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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, 2020

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 28, 2020, the registrant had 75,736,924 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

19

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

34

Item 4.

Controls and Procedures

34

PART II.

OTHER INFORMATION

36

Item 1.

Legal Proceedings

36

Item 1A.

Risk Factors

36

Item 6.

Exhibits

84

Signatures

 

85

 

i


 

 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

APELLIS PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except per share amounts)

 

`

 

September 30,

 

 

December 31,

 

 

 

2020

 

 

2019

 

Assets

 

(Unaudited)

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

415,560

 

 

$

351,985

 

Marketable securities

 

 

312,598

 

 

 

 

Prepaid assets

 

 

11,299

 

 

 

19,802

 

Restricted cash

 

 

1,255

 

 

 

 

Other current assets

 

 

1,637

 

 

 

1,308

 

Total current assets

 

 

742,349

 

 

 

373,095

 

Non-current Assets:

 

 

 

 

 

 

 

 

Right-of-use assets

 

 

18,545

 

 

 

14,110

 

Property and equipment, net

 

 

6,531

 

 

 

1,655

 

Other assets

 

 

909

 

 

 

385

 

Total assets

 

$

768,334

 

 

$

389,245

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

11,069

 

 

$

8,361

 

Accrued expenses

 

 

60,766

 

 

 

54,783

 

Current portion of right of use liabilities

 

 

3,438

 

 

 

2,609

 

Total current liabilities

 

 

75,273

 

 

 

65,753

 

Long-term liabilities:

 

 

 

 

 

 

 

 

Convertible senior notes

 

 

353,769

 

 

 

142,567

 

Development derivative liability

 

 

217,778

 

 

 

134,839

 

Operating lease liabilities

 

 

15,674

 

 

 

11,857

 

Total liabilities

 

 

662,494

 

 

 

355,016

 

Commitments and contingencies (Note 11)

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

 

 

Preferred stock, $0.0001 par value; 10.0 million shares authorized, and zero

   shares issued and outstanding at September 30, 2020 and December 31, 2019

 

 

 

 

 

 

Common stock, $0.0001 par value; 200.0 million shares authorized

   at September 30, 2020 and December 31, 2019; 75.7 million shares

   issued and outstanding at September 30, 2020, and 63.9 million shares

   issued and outstanding at December 31, 2019

 

 

8

 

 

 

6

 

Additional paid-in capital

 

 

1,112,203

 

 

 

615,850

 

Accumulated other comprehensive income/(loss)

 

 

(1,759

)

 

 

(154

)

Accumulated deficit

 

 

(1,004,612

)

 

 

(581,473

)

Total stockholders' equity

 

 

105,840

 

 

 

34,229

 

Total liabilities and stockholders' equity

 

$

768,334

 

 

$

389,245

 

 

See accompanying notes to unaudited condensed consolidated financial statements

 

1


 

APELLIS PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

(Amounts in thousands, except per share amounts)

 

 

For the Three Months Ended September 30,

 

 

For the Nine Months Ended September 30,

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Licensing revenue

$

646

 

 

$

 

 

$

646

 

 

$

 

Total revenue

 

646

 

 

 

 

 

 

646

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

93,207

 

 

 

51,319

 

 

 

249,584

 

 

 

142,497

 

General and administrative

 

36,991

 

 

 

18,629

 

 

 

94,909

 

 

 

39,578

 

Total operating expenses:

 

130,198

 

 

 

69,948

 

 

 

344,493

 

 

 

182,075

 

Net operating loss

 

(129,552

)

 

 

(69,948

)

 

 

(343,847

)

 

 

(182,075

)

Loss on extinguishment of debt

 

 

 

 

(293

)

 

 

 

 

 

(1,501

)

Gain/(loss) from remeasurement of development

     derivative liability

 

2,697

 

 

 

(263

)

 

 

(62,939

)

 

 

(10,103

)

Interest income

 

670

 

 

 

1,342

 

 

 

3,970

 

 

 

3,630

 

Interest expense

 

(9,499

)

 

 

(602

)

 

 

(20,327

)

 

 

(1,354

)

Other income/(expense), net

 

(16

)

 

 

(61

)

 

 

4

 

 

 

(86

)

Net loss

 

(135,700

)

 

 

(69,825

)

 

 

(423,139

)

 

 

(191,489

)

Other comprehensive loss:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    Unrealized gain/(loss) on marketable securities

 

(430

)

 

 

 

 

 

122

 

 

 

 

    Foreign currency loss

 

(1,658

)

 

 

(83

)

 

 

(1,727

)

 

 

(83

)

Total other comprehensive loss

 

(2,088

)

 

 

(83

)

 

 

(1,605

)

 

 

(83

)

Comprehensive loss, net of tax

$

(137,788

)

 

$

(69,908

)

 

$

(424,744

)

 

$

(191,572

)

Net loss per common share, basic and diluted

$

(1.79

)

 

$

(1.10

)

 

$

(5.65

)

 

$

(2.79

)

Weighted-average number of common shares used in net

   loss per common share, basic and diluted

 

75,628

 

 

 

63,753

 

 

 

74,925

 

 

 

68,737

 

 

See accompanying notes to unaudited condensed consolidated financial statements

 

2


 

Apellis Pharmaceuticals, Inc.

CONDENSED Consolidated Statements of CHANGES IN STOCKHOLDERS’ EQUITY

(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, 2020

 

 

63,938

 

 

$

6

 

 

$

615,850

 

 

$

(154

)

 

$

(581,473

)

 

$

34,229

 

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

 

 

10,925

 

 

 

1

 

 

 

381,457

 

 

 

 

 

 

 

 

 

381,458

 

Issuance of common stock upon exercise of stock options

 

 

559

 

 

 

 

 

 

1,674

 

 

 

 

 

 

 

 

 

1,674

 

Share-based compensation expense

 

 

 

 

 

 

 

 

9,294

 

 

 

 

 

 

 

 

 

9,294

 

Unrealized gain on available-for-sale investments

 

 

 

 

 

 

 

 

 

 

 

1,394

 

 

 

 

 

 

1,394

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(168,822

)

 

 

(168,822

)

Foreign currency loss

 

 

 

 

 

 

 

 

 

 

 

(230

)

 

 

 

 

 

(230

)

Balance at March 31, 2020

 

 

75,422

 

 

 

7

 

 

 

1,008,275

 

 

 

1,010

 

 

 

(750,295

)

 

 

258,997

 

Deferred issuance costs

 

 

 

 

 

 

 

 

(35

)

 

 

 

 

 

 

 

 

(35

)

Issuance of common stock upon exercise of stock options

 

 

148

 

 

 

1

 

 

 

1,354

 

 

 

 

 

 

 

 

 

1,355

 

Share-based compensation expense

 

 

 

 

 

 

 

 

11,489

 

 

 

 

 

 

 

 

 

11,489

 

Unrealized loss on available-for-sale investments

 

 

 

 

 

 

 

 

 

 

 

(842

)

 

 

 

 

 

(842

)

Recognition of debt discount on convertible notes

 

 

 

 

 

 

 

 

122,147

 

 

 

 

 

 

 

 

 

122,147

 

Purchase of capped call transactions and associated costs

 

 

 

 

 

 

 

 

(43,112

)

 

 

 

 

 

 

 

 

(43,112

)

Issuance of common stock to employee stock purchase plan

 

 

20

 

 

 

 

 

 

521

 

 

 

 

 

 

 

 

 

521

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(118,617

)

 

 

(118,617

)

Foreign currency gain

 

 

 

 

 

 

 

 

 

 

 

161

 

 

 

 

 

 

161

 

Balance at June 30, 2020

 

 

75,590

 

 

 

8

 

 

 

1,100,639

 

 

 

329

 

 

 

(868,912

)

 

 

232,064

 

Issuance of common stock upon exercise of stock options

 

 

104

 

 

 

 

 

 

1,127

 

 

 

 

 

 

 

 

 

1,127

 

Share-based compensation expense

 

 

 

 

 

 

 

 

12,099

 

 

 

 

 

 

 

 

 

12,099

 

Unrealized loss on available-for-sale investments

 

 

 

 

 

 

 

 

 

 

 

(430

)

 

 

 

 

 

(430

)

Recognition of debt discount on convertible notes

 

 

 

 

 

 

 

 

(1,662

)

 

 

 

 

 

 

 

 

(1,662

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(135,700

)

 

 

(135,700

)

Foreign currency loss

 

 

 

 

 

 

 

 

 

 

 

(1,658

)

 

 

 

 

 

(1,658

)

Balance at September 30, 2020

 

 

75,694

 

 

$

8

 

 

$

1,112,203

 

 

$

(1,759

)

 

$

(1,004,612

)

 

$

105,840

 

 

See accompanying notes to unaudited condensed consolidated financial statements


3


 

Apellis Pharmaceuticals, Inc.

CONDENSED Consolidated Statements of CHANGES IN STOCKHOLDERS’ EQUITY

CoNTINUED

(Unaudited)

(Amounts in thousands)

 

 

 

 

 

 

 

 

 

 

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

 

 

$

5

 

 

$

437,856

 

 

$

(123

)

 

$

(276,766

)

 

$

160,972

 

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

 

 

6,900

 

 

 

1

 

 

 

109,603

 

 

 

 

 

 

 

 

 

109,604

 

Issuance of common stock upon exercise of stock options

 

 

39

 

 

 

 

 

 

192

 

 

 

 

 

 

 

 

 

192

 

Share-based compensation expense

 

 

 

 

 

 

 

 

4,559

 

 

 

 

 

 

 

 

 

4,559

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(50,574

)

 

 

(50,574

)

Foreign currency gain

 

 

 

 

 

 

 

 

 

 

 

2

 

 

 

 

 

 

2

 

Balance at March 31, 2019

 

 

63,218

 

 

 

6

 

 

 

552,210

 

 

 

(121

)

 

 

(327,340

)

 

 

224,755

 

Deferred issuance costs

 

 

 

 

 

 

 

 

(23

)

 

 

 

 

 

 

 

 

(23

)

Issuance of common stock upon exercise of stock options

 

 

454

 

 

 

 

 

 

1,262

 

 

 

 

 

 

 

 

 

1,262

 

Share-based compensation expense

 

 

 

 

 

 

 

 

4,183

 

 

 

 

 

 

 

 

 

4,183

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(71,090

)

 

 

(71,090

)

Foreign currency loss

 

 

 

 

 

 

 

 

 

 

 

(1

)

 

 

 

 

 

(1

)

Balance at June 30, 2019

 

 

63,672

 

 

 

6

 

 

 

557,632

 

 

 

(122

)

 

 

(398,430

)

 

 

159,086

 

Issuance of common stock upon exercise of stock options

 

 

200

 

 

 

 

 

 

955

 

 

 

 

 

 

 

 

 

955

 

Share-based compensation expense

 

 

 

 

 

 

 

 

5,295

 

 

 

 

 

 

 

 

 

5,295

 

Recognition of debt discount on convertible notes

 

 

 

 

 

 

 

 

72,514

 

 

 

 

 

 

 

 

 

72,514

 

Purchase of capped call transactions and associated costs

 

 

 

 

 

 

 

 

(28,380

)

 

 

 

 

 

 

 

 

(28,380

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(69,825

)

 

 

(69,825

)

Foreign currency loss

 

 

 

 

 

 

 

 

 

 

 

(83

)

 

 

 

 

 

(83

)

Balance at September 30, 2019

 

 

63,872

 

 

$

6

 

 

$

608,016

 

 

$

(205

)

 

$

(468,255

)

 

$

139,562