Apellis Pharmaceuticals, Inc. Q3 FY2024 earnings call

Management Statement and Operational Highlights

• Made progress in SYFOVRE with continued growth in vial demand and Phase III VALIANT results for EMPAVELI.
• SYFOVRE had 7% QoQ growth in commercial vial demand, with $152 million in net product revenue in Q3, more than double YoY.
• Launched initiatives to increase SYFOVRE's market share, including educational campaigns and engagement with retina specialists.
• EMPAVELI showed positive results in Phase III VALIANT study for C3G and IC-MPGN, with potential to redefine treatment paradigms in rare kidney diseases.

Segment Performance

• SYFOVRE: Third quarter net product revenue was $152 million, more than double the same period last year. Commercial vial demand grew 7% quarter-over-quarter, with 84,500 commercial vials shipped. Revenue fell 1.7% QoQ due to higher gross to net adjustments. SYFOVRE maintained market leadership.
• EMPAVELI: U.S. product revenue in PNH was $24.6 million in Q3, up 3% YoY. Phase III VALIANT results for C3G and IC-MPGN were presented, highlighting the potential of EMPAVELI in rare kidney diseases.

Guidance

• Anticipates low single-digit percentage vial growth for the remainder of 2024 with flat to modest net revenue growth in Q4.
• Expect gross to nets to be stable going forward with more modest quarterly adjustments typical of a buy-and-bill model.
• Plans to provide further insight into GA market dynamics and growth expectations for 2025 in the coming months.

Risks

• Overall slowing within the GA market with slower vial demand growth than previous quarters.
• Higher gross to net adjustments in the quarter, although expected to be stable going forward.
• Uncertainties in the GA market as it transitions to the next group of retina specialists who take longer to decide on treatment.

Q: How do the pushes and pulls between Apellis and its competitor affect market share, and how are efforts to drive patients to retina physicians delivering to Apellis?

A: Cedric Francois and Adam Townsend discussed SYFOVRE's differentiated efficacy profile as the key, with Adam noting market share based on injections is 65% and new patient starts rebounded in the last half of Q3 due to efficacy-driven market.

Q: When will Apellis feel comfortable providing full year sales guidance, and what's needed for that?

A: Tim Sullivan said they're considering providing guidance for next year, but need to see market dynamics evolve and fortify position as market leader first.

Q: Are Apellis' sales team right-sized for reaching next tier of docs, and trends in sampling?

A: Adam Townsend said sales team is right-sized, with initiatives to drive patients to retina physicians, and sampling expected to make up ~5% of SYFOVRE's total vial demand moving forward.

Q: Elaboration on next group of retinal specialists and flat to modest revenue growth in 4Q related to gross to net?

A: Cedric Francois and Tim Sullivan discussed the transition to the next wave of retina specialists and that Q4 guidance incorporates stable gross to net expected in low to mid-20s range going forward.

Q: Clarity on ASP impact and patient adherence to EMPAVELI?

A: Tim Sullivan explained ASP impact in Q3 was due to strategic contracting, rebates, and true-ups, while Adam Townsend noted patient adherence to EMPAVELI in PNH is strong with 97% compliance rate.

Q: Renal indications for testing EMPAVELI and timeline?

A: Cedric Francois said they'll provide more clarity on renal indications in the next couple of months.

Q: Quantification of Q3 gross to net and impact of vasculitis reports on prescribers?

A: Tim Sullivan said Q3 gross to net was at the high end of previous range, and Apellis doesn't comment on competitor's safety, focusing on SYFOVRE's efficacy.

Q: ROI on promotional efforts for SYFOVRE and DTC spend in 2025?

A: Tim Sullivan and Adam Townsend discussed analyzing initiatives on ROI, with DTC spend having positive ROI and robust analysis on initiatives.

Q: Volume trends in 4Q and October?

A: Tim Sullivan said they expect low to mid-single-digit vial growth in 4Q and no specific guidance on October volume trends.

Q: Dynamics of patients referred from optometrists/ophthalmologists and impact on conversion?

A: Cedric Francois and Caroline Baumal discussed patients referred with various stages of disease, with efficacy and safety data helping physicians make educated decisions, and six to nine conversations needed to convert new physicians.

Q: Factors driving rebound in SYFOVRE share and messaging?

A: Adam Townsend and Caroline Baumal discussed simplified efficacy messaging, transparency on safety, and alignment with retina organizations driving rebound in share.

Q: Reconciliation of cash runway, growth for SYFOVRE in 2025, and OpEx?

A: Tim Sullivan explained cash position including receivables sale, near breakeven on operating level, and minimal growth needed to be cash flow positive.

Q: Switches from IZERVAY and SG&A increase for C3, MPG?

A: Adam Townsend said switching occurs but not frequent, and they're doing homework on nephrology infrastructure.

Q: Potential approval in ex U.S. geographies for SYFOVRE?

A: Adam Townsend said they continue to progress in countries like U.K., Switzerland, Canada, Australia, and build infrastructure for other markets.

Q: Physician feedback on EMPAVELI data from ASN and competitive positioning?

A: Cedric Francois and Caroline Baumal discussed positive physician feedback on EMPAVELI data at ASN, with broader patient population coverage compared to competitor's studies.

Q: Long-term view on complement inhibitor class penetration?

A: Caroline Baumal discussed potential for increased penetration as education and awareness grow for the chronic disease.

Q: Cash runway incorporating C3G launch and average injections per patient for SYFOVRE?

A: Tim Sullivan said cash runway incorporates C3G launch, and average injections per patient for SYFOVRE is stable with 80%-90% of prescriptions on every-other-month dosing.

Q: Potential label for EMPAVELI relative to competitor's and patient population breadth?

A: Cedric Francois discussed broader patient population studied in VALIANT compared to competitor's narrow study, highlighting EMPAVELI's potential for broader patient coverage.