Title

Presentation

Apellis Pharmaceuticals, Inc. misses on earnings expectations. Reported EPS is $-0.46 EPS, expectations were $-0.32.

Operator: Good morning, ladies and gentlemen. Thank you for standing by, and welcome to the Apellis Pharmaceuticals Third Quarter 2024 Earnings Conference Call. [Operator Instructions] Please be advised that today’s conference is being recorded. I would now like to turn the call over to Meredith Kaya, Senior Vice President, Investor Relations & Strategic Finance. Please go ahead.

Meredith Kaya: Good morning, and thank you for joining us to discuss Apellis’ third quarter 2024 financial results. With me on the call are Co-Founder and Chief Executive Officer, Dr. Cedric Francois; Chief Operating Officer, Adam Townsend; Chief Medical Officer, Dr. Caroline Baumal; and Chief Financial Officer, Tim Sullivan. Before we begin, let me point out that we will be making forward-looking statements that are based on our current expectations and beliefs. These statements are subject to certain risks and uncertainties, and actual results may differ materially. I encourage you to consult the risk factors discussed in our SEC filings for additional detail. Now I’ll turn the call over to Cedric.

Cedric Francois: Thank you, Meredith, and thank you all for joining us this morning. Over the past few months, we have made meaningful progress towards our long-term goals, reaching key milestones such as generating continued growth in vial demand for SYFOVRE and presenting the groundbreaking Phase III VALIANT results with EMPAVELI C3G and IC-MPGN. These data underscore the power of C3 and reinforce our belief that targeting C3 is the optimal way to treat complement-mediated diseases. During the third quarter, commercial vial demand for SYFOVRE grew by 7% quarter-over-quarter and SYFOVRE maintained its market leadership with 84,500 commercial vials shipped to physicians. Third quarter SYFOVRE net product revenue of $152 million were more than double the same period last year.

However, we recognized that revenue fell short of expectations, declining by 1.7% relative to the last quarter. This was partially due to higher gross to net adjustments, which Adam and Tim will speak to shortly. Importantly, we expect gross to nets to be stable going forward with more modest quarterly adjustments typical of a buy-and-bill model. Also affecting our performance this quarter was an overall slowing within the GA market. Total vial demand did grow quarter-over-quarter, but at a slower pace than in previous quarters. Market growth is now being driven by the next group of retina specialists who often need more time to appreciate the benefit/risk profile of complement treatments, and therefore, take longer to decide to treat their GA patients.

To support meaningful growth going forward, we need to continue building awareness of SYFOVRE’s strong clinical profile. We have launched several key initiatives aimed at increasing our share of new patient starts, strengthening our market leadership and accelerating growth in the overall GA markets. Early signs suggest that these efforts are delivering positive results, but their impact on the GA market and SYFOVRE demand will take time. Considering this, we remain conservative in our near-term expectations for growth, anticipating low single-digit percentage vial growth for the remainder of 2024 with flat to modest net revenue growth in the fourth quarter. We plan to provide further insight into the GA market dynamics and our growth expectations for 2025 in the coming months as we gain visibility into the impact of our new commercial initiatives.

It is important to remember that we are still in the early stages of the launch. We estimate that only about half of all GA patients are diagnosed and seen by an eye care professional. And of those, an estimated 15% are currently being treated. GA patients are on an irreversible path to blindness and SYFOVRE has a significant impact on slowing disease progression and potentially preserving patients’ vision for longer. We see tremendous opportunity over the long term, but expect the sales ramp to be more ratable going forward. Importantly, we continue to believe SYFOVRE remains on track to becoming a blockbuster drug. Quickly touching on Europe. We were disappointed with the negative CHMP opinion despite multiple analyses showing that treatment with SYFOVRE will preserve vital function.

We do not have plans to pursue EU approval further at this time. And then moving to EMPAVELI. We were extremely pleased to share the full results from the Phase III VALIANT study in C3G and primary IC-MPGN at Kidney Week last month. I will let Caroline discuss these results further, but we believe EMPAVELI has the potential to become a best-in-class treatment for these rare kidney diseases, redefining the current treatment paradigm for patients with C3G and IC-MPGN. At Apellis, we have spent the last two decades investigating C3 as a therapeutic target because we believe in the significant benefit of targeting C3 as compared to other targets within complement. These positive VALIANT results suggest, once again, that Apellis’ C3-targeted therapies are particularly effective across multiple therapeutic areas, now including PNH, geographic atrophy and C3G and IC-MPGN.

We received feedback from the FDA last week that our submission proposal has been accepted, which means that we remain on track to file our supplemental NDA early next year in both C3G and IC-MPGN based on our positive 6-month data. Importantly, the FDA did not require us to file with the full 52-week data. Our ex U.S. partner, Sobi, expects to file a regulatory submission in the EU in early 2025, followed by a submission with the Japanese health authorities later in 2025. The VALIANT data also unlocked additional opportunities within nephrology that we are evaluating and plans to provide detail on soon. On the commercial front, EMPAVELI generated $24.6 million in U.S. product revenue in PNH in the third quarter, up 3% as compared to the same period last year.

The 97% compliance rate supports the substantial benefit that these patients are receiving. In closing, our strong fundamentals position us well for the future. Apellis has two commercial products, each with blockbuster potential, which are already making a meaningful difference in patients’ lives. Our emerging pipeline holds exciting products, and we look forward to sharing more on this soon. We are on a clear path to profitability and continue to believe we can independently fund our core business. And with that, I will now turn it over to Adam to discuss our commercial activities.

Adam Townsend: Thanks, Cedric, and good morning, everyone. I will begin with SYFOVRE. In the third quarter, we delivered approximately 84,500 commercial doses, a 7% increase compared to Q2 and approximately 4,000 samples of SYFOVRE. The growth in demand seen during the quarter reaffirm SYFOVRE’s leadership in the market. SYFOVRE closed the third quarter with approximately 65% market share as defined by injections and approaching half of new patient starts. As of September, more than 2,200 sites of care have awarded SYFOVRE. As Cedric mentioned, the increase in demand was offset by adjustments to our gross to net, including contracting, that affected overall net revenue. As a reminder, contracting with physician practices is common within the buy-and-bill space.

At the end of 2023, we made strategic contracting decisions to remain competitive that impacted SYFOVRE’s average sales price or ASP reimbursement in the third quarter of 2024. We also recorded higher rebates this quarter due to some incremental contracting decisions that took effect on July 1. While this quarter was particularly impacted, to be clear, we have not chased large rebates or deep discounts nor do we intend to in the future. Our strategy has always been to maximize access to SYFOVRE for patients while preserving long-term economics. We recognize the importance of staying competitive and have balanced these economics with the efficacy that SYFOVRE offers. Turning back to demand. We are encouraged by the continued demand growth for SYFOVRE, but we know there’s more work to do to sustain this growth moving forward.

To that end, we’ve launched several initiatives as part of Phase 2 of our commercial strategy to help shift the dialogue with ECPs towards SYFOVRE’s robust efficacy profile including its increasing effects over time up to 42% in non-subfoveal patients, multiple analyses demonstrating preservation of visual function and well-documented safety. Key initiatives include leveraging medical congresses and other key forums to reinforce SYFOVRE’s unique benefits, actively engaging with younger retina specialists who tend to treat a higher share of new patients, expanding our engagement with non-injecting ECPs such as optometrists and general ophthalmologists so that patients with GA seek treatment with a specialist, generating new clinical data and real-world evidence to further reinforce SYFOVRE’s clinical profile.

We introduced the new injection needle, making the user experience even easier by reducing injection force. And we continue to educate payers on the strong value proposition for SYFOVRE. We are pleased to already see some early indications of positive momentum. For example, after seeing a slight decline in new patient share at the start of Q3, SYFOVRE rebounded in the last half of the quarter, closing the quarter approaching 50%. Additionally, market research shows the efficacy messages are resonating. Surveyed ECPs recall SYFOVRE’s efficacy as the leading discussion topic from their last Apellis interaction, up from 46% in April to 73% in September. And lastly, a large Medicare Advantage plan recently made SYFOVRE the only preferred product on their formulary effective January 1, 2025.

This adds to the two large national PBMs that place SYFOVRE as the only preferred product on their commercial plans in July. Looking ahead, we plan to launch Phase 2 of our branded DTC campaign soon, which brings back Henry Winkler. This campaign is intended to educate patients on SYFOVRE’s profile, increasing patient awareness and driving SYFOVRE conversations with ECPs. SYFOVRE’s market share has been stable at roughly 65% since September. This, combined with the uptick in new patient share in recent weeks, suggest that our initiatives are starting to have an impact. While we are encouraged by the positive momentum, it will still take time for these to gain traction, which is why we must be prudent in our guidance for the remainder of 2024.

Market research shows that questions about safety continue to delay more meaningful discussions about the benefits of SYFOVRE and those benefits that are offered to patients. It can take at least six conversations with an ECP before the efficacy messages truly resonate. That said, our long-term outlook for SYFOVRE remains strong. We have only scratched the surface of SYFOVRE’s market potential and there is a significant opportunity for further growth. We anticipate growth moving forward will be gradual, but with only two available therapies in a large category and no new competition expected for at least the next four years, we are confident SYFOVRE will remain the leading GA product in the U.S. for many years to come. Beyond SYFOVRE, I’m excited about the opportunity for EMPAVELI to expand into C3G and IC-MPGN.

We believe the commercial opportunity for these indications is significant. We estimate approximately 5,000 patients in the U.S., but also believe that these diseases are likely under diagnosed because there are no treatments currently available. Feedback from physicians has been resoundingly positive that the severity of these diseases warrants use of the most efficacious treatment option available. Across the board, nephrologist feedback is that EMPAVELI data are significantly differentiated from other compounds in development with the enthusiasm among physicians exceeding even our highest expectations. If approved, we believe we are in a strong position to capture a significant proportion of this market and generate meaningful growth for EMPAVELI.

Now let me shift to EMPAVELI in PNH. In the third quarter, EMPAVELI generated approximately $24.6 million in U.S. net product revenues. Compliance rate remained high at 97%, and the safety profile remains consistent with our previous updates. With that, I will now turn the call over to Caroline. Caroline?

Caroline Baumal: Thanks, Adam, and good morning, everyone. As Adam mentioned, we are starting to see multiple instances of meaningful real-world presentations, reaffirming SYFOVRE’s robust efficacy and we expect the first paper from a third-party on SYFOVRE to be published soon. These real-world data reinforce SYFOVRE’s unprecedented effects, adding to the largest body of evidence supporting SYFOVRE treatment and allowing us to further strengthen our message around efficacy. Moving to EMPAVELI. The feedback on the full VALIANT data set that was presented at Kidney Week last month was remarkable. In these diseases, physicians are focused on three key markers of disease activity when evaluating a potential treatment. These are proteinuria, eGFR and C3c staining.

As detailed in our full data set, pegcetacoplan showed positive effects on all three in just six months. This included a statistically significant 68% reduction in proteinuria with reductions observed as early as week four and effects that were consistent across all subgroups of patients regardless of disease type, age and transplant status. A stabilization of eGFR, a key measure of disease function. And a substantial reduction in C3c staining with over 70% of pegcetacoplan-treated patients having achieved zero C3c staining intensity, indicating complete clearance of C3c deposits. There are no approved treatments for C3G or IC-MPGN and the unmet need, given the severity of these diseases, is extremely high. The totality of the efficacy data from VALIANT shows that pegcetacoplan rapidly, significantly and consistently improved key outcomes for patients with C3G and IC-MPGN.

We are ecstatic about what the results mean for the patients, physicians, caregivers and everyone else within the C3G and IC-MPGN communities. Finally, we are continuing to advance our earlier-stage pipeline such as our C3 siRNA that is currently in Phase I development and our Beam collaboration. We are excited to share more details about our pipeline programs with you in the future. I will now turn the call over to Tim for a review of the financials. Tim?

Tim Sullivan: Thank you, Caroline. I will now provide an overview of our financials. Additional details are available in the press release that we issued earlier this morning. Total revenue for the third quarter of 2024 was approximately $197 million, including $152 million in SYFOVRE and $24.6 million in EMPAVELI U.S. net product revenue. This compares with $110 million in total revenue in the third quarter of 2023. Turning to the rest of the P&L. For the third quarter, cost of sales was $33.6 million. R&D expenses were $88.6 million. SG&A expenses were $122 million. And we reported a net loss of $57.4 million. Cash operating expenses, which excludes stock-based compensation and depreciation and amortization were approximately $180 million for the third quarter.

We continue to expect total cash operating expenses in 2024, inclusive of R&D and SG&A expenses, to be less than our total cash expenses in 2023. As Adam mentioned, there was an increase in SYFOVRE’s gross to net percentage this quarter as compared to previous quarters. This is a result of two factors. The first was due to contract decisions resulting in higher discounts to physicians. The second was related to a true-up of certain fees from prior quarters included in gross to net in Q3. Looking ahead, we expect gross to net to continue to be impacted by ASP erosion and required contracting, but we expect that erosion to be modest and not at the rate we saw in the third quarter. We now expect gross to net through 2025 to be in the low to mid-20% range.

With $397 million in cash and cash equivalents as of September 30, we remain confident in our strong financial position. We expect our existing cash, combined with our future product sales to be sufficient to fund our core business to positive cash flow. I will now hand the call back over to Cedric for closing remarks. Cedric?

Cedric Francois: Thank you, Ted. We are focused on building out the GA market and realizing the opportunity in front of us in C3G and IC-MPGN. With two potentially blockbuster commercial products, a pipeline of innovative programs in development and a strong financial position to support the business, we are confident in our ability to continue to create significant value for our patients and our shareholders. With that, we will now go over to the Q&A session.

Operator: [Operator Instructions] Our first question will be coming from Jon Miller of Evercore. Your line is open.

Jonathan Miller: Hi, guys. Thanks so much for taking the question. I would love to spend my one question talking about the evolution of market share in 3Q and beyond. Obviously, we all heard your competitor talking about increased market share in 3Q and their expectations for, well, in their mind, continuing dominance from here. So what are the pushes and pulls of you versus them on who’s going to end up with the dominant market share? And to what extent do you think that the actions you’re taking to drive patients into the retina physician practice out of those ophthalmology offices, to what extent are those going to deliver patients to you as opposed to the competitor?

Cedric Francois: Thank you, Jon. Great to hear you. So look, as we’ve always said, the benefit of SYFOVRE lies in its differentiated efficacy profile, right? It is also the only drug that has shown increasing effects over time that has shown efficacy with every-other-month dosing both in foveal and subfoveal patients. That differentiated efficacy profile is really what stands out and what we will be building the market on now. So Adam, I’ll hand it over to you to maybe add a couple of thoughts.

Adam Townsend: Yes. Thanks, Jon. So obviously, as we’re heading into year three of the launch, we’re now calculating market share based on injections, versus based on patients. We actually believe this is similar to the way our competitor calculates market share. We think it’s a really important metric and we believe that we are at a market share of 65%. Now if we were still to use our market share based on patients. As we have previously reported, that market share would be approximately 70%. Injection share incorporates factors such as dosing frequency, bilateral usage, compliance and active patients. That’s why we think it’s a really valuable metric. Now as per new patient starts, after seeing a slight decline in new patient starts at the start of Q3.

SYFOVRE rebounded in the last half of the quarter, closing the quarter approaching 50%. The reason we believe is that this is an efficacy-driven market, and we have the strongest efficacy profile, and we’re executing our plan to bring new prescribers and young prescribers into the market.

Cedric Francois: So does that answer your question?

Jonathan Miller: Yes, that helps. Thanks very much. I’ll hop back in the queue.

Operator: And one moment for our next question. Our next question will be coming from Tazeen Ahmad of Bank of America. Your line is open

Tazeen Ahmad: Hi guys. Good morning and thanks for taking my question. And maybe wanted to stay on topic with SYFOVRE. Your competitor has been wanting, it seems, to provide a lot of detail about the cadence of their launch, providing a first stab at guidance and then revising it at their last call upward. I know a question that investors had is when Apellis would feel comfortable providing guidance on sales. And I think that’s also tied to how people think you think the rate of growth of the market is going to be. I think there’s some questions about the size of GA with the 2 products currently approved. So what are you feeling that you need comfort on in order to provide, let’s say, full year sales guide on a go-forward basis? And how are you thinking that’s going to be reflected about how you’re thinking about the size of the overall opportunity? Thanks.

Tim Sullivan: Thank you, Tazeen. Look, we’re considering providing guidance for next year and we haven’t made a decision on that yet. A couple of things, we have these initiatives we’ve discussed and there are certain market dynamics that we think will settle out over time. We’d like to see how those evolve. And for the moment right now, we’re focused on fortifying our position as the market leader and growing the GA market overall. But once I think we feel we have a little bit better understanding of that, I think we would feel comfortable giving some sort of guidance. But at this point, it’s under consideration.

Operator: And one moment for our next question. Our next question will be coming from Anupam Rama of JPMorgan. Your line is open.

Anupam Rama: Hi guys, thanks so much for taking the question. Do you think your sales team is sort of right-sized to get to that next tier of docs that you’re talking about in terms of prescribing SYFOVRE and a complement inhibitor? And any trends we should think about in terms of sampling for that next tier of physicians relative to what you kind of disclosed in 3Q? Thanks so much.

Adam Townsend: Anupam, it’s Adam. Thanks for your questions. So we analyze our sales team and our infrastructure on a regular basis based on our target audience. And at the moment, we believe that we have the right field force structure to execute and grow a depth and a breadth strategy across the market. We have made a couple of new initiatives to drive more patients and patient referrals. So we are in the process of putting an ophthalmology field team in place to educate on geographic atrophy for non-injecting ophthalmologists to help refer patients to SYFOVRE usage. And we also have a digital virtual optometry team to also fuel more and more referrals to injecting retina physicians. As it comes to sampling, obviously, with our commercial vial demand growing at 7% and given that this is a buy-and-bill commercial model.

We now have a J-code, we have well-established payer coverage, and over 2,200 sites of care. We believe that sampling has less significant role at the moment, but we still believe that samples will make up approximately 5% of SYFOVRE’s total vial demand moving forward. You would expect that new prescribers will use samples as part of this market, as they get more and more experience of SYFOVRE.

Operator: And one moment for our next question. Our next question will be coming from Salveen Richter of Goldman Sachs. Your line is open.

Salveen Richter: Thank you. Good morning. You noted that market growth is now being driven by the next group of retinal specialists. Could you just elaborate on who these specialists are and how large that group is? And if I could just also just go back to this flat to modest revenue growth in 4Q. Can you just help us understand what this accounts for in terms of gross to net?

Cedric Francois: Thank you so much, Salveen. I will answer the first part of the question and then hand it over to Tim. So I think the retina community, and I think this is not just typical to the retina community, but any type of launch, you have the initial wave where you have patients that have been waiting on the sidelines for something to be approved, with retina doctors that are enthusiastic to the first movers. And then you have a whole swath of the next wave of physicians, as well as patients in a disease that is slowly progressing, that kind of wait for the dust to settle of that first wave to then engage and slowdown this devastating disease. So that’s really where we currently are, and what we are seeing in the marketplace. Caroline, I don’t know if you want to add something to this?

Caroline Baumal: Sure. Thank you. Hi Salveen. I think that many trainees and younger retina doctors also have only been in practice for a limited time, so have maybe not seen the full effects of geographic accuracy on their patients. But they’re very, very motivated to learn about geographic atrophy, and how to treat these patients. So we really would like to make sure that we don’t forget any of these new, young trainees and with more and more physicians training in retina that, they have available to SYFOVRE.

Tim Sullivan: Thank you, Salveen. In terms of the guidance, that incorporates our gross to net that I mentioned in the prepared remarks, which was going forward through 2025, we believe, that gross to net will be in the low to mid-20s. Obviously, this quarter, we had a relatively large gross to net jump. That’s a function of certain launch dynamics that all came together in this third quarter. So we don’t expect anything remotely like this going forward and gross to net to evolve in a more in a modest sense as ASP sort of steadily erodes as we discussed.

Operator: And one moment for our next question. Our next question will come from Yigal Nochomovitz of Citigroup. Your line is open.

Yigal Nochomovitz: Hi guys. Thank you. So for my one question, I guess I’ll ask a two-part question. Could you just provide a little more clarity on this impact to the ASP? It sounds like there was something related to maybe a discount trigger in the contract related to order volume that may have just all lined up in the third quarter, if you could clarify that. And then regarding the duration and persistence of therapy, I’m curious if you’ve collected any data, Adam, in terms of the percent of patients that are staying on the therapy, and then the percent that may be taking a break or don’t return on schedule? Thank you.

Tim Sullivan: So sure. Thanks, Yigal. I will start with the gross to net part of your question. So the impact in the third quarter was really a result of three things. I know we mentioned two in the prepared remarks, but I’ll dig in and divide this first one into two parts, and this ultimately sort of created the perfect storm for just this quarter. The first one, which is, again, these two parts is the strategic contracting decisions that we actually made in late 2023 and that resulted in a lower ASP starting in Q3, okay? Beyond that, we had certain rebates provided as a result of incremental contracts within the third quarter. And then the final piece, which is not insignificant, was a true-up of certain fees and expenses from prior quarters. So as I said, we now expect gross to net through 2025 to be in the low to mid-20% range.

Adam Townsend: Yigal, it’s Adam. You also asked a question on discons. So obviously, at the moment, we’re happy with the feedback from physicians on patient adherence. We’re seeing persistence and discontinuation rates similar to what is seen with the anti-VEGFs in wet AMD. A key driver of compliance is patient motivation. These patients are really committed to staying on drug to preserve their vision. Every-other-month dosing provides meaningful flexibility to those patients, and we believe that also drives strong compliance with the efficacy you also see with every-other-month dosing.

Yigal Nochomovitz: Thank you.

Operator: And one moment for our next question. Our next question will be coming from Steve Seedhouse of Raymond James. Your line is open.

Nicholas Econom: This is Nick on for Steve. Just a quick one for us. Are you able to comment on which renal indications you like for testing EMPAVELI next? Or do you have a time line set for when you’d articulate further clinical development in kidney? Thank you.

Cedric Francois: Thank you so much for that question. So not yet is the short answer. But we’re working hard in the next couple of months, we will provide more clarity.

Nicholas Econom: Great. Thank you.

Operator: And one moment for our next question. Our next question will be coming from Phil Nadeau of TD Cowen. Your line is open.

Phil Nadeau: Good morning. Thanks for taking our question. One follow-up and then one actual question on – from us. Tim, you’ve been very clear where gross to net is going. I’m still not entirely clear where gross to net actually was in Q3. Could you quantify what the gross to net was in Q3? And then in terms of going forward, there’s been some reports of vasculitis for IZERVAY in the adverse event database at the FDA. Has that had any impact on prescriber in the market from what you’ve seen? Curious to get your feedback from your feet on the street on those reports? Thanks.

Tim Sullivan: Yes. Thank you, Phil. So we previously had guided from the beginning of the launch of gross to net in the 10% to 20% range. And we had sort of earlier on been kind of in the middle-ish of that range. And this quarter, because of what we described as the perfect storm, we were at the high end of that. And that’s about all I’m probably going to give in terms of accuracy there.

Phil Nadeau: Thank you.

Cedric Francois: Phil, you had a follow-up to that?

Phil Nadeau: No, no, I was just saying thank you. That’s very helpful.

Cedric Francois: As it relates to vasculitis, so we’re not going to comment on our competitor’s safety. But again, as we mentioned earlier, we believe that the only and real difference between the two products is on the efficacy profile where SYFOVRE stands out head and shoulders. We are the only product with the increasing effects over time, with every-other-month dosing and with both foveal and subfoveal patients included in our data set.

Phil Nadeau: Great. That’s helpful. Thank you.

Cedric Francois: Thank you.

Operator: And our next question will be coming from Akash Tewari of Jefferies. Your line is open.

Katherine Wang: Hi. This is Kathy on for Akash. It seems like your competitor is spending on promotional efforts for IZERVAY with an increase in SG&A spend associated with IZERVAY of $127 million for six months of sales of $185 million. So during a similar time period for SYFOVRE launch, so like around 1 year of approval, what was your return on investment? And then in the long term, what are the ROI levels you’re targeting? And more specifically for your DTC spend in 2025, do you think it will be much different from the, spend this year since you’re investing in DTC this year already? Thank you.

Tim Sullivan: Yes. So thank you. I’ll quickly start out and I’ll turn it over to Adam. So we don’t actually break out exactly what we’re spending specifically on commercial for SYFOVRE. Obviously, we work hand-in-hand with Adam on those amounts. And we really haven’t — as a finance group, we haven’t really constrained those efforts, we’ve just tried to be as efficient as possible based on things like metrics like ROI. And for that answer, I’ll turn it over to Adam.

Adam Townsend: Yes. Thanks, Kathy. So we look at every initiative from an ROI perspective. So we analyze it internally on a regular monthly cadence and take a big initiative like disease state education pivoting to DTC with Henry Winkler. We do a robust ROI analysis on that. We actually believe that, that’s a really, really sound sophisticated business approach for us, and it drives many, many more patients in. So it’s a very positive ROI for DTC. So that’s the type of analysis we do. This is a really, really big market and we’ve only just started to scratch the surface. So the more effective we are in executing our plan and balancing what that looks like from an ROI perspective, the better the results will be.

Katherine Wang: Okay. Great. Thank you so much.

Operator: And one moment for our next question. Our next question will be coming from Ellie Merle UBS. Your line is open.

Eliana Merle: Hi guys, thanks for taking the question. I want to talk a little bit more about the volume trends that you’re seeing. So specifically, you said that you expect the sales ramp to be more gradual going forward. Just in terms of vial shift, does that mean we should expect similar vial growth in 4Q as in Q3? And just any more details you can give us on the volume trends you’re seeing so far in October? Thanks.

Tim Sullivan: So I think that we did give some guidance in the prepared remarks on the vial growth, and we sort of said mid percentages roughly is what to expect, low to mid percentage vial growth, right? So beyond that, I don’t think we’re planning on guidance for the quarter.

Eliana Merle: Okay. Thanks.

Operator: And our next question will come from Annabel Samimy of Stifel. Your line is open.

Annabel Samimy: Hi. Thanks for taking my question. So I guess from the initial launch, it looks like you’ve got a lot of the low-hanging fruit and now it’s a bigger push to get more. What are you seeing in terms of dynamic referrals? Like when a patient comes into the retinal specialists from the ophthalmologist or the optometrist, are they coming in for monitoring now or treatment? Are they typically severe enough to treat? Or are they still in a watchful waiting mode? And then you mentioned six conversations to convert a retinal specialist who wasn’t an early adopter. Does this get worse as these patients from the optometrists and the ophthalmologists come in because there may be less severe? I just wanted to understand the dynamic there of what types of patients you’re starting to see from those specialists – from those – from that group?

Cedric Francois: Thank you, Annabel. So that is a really important and good question, right? So I think what was actually really great in the last few months is that kind of the uncertainties, people not knowing how to think about efficacy, how to think about safety, et cetera. That is slowly dissipating, right? So we’re going to end up next year in a situation where kind of from a – with a lot of data available to us, both from our trials. But now also as Caroline alluded to, from the real world and that data looks very good, the states where physicians and patients can make an educated decision on treatment. And that’s something that we really look forward to. Caroline, I don’t know if you want to add something to that?

Caroline Baumal: Sure. I can add from what my colleagues are telling me and from what I’m seeing myself, this is a novel mechanism of action and we have a new treatment paradigm. And there are still many patients who are coming into the office. We’re always having patients referred with macular degeneration of all types, whether it’s early or there are patients who have later stages of the disease. And so we’re still seeing a whole host of different types of patients. I think that physicians are having conversations with their patients, and they really center around efficacy. Now of course, whenever we have a treatment safety also plays a role, but patients are really driven by efficacy, and the flexibility of dosing with six injections a year.

And then, I think the other thing that moves the needle for physicians is we have a lot of long-term robust data. In addition to GALE, where patients have already had 5 years of full treatment, we have a real-world VALIANT study. And then there are four real-world studies done unrelated to Apellis and that really, in many ways, speaks more to physicians. One of those studies has over 12,000 patients and those studies have shown robust reductions in GA lesion growth, photoreceptor preservation, and all of the things that we have found, so just confirming our data. Go ahead, Adam.

Adam Townsend: Annabel, it’s Adam. Just on the final part of your question, so we are educating optometrists and ophthalmologists so that the patient also is aware as they progress to a retina physician about their disease and what treatment could possibly look like. We are actually hearing a lot from the fields that patients go in saying, I want the Henry Winkler drug, and that type of activity. So these patients are educated and are learning about the disease. We find it takes between six to nine conversations to get a new physician on board with the efficacy and the benefit/risk for SYFOVRE. So, we have the capability of getting time with these physicians. Access is not a problem. And we’ll continue to execute as flawlessly as we can.

Annabel Samimy: Thank you.

Operator: One moment for our next question. Our next question will be coming from Francois Brisebois of Oppenheimer. Your line is open.

Unidentified Analyst: This is Dan on for Frank. Thanks for taking our questions. Just a quick one from us. I’m sorry if you touched on this, but the uptick in new patients in the recent weeks, could you give us any color in terms of what factors may have contributed to that? Anything around that recent uptick? Thanks.

Adam Townsend: Yes. Thanks, Dan. Yes, we continue – we did dip below and we’re below 50% and we’re back and stable at approximately 50%, and that uptick has been stable. I think it’s down to us executing our plan on the benefits and the efficacy that SYFOVRE can bring: increasing effects over time, flexible dosing, well-documented safety, and the significant real-world experience. And I think that’s starting to resonate with our current prescriber base, but also all of these new physicians that we’re targeting. So, we will continue to execute as flawlessly as we can.

Operator: One moment for our next question. Our next question will be coming from Douglas Tsao of H.C. Wainwright. Your line is open, Douglas.

Douglas Tsao: Hi, good morning. Thanks for taking the questions. Maybe, Adam, just as a follow-up on that. I’m just curious in terms of if you could provide some color in terms of the messaging, and what resonated with physicians to drive a rebound in share? Was it really that physicians simply weren’t aware, of some of these efficacy differentiation points? Have they lost focus on it? Perhaps were they sort of under a mistaken impression on the rate of vasculitis events?

Adam Townsend: Yes. Great question, Doug. We did see a lot of what you’ve described. So we have simplified our efficacy messages, so that we can get them across field-based interactions and digital interactions around the strong efficacy, up to 42% in non-subfoveal patients, flexible dosing and well-documented safety. We have been very transparent on our safety and we have communicated that to physicians, to make sure that people understand the fact base behind our efficacy as well as our safety. And that’s what we will continue to hit. And that, I think, part of the plan of what’s leading to the stability that we’re seeing in the market. Caroline, I don’t know if you want to add anything from a physician perspective.

Caroline Baumal: Thank you, Adam. I think another important thing is that we’re very aligned with the ReST Committee and the ASRS, and that is an organization that’s retina physicians run by retina physicians it’s their organization. And physicians really take confidence in that we’re working with them. The rate hasn’t changed and they’ve seen no unsuspected events. So that based on the real-world data that’s come into play, has really increased confidence amongst retina doctors.

Douglas Tsao: And I guess just as a follow-up, I mean, between all those factors that you mentioned, Adam and Caroline, I mean, was there one in particular that you thought was perhaps – or you’ve gotten feedback was misunderstood in the marketplace, and as your reps have gone out sort of has been corrected?

Adam Townsend: Yes, Doug, we’ve been consistent that we believe that this is a market that’s going to be driven on efficacy. And we get some incredibly positive recall data, and knowledge from physicians on the efficacy messages once we’ve hit them, and it does take a little bit of time for them to resonate. So we think efficacy is changing the curve.

Douglas Tsao: Okay. Great. Thank you so much.

Operator: And one moment for our next question. Our next question will be coming from Lachlan Hanbury-Brown of William Blair. Your line is open.

Lachlan Hanbury-Brown: Hi, thanks for taking the question. We’ve already had a few questions this morning around the October trends for SYFOVRE. It sounds like you’ve recovered new patient share and you’re seeing decent growth, but you’re also guiding to sort of low to mid-single-digit volume growth in the fourth quarter. So can you just sort of reconcile some of those October trends that you’ve talked about with the full quarter commentary?

Tim Sullivan: Sure. Listen, I’ll just start out and then I’ll turn it over to Adam. What Adam said is what we can – obviously what we see. We’ve seen new patient share approaching 50%. We’ve also seen, as you can see, the market is still growing, but it was growing at a little bit of a slower rate in the last quarter. So I think our confidence over the long-term is quite strong that the efficacy profile of SYFOVRE will dominate over time. But in the short term, these dynamics take some time to take effect, right? We have certain initiatives we’re putting in place like DTC, and others that we’ve described, as Adam talked about, but those don’t have an immediate impact. So from the perspective of what we can see this quarter, I think it was prudent to take that approach and just say, look, low to mid-single-digit growth in the vial basis, and flat to moderate growth on a revenue basis. I don’t know if you want to comment more, Adam.

Adam Townsend: No, I think you said it really well.

Lachlan Hanbury-Brown: Thanks.

Operator: And one moment for our next question. Our next question will be coming from Derek Archila of Wells Fargo. Your line is open.

Derek Archila: Hi guys, thanks for taking the questions. So just I wanted some help reconciling your comments on reaching profitability with current cash while anticipating flat to modest sales growth. I guess, what type of growth does that imply for SYFOVRE in 2025 and beyond? And I guess, maybe on the flip side, what levels of OpEx? And then another just to squeeze in, I guess, should we assume the sale of receivables is part of that funding strategy to profitability? Thanks.

Tim Sullivan: Sure. Thank you. That’s a great question. So look, we ended the quarter with about $400 million in cash. That included a sale of roughly $57 million in receivables. So that was — obviously, you’ve read the Q. So congratulations. Thank you. Look, when you look at our operating expense that’s on a cash basis, you exclude one-time items of about $15 million on the COGS line, and then our cash OpEx of roughly $180 million on the SG&A and R&D lines. You get to the fact that we’re basically neutral on net revenue to cash operating expenses basis. And beyond that, we had a net interest of around $10 million. So you’re looking at kind of $10 million in operating burn and the rest of this sort of cash usage relates to working capital.

And for that, we put in place this ability, to monetize our receivables a little bit earlier because we extend these receivables quite significantly as much as five months – four to five months. So from our perspective, that’s really just bringing in cash that’s ours a little bit early. But you can see from an operating level, we are pretty much nearing, if not around breakeven. So our perspective is it doesn’t take much growth to make us cash flow positive. And obviously, we have a lot of faith in the long-term of this product, as we’ve talked about. We also have C3G coming on. So, we don’t see any immediate need or risk from a capital perspective.

Derek Archila: Got it. Thank you.

Operator: And one moment for our next question. Our next question will be coming from Biren Amin of Piper Sandler. Your line is open.

Biren Amin: Yes. Hi guys, thanks for taking my questions. Can you maybe talk about how many switches you’re seeing from IZERVAY as part of the new patient share growth that you’re experiencing in the last half of Q3? And for 2025, what’s the SG&A increase that we should expect for C3, MPG? And I think Novartis mentioned that they have about 100-plus person sales force dedicated to nephrology? Thank you.

Adam Townsend: Hi Biren, yes, it’s Adam. So switching first on SYFOVRE. So obviously, our data analysis suggests that switching does occur, but we actually think it doesn’t happen that frequently. Hence, we’re executing our plan to grow depth and breadth in accounts and bring on new young prescribers to our business. We think that’s what’s really going to move the needle forward. When it comes to infrastructure for the nephrology indications, so we’re doing that homework now. We obviously have a really small, but mighty PNH infrastructure, which we will leverage to move into the kidney. So we’re doing our homework there to look at the target population, and what field force structure that we would need, to compete to get those patients with the great profile that EMPAVELI is showing.

Cedric Francois: And maybe adding one thing to that – or two things to that. On the switches, there are switches occurring in both directions, right? I mean, as again, this field will settle and there’s a couple of things still that we need to see materialize in the next couple of months in both directions. The other aspect is, as it relates to C3G and IC-MPGN, again, reiterating the fact that we were not asked to submit the 12-month data, but the six-month data was sufficient. We had a pre-NDA meeting that was scheduled with our team in Washington. Meeting got canceled because of all questions were answered. So again, a very exciting program for us that we think will add meaningfully to what we are doing.

Biren Amin: Great. Thank you.

Operator: And one moment for our next question. Our next question will be coming from Lisa Walter of RBC. Your line is open.

Lisa Walter: Oh great. Thanks so much for taking our questions. Maybe just one on SYFOVRE and given the recent negative CHMP opinion, and also your competitor withdrawing from filing in the EU. How are you thinking about the possibility of potential approval and other ex U.S. geographies, particularly U.K., Australia, Canada, Switzerland? And also beyond those four countries, are there any other large foreign markets that are also on your radar? Thanks for taking the question.

Adam Townsend: Hi Lisa, it’s Adam. Yes, thanks for your question. So obviously, we still progress with the U.K., Switzerland, Canada and Australia. Those are countries that are outside of EMA’s guidance that used to be within something called the Access Consortium. So we continue to have positive and robust conversations with those geographies. We also will move forward in areas where the U.S. file is required. So we started to build a lean infrastructure in Brazil to get ready for those regulatory interactions. And we have distributors who will help partner with us to get to other smaller markets where the U.S. filing is accepted. So, we still see a really large unmet need outside of the U.S., when it comes to geographic atrophy and we’re executing country by country.

Lisa Walter: Got it. Thanks so much.

Operator: And one moment for our next question. Our next question will be coming from Greg Harrison of Scotiabank. Your line is open.

Greg Harrison: Hi, good morning. Thanks for taking the question. Looking at the feedback from ASN, everything was very positive there. Are you able to provide any additional color on physician feedback now that they’ve had some time to digest the data from the conference? And how are you thinking about your competitive positioning in those indications in the shorter and longer term? Thanks.

Cedric Francois: Thank you so much, Greg. Thank you for asking the question about the kidney, something we’re really excited about. And to your point, ASN was a very pleasant conference for us to attend. The reality here is that if you are a teenager with C3 or IC-MPGN, and with the data that we have, we believe that you have an opportunity to never have to worry about being on hemodialysis or requiring transplant. Think about that, right? I mean, that is what this data really represents. So really excited about that competitively. As I mentioned before, we are – we have a very different profile on three important endpoints on proteinuria reduction, of course, but also on eGFR stabilization, and importantly on C3c staining where we saw these dramatic effects. And Caroline, maybe you want to add something to that?

Caroline Baumal: Sure. Thank you. Well, it was my first nephrology meeting. And I can say across the board, the clinicians were so excited about these findings. I mean, to see this sort of effect is really remarkable. And I think one thing that was really important for them was that the effect started as early as four weeks in these patients. And as a physician, why wait for kidney disease to get worse, it might get worse to the point that it’s irreversible, right? And these patients are often young in our studies, the mean age for patients in their 20s. So they were really excited to give them something that worked, and worked quickly and could prevent them from having a negative outcome. So across the board, everyone was very excited for this.

Operator: And one moment for our next question. And our next question will be coming from Jon Miller of Evercore. Your line is open. Again, Jon Miller of Evercore. Your line is open. Moving forward to our next question. Our next question will be coming from Graig Suvannavejh of Mizuho Securities. Your line is open.

Graig Suvannavejh: Good morning. Thanks for taking my question. My question is on your longer term and perhaps aspirational view around potential peak penetration of the complement inhibitor class, you’ve been great about providing granularity on current penetration, which I believe you said earlier might be at about 15%. But longer term, where do you think 15% can go? And how long do you think it might take to get there? Thanks.

Cedric Francois: Thank you, Greg. Caroline?

Caroline Baumal: Well, I think that no one should be surprised of this treatment. And our patients are only getting older. And these patients come in, whether it’s for AMD, for cataract. We have so much education that we could do not just with optometrists, but across the eye care provider market, which is more than just optometrists and retina. So I think that, hopefully, we will continue. It’s a chronic disease. We’ll continue to have the penetration go up. We’re just really at the start.

Operator: And one moment for our next question. Our next question will be coming from Laura Chico of Wedbush Securities. Your line is open.

Laura Chico: Good morning. Thanks very much. Two clarifications for me. Just following up on the cash runway guidance. Just wanted to clarify, does that incorporate a C3G launch and revenue contribution? And then second, I think I might have missed it, but the average number of injections per patient, how has that changed over the course of the launch here? Thanks very much.

Tim Sullivan: Thank you very much, Laura. I’ll take, obviously, the first question. It absolutely does. The incremental cost for C3G launch would not be massive in terms of expenditure relative to where we are and – so that absolutely does.

Adam Townsend: Laura, it’s Adam, to your second part of the question. So every-other-month dosing or that flexibility to push to every-other-month dosing has been, really stable at 80% to 90% of all of SYFOVRE’s prescriptions. Physicians and patients believe in the efficacy and the flexibility of every other month dosing. So, we expect that to stay the same as we move forward.

Operator: One moment for our next question. Our next question will be coming from Jon Miller. Your line is open.

Jonathan Miller: Hi guys. Thanks for taking my follow-up here. I’d love to ask more on the kidney indications. How do you expect – obviously, it’s a little early to discuss eventual label. But given you’ve got data in C3G, IC-MPGN both pre and post-transplant, how do you expect your potential label, to look relative to Novartis’ considering the differences in trial design? And do you expect that proteinuria efficacy differences aside, is the patient population going to be materially broader for you guys?

Cedric Francois: Thank you, Jon. So that is – we’re not going to comment on what we expect in the label. But to your point, we studied pediatric adults, pre-transplant, post-transplant, C3G and IC-MPGN and all levels of C3 concentration, right? I mean, our competitor studied only patients with C3G, only in adults, only pre-transplant and only in patients that had C3 depletion. So it’s really a very narrow population compared to what we studied in VALIANT where across the board we saw the same efficacy profile. And again, the benefit of being able to file with the six-month data as a reflection of the robustness, and the quality of what we were able to establish. So again, we believe that this is a treatment that may offer the possibility, to an adolescent to never have to worry about hemodialysis, or a transplant.

And there are at least 5,000 patients, we believe, in the U.S. with this condition, of which are already 1,000 to 1,500 are transplanted, and at risk of relapsing. So really important indication, and we believe a tremendous first line and all-encompassing solution, for these patients.

Operator: And I would now like to turn the call back to Cedric for closing remarks.

Cedric Francois: Thank you so much. And thank you, everyone, for joining us this morning. If you have any follow-up questions, feel free to contact Meredith, and we look forward to speaking with many of you today. Thank you so much.

Operator: And this concludes today’s conference. Thank you for your participation. You may now disconnect.