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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, 2023

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.)

 

 

100 Fifth Avenue,

Waltham, MA

02451

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (617) 977-5700

 

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, $0.0001 par value per share

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, a 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 October 24, 2023, the registrant had 118,499,945 shares of common stock, $0.0001 par value per share, outstanding.

 


 

APELLIS PHARMACEUTICALS, INC.

FORM 10-Q

FOR THE QUARTER ENDED SEPTEMNER 30, 2023

 

TABLE OF CONTENTS

 

 

Page

PART I.

FINANCIAL INFORMATION

3

Item 1.

Financial Statements (Unaudited)

3

Condensed Consolidated Balance Sheets as of September 30, 2023 and December 31, 2022

3

Condensed Consolidated Statements of Operations and Comprehensive Income/(Loss) for the three and nine months ended September 30, 2023 and 2022

4

 

Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the three and nine months ended September 30, 2023 and 2022

5

Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2023 and 2022

7

Notes to Unaudited Condensed Consolidated Financial Statements

8

Item 2.

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

23

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

37

Item 4.

Controls and Procedures

 

38

PART II.

OTHER INFORMATION

39

Item 1A.

Risk Factors

39

Item 5.

Other Information

42

Item 6.

Exhibits

43

Signatures

 

44

 

 

i


Table of Contents

Special Note Regarding Forward-Looking Statements and Industry Data

 

 

This Quarterly Report on Form 10-Q contains forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical facts, contained in this Quarterly Report on Form 10-Q, including statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans and objectives of management and expected market growth are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.

These forward-looking statements include, among other things, statements about:

the ongoing commercialization of EMPAVELI and SYFOVRE;
our plans with respect to our ongoing and planned clinical trials for our product candidates, whether conducted by us or Swedish Orphan Biovitrum AB (Publ), or Sobi, or by any future collaborators, including the timing of initiation, dosing of patients, enrollment and completion of these trials and of the anticipated results from these trials;
our sales, marketing and distribution capabilities and strategies, including for the commercialization and manufacturing of EMPAVELI, SYFOVRE and any future products;
the rate and degree of market acceptance and clinical utility of EMPAVELI, SYFOVRE and any future products;
our ongoing review of the reported events of retinal vasculitis following SYFOVRE treatment;
our plans to develop our current and future product candidates for any additional indications;
the timing of and our ability to obtain and maintain regulatory approvals for our product candidates;
the potential clinical benefits and attributes of our current and future product candidates we may develop and the inhibition of C3;
our current and any future collaborations for the development and commercialization of our current and future product candidates;
the potential benefits of any current or future collaboration, including our collaborations with Sobi and Beam Therapeutics, Inc.;
the rate and degree of market acceptance and clinical utility of EMPAVELI, SYFOVRE and any other products for which we receive marketing approval;
our commercialization, marketing and manufacturing capabilities and strategy;
our intellectual property position and strategy;
our ability to identify additional products or product candidates with significant commercial potential;
our estimates regarding expenses, future revenue, capital requirements and needs for additional financing;
the impact of our recent restructuring and anticipated cost savings and operational efficiencies;
developments relating to our competitors and our industry; and
the impact of new government laws and regulations (including tax).

 

We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements included in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, particularly in the “Risk Factors” section, that could cause actual results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, collaborations, joint ventures or investments that we may make or enter into.

 

You should read this Quarterly Report on Form 10-Q and the documents that we have filed or incorporated by reference as exhibits to this Quarterly Report on Form 10-Q completely and with the understanding that our actual future results may be materially different from what we expect. We do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.

1


Table of Contents

This Quarterly Report on Form 10-Q includes statistical and other industry and market data that we obtained from industry publications and research, surveys and studies conducted by third parties. All of the market data used in this Quarterly Report on Form 10-Q involves a number of assumptions and limitations, and you are cautioned not to give undue weight to such data. We believe that the information from these industry publications, surveys and studies is reliable. The industry in which we operate is subject to a high degree of uncertainty and risk due to a variety of important factors, including those described in the section titled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022 and in this Quarterly Report on Form 10-Q. These and other factors could cause results to differ materially from those expressed in the estimates made by the independent parties and by us. The Apellis, EMPAVELI, SYFOVRE and Apellis Assist names and logos are our trademarks, trade names and service marks. The other trademarks, trade names and service marks appearing in this Quarterly Report on Form 10-Q are the property of their respective owners.

 

Note regarding certain references in this Quarterly Report on Form 10-Q

Unless otherwise stated or the context indicates otherwise, all references herein to “Apellis,” “Apellis Pharmaceuticals, Inc.,” “we,” “us,” “our,” “our company,” “the Company” and similar references refer to Apellis Pharmaceuticals, Inc. and its wholly owned subsidiaries.

In addition, unless otherwise stated or the context indicates otherwise, all references in this Quarterly Report on Form 10-Q to “EMPAVELI (pegcetacoplan)” and “EMPAVELI” refer to pegcetacoplan in the context of the commercially available product in the United States for the treatment of adults with paroxysmal nocturnal hemoglobinuria, or PNH, and references to Aspaveli refer to systemic pegcetacoplan in the context of the commercially available product in the European Union for the treatment of adults with PNH who are anemic after treatment with a C5 inhibitor for at least three months, in each case, as more fully described herein. Unless otherwise stated or the context indicates otherwise, all references in this Quarterly Report on Form 10-Q to “SYFOVRE (pegcetacoplan injection)” and “SYFOVRE” refer to intravitreal pegcetacoplan in the context of the commercially available product for which we received approval from the United States Food and Drug Administration in February 2023 for the treatment of geographic atrophy secondary to age-related macular degeneration. Unless otherwise stated or the context indicates otherwise, all references herein to “pegcetacoplan” refer to pegcetacoplan in the context of the product candidate for which we are exploring further applications and indications, as more fully described herein. The other trademarks, trade names and service marks appearing in this Quarterly Report on Form 10-Q are the property of their respective owners.

2


Table of Contents

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

APELLIS PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(Amounts in thousands, except per share amounts)

 

 

 

September 30,

 

 

December 31,

 

 

 

2023

 

 

2022

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

452,414

 

 

$

551,801

 

Accounts receivable

 

 

169,258

 

 

 

7,727

 

Inventory

 

 

98,545

 

 

 

85,714

 

Prepaid assets

 

 

44,617

 

 

 

36,350

 

Restricted cash

 

 

1,086

 

 

 

1,273

 

Other current assets

 

 

30,847

 

 

 

36,658

 

Total current assets

 

 

796,767

 

 

 

719,523

 

Non-current assets:

 

 

 

 

 

 

Right-of-use assets

 

 

15,484

 

 

 

18,747

 

Property and equipment, net

 

 

4,790

 

 

 

6,148

 

Other assets

 

 

1,175

 

 

 

15,799

 

Total assets

 

$

818,216

 

 

$

760,217

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

18,192

 

 

$

37,342

 

Accrued expenses

 

 

117,089

 

 

 

95,139

 

Current portion of development liability

 

 

44,610

 

 

 

29,504

 

Current portion of right-of-use liabilities

 

 

5,739

 

 

 

5,625

 

Total current liabilities

 

 

185,630

 

 

 

167,610

 

Long-term liabilities:

 

 

 

 

 

 

Long-term development liability

 

 

295,532

 

 

 

315,647

 

Convertible senior notes

 

 

92,957

 

 

 

92,736

 

Right-of-use liabilities

 

 

10,880

 

 

 

14,352

 

Other liabilities

 

 

946

 

 

 

 

Total liabilities

 

 

585,945

 

 

 

590,345

 

Stockholders’ equity:

 

 

 

 

 

 

Preferred stock, $0.0001 par value; 10,000 shares authorized, and zero 
  shares issued and outstanding at September 30, 2023 and December 31, 2022

 

 

 

 

 

 

Common stock, $0.0001 par value; 200,000 shares authorized
   at September 30, 2023 and December 31, 2022;
118,359 shares
   issued and outstanding at September 30, 2023, and
110,772 shares
   issued and outstanding at December 31, 2022

 

 

12

 

 

 

11

 

Additional paid-in capital

 

 

2,982,236

 

 

 

2,479,596

 

Accumulated other comprehensive loss

 

 

(1,065

)

 

 

(875

)

Accumulated deficit

 

 

(2,748,912

)

 

 

(2,308,860

)

Total stockholders’ equity

 

 

232,271

 

 

 

169,872

 

Total liabilities and stockholders’ equity

 

$

818,216

 

 

$

760,217

 

 

See accompanying notes to unaudited condensed consolidated financial statements

3


Table of Contents

APELLIS PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME/(LOSS)

(Unaudited)

(Amounts in thousands, except per share amounts)

 

 

For the Three Months Ended September 30,

 

 

For the Nine Months Ended September 30,

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

Product revenue, net

$

99,182

 

 

$

17,676

 

 

$

227,626

 

 

$

45,439

 

Licensing and other revenue

 

11,217

 

 

 

4,380

 

 

 

22,588

 

 

 

7,320

 

Total revenue:

 

110,399

 

 

 

22,056

 

 

 

250,214

 

 

 

52,759

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

Cost of sales

 

22,410

 

 

 

1,381

 

 

 

38,598

 

 

 

2,711

 

Research and development

 

79,421

 

 

 

95,207

 

 

 

285,105

 

 

 

287,813

 

General and administrative

 

145,648

 

 

 

78,406

 

 

 

359,114

 

 

 

192,795

 

Total operating expenses:

 

247,479

 

 

 

174,994

 

 

 

682,817

 

 

 

483,319

 

Net operating loss

 

(137,080

)

 

 

(152,938

)

 

 

(432,603

)

 

 

(430,560

)

Loss on conversion of debt

 

 

 

 

(32,890

)

 

 

 

 

 

(32,890

)

Interest income

 

4,989

 

 

 

2,809

 

 

 

16,385

 

 

 

4,339

 

Interest expense

 

(7,310

)

 

 

(7,903

)

 

 

(22,179

)

 

 

(24,888

)

Other (expense)/income, net

 

(603

)

 

 

99

 

 

 

(946

)

 

 

(42

)

Net loss before taxes

 

(140,004

)

 

 

(190,823

)

 

 

(439,343

)

 

 

(484,041

)

Income tax expense

 

233

 

 

 

446

 

 

 

709

 

 

 

2,140

 

Net loss

$

(140,237

)

 

$

(191,269

)

 

$

(440,052

)

 

$

(486,181

)

Other comprehensive gain/(loss):

 

 

 

 

 

 

 

 

 

 

 

    Unrealized gain/(loss) on marketable securities

 

 

 

 

435

 

 

 

 

 

 

(383

)

    Foreign currency loss

 

(269

)

 

 

(268

)

 

 

(190

)

 

 

(554

)

Total other comprehensive income/(loss)

 

(269

)

 

 

167

 

 

 

(190

)

 

 

(937

)

Comprehensive loss, net of tax

$

(140,506

)

 

$

(191,102

)

 

$

(440,242

)

 

$

(487,118

)

Net loss per common share, basic and diluted

$

(1.17

)

 

$

(1.75

)

 

$

(3.73

)

 

$

(4.65

)

Weighted-average number of common shares used in net
   loss per common share, basic and diluted

 

120,292

 

 

 

109,126

 

 

 

117,827

 

 

 

104,608

 

 

See accompanying notes to unaudited condensed consolidated financial statements

4


Table of Contents

Apellis Pharmaceuticals, Inc.

CONDENSED Consolidated Statements of CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

(Unaudited)

(Amounts in thousands)

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Additional

 

 

Other

 

 

 

 

 

Total

 

 

 

Outstanding

 

 

 

 

Paid-In

 

 

Comprehensive

 

 

Accumulated

 

 

Stockholders’

 

 

 

Shares

 

Amount

 

 

Capital

 

 

Income/(Loss)

 

 

Deficit

 

 

Equity

 

Balance at January 1, 2023

 

 

110,772

 

 

$

11

 

 

$

2,479,596

 

 

$

(875

)

 

$

(2,308,860

)

 

$

169,872

 

Issuance of common stock and pre-funded warrants in common stock offering

 

 

4,008

 

 

 

1

 

 

 

384,386

 

 

 

 

 

 

 

 

 

384,387

 

Issuance of common stock upon exercise of stock options

 

 

951

 

 

 

 

 

 

17,718

 

 

 

 

 

 

 

 

 

17,718

 

Vesting of restricted stock units, net of shares withheld for taxes

 

 

448

 

 

 

 

 

 

(10,999

)

 

 

 

 

 

 

 

 

(10,999

)

Share-based compensation expense

 

 

 

 

 

 

 

 

28,823

 

 

 

 

 

 

 

 

 

28,823

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(177,778

)

 

 

(177,778

)

Foreign currency gain

 

 

 

 

 

 

 

 

 

 

 

100

 

 

 

 

 

 

100

 

Balance at March 31, 2023

 

 

116,179

 

 

 

12

 

 

 

2,899,524

 

 

 

(775

)

 

 

(2,486,638

)

 

 

412,123

 

Issuance of common stock upon exercise of stock options

 

 

1,208

 

 

 

 

 

 

22,334

 

 

 

 

 

 

 

 

 

22,334

 

Vesting of restricted stock units, net of shares withheld for taxes

 

 

119

 

 

 

 

 

 

(27

)

 

 

 

 

 

 

 

 

(27

)

Share-based compensation expense

 

 

 

 

 

 

 

 

29,277

 

 

 

 

 

 

 

 

 

29,277

 

Issuance of common stock to employee stock purchase plan

 

 

73

 

 

 

 

 

 

3,754

 

 

 

 

 

 

 

 

 

3,754

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(122,037

)

 

 

(122,037

)

Foreign currency loss

 

 

 

 

 

 

 

 

 

 

 

(21

)

 

 

 

 

 

(21

)

Balance at June 30, 2023

 

 

117,579

 

 

$

12

 

 

$

2,954,862

 

 

$

(796

)

 

$

(2,608,675

)

 

$

345,403

 

Issuance of common stock upon exercise of stock options

 

 

665

 

 

 

 

 

 

5,757

 

 

 

 

 

 

 

 

 

5,757

 

Vesting of restricted stock units, net of shares withheld for taxes

 

 

115

 

 

 

 

 

 

(9

)

 

 

 

 

 

 

 

 

(9

)

Share-based compensation expense

 

 

 

 

 

 

 

 

21,626

 

 

 

 

 

 

 

 

 

21,626

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(140,237

)

 

 

(140,237

)

Foreign currency loss

 

 

 

 

 

 

 

 

 

 

 

(269

)

 

 

 

 

 

(269

)

Balance at September 30, 2023

 

 

118,359

 

 

$

12

 

 

$

2,982,236

 

 

$

(1,065

)

 

$

(2,748,912

)

 

$

232,271

 

 

See accompanying notes to unaudited condensed consolidated financial statements

 

5


Table of Contents

Apellis Pharmaceuticals, Inc.

CONDENSED Consolidated Statements of CHANGES IN STOCKHOLDERS’ EQUITY

(Continued from previous page)

(Unaudited)

(Amounts in thousands)

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Additional

 

 

Other

 

 

 

 

 

Total

 

 

 

Outstanding

 

 

 

 

Paid-In

 

 

Comprehensive

 

 

Accumulated

 

 

Stockholders’

 

 

 

Shares

 

Amount

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Equity (Deficit)

 

Balance at January 1, 2022

 

 

97,524

 

 

$

10

 

 

$

1,857,430

 

 

$

(2,090

)

 

$

(1,656,688

)

 

$

198,662

 

Common Stock -follow-on-offering

 

 

8,564

 

 

 

1

 

 

 

380,119

 

 

 

 

 

 

 

 

 

380,120

 

Issuance of common stock upon exercise of stock options

 

 

239

 

 

 

 

 

 

4,000

 

 

 

 

 

 

 

 

 

4,000

 

Vesting of restricted stock units, net of shares withheld for taxes

 

 

113

 

 

 

 

 

 

(2,416

)

 

 

 

 

 

 

 

 

(2,416

)

Share-based compensation expense

 

 

 

 

 

 

 

 

20,773

 

 

 

 

 

 

 

 

 

20,773

 

Unrealized gain on available-for-sale investments

 

 

 

 

 

 

 

 

 

 

 

(52

)

 

 

 

 

 

(52

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(138,935

)

 

 

(138,935

)

Foreign currency gain

 

 

 

 

 

 

 

 

 

 

 

83

 

 

 

 

 

 

83

 

Balance at March 31, 2022

 

 

106,440

 

 

 

11

 

 

 

2,259,906

 

 

 

(2,059

)

 

 

(1,795,623

)

 

 

462,235

 

Issuance of common stock upon exercise of stock options

 

 

283

 

 

 

 

 

 

4,770

 

 

 

 

 

 

 

 

 

4,770

 

Vesting of restricted stock units, net of shares withheld for taxes

 

 

26

 

 

 

 

 

 

(536

)

 

 

 

 

 

 

 

 

(536

)

Share-based compensation expense

 

 

 

 

 

 

 

 

22,530

 

 

 

 

 

 

 

 

 

22,530

 

Issuance of common stock to employee stock purchase plan

 

 

92

 

 

 

 

 

 

2,531

 

 

 

 

 

 

 

 

 

2,531

 

Unrealized loss on available-for-sale investments

 

 

 

 

 

 

 

 

 

 

 

(766

)

 

 

 

 

 

(766

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(155,977

)

 

 

(155,977

)

Foreign currency loss

 

 

 

 

 

 

 

 

 

 

 

(369

)

 

 

 

 

 

(369

)

Balance at June 30, 2022

 

 

106,841

 

 

$

11

 

 

$

2,289,201

 

 

$

(3,194

)

 

$

(1,951,600

)

 

$

334,418

 

Issuance of shares in exchange of Convertible Notes, including issuance costs

 

 

3,073

 

 

 

 

 

 

129,636

 

 

 

 

 

 

 

 

 

129,636

 

Forfeiture of accrued interest in exchange of Convertible Notes

 

 

 

 

 

 

 

 

1,287

 

 

 

 

 

 

 

 

 

1,287

 

Issuance of common stock upon exercise of stock options

 

 

521

 

 

 

 

 

 

10,639

 

 

 

 

 

 

 

 

 

10,639

 

Vesting of restricted stock units, net of shares withheld for taxes

 

 

41

 

 

 

 

 

 

(1,003

)