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

Welcome to the UBS virtual event. I would now like to pass the call over to Eliana Merle.

Good morning, everyone. I'm Ellie Merle, one of the biotech analysts here at UBS Ophthalmology Day. Very happy to be starting the day off with Apellis joining us from Apellis is Tim Sullivan, Chief Financial Officer; and David Acheson, SVP of North American Commercial. Just a quick disclosure statement as research analysts, we are required to provide certain disclosures relating to the nature of our own relationship UBS with any company on which we express a view on this call today. You can find these disclosures at ubs.com/disclosures or reach out to us, and we can provide them to you.

With that being said, Tim, David, thank you so much for joining us today. And yes, to jump right in, now we're over 1.5 years into the of SYFOVRE and GA. I guess what are you seeing in terms of the dynamics in the GA market and how the market has changed with approved treatments?

Yes. Thank you for having us today. I appreciate it, and look forward to the conversation for the next 30 minutes or so. Look, I think it's a couple of things. As you would suspect, the fact that we've got 2 products in the space now in the complement space for GA, we're starting to learn a lot more around the market, the physicians, the patients. One of the things and you know this, I think, because we've talked about this, the market is definitely bigger than what we anticipated. This is a very big market. And originally, we had thought there was about 1 million patients that were in the space. And we think now it's 1.5 million and maybe even bigger than that, depending on where everything comes in from patients being referred outside of where the retina specialists are. So I think that's a pleasant surprise for all of us, of course, and I also think the dynamics in the space that we're seeing now is that we are starting to experience a very good momentum on the efficacy message that we have in the product itself. And I think that's a really good move in the right direction for patients. I do think that patients in the space are in tune to what they need for treatment. They ask their physicians regularly about, is this something I should be doing? And I think it's a joint conversation between the 2 and our efficacy message is really starting to play out the way that we expected it would. So I think that's been good for us for sure. And the market, I think, is really starting to understand a little bit more about complement and how it works and the space in general, I think, is accepting of the tools that are here. So excited about that, and I look forward to seeing what happens over the next year or two.

All right. Great. And I mean, you mentioned that the prevalence is much larger than you initially thought. Maybe just -- what are you seeing this in the form of? I guess maybe just are you seeing an increase in referral rates like an increase in the number of patients broadly under care with GA and specifically, if you can speak to that, like if in practices that's grown by a certain percentage since the time of launch?

Yes. So I think like a couple of things to keep in mind, right? So there's about 50% of these patients that sit with injecting retina specialists in those offices today, about 50% sit outside of that. And the data that we have and some of the work that we're doing to help kind of grow the market, we are specifically focused in the world of GOs, general ophthalmologists and ODs because a lot of those patients sit there. And what we can see in the data and what we see now for some of the referral process is coming in. And if you talk to retina specialists that have a referral network already set up, which some of them have a very good referral network already in place. We can start to see some of those patients coming in and they're telling us that those patients are now coming in as a referral based off the fact that there's treatments in the space, which I think is exactly what we wanted to do. And we're working specifically to help move those patients over as well because we know that there are a number of patients that just don't have access to the retina specialist yet or haven't been in that office. And that's how we can kind of see through the data and the information we've got from our physicians that are injecting today that there is a number of patients that just are starting to come in that we didn't -- we don't have access or haven't had access to it in a retina office up until now.

Makes sense. And now that you have a competitor on the market with a Permanent J-Code and you have a better sense of the market share split, I guess, can you speak to the latest that you're seeing in terms of market share for SYFOVRE?

Yes. So look, overall, and what we've reported up until now is that we were sitting around that 75% market share coming out of the last quarter. Things have not adjusted drastically there, and we feel really solid going into the last part of the year with the last quarter. And we're at about a 50-50 split on new starts, which that's starting to trend up for us as well. So I think in general, things have not moved significantly on what we've reported up until this point in time. And I'm comfortable that we'll continue to take the leadership role in this space, especially since we're really working to help grow the space in the market which is going to be important long term, making sure patients get access to the product. So that's where we've been up to this point.

Great. And so you mentioned that the latest you had 75% market share and things haven't changed much since when you gave that update on that you had been seeing a 50-50 split on new starts and that this is starting to adjust up as well? I guess maybe can you speak to what you expect in terms of market share and how this will evolve over time, specifically maybe in the near term, it seems like you're seeing a little bit of an uptick?

Yes, yes. So look, I'm not sure we'll give a whole lot of guidance on where we think the market share will land. But I do -- look, the market is really big. So I think the thing that we've got to keep in mind here is that having 2 competitors in the space is not a bad thing. It helps grow the market, bring awareness in and it gives us the ability to have more patients be treated both for their sake as well as for the brand. And I think that we can do very well long term with the 2 players that are in the space, knowing that there's not anything else coming behind this for several years, right? So I think that's super important to keep in mind. I also think the thing that will always play out over time is the fact that our efficacy story is super strong and super solid with all -- our studies were big, right? We've got every month and every other month dosing and efficacy from the very start of those studies. And over time, I think that will continue to drive the lion's share of the market towards SYFOVRE. And I think we'll continue to be the market leader as a result of that. So efficacy at the end of the day is going to win the battle. And we're starting to see that impact in even some of our latest market research where the recall and efficacy is very, very high, upwards of 75%. A year ago, efficacy was not a conversation that most positions we're really talking about. And it's moved significantly in that direction. So I'm confident we'll continue to lead the market.

And in terms of the centers that you work with, I guess, are you seeing centers stock both SYFOVRE and IZERVAY? Or do you find that it tends to be some practices stock one or the other?

Yes. No, I think it's a great question. All of that's true. Everything you just said is true, right? So some accounts are 100% SYFOVRE, some accounts are 100% IZERVAY. Some accounts are split between both that's just going to happen, right, when you have markets that start to have more than one player in it. I will tell you the majority of the accounts out there will actually have both products stocked. They'll give a patient conversation around both drugs have a good dialogue with the patient and help the patient make the decision. And I do know that those conversations, especially as we've gotten additional information out on the efficacy story in the last couple of meetings, ASRS and Retina Society. Those additional discussions are driving that efficacy discussion a lot more. And I think that's where we'll continue to have a leg up as well as with the efficacy story. So I think all of -- I'm not worried about the fact that someone will have both products in there and they make a choice for patients to have a good discussion around. I think that's healthy. At the end of the day, I think we will still continue to see more patients coming to SYFOVRE as a result of the efficacy and what we're seeing with treatment with patients today.

And I guess what's the split maybe or mix that you're seeing in terms of prescribing from some of the private equity back centers versus the more academic centers and how we should think about that?

Yes. No, that's good question. So a couple of things to keep in mind. About 30% of the retina specialists today or 30% of the market sits in a private equity group, right? And for us, we have about 30% of our overall business that sits in private equity or large accounts like that. So it's not overly weighted. I think that's healthy because we've got a good balance between the very big accounts and then that long tail of accounts that are not a part of private equity which is good for us and the patients. The other thing is we've got over 2,100 accounts that have used the product and they've got products stocked and they've got patients that have been treated, which is also very good. So it's not like we're reliant on just a very specific subset of offices to drive the lion's share of the business. And the breakdown for that is about -- it's about in line with what you're going to see in the marketplace for anti-VEGFs as well, it's not -- we've been very deliberate to make sure that we can get into the right offices, have a good relationship and be able to treat patients in the very big clinics. But also make sure that we've got breadth across the other accounts, including academic centers. I think one of the misnomers is that we don't have a lot of penetration in academic centers. We have a lot of academic centers that have the product available. Those centers don't tend to treat as many patients as maybe some of the private equity groups do. But the ability for the patients to have access to that product and the academic centers is good across the board. And we've got some very good relationships with some very large accounts like the Kaisers of the world and others that have product available for patients in those centers as well.

I know you mentioned that you have used across a number of different types of centers, but maybe is there one type of center that you find, particularly when you have conversations about the SYFOVRE efficacy relative to IZERVAY or about the safety profiles that you find you have more traction in?

Look, I think at this point, the answer to that might have been different when we were going through some of our safety challenges last year, right? I think it's important to remember that the safety challenges that we had have been very stable, right? And we haven't had any additional challenges all the way through up until now. So I think today, what you're going to find is that the penetration is pretty consistent across most of the accounts that we have. Now the larger accounts, they have more patients and more positions and they've got 10 or 15 doctors that are treating patients in there. Obviously, that's a place for us to have a lot more focused just based off of the ability to treat more patients. But at the end of the day, I think the uptake in -- across most of those accounts has been fairly consistent. So I think, again, we're not overly weighted anywhere, and we've got good consistency across the accounts that we have that brought product in. So I feel confident we're going to continue to do that.

Makes sense. And just on the topic of kind of your commercial strategy, particularly as it relates to competition, I mean economics are a big part of some of these retina practices and driving prescriber decisions. I guess how should we think about broadly some of maybe your potential contracting decisions or potential for giving discounts to certain practices?

Yes, great question. So look, I think it's important for everyone to know that contracting in the buy and bill space, not just for this product or any product in the eye care space, but generally speaking, is common practice, right? It just happens. It's one of those things that helps drive the business overall. It's 1 of about 20 levers that you can pull in the commercialization of the product. So I don't think you want to overweight it in your thinking, but I also want to make sure that people know it's just part of what we do. I will tell you that we've got contracts in place, but they are -- one of the things we've not done is chase the really big rebates which is one of the things that our competitor has done. They've really put some big rebates out there. And we've played where we need to, to be in a fairly good balance, but we haven't gone to a deep discount on certain things that in most companies would react to that and do the same thing. And we've tried very diligently to balance the economics with the efficacy story as well as the increased effects over time that we have. This product gets better over time for patients. And we know that if we put all of that in one big story, it helps us manage the discussion in the clinic better than just contracting. So I think it's important to keep that balance in mind. We're doing the best we can to manage that. I think we're doing the right things. And I don't think we'll ever chase the biggest -- we won't ever chase the biggest rebate number because it's not practical and it's not the right thing to do long term for the brand. But again, at the end of the day, it's one of several levers that we've got to pull and we do, we have contracts in place because it's the right thing to do for the patients to have access. But that's just part of the business model that we're in.

Understood. So maybe just from our modeling perspective, how should we think about gross to net going forward, say, in the near term as well as long term relative to the quarters that we've seen reported in the past?

Yes. So I mean I can rely on Tim to maybe jump in here too, but I wouldn't put a whole lot of guidance out there on gross to net. We're still early in the launch. There's things that we're working through to get where we need to go and to grow the space here is a big responsibility for the market leader. That's our job. And we hope that Astellas will come on board and do that with us. They haven't yet but we would like them to because to grow that market would be healthy. And you got to do some things in that environment to grow a market that is going to be a certain amount of spend to get there. So the gross to net is probably not something we're going to put a lot of guidance behind because it can change up and down as we move forward. I don't know, Tim, if you have any comments on that.

Yes. I would say the same thing. We don't guide on gross to net. In different quarters, we'll have different amounts of degradation or whatever. But typically, what you'll see is that over time, gross to net does degrade over time in these buy and bills spaces where you do some contracting because that's just the nature of the game. But we can't guide on a quarter-to-quarter basis or really over the long term.

Okay. Makes sense. But fair to say we shouldn't see like a dramatic uptick in discounts, but maybe slowly over time.