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

Okay. Good afternoon, everybody. Thank you so much for joining us. My name is Chris Howerton, part of the biotechnology research team here at Jefferies. Really excited to be hosting a fireside chat with one of the most exciting companies I cover, Apellis. So on behalf of the management team, we have both the CFO, Tim Sullivan; and Adam Townsend, the Chief Commercial Officer. So thanks for joining us.

Thank you for having us.

Thank you.

All right. So I think for me, the biggest opportunity might be for pegcetacoplan in geographic atrophy. So where are we at in terms of the clinical package? And what will be submitted to the FDA at this point?

Right. So we just announced that we submitted the NDA to FDA, and what's important to know about that is that it encompasses 3 studies. It encompasses our FILLY study, also our DERBY and OAKS Phase III studies that read out first from the primary endpoint in September. What's important also to know about that is that instead of just putting in what we'd originally intended, which was the 12-month primary endpoint data for the DERBY and OAKS studies, we also did an update on the 18-month data. So that was an important addition. We felt that fortified our NDA and gave FDA, and everybody else the confidence that the drug was doing what it was intended to do just not only at 12 months but also over time and helps us project beyond. So that's really a critical component of the NDA filing, and we're extremely proud of this NDA. It's our second, and this is a program that underwent a lot of turmoil with COVID and various other things. And so we're extremely proud of it.

Absolutely. Okay. So then now that you've submitted the NDA, what is the critical path to getting an approval by the end of this year?

Yes. So there really is no critical path other than what's up to FDA. So FDA is going to let us know 60 days, hopefully, from our submission whether or not the filing was accepted. And at that time, we should get a sense of whether or not we get priority review, which in our case is a bit unique because it's not a new chemical entity or an NME. We have -- our clock starts on submission, not on acceptance of the filing. So it's really 6 months from when we submitted. Typically, if it's a new chemical entity, that will start when you actually get an acceptance of the filing. So we'll find out about that. And then I don't think long after that, probably somewhere in the next 30 to 60 days, we could find out whether or not we have an advisory committee. But we don't know when that will come. That is a little bit less clear in terms of timing.

Sure. And so then if we were to think about those 2 components that you just mentioned, Tim, for the priority review, is that expected from your team? Or what should we be thinking about that?

So if you look at history, so the last, I mean we say, 20 years, but certainly, the more recent history of retinal drugs, they have all gotten priority review. And that sort of has set the expectation that we will get priority review. What I would say is that a couple of things make this circumstance a bit unique. One is the slightly compressed time frame because this is not a new chemical entity. And then obviously, we've heard a lot about COVID and other things like that. But as it stands today, our current expectation is that priority review is more likely than not.

Okay. All right. Well, that's awesome. And then what about for the advisory committee? Any thoughts in terms of likelihood of that occurring or not? Or do you think it's like definitely going to a period?

So our current view is that it will occur, and we're preparing for that. We've heard a couple of different views on this, but I think the most likely scenario and the one we believe is that we will have an advisory committee. So again, we're prepared.

Yes. Okay. All right. It's fair enough. And with respect to kind of the differences between the 12-month and the 18-month data, obviously, you said that you updated there, what were some of the key differences that you think you saw or that were important to shore up that package?

Yes. I mean it's no secret that FDA isn't looking at this drug at a 12-month time point only. What they really want to do is understand what happens to the drug over time. We hear a lot of people discussing the difference between what our primary endpoint was, which is at 12 months, this change in lesion size versus sham, but really what everybody cares about is what happens over time. And some people call that the slope or whatever. But ultimately, it gets to what happens after 2, 3, 4, 5, even 10 years because this is a slow-growing disease and people can be treated for a long period of time. So the one thing that does, the 18-month data does, and it was very important not just to us but also to give us confidence in the filing, was that this was a durable effect. And in this case, a couple of really good benefits from that. One it showed that safety was consistent. It showed that the effect was durable and maybe even improve slightly over time. And if that continues, that can have a compounding effect. We also saw sort of individual benefits. Like in DERBY, in particular, we saw the nominal, again, p values at this point because, obviously, there's no alpha there, but they all went below 0.5. And then we also saw what we think is probably the most interesting piece, which is that if you start 6 months, start looking at DERBY from there, it really looks a lot like OAKS, okay? And ultimately, when you're FDA and you're looking at a drug and say, okay, over time, what's really happening over a long period of time, is the first 6 months really the only thing you're going to think about. Now it's going to be basically what happens over a long period of time and DERBY really does start to convert to those.

Got it. Okay. And so obviously, on the safety side, I agree, it's been consistent. So I think the 2 key risks that I've heard recently, one is not new at all, which is CNV or the exit data. And so I guess, what did you see 12 to 18 months on CNV? I saw it as linear in terms of the injection rates. Is that how you guys interpret it?

That's how we see it, yes. It's a linear and more or less predictable.

Yes. Okay. And so I mean, if there was an influence of complement inhibition in addition to just the injections themselves. Do you think that would be apparent at this point? Or how would we observe something like that?

Yes. So that's something that we still debate internally, and we don't have an answer to the presence of exudations on what looks like sort of a dose-dependent basis. Suggests very clearly that it's a treatment effect. And what that -- what contributes to that, we don't know. Okay, there are a few different hypotheses, and I don't think we have the answer.

Yes. All right. One of the other safety events that's occurred recently, I think, is ION, ischemic optic neuropathy, I believe, is what is called. So I guess what have been the observations there? And I guess, is this concerning to you? Or anything that's new?

Yes, so it's not new, and it's not something that concerns us at the moment. We're keeping an eye on it, but it's not something that concerns us. So what we observed the first time we saw this was actually in our FILLY Phase II study, where we saw an example of this in the sham contralateral eye of one of these patients. The second time we saw it was at the 12-month time point, which we reported, we saw one event in DERBY in the monthly arm? And then between months 12 and 18, we saw one in the monthly DERBY arm and one in the monthly OAKS arm. And so these are events that happen with this population. This is an aging population with hypertension and diabetes as certain predictive factors. And hypertension being the primary one, these are essentially little strokes in the eye. And so for example, we did go into some detail on a couple of these patients and some of the timing around these. The timing was, in every single case, more than 14 days after the injection. And just to step back and say the DSMB also said this is not drug-related or unlikely drug-related. So it's -- anyway, so getting back to the time frame, all 3 events were at least 14 days after the injection. They were events that were -- effectively, there were things that were within the bounds of what you would expect for this population. So if you look at VEGF interventions, yes, this happens at a rate where you'd expect in this population to be around 1.5 for the same time frame within DERBY and OAKS, and this was 3. I think the one thing that kind of stuck out was, okay, they're all in the monthly arm, is this something we need to be worried about. And the answer is, no, one thinks at this point it's related. So 2 of these patients were hypertensive and died. So -- and one had a hypertensive event the day before.

So I mean it's an event that occurs in this patient population, something that you're obviously keeping an eye on but no reason to believe that it's causal or from...

Not at this time, no.

Okay. Right. That's fair. All right. So maybe next question for Adam here in terms of the market opportunity and maybe some of the unmet needs. So I'll note that you guys recently did a GA inside survey. So what were some of the key findings in terms of the unmet need for patients there?

Yes. Thanks, Chris. So yes, a quick little summary on the GA market. So 1 million patients in the U.S., 4 million outside of the U.S. of 5 million overly. Interestingly enough, I expect that the first approved molecule engineering will probably drive more patients into the market. So we ran a -- as you said, we call it GAINS, a GA Insights survey with over 200 GA patients from around the world. We wanted to get a bit more detail and hear from these patients about what they like is like living with GA. And some interesting summaries, right? 7 out of 10 patients said that their quality of life was much worse than they had anticipated it would be once they got their diagnosis. So it had a real dramatic impact on their quality of life. 2 out of 3 of the patients that we surveyed had said that super reliant on a caregiver full of support and help. And about 1 out of 3 said that they've actually started to exclude themselves from social events due to anxiety and how the disease can impact their life. So obviously, a very, very high unmet need there. And if you speak to retina physicians or injecting ophthalmologists, they'll tell you the same. They'll tell you that they hear from these patients that they're looking for a treatment because they want to protect their quality of life and their vision as soon as possible.

Got it. And I think one of the -- related to that, I mean I think from a patient perspective, totally get it. You want to save your vision. I understand that. But one of the things that I've heard from investors is that physicians are skeptical that just slowing lesion growth will be sufficient. I guess how do you respond to that?

Yes. So we don't necessarily hear that in the market research that we've done. So we did market research with retina physicians all over the world, 12 months with our 12-month data and our 18-month data. And the majority of physicians look at the data and understand that lesion growth has an impact. I mean we've all heard the statements that dying retina is not a good thing, and I think the retina community agree with that. And the 9 out of 10 of the physicians we interviewed, see the totality of the 18-month data. They see the efficacy. They see safety. And they say we would offer this to our patients. And that's consistent U.S., ex U.S. We do get a couple of skeptics not a surprise. We can do these type of market research, but that just means we have to work harder to make sure that we're identifying the right patients. That's why for physicians, but the majority of physicians within our research are going to offer this product to their GA patients.

Okay. And so obviously, you have a competitor in the space that I cover, but we're not going to talk about them today. However, I do want to bring up the idea of how you see the market opportunity of foveal versus maybe extrafoveal patients?

Yes. So obviously, again, another analog from our market research, which is interesting for this question is if you go to a retina physician and say what type of label would you like. 100% of the doctors we are say give me total flexibility and the ability to treat my patients. So what does that mean? I want a broad for the treatment of GA labeled indication. I want to be able to treat foveal patients. I want to be able to treat extrafoveal patients. And I want the flexibility of offering monthly dosing in every other month dosing. That is the core of the discussions we get in every interaction that we have. So being the only potential GA product that has that opportunity to meet those needs of the physicians to allow them to use I think is a good, strong competitive advantage for us. Also, I believe the robustness of our data and the ability of being first in the market is going to be very strong. Now in the initial phases of our potential launch rate, because there's no current treatment, I think we're going to get a healthy blend of monthly dosing in every other month dosing because there's a high population at the moment of foveal patients just because there's no treatment. I can see with my crystal ball, I predict that the future is looking that every other month, extrafoveal will become the dominant player, as you get through that bolus of patients that exist in the market. But having flexibility on dosing and the ability to treat foveal patients and extrafoveal patients, I think it's a great critical advantage for us.

Yes. I mean 2 recent conversations that we've had kind of support that as well is that broad label is very important to them in terms of ease of administrating drug. Okay. Well, cool. So then thinking about maybe wet AMD. What can we learn about the commercial dynamics there? And maybe sorry, go ahead.

Yes. So it's the easiest analog for us.

Me too.

It's the easiest analog for retina physicians to reference to for sure. So what we're doing, as you would all hope that we are, we're doing a very thorough homework to make sure that we understand exactly what's happening with the AMD analogs from compliance to how retina physicians would actually buy the product or the use it so that we can fit within that system with our product. And again, through our discussions with retina doctors in the U.S., they say this process works. We've got very comfortable with it. That's a great analog for us to use. Make sure you fit within that system. Again, as you come to pricing and all of the pricing work that we're doing in the wet AMD, the vial prices are good analogs from a physician perspective and a payer perspective. Now there are a lot of consistencies with the wet AMD drugs, but we're launching in a different generation, right? So I think the compliance rate will be slightly different with geographic atrophy, right? This has proven in our DERBY and OAKS studies, right? The effect is getting larger. The logging treatment, we hope to see that 24 months. So this is a product that you're going to have to stay on. So we're going to do some work with patients and with retina doctors to remind them that this is slightly different to the wet AMD analogs. The more you treat, the more beneficial the product will be. Now every other month dosing is a big advantage for us there as I think that drives a few more patients into the flow, but it's a great opportunity for us. And the wet AMD benchmark is an easy one for us to reference.

Okay. All right. Fair enough. And so I did want to touch upon kind of compliance rates. I think that is one of the concerns that I've heard from investors is that utilization wanes over time, right? So obviously, I heard you loud and clear that if the effect size increases over time, pretty compelling. Any other strategies to kind of maintain compliance?

Yes. So we'll -- if you speak to a patient in our patient research, I'm constantly impressed by this patient population, and I'm surprised they're super assertive in what type of treatment they want. And so these are -- we're researching patients who aren't in our study, right? We're talking about GA patients out there. And we show them a profile of the drug, and they're like, "I want this drug. I want to protect my vision for as long as possible." We get a lot of references to grandchildren. I want to be able to spend time with my grandkids and my kids. And interestingly, then when you go down the pathway of what dosing would you like to allow you to maintain your time on therapy? The patient said, "I will take whatever my retina doc wants me to take. But if every month is going to have a bigger impact, I'm happy to have every month." So interesting, I think that's a good positive signal for us to compliance. Now when we get into the real world, I expect physicians to look at the patient and go. You'll make this example up right. Your lesion is extrafoveal. It's far enough away from the foveal. I'm going to start you in every other month. I think that's the right measurement and keep track. I also believe that subject to our label, some physicians will likely start on every other month, move up to monthly and then maybe step down, and all of those type of activities from an administration perspective should help drive compliance. We're also looking at various tools and techniques to make sure that patients are educated and they understand that the benefit will come after a longer term, and we'll do various disease state education and DTC, but not on the scale you would expect, right, a more nimble version of DTC for a company like Apellis to drive the patient education and make sure that they fully understand that compliance is important than the cost at this point.

Fantastic. So obviously, a huge opportunity for your team, Adam, to tackle in the near future. But you have something on your plate right now with EMPAVELI and PNH. So I guess, how is that launch going?

Yes. Thank you. Yes. We like being busier in Apellis. So we -- the launch is going incredibly well. I'm super proud of the team that is executing the launch. So we just passed out 1-year anniversary. So we're doing all of the boring stuff that this group probably doesn't want to hear about, making sure that we're fine-tuning our progress from the last year, making sure that our targets are up to date and accurate, making sure that we're getting the most out of all of the infrastructure we have in place. But all of the signs of demand for the launch of the rights. We have over 150 [ start forms ], and that continues to grow. We had 30 in Q1. We have over 170 REMS certifications. And again, that continues to grow. And I'm super impressed with the REMS certification. So every physician has to go through REMS to be able to use the drug, and we continue to see that growth, which is important. We have a really good payer coverage. We're getting a lot more commercial prescriptions than I anticipated based on my original forecast, which just means the payer coverage and how we're helping drive those payer discussions is working well. And I think we've set up best-in-class patient services in Apellis Assist. We get feedback after every patient starts and continue to get crazy good scores on how we're interacting with patients. So I think Apellis Assist is a great competitive advantage for us, too. So launch is going very well. We are doubling down. We're going to make sure that we start to -- as probably everyone knows, right, there are 1,500 C5 treated patients, the majority -- and 150 treatment-naive. We have a broad label. We're getting access to treatment-naive patients as well as switch patients from that. And we started to move out from the really severe patients who are really hard to control to the patients that have higher hemoglobin, potentially don't have any transfusions, and that to me tells me that physicians and patients are really...

Okay well, that's awesome. And so I think -- well, the next wave within PNH might be the oral complement inhibitor, let's say. So if that were to come to fruition, how do you see EMPAVELI competing in that environment?

Yes, great question. So we have a bit of an internal mantra, which is we're focused on executing our plan as Apellis. And if we execute our plan and we continue to see the results that we're seeing on EMPAVELI, I think once patients start on EMPAVELI, they're truly going to feel the benefits of what an increase in hemoglobin means, what less transfusions means. So the focus for any competition entering the market from an Apellis perspective is let's make sure we execute our plan and make as many physicians have conversations around everybody with their patients. One thing that we've learned is we have a very high compliance rate. We're over 95% compliance rate. So that's huge in a rare disease, and I think compliance is a particularly important aspect of PNH patients. And one thing that through our market research we're hearing is these oral molecules of BID or TID compliance might be critical because if you miss a dose, this can be a critique catastrophic event for a patient. It could lead to potential crisis moving into a hospital setting, for example. So I think that's something that people just need to keep an eye on, which is that potential strict. You must take your dose every 12 hours, otherwise you will potentially have a risk. So that's something I think the oral medicines just need to do.

Okay. All right. Fair enough. So I think, Tim, I'm going to ask the very standard Wall Street question, which is what is your cash balance? Where --What are kind of the near-term catalysts? And then I'll see if I can get some guidance on you.

So definitely, no on the last point, unfortunately. I'm sorry. Nice try. So we ended the quarter with $965 million. We also got our approval milestone from Sobi, which was net $45 million. So in that sense, I guess, pro forma, we had over $1 billion in cash, which is really nice to say.

That's good.

Feels great. Yes, I love that.

As a CFO.

As a CFO. And that gets us into the first quarter of 2024. Now in terms of guidance for milestones this year, we just started our C3G/ICM-PGM Phase III study. the HSCT-TMA study, which is run by Sobi is underway. They're in charge of the CAD study that should be starting at some point soon. And then we have obviously a bunch of stuff happening with GA. I think you all know, and I can run through those, but it's a lot of stuff. Hopefully, at end of the year.

Yes. Okay. Well, that's awesome. So I think unless there's any last comments from Tim or Adam, I really appreciate your time this afternoon. And thanks, everybody, for joining us.

Thank you, Chris. Appreciate it, man.

Of course. Thank you very much.