Apellis Pharmaceuticals - Earnings Call - Q1 2025

Transcript

Operator (participant)

Hello everyone and welcome to the Q1 2025 Apellis Pharmaceuticals earnings conference call. At this time, all participants are in a listen-only mode. After the presentation, there will be a Question-and-Answer session. To participate, you will need to press star one one on your telephone. You will then hear a message advising your hand is raised. To withdraw your question, simply press star one one again. Please be advised that today's conference is being recorded. Now, it's my pleasure to turn the call over to the Vice President of Communications, Tracy Vineis. The floor is yours.

Tracy Vineis (VP of Communications)

Good morning, and thank you for joining us to discuss Apellis' first quarter 2025 financial results. With me on the call are Co-Founder and Chief Executive Officer Dr. Cedric Francois, Chief Financial Officer Tim Sullivan, Executive Vice President of Commercial David Acheson, and Chief Medical Officer Dr. Caroline Baumal is on the line for Q&A. Before we begin, let me point out that we will be making forward-looking statements that are based on our current expectations and beliefs. These statements are subject to certain risks and uncertainties, and actual results may differ materially. I encourage you to consult the risk factors discussed in our SEC filings for additional detail. Now, I'll turn the call over to Cedric.

Cedric Francois (Co-Founder and CEO)

Thank you, Tracy, and thank you all for joining us this morning. As many of you know, Apellis is a commercial-stage biopharmaceutical company with two approved C3- targeting therapies, SYFOVRE and EMPAVELI, and a growing pipeline of novel therapeutic compounds. Our focus is on addressing diseases with significant unmet need through targeted inhibition of the complement system. The first quarter of 2025 presented a combination of challenges and progress. Despite growth in injection demand, we faced a unique set of market dynamics that impacted SYFOVRE revenue performance. Meanwhile, we advanced EMPAVELI closer to its second approval, with the FDA granting priority review designation for C3G and IC-MPGN, and a PDUFA date that is now less than three months away. Let's begin with SYFOVRE. While first quarter SYFOVRE injection demand grew 4% quarter over quarter, revenue came in below expectations. We believe that this shortfall was primarily driven by two factors.

As mentioned already in our Q4 earnings call, there were funding shortages at third-party copay assistance programs. There was also a larger-than-expected drawdown of total channel inventory during the first quarter, including in physician offices. Tim and David will share more details on these dynamics shortly. Competitively, we continue to strengthen our market leadership within geographic atrophy. SYFOVRE maintains more than 60% of the overall market, and new patient starts continue to grow, exceeding 50% during the first quarter and already reaching 55% by late April. GA represents a significant unmet need, and GA therapies are only in the early stages of adoption. We expect continued but modest market growth in the near term, and are confident that our efforts in the field will translate into meaningful growth for SYFOVRE over time.

Shifting now to EMPAVELI, where we are gearing up for a major launch of our second potential blockbuster opportunity. We have made significant strides towards our goal of bringing EMPAVELI to more patients in the first quarter. The supplemental NDA for C3G and IC-MPGN was accepted by the FDA and granted priority review designation with a PDUFA date of July 28. The phase III Valiant results demonstrated EMPAVELI's potential for disease modification across all patient subgroups, achieving the trifecta of glomerular disease endpoints. First, an unprecedented 68% reduction in proteinuria. Second, stabilization of kidney function as measured by eGFR. Finally, substantial clearing of C3c staining. We look forward to presenting the Valiant 52-week data at the European Renal Association Congress in early June. US approval and launch of EMPAVELI in C3G and IC-MPGN will represent Apellis' third new product launch in just four years.

We are carrying this momentum forward and looking to build on the success of EMPAVELI in rare nephrology indications. We remain on track to initiate pivotal studies in focal segmental glomerulosclerosis and delayed graft function in the second half of this year. I will now turn the call over to Tim to provide a review of the financials from the first quarter. Tim?

Tim Sullivan (CFO)

Thank you, Cedric. We are very encouraged by the growth in SYFOVRE injection demand during the first quarter. Injections are the true measure of demand, and this performance gives us confidence that the market for SYFOVRE is growing. However, SYFOVRE net product revenue was $130 million for the first quarter, which was down due to two primary factors. First, there was a unique inventory dynamic impacting the first quarter, as you can see on slide six. During Q4, physician demand drove a larger-than-expected build of inventory in physician offices, which led to a corresponding inventory increase at the distributor. We believe this increased physician demand was driven by stronger preference for SYFOVRE and regulatory concerns for the competitor product. In Q1, we saw a drawdown of inventory at both the distributor and physician offices, and total channel inventory returned to more typical levels by the end of the quarter.

Most of the quarter-over-quarter revenue decline was related to this Q1 channel inventory drawdown. The second impact to SYFOVRE revenue was a funding shortage at third-party copay assistance organizations that resulted in increased physician and patient reliance on samples. As we discussed in our fourth quarter call, in connection with the funding shortage, non-revenue-generating sample doses delivered were more than twice the average seen in previous quarters. We expect a similar amount of samples to be used going forward. We estimate that this shift to sample use impacted Q1 revenue by approximately $10 million. To put it simply, adjusting Q4 and Q1 for this inventory dynamic, revenue would have been consistent quarter over quarter. Without the copay assistance funding shortage, we would have expected growth to have been more in line with injection growth. We've spoken about demand, and now let's turn to price dynamics.

We continue to diligently manage our ASP, or average sales price, and expect the SYFOVRE gross-to-net percentage to be in the low to mid-20% through 2025. Turning now to operating expenses. We executed significant cost savings in late 2023 and have since maintained that financial discipline into 2025, completing the necessary reduction in our EU commercial infrastructure while also efficiently scaling for a successful launch in C3G and IC-MPGN. We continue to expect that our 2025 operating expenses will remain in line with our 2024 operating expenses. Also, we are closely monitoring the tariff situation and will take steps to mitigate any adverse impact it could have on our business. With $358 million in cash and cash equivalents at the end of the first quarter, we remain confident that our existing cash, combined with future product sales and ex-U.S. royalties, will be sufficient to fund our business to eGFR.

I will now hand the call over to David for a commercial update. David?

David Acheson (EVP of Commercial)

Thank you, Tim, and good morning, everyone. In the first quarter, there were approximately 92,000 SYFOVRE doses delivered to physician offices, including 82,000 commercial doses and 10,000 samples. As Tim and Cedric noted, there is a funding shortage at the copay assistance programs that has impacted demand for commercial doses, resulting in increased sample usage. Despite this headwind, we successfully drove growth in total injection demand in the first quarter. SYFOVRE remained the clear market leader with overall market share exceeding 60% and share of new patient starts above 50%. Injection demand continued to grow, with the share of new patient starts already reaching 55% by late April. There remains tremendous opportunity in the GA market.

We've put several initiatives in place to continue to drive demand and new patient starts, including leveraging our DTC campaign, where we have seen a meaningful increase in traffic to syfovre.com relative to the monthly average in 2024. Once patients reach our website, they can use our Find a Doctor tool to identify retina specialists that are experienced in treating GA. We are highlighting SYFOVRE's unique 48-month GALE extension study results that demonstrated SYFOVRE's ability to preserve meaningfully more retina tissue when physicians treat patients early and keep them on treatment over time. We've built a robust field team that is focused on growing the market through educating optometrists and ophthalmologists on the importance of treating GA and SYFOVRE's differentiated product profile. We also provide resources so that the GA patients can seek treatment with a retina specialist.

To mitigate issues with the copay assistance programs, we are launching education programs on best practices for managing patient reimbursement. We're working to educate practices about patient benefit designs, potential impacts to out-of-pocket expenses, and how our Apellis Assist program can offer education to retina offices. SYFOVRE's gains in new patient starts reflect that its differentiated profile is resonating, driven by its robust efficacy, flexible dosing, and preferred position with many payers. Turning now to the anticipated launch of EMPAVELI in C3G and IC-MPGN. The commercial and medical teams are ramping up their efforts in anticipation of EMPAVELI's potential label expansion later this year. We are executing several pre-launch activities and working to drive disease state awareness. Our approach to maximizing the potential for EMPAVELI in these diseases is three-pronged. First, highlight the urgency for a treatment that addresses underlying disease pathology.

Second, ensure seamless access to treatment for patients upon approval. Third, establish EMPAVELI as the market leader in C3G and IC-MPGN. Our field teams are already in place and building relationships with key physician accounts. We are working with payers to ensure coverage and access to EMPAVELI upon approval. We are also engaging with physicians and KOLs at medical conferences. The U.S. commercial opportunity is significant with an estimated 5,000 C3G and IC-MPGN patients. Given the strength of the Valiant data, we believe EMPAVELI will be used across all patient groups and disease severities. As many C3G and IC-MPGN patients will progress to end-stage renal disease, physician feedback has been consistent that treatment choice will be primarily based on efficacy, not route of administration. As Cedric mentioned, full 52-week data from the Valiant study will be presented at the ERA conference in June.

We expect this to drive further excitement for EMPAVELI within the treatment community. Switching now to PNH, net product revenue for EMPAVELI in the first quarter was $20 million. Compliance rates remain high at 97%, and the safety profile remains consistent with our previous updates. With that, I will now turn the call over to Cedric for closing remarks.

Cedric Francois (Co-Founder and CEO)

Thank you, David. As we discussed, there is a lot to look forward to. The remainder of 2025 will be a pivotal year for execution. I am confident in our team's ability to capitalize on the strong physician demand for SYFOVRE, and I am excited about the potential for EMPAVELI to transform the treatment in C3G and IC-MPGN. We continue to make progress towards becoming a profitable, well-established biotechnology company with a promising pipeline and approved products across retinal, nephrology, and hematological diseases. Our objective is clear: successfully execute our strategy, drive revenue growth, maintain financial discipline, and most importantly, continue to deliver meaningful treatments to patients in need. Before I open it up for Q&A, I would like to take a moment to welcome the newest member to our board of directors, Craig Wheeler. Craig is the former CEO of Momenta Pharmaceuticals and founder and CEO of Headwaters Biotech Advisors.

He has more than 30 years of leadership experience across the biopharmaceutical industry and has successfully grown companies into strong commercial organizations with robust pipelines. His expertise will be a tremendous asset, and we are thrilled to have him join the board. With that, I'll turn the call over to the operator for Q&A.

Operator (participant)

Thank you so much. As a reminder, to ask a question, press star one one on your telephone and wait for your name to be announced. To remove yourself, press star one one again. As a courtesy to other analysts, we ask that you please keep your questions to one. Thank you. Please stand by for our first question. It comes from the line of John Miller with Evercore. Please proceed.

John Miller (Partner and National Director of Wealth Planning)

Hi, guys. Thanks so much for taking my question and congrats on all the progress. I would love to just be really, really clear about one-queue volume dynamics, I guess, in my question. Obviously, there's a couple of moving parts to this, but I just want to sort of square the circle between your disclosures last quarter and your disclosures this quarter. Last quarter, aggregate volume was 94,000 vials. This quarter, it's 92,000 vials, but your graph shows demand continuing to grow. Last quarter, you called inventory build not significant, I think, in your Q&A. Obviously, this quarter, you're saying it really was a more substantial change. The lack of funding to the copay assistance program was a known headwind we talked about last quarter, but it seems like maybe that's larger than it was expected.

Do we know when that's going to roll off or how all of these dynamics are going to change as we move forward to the rest of the year? Can you sort of square those circles on volume changes for Q to one-Q for me?

Cedric Francois (Co-Founder and CEO)

Thank you so much, John. Great to hear you. I will hand it over to Tim for details. What I want to stress is that we've had quarter-over-quarter growth in demand as measured by the number of injections that are given to patients with geographic atrophy, with Q1, as you correctly indicated, being the largest quarterly injection volume since the launch. That injection volume is a combination between commercial injections and sample injections. That is the true measure of demand. As you correctly alluded to as well, of course, the samples are the ones that are mostly impacted by what is going on with the copay assistance funding situation. I'll hand it over to Tim to talk more about the inventory.

Tim Sullivan (CFO)

Sure. There were a lot of questions within that question. I'll try to touch on what I think was your main question there, which is, we had, as Cedric said, this 4% growth in injections. That injection growth constituted both commercial doses and sample doses. Okay? Those were sample injections and commercial injections, excuse me. When you look at what we deliver, that's what's sent from, if it's commercial doses, that's what's sent from the distributor to the physician. That's different from what the physician puts in the eyes, right? That's an injection. Let's make that distinction very clear. We saw what we had was an inventory build at the end of Q4, both at the ECP level, so that's at the doctor's offices in their fridges, and at the specialty distributor.

What we saw in Q1 was a wind down of that inventory at the ECP level, right, which went to injections into the eye. We also saw an increase in the number of samples as a result of the switch that came from the underfunding of the copay assistance organizations. That also impacted how much these doctors were ordering from the specialty distributor. We had a drawdown. That is where you see this reduction in vials delivered, right? That lower demand for vials delivered was because of the increase in inventory at the ECP level. They had to wind that down. That is why you are seeing a difference between vials delivered and the injection growth that we saw. I do not know if that clarifies your question or if there is some other piece to it, but that is where the discrepancy lies.

John Miller (Partner and National Director of Wealth Planning)

Sure. Thank you. That makes sense. How should we think about that going forward into the future with sampling volumes presumably continuing to remain high?

Tim Sullivan (CFO)

Yeah. What we saw was we saw a drawdown in the total channel. This ended up having, this ended up impacting not only the increase in inventory at the ECP level, but also at the distributor. Now, we do not know exactly where the world will end up from an inventory perspective, but what we can tell you is that inventory at the end of the first quarter looked a lot like inventory in prior quarters, excluding, obviously, the fourth quarter. Going forward, the impact really, from a demand perspective, really is there is this ongoing use of samples we expect that is roughly about the same as what we saw in the first quarter. From a commercial perspective, we hope to be basically at a baseline right now.

John Miller (Partner and National Director of Wealth Planning)

You're not expecting this copay assistance underfunding issue to be resolved anytime soon?

Tim Sullivan (CFO)

We're not expecting that to be resolved anytime soon. I think when you get to this inventory impact and vials, so doses delivered, right, those were the two concepts you were talking about. Those should be on a more normal and steady state going forward, excluding, obviously, what's shifted to samples over time. It would be great. David can comment on the potential to switch those samples to commercial over time.

David Acheson (EVP of Commercial)

Hey, John. It's David. Thanks for the questions. I appreciate the discussion this morning. We are working diligently to understand, and we know where the samples are being used in place of commercial injections. One of the things that we have done is we've done a lot of work with the offices to make sure that we're educating the practices around the patient benefit designs. We've actually got some new programs and other work that's being put in place by the teams inside those offices so that we can transition those patients that are on samples over to commercial paid-for doses that are being used. The work is in progress. Over time, I think we'll see that shift. Right now, we do anticipate the samples to be about the same.

John Miller (Partner and National Director of Wealth Planning)

Okay. Thank you so much.

Operator (participant)

Thank you. Our next question is from Tazeen Ahmad with Bank of America Securities. Please proceed.

Tazeen Ahmad (Managing Director)

Hi, guys. Good morning. Thanks for taking my questions. I did want to ask about your calculation of new patient share. It does seem a little bit different than the calculation your competitor stated on their, I guess, first release a few weeks ago or a couple of weeks ago. Can you tell us how you derive share with new patients? How are you thinking about the potential for providing sales guidance? Again, the competing product company has issued sales guidance, which seems to assume pretty steep uptake going forward. You're not responsible for their guide, but what would you need to feel comfortable with on your end to provide sales guidance for SYFOVRE? Thanks.

Cedric Francois (Co-Founder and CEO)

Thank you, Tazeen. I will hand the first part of your questions over to David, and then Tim will talk about guidance.

David Acheson (EVP of Commercial)

Hey, Tazeen. Thanks for the question this morning. One of the things that we do is we purchase a site of care dataset that covers about 50% of the market that's very accurate. We feel our datasets are as accurate as you can get in the space. We know our competitor talked about claims database type of data, which we know is not as accurate and only covers a small portion of the market. At a high level, what we're focused on is growing the SYFOVRE leadership position, which we're clearly doing. You can see that in the new patient starts growth. We're trying to go to the market as quickly as we possibly can around that. We have launched several near-term initiatives and long-term initiatives to manage through that, which we can certainly talk about. I'll hand it over to Tim on the guidance part.

Tim Sullivan (CFO)

Sure. Thanks, Tazeen. From a sales guidance perspective, we've obviously had a couple of pretty big dynamics happen over the last two quarters. We had the CRL for the competitor, and we also had this underfunding of the patient copay assistance organizations. I think we really need to enter more of a steady state before we think about guiding around SYFOVRE. Married with that, we also have a new launch in C3G and IC-MPGN, which we're really excited about, but which comes with a little bit of how big is this. When we feel comfortable guiding, we probably want to guide on both products. That's probably the best thing to do right now.

Cedric Francois (Co-Founder and CEO)

Thank you, Tim. And just maybe one brief touch on what you mentioned as well. I mean, for us, what is most encouraging is how quarter after quarter, since the early fall, we keep gaining on that new patient share, right? So the relative evolution over time creates a very clear trend for us.

Tazeen Ahmad (Managing Director)

So I did want to follow up on that, Cedric. I think the reason why people would like to see you provide sales guidance is because there's a question about how big the number of patients is large in GA, but how much of it is actually addressable in this market. I think people are trying to figure that out. One of the two companies has provided what their view of what they think they'll do this year is. When do you think, forget about C3G, let's talk about SYFOVRE, which is a much more mature launch. When do you think, I mean, is it possible at all this year that you would feel comfortable?

Tim Sullivan (CFO)

I don't think it's likely we'll provide guidance this year. We don't do interim guidance. We'll consider it probably towards the end of the year, next year, but we're not committing to it.

Cedric Francois (Co-Founder and CEO)

I think, Tazeen, just kind of to the broader point of adoption, we see, as you see quarter over quarter, that growth is there. It's steady. It's a new space, a new disease indication, a new therapeutic modality. These things take time to find a place of adoption. As you correctly outlined, only a very small portion of patients with geographic atrophy have been treated so far. The shift that we see gradually in the community of physicians is meaningful. Maybe Caroline is here with us. She can maybe briefly comment on this as well.

Caroline Baumal (Chief Medical Officer)

Thank you, Cedric. Hi, Tahsin. I think that similar to the wet AMD market, which started in a similar way, it took physicians a little bit of time to adopt the treatments, the anti-VEGF treatments, but there's continually more patients to treat. It doesn't stop. I think we'll find the same thing with GA patients. I mean, it's the same population. Patients develop both diseases in both eyes, and there's a lot of overlap. I think this market will continue to grow. That's based on my experience as well.

Operator (participant)

Thank you. One moment for our next question, please. It comes from Anupam Rama with JPM. Please go ahead.

Anupam Rama (Managing Director and Senior Equity Analyst)

Hey, guys. Thanks so much for taking the question. Can you help us understand a little bit the payer landscape post the label update for IZERVAY? And what are the strategies to get some formulary wins here on the payer side? Thanks so much.

Cedric Francois (Co-Founder and CEO)

Thank you, Anupam. Great hearing you. Let me hand that over to David to answer.

David Acheson (EVP of Commercial)

Hey, Anupam. It's David. Thank you for the question. We have been very open and very clear that we've had preferred positioning with SYFOVRE on a number of plans, in particular some of the large Medicare Advantage plans. That continues to exist. We haven't seen significant changes with the label update that's happened with our competitor. In particular, I think what really drives a big part of that is that we have efficacy data with every other month dosing or up to six doses a year. A major differentiator for us with our data and with our label. We continue to see preferred positioning, and nothing has changed moving into this year.

Anupam Rama (Managing Director and Senior Equity Analyst)

Thanks so much for taking the question.

Operator (participant)

Thank you. One moment for our next question, please. It comes from the line of Salveen Richter with Goldman Sachs. Please proceed.

Hi. This is Srinathrao for Salveen. Thank you for taking our question. Could you speak to, this is with regard to APL-3007, where you're initiating a phase II study with SYFOVRE into Q. Could you speak to the magnitude of expected benefit from this combination versus SYFOVRE alone?

Cedric Francois (Co-Founder and CEO)

Thank you so much for that question. I will quickly repeat it because your line was a little bit muted. The question was whether our 3007 program, where we combine a subcutaneous injection with an siRNA product that brings the systemic C3 levels down by approximately 90%, if when we combine that with the intravitreal injection for SYFOVRE, which we are currently doing, as you know, every two months, but we plan to also test with an every three-month injection. A combination of intravitreal administration with this new product subcutaneously. The question is, what is the magnitude of benefit that we can expect from that? This is a very exciting program for us. I think that this will be, we obviously believe that this will be the next big innovation in this space in geographic atrophy.

We believe that the protection that SYFOVRE has on photoreceptor cells by the analysis that we have done on the photoreceptor cells specifically is pretty much as good as it can be. The protection on the layer below that, which are the retinal pigmented epithelial cells, we have increasing effects over time, slowdowns of 30%-40%, even all the way up to 42%. There we think we can further improve and have an impact beyond that 40% threshold that we're bumping into right now. If we could get north of 50%, that would be an important improvement. We are also going to use these next clinical trials to apply everything that we learned in terms of how you can measure the functional impact on vision with these therapies and be able to assess that much better than we have been able to do in the past.

Thank you.

Operator (participant)

Thank you. Our next question comes from Steve Seedhouse with Cantor. Please proceed.

Steve Seedhouse (Biotech Research Analyst)

Good morning. Thanks so much. I wanted to ask specifically about, I appreciate the comments that you're not expecting a near-term resolution to the charity, the copay assistance situation. The question is, are you in dialogue with other industry members seeking a solution? It sounded like Regeneron was open to contributing again, either to Good Days or to a new entity, something similar, but basically wanted others in the industry to pony up as well. Are you in dialogue with folks, Regeneron or others, and is Apellis willing to pay some prorated amount along with other industry members into Good Days or some similar charity to bring that back online? Thank you.

Cedric Francois (Co-Founder and CEO)

Thank you so much, Steve, for that question. The answer to that question is no. We respect the full independence of these co-funding or these copay assistance organizations. We do contribute to them typically at the beginning of the year. Sometimes that can also happen throughout the year. We keep that as an entirely dissociated contribution from what we do, obviously, with SYFOVRE as a commercial product.

Operator (participant)

One moment for our next question, please. It comes from the line of Colleen Kusy with Baird. Please proceed.

Colleen Kusy (Senior Research Analyst)

Hi. Good morning. Thanks for taking our questions. We have a follow-up on that. What do you see as the risk of the third-party copay assistance headwind, the third-party copay assistance program coming back at all? Do you think that that's definitely going to happen, or is that a risk that that part of the business might go away completely?

Cedric Francois (Co-Founder and CEO)

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

David Acheson (EVP of Commercial)

Yeah. Colleen, look, thank you for the question, first of all. We don't know. It's unpredictable, right, and what will happen with the funding of the foundation overall. We have taken the approach that we anticipate, and we're working under the assumption that it won't. That's why we do anticipate our sampling and our injections to continue to grow. The balance between samples and commercial doses that are out there will be balanced a little bit differently. That's where we sit on our observations of it.

Colleen Kusy (Senior Research Analyst)

Understood. Thank you.

Operator (participant)

Thank you. Our next question comes from the line of Phil Nadeau with TD Cowen. Please proceed.

Hi. This is Alex on for Phil. Thanks for taking my question. Could you comment maybe on the potential tariff exposure for SYFOVRE and EMPAVELI, and to what extent is manufacturing located at ex-U.S.? Also, where is Apellis's key IP domiciled? Thank you.

Tim Sullivan (CFO)

Thanks. Yeah, this is Tim. I'll take the question. Appreciate it. Unfortunately, there's not much we can say to any of the really three parts to your question. First, we're analyzing any potential exposure to tariffs, and obviously, mitigation tactics under these multiple tariff scenarios are being evaluated. We'll provide updates when we can on that, but we really don't have much more information. We do talk about, and we have disclosed where our drug substance for SYFOVRE is manufactured, which is at Switzerland, and that our NAFA drug intermediate where that is produced. Those are Switzerland and Japan, respectively. We haven't disclosed who we work with on drug product, nor have we disclosed where our IP is domiciled. I'm afraid there's not a lot to tell you on those answers.

Understood. Thank you.

Operator (participant)

Thank you. Our next question comes from Eliana Merle with UBS. Please proceed.

Eliana Merle (Stock Analyst)

Hey, guys. Thanks for taking the question. Just looking at the revenues reported versus the amount of commercial vials that you shipped, it does look like the net price per vial has gone down a bit. Can you just help us understand the dynamics here and what you saw with net price in 1Q? I know you commented you expect gross to net in the low to mid-20% over 2025, but can you just clarify how that could potentially vary quarter to quarter and what you saw specifically in 1Q? I have a follow-up question after. Thanks.

Tim Sullivan (CFO)

It could be a lot of those. Okay. First, let me start out with the difference between revenue recognizing and then vials shipped or doses shipped as we disclose it. The first thing is we recognize revenue when a dose is shipped to the distributor. That's not what we're disclosing to you in terms of vials shipped or doses shipped. That's from the distributor to the doctor. Those are disconnected, and you can't back into the price and that price that way. Okay? That's the first thing. We talked about some of the inventory dynamics that changed how those ordering patterns were happening for the physician from the distributor. Again, that's what we disclose, but that's not what the revenue recognition comes from. I hope that answers your question.

From a gross to net perspective, we were on the low end of the 20%-25% range this quarter. It does fluctuate. We obviously gave the guidance that through the end of the year, it would be between 20% and 25% or low to mid-20s.

Eliana Merle (Stock Analyst)

Great. Thanks. That's helpful. And then just in terms of the demand growth, can you just elaborate a little bit more on what you're seeing in 2Q so far? So this 4% injection growth that you saw in 1Q, I guess, is this fair for us to assume going forward in terms of injection growth and how you're thinking about that? Thanks.

Cedric Francois (Co-Founder and CEO)

Thank you so much for that question, Ellie. Again, without providing guidance, I think what is really important here, what you picked up on, is that this quarter-over-quarter demand, as measured by the number of injections that are given to the number of patients that are out there, continues to grow. Last quarter, consequently, was the largest quarterly injection volume that we saw. That is not something that we expect to change. We are very early in the launch still, in many ways. Only a small percentage of patients have been treated. As Caroline alluded to earlier, this is something where when you speak with physicians that have properly adopted the product, you will find numbers ranging all the way from, I will treat between 30 and 50% of my patients with geographic atrophy. We are only in the very beginning stages.

I think as physicians become comfortable with understanding the mechanism, the disease, the drug, that will continue to grow.

Caroline Baumal (Chief Medical Officer)

One thing that we're doing is we're introducing tools to help physicians and patients realize the benefits of our product and being able to pull these into practice. We presented on a GA prediction tool. We're working across multiple imaging and AI studies to give the physicians the tools that they need for their patients.

Eliana Merle (Stock Analyst)

Great. Thanks.

Operator (participant)

Thank you.

Thank you. Our next question is from Annabel Samimy with Stifel. Please proceed.

Annabel Samimy (Managing Director of BioPharma and Biotechnology)

Hi, everyone. Thanks for taking my question. Just going back to the issue of the inventory, I realized that you get some build in the fourth quarter around the holidays, but you didn't know last quarter that it wasn't outside of the two to three-week norm. Maybe you can help us understand the extent to which the build was from the IZERVAY CRL and not being comfortable with that product during that CRL period. Now seeing drawdown based on more comfort with IZERVAY with the label expansion. Have the conversations changed at all since their label update? Maybe I missed this, but maybe you can quantify what that inventory impact was?

Tim Sullivan (CFO)

Sure. I'll start, and then I'll hand it over to David for what the latest conversations are with the physicians on this topic. In terms of what we saw in December, right after the CRL, we saw a sharp increase in demand for SYFOVRE. That is in terms of doses ordered to the physician's offices. It also correlated to three very important metrics. The first one was an increase in SYFOVRE total injections in December. The second one was an increase in new patient share of injections. You've seen that continue, obviously, in the chart that is in the deck. Finally, we saw a sharp increase in switches from the competitor product. All of these things together contribute to the increase in inventory that we saw.

Now, in Q1, we saw this drawdown to more typical levels, and that was probably impacted further by the underfunding of this copay assistance organization dynamic that we talked about. There is no question that the CRL for the competitor, as well as the more limited label that they achieved, has really changed that conversation. With that, I'll turn it over to David to talk a little more about that conversation.

David Acheson (EVP of Commercial)

Tim mentioned that one of the dynamics that we benefited from and took an opportunity to grow SYFOVRE was the CRL and the label situation and the regulatory situation that our competitor was under. Obviously, that drove some business for us, and actually, we continued to benefit from that. In the offices, I can tell you there's definitely more of a comfort level that the product, the competitive product, will be reimbursed. Here's our differentiator, right? This is both with the physicians and with the payers. We are the only product that's got every other month dosing opportunity with high efficacy. That's a separator both with the physicians and patients as well as at the payer level. Even though there was a label change that opened up the 12-month restriction for our competitive product, we clearly have benefits that they do not have.

That is where we're growing the business today.

Thanks.

Operator (participant)

Thank you. Our next question is from Biren Amin with Piper Sandler. Please proceed.

Biren Amin (Managing Director and Senior Research Analyst)

Yeah. Hi, guys. Thanks for taking my questions. You mentioned that samples increase about 5,000 vials quarter-over-quarter. I assume that increase was largely due to the foundation use. Can you maybe confirm that that increase quarter-over-quarter was due to the fact that there was not a copay assist through the foundation? I guess going forward, should we expect that your samples will continue to grow as new patient growth continues and you will have more patients go on the samples without having a copay assist?

Cedric Francois (Co-Founder and CEO)

Thank you, Biren. I will hand it over to David to speak about kind of the trends moving forward and what to expect and how we're working on that. I think it's important for you to remember that when a physician administers a sample to a patient, they make significantly less revenue than if they actually administer a commercial injection to a patient. What that indicates to you, and I think this is important, is that physicians care deeply about patients. They care about following up with treatment. They care about bringing new patients on. Even if that patient is not able to pay that copay, physicians are trying to find ways to still treat these patients. Remember, again, this probably affects up to as much as 20% of the patient's population.

Now, the goal moving forward is how are we going to switch as much as possible from samples to commercial, and David will speak briefly to that.

David Acheson (EVP of Commercial)

That's great. Thank you, Cedric. I also look at samples as true demand, right? It could have been easy for physicians to not use a sample based on what Cedric just talked about. What we're doing to mitigate the issues is a couple of things. We are working specifically with the practices inside the reimbursement discussions, but we're also doing educational programs that have been updated for practice managers to talk to other practice managers about making sure that the benefit programs or the benefit design programs that these patients are on, we can find ways to transition them from the samples to the commercial doses. That is efforts that are currently underway and have been since the middle of Q1.

Biren Amin (Managing Director and Senior Research Analyst)

Thank you.

Operator (participant)

Thank you. Our next question comes from the line of Yigal Nochomovitz with Citi Group. Please proceed. Yigal, your line is open. Please check your mute button.

Yigal Nochomovitz (Biotech Analyst)

Hello. Can you hear me?

Operator (participant)

We can hear you now. Please proceed.

Yigal Nochomovitz (Biotech Analyst)

I was just curious about the copay situation. What is your level of visibility on that resolving and the funding gap going away in the ophthalmology sector? Thank you.

Cedric Francois (Co-Founder and CEO)

Thank you, Yigal. David?

David Acheson (EVP of Commercial)

Yeah. Yigal, good to hear from you. Just like we talked about a few minutes ago, we aren't real sure. It's not predictable at all on what will happen with the funding issue that's out there with the copay assistance program. What we are doing is assuming that it will not be resolved, and that's how we're operating moving forward. For us, it's about making sure we transition patients from the samples to a commercial dose as quickly as possible where we can educate offices to do that based off of benefit design and the plans that these patients are on. Those are the efforts currently underway.

Yigal Nochomovitz (Biotech Analyst)

Okay. Could you talk a little bit about your launch plans in C3G and IC-MPGN? What are you working on now to have a strong launch out of the gates and have a differentiated message versus the oral competitor?

David Acheson (EVP of Commercial)

Yeah. Great question. Thank you. Look, a couple of things. We are in a situation now where we have all field teams, and all of our teams are currently and actively in the field working to profile accounts and to also understand the links between KOLs and where the patients are located. We've got a very specific set of accounts that we're spending time with now to profile and understand where to launch and how to launch quickly. The other thing that we're working through is making sure that everyone through our medical affairs team that would like to know and understand the data can do that. Our biggest differentiators, of course, in this market is the fact that our efficacy is twice that of the competitive product. We also believe that efficacy in this space is going to drive decision-making, not the route of administration.

We're focused on that as well. At the end of the day, the teams have been out there since April, and we've got until late July for PDUFA. It's all about making sure that we're ready to go for launch as soon as we get approved.

Yigal Nochomovitz (Biotech Analyst)

Okay. Thank you very much.

Operator (participant)

Thank you.

Thanks. Your next question comes from the line of Douglas Tsao with HC Wainwright. Please go ahead.

Douglas Tsao (Managing Director of Equity Research)

Hi, good morning, and thanks for taking the questions. I guess, David, just given your sort of comments that you do not assume the foundation will come back online, I guess I am trying to sort of understand some of the steps that you can take in terms of benefit design because presumably most of these patients have some coverage. It is just the out-of-pocket that they are not able to address. I am not sure, it just might be helpful to sort of understand some of the steps that you might be able to take to mitigate that impact. Do you see yourself being more or less affected than your competitor? Does the fact that you have sort of every other month dosing potentially become even more of an advantage in this environment for a segment of the patient population? Thank you.

David Acheson (EVP of Commercial)

Absolutely. Thank you for the question. I think you answered part of the question at the end. Part of the advantage that we have is that we do have every other month dosing and high efficacy with that modality. I think one of the things in those offices for patients that would struggle to pay a copay 12 times a year could do that half as many times as that, which is great. What we are doing to mitigate this is a couple of things to go a little bit deeper. We have a reimbursement team, as you are aware of, in the field. They know benefit plans and design by each one of these plans very, very well.

One of the things that we do know about the reimbursement through the foundation is that in many times, patients were going on reimbursement through the foundation that did not need to. It was a situation where it was just benefit design that was missed, and we are making sure we educate offices so they understand that down to the patient level. The other thing is we are using ApellisAssist, which is our patient hotline and also works with our offices to help identify when these patients that have a benefit that will run when the out-of-pocket max is hit for a specific patient, we can help identify that for a specific patient and then work with the offices to get that patient in for treatment. There is a fairly detailed plan behind the scenes that goes down to the patient level to help the offices manage with that.

Douglas Tsao (Managing Director of Equity Research)

Okay. Great. That's very helpful.

Operator (participant)

Thank you. One moment for our next question. It comes from Lachlan Hanbury Brown with William Blair. Please go ahead.

Lachlan Hanbury-Brown (Biotech Analyst)

Hey, guys. Thanks for taking the question. I guess your competitor mentioned that they've sort of seen some signs of market growth. I know that's something that you've been investing in. I was wondering if you can comment on, is there anything you've seen that suggests that those efforts to kind of grow the market, increase diagnosis and referrals, are starting to bear fruit?

David Acheson (EVP of Commercial)

Yeah. Thank you for the question. This is David. We are both working very diligently to grow the market. We have DTC plans in place with, as you know, for us, both on TV as well as digitally with Henry Winkler. We also have multiple different programs that are in place to help folks identify patients that have GA, both in the treating offices and the non-treating offices. We also have a very robust team that is built to focus on optometry and ophthalmology offices that are non-injecting. Their sole purpose is to educate on geographic atrophy, identifying the patients that have geographic atrophy, and then having the opportunity for those patients to have information and some sort of referral into an office that is an injecting office. That is ongoing and has been ongoing since the first part of the year.

That's what we're working to do to grow the market, and our competitors are doing a number of alike opportunities. What I can tell you is that the market's been relatively flat coming into Q1, but we've been able to grow our new-to-brand starts robustly since late last year, which gives us comfort that we're going to see continued growth in our brand as well as in the market moving forward.

Lachlan Hanbury-Brown (Biotech Analyst)

Yep. Thanks.

Operator (participant)

Thank you. Our next question is from Ryan Racine with Raymond James. Please go ahead.

Ryan Racine (Retirement and Endorsement Specialist)

Hi there. Good morning. How likely do you think it is that the impacts of inventory drawdown and copay funding shortages continue to have a significant impact on Q1 net sales of SYFOVRE going forward in subsequent first quarters? I have a follow-up. Thanks.

Cedric Francois (Co-Founder and CEO)

Sure. I'll take this question. There are always little inventory fluctuations that you really can't control. These two events, the first one, obviously the CRL and the accelerated build that we saw in the fourth quarter, obviously that's a settled issue at this point. In terms of the copay assistance organizations being underfunded, we look at that as sort of a one-time issue that has continued effect. In that sense, there's no kind of event that's going to change any inventory dynamic. We would expect neither of these two things would impact inventory specifically going forward.

Ryan Racine (Retirement and Endorsement Specialist)

Got it. Can you tell us about your latest thinking on the impact of the new DTC campaign on sales across 2025? Thanks.

David Acheson (EVP of Commercial)

Yeah. So far, it's been very positive. What we can see early, because it started in January as a branded direct-to-consumer campaign, we can see a very high spike in the additional hits to our website, which is kind of an early indicator metric that we look at before we can get robust data switches or information on patients that actually go to product. As early as we are, all of our metrics are up quite a bit. We're actually 30% higher this year just alone in Q1 than we were all year last year on average per quarter on the number of actually website visits as well as actions that people, either physicians or patients, take beyond that. It's been positive so far.

Ryan Racine (Retirement and Endorsement Specialist)

Thank you very much.

Operator (participant)

Thank you so much. Our next question is from Judah Frommer with Morgan Stanley. Please go ahead.

Judah Frommer (SMid Cap Biotech Analyst)

Hi. Good morning. Thanks for taking the question. Just a couple more on sampling dynamics. We're curious if you could help us with whether there's ostensibly competition within sampling. Are you seeing the competitor provide more samples? Is there, I guess, some inclination to compete with their level of sampling? Separately, is there anything you can share on sampling into newer practices that you're penetrating versus existing customers? Thanks.

David Acheson (EVP of Commercial)

Yep. No problem. Thank you. Let me first comment on our sampling efforts. Our sampling efforts are there for physicians to take advantage of in their offices when they have patients they want to treat. Obviously, if the copay situation has gotten in the way from the foundation funding issue, they can certainly manage through that with an opportunity to treat patients. That is readily available for all offices. We can see it across both new and former treaters. We do continue to add new treaters as we progress throughout the launch. Samples are used in almost all offices across patients. I'm not going to comment on what we see from a competitive landscape, and we do not see that data specific to their sampling efforts. For us, we know that it is something that is a good tool for us to use under our current circumstances.

Yigal Nochomovitz (Biotech Analyst)

Thanks.

Operator (participant)

Thank you. One moment for our next question, please. He is from the line of Greg Harrison with Scotiabank. Please go ahead.

Greg Harrison (Director of Biotechnology)

Hey, good morning. Thanks for taking the question. Maybe one on EMPAVELI. What are you seeing that led to the revenue decline this quarter? Any inventory issues here or something else involving demand? Just trying to understand that dynamic and what we could expect going forward.

Cedric Francois (Co-Founder and CEO)

Yeah. Thank you. I will hand it over to Tim for additional details. We are actually very happy with the stable situation that we found in PNH, where, as you know, there was an oral competitor that came in a little over a year ago. It's been very good for us. I mean, we have a stable business in PNH where we've actually had several patients that went to the oral product and then decided to come back to EMPAVELI, kind of bearing witness to the remarkable efficacy and safety profile of that drug in PNH. With the new launch coming up in C3G and IC-MPGN, that, of course, will, we believe, turn EMPAVELI into our second blockbuster opportunity. We're really excited about what we're seeing there. We estimate approximately 5,000 patients just in the U.S., 8,000 patients ex-U.S.

I want to point out again that because of the breadth of patients that we studied in C3G and IC-MPGN, being adolescents and adults, C3G and IC-MPGN, pretransplant and post-transplant, we may end up competing only for maybe 1,500-2,000 out of these 5,000 patients with, again, a very powerful and differentiated efficacy profile for EMPAVELI. A launch that we're incredibly excited about for all the right reasons, and that is now just around the corner. Tim, maybe you want to briefly speak about that?

Tim Sullivan (CFO)

Yeah, sure. If you look at the decrease in revenue, there was probably about a third of that would be inventory and pricing dynamics. The other two-thirds would really just be sort of a small decrease in demand over time versus last year. We've seen towards a leveling off of that change. We've seen actually incredibly good compliance vis-à-vis switches to our competitor product in the first quarter. I don't know if David, you want to talk a little bit about that.

David Acheson (EVP of Commercial)

I think that Cedric touched on it, but what we do see is we see patients that will go to the oral Factor V product, but a number of times we've seen them come back as a result of efficacy and the safety profile that we've presented with EMPAVELI.

Cedric Francois (Co-Founder and CEO)

Great. That's helpful. Thanks so much.

Operator (participant)

Thank you so much. Our next question is from Derek Archila with Wells Fargo. Please proceed.

Hey, good morning. This is Evan for Derek. Thanks for taking our question. A quick one from us. Can you share some updated thoughts on your cash runway given first-quarter sales came in a bit lower than expected and just discuss the puts and pulls as you move towards profitability? Thanks.

Cedric Francois (Co-Founder and CEO)

Thank you very much. We're not changing our guidance on cash runway and profitability. As we stated before, we continue to expect that our 2025 operating expenses will remain in line. Obviously, the only impact we've seen here from a revenue perspective is some transient inventory dynamics and a little bit of an impact related to the switching to samples. As we look forward, we expect the launch in C3G, which is targeted for Q3, to meaningfully contribute to our top line. We're maintaining our guidance as discussed.

Got it. Thanks.

Operator (participant)

Thank you so much. Our next question is from the line of Graig Suvunnahvejh with Mizuho Securities. Please proceed.

Graig Suvannahvejh (Senior Biopharmaceuticals and Biotechnology Analyst)

Good morning. Thank you for taking my question. I just wanted to return to SYFOVRE and the growth dynamics there. Could you just for us paint a picture of where we are today in terms of prescribing of SYFOVRE and perhaps just the complement inhibitor class? Should we expect that the growth outlook is more of a slow and steady grind, or do you think that there is still a possibility for some sort of inflection, some meaningful inflection as we think about the total commercial potential of not only SYFOVRE, but the class overall? Thanks.

Cedric Francois (Co-Founder and CEO)

Thank you for that question, Graig. I will look, this is a steady growth that, again, takes time to adopt as Caroline mentioned earlier. We have, in addition to the work that David is doing that he spoke to in terms of bringing physicians along with the journey, there are a couple of things that will believe further acceleration points. One notable one is the AI tools that we are working on and that are in development. What is important there is that we believe that we have the tools available to allow a physician and a patient to see the drug work for them, both on protecting retinal tissue as well as the impact that it can have on the visual function of the patient. That is something that is very exciting. We'll create further acceleration within this space.

Caroline can maybe briefly expand on this because there is a precedent for this.

Caroline Baumal (Chief Medical Officer)

Yes. Thank you, Cedric. Cedric highlighted we have actually the largest data set of an approved product for the longest time period with favorable dosing. We have so much experience from the anti-VEGF era, but we're able to pull out data-driven tools for physicians that are able to use that to really understand the disease and access their patients. I think that that is something that's been missing in GA, and we're really at the forefront of being able to pull meaningful tools and algorithms for physicians and for patients so people can understand we have data coming up on who responds best to SYFOVRE and what's the patient experience and functional improvements for patients. All of that will increase the market for our patients.

Graig Suvannahvejh (Senior Biopharmaceuticals and Biotechnology Analyst)

Thank you.

Operator (participant)

Thank you so much. Our last question comes from Lisa Walter with RBC. Please go ahead.

Lisa Walter (VP)

Oh, great. Thank you so much for taking our question. Maybe just one on the broader kidney space. We recently saw some IgAN data from Arrowhead with their C3 siRNA, and their early results looked on par with what Apellis has shown in IgAN. I'm just curious, would you consider also exploring your C3 siRNA in other kidney indications?

Cedric Francois (Co-Founder and CEO)

Thank you so much, Lisa. In the past couple of quarters, we've spoken about this. The efficacy that EMPAVELI showed in C3G and IC-MPGN is absolutely remarkable, as we call it the trifecta, right, as you heard in our remarks earlier. What is really exciting here is that we did a thorough analysis. We have perfect or near perfect, we believe, engagement of C3 in the kidney. We had to find which next indications in the kidney we could be exploring. After that thorough analysis, we decided to do two phase three clinical trials, one in delayed graft function, one in focal segmental glomerulosclerosis. IgAN is not one of those indications, but those are the two next ones where we believe we can make a meaningful difference in the kidney.

Lisa Walter (VP)

Great. Thank you, Cedric. Maybe just one last one on SYFOVRE. I can't help it. I'm just wondering if you can give us any more color on the ex-U.S. plans. For instance, how is the launch progressing in Australia? How have conversations with regulators been progressing in Canada, the U.K., and Switzerland? Any color here would be helpful. Thank you so much.

Cedric Francois (Co-Founder and CEO)

Thank you so much for that question. In Australia, it's a little bit early, but the enthusiasm there by the retina community is meaningful and palpable. As it relates to other regions around the world, we continue to do the work. We believe that the data, as it continues to grow, remember, we have the GALE extension study for the eight-month data available to us now. It is undeniable what the benefit is that SYFOVRE can provide to these patients. That is something that we will continue to work on with regulators so that patients can have the best access globally for this product.

Operator (participant)

Thank you. This concludes our Q&A session for today. I will turn it back to Cedric Francois for closing remarks.

Cedric Francois (Co-Founder and CEO)

Thank you so much. Thank you again, everybody, for joining us this morning. It has been a special quarter for us. Of course, in spite of what we saw in terms of revenue, based on the dynamics, we see that continued growth in a market that has just started to grow, and we believe we can make a huge difference for patients with SYFOVRE. Also, with EMPAVELI, just three months away from the launch, we look forward to speaking about that and other elements of the company with you today and in the days to come. Thank you so much.

Operator (participant)

Thank you all for participating in today's conference. You may now disconnect.