apls-10q_20190930.htm
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2019

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission File Number: 001-38276

 

APELLIS PHARMACEUTICALS, INC.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

27-1537290

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

 

 

6400 Westwind Way, Suite A

Crestwood, KY

40014

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (502) 241-4114

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock

APLS

Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒  No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

Small reporting company

 

 

 

 

 

 

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

 

As of November 1, 2019, the registrant had 63,888,238 shares of common stock, $0.0001 par value per share, outstanding.

 

 

 


 

 

Table of Contents

 

 

 

Page

PART I.

FINANCIAL INFORMATION

1

Item 1.

Financial Statements (Unaudited)

1

 

Condensed Consolidated Balance Sheets

1

 

Condensed Consolidated Statements of Operations and Comprehensive Loss

2

 

Condensed Consolidated Statements of Changes in Stockholders’ Equity

3

 

Condensed Consolidated Statements of Cash Flows

5

 

Notes to Unaudited Condensed Consolidated Financial Statements

6

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

16

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

30

Item 4.

Controls and Procedures

30

PART II.

OTHER INFORMATION

32

Item 1.

Legal Proceedings

32

Item 1A.

Risk Factors

32

Item 6.

Exhibits

74

Signatures

 

75

 

i


 

 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

APELLIS PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

 

December 31,

 

 

September 30,

 

 

 

2018

 

 

2019

 

Assets

 

 

 

 

 

(Unaudited)

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

176,267,666

 

 

$

433,994,644

 

Prepaid assets

 

 

24,333,851

 

 

 

14,742,698

 

Other current assets

 

 

1,837,704

 

 

 

2,457,530

 

Total current assets

 

 

202,439,221

 

 

 

451,194,872

 

Non-current Assets:

 

 

 

 

 

 

 

 

Right-of-use assets

 

 

 

 

 

13,332,783

 

Property and equipment, net

 

 

977,918

 

 

 

1,592,787

 

Other assets

 

 

116,420

 

 

 

236,515

 

Total assets

 

$

203,533,559

 

 

$

466,356,957

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

10,254,938

 

 

$

11,836,609

 

Accrued expenses

 

 

5,103,002

 

 

 

30,431,607

 

Current portion of long-term debt

 

 

1,666,667

 

 

 

 

Current portion of right of use liabilities

 

 

 

 

 

2,304,147

 

Total current liabilities

 

 

17,024,607

 

 

 

44,572,363

 

Long-term liabilities:

 

 

 

 

 

 

 

 

Convertible senior notes

 

 

 

 

 

140,614,523

 

Development derivative liability

 

 

 

 

 

130,103,000

 

Term loan facility

 

 

18,722,321

 

 

 

 

Promissory note

 

 

6,655,193

 

 

 

 

Right-of-use liabilities

 

 

 

 

 

11,255,257

 

Other liabilities

 

 

158,783

 

 

 

250,000

 

Total liabilities

 

 

42,560,904

 

 

 

326,795,143

 

Stockholders' equity:

 

 

 

 

 

 

 

 

Preferred stock, $0.0001 par value; 10,000,000 shares authorized, and zero

   shares issued and outstanding at December 31, 2018 and September 30, 2019

 

 

 

 

 

 

Common stock, $0.0001 par value; 200,000,000 shares authorized

   at December 31, 2018 and September 30, 2019 and 56,279,307 shares

   issued and outstanding at December 31, 2018 and 63,872,762

   shares issued and outstanding at September 30, 2019

 

 

5,628

 

 

 

6,387

 

Additional paid in capital

 

 

437,855,681

 

 

 

608,015,713

 

Accumulated other comprehensive loss

 

 

(122,807

)

 

 

(205,249

)

Accumulated deficit

 

 

(276,765,847

)

 

 

(468,255,037

)

Total stockholders' equity

 

 

160,972,655

 

 

 

139,561,814

 

Total liabilities and stockholders' equity

 

$

203,533,559

 

 

$

466,356,957

 

 

See accompanying notes to unaudited condensed consolidated financial statements

 

1


 

APELLIS PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

 

 

For the Three Months Ended September 30,

 

 

For the Nine Months Ended September 30,

 

 

2018

 

 

2019

 

 

2018

 

 

2019

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

$

29,539,456

 

 

 

51,319,017

 

 

$

74,479,965

 

 

$

142,497,342

 

General and administrative

 

6,265,125

 

 

 

18,628,945

 

 

 

16,248,203

 

 

 

39,577,627

 

Operating loss

 

(35,804,581

)

 

 

(69,947,962

)

 

 

(90,728,168

)

 

 

(182,074,969

)

Loss on extinguishment of debt

 

 

 

 

(293,083

)

 

 

 

 

 

(1,501,215

)

Loss from remeasurement of development

      derivative liability

 

 

 

 

(263,000

)

 

 

 

 

 

(10,103,000

)

Interest income

 

858,425

 

 

 

1,341,811

 

 

 

1,468,957

 

 

 

3,630,314

 

Interest expense

 

(577,534

)

 

 

(601,377

)

 

 

(1,270,743

)

 

 

(1,354,379

)

Other (expense)/income, net

 

(22,234

)

 

 

(61,048

)

 

 

(86,575

)

 

 

(85,941

)

Net loss

 

(35,545,924

)

 

 

(69,824,659

)

 

 

(90,616,529

)

 

 

(191,489,190

)

Other comprehensive gain:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    Foreign currency gain/ (loss)

 

(86,249

)

 

 

(83,272

)

 

 

(86,249

)

 

 

(82,442

)

Total other comprehensive gain/ (loss)

 

(86,249

)

 

 

(83,272

)

 

 

(86,249

)

 

 

(82,442

)

Comprehensive loss, net of tax

$

(35,632,173

)

 

$

(69,907,931

)

 

$

(90,702,778

)

 

$

(191,571,632

)

Net loss per common share, basic and diluted

$

(0.64

)

 

$

(1.10

)

 

$

(1.69

)

 

$

(2.79

)

Weighted-average number of common shares used in net

   loss per common share, basic and diluted

 

56,201,299

 

 

 

63,752,719

 

 

 

53,770,400

 

 

 

68,737,045

 

 

See accompanying notes to unaudited condensed consolidated financial statements

 

2


 

Apellis Pharmaceuticals, Inc.

CONDENSED Consolidated Statements of CHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited)

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Additional

 

 

Other

 

 

 

 

 

 

Total

 

 

 

Outstanding

 

 

 

 

Paid-In

 

 

Comprehensive

 

 

Accumulated

 

 

Stockholders'

 

 

 

Shares

 

Amount

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Equity

 

Balance at January 1, 2018

 

 

50,334,152

 

 

$

5,033

 

 

$

298,201,480

 

 

$

 

 

$

(149,263,653

)

 

$

148,942,860

 

Issuance of common stock upon exercise of stock options

 

 

94,868

 

 

 

9

 

 

 

225,352

 

 

 

 

 

 

 

 

 

225,361

 

Share-based compensation expense

 

 

 

 

 

 

 

 

1,610,188

 

 

 

 

 

 

 

 

 

1,610,188

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(21,736,304

)

 

 

(21,736,304

)

Balance at March 31, 2018

 

 

50,429,020

 

 

 

5,042

 

 

 

300,037,020

 

 

 

 

 

 

(170,999,957

)

 

 

129,042,105

 

Issuance of common stock in follow-on offering, net of offering costs

 

 

5,500,000

 

 

 

550

 

 

 

131,324,477

 

 

 

 

 

 

 

 

 

131,325,027

 

Issuance of common stock upon exercise of stock options

 

 

225,418

 

 

 

23

 

 

 

275,726

 

 

 

 

 

 

 

 

 

275,749

 

Share-based compensation expense

 

 

 

 

 

 

 

 

2,243,527

 

 

 

 

 

 

 

 

 

2,243,527

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(33,334,301

)

 

 

(33,334,301

)

Balance at June 30, 2018

 

 

56,154,438

 

 

 

5,615

 

 

 

433,880,750

 

 

 

 

 

 

(204,334,258

)

 

 

229,552,107

 

Deferred issuance costs

 

 

 

 

 

 

 

 

(130,997

)

 

 

 

 

 

 

 

 

(130,997

)

Issuance of common stock upon exercise of stock options

 

 

88,133

 

 

 

9

 

 

 

114,980

 

 

 

 

 

 

 

 

 

114,989

 

Share-based compensation expense

 

 

 

 

 

 

 

 

2,050,924

 

 

 

 

 

 

 

 

 

2,050,924

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(35,545,924

)

 

 

(35,545,924

)

Foreign currency loss

 

 

 

 

 

 

 

 

 

 

 

(86,249

)

 

 

 

 

 

(86,249

)

Balance at September 30, 2018

 

 

56,242,571

 

 

$

5,624

 

 

$

435,915,657

 

 

$

(86,249

)

 

$

(239,880,182

)

 

$

195,954,850

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to unaudited condensed consolidated financial statements

3


 

Apellis Pharmaceuticals, Inc.

CONDENSED Consolidated Statements of CHANGES IN STOCKHOLDERS’ EQUITY

COntinued

(Unaudited)

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Additional

 

 

Other

 

 

 

 

 

 

Total

 

 

 

Outstanding

 

 

 

 

Paid-In

 

 

Comprehensive

 

 

Accumulated

 

 

Stockholders'

 

 

 

Shares

 

Amount

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Equity

 

Balance at January 1, 2019

 

 

56,279,307

 

 

$

5,628

 

 

$

437,855,681

 

 

$

(122,807

)

 

$

(276,765,847

)

 

$

160,972,655

 

Issuance of common stock in follow-on offering, net of offering costs

 

 

6,900,000

 

 

 

690

 

 

 

109,603,159

 

 

 

 

 

 

 

 

 

109,603,849

 

Issuance of common stock upon exercise of stock options

 

 

39,169

 

 

 

4

 

 

 

192,001

 

 

 

 

 

 

 

 

 

192,005

 

Share-based compensation expense

 

 

 

 

 

 

 

 

4,558,588

 

 

 

 

 

 

 

 

 

4,558,588

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(50,574,367

)

 

 

(50,574,367

)

Foreign currency gain

 

 

 

 

 

 

 

 

 

 

 

2,162

 

 

 

 

 

 

2,162

 

Balance at March 31, 2019

 

 

63,218,476

 

 

 

6,322

 

 

 

552,209,429

 

 

 

(120,645

)

 

 

(327,340,214

)

 

 

224,754,892

 

Deferred issuance costs

 

 

 

 

 

 

 

 

(22,741

)

 

 

 

 

 

 

 

 

(22,741

)

Issuance of common stock upon exercise of stock options

 

 

453,954

 

 

 

45

 

 

 

1,262,117

 

 

 

 

 

 

 

 

 

1,262,162

 

Share-based compensation expense

 

 

 

 

 

 

 

 

4,183,221

 

 

 

 

 

 

 

 

 

4,183,221

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(71,090,164

)

 

 

(71,090,164

)

Foreign currency loss

 

 

 

 

 

 

 

 

 

 

 

(1,332

)

 

 

 

 

 

(1,332

)

Balance at June 30, 2019

 

 

63,672,430

 

 

 

6,367

 

 

 

557,632,026

 

 

 

(121,977

)

 

 

(398,430,378

)

 

 

159,086,038

 

Issuance of common stock upon exercise of stock options

 

 

200,332

 

 

 

20

 

 

 

954,372

 

 

 

 

 

 

 

 

 

954,392

 

Share-based compensation expense

 

 

 

 

 

 

 

 

5,295,152

 

 

 

 

 

 

 

 

 

5,295,152

 

Recognition of debt discount on convertible notes

 

 

 

 

 

 

 

 

72,514,163

 

 

 

 

 

 

 

 

 

72,514,163

 

Purchase of capped call transactions and associated costs

 

 

 

 

 

 

 

 

(28,380,000

)

 

 

 

 

 

 

 

 

(28,380,000

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(69,824,659

)

 

 

(69,824,659

)

Foreign currency loss

 

 

 

 

 

 

 

 

 

 

 

(83,272

)

 

 

 

 

 

(83,272

)

Balance at September 30, 2019

 

 

63,872,762

 

 

$

6,387

 

 

$

608,015,713

 

 

$

(205,249

)

 

$

(468,255,037

)

 

 

139,561,814

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to unaudited condensed consolidated financial statements


 

4


 

Apellis Pharmaceuticals, Inc.

CONDENSED Consolidated Statements of Cash Flows

 

 

 

 

For the Nine Months Ended September 30,

 

 

 

2018

 

 

2019

 

Operating Activities

 

 

 

 

 

 

 

 

Net loss

 

$

(90,616,529

)

 

$

(191,489,190

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Share-based compensation expense

 

 

5,904,639

 

 

 

14,036,961

 

Loss on early extinguishment of debt

 

 

 

 

 

1,501,215

 

Loss from remeasurement of development derivative liability

 

 

 

 

 

10,103,000

 

Amortization of right-of-use assets

 

 

 

 

 

226,621

 

Depreciation expense

 

 

 

 

 

152,970

 

Amortization of debt discounts

 

 

53,047

 

 

 

51,725

 

Amortization of term loan facility discounts

 

 

463,088

 

 

 

104,172

 

Amortization of deferred financing costs

 

 

 

 

 

233,686

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Prepaid assets

 

 

(11,796,362

)

 

 

9,590,758

 

Other current assets

 

 

(169,704

)

 

 

(884,275

)

Other assets

 

 

(96,829

)

 

 

(120,018

)

Accounts payable

 

 

1,794,844

 

 

 

1,792,617

 

Accrued expenses

 

 

7,695,524

 

 

 

25,544,779

 

Other liabilities

 

 

5,708

 

 

 

91,217

 

Net cash used in operating activities

 

 

(86,762,574

)

 

 

(129,063,762

)

Investing Activities

 

 

 

 

 

 

 

 

Purchase of property and equipment

 

 

 

 

 

(1,537,536

)

Net cash used in investing activities

 

 

 

 

 

(1,537,536

)

Financing Activities

 

 

 

 

 

 

 

 

Proceeds from issuance of common stock, net of issuance costs

 

 

131,194,030

 

 

 

110,239,260

 

Deferred issuance costs

 

 

(22,426

)

 

 

(609,971

)

Proceeds from development derivative liability

 

 

 

 

 

120,000,000

 

Payments for capped call transactions and associated costs

 

 

 

 

 

(28,380,000

)

Proceeds from issuance of convertible notes, net of issuance costs

 

 

 

 

 

213,400,000

 

Proceeds from exercise of stock options

 

 

616,099

 

 

 

2,383,877

 

Repayment of promissory note

 

 

 

 

 

(7,000,000

)

Repayment of term loan facility

 

 

 

 

 

(21,701,292

)

Net cash provided by financing activities

 

 

131,787,703

 

 

 

388,331,874

 

Effect of exchange rate changes on cash and cash equivalents

 

 

(27,840

)

 

 

(3,598

)

Net increase in cash and cash equivalents

 

 

44,997,289

 

 

 

257,726,978

 

Cash and cash equivalents at beginning of period

 

 

175,643,529

 

 

 

176,267,666

 

Cash and cash equivalents at end of period

 

$

220,640,818

 

 

$

433,994,644

 

Supplemental Disclosure of Financing Activities