APLS - NASDAQ

Good morning, ladies and gentlemen. Thank you for standing by, and welcome to the Apellis Pharmaceuticals First Quarter 2024 Earnings Conference Call. [Operator Instructions] Please be advised today's call is being recorded. I will now turn the call over to your speaker host, Meredith Kaya, Senior Vice President, Investor Relations & Strategic Finance. Please go ahead.

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

Thank you, Meredith, and thank you all for joining us this morning. 2024 is off to a strong start. SYFOVRE continues to deliver robust growth in the first quarter driven by an acceleration in demand, resulting in $137 million in net sales, up 20% compared to Q4. EMPAVELI also making a difference for patients with PNH generating $26 million in revenue for the quarter, and we have a number of exciting opportunities to potentially expand EMPAVELI into new indications. We are one of the rare companies in our industry to have 2 drugs approved in just 3 years, a testament to the strength of our science and our incredible team. As a result, Apellis is now well positioned strategically, operationally and financially to deliver significant long-term value to our shareholders. SYFOVRE is key to delivering this long-term value and the growth in Q1 underscores the strong demand we continue to see from both physicians and patients. Through March, eye care professionals administered 250,000 SYFOVRE injections. And in the first 12 months of launch, SYFOVRE generated over $400 million in sales, substantially exceeding both our and Wall Street's expectations. This is extraordinary performance for any new product launch. SYFOVRE's leadership in the market is driven by 3 important factors: first, treatment with SYFOVRE results in increasing effects over time with up to 42% slowing of GA progression in year 3 of GALE, building on the meaningful effect demonstrated in DERBY and OAKS. Second, SYFOVRE has a well-documented safety profile based on extensive experience, both clinically and in the real world. And third, SYFOVRE offers flexible dosing as described in our label which means that patients can benefit from SYFOVRE's impressive clinical profile in as few as 6 doses per year. As the market leader, we are only getting started. Our performance to date reaffirms our belief that SYFOVRE has the potential to become a multibillion dollar product in the U.S. alone. We are also working to bring SYFOVRE patients worldwide. We recently announced that the European Medicines Agency reset the review of the SYFOVRE application back to day 180 of our initial assessment, which is the last phase of that procedure. This decision follows a judgment made by the Court of Justice in the EU regarding the competing interests of experts. The decision for SYFOVRE is strictly procedural and not related to the SYFOVRE application. The remainder of our review is expected to be led by the original reporters. We are working closely with the CHMP and EMEA on next steps with the upcoming CHMP opinion anticipated no later than July. Shifting to EMPAVELI. Since its launch in 2021, EMPAVELI has transformed the standard of care for patients with PNH. EMPAVELI was the first available treatment proven to effectively control both intravascular and extravascular hemolysis, 2 hallmarks of PNH while also significantly improving anemia and protecting the majority of patients from transfusions over the long term. We continue to serve PNH patients who may benefit from EMPAVELI and we believe it has the potential to become a best-in-class treatment option for additional high unmet need areas. Our biggest near-term opportunity is in C3G and IC-MPGN, 2 rare and devastating kidney diseases that often start in adolescents. There are currently no approved treatments for these diseases, which often leads to kidney failure or lifelong dialysis. Our Phase II NOBLE data showed unprecedented effects on disease activity, including complete clearing of disease activity in 40% of the treated patients at week 12 and reductions by one or more magnitude of intensity in 80% of treated patients. We plan to share the 52-week data from the NOBLE study at the European Renal Association meeting later this month and we look forward to sharing the top line data from our Phase III VALIANT study in mid-2024. Separately, I'm sure many of you saw the recent news out of New York University regarding the first ever combined mechanical heart pump and big kidney transplant. This was a historic event and we are thrilled that EMPAVELI played a role in making this xenotransplant surgery a success by helping to protect the kidney from potential rejection. EMPAVELI was also involved in the xenotransplant surgery performed at Mass General Hospital in March by helping to stabilize the transplanted kidney when it showed signs of early rejection. And while the research is early and we have a lot to learn still, we are encouraged by the potential of EMPAVELI in xeno-transplantation. Overall, I am thrilled with the progress we have made so far in 2024. With 2 commercial products and an emerging pipeline, which we are excited to share more about later this year, we remain steadfast in our vision to develop life-changing medicines for people living with some of the most challenging diseases. And with that, I will now turn it over to Adam to discuss our commercial activities.

Thanks, Cedric, and good morning, everyone. I will jump right in with SYFOVRE. As Cedric shared, SYFOVRE sales over the past 12 months have been strong. Initially, our success was largely driven by fast uptake from early adopters. More recently, we've seen both new patient demand and an increasing prescriber base driving sales. While we continue to focus our marketing efforts on retina specialists, we are also educating the referring eye care provider network on the importance of patients with GA getting the treatment they need. Further, we are investing in direct-to-consumer marketing initiatives to increase patient awareness and education about SYFOVRE and GA. Suffice to say that our efforts are paying off. In the first quarter, we distributed 72,000 commercial doses and 5,000 samples. The first 3 months of this year were the 3 largest volume months since launched through Q1. Growth rates varied monthly with a slight decline in February as compared to January and then a reacceleration in March, resulting in some of the largest demand weeks to date and our biggest month of the quarter. Additionally, in Q1, we continue to see a double-digit number of new sites come on board each week. With over 2,000 sites of care now using SYFOVRE across a broad range of practice types. We are thrilled by the continued growth we have seen in the second quarter so far across both new and existing patients. It has been an incredible launch. And now that we are in its second year, we will be going back to sharing key metrics with you as of quarter end. Regarding vasculitis, the rate remains rare at approximately 1 in 10,000 injections. What we have learned is that this appears to be our first injection phenomenon with the rate following a first injection estimated at about 1 in 4,000. Given the extensive real-world experience with SYFOVRE to date, retina specialists are more confident that these rates are rare and stable, and we are seeing many physicians who had either paused or decreased their use now start to use SYFOVRE again or use it in more of their patients. Shifting gears to longer-term dynamics. SYFOVRE remains the #1 chosen treatment for GA with approximately 85% of the treated market. We are confident that it will remain the market leader due to its strong efficacy, well-documented safety profile, flexible dosing and the robustness of our overall data set. Even more, we are only in the early stages of a large and growing market. The estimated prevalence of GA patients is up to 1.5 million in the United States. Today, based on a recent clients analysis, patients treated are estimated to make up 12% of the market has defined only by those patients who have been diagnosed and are managed by an ECP. However, many GA patients are not yet diagnosed or have not been referred to a specialist. In fact, only a small portion of newly diagnosed patients currently being treated with SYFOVRE are referrals. This means there continues to be a huge opportunity for SYFOVRE as the vast majority of GA patients have not yet been treated. Now that we are in year 2, we are executing the next stage of our commercial strategy. Remember, we are launching a transformative medicine for a disease that has never had a treatment available. So we have learned a lot about what drives both physicians and patients. Let me start with physicians. We plan to further increase our reach within existing physician targets as well as expand our use amongst those who have not used SYFOVRE yet. We are refining our messaging as we better understand what is resonating. At launch, our messaging initially focused on efficacy, then shifted to safety last summer. Now we have pivoted back to leading with efficacy, highlighting the positive results from our 3-year GALE extension study in addition to our OAKS and DERBY data and the multiple post hoc analyses that demonstrate functional benefits following SYFOVRE treatment. We are also broadening our reach to provide disease state education to other referring eye care providers who see tens of thousands of GA patients. As the market leader, we are educating those doctors on the importance of GA treatment, so that patients see a specialist who can then decide the right treatment approach. Moving to patients. Another key learning over the past year is how motivated and actively engaged patients are in their treatment decisions. As you may have seen in our unbranded DTC campaign, our initial message was focused on increasing awareness of GA and encouraging patients to see their eye care professional. These efforts have netted very positive results, including thousands of new GA diagnosis and a significant number of patients starting SYFOVRE treatment. We recently launched a branded DTC campaign with the focus now on encouraging patients to talk to their physicians about GA treatment with SYFOVRE. Our goal for this campaign is to increase awareness, access many more patients and accelerate the speed to diagnosis and treatment of GA. Now let me shift to EMPAVELI for PNH. Revenues in the quarter were $26 million. Compliance rates remain incredibly high at 97%, and the product also continues to have a compelling safety profile. With over 1,600 patient years of systemic pegcetacoplan exposure, there have still been zero cases of meningococcal infection and very low rates of thrombosis. But obviously, we are now seeing heightened competition. With the new entrant in the market, we anticipate pressure on EMPAVELI sales at least for the next 6 to 12 months. Although we have a strong foothold, I want to be realistic that demand is expected to be flat in the medium term. We still expect to see new patients starting on treatment but we also expect to see some patients switching to an oral. The EMPAVELI team is laser focused on emphasizing the real-world profile of EMPAVELI with physicians including its 3-year efficacy data and strong safety profile. We are confident that this profile will drive some physicians and patients to return to EMPAVELI over time. While still very early, we've already seen a few instances of this. Finally, we are particularly excited about the opportunity to potentially expand EMPAVELI into C3G and primary IC-MPGN. These are 2 devastating diseases with tremendous unmet need and a patient population that is 3x bigger than PNH. If approved, we will be able to leverage much of our existing infrastructure such as utilization of our field-based teams to reach nephrologists and deliver EMPAVELI to patients and physicians. Caroline will give more detail on the opportunity we have for these diseases. Caroline?

Thanks, Adam, and good morning, everyone. Yes, we are really looking forward to the top line data from our Phase III VALIANT study in C3G and IC-MPGN, which we expect mid-2024. I'm going to focus my remarks today on this upcoming development milestone, providing some background on the patient population as well as on the study. C3G and IC-MPGN are debilitating kidney diseases caused by uncontrolled complement activation and breakdown of C3. Symptoms include protein and blood in the urine, swelling, fatigue and high blood pressure. These diseases are estimated to affect 5,000 people in the United States and up to 8,000 in Europe, with the first diagnosis typically occurring in adolescence. Within 5 to 10 years of diagnosis, approximately 50% of people living with C3G and IC-MPGN ultimately suffer from kidney failure, resulting in either a kidney transplant or lifelong dialysis, both of which are highly burdensome and life-threatening to the patient. However, neither are curative and there are no approved therapies for these diseases. The incidence of disease recurrence is high and up to 50% of patients lose their kidney transplant due to the disease recurrence. Some patients may have multiple transplants in their lifetime, depending on their age at the first diagnosis. The VALIANT study enrolled 124 patients with either C3G or primary IC-MPGN in a randomized, placebo-controlled, double-blinded multicenter study designed to evaluate pegcetacoplan efficacy and safety. It is the only Phase III study to include a broad population, inclusive of adolescent and adult patients with native and post-transplant forms of both diseases. Study participants were randomized 1:1 to receive pegcetacoplan or placebo twice weekly for 26 weeks. Following this 26-week period, patients move to a 26-week open-label phase in which all patients received pegcetacoplan. The primary endpoint is a log-transformed ratio of urine protein to creatinine ratio, or uPCR, a key marker of disease progression in all patients at week 26 compared to baseline. Physicians consider a statistically significant response to the primary endpoint as clinically meaningful in this disease. Key secondary endpoints include additional measures on both uPCR and on eGFR. We are very excited about the potential opportunity that pegcetacoplan may have on patients with C3G and IC-MPGN. Turning to SYFOVRE briefly. We participated in several global medical meetings over the past few months. The retina community has been highly engaged with the Apellis team especially regarding our latest data from the GALE study, which demonstrated up to 42% slowing of GA growth in year 3 in non-subfoveal patients compared to projected sham. These increasing effects have never been shown before in any GA study. Finally, before I hand it over to Tim, I want to extend a warm welcome to Dr. Phil Ferrone, who joins us as our Chief Medical Retina Advisor. I have known Phil for a long time, having worked on multiple clinical trials and other programs together throughout our careers. Phil is a leading figure within the medical community with deep expertise in patient care and retina research. He is also a past President of the ASRS and has been on its Board for 18 years. Given Phil's in-depth experience with SYFOVRE and overall retina experience, he is uniquely positioned to help us continue to bring SYFOVRE to GA patients and develop our retina pipeline. I know I speak for all of us at Apellis when I say we are thrilled to have him on board. 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 first quarter of 2024 was $172.3 million, including $137.5 million in SYFOVRE and $25.6 million in EMPAVELI U.S. net product revenue. This compares with $44.8 million in total revenue in the first quarter of 2023. Turning to the rest of the P&L. For the first quarter, cost of sales was $20.2 million. R&D expenses were $84.7 million. The reason R&D expenses are slightly higher in Q1 versus Q4 is because there was a $15 million onetime noncash expense in Q1 related to the discontinuation of CAD. SG&A expenses were $129.5 million, and we reported a net loss of $66.4 million. While R&D and SG&A may fluctuate on a quarterly basis, we continue to expect our total operating expenses for the full year 2024 to be less than our total expenses in 2023. Turning to our balance sheet. As of March 31, 2024, we had $326 million in cash and cash equivalents. As Cedric mentioned, we are in a strong position financially. With our existing cash, combined with projected revenues, we continue to believe that we have sufficient cash to fund our operations for the foreseeable future. I will now hand the call back over to Cedric for closing remarks. Cedric?

Thanks, Tim. We are highly encouraged by the start of 2024 and excited for the value-driving milestones on the horizon. I want to emphasize our determination to be the leader in complement medicine. The progress across our pipeline exemplified by, but not limited to SYFOVRE and EMPAVELI is presenting us with opportunities to create meaningful therapies and substantial value for shareholders. We appreciate your continued support. We truly believe that the best is yet to come. Let us now open the call for questions. Operator?

[Operator Instructions] Our first question comes from Umer Raffat with Evercore ISI.

It's actually Jon Miller on for Umer here. I would love to start with the competitive dynamics in GA. Obviously, we heard recently from your recently launched competitor that they expect to see 25% market share already and going to 40% by the end of the year, that doesn't jive with what you just told us saying you have 85% market share. So maybe you could put into context some of the differences, how we square that circle with the market share that they reported versus your reported? And maybe a little bit about how you expect competitive dynamics in GA to evolve over the course of the year as a new competitor launches?

Thank you, Jon. Great to hear you. Adam?

Thanks, Jon. It's Adam. So yes, firstly, we are thrilled with the 20% growth we saw in Q1 versus Q4. So obviously, there are many ways to estimate market share. And what we do here is that we look at market share as patients treated with GA. We think it's the most robust way of measuring market share. You then know that the drug is actually being used within a patient. Astellas calculates market share based off of vials distributed. So again, patients is the #1 choice for us when it comes to market share. It means you can roll out things like vials stacked wholesalers, vials stacked in hospital fridges and doctors fridges. And also, it accounts for frequency of administration, right? We are -- tend to be a very much strong every other month drug. And by looking at patients, you can be much more specific than that. So we're the #1 chosen GA therapy. I continue to see that progressing as we progress through the year. This is a massive market. We've chosen first across new patients and continued physician choice. We have the potential to be a multibillion dollar product in the U.S., and I expect that to continue as we push to execute our plans for the rest of the year.

That makes a ton of sense. And I guess as we think about moving beyond that U.S. market, which, as you say, is very robust. I have a question about the EU process that now seems to have been restarted or set back or gone back to the original reporters. Can you just bottom line for us is that good news or bad news? Does this increase the likelihood or decrease the likelihood of EU actually getting approved at some point?

Thank you, Jon. In terms of the answer of approval, quite frankly, we think nothing has changed. This is a procedural delay that was caused by a loss that had nothing to do with us between the EU and another company. So we're going to have to wait a little bit longer, but we think that the other approvability stay the same.

Our next question comes from Tazeen Ahmad with Bank of America Securities.

I just wanted to get a sense about how you're seeing the rate of growth we saw in 1Q? We know that you had impact several insurances needing to be reset. But now that that's largely or completely behind you. Can you talk about the general rate of growth and whether or not the rate of growth is starting to flatline or 1Q is going to be a seasonal effect going forward.

Thank you so much, Tazeen. You were breaking up a little bit. I think your question was whether the rate of growth continues to be in line with what it was before for SYFOVRE, right?

Yes. With the exception of 1Q being impacted with the insurance reset.

Okay. Yes. Excellent. Thank you. Adam?

Thanks, Tazeen. So yes, for us to see 20% quarterly growth 1 year into the launch, I think it's an incredible indicator for long-term success. Also remember that last year, October to December, we had a better understanding of our efficacy profile with the 3-year GALE data in November. And we're going to continue to push that for the remainder of the year. This large market, we believe, is driven by efficacy. We are incredibly well positioned for strong future growth, both in the near term and the long term. And we continue to see that strong growth into Q2, and we're excited for our next earnings call where we can share a lot more details about that.

Our next question comes from Anupam Rama with JPMorgan.

This is Priyanka on for Anupam. And just building up a little bit on the first question, how are you thinking about the dynamics around the November regulatory action for I

Thank you so much for that question. We do not want to comment on our competitor. You would have to ask them about that. But of course, these are all elements that will factor into where ultimately the landscape ends. I think what really stands out here is that this market is absolutely enormous, unfortunately, because there are so many patients, and we have only begun to scratch the surface.

Our next question comes from Salveen Richter with Goldman Sachs.

Could you just speak to the magnitude of seasonality impact in the first quarter? And then regarding your launch here, maybe help us understand in the first quarter, what new prescribers and new patients look like in terms of uptake here and as well as follow-up doses.

Thank you, Salveen. Great to hear you. Adam?

Thanks, Salveen. So yes, March was the strongest month for our first quarter. So February dipped a little bit. And as you know, right, this is the first time we learn about seasonality with SYFOVRE with all of the work that we did for insurance recertifications plus the impact of storms. Agnostic to that, et cetera, and that seasonality, we still saw great strong growth. So -- and we're seeing that growth continue into Q2. As Cedric has said earlier in the previous question, this is an incredibly big market, of which we think the profile of our drug with its strong efficacy, well-documented safety, flexible dosing and the unmatched data that back all of that up is going to be incredibly strong for us moving forward. Q2, the team is laser-focused on executing our plan, and we are the #1 picked GA treatment.

Our next question comes from Yigal Nochomovitz with Citigroup.

I had a few, Adam, on some of the commercial dynamics. Could you comment at all on switching rates either from I

Yes, Yigal. So switching. So again, we have the strong majority of new patient starts. They choose SYFOVRE. No surprise, right? By the way, J-code is now into action. We'll see some fluctuations on new starts as we did with our J-code. But the strong majority of new starts choose SYFOVRE. I think that's a very positive metric moving forward. Yes, we have over 2,000 sites of care and my very nerdy metric continues that we get double-digit new sites starting SYFOVRE every week, and that has been the same since the beginning of the launch. That's a very strong indicator of demand. Some sites share both drugs. There are certain sites that are SYFOVRE-only sites, predominantly SYFOVRE, they tend to choose SYFOVRE for the efficacy of the drug and the data set that supports that efficacy. There are 1 or 2 sites that during vasculitis did switch to I

Sorry, this is Cedric. So the rate has been stable since the very beginning at about 1 in 10,000, and this is predominantly a first injection phenomenon where the odds are about 1 in 4,000, which is in the same range of what you would find, for example, infectious endophthalmitis but it is really that first injection. So if you are a physician with a patient that is the conversation that you can have. After that, we believe that the very low vasculitis rate is in line with what it was defined for anti-VEGF.

I understand what you're saying. I thought you said the 1 in 4,000 was for the second and third -- and subsequent, but it's for the first. I get you.

Only the first injection. Correct.

Our next question comes from Steve Seedhouse with Raymond James.

This is Nick on for Steve. We just wanted to clarify if you're able to submit new data whether it's long-term GALE data, functional analyses or real-world safety data as part of the updated review process in Europe?

Thank you so much, Steve. So we are allowed to make changes and submit new data as part of the first review. It is in the appeals process that, that is not allowed.

And one quick follow-up. Are you able to comment on how many patients have been treated with SYFOVRE to date?

That is not a number that we provide.

Our next question comes from Colleen Kusy with Baird.

Great. Adam, you commented on a slight dip in February. Is that a factor of every 8-week dosing? Or kind of what do you think was driving that slight dip? And then can you just comment on inventory in the quarter? I think our math is showing as a slight draw down in the quarter, but could you just comment, please?

Colleen, yes, I mean, obviously, February was a shorter month and I think there's always a little bit of seasonality in January, February and March that we've seen. But we pick straight back up in March and continue to see growth into Q2. Now we previously announced mid-February, 40,000 doses and just add a little bit of context to your question. That was within the first 7 weeks of the 13-week quarter. We then saw an additional 37,000 doses distributed across the remaining 6 weeks. So that just shows you a little bit about the timing of those type of announcements and the seasonality within. What was the second part of your question? Just I didn't catch it.

Draw down in inventories.

Draw down of inventory, we did see certain wholesalers draw down inventory, and we -- that's, again, normal as part of the seasonality of the month.

Our next question comes from Phil Nadeau with TD Cowen.

One from us and a follow-up. On the future trends, there seems to be a lot of focus among investors on what I

Thank you so much, Phil. Adam?

Yes. Thanks, Phil. So 20% growth Q1 versus Q4, I think is a very positive thing and we continue to seeing growth into Q2, strong growth. We don't comment on what that growth will look like for the fourth quarter. We're excited to be able to represent that at our next earnings call.

That's fair enough. And then just one follow-up on the EU. Should you get a negative CHMP opinion in July, do you still now have the Apellis process available to you? Could you go down the same road that you thought you were going to go down back in January once this review is over?

Thank you, Phil. Yes, we can. So as I mentioned before, the process will be longer, but we believe that the other approvability stay the same.

And our next question comes from Akash Tewari with Jefferies.

This is Ivy on for Akash. We have a couple of quick ones on SYFOVRE. The first is on safety. What's your current hypothesis on the causes behind the cases? Have you done any testing on PEG antibodies? And then on the competitive landscape, if there's no more retinal vasculitis cases for either way over the next 2 quarters, how would your internal market share projections shift? And finally is for your branded DTC campaign. What's the ROI you're targeting at? And also like what's the spend associated with this campaign for this year?

Thank you so much and wonderful to hear you. So first of all, on the hypothesis, again, as we've discussed before, it is pretty remarkable that there is this first injection phenomenon, right, from an immunological perspective. Our leading hypothesis, as you correctly mentioned, is indeed around polyethylene glycol. That is the work that we will continue to do to further explore. Now for our competitor, we will see where things land. I think what is really important for us is that the rates of vasculitis is extremely low and stays extremely low is a first injection phenomenon. And the efficacy is something that, of course, really stands out for SYFOVRE versus our competitor, which at the end of the day, we think will be the most important. All of this stands in the background, of course, of this enormous market that geographic atrophy represents because of the enormous amount of patients that are unfortunately affected by this disease. So as it relates to the DTC campaign, let me hand it over to Adam.

Yes, Ivy, and I'll just add on to what Cedric said, right? Our market leadership is driven by our strong efficacy, well-documented safety, flexible dosing and the unmatched data set that holds all of that up. So that's, I think, incredibly important for the rest of the year. And I think people choose GA drugs for their incredibly strong efficacy. As to DTC, so our DTC campaign is actually live now on TV. So our new campaigns are streaming. We're investing in this campaign because we think it has an incredibly strong positive return on investment. It will drive more patients into retina specialist offices and those patients will see our ad and ask for SYFOVRE. And then the 4 pillars of what we think builds up a great GA drug come into play there where the physician will have that conversation with those patients and hopefully put those patients on. So as Cedric said, this is a large market, and all of our DTC activities will push more SYFOVRE patients into the market.

Our next question comes from Ellie Merle with UBS.

Just one quickly on expenses and profitability. Just given you expect expenses to be less in '24 versus '23? And with SYFOVRE growing, how are you thinking about when you might reach profitability? And what are the potential swing factors there? And then just a second one on your pricing strategy. Just what are your expectations for gross to net in the second quarter? And do you expect any uptick in gross to net or your use of sampling in the second quarter? And just walk us through how you're thinking about your pricing and contracting strategy.

Thank you, Ellie. Great to hear you. Tim?

Sure. Thanks, Ellie. So the good news is we're in a very strong financial position, and we've previously said that our cash and our projected revenues are sufficient to fund our operations for the foreseeable future. From an expense perspective, on a quarterly basis, our Q4 2023 expenses were lower than our Q3 2023 expenses by about 7% and then taking into account the onetime charge for cold agglutinin disease. This quarter, they would have been down a further 5 or so percent. So we have seen that decrease in operating expenses, and we continue to believe that our expenses will be lower in 2024 than in 2023. On the topline, you can see that we're also growing nicely. And that combination, we've said, will obviously allow us to fund our operations, but we don't actually guide on when we would become profit...

Our next question comes from Annabel Samimy with Stifel.

I want to ask about the referrals from ophthalmologists. Has that just started or retinal specialists will working with their own patients? And with this DTC campaign, can the retinal specialists handle the number of -- the volume of referrals that are going to be coming in, if the referrals have just started. And on the competitive landscape, obviously, I

Thank you so much, Annabel. I'll leave it over to Adam.

Yes. Thanks, Annabel. So at the moment, referrals are quite low. And as you said, right, this is a very large market. So the vast majority of retina physicians are treating patients that they already had a relationship with or what on their books, so to speak. And we believe the DTC campaign will start to push those patients that they don't have and those referrals from ophthalmologists and optometrists in to get treatment. So that's the core aspects of our DTC. The feedback we hear from retinal physicians is that they have the capability of accepting many, many more patients. And I don't think it's remotely a problem for them to treat those new additional patients. And that's been consistent feedback we've got as we progress through the launch. Now competition is healthy and competition does grow in incredibly large market. And I think the team that we have in the field is laser focused on executing because we believe that we have the strongest product profile out there in this large and growing market. So I do think market growth driven by competition is a great tailwind for us. And I think we're primed and have the best drug to be able to capitalize upon.

Thank you, François. Adam?

Thank you so much for that question as well. We are very excited about the VALIANT readout. We believe that in C3G and IC-MPGN, there is a very high and unmet medical need that will be associated with an important new market for EMPAVELI. In the VALIANT trial, we have enrolled 124 subjects, a very large trial across both IC-MPGN and C3G pre-transplant as well as post-transplant. And the primary endpoint is a local transformation in proteinuria reduction powered to show approximately 13%, but a significant reduction in proteinuria is what we are looking for and will be placed in the context with some of the secondary endpoints.

Our next question comes from Adam Vogel with Wells Fargo.

I'm on for Derek today. Maybe just a little bit more on the VALIANT's readout. How granular will you report this data out across each indication and setting? And then within those, is there like one that's clearly the largest opportunity for you? Or are they fairly similar across indication and settings?

Thank you so much, Adam. So this is, again, a very large market opportunity and something that we're really looking forward to reading out. I didn't exactly hear your question because it was breaking up little bit. Could you repeat that, please?

Sorry. Yes. So just across indications, how granular are you going to be reporting out like each indication across like pre- and post-kidney transplant and is there a market opportunity among these that is kind of like the largest opportunity for you guys? Or is it fairly similar across each indication and setting?

Yes. Thank you so much. So the C3G is the larger markets and the larger opportunity in terms of patients compared to IC-MPGN. But I think it's important here to point out as well that correctly differentiating between those 2 indications is also not straightforward. You have to look at the scope at and make the determination there. I think for us, the purpose was to really go very broad, again, not just between the 2 indications, but also in the pre- and the post-transplant setting and especially in the post-transplant setting, we think we have a really unique opportunity to stand out as a best-in-class opportunity.

Got you. And then maybe just one follow-up. On the SFJ Loan repayment. Is there any new color you can provide us on loan repayment strategies?

Thank you. Tim?

Sure. Thank you. And so look, one of the things we look at carefully is our cash management. So ultimately, when you look at our SFJ payments, they amount to approximately $200 million over the next, call it, 20 months. And that, along with our increase in the receivables that we extend, so the credit we extend to the channel. That represents a fairly large cash use for us. So obviously, we spent a good amount of time thinking about the best way to perform balance sheet management, and we have a number of options available to us. Tactical options, non-dilutive options are -- there are several of those. So we evaluate those all the time. We'll update you if we plan to do anything there.

Our next question comes from Joseph Stringer with Needham & Company.

Just to follow-up on a prior question on the switching between SYFOVRE and I

Thank you so much for the question. So look, I think the switchers, quite frankly, is not something that I think is an easy conversation between physicians and patients. When you are on either of the 2 drugs, and you want to switch that patient over, you're going to have a conversation around that. Again, we are mostly focused on the new patients and as they come on board. And as we've mentioned, we have, of course, our differentiated efficacy profile to work from. And again, it's an enormous market and it's an enormous number of patients who are in dire need. Adam, Caroline, do you want to add something?

I think it's uncommon for our physicians to be switching now. The majority of physicians are really very happy with our transparency, with our messaging and with our efficacy. And in the long term, this is an elderly patient population. They want to have this true every other month dosing, which shows enormous efficacy for us into year 3 and beyond. And I think that really speaks to the doctors. And they sort of understand the safety messaging and which has also been associated with intravitreal injections as a whole, understand that are able to inform their patients and have moved on from that.

And Joey, just to add, it's Adam. Yes. So I think the switching dynamic did occur during the late summer months of last year. We have also seen some patients anecdotally switched back to SYFOVRE. As Caroline said, our assumption there is that this is an efficacy driven market, and these are incredibly well educated patients and physicians. So we continue to see the strong majority of new starts start on SYFOVRE and I think that's a very positive indicator.

Our next question comes from Douglas Tsao with H.C. Wainwright.

Congrats on the progress. Just you've noted that this -- the [indiscernible] seems to be a first injection phenomenon. I'm just curious, is there anything that you can do to lower the rate from the 1 in 4,000, which is already rare, but to minimize it even further, and I guess I'd just be curious if there are efforts both in the near term or perhaps longer-term work that could be done.

Thank you so much, Doug. Look, we are looking into ways to potentially predict the at-risk patients that are there. But again, kind of placing things into context here, right? I mean the rate that we have here is similar to what you have with -- for infectious endophthalmitis, which is a risk that happens at every single injection that is done, right? So most importantly, last year when we went into this, the question was, is this a problem that is just the beginning of much more, and it is not. So right now, we are in a period of stabilization, physicians understand the risk. We've been incredibly, I think, good and transparent at communicating it. And now the dialogue is shifting towards efficacy.

And I'm just curious, as a follow-up, to the extent that there are practices using both SYFOVRE as well as I

Yes. Thank you. Caroline, do you want to add?

Well, I think some of these practices are so large. There's a benefit to offering across all of the therapeutic options. For example, a patient might come in who was treated in a different state and wants to continue on while they're vacationing with their treatment and then they'll go back. So there's a whole host of reasons that speak to physician choices. But I think the main thing that physicians like is efficacy. And that is really where we're strong efficacy and flexibility while being transparent with our safety dosing. So I can only say that in my practice, we offer every therapeutic option that's available. But the discussion is often based on the statistics with the patients and making that [indiscernible] with them together.

Our next question comes from Graig Suvannavejh with Mizuho Securities.

Congrats on the nice SYFOVRE number. I was wondering if you could either qualify or quantify what you're expecting the recent implementation of the CMS J-code for I

Thank you, Graig. Adam, on CMS and then Tim on gross-to-net.

Yes. So I think J-code unlocks prescribers. And so just like it was for us, I think the J-code will unlock some prescribers for I

Thank you for the question, Graig. Yes. So for gross-to-net, it has been relatively stable. And really, we don't comment generally other than to say we've had a pretty wide range of 10% to 20% that we've said. I think it's a wide range, but you can get somewhere in the middle where we can understand our gross-to-net has been consistent.

I'm showing no further questions at this time. I would now like to turn it back to Cedric Francois for closing remarks.

Thank you so much, everyone, for joining. If you have any follow-up questions, please feel free to reach out to Meredith, and we look forward to hearing and speaking with many of you today and the next week. Thank you.