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

It's the second day of the Bank of America Healthcare Conference. I am Tazeen Ahmad. I'm one of the senior biotech analysts here. It is my pleasure to have sitting with me on stage couple of members from the Apellis Pharmaceuticals management team. I will let Cedric and Tim and Adam introduce themselves to you first. And then Cedric, if you don't mind, give us a quick 2-minute overview of the company. And then we can go into Q&A if that's okay.

Sure. Thank you Tazeen. Thank you for inviting us. My name is Cedric Francois, CEO.

Hi everyone. Adam Townsend, Chief Commercial officer.

Hi, Tim Sullivan, Chief Financial Officer.

So 2 minutes summary on our company focused on the complement deathbeds when public en route 2017 went on a mission to control, the fight to control the central tech in helping [indiscernible] complement factor C3. We took a decision at the time to go very broad across multiple therapeutic areas and so we kind of developed technique that [ pipeline ] all the way from preclinical to commercial. We currently have a first product on the market called Empaveli, which was approved for paroxysmal nocturnal hemoglobinuria in May last year. So we're clearly running up on the first-year anniversary. That exact same product is in 4 additional registrational programs in the C3 glomerulopathy, ALS [ Lou Gehrig's disease ] and the metabolic stem cell associated thrombotic microangiopathy. And then of course, we have our program in thrombotic microangiopathy where we had to read out those 2 Phase III clinical trials, large Phase III clinical trials, 400 patients in total in September of last year and where we are very close now to filing our NDA for that indication as well with a hopeful tentative approval date before the end of this year. We then also have a deep line of new investigational products that are coming on board in the next year to 2 years. That includes siRNA program for lower level of C3. So that for our product anti-VEGF is currently getting place per week subcutaneously self-administered at home to be able to hopefully do that less frequently, as less frequent as potentially once per month. Second program that is preclinical is one with an anti-infective D molecule that oral products that we believe can be given once per day and it'll be more about that in the months to come as well. We then also have APL-1030, which is the first product that we need, will allow us to control C3 in the brain for new degenerative conditions. We currently administer that product in practically. That is something that we're working on improving and potentially in the future being into other routes of administration. But as a proof of concept something very exciting to look forward to then a product called [ Renfitins ] which allowed us to control both C3 as well as VEGF preparedness wet [indiscernible] where we hope to develop in next-generation anti-VEGF molecule that allows you to avoid the development of thrombotic microangiopathy, which is currently almost inevitable 97%, 98% of patients after 7 years. Finally, our collaboration with DIM gene editing program, 6 in total, where for the first time we are trying to see what we can do with complements that you feel looking at gene as well.

Okay. So there's a lot going on with the company. It's not just a DA company. Okay. So let's talk about your currently commercial asset Empaveli, which you already introduced us to. So in the relatively still early stages of the launch, you've mentioned that the vast majority of our patients are coming from switches. And that 75% of those patients are coming from Ultomiris switches. Where do you see that trends going forward? And what kind of composition do you think will come from treatment-naive patients?

So we have our chief commercial officer who can answer that.

Happy to take it. Yes. Thank you. So yes, launch is going very well. And as you said, the majority of our commercial Empaveli patients are coming from C5 switches. So a quick summary of the PNH market in the U.S. There are 1,500 C5 treated patients, so either on Soliris or Ultomiris and there are about 150 treatment-naive patients. 75% of our business at the moment is coming from Ultomiris switches. We do have treatment-naive patients. And one thing we set out at the beginning of the launch was we expected to get those patients with the highest unmet need first. So they tend to be on a C5 inhibitor. They have a low hemoglobin, they're heavily transfused. And that was the bolus of our initial prescriptions to Empaveli. We're now starting to see the use broaden out, more treatment-naive patients. We're also getting patients who are on -- closer to normal hemoglobin on Ultomiris or Soliris, and they are coming across to Empaveli. So I expect to see a transition to the broader patient population as we progress.

Okay. So the Prince and the Pegasus data, how does that impact what your label could look like in the future and what expansion of opportunity that would be?

Yes. Perfect. So we obviously, we were approved with a broad label and a significant improvement in hemoglobin. That broad label based on the Pegasus study allowed us to promote to treatment-naive patients as well. The additional Prince data and the long-term safety and efficacy data of Pegasus just adds more fuel to the fire. More information for us to communicate to physicians to get that broader patient population on to Empaveli.

And I think you also updated us that you have about 175 or so prescribers that have this REMS certification. How many of those have actually converted into a prescription?

Yes, great question. So obviously, REMS certification is a leading indicator of a potential prescription to Empaveli. So REMS certification continues to drive forward. We continue to see more doctors sign up to REMS. The vast majority of those doctors have prescribed Empaveli. There are some sites where there -- there might be 3 hematologists at that site, and they all sign up for REMS, but that site might only have 1 or 2 patients. But REMS is a great leading indicator for us, and I expect that to continue to grow.

And I think an important part of this launch is your positioning with payers. So you've mentioned that a very large payer has given your drug an exclusive position. So what does that really mean in a real-world setting? What's the impact and how do you get that position as -- are there discounts involved?

Yes. Great question. So obviously, prior to Apellis coming into the market with Empaveli, there were only C5 treatments available. So we prioritized our approach with payers. So what we did very early on is we did multiple medical presentations with payers. We showed them the power of the Pegasus study. We also asked them to model their own data on their C5 patients and see what impact the burden of transfusions had on those patients, what level of hemoglobin they had. So we really led with our strong efficacy data, and that's really what's driven the success with payers. Now we are exclusive with one large payer for treatment-naive patients. So that payer saw the benefit of the efficacy of Empaveli. We're very thoughtful in how we approach payers. I mean obviously, we commented our gross to net is in the mid-teens. That's pretty normal for a rare disease drug. That would include any activity we're having with payers. So we're in a great spot. We're allowing patients to get access to Empaveli, which was always our driving force there.

And why just treatment-naive for the state payer?

For us, it was just part to show that the benefits of Empaveli is broader than just C5 switch and that we truly believe that treatment-naive patients will benefit from the results as well.

Okay. And then how should we think about the dynamics of ex-U.S. versus U.S.? And is that going to be size-wise similar?

Yes. So we have a great partner in Sobi, who are handling everything ex-U.S. for us. They just recently launched. So they're in charge of all aspects of -- it's called Aspaveli ex-U.S., Aspaveli launch, and they're making great progress. They've had some quick successes in the U.K. They've had some successes in Germany and some rest of world countries. Tim can talk about how we account for the Aspaveli revenues, but they're controlling everything ex-U.S. Yes, they're. So we obviously booked the U.S. revenue for Empaveli. Ex-U.S., we have a line item for revenue associated with the royalty we received. So we received royalties from the high teens to the high 20s, depending on the tier. And we also received some revenue for essentially selling an inventory to cost plus.

So for Aspaveli without telling us the actual price, can you give us a range of what type of discount to U.S. price in general drugs have in Europe?

Yes. So Sobi is fully accountable for pricing of Aspaveli. So any pricing questions should go their way. But it's a typical rare disease. It's obviously slightly less expensive in Europe as is always the way. But it's comparable to Soliris and Ultomiris ex-U.S.

Because for some of our rare disease, other categories, it can be as much as a 50% discount?

That's not the case here.

Okay. How are you thinking about the rest of the countries that you plan on your partner plan on launching, where would be the greatest opportunities?

Yes. So obviously, as I said, Sobi is accountable for everything in Europe and also internationally. So the European geographies as typically are super important. And some of the Middle East and Latin American countries where Sobi is building up infrastructure will also be very important for them, too.

Okay. So maybe let's move on now to GA because I don't think you guys get enough questions on GA. So really quickly, where are you in completing everything that's needed in order for you to hit the target of filing by the end of the first half by June 30.

We are on track. So we're a few weeks away before the end of the quarter, and everything is exactly where it was scheduled to be so…

And so as we think about what happens after you apply, so time line wise, when would you expect to hear from FDA on whether the application has been accepted. Is it your expectation that you'll hear at that time whether or not you get a priority review? And what is your view of AdCom and the potential for an AdCom?

So we'll get an answer to the most after submitting. And the clock, the time clock starts at the time of the submission. So the time clock for the approval is going to be 6 months from the time of submission, not the time of acceptance.

Right.

And that is a little bit unusual in a sense or cause by the fact that this is not a new chemical entity. So even though it's not a supplemental NDA, it is the new drug application. The drug substance is already approved, of course, in BNH. So since it's not a new chemical entity the clock is 6 months from the time of submission.

And if you get a -- I guess, talk us through why you think you should get the faster review versus the standard review. And if you did end up getting a standard review by how much would that increase the review time?

Yes. So priority review or assessment of getting priority reviews based on precedent so the last 30 years old retinal drugs that have gone through this division, which still has the same leadership has received priority review. Also, you can say, while there's COVID, but this division has spent with available at this point in time. So all these things kind of bodes well for us. It's important to point out that our feedback on an expectation of priority review is not yet interactions with them. So that's our own assessment based on precedent. Should we get a standard review, it would add 4 months through the approval process.

Okay. And then -- and what's your expectation for the com? And if there is one, if you were to be the person managing the outcome, what would you want to focus on?

Yes. So the outcome is something that we expect, something that we are preparing for. Again, there have been no discussions with the FDA above that, but it's a new indication. So it's reasonable and should be surprise if we get one. The way which the NDA is being put together is kind of centric 4 cornerstones: safety, biological activity, which is premised on meeting the primary endpoint in 2 registrational studies, FILLY and OAKS. And then on the fellow eye analysis in patients with [indiscernible]. The third one is to assess what is the effect size of administration with the drug, which we estimate to be around 20% at the 1-year time point, and we get to that assessment by doing what is called a covariant analysis where, these 3 studies, which give disparate results ranging from 12% to 39% can be analyzed with that number. And then last but not least, what happens beyond 12 months. So we are including the full 18-month analysis in our application, and it gives still a better sense of what it means to be on treatments, not for a year or even 18 months or 5 years, 10 years, what should be spend from that. So taking a step back and to answer your question, what is kind of the subject for discussion and all of this. It would probably be the effect size, 20% effect at 1 year. What does that mean? Is it medically meaningful? What does it mean for patient so.

And how does the 24-month data, which we calculate will come in September factor into the application? Is it a requirement? Will they be able to view the data beyond what you reveal in the press release to the public? And is that going to be a potential reason for the agency to maybe extend the PDUFA review period at all?

Yes, it was not requested. And that is because at 24 months, we should not expect to see anything different from what we already know at 18 months. Something important that will happen in 24 months in the analysis of the functional end points, right? So that includes visual acuity, micro-perimetry, reading speed and to quality-of-life questionnaires, we gave the vision. But on these functional endpoints, which all have their own limitations, not the statistical should be expected or as expected by any of the regulatory agencies that we talk with. So it will be contextual. And for that reason, in the U.S., not expected to be part of the submission. So of course, when we get to data, we'll communicate if it would not be a major amendment unless there is something that unexpected happens.

Okay. So how important was seeing the 18-month data relative to the 12-month data, either for physicians or in your view about the strength of the application that you're submitting?

Very important to know that we know the data, especially. So it's always -- these are difficult clause to make because we don't know what to expect and firstly in the complicated environment. But we had a strong sense that at 18 months, we would see a continued dilution within the dirty trial of the fact that we enrolled kind of aggressive, fast progress in patients in a monthly arm that we could potentially have a flip on the nominal P value, which was indeed the case. And just kind of extends as to what we should expect in terms of saving for the receptor cells in these patients. That is something that has resonated really well with physicians. I think everyone is not very excited about what's coming next. It's also important of course, to see the safety profile extends to be similar to what we have here.

Okay. Clearly, you have not started labeling discussions. But as we kind of think about what the label could look like, some of the conversations we have with investors revolve around whether or not there will be a distinction of use limited to, let's say, non-full vial involvement patients. Your study included full vial but how are you thinking the agency might approach that question?

Yes, I think the discussion around the expat full vial is interesting. We see clearly that will in OAKS less so in FILLY, the transition between these 2 populations extrafoveal are patients where the central vision to the fovea has not yet involved. And those patients for reasons that we don't really understand that to progress more quickly in terms of the way that was schedule photoreceptor cells. It's good to see a bigger effect on those patients as well because they're naturally or rapidly progressing patient. And the focus on that particular population is also to the -- extended device by some of our competitors that specifically focus on that population. But when we made the design of our studies the way in which we establish the primary endpoints was with a consideration for how these patients manifest in the clinic for what we believe the unmet need is, which we're expanding maybe 1 minute on that. If you take the prevalent population, so all patients with geographic atrophy today, approximately 60% of those patients have full vial involved. I say involvements because the overwhelming majority of those patients also an expert total involvement. So the foveal is gone, but they have big batches in the extrafoveal that are involved. Those patients often want to have treatment, right? To save whatever it is that they have left. But they're blind in one eye and have something like the untreated other eye better, you want to be able to do something. So this is a product that we hope will be able to address that need as well. The second place in which extrafoveal manifests itself is a newly language. So now we go from prevalence to incidents. And as many as 85% of patients were newly diagnosed are first diagnosed with extra extrafoveal lesion where the foveal is not involved yet. So the central vision tends to be very good often with 2020 vision. And in those patients, if you start treating them in an effort to prevent them from getting foveal involvement, when the foveal becomes involved, we want to, first, continue to be the sets. So having the foveal involved or including the labor, we believe it is important. And it was great to see at the 18-month time point, how what was very limited in terms of foveal effects at 12 months continues to manifest itself much better at safety market.

Okay. Let's talk about the safety profile of the drug for a second. I think there have been some concern going into the Phase III readout about exudation rates, but they came in much lower than had been expected. What's your physician feedback been on that safety profile?

So overwhelmingly positive. First, coming out of FILLY, we had a concern around this. We often get the question why [indiscernible] and FILLY went below in [indiscernible]. That is primarily driven by 2 factors. The first one is that in the FILLY trial, we had a lot of patients, 38% of the patients that we enrolled that at the start of the study already had wet AMD in their untreated fellow eye. And that is a kind of a condition that heavily predisposes you to develop leakage in the study eye as well. So that was an important contributor. You could ask that what does that mean 38%, but an average distributing approximately 20% of those patients in the overall GP. So made a big difference. Secondly, we had -- this was driven by some centers where there was a lot of anti-VEGF use. And it's important to note that in the FILLY trial, the investigator was the injecting physician. So if you had investigators that would see exudates on SD-OCT, they would have -- they would know which patients were on active. And we believe that those patients -- those physicians that are -- may have been biased to go for these exudes. The rates that we had in Derby and Oaks are very much in line with what you could expect based on natural history, and we presented a day from that at AAO in December. And looking back at 69,000 patients where, again, at the 2-year time point, you see in pure GA patients a rate of approximately 8%. And patients that come out of the 20% segment within the fellow eye exactly as high as 22%. So not something that physicians are concerned about. But is it real? It is real. There is an increased rate for the manageable increase rate that pegcetacoplan for FILLY, DERBY and OAKS.

And how do patients who develop leakage at FDA responds of VEGF therapy once they put on VEGF, not the progression of the GA itself, but the response of the treatment for the leak, is it similar to how patients who don't have GA respond?

Short answer is yes. And it's important to note that to point out that overall while the majority of the cases of what AMD wet have where what we call small cystoid changes. So on those city, you can detect very tiny exudes in the rate. You can treat those who have the VEGF and most physicians work and then exudes typically go away. By protocol, [indiscernible] when that occur, these patients go on standard pathology so they now receive anti-VEGF use every month. At the end of the 2-year period actually by protocol stop giving anti-VEGF and then track these patients to find out how long it takes for them to leak again and then they switch over to what is more usual, which is a PRM or a freedom extent VEGF.

And if you look at these patients over an extended period of time, how would they just compare to like a regular patient being treated with the VEGF.

Again, very similar symptom.

Okay. And one of your more recent presentations, I think you stated that there were 3 cases of ischemic optic neuropathy that were observed in the drug arm, none were observed in the placebo arm. I think this is relatively new information. I just wanted to ask you how you feel about that observation. It can be serious enough in some patients, right, to end up in permanent vision loss and wanted to get a sense of why you think those 3 patients have that observation.

Yes. So maybe first a word about this condition ischemic optic neuropathy. This is something that is quite common in elderly people and this typically associated with hypertensive disease. So of course, in 3 cases, the active arm not [indiscernible] is flat. We have over the course of 18 months, and we had one case at 12 months. We had 2 additional cases in the '18 -- in the 12 to 18 months -- what's important here, and this was the first thing we looked at is that these cases occurred more than 2 weeks after the injection was done of the product in the end. And why does that matter? Because Ischemic optic neuropathy is something that is best comparable if you want and a few case of local, right, where intra-operative pressure increases in the case of glaucoma prevent perfusion of the optic nerve. And where in the case of hypertension, kind of the hypertensive effect on the arteries does the same thing to the optic nerve. So you get a patient, you see -- you're like, oh, we have a problem. And as we mentioned, this can be very serious and lead to dramatic vision loss. One of those 3 patients have diagnosed is of hypertensive attack before this happens. So again, it seems to be something not related to the drug, also most effectively related with the injection or it would occur within a day of that injection being done and that is related to the increase in ocular pressure. So we're tracking that. But for now it looks like something that isn't in balance, of course, back and the natural that happen with this is definitely.

I guess in a real world setting what percent of patients would have hypertension.

Okay. The high percent of patients that we just populate that's been at the [indiscernible].

So do you think that doctors would have to take extra measures to monitor for this?

Yes. This is not something that you can monitor for -- again, something associated with hyper disease.

And anything about those additional 2 patients that would allow you to be able to predict that they were going to be more likely to develop the side effect.

That we can currently -- and the very first thing was to see that this associated with the injection of -- and it is 100% certainly.

Okay.

And of course to track it and see whether this is a good drug and indeed expansion or not because likely to be as that being not something that where we would see a lot of poor connection.

Okay. So let's move on to dosing frequency. So it doesn't matter whether it's dose, maybe it's a good question for Adam. In a -- for commercial advantage purposes, does it matter if it's dosed every month or every other month. And how do you think doctors would respond to monthly versus every other month just given the way they're reimbursed.

Yes. Great question. So we presented the 18-month data to a lot of retina physicians in the U.S. and ex-U.S. And very quickly, those physicians progress from, I like seeing the 18-month data help us with the label. We would like a broad label with the flexibility to treat monthly and every other month as we choose as the patient comes in and also with the flexibility to treat foveal lesions as well as extrafoveal lesions. So -- as Cedric explained, right, there's currently no treatment, 1 million patients in the U.S. There's a large prevalent population because they haven't been treated that would be foveal patients, and even still, retina physicians want that flexibility of every other month and monthly for those patients. As we get into the incident population, my belief is that we'll see a lot more every other month usage, particularly for extrafoveal lesions. It's just a much -- the data looks good, the physicians are willing to do it and the patients are probably very happy to do that too based on our research. And if we get all of those within the label, which is our current expectation and hope, I think we'll have no issues getting coverage for that flexibility of those.

How long do you think -- I guess if you fast forward 2 years, what do you think the mean dosing frequency is going to be in the GA population? Is it going to be every month or the other month or something in between the way we see it with what AMD injection frequencies.

I can give you my crystal ball answer.

Definitely.

I'm pretty sure it's going to skew a little bit towards every other month, but I do see monthly being a very useful tool for certain types of patients. But I would assume 3, 4, 5 years into the launch that every other month will likely be the dominant dose frequency but that's question.

Okay. We'll take it, will take it at your -- so maybe in the basically a minute that we have left, I did want to maybe dive a little bit into the partnership that we have with Beam because I don't think that gets a ton of attention. So why was it a good idea to do this now? And how do you think it ultimately will benefit Apellis?

Look, we love being at the forefront of [ the standalone ] company. And we believe that in gene editing has primarily been focused, of course, on monogenic diseases so far. For us, it is very exciting to think about what can be done with once and no treatments, and given there are always once in no treatment but for geneticists with replaceable cells. And where again with C3, we believe it opens kind of a vast array of new opportunities that we can explore. I think naturally, what we will see with gene editing, and we are seeing that right, is that you have other approaches like siRNA, et cetera, to nucleic as well that allow us to assess the long-term safety and therefore step into the footsteps so that is something that is purely based on editing. So kind of completes the package of what we are able to do in this time.

Okay. And when should we start to see data for [indiscernible]?

Yes, you are not getting yet. But we are very active and a great collaboration. And again, it's very comprehensive. So we have 6 programs in total, 5 of those, we have already started on and are collaborating on with one still determine [indiscernible].

Okay. So with that, I think we're on time for today. So thank you all for joining us here at the conference. We really appreciate it and coming live. And thanks, everybody, for coming to the session.

Thanks.