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Operator: Good day, and welcome to the Second Quarter 2025 Apellis Pharmaceuticals, Inc. Earnings Conference Call. [Operator Instructions] Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your speaker, Tracy Vineis, Vice President of Communications. Please go ahead.

Tracy Vineis: Good morning, and thank you for joining us to discuss Apellis’ Second Quarter 2025 Financial Results. With me on the call are Co- Founder and Chief Executive Officer, Dr. Cedric Francois; Chief Financial Officer, Tim Sullivan; Chief Medical Officer, Dr. Caroline Baumal; and Executive Vice President of Commercial, David Acheson. 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, Tracy. As many of you know, Apellis is a pioneering biopharmaceutical company with 2 approved C3-targeting medicines, SYFOVRE and EMPAVELI, both have blockbuster potential and a pipeline of innovative therapies. We are focused on treating diseases with high unmet needs by targeting C3, the central protein in the complement cascade and the only target that addresses all 3 activation pathways that can initiate and strike disease. Earlier this week, the FDA approved a label expansion for EMPAVELI for the treatment of patients 12 years and older with C3 myelopathy or primary immune complex membranoproliferative glomerulonephritis. This marks our third FDA approval in just 4 years, a significant milestone that reflects the strength of our science and our ability to deliver for patients.

Importantly, this approval represents a breakthrough for patients as for the first time, they can be treated with a C3-targeting therapy and 1 that achieves the trifecta of outcomes across all 3 key markers of these diseases, including proteinuria reduction, eGFR stabilization and substantial clearance of C3 deposits. It also advances care for several underserved populations that previously had no approved treatments, including pediatric patients with C3G, primary IC-MPGN patients 12 years and older and patients with post- transplant C3G disease recurrence. Launch is now underway, and we are excited to make this transformative medicine available to patients as we expand into rare nephrology. Moving then to SYFOVRE performance. We continued to see steady demand growth in the second quarter.

Total injections, including commercial and free goods grew by 6% quarter-over-quarter, delivering SYFOVRE revenues of $151 million. SYFOVRE remains the clear market leader in GA with 55% of new patient starts during the quarter and total market share exceeding 60%. Commensurate with the headwinds we saw in the first quarter, we do continue to see high levels of free goods usage in connection with the funding shortage at the co-pay assistance programs. The market opportunity in GA is significant. With SYFOVRE’s market leadership, strong patent life, meaningful potential for growth and a low likelihood of new market entrants in the next few years, we have confidence in the long-term potential of SYFOVRE. During the second quarter, we also gained significant operational flexibility through our Aspaveli capped royalty purchase agreement with Sobi.

This transaction reflects our shared confidence in the meaningful growth potential in rare kidney diseases. With a strong cash position, a substantial growth opportunity for EMPAVELI, SYFOVRE’s continued market leadership and a maturing pipeline, we are well positioned for success going forward. With that, I will now turn over the call to Tim to provide a review of the financials from the second quarter. Tim?

Timothy E. Sullivan: Thank you, Cedric. Total revenue for the second quarter was $178 million, including SYFOVRE net product revenue of $151 million. Utilization of SYFOVRE free goods remained high during the second quarter and impacted revenue by approximately $13 million. We expect a similar impact to quarterly revenue throughout the rest of 2025. We delivered over 95,000 doses of SYFOVRE in the quarter, including 82,000 commercial doses and 13,000 free goods doses. SYFOVRE injection demand grew 6% during the quarter. Looking ahead to the rest of the calendar year, we expect quarter-over- quarter injection growth to be in the low to mid-single digits, consistent with the growth trajectory of the last 2 quarters. Over the longer term, we aim to accelerate growth with several key initiatives that David will speak to shortly.

EMPAVELI continues to elevate the standard of care in PNH. Revenue in the second quarter was $21 million, up 5% quarter-over- quarter. Patient compliance rates remained at 97%. We expect EMPAVELI to begin generating meaningful revenue from the C3G and primary IC-MPGN opportunities in the fourth quarter of 2025. Turning now to the capped royalty purchase agreement with Sobi. This transaction reflects both parties’ shared confidence in the blockbuster potential of this product. In exchange for 90% of future ex-U.S. Aspaveli royalties up to the cap, Apellis received a $275 million cash payment upfront. Apellis is also eligible to receive $25 million in milestones upon their European Medicines Agency approval of Aspaveli in C3G and primary IC-MPGN.

Defined caps tied to Aspaveli’s performance allow Apellis to participate in long-term upside. Once these caps are achieved, all royalties refer to Apellis. These deal terms provide validation of the potential for meaningful growth in C3G and primary IC-MPGN. This purchase agreement does not affect the regulatory and commercial milestones Apellis is eligible to receive under our 2020 agreement with Sobi. We have maintained a highly disciplined approach to cost management while prioritizing the commercialization of SYFOVRE and EMPAVELI. Operating expenses were $212 million in the second quarter versus $229 million in the second quarter of 2024. We continue to expect our 2025 operating expenses to be in line with 2024 OpEx. We ended the quarter with $370 million in cash and cash equivalents.

We expect this cash, combined with the $275 million payment from the royalty purchase transaction and future product sales, will be sufficient to fund the business to sustainable profitability. I will now hand the call over to Caroline for an update on our medical activities. Caroline?

Caroline R. Baumal: Thanks, Tim. With SYFOVRE as the leader in geographic atrophy and 3 diseases now approved for treatment with EMPAVELI, we have validated our conviction in targeting C3 as the optimal way to control complement-mediated diseases. With the launch underway in C3G and primary IC-MPGN, we are planning the next phase of our strategy to maximize the potential with EMPAVELI. With a proven ability to control complements with targeting C3, we are expanding EMPAVELI development into 2 other rare kidney diseases, delayed graft function or DGF and primary focal segmental glomerulosclerosis, FSGS. Similar to C3G, FSGS is a rare kidney disease that progresses to kidney failure within 5 to 10 years for about half of patients.

DGF is a complication in kidney transplantation, where the transplanted kidney fails. Most patients are forced to go on to dialysis, which negatively affects the long-term survival of the kidney and overall patient outcomes. The complement pathway plays a significant role in both diseases and there are currently no FDA-approved therapies for either. We remain on track to begin pivotal trials in DGF and FSGS by the end of the year. We are also focused on the development of a next-generation treatment for geographic atrophy. I’m pleased to share that we have initiated a Phase II study evaluating the combination of SYFOVRE and our siRNA ATL-3007. With ATL-3007’s ability to lower complement levels systemically and SYFOVRE’s well-established ability to inhibit complement in the retina, we believe we can improve efficacy with fewer injections.

I look forward to sharing more on our exciting progress in the coming quarters. I’ll now turn the call over to our Executive Vice President of Commercial, David Acheson.

David L. Acheson: Thank you, Caroline, and good morning, everyone. Following approval and the outstanding broad label we received from the FDA, I’d like to start with EMPAVELI and the launch in C3C and primary IC-MPGN. The initial response has been gratifying, and we have already seen activity from both patients and the treatment community. In the U.S., we estimate there are approximately 5,000 C3G and primary IC-MPGN patients. Notably, EMPAVELI’s broad label makes it the first treatment approved for pediatric patients with C3G, primary IC-MPGN patients aged 12 years and older and patients with post-transplant C3G disease recurrence. We expect EMPAVELI to become the preferred treatment option across all C3G and primary IC-MPGN patients on its way to blockbuster status.

By the end of the year, we expect to transition approximately 50 C3G and IC-MPGN patients who are receiving EMPAVELI as part of our early access program or EAP to commercial growth. Furthermore, we know there are some patients and physicians who are awaiting the approval of EMPAVELI that are expected to generate early demand. Beyond this, we expect traditional rare disease launch dynamics, where there have historically been few or no approved treatments. More broadly, we are excited about this opportunity for growth. We are executing on 3 pillars to maximize the potential of EMPAVELI in these diseases. First, raise awareness about the availability of EMPAVELI as a disease-modifying therapy that targets the underlying cause of disease. This approval represents a breakthrough for patients, and for the first time, they can be treated with a C3-targeting therapy.

Second, our goal is to establish EMPAVELI as the treatment of choice among nephrologists. We plan to leverage the outstanding clinical data that supported this approval. Our goal is for physicians and patient communities to equate early use of EMPAVELI with the preservation of kidney function and long-term disease control. Third, we are working to secure broad access as soon as possible. We care deeply for patients and are committed to ensuring that every patient who may benefit from EMPAVELI has access to treatment. This includes helping patients through reimbursement processes, disease education and product support. We have been very successful in increasing disease awareness through our strong presence in physician offices and medical conferences and look forward to updating you on our progress.

Switching now to SYFOVRE and the GA market. We are encouraged to see continued market leadership with injection growth of 6% during the quarter. However, revenue continued to be impacted by elevated use of free goods. We are working closely with retina offices to educate on best practices for managing patient access and reimbursement processes. As Tim already mentioned, our expectation for the rest of 2025 is for low to mid-single-digit injection growth, consistent with the growth we’ve seen in the first half of this year. Now moving to our key strategic objectives, growing the GA market and maintaining our leadership. Last quarter, I talked about some of our field initiatives to drive demand and new patient starts. We continue to execute on these.

Disease awareness education on the importance of treating GA early and effectively remains a major focus for us. Many retina specialists take a wait-and-see approach when treating GA patients. There is a disconnect between physician perceptions of GA and the functional impact patients experience. We’re working to close this gap. Next, we are expanding our engagement within the clinical community to educate the optometrists and ophthalmologists who manage a significant proportion of patients. We have prioritized engaging with these physicians to raise awareness about GA and the benefits of SYFOVRE treatment. Our efforts include directing them to our physician finder tool, which provides a list of retina specialists who have recently had experienced using SYFOVRE.

Finally, we continue to leverage our highly successful DTC campaign to secure awareness and activating the patient base to seek treatment. Turning to competitive dynamics and our continued market leadership, SYFOVRE is the clear market leader by any measurable metric, revenue, new patient share, overall market share, commercial vials, total injections, preferred payer coverage and presence at academic conferences. Our gains on new patient share reflects an understanding of SYFOVRE’s differentiated profile, specifically. SYFOVRE is the only GA product to demonstrate robust and increasing effects over time. SYFOVRE is the only GA product approved for as few as 6 doses per year. SYFOVRE is the only product in a preferred position with many payers.

And finally, we have 5 outstanding data presentations at the ASRS conference this week. We expect this newly published data on SYFOVRE’s unique ability to preserve retina tissue over time to further differentiate SYFOVRE and build on our market leadership. I look forward to reporting on our progress on our third quarter call. Let me now turn the call back to Cedric.

Cedric Francois: Thanks, David. Before we close out the call, I’m excited to also share 2 key leadership appointments that mark an important new chapter for Apellis. We are pleased to welcome Dr. Leslie Meltzer as our new Chief Research and Development Officer. Leslie comes to us from Orchard Therapeutics and is an experienced biopharma leader with a proven track record of advancing therapies from early-stage research through regulatory approval and commercialization. She will officially join Apellis on August 25. We also recently welcomed Kelley Boucher as our new Chief People Officer. Kelly joins us from Alnylam, where she served as consistently recognized for its outstanding workplace culture. Please join me in warmly welcoming both Kelly and Leslie to the Apellis team. The first half of 2025 has been a period of success for Apellis and we look forward to continuing this in the second half of this year. So with that, I’ll turn the call over to the operator for Q&A.

Operator: [Operator Instructions] And our first question will come from the line of Jon Miller with Evercore.

Jonathan Miller: Congrats on the progress. I’d love to ask about the GA market since we just had a kidney call. But I guess your competitor is talking about 20%-plus quarter-on-quarter growth. They’re talking about majority market share as well. They confirmed that they’re also using insurance claims to generate their supposedly majority market share. So I wonder if you could just help me square that circle a little bit. It feels like your growth in the mid-single digits is good, but that’s not what they’re expecting. Your market share looks great, but again, discordant with what they’re expecting. So can you help me understand how you guys are getting to different results on the overall market potential here?

Cedric Francois: Thank you so much, Jon, and great hearing you. So we have clear leadership, to be clear, on every single metric. On revenue, new patient share, overall market share on vials and injections, on preferred payer coverage and also presence at academic conferences. I mean we’re here at ASRS in Long Beach. We have 5 podium presentations, our competitor has 0, right? . So I think it’s really important to point out also that the data that is being presented is still — is by now 4 years old, and it’s still the 1- year data because in the second year, it wasn’t as good as in the first year. So these are things that really favor us. And I think the quality of the data, especially what came out after 4 years of treatment in the GALE extension with SYFOVRE, is something that really resonates with the retina community.

So look, also, I think it’s important to note that the way in which we track and measure the competitive dynamics is on a much larger database sets than what our competitor uses. Ours is representative of approximately 50% of injections in the offices, whereas our competitor estimates their presence on approximately 10% with the database that they use. So I think, look, at the end of the day, it comes down to the meaningfully differentiated efficacy profile that we have that is starting to resonate with the retina community and the continued evaluation scientifically of what SYFOVRE can do for patients. And that is really gratifying to see because, again, it’s a full 4 years of data that we can analyze for SYFOVRE with the benefit and the increasing effects over time that continue to stand out.

Operator: One moment for our next question, and that will come from the line of Anupam Rama with JPMorgan.

Anupam Rama: I was wondering if you could comment a little bit more on some of the sampling trends you saw in the quarter. I know last year, you said it’s been — last quarter, you said it was going to be about a similar amount. It looks like there’s a little bump here on an absolute basis. So maybe just providing a little bit more color on how you’re thinking about moving forward.

Cedric Francois: Thank you, Anupam. Great hearing you, and I will hand that question over to David Acheson.

David L. Acheson: Thank you very much for the question. Appreciate it. As you would suspect, as we continue to grow the business quarter-over-quarter with the injections, you’re going to continue to see some additional growth as we continue to play through the situation with the foundation funding, where we’ll — we could potentially see at or close to the same levels of the 13 million in samples that we saw in Q2. And that’s why you have a little bit of the bump. So the business continues to grow and the injections and the demand is there, which is very positive. And I’m very encouraged by that. As we work through the rest of this year, I think we’ll see similar trends.

Operator: One moment for our next question. And that will come from the line of Yigal Nochomovitz with Citigroup.

Yigal Dov Nochomovitz: I had a question on FSGS with regard to your Phase III plans. As you know, there’s been a lot of work regarding endpoints in FSGS, including PARASOL working group that had determined that proteinuria was a very good proxy for eGFR slope. I’m wondering if you can comment with respect to what your plans are on endpoints for the FSGS trial.

Cedric Francois: Thank you so much, Yigal, and thank you for that question. So obviously, we are going to be in the slipstream, if you want to call it, of the PARASOL group work. And it’s a trial we’re very excited about. We’re still planning to enroll or start enrollment in that trial in the second half of this year. But we believe that the mechanism, the target engagement of EMPAVELI in kidney and what we can do on a differentiation basis, [indiscernible] look forward to.

Yigal Dov Nochomovitz: Okay. And if I could just put 1 follow-up. Regarding the free goods, in prior quarters, you’d referenced samples for SYFOVRE. Is it fair to assume that the samples are sort of subsumed within free goods? Or are they different or the same? It’s a little unclear as far as the terminology now.

Cedric Francois: Thank you go. David will elaborate on that.

David L. Acheson: Thanks for the question, by the way. You’re right. It’s basically a terminology shift that we’ve made. We’ve included both samples and the PAP program or patient assistance program in free goods to capture all of the figures that are being used in the marketplace.

Operator: One moment for our next question. And that will come from the line of Salveen Richter with Goldman Sachs. shaurya chauhan This is Shaurya Chauhan on for Salveen. Congratulations on the quarter. So you’ve mentioned that the expectation of Q-o-Q injection growth in the low to mid-single digits. Is this a conservative estimate? And when do you expect to see an expansion for this growth rate?

Cedric Francois: Yes. Thank you so much for that question. I think the most important aspect here to bear in mind is that we — with SYFOVRE, we are now having a stable business with steady and gradual growth, right? And that is something that allows us to really continue to work on the many, many patients that haven’t been treated yet, continue to educate the retina community. And again, I want to point out that between the 2 products on the market, a little over 10% of patients have been treated so far. There’s a long way to go. But most importantly, we are now in a quite stable situation, something that we look forward to taking advantage of.

Operator: One moment for our next question. And that will come from the line of Steve Seedhouse with Cantor.

Timur Ivannikov: This is Timur Ivannikov on for Steve. So for Q2, could you talk about the factors that drove higher SYFOVRE revenue with similar commercial doses quarter-over-quarter? And also to follow up on Yigal’s question, out of 13,000 free injections, how many were samples from new patients versus help — assistance to existing patients?

David L. Acheson: Yes. Thank you for the question. Appreciate it. This is David. So a couple of quick points there. So a little less than half of the growth that we saw was attributed to the free goods of the samples. So that’s a specific data that we can pull on our free goods program. When it comes to the growth or the — I guess, the first part of your question around sample usage and where that played out against the quarter-over-quarter kind of the growth that we saw overall, obviously, we’ve got great demand, been thrilled with that and continue to see quarter-over-quarter growth and samples is a part of that. So yes, we saw the trend that was pretty — was consistent between the commercial and trade vials, but we’re also seeing true demand and patients getting started on the product through our sampling and our PAP programs.

Operator: And one moment for our next question. And that will come from the line of Colleen Kusy with Baird.

Colleen Margaret Kusy: Just on the ongoing disruption of the third-party co-pay assistance, is there anything that you’re hearing on that and any expectations on that in the near future? And then maybe 1 longer-term question, if I can. For the VALE long-term extension study for C3G, IC-MPGN, obviously, we’ve seen some good data from GALE that’s helped us understand the differentiation of SYFOVRE. Any expectations for the VALE data going forward and how that might differentiate EMPAVELI in C3G and IC-MPGN?

Cedric Francois: Thank you so much, Colleen. So look, there are evolving things happening at the foundation level for us. The way we think about these organizations is they are wonderful for patients, of course. We have supported them in the past, and we will continue to support them. So that is something that we are obviously very much in favor of. And then as it relates to the second part of your question on — could you repeat because I can’t really hear it. On IC-MPGN…

Colleen Margaret Kusy: Just on the VALE data, anything we can expect from that and how that will differentiate EMPAVELI versus its competitor in C3G, IC-MPGN?

Cedric Francois: Thank you. I will hand it over to Caroline.

Caroline R. Baumal: Thanks, Colleen. Well, we got — we are really thrilled with what we’ve seen for EMPAVELI and the recent approval and label for C3G and IC-MPGN. And I think what really differentiates us is that we achieved this trifecta of positive outcomes across the 3 key disease markers, reduced proteinuria, eGFR stabilization and this robust substantial clearance of C3 deposits in the kidney. And what we’re really excited about is that these effects continued on the VALE extension study, which, of course, from — rhymes with GALE, which is what we use for ophthalmology. But so we continue to see these effects. And even more important, physicians are so excited about this data. We’re hearing a lot of positive input from them.

Operator: And 1 moment for our next question. And that will come from the line of Akash Tewari with Jefferies.

Katherine Wang: This is Kathy on for Akash. Given the current SYFOVRE trajectory, as of now, it seems like the class isn’t expanding into a broader community center setting. So what’s the right amount of OpEx spend for the GA franchise going forward? And given the current business trajectory, when do you think SYFOVRE will reach profitability?

Cedric Francois: Thank you so much for that question. I’ll hand it over to David.

David L. Acheson: Yes. So look, I will tell you, and I think we just need to take a step back for a second and remind ourselves how big this market is and the potential opportunities to meet a lot of unmet needs for a lot of patients that live with GA today. So I think it’s important to keep that in note. I also think it’s super important to go back to what Cedric just talked about. We believe we are now in a very stable market. And we anticipate that we will have stable, steady, gradual growth. And right now, we’ve got about 10-plus percent of the market that’s currently treated. So the market opportunity still exists. And we think long term, this is still a blockbuster product clinic in the space.

Timothy E. Sullivan: David, this is Tim Silver. I’ll just jump in for one second. SYFOVRE is one of our business lines. So we have obviously EMPAVELI, we have development and we have discovery. If you’re looking for whether or not SYFOVRE alone is profitable, on its own, it’s a very profitable business. It’s high leverage with a reasonable sales force. And you can also see in our 10-Q, we do show on an R&D basis, what is allocated to G&A. So you can make a P&L for SYFOVRE alone that shows it’s a profitable business.

Operator: And 1 moment for our next question. And that will come from the line of Divya Rao with TD Cowen.

Divya Rao: This is Divya on for Phil. Based on your discussions with physicians, I’m curious if you get the sense that the competitor label expansion in February has impacted prescribing patterns now that we have about like one full quarter with the new label. And then if I can, a quick one on EMPAVELI. What might be the specific launch metrics we can expect for the launch in C3G over the next few quarters?

Cedric Francois: Thank you so much for that question. I will briefly comment on our competitor’s CRL and the removal in February, and then I will hand the second part of your question over to David. So I think the most important aspect of the CRL that was issued to our competitor in November is the fact that it kind of truly called out the fact that there was a limitation on that initial level of 1 year, something that a lot of physicians were not aware of. And then the fact that every other month dosing was reviewed by the FDA as a treatment that works for this product. So I think that in terms of reputation, this was very important for retina specialists to understand and know. And from all the data that we see, that is not something that we have recovered from. Caroline, I don’t know if you want to expand on that.

Caroline R. Baumal: Just adding that, we have a very — SYFOVRE has a flexible label with every other month dosing, which has been well studied in our clinical study as well as in our expansion study. And we’re currently at ASRS with 5 podium presentations. And we will continue to have robust data that data-driven retina physicians really need to treat their patients best. And all of this has helped with patient compliance. Treating them with every other month is much more reasonable, and this really speaks to the broadness of SYFOVRE use.

Cedric Francois: David, do you want to comment?

David L. Acheson: Can you repeat the second part of your question? I think it was on C3G.

Divya Rao: Yes. I was just curious if there was any specific launch metrics we can expect over the next few quarters on just how the launch is going for EMPAVELI.

David L. Acheson: Yes. No, great question. Thank you for that. So our specific focus, and what we’ll lay out for you, will be the transition that we’ve got for our EAP patients, which is in motion already as of this week in our Compassionate Use patients. And then we will look at start forms. That will be where we spend our time reporting out. And then also REMS, we’ll work through the REMS enrollments on the physician side. Over time, what we’d like to do is transition it over to actual patients on product. But it’s early, right? We’re 3 days post the [ open ] label coming out from the FDA. And it’s going to take us a little time to get active data coming in that we can continue to track and be consistent with. So we want to make sure we get a little time before we do that.

Operator: One moment for our next question. And that will come from the line of Eliana Merle with UBS.

Unidentified Analyst: This is Jasmine on for Ellie. So I wanted to follow up on the patient assistance funding dynamics going forward. Specifically, can you talk about what you expect from the impact of the Regeneron donation matching to Good Days? And do you think that seeing some funding return can potentially lower the usage of free drug that you see in the coming quarters? And then just secondly, can you talk about the latest you’re seeing in compliance and adherence for SYFOVRE?

Cedric Francois: Yes. Thank you so much for that question. So look, on the foundations, again, I think the most important element there, as I mentioned earlier, is that this is something that is important for patients. The way in which they manage their money, the way in which it gets allocated, the way in which it does get funded, it is something that we are completely independent from. Of course, it’s a medical decision to help and assist these foundations to help patients. So we have done that in the past. We will continue to do that. As far as compliance is concerned, I will hand that question over to Caroline.

Caroline R. Baumal: Thank you, Cedric. I think that of course, there’s things that might affect patient compliance like the patient foundations. But overall, physicians from large real work groups are reporting compliance and it’s been about 80%. Depending on which physician group, patients are motivated to be treated, especially with their experienced persistent vision loss. David, do you have anything to add?

David L. Acheson: No.

Operator: One moment for our next question. And that will come from the line of Lachlan Hanbury-Brown with William Blair.

Lachlan Hanbury-Brown: I guess can you just talk to the progress you’ve made with the benefits investigation process for the patients that were previously getting assistance and obviously, no longer are? I think last call, you said that was maybe 20% of patients. Has that — have you sort of been able to make a dent in that 20% of patients, especially in light of the fact that, as was mentioned earlier, commercial vials was sort of flat quarter-over-quarter?

Cedric Francois: Yes, Lachlan, our apologies, but we can’t really hear what you’re saying. Can you repeat, please?

Lachlan Hanbury-Brown: Is this better?

Cedric Francois: Yes, please go ahead.

Lachlan Hanbury-Brown: I was wondering if you could talk to the process that you — the progress that you’ve had with the benefits investigation for patients that previously were using co-pay support. I think you previously said that was about 20% of patients. Have you been able to make a dent in that number because the SYFOVRE commercial vials were flat quarter-over-quarter.

Cedric Francois: Okay. Thank you so much for that question. Yes, I’ll hand it over to David.

David L. Acheson: Yes. Great. Thank you for the question. I appreciate that. So we did report back in our earnings call for Q1 and about 20% of the market has shifted. And our patient assistance program, obviously, is being used at a higher rate. We are working through our cost assist program very closely with our offices, along with our reimbursement team inside the offices to make sure that when a patient hits an out-of-pocket max, they then get moved over to trade or commercial product as soon as they are able to do that. And there’s a lot of communication between our teams and the offices and the reimbursement teams inside these accounts. And yes, we can see definitely a trend where patients get transitioned over. But I can also tell you that the continued use of the program has been high because the funding issue is still in place.

So as patients come out of their out-of-pocket max, we move them. The good thing is we’re seeing quarter-over-quarter injection growth. And we have additional opportunities for patients to be on product, and we’ll transition them over as well. I’m going to hand over to Tim as well just on some of the financial part of it.

Timothy E. Sullivan: I just want to caution against reading too much into any given quarter on the commercial vials delivered. That’s actually from the specialty distributor to the ECP offices. And there are inventory dynamics at the ECP offices that play into that. So that’s why we kind of lead people to that injection growth as the true demand measure as opposed to looking at commercial vials. That’s sort of in between 2 inventory stops. So I just wanted to caution on that on any given quarter. Over time, that injection demand and the commercial vials delivered should more or less equate to each other. But on any given quarter, they’re not going to be exact. So I wouldn’t read too much into any particular quarter there.

Operator: And one moment for our next question. That will come from the line of Annabel Samimy with Stifel.

Annabel Eva Samimy: Just for SYFOVRE again, you mentioned several times the market is about 10% — I guess, 10% or 15% penetrated, depending on whose numbers you’re lying on. Do you have a sense now with the education of ophthalmologists and optometrists on what the total penetration could be of the market? I think Astellas has got a goal of about 35% of the target population by 2029. Does that seem realistic based on what you’re hearing back from the community? And I guess, separately on the funding gap, are there — do you know of patients who are holding off starting treatment because of this funding gap? Or most of these patients who need treatment are getting free goods?

Cedric Francois: Thank you so much. So what I will say about kind of the growth beyond the — a little more than 10% where we currently are, is that if you take physicians that have adopted SYFOVRE as part of their routine practice, they end up treating between 30% and 50% of the GA population with SYFOVRE. So that is — on a gross basis, that is probably the type that you should be looking at in terms of what population really benefits from this product and what we should be looking forward to. As it relates to the funding gap, I will hand it over to Caroline for comments.

Caroline R. Baumal: Thank you, Cedric. As someone who is still a practicing ophthalmologist, we see this that patients are not able to start on treatment because of the funding gap. What — starting patients on SYFOVRE is not just a onetime thing, it’s signing up for every 4 to 8 weeks injections and having a long-term plan. So it’s unfortunate that this is affecting patients who need this treatment. And while some patients are able to compensate for that, others are not. So resolution, I think, will be very helpful for patients. The other thing I want to say is that this is a really dynamic market and the retina practice in the United States is very dynamic. There’s constantly new patients. There’s constantly new retina physicians, new ophthalmologists, new types of eye care providers.

And our process of doing medical education and education around GA is continuous. So physicians understand how to use this medication. And one of our key highlights at the ASRS meeting is showing a 48-month GALE data. And this really attests to the fact that there is increasing effects over time. And our key points here is that earlier treatment leads to more retina tissue saved. And it’s significant in the amount of the best treated group of up to over 3 millimeters squared of retina tissue. That is about 1.5 disc areas of tissue. And just so you know, that’s about the size of the fovea. So we show this image to our eye care providers, and they’re really impressed with how significant it is.

Operator: One moment for our next question. And that will come from the line of Biren Amin with Piper Sandler.

Biren N. Amin: Maybe to start on SYFOVRE. Commercial doses, I think, in the quarter were 82,000 vials, but this number was a lot higher in Q4, which is around, I think, 89,000 commercial doses. So about a decline of about 9% from Q4. Is that due to conversion to free samples? Or are you seeing patient discontinuations from current patients with new patient starts predominantly going to free sample? So that’s first question. And then second question. R&D expenses came in lighter. Should we expect the Q2 run rate going forward? Or should we assume the average over the last several quarters, which is around the low 80s?

Timothy E. Sullivan: Thanks for the question. This is Tim. So in the fourth quarter, as you know, there was a bit of a build. And again, the vials delivered is — goes from the specialty distributor to the ECP. And as we talked about in the fourth quarter, there was a lot of stocking at the ECP level. So the fourth quarter, unfortunately, is really not a good barometer for looking at growth or change over time. There are a lot of inventory dynamics between the specialty distributor and the ECP fridges that we — that tracks and again sort of to my prior comment, over time, that should average out to what the injection growth looks like. In any given quarter, it can be misleading as — even in this quarter, right? It wasn’t the growth versus the first quarter didn’t exactly track injections.

So we’re hoping that will more normalize over time. So just a caution around that. It’s — commercial vials delivered is something we talk about sort of as an industry. And we do that. But on any given quarter, I don’t think it’s the best measure. That’s why we’ve talked about injections. So that’s your first part. And then on your second part, in the Qs, we give a pretty good table on what’s happening within the R&D expense. We do that on — it’s in the research and development expense section of our Q. And it breaks out those expenses pretty nicely. What you’ll see is that we did have a pretty decent drop in a couple of areas for this quarter, but some of those were onetime options for some collaborative stuff we’ve done. However, I like — at least for — on a go-forward basis, I like the average a little bit better because we are heading into some pivotal studies that really haven’t ramped up.

That’s the DGF study and the FSGS studies. So I think you’re probably safer more in that average zone than you are taking this quarter. But obviously, we had a few things that made this quarter look a little bit more efficient from an R&D perspective. But going forward, I would use the average.

Operator: One moment for our next question. And that will come from the line of Ryan Deschner with Raymond James.

Ryan Phillip Deschner: Thanks for the question. Just to clarify, when you report patient start forms and REMS enrollments for EMPAVELI in the future, will you be breaking these numbers out by specific indication, i.e., PNH, C3G and IC-MPGN? And can you also talk about what the burden will look like to obtain prior authorization for C3G and IC-MPGN patients?

David L. Acheson: Thanks for the question. So yes, on the metrics of the start forms, that will come in initially when we report total start forms. Over time, we’ll start to look at how the data plays out and where we’re penetrating by age group and disease state and differences in indications. But upfront, it will be start forms only, and then we’ll transition over time as we get more data.

Caroline R. Baumal: As per the burden of doing REMS form, I think that the REMS certifications are done to inform physicians about these medications so they’re aware of all the effect of them. I think that it’s done with all complement inhibitor therapy. And physicians, once — they do it once, they don’t have to do it again. And I think that it will not be a big burden on position to do this.

Ryan Phillip Deschner: And then for the REMS enrollment and patient start forms, will you be breaking down between C3G and IC-MPGN?

David L. Acheson: Not initially, we won’t. Everything will be just start forms and then we’ll break it down as we learn more and we get more data.

Operator: One moment for our next question. And that will come from the line of Douglas Tsao with H.C. Wainwright.

Douglas Dylan Tsao: I’m just curious, are you seeing relatively consistent utilization of free goods across all retina specialists? Or is there sort of some practices that are using it more than others based on patient mix? And so I guess, as this funding shortage exists, is there a way for you to sort of target the market a little bit more towards patients who might be able to sort of afford the out-of-pocket for the time being?

David L. Acheson: Yes. Great question. Thank you. This is David. So let me answer the first part of it. So when you look at the marketplace, what I think is a really good metric to look at is the true demand, which is the growth quarter-over-quarter in injection. So we should start there. And I think the part to also keep in mind is that when a physician wants to put a patient on a product, they can use free goods to do that, and they’re putting those patients on product through our ApellisAssist program, and we can transition them over when their out- of-pocket max is met. So I think it’s important to keep that in mind. As far as the targeting part of it and how we try to make sure that we’re in the right places with the right benefit design discussions, we have a reimbursement team.

I also have an ApellisAssist organization that connects with these offices on a regular basis. We’ve had a very concerted effort in these offices to go in and educate on benefit design so that those accounts can help patients pick the right benefit in Medicare that will pay for these products even today and the funding issues that we’ve had over time, right? So we’ve been very close to the education on it. So we’ve done a lot of targeting, and I think that tells a lot, the feedback we’ve gotten back from the offices. And we’ll continue to do that. And over time, these patients will then transition either to a new benefit design or they’ll transition because of out-of-pocket max to trade vials and treatment.

Douglas Dylan Tsao: And if I may, one follow-up. I’m just curious, when you think about the patients that are getting treated today, I think in the past, you had referred to sort of like most — like sort of just almost all of them were coming from existing retina specialists’ books or existing patient-based populations. Are you seeing more patients come from referrals directly? And are you seeing a shift in terms of the time of a patient’s initial diagnosis of GA to starting treatment?

David L. Acheson: Yes. So we have a program. We’ve got actually a couple of programs where we’ve got folks that are in these offices for ophthalmology and optometry, specifically for education and specifically so patients can be identified and then referred to a treating retina specialist. And that has obviously been running for quite some time now. But — and we do see data in transition. I will tell you one thing to keep in mind and as we move those patients over, there are still a lot of patients inside these offices, where the treating, injecting offices and retina specialists are, that could go on treatment because about 50% of the market sits in those offices already. And then the market is very large, as you know. So there’s opportunities on both sides. Yes, we can see that data. And we do know that the referral processes and our DTC alongside of that is working.

Operator: One moment for our next question. And that will come from the line of Derek Archila with Wells Fargo.

Unidentified Analyst: This is Simone on for Derek. Congrats on the quarter. Just one question. Can you guys provide more color on the free drug trends? And how should we be thinking about the percent for the rest of the year? And is the 10% to 15% range still valid that you said last quarter?

David L. Acheson: Yes. So let me answer that on the free drug part of it. And like I mentioned a few minutes ago, we expect similar levels of drug that’s going to be used moving forward. We did have a $13 million headwind in the second quarter as a result of free goods being used. But what I’m mostly encouraged by is that the demand at the physician and the patient model continues to grow. And that’s why we see injection growth that we’re seeing today.

Operator: One moment for our next question. And that will come from the line of Judah Frommer with Morgan Stanley.

Judah C. Frommer: First, just kind of on more of a high-level market penetration question. Do you see achieving kind of the market penetration in GA that you’ve discussed over time alone with SYFOVRE and maybe additional patient and provider education? Or do you think you might need a next-gen product like the 3007 combination to get there? And then secondarily, just a housekeeping question, on the Sobi royalty, can you walk us through how that’s going to be recorded in the financials, whether it’s going to run through the income statement or the balance sheet or both?

Cedric Francois: Yes, thank you so much for these questions. So first of all, as it relates to the penetration, I want to reiterate that we are now in a — we have a stable business with SYFOVRE with steady and gradual growth in front of us. And again, I think remarkable data over the course of a full 4-year follow-up in these patients that allow us to really to expand on what the efficacy profile means for this drug and what it means for patients to be on treatment. We do have, as you may know, a next-generation product in development. But this is a next-generation product that will actually combine SYFOVRE with an easy-to-administer subcutaneous injection which is an siRNA product. So what we’re going to be testing in that clinical trial is whether we can give SYFOVRE every 3 months and every 2 months and whether the reduction of the lesion growth, which is 30% to 40% with SYFOVRE, whether we can expand that and go hopefully well beyond 50% in terms of lesion size reduction.

This would make it more convenient for patients, expand on the already impressive efficacy that SYFOVRE has. And by the way, I want to point out here as well that in the 4-year data set, we now have very clear indicators of the functional benefit that patients gain from treatment with SYFOVRE. With the subcutaneous product, it’s easy to administer, would be an auto-injector and would make it every 3 months instead of every 2 months. Importantly, I think we are the leaders in geographic atrophy. And targeting C3 is definitely very clearly now the way to address the disease in the first place.

Timothy E. Sullivan: Yes, Judah, and I’ll just jump in on your housekeeping question. So it’s a very simple recognition. So the payment upfront will be recognized as revenue, and it will show up on the balance sheet in cash.

Operator: One moment for our next question. And that will come from the line of Greg Harrison with Scotiabank.

Unidentified Analyst: This is Joe on for Greg. Just a quick one on C3G and IC-MPGN. How are you seeing the competitive landscape evolving there, considering the competitors working on studies to kind of expand their patient population going forward? So kind of over the longer time horizon, how do you think that could play out with EMPAVELI ?

Cedric Francois: Yes. Thank you for that question. So first of all, again, I want to highlight that what we did in the VALIANT study was go very broad, right? We studied C3G and IC-MPGN. IC-MPGN is a separate trial for our competitor, which will take a while to read out. We also included the pediatric population. There is a separate trial for pediatrics by our competitor, which will take time to read out. And we studied pre and posttransplant as well. What is remarkable about VALIANT is not just the fact that we had the trifecta efficacy and with kind of these profound beneficiary effects that we saw across proteinuria, GFR as well as the deposition of C3 in the kidney, but also how homogenous that readout was across both populations. And that is why we got the label that we did. So I think moving forward, again, this is a product that can be life-changing for patients, and we look forward to providing it as soon as possible for as many patient as possible.

Operator: One moment for our next question. And that will come from the line of Graig Suvannavejh with Mizuho.

Graig C. Suvannavejh: I wanted to revisit a question that was asked earlier with respect to growth for the category, this is SYFOVRE in GA. Relative to your comments about seeing a very stable business now, where growth will be steady and that’s great to see, I’m wondering if you can again just revisit your thoughts around how your competitor is seeing or has projected that their product can potentially grow in the upper 20s on a quarterly basis. And if you have any insights as to whether that is a reflection of market growth and perhaps your view of low to mid-single-digit growth is perhaps conservative.

Cedric Francois: Yes. So again, I want to point out, first of all, our clear leadership in this category across every metric, right? Revenue, new patient share, overall market share, trials injections, preferred payer coverage and then also the presence at academic conferences. We have these long-term data, and we have a very thorough understanding of the market dynamics. So we don’t want to comment on what, of course, our competitor believes the market looks like. But I think the key thing here is that with the right data set in hands, which is a full 4 years of data in our hands, consistently showing increasing benefits over time, the benefits of every other month dosing, where our competitor is still talking about the 1-year data, which is many years old, I think we have the better grasp on what can happen within this space.

Operator: One moment for our next question. And that will come from the line of Lisa Walter with RBC.

Lisa A. Walter: Maybe just one on EMPAVELI. On the call on Tuesday, you reiterated that EMPAVELI has potential for blockbuster status. So I was just wondering, could you walk us through the path to get there? Does that also include further label expansion into other kidney indications or even beyond that? Any color here would be helpful.

Cedric Francois: Yes. I think — look, I mean, we shared with you the numbers on the demographics, right? So we estimate conservatively that our 5,000 patients between C3G and IC-MPGN, that approximately half of these patients have IC-MPGN, that approximately 20% of these patients are transplanted, that probably about 15% to 20% of these patients fall in the pediatric category, which means that we would only be competing with the only other available products, where we are differentiated again, as we’ve outlined many times now, for 1,500 to maybe 2,000 out of those 5,000 patients. In terms of revenue, every 1,000 patients could represent approximately $0.5 billion in revenue. So that is what this particular approval means for us in terms of potential revenue moving forward.

The additional potential approvals in FSGS and DGF, obviously, will take some time to run the clinical trials and to find out if the drug works and how well it works in these indications, would then be in addition to what we can do there. And of course, in the background, there’s always the PNH business, which continues as well.

Operator: Thank you. I’m showing no further questions at this time. I would now like to turn the call back over to Mr. Cedric Francois for any closing remarks.

Cedric Francois: Thank you so much, and thank you, everyone, for your thoughtful questions. This concludes the Apellis second quarter earnings call, second one of the week. And we hope you have a wonderful rest of the day. If you have questions, don’t hesitate to reach out to our team, and we’ll be happy to answer what we can. Thank you.

Operator: This concludes today’s program. Thank you all for participating. You may now disconnect.