Apellis Pharmaceuticals, Inc.

Good day and welcome to the second quarter 2025 Appellus Pharmaceuticals, Inc. Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker, Tracy Bennis, Vice President of Communications. Please go ahead.

Good morning, and thank you for joining us to discuss Appellus' 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 Baumel, 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.

Thank you, Tracy. As many of you know, Apelis is a pioneering biopharmaceutical company with two approved C3 targeting medicines, Cyfovir and Empatheli, both with 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 three activation pathways that can initiate and drive disease. Earlier this week, the FDA approved a label extension for Empaveli for the treatment of patients 12 years and older with C3 glomerulopathy or primary immune complex membranoproliferative glomerulonephritis. This marks our third FDA approval in just four 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 one that achieves the trifecta of outcomes across all three 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 T3G, primary ICMP-GEM patients 12 years and older, and patients with post-transplant T3G disease recurrence. The 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 SIFO re-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 SIFO-V revenues of $151 million. SIFO-V 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 SIFOBRI'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 SIFOBRI. During the second quarter, we also gained significant operational flexibility through our Astaveli capped royalty purchase agreement with SOVI. 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, Cyphovri'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?

Thank you, Cedric. Total revenue for the second quarter was $178 million, including Sifovri net product revenue of $151 million. Utilization of Sifovri 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 Sifovir in the quarter, including 82,000 commercial doses and 13,000 free goods doses. Sifovir 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 two quarters. Over the longer term, we aim to accelerate growth with several key initiatives that David will speak to shortly. EMPA Valley continues to elevate the standard of care in P&H. Revenue in the second quarter was $21 million, up 5% quarter over quarter. Patient compliance rates remained at 97%. We expect EMPA Valley to begin generating meaningful revenue from the C3G and primary ICMPGN opportunities in the fourth quarter of 2025. Turning now to the capped royalty purchase agreement with Sobe. This transaction reflects both parties' shared confidence in the blockbuster potential of this product. In exchange for 90% of future ex-US Aspavelli 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 Aspavelli in C3G and primary ICMPGN. Defined caps tied to ASPA Valley's performance allow APELIS to participate in long-term upside. Once these caps are achieved, all royalties refer to APELIS. These deal terms provide validation of the potential for meaningful growth in C3G and primary ICMPGN. This purchase agreement does not affect the regulatory and commercial milestones APELIS is eligible to receive under our 2020 agreement with SOVI. We have maintained a highly disciplined approach to cost management while prioritizing the commercialization of Seifovri 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?

Thanks, Tim. With Cyphovry as the leader in geographic atrophies, and three diseases now approved for treatment with Enfavelli, 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 of Enfavelli. With a proven ability to control complement through targeting C3, We are expanding enfoveli development into two other rare kidney diseases, delayed graft function, or DGF, and primary focal segmental glomerulospirosis, FSGF. Similar to C3G, FSGF 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 two study evaluating the combination of Siphovery and our siRNA ATL 3007. With APL 3007's ability to lower complement levels systemically and Sifovir'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 Atchison.

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 into C3G and primary ICMPGN. 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 ICMPGN patients, notably Empaveli's broad label makes it the first treatment approved for pediatric patients with C3G, primary ICMPGN 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 ICMPGN patients on its way to blockbuster status. By the end of the year, we expect to transition approximately 50 C3G and ICMPGN patients who are receiving Empaveli as part of our Early Access Program, or EAP, to commercial drugs. 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 three 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 to support 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 to reimburse the 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 Cyphovry 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 red 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 Cyphover treatment. Our efforts include directing them to our physician finder tool, which provides a list of retina specialists who have recently had experience using Cyphover. 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, SIFOBRI 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 reflect an understanding of SIFOBRI's differentiated profile specifically. SIFOBRI is the only GA product to demonstrate robust and increasing effects over time, Cyphobry is the only GA product approved for as few as six doses per year. Cyphobry is the only product in a preferred position with many pairs. And finally, we have five outstanding data presentations at the ASRS conference this week. We expect this newly published data on Cyphobry's unique ability to preserve retina tissue over time to further differentiate Cyphobry 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.

thanks david before we close out the call i'm excited to also share two key leadership appointments that mark an important new chapter for us we are pleased to welcome dr leslie melzer 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 APELIS on August 25th. We also recently welcomed Kelly Boucher as our new Chief People Officer. Kelly joins us from Allen Island, where she serves as Chief Human Resources Officer. Over her six-year tenure, she played a pivotal role in shaping Allen Island into a top-tier biotech company consistently recognized for its outstanding workplace culture. Please join me in warmly welcoming both Kelly and Leslie to the Athelies team. The first half of 2025 has been a period of success for Athelies, 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.

Thank you. As a reminder, to ask a question, you will need to press star 11 on your telephone. To withdraw your question, press star 11 again. Due to time restraints, we ask that you please limit yourself to one question. Please stand by while we compile the Q&A roster. And our first question will come from the line of John Miller with Evercore. Your line is open.

Hi, guys. Thanks for taking my question and congrats on all 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? Thank you so much, John, 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, on injections, on preferred payer coverage, and also presence at academic conferences. I mean, we're here at the SRS in Long Beach, We have five podium presentations. Our competitor has zero, right? So I think it's really important to point out also that the data that is presented is by now four years old, and it's still the one-year data because in the second year, you know, 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 four years of treatments in the Gale Extension with CycleReach, is something that really resonates with the retina community. 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 set 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 database data. 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 cytophery can do for patients. That is really gratifying to see because, you know, again, it's a full four years of data that we can analyze for cytophery with the benefits and increasing effects over time, continue to stand out.

Thank you. One moment for our next question. And that will come from the line of Anupam Rama with JP Morgan. Your line is open.

Hey, guys. Thanks so much for taking the question. 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 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. Thanks so much.

Thank you, Anup. Great hearing you. And I will hand the question over to David.

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, you know, we could potentially see at or, you know, 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 a 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 some more trends.

Thank you. One moment for our next question. And that will come from the line of Igor Nochomovich with Citigroup. Your line is open.

Oh, great. Thank you. I had a question on FSGS with regard to your Phase 3 plans. As you know, there's been a lot of work regarding endpoints in FSGS, including a parasol working group that 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. Thank you.

Thank you so much, Yigal, and thank you for that question. So, you know, obviously we are going to be in the slipstream, if you want to call that, of the parasol group's work. parasols group work, and it's a trial we're very excited about. We're still planning to start an enrollment in that trial in the second half of this year, but we believe that the mechanism, the target engagement of Mpaceti in the kidney, and what we can do on a differentiation basis, you know, neither should not look forward to.

Okay, and if I could just put one follow-up. Regarding the free goods, in prior quarters, you'd referenced samples for Sifovri. 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. Thank you.

Thank you, Igor. 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 PATH program, or patient assistance program, in free goods. to capture all the figures that are being used in the marketplace.

Okay, thank you.

One moment for our next question. And that will come from the line of Salveen Richter with Goldman Sachs.

Hi, this is Srinath Rao for Salveen. Congratulations on the quarter. So you've mentioned the expectation of QOQ 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?

Yeah, thank you so much for that question. I think the most important aspect here to bear in mind is that we would say 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 two 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 quite a stable situation, something that we look forward to taking advantage of.

Thank you. One moment for our next question. And that will come from the line of Steve Seedhouse with Cantor. Your line is open.

Yes, hi. This is Timur Vanikov on for Steve. So for Q2, could you talk about the factors that drove higher syphovir revenue with similar commercial doses, quarter-by-quarter? And also to follow up on Egal's question, out of 13,000 free injections, how many were samples for new patients versus help assistance to existing patients? Thank you.

Yeah, thank you for the question. Appreciate it. This is David. So a couple quick points there. So a little less than half of the growth that we saw was attributed to the pre-goods or the samples. So that's specific data that we can pull out of our pre-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 up 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 as a part of that. So yes, we saw the trend that 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 path programs.

And one moment for our next question. And that will come from the line of Colleen Pusey with Baird. Your line is open.

Great. Thanks. Good morning. Thanks for taking my question. Just on the ongoing disruption of the third-party copay assistance, is there anything that you're hearing on that and any expectations on that in the near future? And then maybe one longer-term question, if I can. For the VAIL long-term extension study for C3G, IC, and PGN, obviously we've seen some Good data from Gail that's helped us understand the differentiation of sex ovary. Any expectations for the VALE data going forward and how that might differentiate mPavelli and C3G and ICMPGM? Thank you.

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 you know, we are obviously very much in favor of. Then as it relates to the second part of your question on, could you repeat that, because I couldn't really hear it, on ICMPGN?

Sorry, just on the VAIL data, anything we can expect from that on how that will differentiate Empaveli versus its competitor in C3G, ICMPGN?

Thank you. I will hand that over to Caroline. Thank you, Colleen.

Thanks, Colleen. Well, we got... We are really thrilled with what we've seen for Epivelli and the recent approval and label for C3G and ICMPGN. And I think what really differentiates us is that we achieved this trifecta of positive outcomes across these three 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 to the Veil Extension Study, which, of course, rhymes with Gale, which is what we use for ophthalmology. But so we continue to see these effects. And even more importantly, physicians are so excited about this data. We're hearing a lot of positive input from them. Thanks, Holly.

And one moment for our next question. And that will come from the line of Akash Tiwari with Jefferies. Your line is open.

Hi, this is Cassie on for Akash. Given the current SIFOBRI 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 office spend for the J franchise going forward? And given the current business trajectory, when do you think SIFOBRI will reach profitability? Thank you.

Thank you so much for that question.

I'll hand that over to David. Yeah, 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'll have stable, steady, gradual growth. And, you know, 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 in the States.

Hey, David. This is Tim Feldermay. I'll just jump in for one second. You know, Cypovery is one of our business lines. So we have, obviously, Ampavelli. We have Development. We have Discovery. If you're looking for whether or not Cyphery 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 GMA. So you can make a P&L for Cyphery alone that shows it's a profitable business.

Thank you. And one moment for our next question. And that will come from the line of Divya Rao with TD Cowan. Your line is open.

Hi, team. 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?

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 label of one year, something that a lot of physicians were not aware of. And then the fact that every other month dosing was rebuked 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 they have recovered from. Carolyn, I don't know if she wants to expand on that.

Just adding that we have a very flexible label with every other month dosing, which has been well studied in our clinical study as well as in our extension study. And we're currently at SRS. with five 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 every other month is much more reasonable, and this really speaks to the broadness of psych overuse.

Thank you. David, do you want to comment? Can you repeat the second part of your question? I think it was on C3 genes.

Yeah, 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 empathy.

Yeah, 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 EAP patients, which is in motion already as of this week in our compassionate use patients. And then we will look at star forms. That'll be where we spend our time reporting out, and then also REMS. We'll work through REMS enrollments on the physician side. Over time, what we'd like to do is transition it over to actually patients on product, but it's early, right? We're three days post that awesome 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 give them a little time before we do that.

Thank you. One moment for our next question. And that will come from the line of Eliana Merle with UBS. Your line is open.

Hi, this is Jasmine on for Ellie. Thank you for taking our question. 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 Regeneron donation matching to Good Days? Do you think that being 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 Sifo-Roy?

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 is something that we are completely independent from. For us, it's a medical decision to help and assist these foundations, health patients. So we have done that in the past. We will continue to do that. As far as compliance concerns, I will hand that question over to Caroline.

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-world groups are reporting compliance, and it's been about 80%. Depending on which physician group, patients are motivated to be treated, especially because they experience persistent vision loss. David, do you have anything to add to that?

No, that's good. Thank you.

OK. Great. Thank you. One moment for our next question. And that will come from the line of Lachlan Hanbury-Brown with William Blair. Your line is open.

Good morning, and thanks for taking the questions. 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. Have you sort of been able to make a dent in that? in that 20% of patients, especially in light of the fact that, as was mentioned earlier, commercial vials with sort of flat core over core.

Yeah, Lachlan, our apologies, but we can't really hear what you're saying. Can you repeat, please?

Sorry, is this better? Yes, please go ahead. I was wondering if you could talk to 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 commercial vials were flat quarter over quarter?

Okay. Thank you so much for that question.

Yes, I will hand that over to David.

Yeah, great. Thank you for the question. I appreciate that. So we did report back in our earnings call for Q1 at 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 Pulse 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 it's a lot of communication between our teams and the offices and their reimbursement teams inside these accounts um and yes we can see definitely a trend where patients get transitioned over but i can also tell you that the you know continued use of the program uh has been high because the funding issue is still in play so as patients come out of their out-of-pocket max we move them um 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 head over to tim as well just on some of the financial part of it.

Yeah, hey, Lachlan, thank you. 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 two 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. Thanks.

And one moment for our next question. That will come from the line of Annabelle Samimi with Stifel. Your line is open.

Hi, guys. Thanks for taking the question. Just for Seif over again, you mentioned several times the market is about 10%, I guess 10% or 15% penetrated, depending on whose numbers you rely 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 as Stella said, 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, 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? Thanks.

Thank you so much. So what I will say about kind of the growth beyond the, you know, a little more than 10% where we currently are, is that if you take physicians that, you know, have adopted cyphovir as part of their routine practice, they end up treating, you know, between 30 and 50% of the RGA population with type 4. So that is the, you know, on a broad 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 that over to Caroline for comments.

Thank you, Cedric. You know, as someone who is still practicing ophthalmologist, you know, we, we see this, that patients are not able to start on treatment because of the funding gap. You know, what starting patient on type ovary is not just a one time thing. It's signing up for, you know, every four to eight 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 on GA is continuous. So physicians understand how to use this medication. And one of our key highlights at the ASRS meeting is showing the 48-month Gale data. And this really attests to the fact that there's increasing effects over time. And our key point here is that earlier treatment leads to more retina tissue space. And it's significant in the amount of the best treated group of up to over three millimeters squared of retina tissue. That is about one and a half disc areas of tissue. And just so you know, that's about the size of the fovea. So we show this image to, you know, our eye care providers, and they're really impressed with how significant it is. Thank you. Great. Thank you.

One moment for our next question. And that will come from the line of Byron Amin with Piper Sandler. Your line is open.

Yeah. Hi, guys. Thanks for taking my questions. Maybe to start on psych ovary. 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 samples? So that's the first question. And the second question, aren't the 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? So thanks for that.

Hey, Barron. Thanks, yeah, 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 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, you know, 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, even in this quarter, right? It wasn't the growth versus the first quarter didn't exactly track injections. So we're hoping that'll be more normalized over time. So just a caution around that. 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, you know, in the queues, we give a pretty good table on what's happening within the R&D expense. You know, we do that on, you know, it's in the research and development expenses section of our queue. 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 one-time opt-ins for some collaborative stuff we've done. However, I like, at least 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. 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.

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

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

Thanks. Thanks for the question. So, yes, on the metrics of the start forms that will come in, initially we'll report total start forms. You know, 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 different syndications. But up front, it'll be start forms only. And then we'll transition over time as we get more data.

As for the burden of doing REMS forms, I think that, you know, if REMS certifications are done to inform physicians about these medications so they're aware of all the effects of them. I think that it's done with all complement inhibitor therapies. 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 physicians to do this. Thank you.

And then for the remdesivir and patient start forms, will you be breaking down between C3G and ICMPGN?

Not initially. We won't. Everything will be just star forms, and then we'll break it down as we learn more and we get more data.

Thank you very much.

One moment for our next question. And that will come from the line of Douglas So with HC Wainwright. Your line is open.

Hi, good afternoon. Thanks for taking the questions. I'm just curious, are you seeing... relatively consistent utilization of free goods across all wetness 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-pockets for the time being?

Yeah, 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 injections. 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 product, they can use free goods to do that. And they're putting those patients on product through our appellate assist 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 discussion, we have a reimbursement team. I also have an Appellate Assist 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's helped 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 masks, and treatment.

And if I can, if I may, one follow-up. I'm just curious when, you know, you think about the patients that are getting treated today, I think, you know, in the past you had referred to sort of like most, you know, like sort of just almost all of them were coming from existing retina specialist books or existing patient-based population are you seeing more patients come from referrals directly, and are you seeing a shift in terms of the time of the patient's initial diagnosis of GA to start a treatment?

Yeah, so we have a program. We've got actually a couple 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. 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. They could go on treatment because about 50% of the market sits in those offices already. And the market is very large, as you know. There's opportunities on both sides. Yes, we can see that data, and we do know that the referral processes and our DPC alongside of that is working.

Okay, great. Thank you so much.

One moment for our next question. And that will come from the line of Derek Archilla with Wells Fargo. Your line is open.

Hi, this is Simone. I'm 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? Thank you.

Yeah, 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 drugs 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 level continues to grow, and that's why we see injection growth that we're seeing today.

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

Hi. Thanks for taking the questions. 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 Cyphovry 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 Sobe question, 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? Thank you.

Yeah, thank you.

Thank you so much for these questions.

So first of all, as it relates to penetration, I want to reiterate that we are now in a, we have a stable business with Cyphery with steady and gradual growth in front of us. And again, I think you know, remarkable data over the course of a full four-year follow-up in these stations that allow us to really to expand on what the efficacy profile means for this drug and what it means for patients, you know, 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 SIFO-3 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 Cyphovri every three months and every two months, and whether the reduction of the lesion growth, which is, you know, 30 to 40%, with Cyphovri, 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 Cyphovri has. And by the way, I want to point out here as well, But in the four-year data set, we now have very clear indicators of the functional benefits that patients gain from treatment with Cyphovir. With this subcutaneous product, it's easy to administer, would be an auto-injector, and would make it every three months instead of every two months. Importantly, I think we are the leaders in geographic astrophy, and targeting C3 is definitely very clear in the the way to address the disease in the first place.

Yeah, Judah, and I'll just jump in on your housekeeping question. So it's a very simple recognition. So the payment up front will be recognized as revenue, and it'll show up on the balance sheet in cash. Great. Thank you.

One moment for our next question. And that will come from the line of Greg Harrison with Scotiabank. Your line is open.

Hi, everyone. Thank you for taking our questions. This is Joe on for Greg. Just a quick one on C2G and ICMPGN. How are you seeing the competitive landscape evolving there considering, you know, 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 can play out within the Valley? Thank you.

Yeah, thank you for that question. So, first of all, again, I want to highlight that what we did in the Valiant study must go very broad, right? We studied C3G and ICMPGN. ICMPGN 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 post-transplant as well. What is remarkable about VALIANs is not just the fact that we had the trifecta of efficacy with kind of these profound beneficial 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 all 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 to as many patients as possible. Thank you.

One moment for our next question. And that will come from the line of Greg Suvanovich with Mizuho. Your line is open.

Great. Thanks so much for taking my question. I wanted to revisit a question that was asked earlier with respect to growth for the category. This is Cyphovere 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. Thanks.

Yeah, thank you so much. 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 and 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 hand, which is a full four 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 one-year data, which is many years old, I think we have the better grasp on what can happen within this space.

One moment for our next question. And that will come from the line of Lisa Walter with RBC. Your line is open.

Oh, great. Thanks so much for taking our questions. Maybe just one on Mpivelli. On the call on Tuesday, you know, you reiterated that Mpivelli 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. Thanks so much.

Yeah, I think, look, I mean, we shared with you the numbers on the demographics, right? So we estimate conservatively that there are 5,000 patients between T3G and ICMPGN, that approximately half of these patients have ICMPGN, 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 half a billion dollars in revenue. So that is what this particular approval means for us in terms of potential revenue moving forward. The additional potential approvals in SSGS and DGS 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 P&H business, which continues as well.

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.

Thank you so much, and thank you, everyone, for your thoughtful questions. This concludes the APEDI's 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'd be happy to answer what we can. Thank you.

this concludes today's program thank you all for participating you may now disconnect