APLS - NASDAQ

Good morning ladies and gentlemen. Thank you for standing by and welcome to the Apellis Pharmaceuticals Fourth Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised, today’s conference is being recorded. I will now hand the conference over to your speaker host, Meredith Kaya, Senior Vice President of Investor Relations and Strategic Finance. Please go ahead.

Good morning and thank you for joining us to discuss Apellis' fourth quarter and full year 2023 financial results. With me on the call are Co-Founder and Chief Executive Officer, Dr. Cedric Francois; Chief Operating Officer, Adam Townsend; Chief Medical Officer, Dr. Caroline Baumal; and Chief Financial Officer, Tim Sullivan. Before we begin, let me point out that we will be making forward-looking statements that are based on our current expectations and beliefs. These statements are subject to certain risks and uncertainties and our 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, Meredith, and thank you all for joining us this morning. As I reflect on this past year, I am extremely proud of our team and all of our achievements in 2023. Our two commercial products, SYFOVRE and EMPAVELI, are making meaningful differences for patients. The year ended with SYFOVRE in a very strong position, and we remain encouraged by the continued uptake and high compliance rates for EMPAVELI in PNH. We also had multiple positive data readouts, including up to three years of efficacy and safety data from both of our approved therapies. While 2023 certainly had its challenges, our accomplishments and our resilience position us well for continued execution in 2024 and to deliver on our vision for patients now and in the future. Let me share some details on this past year and our priorities for 2024. Beginning with SYFOVRE, we recently celebrated SYFOVRE's one-year approval anniversary, and what a year it has been. The loss had exceeded our expectations, even with the unexpected challenges we faced last summer. More than 200,000 SYFOVRE doses have now been distributed to physician practices since launch through mid-February, and we estimate that approximately 215,000 SYFOVRE injections have been administered to patients through mid-February, including our Phase III clinical trials. These numbers underscore the retina community's confidence in the benefits of SYFOVRE and the central role it plays in improving patients' lives. And importantly, based on these numbers, the risk of developing retinal vasculitis remains rare at an estimated rate of approximately 0.01% per injection. In the fourth quarter, we reported $114 million in SYFOVRE U.S. net product revenue. We achieved $275 million in SYFOVRE revenues for the full year. While we have experienced modest seasonality in the first quarter so far, SYFOVRE continues to show meaningful growth, and we look forward to bringing it to more and more patients throughout the year. In 2024, our priorities with SYFOVRE are to maximize access to patients in need in the U.S. and to bring SYFOVRE to patients with GA, worldwide. Key to these are, our commercial and medical activities, including building on the relationships we've already established in the retina community. Given our global expansion goal with SYFOVRE, let me comment on the European Union. As you know, we received a negative opinion by the Committee of Medicinal Products for Human Use or CHMP, for the marketing application of SYFOVRE in the EU. While this is disappointing, we remain steadfast in our efforts, given the more than 2.5 million GA patients in need of treatment across Europe. The feedback and support we have received for SYFOVRE from the physician and patient communities in Europe has been extraordinary. We have been informed of several letters sent to EMEA from multiple European retina organizations, highlighting the need for new treatments and how important SYFOVRE would be for patients. As such, we are initiating a re-examination of our application, which includes revising our dossier to ensure that key questions are addressed. We expect a final opinion in connection with this re-examination to be issued at an upcoming CHMP meeting in the second quarter. If positive, a decision by the European Commission is anticipated in the third quarter. To be clear, and as we've said many times before, this is not going to be easy. It will be an uphill battle, and we do not know the likelihood of success at this stage. But we strongly believe in our data, including analyses that many experts agree, demonstrate a functional benefit with SYFOVRE treatment, and we will continue to work closely with the CHMP and the retina community throughout the process. Turning to EMPAVELI, we generated $24 million in fourth quarter U.S. net product revenue and $91 million for the full year. The EMPAVELI Injector, an innovative and first-of-its-kind high-tech volume injector, was approved and launched last fall. We've been very pleased with the feedback and adoption so far. And in 2024, we will remain focused on maximizing our market position in PNH, and also look forward to the Phase III data readouts for systemic pegcetacoplan in C3G and IC-MPGN, two rare and debilitating kidney diseases. Our Phase III value study is fully enrolled, and we expect top-line data from this study mid-year. Over the past couple of years, we've been very focused on our commercial products and new launches, but we have other exciting earlier-stage programs advancing. Let me shift to our fourth priority for 2024, which is to progress our early R&D pipeline with an eye to the long term. In addition to the EMPAVELI initiatives in C3G and IC-MPGN, we are focused on our siRNA program, APL-3007, which is now in a Phase I of dose escalation study with data expected later this year. Additionally, we are advancing the gene-editing program with Beam, on which we also expect to share more this year. We are entering 2024 from a position of strength with an unwavering commitment to address unmet needs for patients and to create even greater value for our shareholders. And with that, I will now turn it over to Adam to discuss our commercial and medical affairs activities.

Thank you, Cedric. It was a big year commercially for Apellis with the launch of SYFOVRE in GA and the commercialization of EMPAVELI in PNH. Starting with SYFOVRE, in the fourth quarter, we delivered approximately 62,000 doses to physician practices, including 55,000 commercial vials and 6,400 samples, generating $114 million in U.S. net product revenue. This strong growth underscores the rebound in weekly demand that began in August of 2023. Our execution was driven by meaningful engagement with our key stakeholders, physicians, patients and payers. We continue to see weekly orders coming from both new and existing physician practices, with a double digit number of new sites ordering SYFOVRE every week since launch. Patients are motivated to seek treatment and the vast majority of physicians are treating their patients with SYFOVRE every six to eight weeks, reinforcing how much doctors and patients appreciate a more flexible dosing regimen. And we continue to have robust payer coverage. We are encouraged by the demand growth we are seeing in the first quarter so far. January and February have been two of our biggest months since launch. However, as expected, we did see some seasonality in January as a result of Medicare recertifications, as well as weather delays affecting doctor visits and product shipments. These seasonality trends are consistent with what has been seen with some of the anti-VEGF products in the wet AMD market. Today, SYFOVRE is the number one chosen GA treatment, with a current market share of approximately 90%. At launch, we estimated that there were 1 million patients with GA in the U.S. Now that treatments are available for GA patients, we are learning that this population may be even bigger than we expected, with estimates suggesting there may be up to 1.5 million patients. Going forward, we expect to continue to build this market and maintain our market leading position. We will be laser focused on executing our strategy, highlighting the key advantages of SYFOVRE, which include increasing effects over time, with more than 40% reductions in GA lesion growth demonstrated in our GALE Extension Study. Extensive experience with approximately 215,000 injections estimated to have been administered between our clinical trials and real world experience, and more vision saved for patients. Meaning treatment with SYFOVRE has been shown to preserve visual function longer in multiple post-hoc analyses. Now to EMPAVELI. The positive trends witnessed across the key leading indicators for this patient population have continued through the end of 2023. In the fourth quarter, EMPAVELI generated approximately $24 million in U.S. net product sales, resulting in a total of $91 million for the full year. Notably, approximately 10% of demand in 2023 was from treatment naive patients, and compliance rates remain incredibly high at 97%. We also continue to have a very strong safety profile. We have over 1,400 patient case of systemic pegcetacoplan exposure and have had zero cases of meningococcal infection and very low rates of thrombosis. We are facing a more competitive market with the recent approval of an oral product in PNH. And I expect the convenience of a twice a day pill will be appealing to some patients. I previously commented on the positive feedback since approval of the EMPAVELI Injector. By simplifying administration and offering greater mobility, we believe the injector elevates the patient experience and fortifies our competitive position. Before I hand it over to Caroline, I'll close by saying that I am incredibly proud of both the SYFOVRE and EMPAVELI medical and commercial teams. They did an outstanding job throughout 2023, working night and day to bring these two medicines to physicians and patients in need. With that, let me turn the call over to Caroline.

Thanks, Adam, and good morning, everyone. We had an active year within the medical community for both SYFOVRE and EMPAVELI. In November, we presented data from our GALE extension study, which followed three years of continuous treatment with SYFOVRE at the American Academy of Ophthalmology Annual Meeting. These data continue to show increasing effects over time with both monthly and every other month SYFOVRE dosing, a seminal feature of SYFOVRE’s efficacy profile. As Adam just highlighted, SYFOVRE reduced GA lesion growth by more than 40% in patients with nonsubfoveal GA lesion in year three, compared to projected sham. This is the largest treatment effect shown in GA to-date. 2024 has already been a busy year so far in terms of medical meetings. Most recently, we were at the Macula Society, where we had a significant presence with three oral data presentations, including our GALE 36-month data, a matching adjusted indirect comparison, or MAIC analysis, using our 24-month data, and post-hoc microperimetry analysis, demonstrating preservation of function in the retina following treatment with SYFOVRE. Turning to EMPAVELI, we, along with our partner Sobi, presented post-hoc long-term efficacy and safety data on EMPAVELI at ASH Annual Meeting in December. These data showed that treatment with EMPAVELI can help PNH patients achieve rapid and sustained control of their disease over the long term. Furthermore, it is impressive that the majority of patients remain transfusion-free for up to three years, alleviating a significant and common disease burden for many patients living with PNH. Additionally, at Kidney Week, we had the opportunity to present new data from our Phase II NOBLE study, investigating pegcetacoplan for the treatment of post-transplant recurrence of C3G and IC-MPGN. C3G and IC-MPGN are diseases in which patients have a 50% chance of progressing to end-stage renal disease or kidney transplantation over the course of five to ten years. Between these two indications, there are approximately 5,000 potential patients in the U.S. and up to 8,000 in Europe with no approved treatments available. This year, we are looking forward to the top-line data from our Phase III VALIANT study, which we expect mid-year. VALIANT enrolled 124 patients, split 50/50 between treatment and placebo, aged 12 and up with C3G or primary IC-MPGN. It is the only study to include both native kidney patients and patients who have recurrent disease after receiving a kidney transplant. Study participants were randomized to receive pegcetacoplan or placebo twice weekly for 26 weeks. Following this 26-week randomized controlled period, patients will proceed to a 26-week open-label phase in which all patients receive pegcetacoplan. The primary endpoint of the study is the reduction from baseline in urine protein-to-creatinine ratio or uPCR as compared to placebo at week 26. I'd like to shift gears and comment on the Cascade Phase II study evaluating the efficacy and safety of pegcetacoplan in patients with Cold Agglutinin Disease or CAD. As Sobi previously disclosed, the decision was made to end the study due to decreased medical need in the CAD space and a limited number of patients eligible for the study. This is not due to any safety concerns and the efficacy has not been evaluated due to the study being mapped. I'd like to express our gratitude to the CAD community for their support and collaboration. Sobi is working with study investigators to manage the next steps for those enrolled in the study with their welfare as the priority. Now I will turn the call over to Tim for a review of the financials. Tim?

Thank you, Caroline. I will provide a brief overview of our financials and you can find additional details in the press release that we issued earlier this morning. Total revenue for the fourth quarter in full year 2023 was $146 million and $397 million respectively. Quarterly revenue consisted of $114 million in SYFOVRE and $24 million in EMPAVELI U.S. net product revenue and $8 million in additional licensing and other revenue associated with the Sobi collaboration. Full year revenue consisted of $275 million in SYFOVRE and $91 million in EMPAVELI U.S. net product revenue and $30 million in additional licensing and other revenue associated with Sobi collaboration. Turning to the rest of the P&L, for the fourth quarter and full year, cost of sales was $20 million and $58.5 million respectively. R&D expenses were $69 million and $354 million respectively. G&A expenses were $142 million and $501 million respectively. And we reported a net loss of $89 million and $529 million respectively. I'd like to point out a few items in our financial statements that will help in evaluating our business. First, we recorded accounts receivable of $206 million at year end, which is primarily associated with payment terms that we provide to the SYFOVRE distributors. The accounts receivable line item has increased along with the increasing SYFOVRE sales and is in line with typical payment terms. Second, as we shared previously, we are now categorizing the majority of medical affairs and certain other costs in G&A instead of in R&D. This represents an approximately $22 million shift from R&D to G&A in the fourth quarter and $41 million in the second half of 2023. No new classifications were necessary for prior periods. However, it is important to note this shift when reviewing trends in our operating expenses. And finally, our operating expenses do not yet reflect the ongoing efficiencies that we expect from our restructuring last August due to severance and winding down of certain projects. As I said last quarter, we expect to realize these efficiencies beginning in 2024. And while I'm not going to get into detailed numbers, what I will say is, that we expect our total operating expenses in 2024 to be less than our total expenses in 2023. Turning to our balance sheet, as of December 31, 2023, we have $351 million in cash from cash equivalents. We continuously evaluate ways in which to further strengthen our financial position. And with that in mind, today we announce that we entered into agreements to unwind approximately 80% of the cash call associated with the $425 million in convertible notes that we hold in Treasury. We expect total aggregate net cash proceeds to be up to $125 million, including approximately $100 million following this transaction and up to $25 million in additional net cash proceeds if we unwind the remaining capped call. The underlying transactions will be settled based on a seven-day averaging period beginning on and including February 27, 2024. As of December 31, 2023, the aggregate principal balance of the remaining convertible notes made of unamortized issuance costs was $93 million. We now believe that our cash and cash equivalents combined with the cash generated from the capped call unwind and from sales of SYFOVRE and EMPAVELI would be sufficient to fund our projected operating expenses and capital expenditures for the foreseeable future. That said, we will continue to evaluate opportunities to further optimize our balance sheet and maintain an appropriate cash balance at all times. We have multiple levers that are available to us, and as always, we will be incredibly thoughtful and opportunistic in any decision we make. I will now hand the call back over to Cedric for closing remarks. Cedric?

Thanks, Tim. This was a strong finish to the year. We are building on our success and learnings. And the evidence of our ongoing strengths continues to be seen in the numbers and feedback we are seeing. We are headed into the year with renewed energy and an acute focus in our goal of putting patients first and elevating the standard of care in all disease areas in which we work. With this, we are determined to execute on our four key priorities, continuing to expand patient access to SYFOVRE in the U.S., while also working to bring the therapy worldwide, maximizing EMPAVELI in PNH and then expanding in this new indication in C3G and IC-MPGN, and finally progressing our early pipeline, including the siRNA program and our collaboration with Beam. As always, we are looking forward to sharing updates as they become available and continuing our efforts towards becoming the global leader in complement medicine. Let us now open the call for questions. Operator?

Thank you. [Operator Instructions] Our first question comes from Jon Miller with Evercore. Your line is open.

Hey, guys. Thanks for taking the question. Congrats again on a great Q4 and a great reacceleration of the launch. I would love to start on the EU reexamination. Cedric, you mentioned that you're getting a lot of enthusiasm from patient groups, from docs in the EU. I would love to get a sense from you for how much impact that doc enthusiasm will have on the EU reexamination and maybe why that wasn't helpful in the first round. What's changed now that wasn't the truth in the first examination? Then secondly, on the commercial launch, if, you’re even accounting for seasonality, is it fair to expect that Q1 will still be growing robustly relative to Q4? Do you expect that March orders will be making up for Medicare recertification delays in January and February?

Thank you so much, Jon. First of all, as it relates to the European Union, so these letters are letters that are not sent to us. They are sent to -- independently from us to the review organization, and then we receive them via that route. So these are important letters of support. I think they highlight the unmet medical need. They highlight the support that physicians have for this product and their desire to make it available to their patients in Europe. Will it have an impact? That is really impossible to tell for us. As we've always mentioned, this will be an uphill battle. It is rare for these appeals to be successful. But, of course, having the support from the patients and the physicians is important. Then as it relates to the commercial question, I will hand that over to Adam.

Yes. Hey, Jon, it's Adam. So, yeah, we did see seasonality impact January and the start of February. So the vast majority of that was due to recertifications and we also had a few weather delays. So, interestingly, right, we did some homework, and the seasonality is always consistent. And we saw it in our homework with some of the anti-VEGF products over the years. For example, I mean, we believe that earlier has not seen growth above 5% in Q1 versus Q4 over approximately the last 10 years, with several years resulting in a quarter-on-quarter decline in Q1. It tends to be due to recertification seasonality and weather, etc., other demands. We have seen two of our biggest months since launch in January and February. And your question was, do you expect to see that continue in March? We think we're through all of the recertifications. Hopefully, the weather stays friendly to us, so we continue to expect to see solid numbers in March as we move forward.

Now it makes sense. And maybe one for Tim, or I'll get back in the queue. Why don't I let it play?

Go ahead, Jon. Why don't you ask it quickly? I think that's easier.

I was just going to ask Tim about the runway now through the foreseeable future. I remember at J.P. Morgan, you were saying that it was plausible you could reach profitability and be funded through the foreseeable future, but that you might not want to do that. I just wanted to get a sense for how that's changed since J.P. Morgan and whether you're really actively looking for ways to bolster cash position and give yourself a little bit more flexibility, or if you think you've done that with these capped calls?

Well, so, thanks, Jon. The good news is with the capped call, with the $125 million of essentially non-dilutive capital, in addition to the $351 million we reported at year-end, that puts us in a great financial position. And as we mentioned, in our scenarios that we project that, that should get us through without having to raise capital necessarily. I mean that could be technically done. But we also have certain things like our SFJ liability, which that's $200 million in cash out of the door over the next two years. That could put us in a position where we don't really have an ideal cash balance. So, the good news is we're in a pretty strong position and we have a lot of options available to us to opportunistically make sure we have a sufficient cash balance. That could be refinancing SFJ, that could be a number of things. So, again, we'll be thoughtful and opportunistic, as we always have been, and that pretty much covers it.

Fair enough. Thanks so much.

Thanks.

Thank you, Jon.

One moment for our next question. Our next question comes from Tazeen Ahmad with BofA Securities. Your line is open.

Hi, guys. Good morning. Thanks for taking my questions. Just a point of clarification, Adam, are you expecting to see growth in 1Q relative to 4Q on sales? I just want to clarify. You did mention the earlier historics and wanted to make sure it's not going to be slapped down. And then, secondly, I have a question on 3007. What are you expecting to show for this siRNA program, and what potential indications do you think it has promising?

Hey, Tazeen, it's Adam. So, yes, I mean, we continue to see growth in February, and we expect to continue to see growth in March moving forward. As I said, you know, January and February were two of our biggest months since launch. You also asked about samples. So, we continue to provide samples to our U.S. physicians, and we expect to continue to do that, especially as we're still in what I would call, the early phases of this launch. Interestingly, we didn't see sampling increase in the first quarter, which, I'll be honest, I thought it probably would, as we were going through the recertifications. But sampling will continue to be there as we move forward. So, hopefully, that answers your first question. And I'll hand it over to Cedric.

Thank you, Adam. So, Tazeen, on 3007, so, this is in the escalation phase and healthy subject. It is the first of several things that are coming out of the preclinical realm now, things that we're very excited about, and we'll talk about more in the years to come as well. So, what we're hoping to see there in the healthy volunteer phase is, of course, how much we can knock down C3 and how durable that will be in these subjects. The indications that we are going to pursue, we are, for now, keeping confidential. But we, of course, have a, what we believe is a very exciting development plan in store for that product.

Thank you. One moment for our next question. Our next question comes from Anupam Rama with J.P. Morgan. Your line is open.

Hey, guys. Thanks so much for taking the question. Adam, I wanted to ask you a quick question. What is driving your commentary about the GA population size here in the US being closer to 1.5 million versus I think what you've previously talked about is about a million patients? Thanks so much.

Yeah. Thanks, Anupam. So, I'll answer, and then I'll hand it to Caroline as well, if she has any comments. So, one thing we found with our interactions with physicians is, one of our work prior to launch was sizing an opportunity that was based on prevalence data but also having discussions pre-launch with physicians about how many patients that they think they have. And one thing we found is when you're first to market launch, you'll find a lot of patients that weren't categorized as GA, having GA because there was no treatments, were lost to follow-up in terms of sitting with their optometrist or something like that. So, we spent a large amount of effort to drive patients to go and get tested and check their vision of their optometrist, and then if they're diagnosed with GA, move into the clinic of a retina physician or an injecting physician. So, in those interactions, we're starting to find that those patients that potentially were lost to follow-up have now been diagnosed with GA and are moving into the practices. So, that's how we believe, based on those interactions, that the market is bigger than we had first anticipated. Caroline, do you want to add anything from a doctor perspective?

Sure. Thank you. I think that the GA story is getting out there not only to retina physicians and other eye care specialists, but to patients, and this has really helped to drive it. The other thing is that now that we have a treatment, all of the patients that we've been seeing that have neovascular or wet AMD in one eye were looking more closely at their fellow eye and seeing, I think, that there's GA in those patients that have previously just been observed. So, the number of patients seems to be greater and continues to be more in my practice.

Thanks so much for taking our questions.

One moment for our next question. Our next question comes from Salveen Richter with Goldman Sachs. Your line is open.

Great. Good morning and thank you for taking our question. This is Elizabeth on for Salveen. And two questions from us on the EU reexamination of the application of SYFOVRE. So, first, you noted that you had revised the dossier to ensure key questions are addressed. Could you just speak to what was included in that revision? And then, secondly, curious if the new rapporteurs have been identified and if there's any color you could provide on them with respect to them providing potentially a new perspective compared to the first set of rapporteurs?

Thank you, Elizabeth, great to hear you. So in the revision, we don't provide that detail, of course, but what's important is to educate, of course, to understand this disease of geographic atrophy and how that works as it relates to the functional endpoints. We have, as you mentioned, two new rapporteurs now. These are going to provide a very fresh view as to what we have presented, and we have new analyses available. We continue to generate data, as you know, in the GALE extension study as well. So, look, as we've always said, we believe that we have strong evidence, of course not in a pre-specified prospective trial, but based on what we gathered throughout our very large data set. And that is what we will now present to these new rapporteurs, with more focus and by making some concessions maybe on the label but with a path forward, we hope.

Got it. Understood, thank you.

One moment for our next question. Our next question comes from Yigal Natromovitz with Citigroup. Your line is open.

Hi, great. Thanks, Cedric and team. Cedric, I appreciate, as you pointed out, that it's not going to be easy for the CHMP re-examination, it's an uphill battle. You've mentioned the microperimetry data. You've shown us the post-hoc BCVA data. There's another metric which maybe you could talk about. I don't think you've discussed it before, the electroretinogram, the ERG. It's a very precise measure of electrical activity in the retina. Have you looked at that? Do you have any data there? Is that something that you could potentially include in the future that could support the claim that there is a functional benefit, even though you don't see it in the imaging or in the post-hoc BCVA? Thanks.

Thank you so much, Yigal. So ERG -- I will hand it over to Caroline to comment on that next but it is not the type of examination that you could use to look at a functional response in geographic atrophy. Again, there's like a resolution problem with that, from what I understand, but Caroline can talk about that more. What I think is important here is that the data that we have on microperimetry is very strong, right? And its data that, again, the longer you treat patients, the more you see these benefits increase over time, and that is also reflected in the functional measurements that we have. So we will put all of that together in that package. We will consider on what we can do prospectively. That will take time, of course, but for everybody, in the future, to continue to study this. But for now, I think we have a strong package with clear evidence. But ERG is definitely not something that is part of that equation. Caroline, I don't know if you want to?

Oh, thank you. ERG is something that absolutely is used for clinical studies for inherited retinal diseases. It gives a gross response to function and is less used for something like geographic atrophy but actually, our microperimetry data gives very similar sort of data to an ERG but in a more directed fashion. I think the story with SYFOVRE is, it's looking at the overall picture of what SYFOVRE has to add. And when we present this, it's very meaningful for doctors at meetings. We talk about the imaging parameters, how SYFOVRE reduces growth of GA, which alone in itself is highly meaningful. We talk about the AI parameters, and then we talk about all the functional data that we have, which is microperimetry times vision loss, and other parameters that we've given at the clinical meetings. So I think that no one else has the amount of the robust microperimetry data that we have in such a large patient group, and it really speaks to physicians. And it's really just presenting the entire SYFOVRE story to the EMA and really educating the EMA on this story.

Okay. Thank you. Thank you, Carolyn and Cedric. And then just one for Adam. You mentioned, Adam, the 90% share. Is that new starts, or is that existing, or is that everybody? Can you just split that out if possible?

Yeah. Thanks, Yigal. Yeah, that's the total market share. So we're the number one leading GA drug.

Okay. Thank you very much.

One moment for our next question. The next question comes from Steve Seedhouse with Raymond James. Your line is open.

Great. Yeah, thanks for taking the question. I wanted to ask about a couple of specific parameters as it pertains to the SYFOVRE launch. First, can you comment on patient persistence or discontinuation rates in the real world? Second, just the interval between doses, is it closer to eight weeks or six weeks? What's the sort of average dose interval? And then also net price or gross to net adjustment we should be thinking about as well. Thanks.

Thank you, Steve. Maybe, Caroline, you can briefly comment on what we've seen with discontinuation and then Adam will talk about the pathology and the gross to net.

Overall, from what I hear from physicians and what I've seen is that patients are highly motivated and actually in some ways are very comforted to know the exact number of injections that they might be receiving over the year and the following years. With anti-VEGF, we often use treat and extend, so it can be a little more variable. But I think that the majority of physicians in the real world are dosing every six to eight weeks with patients and patients seem to be returning for their follow-ups. There was one group that looked at this, a large retina group, that found very, very high level of [follow-up] in patients.

Yeah, just to build on that too, Steve, it's Adam. You know, we're still in the first -- you know, we just got past the first year, so it's still early in the launch, and we found that the vast majority of patients are really committed to receiving the treatment, as Caroline just described beautifully. So, I think, to the second part of your question, we are seeing the vast majority being every six to eight weeks. It tends to skew closer to six weeks, but that flexibility of every other month's dosing and that range allows physicians to move appointments around, particularly when the weather impacts, etc., etc. So we truly believe that the every-other-month dosing, as we call it, six to eight weeks, is a real, real competitive advantage for us, and that the vast majority of patients are choosing that frequency. I'll hand the gross to net question over to Tim.

Yeah, thanks, Adam. So, in terms of gross to net, we don't guide on that. I think our previous guidance was something between 10% and 20%, but, in our 10-K, we do have some pretty good disclosure over the past year in terms of blended disclosure, both at SYFOVRE and EMPAVELI, but it has chargebacks, discounts and fees laid out, government and other rebates and returns, and what you can see there is a provision related to sales in the current year that gets you kind of to the midpoint of that. That's on a historical basis. You know, we don't say what that is going forward, but that's just sort of towards the middle.

Thanks so much. I just have one clarification. Because Adam mentioned, I think, sampling, you didn't see sampling increase in 1Q so far. I'm just curious, is that relative to 4Q or relative to what? Because in 4Q, it was down, I think relative to -- like, it was six, what you just reported, 6400 relative to 10,000 in the prior quarter, so I'm just curious, what's the reference to that? What's the reference point for that comment?

Yeah, I was a little surprised, I'll be honest with you. Our assumption going -- this is the first January and February we've had, right, where recertifications were new to us. So our assumption prior to that was that, some physicians would reach for a sample during this process. But I actually think that, our sampling rate was relatively flat, did not increase. It did not increase versus Q4 too dramatically. And I think that's because we were relatively efficient in getting through the reverification process. So my assumption on sampling going up prior to those months turned out to be wrong. So I do expect sampling to continue. I do expect it to be -- continue to be flat quarter-on-quarter. As we drive new accounts to start, they tend to reach for less samples. And with our J-code, it's very easy for these accounts to get reimbursed for SYFOVRE. So hopefully that answers your question.

Yeah, thanks so much.

One moment for our next question. Our next question comes from Colleen Kusy with Baird. Your line is open.

Great. Thanks, good morning. Congrats on all the progress, a couple of commercial questions from us. What share of the patients on SYFOVRE today are receiving bilateral injections versus one injection or an injection in one eye? And then following up on Caroline's comment about patients with wet AMD, are you seeing those patients able to get their SYFOVRE and VEGF injections on the same day, or are those injections typically being staggered?

Hey, Colleen, it's Adam. So, yeah, we were expecting bilateral treatment to be a core piece of our launch. And then, obviously, during the rare episodes of vasculitis last year, we did see that bilateral usage slow down. We are seeing a return to bilateral usage, we are seeing physicians change their approach in how they administer bilateral. They'll start potentially with one eye, and they'll wait a little bit and see how that progresses, and then they'll move to the second eye. So, we are seeing bilateral usage increase. I think that's very positive as physicians start to really understand the benefit-risk profile of this drug and be able to have those conversations with patients. Anything, Caroline, you want to add on bilateral?

I think it's very common to have -- patients have treatment with an anti-VEGF in one eye, and if they need treatment with different products, including SYFOVRE in the other eye, to do that on the same day. But there's no generalizable formula to how retinal doctors work. I will say one thing that retina doctors really like is flexibility. And, fortunately, we have that in our label with this very flexible treatment interval between our label, so it can really be tapered to what works for your patient.

Great. Thanks for taking our questions.

Thanks, Colleen.

One moment for our next question. Our next question comes from Phil Nadeau with TD Cowen. Your line is open.

Good morning. Thanks for taking our questions, a couple on the U.S. market. First, over the summer, right after the vascularized events were first found, I think you did a physician survey where you showed about one-third of physicians had stopped using SYFOVRE, one-third stopped using in new patients but continued patients, and then one-third there was no change. Do you have a sense of how those numbers stand today, what proportion of physicians are still not using SYFOVRE versus what proportion have returned that are used to normal? That's the first question. And then the second question, a follow-up to Yigal's. On the 90% share, what do you attribute that to? Is it the two-year data that you have versus the two-year data that eye surveys presented, or is it execution issues? What do you think is enabling the 90% share that you currently have? Thanks.

Okay, Phil, its Adam. Thanks for the question. So, yes, we haven't done any new research since the last wave of what I call the third, a third, a third. One thing we have seen anecdotally is that each of those segments have started to use SYFOVRE again. So, the segment that has stopped, we really spent time with those physicians. We were there, we were being incredibly transparent about these rare cases of vasculitis and we waited. And once those physicians were ready, we then stepped back up. And so we've started to see physicians that had stopped restart and same for the segment of new patients only. Again, we've had a couple of physicians that I know of anecdotally that have said, no, I've started new patients again, based on the benefit-risk profile of the drug. And we continue to see growth in those accounts that did not stop. They continue to see the benefit of this drug. So, whilst we haven't done that wave of market research again, I do believe we're really impacting those three segments. Now, the second part of your question, the 90%, is, I think it's down to a lot of things, right? Continued strong execution from the team, particularly over the last few months, we've been incredibly transparent with the retina community, and I think we've spent a lot of time building trust and confidence. Physicians now, I believe, truly see the benefits of our overall clinical profile. So this is long-term efficacy from GALE, real-world safety in over 200,000 doses since launch. Dosing flexibility, you know the vast majority of physicians as I said before are leaning towards six to eight weeks. We have strong payer coverage with our J-code from October 1st. I think it's all of those things coming together, but the efficacy profile of this drug I think stands up high and this is the drug you choose for its efficacy, the impact it can have on patients vision moving forward. So we are laser focused on you know communicating our benefit risk and the benefit of this drug with physicians, and I think that will make a difference. Caroline anything you want to add?

I think it's -- like just to hone a little more on the efficacy story, the fact that we have the data from GALE with up to three years of data now, that's -- they really appreciate that this data is so thoughtful and also includes visual function with up to 42% reduction in GA lesion growth. That's something that's amazing and the fact that every other month dosing into GALE in nonsubfoveal patients is so meaningful. So the first thing for physicians is the efficacy story, the experience with the company and then their experience using the product and that's sort of where doctors are getting that experience now. The initial patients who came in were with physicians who are in our clinical study, which was so large and now we're reaching all the other physicians in the community.

That's very helpful. Thank you

One moment for our next question. Our next question comes from Akash Tewari from Jefferies. Your line is open.

Hey morning, this is Ivy on for Akash. Thanks for taking our questions. We just have two quick ones on SYFOVRE. So when we spoke to our team heading the train, you had felt confident that the long-term split between SYFOVRE and I

Thank you so much for that question. Adam?

Sure. Hi, Ivy, it's Adam. So yeah, Astellas has said they have a 20% market share but as I discussed previously, there are multiple ways you can estimate market share. Our assumption is that Astellas is using total vials shipped for a specific time period. So their last quarter versus our last quarter? What we do is we use real-world ECP injection data which is a snapshot of the current market where physicians are, ordering vials and using vials. And we think this is actually a better way of analyzing market share. It actually counts injections rather than looking at vials shipped or revenue and obviously, there's a total market analysis that we would do. So we're confident that we are the number one GA drug out there. We also did a time-adjusted analysis of our launch versus the competitor's launch. And if you time adjust so that you assume they both launch on the same day, ECP or physician demand for SYFOVRE was three times greater than that of I

Yeah, I’ll take the guidance question, so obviously after the past year we felt we needed a little more time before we could guide effectively and you know case in point. We've never been through a first quarter where we have recertifications or the like. So, we're just going to take our time and make sure we understand the dynamics over the course of a full year and we'll get back to you on when we plan to guide. Thanks.

One moment for our next question. Our next question comes from Ellie Merle with UBS. Your line is open.

Hey guys, thanks for taking the question and congrats on all the progress. I just want to follow up on the quarter-over-quarter gross question asked earlier. You said you're seeing January and February as two of the strongest months since launch and the sampling rate did not increase. So shouldn't 1Q be higher than 4Q? I guess how do we balance that with the seasonality commentary? I just want to clarify on that point. And then just a second question, in terms of compliance and dosing frequency, are you seeing any trends and differences in compliance or dosing frequency at different types of sites such as private equity owned versus academic? Thanks.

Hi, Ellie, it’s Adam. So, yeah, so we've been -- seasonality does impact drugs within this market. As I said, I use the analogs that we found from the anti-VEGF and we do see recertifications happen a lot in January and leak into February and impacted on the weather. We do believe that January and February are likely to be two of our largest months. So we're executing flawlessly and pushing to make Q1 as big as it possibly can be by being incredibly thoughtful in how we interact with the physicians. So, the team is flawlessly executing, I'm incredibly proud of them and we're pushing incredibly hard as you would expect us to. We believe we have the number one GA drug, moving forward Compliance, as I said, it's a touch early for compliance. We tend to see the vast majority of patients being six to eight weeks and they seem to be very comfortable with that. We have not noticed any difference that I'm aware of between compliance at PE backed practices versus non-PE backed practices. We have a nice wide range of business, right? So PE backed practices are about 30% of our business and the rest, the remaining 70% are independent practices and academic practices. To my knowledge, we haven't seen any differences in terms of compliance from those groups. As I said, we've just exited the first year. I think as we get into years two and three of treatment with this drug, that's when you know physicians will have to have a conversation with their patients about compliance, but it's too early for them.

Great, thanks.

One moment for our next question. Our next question comes from Francois Brisebois with Oppenheimer. Your line is open

Hi, this is Dan on for Frank, please. Well, thanks for taking our questions. Related to a question regarding the physician segments from the market research, now with the permanent J-code effective and the GALE extension read out, are you starting to see an impact within that 1/3 segment of physicians who are on the sidelines?

Yes, thanks for the question so yes, obviously, we haven't redone that market research, but we are starting to see an impact for physicians who are on the sideline, the J-code unlocked all of that. We continue, it's my favorite metric. We continue to see double-digit new accounts sign up to use SYFOVRE every week since launch. That has continued. That tells you that these physicians are no longer on the sidelines. They keep starting to and want to start patients. I think that's an incredibly positive metric for us. So yeah, whilst we haven't done them the research anecdotally, we're hearing that those physicians who are on the sidelines have started to go. We do have some upside opportunity too, right? So, we have about 1,800 sites of care across the U.S. that's about 50% of our potential target list. So there's still an opportunity for growth for us to target that other half of the market and we have some good plans to go and execute that which we started in the first quarter and expect to move into the -- for the rest of the year. So hopefully that answers your question

And just, congrats on the quarter.

Thank you.

Thank you.

One moment for our next question. Our next question comes from Joseph Stringer with Needham. Your line is open.

Hi, good morning and thanks for taking our question. Just a quick one on potential switching dynamics, just curious if you could provide any metrics or data or even qualitative feedback that you're hearing so far on any switching dynamics between SYFOVRE and I

Yeah, I think thank you so much are we great to hear you look that that is a place where I think we are very well positioned as well. At the end of the day where the metrics will stand out is the comparator between on efficacy as well as on safety, right. So and on the efficacy, quite frankly the difference is quite stark, right? I mean as mentioned before on ex-subfoveal patients up to 42% slow down versus what has so far been reported as 14%, even though we don't know what it is exactly in the second year for our competing product. And then maybe briefly on the safety, right, that risk that exists on the first injection of developing vasculitis, which is very rare, is something that we now firmly believe is caused by a pre-existing allergy towards polyethylene glycol, something that is shared between the products. And we have every reason to expect that both products in the future will have that risk, rare risk associated with it. That will then have to be discussed with the patient when a treatment is planned. Adam, do you want to add something to that?

Yeah, hey, Joe, it's Adam. So yes, no surprise, right, during the rare cases of vasculitis last year, we did see some accounts switch. They switched primarily for safety. And we know where those accounts are. Now, again, anecdotally, I have actually seen some physicians switch patients back. So I have seen and heard from my field teams that, physicians switched from SYFOVRE to the competitor, and then some of those patients were switched back. So switching does happen in this market. It definitely happened. It definitely happened during the rare cases of vasculitis. But we believe in the profile, the efficacy and the safety and the benefit-risk of this drug. And we truly will be focused on making sure we communicate that profile to every physician in this market.

Great. Thanks so much for the color.

One moment for our next question. Our next question comes from Derek Archilla with Wells Fargo. Your line is open.

Hey, good morning. Thanks for taking the questions. Just two on EMPAVELI, I guess first, have you seen any impact from the launch of Iptocopan in PNH? And I guess, how much upside do you think there is in the first line setting from the 10% you discussed today? And then just overall kind of commercial strategy for EMPAVELI and C3G and MPGN? Thanks.

Thank you so much, Derek. And great to hear you. Look, in PNH, we now have a very competitive situation, of course. And our expectations should be commensurate with that competitive situation. So while we don't guide, certainly there will be pressure from this world product. I think in general, though, that it is a great thing that there are now two products available to address the problem of extravascular hemolysis in these patients. If we go back a couple of years, as you may recall, because you were already covering us, there was a notion that this was something affecting 7% of patients. That is not true. This is something that affects the overwhelming majority of these patients. And a big segment of patients can and will benefit from this. And in that sense, raising the awareness around that, having the overtures by our side, will be helpful. As we've mentioned before, we're incredibly excited about what we can do in the kidney to the readout of the VALIANT trial this summer and what we will be able to do for the 5,000 patients with C3G and IC-MPGN that are in need. Adam, do you want to add something to that?

Yeah, you said it really well, Cedric, but just to add a few extra bits, right? So Derek, a twice a day oral will be appealing to PNH patients, for sure. We should expect that. In fact, we've seen one or two patients switch from EMPAVELI to the twice a day oral, as you would expect. The vast majority of our patients are really committed to EMPAVELI. They see the benefits of the efficacy, they see the benefits of the safety profile. And with the auto injector, the EMPAVELI Injector, we're really improving that convenience aspect of the drug. So we're going to be strongly competitive in the market, but an oral will have an impact. You asked about the first line segment, right? So I do expect we have 10%. I do expect that the oral will be used nicely within that first line segment, but I've been around the blocker a little bit and every time there's a new entrant into the market and a conversation is had between a physician and a patient, it's an opportunity for EMPAVELI. So if a patient has a conversation with a physician about starting on an oral or switching from ULTOMIRIS or SOLIRIS to an oral, that is an opportunity for us to make sure that EMPAVELI was in that consideration set, so switching opportunities become particularly important for us during this phase and just an execution perspective on nephrology. So we obviously have a great medical affairs EMPAVELI team. We're starting to send that medical affairs team to the nephrology conferences and that will be the face of the nephrology discussions that we have based on these conferences, etc., until we see some data mid-2024.

Got it. Thank you.

One moment for our next question. Our next question comes from Douglas Tsao with H.C. Wainwright. Your line is open.

Hi. Good morning. Thanks for taking the questions. Just maybe as a follow up on bilateral treatments, presumably there is a slowdown during the vasculitis phase. So should we think that relative to your sort of original expectations in terms of how big a part of the business it was, it is smaller? And are we starting to see sort of some of that catch up? And so should we think about that as sort of some amount of pent up demand of patients who are on SYFOVRE but only getting one eye treated but eventually should most likely convert to bilateral treatment? Thank you.

I think that it's likely that physicians will once they are comfortable and patients have got past the first injection or so, then they will be using bilateral for patients just out of convenience for these patients, they only have to come in once. So, now that we have such a large number of vials that have been used and the robust patient experience to-date, I think that we're approaching that.

Yeah, Doug, it's Adam. Just to add, you know, I think the bilateral usage was definitely impacted as you said. I expect that to come back but it's going to be time delayed, right, as we start to communicate with all of these physicians. They've changed their practice on how they do bilateral injections, how the -- process of how they do it is different based on what happened last year. I don't think it impacts the opportunity. I think that's just the time delay as physicians get more comfortable.

No, no, and I think my sort of question was is that when we think about a certain number of patients on SYFOVRE today, presumably a higher proportion are just having a single eye treated than you might have originally anticipated, but we should expect those to eventually catch up. So, we should see vials per patient increase relative to where we are?

I think you should expect to see bilateral increase, yes, moving forward.

Okay, great. Thank you.

One moment for our next question. Our next question comes from Graig Suvannavejh with Mizuho Securities.

Good morning. Thank you for taking my questions and congratulations on the quarter. Just two, please. One, I might have missed this before, but just on the European re-examination process, could you just clarify for me whether as a company during this re-examination period, whether you are able to submit additional data or new analyses, or is it that the two new rapporteurs provide just a fresh view of the previous data that was included in the original dossier? So, that's my first question. And then my second question, please, just a reminder on the safety profile on SYFOVRE and has the rate of vasculitis changed in terms of either increasing or potentially decreasing, or is it essentially the same? Thank you.

Thank you so much, Graig, great to hear you. First of all, on the European Union, so you are not allowed to include new data, but you are allowed to include new analyses, right? So, that is something that our team has really done well. And again, especially the microperimetry data is really compelling. So, we will see what is going to happen, as we mentioned, it’s an uphill battle, but one that we are excited to take on. Then as it relates to the safety, the rate continues to be at 0.01%, where it has been since July. And of course, that stability provides a very good context for physicians to disclose to their patients when they speak with them as to what the risk in front of them is versus the benefit that they can get from being untreated. So, unchanged, again, these cases are so rare that for a rate change to become manifest, we are going to have to wait quite a bit.

Thank you.

And I am not showing any further questions at this time. I would like to turn the call back over to Cedric for any closing remarks.

Thank you so much everyone for joining. It is a great start to the year for us, and we look forward to sharing much more with all of you as the months come by. And for those of you available later today, we will be here to take questions and answer any further inquiries that you may have. Thank you.