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

Welcome, everyone, to the 40th Annual JPMorgan Healthcare Conference. My name is Anupam Rama. I'm one of the senior biotech analysts here at JPMorgan. I'm joined by Priyanka Grover, Malcolm Kuno and Caleb Smith from the team. Our next presenting company is Apellis and presenting on behalf of the company, we have CEO Cedric Francois. I want to remind the attendees of this session to use the Ask the question feature in the portal, and I would be happy to ask the question on your behalf. With that, Cedric, take it away.

Thank you so much, Anupam, and thank you for inviting us again to this conference. I wished it was in person, but hopefully next year, that will be the case. So starting with our first slide, Slide #2 are forward-looking statements. And going to Slide #3. First, taking a quick look back at year 2021, which was an extraordinary year for us. We continued to position ourselves to be the global leader in complement across rare diseases, ophthalmology and neurology. In rare diseases, we transform treatments across rare complement-driven diseases with our -- of course, our first approval of EMPAVELI last year in May, Aspaveli, later in the year just before Christmas with our partner, Sobi in Europe and our positive Phase III PRINCE data in treatment-naive PNH patients. In ophthalmology, we had the readout on DERBY and OAKS, our Phase III clinical trial in September, and we continue to build on a portfolio of brain-active complement therapies with our first molecule for the control of C3 in the brain called APL-1030, which is heading towards an IND in the second half of 2022.

Cedric, your slides are not presenting. So is there a way to present them real quick? Maybe operator, if you could just get the slides up, please? Michael?

Checking. Please stand by.

It appears the slides are visible for some folks. And so Cedric in the interest of time, while they get it fixed in the background, just I would continue with your presentation.

Okay. Thank you, Anupam. I'll just call out the slides by number. That way, everybody knows where I am. So going to Slide #4. So complement factor C3, centrally in the complement cascade is where Apellis does its work. The magic, we like to say of complement factor C3 is that it sits centrally in this highly complex cascade of about 30 interacting serine proteases. And by controlling C3, you can control all of the downstream effects of complement, regardless of what the source of activation is. And obviously, pegcetacoplan, our lead molecule is the one that we use systemically by injecting it subcutaneously twice per week and in ophthalmology, by injecting it directly intravitreally. Then moving on to Slide #5, our 4 key priorities for 2022. First of all, in geographic atrophy, we aim to bring the first ever therapy to treat patients with geographic atrophy. So geographic atrophy, as a quick reminder, is the advanced dry form of age-related macular degeneration, a disease that affects approximately 5 million patients globally, and for which no treatment is available. Everything in the past has been very complicated. Trials have failed. But with our data that we generated in the past couple of years, we believe we are on a track to do this in the fourth quarter of this year. Then secondly, with EMPAVELI, we continue to further establish EMPAVELI as an opportunity to elevate the standard of care in PNH. So this was, of course, a very joyful moment for us on the 15th of May, our first approval. And what we were able to do with EMPAVELI was to show superiority of 3.8 grams per deciliter on hemoglobin levels in patients with PNH compared to when they are treated with C5 inhibitors, which, before the introduction of EMPAVELI, were the standard of care. We are going to work very hard on making this treatment available to all patients with PNH regardless of what their baseline hemoglobins are, and we'll talk a little bit more about that later. Then the third priority for 2022 is in gene therapies. This is something really exciting to us. In the past couple of years, we have been working with APL-9 as well as with pegcetacoplan on trying to find out if we can control the many issues that are associated with AAV-delivered gene therapies. And we believe we have something that will allow us to solve many, maybe old issues associated with these therapies. Thirdly or fourthly, we have our early pipeline. So there too, we have been working with several -- Anupam, should we take a little break?

No, no, no. Keep going. We're trying to get it solved.

The joys of virtual. There's somebody who's not muted though. Then a fourth priority, our early pipeline, we intend to expand our clinical pipeline with new programs to control complement. But first of all, let's talk about geographic atrophy. And moving to Slide #7, geographic atrophy, you can best describe as a forest fire raging through your retina, which is a continuous process in which you lose photoreceptor cells. It's irreversible. Once these cells are gone, you start going blind. No approved treatments are available for this disease. And the better known entity of macular degeneration is what's called wet macular degeneration for which we have Lucentis and Eylea on the market. These are drugs that can slow down the leakage in the retina that is associated with this form of macular degeneration. But even in this form as well as in geographic atrophy, the continuous loss of photoreceptor cells cannot be slowed down or stopped. And that is something that we have been working hard on and that we generated the data on that we believe will lead to the first approval in this disease. Moving on to the next slide. So as we think about the approval process in geographic atrophy, we think about 4 important components. First of all, the biological activity. Is our molecule pegcetacoplan able to slow down the photoreceptor cell loss that we typically see? The second question is, what is the treatment effect? How much can it slow down this process? And what happens to that continued treatment over time, which can sometimes take a decade or longer? Thirdly, of course, the safety needs to be exquisite. And last but not least, we'll talk a little bit about the early treatment opportunity. And what that refers to is patients with geographic atrophy, when they are first diagnosed, have the biggest opportunity to save as many photoreceptor cells as possible if they treat themselves for a long period of time. So starting with biological activity. Of course, that's where the primary end points matter. We have 3 adequate and well-controlled clinical trials that we ran. The first one was the FILLY trial and then the DERBY and OAKS studies, which we presented in September. And the rate of reduction that we saw in the photoreceptor cell loss in these patients was 29%, 12% and 22%. With every other month treatment, so every 2 months intravitreal injections, we saw a slowdown by 20%, 11% and 16%. On Slide #9, we then saw something else that is, we believe, critical in understanding the biological activity of the drug. Patients with bilateral geographic atrophy who are affected in both eyes, are known to progress at very similar rates. And you can see that in the Sham Pooled data in the third line on this graph where you see more or less an equivalent progression between the 2 eyes and, if anything, a faster progression in the study eye because that's typically the worst seeing eye that gets investigated. Within that context, in all 3 studies, and again, with a dose response as we saw with the primary end point, we see a reduction or slowdown in the treated eye compared to the untreated contralateral eye in patients with bilateral GA. But now one of the things that you have seen from these past 2 slides, as we move on to Slide #10 is that the results can be quite divergent. And the reason for that is that these patients progress at very different rates. Typically between 1 and 4 square millimeters of retina are lost every year. And the way in which these patients progress depends on multiple factors. So it's hard -- when you run a study, it's very hard to get uniform results. But what we can do is in a post hoc setting, do an analysis where we then compensate for these differences between patients and get a better idea of what the true effect size of the drug is. And that is what is exemplified on this slide, where through a post hoc analysis, you harmonize the data, and we see effect sizes of 25%, 16% and 26% slowdown with monthly dosed individuals and 18%, 15% and 18% with individuals dosed every other month. Then on Slide 11, moving on to the safety of the drug. In the DERBY and OAKS studies, we used the commercial formulation of pegcetacoplan, which is a liquid preparation that physicians can pull straight out of the syringe and inject into patients. So based on the data set that we generated in DERBY and OAKS, we got a good assessment of what the safety profile of this commercial product will be. And most importantly, we looked at exudations. Exudations is something that can occur, which some people call wet AMD, where liquid can get into the retina. And in that case, patients need to be treated with anti-VEGF agents, like Lucentis or Eylea. And what we saw was a rate of 6%, 4.1% in monthly and every other month dosed individuals compared to 2.4% in the Sham, which means that this side effect is well under control. We then also look at infectious endophthalmitis. What this refers to is the fact that when you do an intravitreal injection, where a needle basically is penetrated into the eyeball, that can, in a very rare instances, lead to an infection. It is typical for this procedure. You see it with anti-VEGF injections as well. And the rate that we saw, 0.047% is the rate of endophthalmitis that you would typically see with anti-VEGF injections as well. So associated with the procedure, no increase in this particular and important side effect. Then moving on to Slide #12. A brief look at this early treatment opportunity that we spoke about at the beginning of the presentation. When you have patients that show up with geographic atrophy, they typically have what we call extrafoveal lesions. That means that the first retinal cells that are affected do not sit in the fovea centrally, but outside of the fovea. And those patients typically progress faster than patients where the fovea is actually involved. So when we looked at those patients, we thought how great would it be for those patients at the beginning of the disease to be treated every 2 months instead of every month and where we make an investment in a decade or 2 or 3 decades of treatment to save as many photoreceptor cells as possible. And with every other month treatment, what we saw was a 21% reduction in OAKS and a 25% reduction in DERBY. Then moving on to Slide 13. So we are very excited right now working towards our application, which will happen to the FDA in the second quarter of this year. In the meantime, we will be talking to the European regulators, and we believe that we are on a path to have the first FDA-approved drug for geographic atrophy by the fourth quarter of this year. In the application, we will follow more or less the same storyline that I outlined to you today. We will also include in the data, efficacy data on the lesion size beyond 12 months to show that this effect can actually continue to help patients and look forward to be able to make this potential drug available to as many patients as possible, as quickly as possible. Then moving on to Slide 14. In the meantime, our med affairs teams and our commercial teams have done a lot of work preparing of course, to see what the response has been from physicians and 80% of surveyed retina specialists say that they plan to use pegcetacoplan to treat their patients with geographic atrophy. So again, something truly important for these patients who currently have no option available to them and something that we intend to educate the physician and patient community further on in the year to come. Then moving on to Slide 15, talking about EMPAVELI, our very first approval, so of course, a very special drug to Apellis. And on Slide 16, you see the first parameters of that launch, which started in the middle of May. As of December 31, 2021, I think the most important parameter is the first one. We have more than 95% patient compliance. This is something that is very rarely seen, none that we are aware of and is a testament to how much better patients feel when they actually get phased on a better control of all the complement pathways within this disease of PNH. In the meantime, we had 120 -- more than 125 start forms that were submitted. And more than 75% of the C5 switches were not from Soliris, but from Ultomiris. So that's also something very important because it's a reflection, 75% of what is probably more or less the natural distribution between Soliris and Ultomiris treated patients. Importantly, with approximately 400 patient years of dosing between PNH and the other indications that we treat, we have as of yet to see a case of meningococcal infection. Based on what we know of C5 inhibitors, we should have expected to see more or less 2 to 3 by now. So we will continue to monitor this, but this is not unexpected based on the mechanism of the drug, as something that we believe may provide another very important advantage for patients affected by PNH and the other indications we are pursuing. And sales for 2021 accounted for $15 million. Slide 17 then. There are 2 important populations that we aim to bring EMPAVELI to. In PNH, there are the patients who are currently on treatment with C5 inhibitors. And then there are, of course, the newly diagnosed patients with PNH, where we also aim to elevate the standard of care. In the beginning, the patients that immediately try to resort to a solution where, of course, patients that were highly transfusion-dependent because their disease was not properly controlled. But it is important to note that in the meantime, we also have a lot of patients with higher and even normal hemoglobin levels that have been treated with EMPAVELI, and the response there has been really, really good. And just as a brief sidenote, if you are a patient with PNH with a normal hemoglobin level, that comes at the expense of very strong bone marrow outputs of red blood cells. Just like in patients who are transfusion-dependent, these red blood cells die quicker than they should or are supposed to. That leads to the breakdown products of these red blood cells, namely bilirubin accumulating in the body. This leads to high what we call reticulocytosis, which is that output of cells from the bone marrow, and that comes with a lot of fatigue and other symptoms. So we're very excited about seeing this materialize. We presented a lot of data on that at ASH 2021. In December, we'll continue to explore that during the course of this year. In the meantime, also for treatment-naive, newly diagnosed patients, we also aim to make our drug available to as many patients as possible over the course of the year. And then on Slide 18, further leading indicators for the support of EMPAVELI, we have 18 of the top 20 payers who have agreed to place EMPAVELI in a positive formulary position and certain large payers and PBMs have placed EMPAVELI as exclusive for all treatment-naive patients or as the preferred agent for PNH on several formularies. But I think the most important piece of this whole presentation really is on the right hand of this slide, and that is the patient impact that EMPAVELI has had on these patients with PNH, not just the patients again that were transfusion dependent, but including patients who have normal hemoglobin levels where you may think based on laboratory values that they're fine, but they're not. And here are 2 quotes: one, "my disease no longer controls my life; I do. I'm now able to travel for extended periods of time without having to worry about scheduling my infusions. I'm about to take a month-long trip in October." And the second quote, "My hemoglobin has not been this high without transfusions in years. I'm feeling so good." That's just 2 of the many, many testimonies that we get on a daily basis, which is why we do what we do. So moving on to the next slide, Slide 19. We also have 4 registrational programs with EMPAVELI in new indications where we believe we can make a real difference for patients, in immunocomplex membranoproliferative glomerulonephritis and C3 glomerulopathy, we are about to start our Phase III clinical program, where we believe we can make a big difference in the lives of 5,000 patients in the U.S. In ALS, we have a trial currently ongoing that we expect to be fully enrolled within the first half of this year. Needless to say, ALS, extraordinary unmet needs affecting about 19,00 patients in the U.S. And with the completion of enrollments, we expect in the first half again of this year. In cold agglutinin disease, another 5,000 patients, this is a trial that is run in collaboration with Sobi, our partner ex-U.S. and in hematopoietic stem cell associated thrombotic macroangiopathy where another 4,000 patients are affected for a total of 34,500 patients. Then moving on to Slide 20 and straight to Slide 21, sorry, the gene opportunity, what this particularly refers to is the fact that if you look at the central slide, or the center of the slide, the fact that with AAV-delivered gene therapies, we have encountered a lot of problems in the past couple of years. And those can be concentrated in the fact that on one hand, lots of AAVs are needed to deliver these gene therapies that is associated with side effects, sometimes lethal side effects in patients. And last but not least, the fact that patients who have preexisting antibodies, whether because they have been pretreated with AAVs or because they had naturally occurring infections in the past cannot be redosed with these AAV-mediated therapies. On all of these 3 elements, we have been working in the past couple of years, and we believe that we can have a beneficial effect by controlling C3. The market opportunity there is meaningful. There are more than 100 AAV gene therapy assets currently in development with approximately $17 billion in projected 2024 worldwide sales. So this year, what we will present in the first half of this year is the results of our preclinical data set, again, which we believe will make a big change in how we approach these AAV-mediated therapies. Then moving on to Slide 23 and APL-1030, which is the advancement of our first-in-class brain-active C3 inhibitor. APL-1030 distributes well throughout the brain, inhibits C3 breakdown in the brain and has the potential to treat multiple neurodegenerative conditions. An IND is planned in the second half of this year. And if you look at Slide 24, you can see what the administration of APL-1030 to the brain can do in terms of controlling C3 activation. So both at the doses of 2 milligrams per day as 20 milligrams per day, you can see the exquisite control in what in this particular case are the cognitive functions -- cognitive areas of the brain. Then moving on to Slide 25, the key milestones through 2022. So in the first quarter, we will begin the pre-submission discussions with the European regulators for GA. We will have the initial ex U.S. PNH launches by our partner, Sobi. We will initiate the Phase III study in IC-MPGN and C3G, and Sobi will initiate the potential registration of studies in cold agglutinin disease and HSCT-TMA. And in the second quarter, we will submit our NDA in geographic atrophy to the U.S. FDA. We will publish our preclinical data on AAVs administered with C3 inhibition. And over the course of the first half, we will also complete the enrollment in our Phase II study in AMS. In the third quarter, we will then have the 24 months DERBY and OAKS update. And in the fourth quarter, we expect to have our PDUFA date for geographic atrophy in the U.S. In the second half of this year, we also expect the MAA submission in the European Union for GA and to submit our IND for APL-1030. So that is what is in store for 2022. Moving on to Slide 26. We intend to position ourselves and continue to position ourselves for long-term leadership in components across our 3 areas in rare diseases, ophthalmology and neurology. Thank you so much. And my apologies for the small IT disruptions, Anupam.

That's like you said, Cedric, the joys of virtual. Cedric, if you want to take just a quick second and introduce the broader team on the line for the breakout session to get started?

Yes, I'd be very happy to do that. So with us today, we have Tim Sullivan, our Chief Financial Officer; and the 2 of us will be answering the questions that you have, Anupam.

Yes. And when you talked about the GA filing in 2Q, what are the gating factors to completing that submission?

So the timing that we have for this submission is the one that we set out in the spring of last year. So it's important to bring all of the CMC clinical data and all the valuation parameters together in a proper package. So right now, there are no gating factors. We believe that all the pieces are there. And barring the unforeseen, this submission will happen in the second quarter of this year.

We have a portal question along these lines, which is have you completed your FDA interactions for the 2Q BLA submission in GA? Or are there upcoming minutes or meetings that have not yet been finalized?

We will have an additional meeting with the FDA, but that's really on the nuts and bolts of the submission, making sure that they agree with everything. But all of the critical questions have been answered. Most importantly, of course, the question that we had around the FILLY trial and how the FDA thinks about our FILLY trial, which they gave a clear indication they consider it a well-controlled and adequate study, which is terminology for registration.

On the FILLY study, one of the questions that we keep getting is what is the role of the Phase II FILLY study in the submission, like what is it going to add? How does it strengthen the package overall?

Yes. So I think the most important piece of the feedback that we got from the FDA is that FILLY is considered registrational, meaning that from an efficacy interpretation, it is the same equal weight to DERBY and OAKS. So between these 3 studies, what you have is 2 positive studies and 1 study DERBY, which was directionally supportive. So that's important in the context that from a check-box perspective, while many approvals have happened in the past with 1 positive study or that 2 positive study is the typical standard that the FDA can resort to, and that is available for this indication.

Okay. Another portal question, which I think you answered, but I'll ask is, do you need a pre-BLA meeting for the filing?

No. I mean we will have a pre-NDA meeting, right, not a pre-BLA meeting. But again, as mentioned, that is more for the nuts and bolts. We've had an ongoing conversation with the FDA, kind of, again, supporting what we are doing moving forward.

Then you've presented the DERBY and OAKS studies at multiple medical meetings in the fall of last year. What's the physician feedback been? What have been any areas of potential pushback?

Yes. Feedback has been almost uniformly positive, right? Again, this is a disease where I think physicians have been waiting for a very, very long time to have something available to treat their patients. It's also important to note that the genesis behind this whole program is really the first breakthrough out of the human genome project in 2005, where an association was established between complements and macular degeneration. So the genesis of this pharmacology is also very exciting. And where, again, I think the first treatment available, I think, is going to be very important.

And given the data that's known from DERBY and OAKS, would you anticipate regulators potentially limiting the product label to extrafoveal lesions?

We believe that will not be the case. I mean, these studies were run in patients with GA, the way we did it. We see a little bit of an increased effect as you've seen in the presentation, and as we discussed before, in patients with extrafoveal lesions. But that does not exclude patients with foveal lesions, right? I mean those patients also need help in slowdown of the disease. So we have 2 positive studies with a very good safety profile. We don't think that there is a need to limit the level.

We have another portal question here, which is, what are your expectations for the 2-year data from the Phase III GA studies? And I will throw in on top of that, what are the important endpoints, particularly to OUS regulators?

Yes. So look, it is important that, of course, the effect is maintained, right, beyond year one. That is something that we will continue to look into. We also have the functional endpoints at 3 years. As we've always discussed before, those are supportive in nature. At the end of the day, I think Wiley Chambers, the Head of the FDA division of ophthalmology said it best. I think we can all agree that a dying retina is a bad thing, right? So and what you measure with this anatomical endpoint is dying photoreceptor cells. That is something that in the long run will correlate to functional decreases. But the difficulty that you have in geographic atrophy is that the central portion of the vision, the fovea, gets involved last. So the visual acuity loss is not gradual, but more like stable until it goes over a cliff, while in the meantime, the visual function is dramatically affected, right, with patients, as we mentioned before, about half of patients losing their driver's license over the course of 3 years.

Maybe I'll switch gears a little bit to EMPAVELI. Maybe you can talk a little bit, are there a patient phenotype of the types of patients that are switching on to EMPAVELI? Have there been any kind of switch in the demographics of the types of patients that are starting EMPAVELI therapy?

Well, I think as I mentioned during the presentation, in the beginning, it was really the patients in dire need, right? I mean if some of these patients get transfusions every 2 weeks. I mean it's -- they just need something to help them. But what is now very exciting is that patients with good hemoglobin levels, right? I mean good -- with normal hemoglobin levels, are patients that now also are starting to see the benefits of EMPAVELI. And I think at the end of the day, as we've discussed in the years prior, right, I mean we believe that elevating the standard of care and controlling PNH means that we control intra and extravascular hemolysis. And with C5 inhibitors, you only control intravascular hemolysis. And the clinical phenotypes and the clinical expressions of that, that we see are the result of that broader control.

Maybe a question on -- a financial question here. Are there any milestone payments anticipated from partner Sobi? And how do we think about that SJF dynamic as it relates to this...

Sorry. Anupam, how are you? Yes. So in terms of milestones this year, we do expect to receive a milestone from Sobi based on the first EU approval and reimbursement for Aspaveli or pegcetacoplan's name in Europe. And then regarding SFJ, look, SFJ, we do have payments over the next 6 years. Those payments really were designed like a royalty. They escalate over time. So the first few years are relatively low and don't have a meaningful impact really on our cash runway relative to the other obligations we have from a spend perspective. So that was really designed to track the commercial uptake of EMPAVELI. So we may, of course, give a little more guidance as time goes on, on what those are, but right now, they don't represent too much of a material impact.

We have a portal question here in terms of -- are you planning on providing EMPAVELI guidance either quarterly or annually at any point?

We're debating when to do that, but certainly not in the near term, right? I suspect over time, we'll give you a little more of a sense of when we will provide guidance. But right now, we're obviously early on in the launch. And once we get a little more scale, we'll start to think about giving you guys some guidance.

And then another question in the portal which is, how do we think about expenses in '22 and '23 given the breadth of your pipeline?

Yes. So from an expense perspective, we obviously -- we don't right now give any guidance, and it's something again, at some point, we may consider doing. But from obviously, our expenses, I can give you a sense of what those kind of encompass. Obviously, that encompasses a full year of commercial spend for PNH here. We're, obviously, building out our commercial infrastructure for a GA launch first in the U.S. and then ex-U.S., so global launch. And then the continued advancement of our pipeline. So that's obviously GA, ALS and the rest of the study. So C3G, TMA, CAD and all these others. So yes, that's what it encompasses.

Another portal question here is that the slide noted a potential 4Q '22 approval for a PDUFA date for GA. I mean, have you gotten -- basically, the question is have you gotten confirmation that you'll be able to get a priority review for this indication finally?

Thanks, Anupam. We have not. So our expectation is that we get priority review, and that's based on 20 years of precedent with retinal drugs. It's, obviously, considering the severity of that disease is something that we anticipate, but that is not something that's confirmed yet.

Okay. Cedric, Tim, I want to thank you guys so much for taking the time, and good luck for the rest of the conference.

Thank you so much, Anupam. Thank you.

Thanks, everybody.