability, and we have at least 1 month of that. And number three, we wanted it to be as needle-less of an experience as possible. And what you see here is a small PNH patient who took a vail out of the fridge and he's going to stick that in that little receptacle, which heats the product and automatically sucks it in the delivery device. This was developed by Enable Injections, a fantastic partner that we have in Cincinnati, and you can see here how the administration works. So the vial goes into the receptacle, sucks it into the device. You take it out, it sticks to the abdomen, you can walk around with it. A 4-millimeter, 30-gauge needle instills itself subcutaneously and delivers the product over the course of approximately half an hour. And in the future, this will be cloud-enabled, so that we can also track compliance and make sure that people take their products on time. And then moving on to geographic atrophy because this is a very large trial on which we're spending a lot of money and a lot of time and on which we are really very excited. What is geographic atrophy? Well, it is the advanced drive form of macular degeneration. Macular degeneration typically starts with the formation of drusen. We also call this Intermediate AMD. These are small lipid deposits that accumulate in the retina, which about 1/4 of 75-year-old individuals have, and that can then advance in 1 of 2 forms of the advanced disease. Wet AMD is something that many of you are familiar with, with drugs like Lucentis and Eylea on the market. Obviously, super important product for these patients. And geographic atrophy, a little bit less prevalence, but extremely prevalence to 1 million patients in the U.S. is the advanced drive form where you should imagine the retina literally in a slowly degenerative process disappearing. There's nothing on the market for these patients. Everything in clinical development had failed until our Phase II clinical trial came around, and we have an important duty, quite frankly, to see whether in Phase III, we can repeat what we did in Phase II. It is worth mentioning as well that patients with Wet AMD, who are on treatment with anti-VEGF, after 7 years of treatment with anti-VEGF, in 98% of cases also end up developing atrophy. And so that is an entirely new, quite frankly, enormous problem in the retinal practice where now that we are in a little over a decade beyond the introduction of anti-VEGFs, we need something for these patients. And this is the Phase II FILLY clinical trial, which we disclosed in 2017, which was, quite frankly, the genesis for our IPO at the time and where we decided to run a large Phase II clinical trial, 246 patients with a primary endpoint that we modeled after a very large Phase III trial that Genentech/Roche as the time was running. These were the Chroma and SPECTRI trials. So we wanted to make sure that at the end of this trial, whether we got a negative or a positive response, that's fine, but medium response or uninterpretable response was not acceptable. And what that meant is we took the way of measuring the primary endpoints, which translates into looking at the areas of atrophy in the back of the eye and seeing how quickly they progress over time and finding out whether pegcetacoplan when injected intravitreally could reduce or slowdown that degenerative process. We took images of the retina at 0, 2, 6 and 12 months, then we stopped dosing patients. And 6 months later, we took another look to find out what happened. And the primary endpoint was, again, something that we really embraced and aim to repeat in Phase III. What I wanted to mention here, as possibly most important, is that the sham-controlled progressed at more or less exactly the rate that we had predicted. And in geographic atrophy, many, many trials in the past have failed because the rate of progression in the sham control deceived the outcome. We did not have that. And we showed a reduction of 29% on the multi-dosed individuals and 20% after run year on every-other-month dosed individuals. But pay attention here, how between month 6 and month 12, the effect really seems to kick in. And that is something where in this Phase III that we are currently running, where we will treat patients for a full 2 years, even though we readout at 1 year, we are exciting to find out or excited to find out what will happen in the second year of dosing. So this trial, as I mentioned earlier, or these 2 trials will be fully enrolled in the next couple of months, and we look forward to sharing the data with you in the middle of next year. And then moving on to our third program, on which we haven't spent a lot of time yet. APL-9 intravenously in AAV-mediated therapies. For those of you that follow genetic therapies and especially AAVs and especially AAV9s, you must be familiar with, I'd say, 2 important problems that we face in these treatments. One is the fact that the transduction efficiency is, quite frankly, low. So therefore, we need to inject extraordinary amounts of AAVs and virions into circulation to be able to get good expressions of the proteins we are interested in. We believe that complement plays an -- and especially C3, plays a very important role in reducing that transduction efficiency. But on top of that, the massive activation of complement that occurs when these virions go into circulation is something that can lead to problems. And what we believe is happening in this condition is that basically, when these AAVs go into circulation, there's an acute form of PNH that is introduced into the intravascular compartment and something that we believe we can control with APL-9. And by doing that, in other words, by pretreating patients before we do this, we are hoping to improve transduction efficiency and hopefully, reduce or eliminate the secondary side effects that have led to some of the severe adverse events that have been plaguing this field. And to give you a little teaser of what that could mean in terms of transduction efficiency, in vitro, we ran an experiment. And I want to point out this was in vitro, not in vivo, an experiment to find out what the impairment of transduction efficiency would be due to C3 accumulation. And by preventing that accumulation with APL-9, in vitro, again, we saw more or less a doubling in transduction efficiency. This means that just the fact that C3 sits on the surface of these capsids, prevents them from fusing properly. That excludes the contribution of the reticuloendothelial system, eating up these virions, once they are in vivo and circulation. We're very excited about this and look forward to sharing more next year or this year. And then Apellis 2020, what will we have this year? So many things. First of all, in PNH, we look forward to providing an update with the regulators in the first half of this year. We aim to present the full 16-week data on PEGASUS in June at the European Hematology Association. We will have the 48-week top line PEGASUS data, which we will bring in as a safety measure into our NDA submission in the second half of this year. At the end of this year, maybe the beginning of next year, we will have the top line data on the PRINCE trial. We will complete the enrollment of our Phase III geographic atrophy studies in the spring. We will advance pegcetacoplan in C3 glomerulopathy and cold agglutinin disease. And we will progress APL-9 in gene therapies. And on a closing notes, I want to thank the patients, the physicians, science, the Apellis scientists and employees who have been amazing for us. I also want to thank all of you for supporting us in this effort because without you, we could not do this. It's a worthy endeavor. This is a turning point for us as a company. And I think in the next couple of years, we look forward to, hopefully, making a very big difference. Thank you so much.