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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 June 30, 2022

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 August 4, 2022, the registrant had 109,865,305 shares of common stock, $0.0001 par value per share, outstanding.

 


 

APELLIS PHARMACEUTICALS, INC.

FORM 10-Q

FOR THE QUARTER ENDED JUNE 30, 2022

 

TABLE OF CONTENTS

 

 

 

Page

PART I.

FINANCIAL INFORMATION

3

Item 1.

Financial Statements (Unaudited)

3

 

Condensed Consolidated Balance Sheets as of June 30, 2022 and December 31, 2021

3

 

Condensed Consolidated Statements of Operations and Comprehensive Income/(Loss) for the three and six months ended June 30, 2022 and 2021

4

 

Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the three and six months ended June 30, 2022 and 2021

5

 

Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2022 and 2021

7

 

Notes to Unaudited Condensed Consolidated Financial Statements

8

Item 2.

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

22

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

36

Item 4.

Controls and Procedures

 

36

PART II.

OTHER INFORMATION

37

Item 1A.

Risk Factors

37

Item 5.

Other Information

37

Item 6.

Exhibits

38

Signatures

 

39

 

 

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:

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 dosing of patients, enrollment and completion of these trials and of the anticipated results from these trials;
the ongoing commercialization of EMPAVELI and our preparation for the commercialization of intravitreal pegcetacoplan;
our sales, marketing and distribution capabilities and strategies, including for the commercialization and manufacturing of EMPAVELI, intravitreal pegcetacoplan and any future products;
the rate and degree of market acceptance and clinical utility of EMPAVELI, intravitreal pegcetacoplan and any future products;
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;
our plans to initiate clinical trials of our current and future product candidates;
the potential clinical benefits and attributes of our current and future product candidates we may develop and the inhibition of C3;
our plans to research and develop any current and future product candidates we may develop;
our current and any future collaborations for the development and commercialization of our current and future product candidates;
the potential benefits of any collaboration;
the rate and degree of market acceptance and clinical utility of any 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;
developments relating to our competitors and our industry;
the impact of the COVID-19 pandemic on our clinical trials, business and operations; 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, 2021, particularly in the “Risk Factors” section, that could cause actual results or events to differ materially from the forward-looking

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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.

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, 2021 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 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 for which we received approval from the United States Food and Drug Administration in May 2021 for the treatment of adults with paroxysmal nocturnal hemoglobinuria, or PNH, and references to Aspaveli refer to pegcetacoplan in the context of the commercially available product for which Sobi and us received approval from the European Commission in December 2021 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; whereas, 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.

 

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PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

APELLIS PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except per share amounts)

 

 

 

June 30,

 

 

December 31,

 

 

 

2022

 

 

2021

 

Assets

 

(Unaudited)

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

604,489

 

 

$

640,192

 

Marketable securities

 

 

248,307

 

 

 

60,358

 

Accounts receivable

 

 

7,518

 

 

 

10,103

 

Inventory

 

 

48,451

 

 

 

16,286

 

Prepaid assets

 

 

21,478

 

 

 

24,868

 

Restricted cash

 

 

1,266

 

 

 

1,563

 

Other current assets

 

 

28,460

 

 

 

70,677

 

Total current assets

 

 

959,969

 

 

 

824,047

 

Non-current assets:

 

 

 

 

 

 

Right-of-use assets

 

 

20,755

 

 

 

19,901

 

Property and equipment, net

 

 

5,892

 

 

 

6,177

 

Other assets

 

 

15,882

 

 

 

31,640

 

Total assets

 

$

1,002,498

 

 

$

881,765

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

16,220

 

 

$

16,909

 

Accrued expenses

 

 

89,419

 

 

 

103,239

 

Current portion of development liability

 

 

15,842

 

 

 

7,584

 

Current portion of right-of-use liabilities

 

 

5,312

 

 

 

4,115

 

Total current liabilities

 

 

126,793

 

 

 

131,847

 

Long-term liabilities:

 

 

 

 

 

 

Long-term development liability

 

 

333,729

 

 

 

345,151

 

Convertible senior notes

 

 

189,313

 

 

 

189,024

 

Right-of-use liabilities

 

 

16,676

 

 

 

17,081

 

Other liabilities

 

 

1,569

 

 

 

 

Total liabilities

 

 

668,080

 

 

 

683,103

 

Commitments and contingencies (Note 14)

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Preferred stock, $0.0001 par value; 10,000 shares authorized, and zero 
  shares issued and outstanding at June 30, 2022 and December 31, 2021

 

 

 

 

 

 

Common stock, $0.0001 par value; 200,000 shares authorized
   at June 30, 2022 and December 31, 2021;
106,841 shares
   issued and outstanding at June 30, 2022, and
97,524 shares
   issued and outstanding at December 31, 2021

 

 

11

 

 

 

10

 

Additional paid-in capital

 

 

2,289,201

 

 

 

1,857,430

 

Accumulated other comprehensive loss

 

 

(3,194

)

 

 

(2,090

)

Accumulated deficit

 

 

(1,951,600

)

 

 

(1,656,688

)

Total stockholders’ equity

 

 

334,418

 

 

 

198,662

 

Total liabilities and stockholders’ equity

 

$

1,002,498

 

 

$

881,765

 

 

See accompanying notes to unaudited condensed consolidated financial statements

 

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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 June 30,

 

 

For the Six Months Ended June 30,

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

Product revenue, net

$

15,654

 

 

$

623

 

 

$

27,763

 

 

$

623

 

Licensing and other revenue

 

668

 

 

 

 

 

 

2,940

 

 

 

 

Total revenue:

 

16,322

 

 

 

623

 

 

 

30,703

 

 

 

623

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

Cost of sales

 

82

 

 

 

 

 

 

1,329

 

 

 

 

Research and development

 

101,661

 

 

 

95,943

 

 

 

192,606

 

 

 

179,955

 

Cost of research collaboration

 

 

 

 

50,000

 

 

 

 

 

 

50,000

 

General and administrative

 

63,203

 

 

 

48,967

 

 

 

114,390

 

 

 

89,546

 

Total operating expenses:

 

164,946

 

 

 

194,910

 

 

 

308,325

 

 

 

319,501

 

Net operating loss

 

(148,624

)

 

 

(194,287

)

 

 

(277,622

)

 

 

(318,878

)

Loss on conversion of debt

 

 

 

 

 

 

 

 

 

 

(39,487

)

Loss from remeasurement of development derivative liability

 

 

 

 

(21,180

)

 

 

 

 

 

(38,264

)

Interest income

 

1,432

 

 

 

104

 

 

 

1,530

 

 

 

237

 

Interest expense

 

(8,448

)

 

 

(3,767

)

 

 

(16,986

)

 

 

(7,941

)

Other income/(expense), net

 

149

 

 

 

(61

)

 

 

(140

)

 

 

1,483

 

Net loss before taxes

 

(155,491

)

 

 

(219,191

)

 

 

(293,218

)

 

 

(402,850

)

Income tax expense

 

486

 

 

 

 

 

 

1,694

 

 

 

 

Net loss

$

(155,977

)

 

$

(219,191

)

 

$

(294,912

)

 

$

(402,850

)

Other comprehensive (loss)/gain:

 

 

 

 

 

 

 

 

 

 

 

    Unrealized (loss)/gain on marketable securities

 

(766

)

 

 

(35

)

 

 

(818

)

 

 

44

 

    Foreign currency loss

 

(369

)

 

 

(174

)

 

 

(286

)

 

 

(1,756

)

Total other comprehensive income/(loss)

 

(1,135

)

 

 

(209

)

 

 

(1,104

)

 

 

(1,712

)

Comprehensive loss, net of tax

$

(157,112

)

 

$

(219,400

)

 

$

(296,016

)

 

$

(404,562

)

Net loss per common share, basic and diluted

$

(1.46

)

 

$

(2.72

)

 

$

(2.88

)

 

$

(5.04

)

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

 

106,630

 

 

 

80,654

 

 

 

102,349

 

 

 

79,938

 

 

See accompanying notes to unaudited condensed consolidated financial statements

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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, 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

 

 

See accompanying notes to unaudited condensed consolidated financial statements

 

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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, 2021

 

 

76,130

 

 

$

8

 

 

$

1,131,013

 

 

$

(117

)

 

$

(926,347

)

 

$

204,557

 

Impact of adoption of ASU 2020-06

 

 

 

 

 

 

 

 

(165,747

)

 

 

 

 

 

16,013

 

 

 

(149,734

)

Issuance of shares in exchange of 2019 Convertible Notes, including issuance costs

 

 

3,976

 

 

 

 

 

 

162,258

 

 

 

 

 

 

 

 

 

162,258

 

Forfeiture of accrued interest in exchange of 2019 Convertible Notes

 

 

 

 

 

 

 

 

1,668

 

 

 

 

 

 

 

 

 

1,668

 

Issuance of common stock upon exercise of stock options

 

 

285

 

 

 

 

 

 

2,588

 

 

 

 

 

 

 

 

 

2,588

 

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

 

 

47

 

 

 

 

 

 

(956

)

 

 

 

 

 

 

 

 

(956

)

Share-based compensation expense

 

 

 

 

 

 

 

 

16,439

 

 

 

 

 

 

 

 

 

16,439

 

Unrealized gain on available-for-sale investments

 

 

 

 

 

 

 

 

 

 

 

79

 

 

 

 

 

 

79

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(183,659

)

 

 

(183,659

)

Foreign currency loss

 

 

 

 

 

 

 

 

 

 

 

(1,582

)

 

 

 

 

 

(1,582

)

Balance at March 31, 2021

 

 

80,438

 

 

 

8

 

 

 

1,147,263

 

 

 

(1,620

)

 

 

(1,093,993

)

 

 

51,658

 

Issuance of common stock upon exercise of stock options

 

 

444

 

 

 

 

 

 

7,062

 

 

 

 

 

 

 

 

 

7,062

 

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

 

 

11

 

 

 

 

 

 

(233

)

 

 

 

 

 

 

 

 

(233

)

Share-based compensation expense

 

 

 

 

 

 

 

 

17,722

 

 

 

 

 

 

 

 

 

17,722

 

Issuance of common stock to employee stock purchase plan

 

 

63

 

 

 

 

 

 

1,698

 

 

 

 

 

 

 

 

 

1,698

 

Unrealized loss on available-for-sale investments