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

Okay. Excellent. Well, listen, Tim, why don't you kick it off? We'll jump right in. I think we have Jazz coming up in about 15 minutes, but jump right in.

Sure. Sure.

So let's start with the latest update. Where are we right now in commercial launch and in the debates of the day?

Sure. So in the third quarter, we announced that we had $75 million in revenue of SYFOVRE, we had $24 million in revenue with EMPAVELI. So the launch is underway. And as you probably all saw or most of you saw from our third quarter earnings, we had a nice rebound in our revenue and our vials shipped. So from a commercial perspective, the dip from the vasculitis announcement, looks like it's recovered. And we've had some of our best weeks since that quarter was announced. So growth seems to be back on track.

And maybe can you expand on that a little more, Tim, because I know there was a point in time where you guys were adding -- heading into mid-July, there was certain weekly ads that could be backed out. It decelerated. It started to pick back up. Do you think you've topped off the levels where we were prior to when we were entering July?

Yes. So when we announced our quarter, we were absolutely at the levels where we were in that time period. So we were back to our growth trajectory and pretty much back at that level.

Okay. Got it.

One thing that we obviously spent a lot of time talking about is adjudication on vasculitis cases. I understand you're not giving case-by-case descriptions anymore. I totally appreciate that. But can you talk to us a little bit about the process of adjudication and what the delay is from an initial report that might show up on FAERS, for instance, to a fully adjudicated case that will show up in new accounts?

Yes. Hi, everyone. So thank you so much for inviting us and to be here. So the process is when a physician has a case that where vasculitis is suspected, they will typically report it to the risk committed to us and to the FDA typically in parallel. We then get that case and we have an independent panel of 4 retina docs, very well-respected key opinion leaders who have been public about their contribution to this. And they -- sorry, I mean running. They review that case and then make an adjudication on whether they believe this is vasculitis or not. And then it goes from being a suspected case to a confirmed case or sometimes gets adjudicated as not being vasculitis as well. And all of that, of course, needs to be seen in the context also of what are the visual outcomes. We communicate very closely with the ASRS Risk Committee, and we are pretty much exactly on the same page as far as it relates to those adjudications and everything else.

What's the time line of that independent adjudication committee. How delayed is a final adjudication from them relative to the initial report?

Yes. So it can happen very quickly. It depends on how much information we get from the physicians. So when we get the proper information from the physician typically within a week or 2, we make a determination.

How are -- I guess, Cedric, because one of the easiest -- from a research perspective on the easiest notes right on Apellis right now is, do the latest FAERS run or submit an FOI and say, hey, there's like 25 now and not 23. How -- are you guys actively monitoring those cases being sent into FDA and adjudication around it and/or do you ever intend to perhaps put out something a little more definitive where you speak about what are some of those cases being submitted because a lot of them don't technically meet the bar for true vasculitis that tease the noise out from what actually matters?

Yes. So we cross reference, obviously, with the FDA make sure that we don't miss anything. And in that sense, what is really great is that the reporting is very good and robust in this field of the retina. So we have a very clear view on what is going on. It's important to note that on the fares, you will typically often get the same patient being reported multiple times, right? I mean there was a report that came out a few weeks ago where that was not very well understood by the author of that report that these are not new cases. These are old cases that can get updates in the...

Can you remind us the exact case count from the last update that you guys have mentioned versus what some of the FAERS stuff is showing?

Yes. So I think FAERS and us are pretty much on the same page, right, I mean that's the -- so when the physician reports it, it can be reported on FAERS as vasculitis, but then it can be adjudicated by us and by the risk committee as not being vasculitis as well. But I think the key thing is risk committee and us being in lockstep with each other. And I think we are at wealth confirmed cases. Was that correct? Yes?

And there was a very interesting slide shown by the risk Committee at that Seattle conference where they had this 3x2 table with a bunch of different characteristics, which they need to check the box on to call it a vasculitis and/or ROV depending on whether certain box they're checked or not. My understanding is your criteria were generally consistent with that. But is that well understood and well appreciated by clinicians that are self submitting these reports into FDA or the FAERS database on whether those criteria are properly being checked?

Yes. No. I mean -- so again, kind of to do -- it's important to note here that vasculitis is really an imaging finding, right? I mean it refers to the leakage of blood from the blood vessels in the back of the eye, which can be associated with occlusion, but which is typically a manifestation of something else, either inflammation, sometimes autoimmune disease, whatever it is. I mean there's many causes behind that, right? So that complexity is something that needs to be taken into consideration as well. Also vasculitis is not something that is -- that doesn't happen in the absence of drugs being used or not, it happens with anti-VEGF injections. It can happen naturally in people as well. So all of these things are important to get a context.

Is it still a first dose phenomenon, the vasculitis findings? Because I know there was an 86-year-old second dose reported at the retina conference. But generally speaking, my sense has been it's a first dose phenomenon and it happened.

Yes, it's a first dose phenomenon, and that patient that was reported as a second injection, even the risk committee is revisiting that, I believe so...

That's also...

Yes. So I think that it's very much a first injection phenomenon. Again, etiology is something that we'll look further into. But I think it's important to note here, this is so extremely rare on such a large denominator. It has to be placed in the context of the history, right? The problem was or if brolucizumab, i.e. Beovu had not happened a couple of years ago, this would never have been or turn into what it is today. That is just a simple fact. What happened back then is, it started off being a 1 in 10,000 event. But because patients were getting sensitized against that drug, it became more and more. And in the end, it was 150 subjects that have this. This is completely different.

Cedric, to that point exactly. This is a first dose phenomenon and there's no acceleration, is the proper denominator total doses given or not new patients given...

No, I think that's an excellent point. So I think from either angle, right, it looks very good for us, right? So we have, on the last time that we updated this, we have -- more than 50,000 subjects that have at least received one injection. And we have well north of 100,000 injections at this point in time as well. If you take patients with bad visual outcomes, right, there were 5 patients with bad visual outcomes on a total of 50,000 subjects.

So is that countering only those patients adjudicated as vasculitis with bad outcomes? Or are you also counting nonvasculitis cases that had some visual exacerbation?

No, that is vasculitis cases with bad visual outcomes, right? So that was the -- and then again, on the denominator of 100,000. There again, you have that very small number of cases as well. So on either way you look at it, it's something very rare sporadic. Physicians appreciate this now, and I think have largely moved beyond that and are now focused on efficacy, right, because...

Maybe let's expand on that. So you mentioned clinicians have moved on beyond that. I remember as of July in the thick of it. There were 3 groups of doctors, 1/3 that were saying, we're going to continue to do is because we're comfortable and there a lot of private equity practice in that. 1/3 that said we're never ever, ever going to catch it. And then there were 1/3 that we're saying we're on the side, and we'll revisit. Has that group started dosing now? Is the clinician base expanding meaningfully as we're gaining more commercial experience?

The middle segment is the most important one, right? I mean those were the physicians that say like, okay, we have something new, let's take a pause on new patients, but as time progressed, and as it was clear that this is not a sensitization problem like Beovu. They are now in large numbers starting to retreat new patients, which is, of course, accountable for the growth that we're seeing right now.

Got it. And as you think about expansion into Europe, do you think you want to do that yourself? Or do you need a strategic pharma partner to help you with Europe?

No. Europe is something that we have prepared for, for years. We have prepared the physicians, the payers, the regulators. We're very excited about the prospect of commercializing in Europe on our own.

Got it. So in one sense, you don't necessarily need any help from a strategic partner for any ex-U.S. territories or maybe certainly not for Europe, but beyond you may...

Correct. Not for Europe. Outside of Europe, we will have a partnering strategy.

Got it. And then also maybe a question for both of you. I know there was a point in the summer where it sounded like people thought this drug could get -- there's no commercial future for this. There were a lot of -- there's a lot of hysteria around it. Things have stabilized quite a bit, certainly from the vials per week you guys are showing. There's growth again. Have you sensed that sense of normalcy beyond just your core prescriber base and even expanding into other corporates you guys interact with that. This is now past like that zone where there were a lot of question marks and things are stable and growing again. Has that reflected in the types of meetings you guys are still broadly speaking?

Absolutely. I mean, I think the -- again, I mean, it was kind of a bit of a panic moment because of the muscle memory of what happened a few years ago with that other drug. That was what -- that is now beyond us. I mean, we felt that for the first time at ASRS in October and very clearly at AO as well. And now the focus is squarely on efficacy, right? I mean you have an ability to slow down by as much as 40% the degenerative process in the third year of dosing. I mean that's something that really resonated with physicians. Also, the functional data is looking really, really good, which is important, of course, for Europe. I mean we have the extension in GALE. So all of these things are coming together in this complex disease.

Yes. Cedric, I'll tell you why I ask, and it's the elephant in the room, which is there's a world in which you say, you know what, the way we see this launch going is very different than, let's say, a typical pharma would be seeing it. And for that reason, there's a big disconnect in how we think about the true intrinsic value of our company. And sometimes that can create a mismatch in the expectations that you have and/or your investors may have versus external partners. I'm just curious, as you think about it, broadly speaking, is this return in growth being reflected broadly even in many discussions you have beyond Apellis as well?

Yes. I don't want to specifically comment on what external expectations are versus our own. But what we have seen is by focusing on the patients and focusing on being transparent and having trust with the retina community that we are seeing this very meaningful pickup again now, similar to what we saw in the spring. We will know very soon in the next 2 months, a couple of important points. I mean, first of all, we're going to get more clarity on the European approval process, and we're going to get more clarity on the projections in terms of revenue. And I think once those 2 elements are clear, we're going to have much more certainty about what's in front of us.

Tim, can you speak to the expectations on 2024 for SYFOVRE? And where they stand and...

Yes, we feel -- like nobody really knows right now. I mean, the expectations are -- I can't comment on expectations that constitutes guidance, and I'm going to get in trouble with Meredith, if I do that. But look, we feel very good about growth trajectory. Again, as I mentioned, we had, I think, very nice growth under the circumstances for our last quarter, and we continue to see strong uptake. So we've seen some of our best weeks in the last months.

How do you -- from this point forward, I understand you're not giving patient-by-patient updates on vasculitis, but what do you expect to be giving in terms of cadence of updates, both on the rate of vasculitis and on the rate of vial shipment going forward?

Kind of both.

Yes. Well, I think look, next step for us is to work on that label update, right? I think that's -- I think...

Label update for U.S.?

For the U.S., yes. I think we're going to end up with something that's going to be similar to what the Vabysmo update was as well in the label. And after that...

Sorry, what was the Vabysmo update on the label?

So Vabysmo had a label update as well for vascularity events. I think that's important, actually because, again, vasculitis is something that can occur with intravitreal injections, including drugs like faricimab. So I think we're going to get a label update that's going to be quite similar to that level update. And at that point in time, what we will do with the retina community is probably give another update on kind of reconfirming that the rate case is stable. There will then be a publication at some point by the risk committee, which kind of will synchronize with what we have disclosed. And then at that point in time, I mean, I'm not sure that updates are further needed unless there's a change, of course, that's a...

And on the commercial front, it sounds like you're also not guiding to regular updates on vials shipped anymore?

I think we'll give some update...

Quarterly? Or is it possible that you can give more [indiscernible] you have been...

Yes, we're going to keep you updated, I think, on vials shipped. That's -- I wouldn't worry about it. I don't know whether it's quarterly. I think quarterly is probably an expectation, but beyond that, I don't know.

Got it. Okay. And the big difference between Beovu vasculitis mentioned and the ibis vasculitis mentioned on label is that -- it just as, if you have it or you discontinued. That's all that on Vabysmo label.

Yes. So it is -- the big 1 with Beovu was, of course, kind of the immunity-related aspect, et cetera. That's not something that I expect...

Okay. Excellent. Maybe just as we wrap it up, I know there were peak sales for the drug. There were a lot of numbers out there. Clearly, you guys had a certain number in mind internally as well. How has that evolved over the course of the summer and into fall, your peak sales expectation?

Yes. I mean without commenting on the public's view on peak sales, I think the peak sales expectation hasn't changed that much, to be honest with you. Well, certainly not from our initial launch, right? We -- I think one of the things that people don't fully appreciate is how big, for example, Europe and ex U.S. can be, right? So think about the anti-VEGFs, right? The anti-VEGF more or less for branded anti-VEGF, that's 45% of revenue, right? If you look at Eylea, it's 40%, Lucentis at 60%. It's a gigantic opportunity. It's probably twice the size of the U.S., both in terms of retina docs that inject but also patients. So when you think about that, of course, the pricing is less, right? But when you think about that, that opportunity is, I think, underappreciated.

And why don't you need a pharma partner for ex U.S. then?

Yes, because it's a very concentrated prescriber base, right? And so if you look at Germany and France, for example, you need, I'm going to say, 25 -- 20 to 25 reps. And then for the other EU5, you're looking at 10 to 15 and beyond that...

Cedric mean Belgium?

Cedric is our #1 in Belgium, Head of MedAffairs. And then those EU5 represent 80% of the European anti-VEGF So when you think about that, it's like EU5 is a gigantic market, and it's pretty concentrated, something we can do on our own.

Excellent. Well, listen, we're past time I was going to ask you time to breakeven, but save back on other calls.

2Q 2025 at the earliest.

All right. Excellent. Well, thank you guys for being here.

Thank you so much. Sorry about that miss collect.

That's our cash formation.

No, no. I was joking.