10-Q 1 apls-20240331.htm 10-Q 10-Q
Q1false--12-310001492422639 days366 days365 days305 days449 days294 days351 days166 days378 days231 days0001492422apls:AllowanceForGovernmentAndOtherRebatesMember2024-03-310001492422apls:AllowanceForChargebacksDiscountsAndFeesMember2024-03-310001492422apls:SFJAgreementMember2019-06-300001492422apls:CollaborationAndLicenseAgreementMembersrt:MaximumMemberapls:SwedishOrphanBiovitrumABPublMember2020-10-310001492422apls:SFJAgreementMember2022-05-012022-05-310001492422apls:AccruedLiabilitiesCurrentMember2023-12-310001492422us-gaap:CustomerConcentrationRiskMemberus-gaap:SalesRevenueProductLineMemberapls:CustomerAMember2024-01-012024-03-310001492422us-gaap:ProductMember2023-01-012023-03-310001492422apls:ConvertibleSeniorNotesDueTwoThousandTwentySixMember2019-09-162019-09-160001492422apls:ConvertibleSeniorNotesDueTwoThousandTwentySixMemberapls:TwoThousandNineteenConvertibleNotesMember2019-09-162019-09-160001492422apls:NurNicholsonMember2024-03-310001492422apls:SFJAgreementMember2021-06-012021-06-300001492422apls:BeamTherapeuticsIncorporationMemberapls:ResearchCollaborationAgreementMember2021-06-012021-06-300001492422apls:EmpaveliPegcetacoplanMember2024-01-012024-03-310001492422apls:SwedishOrphanBiovitrumABPublMember2024-01-012024-03-310001492422apls:AllowanceForGovernmentAndOtherRebatesMember2023-12-310001492422us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-03-310001492422apls:ConvertibleSeniorNotesDueTwoThousandTwentySixMember2023-12-310001492422apls:MarkDelongMember2024-03-310001492422apls:SFJAgreementMember2019-06-012020-01-310001492422apls:EmpaveliAndAspaveliMember2024-03-310001492422us-gaap:CustomerConcentrationRiskMemberus-gaap:AccountsReceivableMemberapls:CustomerDMember2023-01-012023-03-310001492422apls:SobiAgreementAndAnotherLicensingTransactionMember2024-01-310001492422apls:CappedCallTransactionMember2024-03-082024-03-080001492422us-gaap:RetainedEarningsMember2023-03-310001492422apls:ConvertibleSeniorNotesDueTwoThousandTwentySixMemberus-gaap:PrivatePlacementMemberapls:TwoThousandNineteenConvertibleNotesMember2019-09-160001492422apls:SFJAgreementMember2019-02-282019-02-280001492422us-gaap:CommonStockMember2024-03-310001492422apls:ConvertibleSeniorNotesDueTwoThousandTwentySixMember2023-01-012023-03-310001492422apls:SwedishOrphanBiovitrumABPublMember2023-01-012023-03-310001492422apls:ConvertibleSeniorNotesDueTwoThousandTwentySixMember2024-01-012024-03-310001492422apls:ConvertibleSeniorNotesDueTwoThousandTwentySixMember2019-09-160001492422apls:SyfovreMember2024-03-310001492422us-gaap:FairValueMeasurementsNonrecurringMember2024-03-310001492422apls:TwoThousandTenLicenseAgreementMembersrt:MaximumMember2024-01-012024-03-310001492422apls:SFJAgreementMember2023-05-012023-05-3100014924222023-03-310001492422apls:BachemAmericasIncMember2024-01-012024-03-310001492422apls:ProductRevenueAllowanceAndReservesMember2023-12-310001492422apls:ConvertibleSeniorNotesDueTwoThousandTwentySixMember2024-03-310001492422us-gaap:ProductMember2024-01-012024-03-310001492422apls:CollaborationAndLicenseAgreementMemberapls:SwedishOrphanBiovitrumABPublMember2023-01-012023-03-310001492422apls:ConvertibleSeniorNotesDueTwoThousandTwentySixMemberus-gaap:CommonStockMember2024-01-012024-03-310001492422apls:SFJAgreementMember2022-01-012022-01-310001492422apls:AllowanceForGovernmentAndOtherRebatesMember2023-03-310001492422apls:ProductRevenueAllowanceAndReservesMember2023-01-012023-03-310001492422apls:SyfovreMember2023-01-012023-12-310001492422apls:KarenLLewisMember2024-01-012024-03-3100014924222024-03-310001492422srt:MaximumMemberapls:ConvertibleSeniorNotesDueTwoThousandTwentySixMemberapls:PriorToMarchFifteenTwoThousandAndTwentySixConvertibleMember2024-01-012024-03-310001492422apls:SFJAgreementMember2021-12-310001492422apls:MarkDelongMember2024-01-012024-03-310001492422us-gaap:AdditionalPaidInCapitalMember2024-03-310001492422apls:CollaborationAndLicenseAgreementMemberapls:SwedishOrphanBiovitrumABPublMember2023-12-3100014924222024-01-012024-01-310001492422us-gaap:FairValueMeasurementsNonrecurringMemberus-gaap:MoneyMarketFundsMember2023-12-310001492422apls:SyfovreMember2024-01-012024-01-310001492422srt:MaximumMemberapls:TwoThousandTenLicenseAgreementMember2024-03-310001492422us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsNonrecurringMember2023-12-310001492422apls:SFJAgreementMemberapls:FoodAndDrugAdministrationMember2019-02-282019-02-280001492422us-gaap:CommonStockMember2023-03-3100014924222024-01-012024-03-310001492422us-gaap:CustomerConcentrationRiskMemberus-gaap:AccountsReceivableMemberapls:CustomerDMember2024-01-012024-03-310001492422us-gaap:CustomerConcentrationRiskMemberus-gaap:SalesRevenueProductLineMemberapls:CustomerAMember2023-01-012023-03-310001492422us-gaap:RetainedEarningsMember2023-12-310001492422us-gaap:SalesReturnsAndAllowancesMember2023-03-310001492422apls:JeffreyREiseleMember2024-01-012024-03-310001492422us-gaap:CustomerConcentrationRiskMemberus-gaap:AccountsReceivableMemberapls:CustomerAMember2024-01-012024-03-310001492422apls:BeamTherapeuticsIncorporationMemberapls:ResearchCollaborationAgreementMember2022-06-012022-06-300001492422us-gaap:AccumulatedOtherComprehensiveIncomeMember2024-01-012024-03-310001492422apls:SyfovreMember2023-01-012023-03-310001492422us-gaap:CustomerConcentrationRiskMemberapls:CustomerCMemberus-gaap:SalesRevenueProductLineMember2024-01-012024-03-310001492422us-gaap:AdditionalPaidInCapitalMember2024-01-012024-03-310001492422us-gaap:SalesReturnsAndAllowancesMember2024-01-012024-03-310001492422apls:ConvertibleNotesMember2023-01-012023-03-310001492422apls:CollaborationAndLicenseAgreementMemberapls:SwedishOrphanBiovitrumABPublMember2020-10-272024-03-310001492422us-gaap:CommonStockMember2023-12-310001492422us-gaap:RetainedEarningsMember2024-01-012024-03-310001492422apls:CarolineBaumalMember2024-01-012024-03-310001492422apls:SFJAgreementMemberapls:FoodAndDrugAdministrationMember2019-02-280001492422us-gaap:EmployeeStockOptionMember2023-01-012023-03-310001492422apls:SFJAgreementMember2023-12-012023-12-310001492422apls:SFJAgreementMembersrt:ScenarioForecastMember2024-12-012024-12-310001492422us-gaap:AdditionalPaidInCapitalMember2022-12-310001492422apls:AlecMachielsMember2024-01-012024-03-310001492422apls:NurNicholsonMember2024-01-012024-03-310001492422apls:SFJAgreementMember2023-12-310001492422us-gaap:FairValueMeasurementsNonrecurringMemberus-gaap:FairValueInputsLevel1Memberus-gaap:MoneyMarketFundsMember2023-12-310001492422apls:SFJAgreementMember2023-01-012023-03-310001492422us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsNonrecurringMember2024-03-310001492422apls:ConvertibleSeniorNotesDueTwoThousandTwentySixMemberapls:PriorToMarchFifteenTwoThousandAndTwentySixConvertibleMember2024-01-012024-03-3100014924222022-12-310001492422apls:AllowanceForGovernmentAndOtherRebatesMember2022-12-310001492422srt:MaximumMemberapls:UniversityOfPennsylvaniaMember2024-03-310001492422us-gaap:CustomerConcentrationRiskMemberapls:CustomerCMemberus-gaap:AccountsReceivableMember2023-01-012023-03-310001492422apls:AllowanceForGovernmentAndOtherRebatesMember2023-01-012023-03-310001492422us-gaap:FairValueMeasurementsNonrecurringMemberus-gaap:FairValueInputsLevel1Memberus-gaap:MoneyMarketFundsMember2024-03-3100014924222023-01-012023-12-310001492422us-gaap:RetainedEarningsMember2022-12-310001492422us-gaap:CommonStockMember2022-12-310001492422apls:ConvertibleNotesMember2024-01-012024-03-310001492422apls:CollaborationAndLicenseAgreementMemberapls:SwedishOrphanBiovitrumABPublMember2022-04-012022-04-300001492422apls:ASinclairDunlopMember2024-03-310001492422apls:ProductRevenueAllowanceAndReservesMember2024-01-012024-03-310001492422apls:AllowanceForChargebacksDiscountsAndFeesMember2023-03-310001492422apls:ConvertibleSeniorNotesMemberus-gaap:FairValueInputsLevel1Member2023-12-310001492422us-gaap:RestrictedStockUnitsRSUMember2023-01-012023-03-310001492422apls:CappedCallTransactionMember2024-03-080001492422apls:SFJAgreementMember2024-01-012024-03-310001492422apls:SFJAgreementMember2021-12-012021-12-310001492422us-gaap:FairValueMeasurementsNonrecurringMember2024-01-012024-03-310001492422apls:CarolineBaumalMember2024-03-310001492422apls:CappedCallTransactionMember2019-09-110001492422apls:AllowanceForChargebacksDiscountsAndFeesMember2023-12-310001492422apls:AllowanceForChargebacksDiscountsAndFeesMember2023-01-012023-03-310001492422apls:CedricFrancoisMember2024-01-012024-03-310001492422us-gaap:AdditionalPaidInCapitalMember2023-01-012023-03-310001492422apls:DavidWatsonMember2024-01-012024-03-310001492422apls:ConvertibleSeniorNotesDueTwoThousandTwentySixMemberapls:TwoThousandTwentyConvertibleNotesMemberus-gaap:CommonStockMemberapls:ExchangeAgreementsMember2021-07-012021-07-310001492422apls:SFJAgreementMember2019-02-280001492422apls:UniversityOfPennsylvaniaMember2021-08-012021-08-310001492422us-gaap:FairValueInputsLevel2Memberapls:DevelopmentLiabilityMember2023-12-310001492422apls:SobiAgreementAndAnotherLicensingTransactionMember2021-01-310001492422apls:AlecMachielsMember2024-03-310001492422us-gaap:CustomerConcentrationRiskMemberapls:CustomerCMemberus-gaap:AccountsReceivableMember2024-01-012024-03-310001492422apls:BeamTherapeuticsIncorporationMemberapls:ResearchCollaborationAgreementMember2022-06-300001492422apls:ConvertibleSeniorNotesDueTwoThousandTwentySixMemberapls:TwoThousandTwentyConvertibleNotesMemberapls:ExchangeAgreementsMember2024-03-310001492422apls:EmpaveliPegcetacoplanMember2023-01-012023-03-310001492422us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-12-310001492422apls:ConvertibleSeniorNotesDueTwoThousandTwentySixMemberapls:TwoThousandTwentyConvertibleNotesMemberapls:ExchangeAgreementsMember2021-07-012021-07-310001492422apls:ASinclairDunlopMember2024-01-012024-03-310001492422apls:ProductRevenueAllowanceAndReservesMember2022-12-310001492422us-gaap:RetainedEarningsMember2024-03-310001492422apls:ConvertibleSeniorNotesDueTwoThousandTwentySixMemberapls:TwoThousandNineteenConvertibleNotesMemberus-gaap:CommonStockMemberapls:ExchangeAgreementsMember2021-01-012021-01-310001492422apls:ConvertibleSeniorNotesDueTwoThousandTwentySixMemberapls:TwoThousandTwentyConvertibleNotesMemberapls:ExchangeAgreementsMemberus-gaap:CommonStockMember2022-07-012022-07-310001492422apls:EmpaveliAndAspaveliMember2024-01-012024-01-310001492422us-gaap:SalesReturnsAndAllowancesMember2022-12-310001492422apls:ConvertibleSeniorNotesDueTwoThousandTwentySixMemberapls:TwoThousandNineteenConvertibleNotesMemberapls:ExchangeAgreementsMember2021-01-012021-01-310001492422apls:AllowanceForGovernmentAndOtherRebatesMember2024-01-012024-03-310001492422apls:BachemAmericasIncMember2024-03-310001492422us-gaap:AdditionalPaidInCapitalMember2023-12-310001492422srt:MaximumMemberapls:UniversityOfPennsylvaniaMember2024-01-012024-03-310001492422apls:ConvertibleSeniorNotesDueTwoThousandTwentySixMemberapls:CappedCallTransactionMember2024-03-310001492422us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-01-012023-03-310001492422us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-12-310001492422apls:ConvertibleSeniorNotesMemberus-gaap:FairValueInputsLevel1Member2024-03-310001492422apls:SFJAgreementMember2022-12-012022-12-310001492422apls:ConvertibleSeniorNotesDueTwoThousandTwentySixMemberapls:TwoThousandNineteenAndTwoThousandTwentyConvertibleNotesMemberapls:ExchangeAgreementsMember2021-07-012021-07-310001492422apls:EmpaveliAndAspaveliMemberapls:UniversityOfPennsylvaniaMember2023-01-012023-01-310001492422us-gaap:CommonStockMember2024-01-012024-03-310001492422us-gaap:RetainedEarningsMember2023-01-012023-03-310001492422apls:UniversityOfPennsylvaniaMember2022-06-012022-06-300001492422us-gaap:SalesReturnsAndAllowancesMember2023-12-3100014924222023-01-012023-03-310001492422apls:SyfovreMember2023-04-012023-04-300001492422apls:AllowanceForChargebacksDiscountsAndFeesMember2022-12-310001492422us-gaap:FairValueMeasurementsNonrecurringMemberus-gaap:MoneyMarketFundsMember2024-03-310001492422apls:SFJAgreementMembersrt:ScenarioForecastMember2024-05-012024-05-310001492422apls:ProductRevenueAllowanceAndReservesMember2023-03-310001492422us-gaap:RestrictedStockUnitsRSUMember2024-01-012024-03-310001492422apls:CollaborationAndLicenseAgreementMemberapls:SwedishOrphanBiovitrumABPublMember2020-11-302020-11-300001492422us-gaap:CustomerConcentrationRiskMemberus-gaap:AccountsReceivableMemberapls:CustomerAMember2023-01-012023-03-310001492422us-gaap:CommonStockMember2023-01-012023-03-310001492422apls:SyfovreMember2024-01-012024-03-310001492422apls:ConvertibleSeniorNotesDueTwoThousandTwentySixMemberapls:TwoThousandTwentyConvertibleNotesMember2020-05-122020-05-120001492422apls:DavidWatsonMember2024-03-310001492422apls:AccruedLiabilitiesCurrentMember2024-03-310001492422apls:KarenLLewisMember2024-03-310001492422us-gaap:AdditionalPaidInCapitalMember2023-03-310001492422apls:JamesChopasMember2024-01-012024-03-310001492422apls:JamesChopasMember2024-03-310001492422us-gaap:CustomerConcentrationRiskMemberus-gaap:SalesRevenueProductLineMemberapls:CustomerDMember2024-01-012024-03-310001492422apls:SyfovreMember2023-10-012023-10-310001492422us-gaap:SalesReturnsAndAllowancesMember2024-03-310001492422apls:CollaborationAndLicenseAgreementMemberapls:SwedishOrphanBiovitrumABPublMember2024-01-012024-03-310001492422us-gaap:AccumulatedOtherComprehensiveIncomeMember2024-03-310001492422apls:CedricFrancoisMember2024-03-3100014924222023-12-310001492422us-gaap:EmployeeStockOptionMember2024-01-012024-03-310001492422apls:TwoThousandTenLicenseAgreementMember2024-03-310001492422apls:ProductRevenueAllowanceAndReservesMember2024-03-3100014924222024-05-010001492422apls:BeamTherapeuticsIncorporationMemberapls:ResearchCollaborationAgreementMember2021-07-310001492422apls:SFJAgreementMember2024-03-310001492422apls:ConvertibleSeniorNotesDueTwoThousandTwentySixMemberapls:TwoThousandTwentyConvertibleNotesMemberus-gaap:PrivatePlacementMember2020-05-120001492422apls:LicensingAndOtherRevenueMember2024-01-012024-03-310001492422apls:LicensingAndOtherRevenueMember2023-01-012023-03-310001492422us-gaap:CustomerConcentrationRiskMemberus-gaap:SalesRevenueProductLineMemberapls:CustomerDMember2023-01-012023-03-310001492422apls:JeffreyREiseleMember2024-03-310001492422apls:ConvertibleSeniorNotesDueTwoThousandTwentySixMemberus-gaap:CommonStockMember2024-03-310001492422us-gaap:VehiclesMember2024-03-310001492422us-gaap:SalesReturnsAndAllowancesMember2023-01-012023-03-310001492422apls:AllowanceForChargebacksDiscountsAndFeesMember2024-01-012024-03-310001492422us-gaap:FairValueMeasurementsNonrecurringMember2023-12-310001492422us-gaap:FairValueInputsLevel2Memberapls:DevelopmentLiabilityMember2024-03-310001492422apls:CollaborationAndLicenseAgreementMemberapls:SwedishOrphanBiovitrumABPublMember2024-01-310001492422us-gaap:CustomerConcentrationRiskMemberapls:CustomerCMemberus-gaap:SalesRevenueProductLineMember2023-01-012023-03-31apls:Licenseapls:Installmentxbrli:purexbrli:sharesiso4217:USDxbrli:sharesapls:Daysutr:Dapls:Programapls:CounterPartyiso4217:USD

 

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 March 31, 2024

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 May 1, 2024, the registrant had 121,365,555 shares of common stock, $0.0001 par value per share, outstanding.

 


 

APELLIS PHARMACEUTICALS, INC.

FORM 10-Q

FOR THE QUARTER ENDED MARCH 31, 2023

 

TABLE OF CONTENTS

 

 

Page

PART I.

FINANCIAL INFORMATION

3

Item 1.

Financial Statements (Unaudited)

3

Condensed Consolidated Balance Sheets as of March 31, 2024 and December 31, 2023

3

Condensed Consolidated Statements of Operations and Comprehensive Loss for the three months ended March 31, 2024 and 2023

4

 

Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three months ended March 31, 2024 and 2023

5

Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2024 and 2023

6

Notes to Unaudited Condensed Consolidated Financial Statements

7

Item 2.

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

20

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

31

Item 4.

Controls and Procedures

 

31

PART II.

OTHER INFORMATION

32

Item 1A.

Risk Factors

32

Item 5.

Other Information

32

Item 6.

Exhibits

34

Signatures

 

35

 

 

i


 

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 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;
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, 2023, 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


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, 2023. 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 systemic 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 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


PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

APELLIS PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(Amounts in thousands, except per share amounts)

 

 

 

March 31,

 

 

December 31,

 

 

 

2024

 

 

2023

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

325,923

 

 

$

351,185

 

Accounts receivable, net

 

 

267,837

 

 

 

206,442

 

Inventory

 

 

161,283

 

 

 

146,362

 

Prepaid assets

 

 

43,163

 

 

 

38,820

 

Restricted cash

 

 

1,103

 

 

 

1,114

 

Other current assets

 

 

12,119

 

 

 

22,408

 

Total current assets

 

 

811,428

 

 

 

766,331

 

Non-current assets:

 

 

 

 

 

 

Right-of-use assets

 

 

14,994

 

 

 

16,745

 

Property and equipment, net

 

 

4,195

 

 

 

4,345

 

Other assets

 

 

1,313

 

 

 

1,309

 

Total assets

 

$

831,930

 

 

$

788,730

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

26,788

 

 

$

37,516

 

Accrued expenses

 

 

101,399

 

 

 

127,806

 

Current portion of development liability

 

 

77,287

 

 

 

75,830

 

Current portion of lease liabilities

 

 

6,257

 

 

 

6,441

 

Deferred Revenue

 

 

3,560

 

 

 

 

Total current liabilities

 

 

215,291

 

 

 

247,593

 

Long-term liabilities:

 

 

 

 

 

 

Long-term development liability

 

 

244,426

 

 

 

239,817

 

Convertible senior notes

 

 

93,109

 

 

 

93,033

 

Lease liabilities

 

 

9,770

 

 

 

11,454

 

Other liabilities

 

 

2,658

 

 

 

2,312

 

Total liabilities

 

 

565,254

 

 

 

594,209

 

Stockholders’ equity:

 

 

 

 

 

 

Preferred stock, $0.0001 par value; 10,000 shares authorized, and zero 
  shares issued and outstanding at March 31, 2024 and December 31, 2023

 

 

 

 

 

 

Common stock, $0.0001 par value; 200,000 shares authorized
   at March 31, 2024 and December 31, 2023;
121,267 shares
   issued and outstanding at March 31, 2024, and
119,556 shares
   issued and outstanding at December 31, 2023

 

 

12

 

 

 

12

 

Additional paid-in capital

 

 

3,174,100

 

 

 

3,035,539

 

Accumulated other comprehensive loss

 

 

(3,525

)

 

 

(3,542

)

Accumulated deficit

 

 

(2,903,911

)

 

 

(2,837,488

)

Total stockholders’ equity

 

 

266,676

 

 

 

194,521

 

Total liabilities and stockholders’ equity

 

$

831,930

 

 

$

788,730

 

 

See accompanying notes to unaudited condensed consolidated financial statements

3


APELLIS PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

(Amounts in thousands, except per share amounts)

 

 

For the Three Months Ended March 31,

 

 

2024

 

 

2023

 

Revenue:

 

 

 

 

 

Product revenue, net

$

163,075

 

 

$

38,800

 

Licensing and other revenue

 

9,250

 

 

 

6,046

 

Total revenue:

 

172,325

 

 

 

44,846

 

Operating expenses:

 

 

 

 

 

Cost of sales

 

20,209

 

 

 

7,809

 

Research and development

 

84,701

 

 

 

110,027

 

Selling, general and administrative

 

129,505

 

 

 

102,093

 

Total operating expenses:

 

234,415

 

 

 

219,929

 

Net operating loss

 

(62,090

)

 

 

(175,083

)

Interest income

 

3,303

 

 

 

5,393

 

Interest expense

 

(6,967

)

 

 

(7,529

)

Other (expense)/ income, net

 

(499

)

 

 

(277

)

Net loss before taxes

 

(66,253

)

 

 

(177,496

)

Income tax expense

 

170

 

 

 

282

 

Net loss

$

(66,423

)

 

$

(177,778

)

Other comprehensive gain/(loss):

 

 

 

 

 

    Foreign currency translation

 

17

 

 

 

100

 

Total other comprehensive income

 

17

 

 

 

100

 

Comprehensive loss, net of tax

$

(66,406

)

 

$

(177,678

)

Net loss per common share, basic and diluted

$

(0.54

)

 

$

(1.56

)

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

 

122,957

 

 

 

113,872

 

 

See accompanying notes to unaudited condensed consolidated financial statements

4


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, 2024

 

 

119,556

 

 

$

12

 

 

$

3,035,539

 

 

$

(3,542

)

 

$

(2,837,488

)

 

$

194,521

 

Proceeds from settlement of capped call

 

 

 

 

 

 

 

 

98,763

 

 

 

 

 

 

 

 

 

98,763

 

Issuance of common stock upon exercise of stock options

 

 

714

 

 

 

 

 

 

9,477

 

 

 

 

 

 

 

 

 

9,477

 

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

 

 

997

 

 

 

 

 

 

(28

)

 

 

 

 

 

 

 

 

(28

)

Share-based compensation expense

 

 

 

 

 

 

 

 

30,349

 

 

 

 

 

 

 

 

 

30,349

 

Unrealized gain on available-for-sale investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(66,423

)

 

 

(66,423

)

Foreign currency translation

 

 

 

 

 

 

 

 

 

 

 

17

 

 

 

 

 

 

17

 

Balance at March 31, 2024

 

 

121,267

 

 

 

12

 

 

 

3,174,100

 

 

 

(3,525

)

 

 

(2,903,911

)

 

 

266,676

 

 

See accompanying notes to unaudited condensed consolidated financial statements

 

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

 

 

Loss

 

 

Deficit

 

 

Equity (Deficit)

 

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

 

Unrealized gain on available-for-sale investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(177,778

)

 

 

(177,778

)

Foreign currency translation

 

 

 

 

 

 

 

 

 

 

 

100

 

 

 

 

 

 

100

 

Balance at March 31, 2023

 

 

116,179

 

 

 

12

 

 

 

2,899,524

 

 

 

(775

)

 

 

(2,486,638

)

 

 

412,123

 

 

See accompanying notes to unaudited condensed consolidated financial statements

5


Apellis Pharmaceuticals, Inc.

CONDENSED Consolidated Statements of Cash Flows

(Unaudited)

(Amounts in thousands)

 

 

For the Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

Operating Activities

 

 

 

 

 

 

Net loss

 

$

(66,423

)

 

$

(177,778

)

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

 

 

 

 

 

 

Share-based compensation expense

 

 

30,349

 

 

 

28,823

 

Loss on disposal of fixed assets

 

 

 

 

 

19

 

Depreciation expense

 

 

444

 

 

 

421

 

Amortization of discounts for convertible notes

 

 

76

 

 

 

73

 

Accretion of discount to development liability

 

 

6,066

 

 

 

6,633

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

    Accounts receivable

 

 

(61,415

)

 

 

(23,778

)

Inventory

 

 

(14,921

)

 

 

144

 

Prepaid assets

 

 

(4,338

)

 

 

(107

)

Other current assets

 

 

10,697

 

 

 

2,308

 

Other assets

 

 

98

 

 

 

14,969

 

Right-of-use assets and lease liabilities

 

 

(116

)

 

 

(22

)

Accounts payable

 

 

(10,730

)

 

 

(5,854

)

Accrued expenses

 

 

(26,330

)

 

 

(23,471

)

Deferred revenue

 

 

3,560

 

 

 

 

Net cash used in operating activities

 

 

(132,983

)

 

 

(177,620

)

Investing Activities

 

 

 

 

 

 

Purchase of property and equipment

 

 

(293

)

 

 

(259

)

Net cash used in investing activities

 

 

(293

)

 

 

(259

)

Financing Activities

 

 

 

 

 

 

Proceeds from settlement of capped call

 

 

98,763

 

 

 

 

Proceeds from issuance of common stock and pre-funded warrant offering,
 net of issuance costs

 

 

 

 

 

384,387

 

Proceeds from exercise of stock options

 

 

9,477

 

 

 

17,718

 

Payments of employee tax withholding related to equity-based compensation

 

 

(28

)

 

 

(10,999

)

Net cash provided by financing activities

 

 

108,212

 

 

 

391,106

 

Effect of exchange rate changes on cash, cash equivalents and restricted cash

 

 

(209

)

 

 

56

 

Net (decrease) increase in cash, cash equivalents and restricted cash

 

 

(25,273

)

 

 

213,283

 

Cash, cash equivalents and restricted cash at beginning of period

 

 

352,299

 

 

 

553,075

 

Cash, cash equivalents and restricted cash at end of period

 

$

327,026

 

 

$

766,358

 

Reconciliation of cash, cash equivalents and restricted cash to the
     consolidated balance sheets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

325,923

 

 

$

765,083

 

Restricted cash

 

 

1,103

 

 

 

1,275

 

Total cash, cash equivalents, and restricted cash

 

$

327,026

 

 

$

766,358

 

Supplemental Disclosures

 

 

 

 

 

 

Cash paid for interest

 

$

1,643

 

 

$

1,643

 

Cash paid for income taxes

 

 

 

 

$

250

 

Proceeds from income tax refunds net of income taxes paid

 

 

257

 

 

 

 

 

See accompanying notes to unaudited condensed consolidated financial statements

6


APELLIS PHARMACEUTICALS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. Nature of Organization and Operations

 

Apellis Pharmaceuticals, Inc. (the “Company”) is a commercial-stage biopharmaceutical company focused on the discovery, development and commercialization of novel therapeutic compounds to treat diseases with high unmet needs through the inhibition of the complement system, which is an integral component of the immune system, at the level of C3, the central protein in the complement cascade.

The Company was incorporated in September 2009 under the laws of the State of Delaware. The Company’s principal executive offices are located in Waltham, Massachusetts.

The Company’s operations since inception have been limited to organizing and staffing the Company, acquiring rights to product candidates, business planning, raising capital, developing its product candidates, commercializing EMPAVELI (pegcetacoplan) for the treatment of paroxysmal nocturnal hemoglobinuria (“PNH”) and the commercialization of SYFOVRE (pegcetacoplan injection) for the treatment of geographic atrophy secondary to age-related macular degeneration (“GA”).

 

The Company is subject to risks common in the biotechnology industry including, but not limited to, raising additional capital, development by its competitors of new technological innovations, its ability to successfully complete preclinical and clinical development of product candidates and receive timely regulatory approval of products, market acceptance of the Company’s products, protection of proprietary technology, healthcare cost containment initiatives, and compliance with governmental regulations, including those of the U.S. Food and Drug Administration (“FDA”).

 

Liquidity and Going Concern

 

The accompanying unaudited condensed consolidated financial statements have been prepared on the basis of the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. From inception to March 31, 2024, the Company has incurred cash outflows from operations, losses from operations and had an accumulated deficit of $2.9 billion primarily as a result of expenses incurred through a combination of research and development activities related to the Company’s various product candidates and expenses supporting those activities. The Company has primarily financed its operations through public offerings of its common stock, convertible debt, private placements of preferred stock prior to its initial public offering, the development funding agreement with SFJ Pharmaceuticals Group (“SFJ”), and the collaboration agreement with Sobi. The Company has financed a portion of its operations through product sales but has not yet achieved profitability.

 

As of May 7, 2024, the date of issuance of these unaudited condensed consolidated financial statements, the Company believes that its cash and cash equivalents of $325.9 million as of March 31, 2024 together with cash anticipated to be generated from sales of EMPAVELI and from SYFOVRE will be sufficient to fund its operations and capital expenditure requirements for at least the next twelve months.

 

2. Basis of Presentation and Summary of Significant Accounting Policies

 

Basis of Presentation

 

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and following the requirements of the Securities and Exchange Commission (the “SEC”), for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by U.S. GAAP have been condensed or omitted and, accordingly, the condensed consolidated balance sheet as of December 31, 2023 has been derived from audited consolidated financial statements at that date but does not include all of the information required by U.S. GAAP for complete financial statements. These financial statements have been prepared on the same basis as the Company’s annual financial statements and, in the opinion of management, reflect all adjustments (consisting only of normal recurring adjustments) that are necessary for a fair presentation of the Company’s financial information. The results of operations for the three months ended March 31, 2024 are not

7


necessarily indicative of the results to be expected for the year ending December 31, 2024 or for any other interim period or for any other future year.

 

The accompanying unaudited condensed consolidated financial statements and related financial information should be read in conjunction with the audited consolidated financial statements and the related notes thereto for the year ended December 31, 2023 included in the Company’s Annual Report on Form 10-K filed with the SEC on February 27, 2024, as amended by Amendment No. 1 thereto filed with the SEC on February 29, 2024 (the “2023 Form 10-K”).

 

Use of Estimates

 

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from those estimates. Management considers many factors in selecting appropriate financial accounting policies and controls, and in developing the estimates and assumptions that are used in the preparation of these financial statements. Management must apply significant judgment in this process. In addition, other factors may affect estimates, including expected business and operational changes, sensitivity and volatility associated with the assumptions used in developing estimates, and whether historical trends are expected to be representative of future trends. The estimation process often may yield a range of potentially reasonable estimates of the ultimate future outcomes, and management must select an amount that falls within that range of reasonable estimates. Estimates are used in the following areas, among others: development liability, accrued expenses, prepaid expenses, convertible debt, reserves for variable consideration, reserves for excess or obsolete inventories, and income taxes.

 

Summary of Significant Accounting Policies

 

Reference is made to Note 2 Summary of Significant Accounting Policies in our 2023 Form 10-K for a detailed description of significant accounting policies. There have been no significant changes to our accounting policies as disclosed in our 2023 Form 10-K.

 

Recently Issued Accounting Standards

 

In December 2023, the Financial Accounting Standards Board (“FASB”) issued an amendment to the accounting guidance on income taxes which requires entities to provide additional information in the rate reconciliation and additional disaggregated disclosures about income taxes paid. This guidance requires public entities to disclose in their rate reconciliation table additional categories of information about federal, state, and foreign income taxes and to provide more details about the reconciling items in some categories if the items meet a quantitative threshold. The guidance is effective for annual periods beginning after December 15, 2024. The Company is currently evaluating this guidance to determine the impact it may have on its consolidated financial statements and disclosures.

 

In November 2023, the FASB issued an amendment to the accounting guidance on segment reporting. The amendments require disclosure of significant segment expenses and other segment items and requires entities to provide in interim periods all disclosures about a reportable segment's profit or loss and assets that are currently required annually. The amendment also requires disclosure of the title and position of the chief operating decision maker (“CODM”) and an explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources. The guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15,

2024. Retrospective application is required, and early adoption is permitted. The Company is currently evaluating the impact the guidance will have on its consolidated financial statements.

3. Product Revenues, Accounts Receivable, and Reserves for Product Sales

 

The Company received FDA approval for the sale of EMPAVELI in the United States in May 2021 and approval for the sale of SYFOVRE in the United States in February 2023. The Company’s product revenues, net of sales discounts, allowances and reserves, for the three months ended March 31, 2024 and 2023 were $163.1 million and $38.8 million, respectively. The Company’s product revenues consist of sales of EMPAVELI and SYFOVRE to specialty pharmacies and specialty distributors.

 

The table reflects product revenue by major source for the following periods (in thousands):

 

8


 

 

Three Months Ended March31,

 

 

 

2024

 

 

2023

 

 Products:

 

 

 

 

 

 

 EMPAVELI

 

$

25,610

 

 

$

20,440

 

 SYFOVRE

 

 

137,465

 

 

 

18,360

 

 Total Product revenue, net

 

$

163,075

 

 

$

38,800

 

 

The Company’s accounts receivable balance of $267.8 million as of March 31, 2024 and $206.4 million as of December 31, 2023, consisted of EMPAVELI and SYFOVRE product sales receivable and licensing and other revenue receivables from our collaboration with Swedish Orphan Biovitrum AB (Publ) (“Sobi”). The Company does not have a reserve related to expected credit losses against its accounts receivable balance and expects to collect its accounts receivable in the ordinary course of business.

 

The Company’s product sales reserves totaled $19.2 million and $16.6 million as of March 31, 2024 and December 31, 2023, respectively. These amounts are included in accrued expenses on the Company’s unaudited condensed consolidated balance sheets.

The following table summarizes activity in each of the product revenue allowance and reserve categories for the three months ended March 31, 2024 and 2023 (in thousands):

 

 

 

Chargebacks, Discounts, and Fees

 

 

Government and other rebates

 

 

Returns

 

 

Total

 

 Ending balance at December 31, 2023

 

$

5,674

 

 

$

8,898

 

 

$

2,053

 

 

 

16,625

 

 Provision related to sales in the current year

 

 

9,575

 

 

 

13,125

 

 

 

1,355

 

 

 

24,055

 

 Adjustments related to prior period sales

 

 

146

 

 

 

(19

)

 

 

(96

)

 

 

31

 

 Credits and payments made

 

 

(9,724

)

 

 

(9,906

)

 

 

(1,859

)

 

 

(21,489

)

 Ending balance at March 31, 2024

 

$

5,671

 

 

$

12,098

 

 

$

1,453

 

 

$

19,222

 

 

 

 

Chargebacks, Discounts, and Fees

 

 

Government and other rebates

 

 

Returns

 

 

Total

 

 Ending balance at December 31, 2022

 

$

164

 

 

$

1,936

 

 

$

251

 

 

 

2,351

 

 Provision related to sales in the current year

 

 

1,466

 

 

 

2,566

 

 

651

 

 

 

4,683

 

Adjustments related to prior period sales

 

 

 

 

 

(2

)

 

 

(249

)

 

 

(251

)

 Credits and payments made

 

 

(184

)

 

 

(1,639

)

 

 

 

 

 

(1,823

)

 Ending balance at March 31, 2023

 

$

1,446

 

 

$

2,861

 

 

$

653

 

 

$

4,960

 

 

Significant customers - Gross product revenues and product sales receivable from the Company's customers who individually accounted for 10% of more of total gross product revenues and/or 10% or more of total product sales receivable consisted of the following:

 

 

 

Percent of Total Gross Product Revenues

 

 

Three Months Ended March31,

 

 

2024

 

2023

 Customer A

 

15%

 

52%

 Customer C

 

19%

 

9%

 Customer D

 

59%

 

33%

 

 

 

Percent of Product Sales Receivable

 

 

As of March 31,

 

 

2024

 

2023

 Customer A

 

3%

 

25%

 Customer C

 

21%

 

15%

 Customer D

 

67%

 

52%

 

9


4. Inventory

 

The Company’s inventory consisted of the following as of March 31, 2024 and December 31, 2023 (in thousands):

 

 

 

March 31,

 

 

December 31,

 

 

 

2024

 

 

2023

 

Raw materials

 

$

42,089

 

 

$

32,724

 

Semi-finished goods

 

 

106,161

 

 

 

82,924

 

Finished goods

 

 

13,033

 

 

 

30,714

 

Total Inventory

 

$

161,283

 

 

$

146,362

 

 

Inventory amounts written down as a result of excess, obsolete, unmarketability or other reasons are charged to cost of sales. The Company's reserve for excess and obsolete inventory was $7.9 million and $9.3 million as of March 31, 2024 and December 31, 2023, respectively.

 

5. Prepaid and Other Current Assets

 

Prepaid and other current assets consisted of the following as of March 31, 2024 and December 31, 2023 (in thousands):

 

 

 

March 31,

 

 

December 31,

 

 

 

2024

 

 

2023

 

Down payments for inventory

 

 

13,828

 

 

 

16,296

 

Prepaid research and development

 

 

12,626

 

 

 

13,931

 

Other prepaid expenses

 

 

16,709

 

 

 

8,593

 

Total prepaid expenses

 

$

43,163

 

 

$

38,820

 

 

 

 

March 31,

 

 

December 31,

 

 

 

2024

 

 

2023

 

Royalties receivable

 

$

4,499

 

 

$

3,054

 

Receivable from collaboration agreement(1)

 

 

 

 

 

15,000

 

Deposits and other current assets

 

 

7,620

 

 

 

4,354

 

Total other current assets

 

$

12,119

 

 

$

22,408

 


(1)
In January 2024 the Company waived the remaining reimbursement payment of $15.0 million from Sobi in connection with the decision to discontinue the cold agglutinin disease (CAD) program.

 

6. Development Liability

 

On February 28, 2019, the Company entered into a development funding agreement with SFJ (the “SFJ agreement”), under which SFJ agreed to provide funding to the Company to support the development of pegcetacoplan for the treatment of patients with PNH. Pursuant to the SFJ agreement, SFJ paid the Company $60.0 million following the signing of the agreement and agreed to pay the Company up to an additional $60.0 million in the aggregate in three equal installments upon the achievement of specified development milestones with respect to the Company’s Phase 3 program for pegcetacoplan in PNH and subject to the Company having cash resources at the time sufficient to fund at least 10 months of the Company’s operations.

 

In June 2019 the Company amended the SFJ agreement to include an additional $20.0 million funding payment. SFJ paid the Company $80.0 million under the amended SFJ agreement between June 2019 and January 2020.

Under the SFJ agreement, following regulatory approval by the FDA in May 2021 for the use of systemic pegcetacoplan as a treatment for PNH, the Company became obligated to pay SFJ an initial payment of $4.0 million and then an additional $226.0 million in the aggregate in six additional annual payments with the majority of the payments being made from the third anniversary to the sixth anniversary of regulatory approval. The Company paid SFJ the initial payment of $4.0 million in June 2021, its first annual payment of $11.5 million in May 2022 and its second annual payment of $24.5 million in May 2023. The subsequent annual payments remaining are due and payable in May of each year from 2024 through 2027.

10


Following regulatory approval of systemic pegcetacoplan for the treatment of PNH by the European Medicines Agency (“EMA”) in December 2021, the Company became obligated to pay SFJ an initial payment of $5.0 million and then an additional $225.0 million in the aggregate in six additional annual payments with the majority of the payments being made from the third anniversary to the sixth anniversary of regulatory approval. The Company paid SFJ the initial payment of $5.0 million in January 2022 its first annual payment of $18.0 million in December 2022 and its second annual payment of $31.0 million in December 2023. The subsequent annual payments are due and payable in December of each year from 2024 through 2027.

The Company has paid SFJ a total of $94.0 million as of March 31, 2024. The Company is obligated to pay SFJ $37.5 million in May 2024 and $61.3 million in December 2024.

Additionally, the Company granted a security interest to SFJ in all of its assets, excluding intellectual property and license agreements to which it is a party. In connection with the grant of the security interest, the Company agreed to certain affirmative and negative covenants, including restrictions on its ability to pay dividends, incur additional debt or enter into licensing transactions with respect to its intellectual property, other than specified types of licenses.

From December 15, 2021 to the final annual payment due in December 2027, the development liability will be accreted from its initial carrying amount to the total payment amount using the effective interest rate method over the remaining life of the SFJ agreement. The difference between the carrying amount and the total payment amount is presented as a discount to the development liability. The accretion is recorded as interest expense in the unaudited condensed consolidated statement of operations.

 

The following table summarizes the development liability (in thousands):

 

 

 

March 31, 2024

 

 

December 31, 2023

 

 

Effective
 Interest Rate

 

 Development liability

 

$

366,000

 

 

$

366,000

 

 

 

7.91

%

 Less: Unamortized discount to development liability

 

 

(44,287

)

 

 

(50,353

)

 

 

 

 Less: Current portion of development liability, net of discount

 

 

(77,287

)

 

 

(75,830

)

 

 

 

 Total long-term development liability

 

$

244,426

 

 

$

239,817

 

 

 

 

 

For the three months ended March 31, 2024 and 2023 interest expense of $6.1 million and $6.6 million were recorded for the accretion of the development liability.

 

Future minimum SFJ payments as of March 31, 2024 is as follows (in thousands):

 

2024

$

 

98,750

 

2025

 

 

103,000

 

2026

 

 

109,000

 

2027

 

 

55,250

 

Total future minimum payments

 

 

366,000

 

 

 

 

 

7. Accrued Expenses

 

Accrued expenses consisted of the following as of March 31, 2024 and December 31, 2023 (in thousands):

 

 

March 31,

 

 

December 31,

 

 

 

2024

 

 

2023

 

Accrued research and development

 

$

22,912

 

 

$

28,318

 

Accrued royalties

 

 

6,224

 

 

 

10,197

 

Accrued payroll liabilities

 

 

20,789

 

 

 

51,781

 

Accrued goods received not invoiced

 

 

15,829

 

 

 

5,902

 

Product revenue reserves

 

 

19,222

 

 

 

16,625

 

Other

 

 

16,423

 

 

 

14,983

 

Total

 

$

101,399

 

 

$

127,806

 

 

11


8. Long-term Debt

Convertible Senior Notes

 

On September 16, 2019, the Company completed a private offering of convertible notes (the “2019 Convertible Notes”) with an aggregate principal amount of $220.0 million issued pursuant to an indenture (the “Indenture”) with U.S. Bank National Association, as trustee.

The net proceeds from the sale of the 2019 Convertible Notes were approximately $212.9 million after deducting the initial purchasers’ discounts and commissions of $6.6 million and offering expenses of $0.5 million paid by the Company. The Company used $28.4 million of the net proceeds from the sale of the 2019 Convertible Notes to pay the cost of the capped call transactions in September 2019 described below.

 

On May 12, 2020, the Company issued convertible notes (the “2020 Convertible Notes”) with an aggregate principal amount of $300.0 million. The net proceeds from the sale of the 2020 Convertible Notes were approximately $322.9 million after deducting the purchasers’ discounts and commission of $5.7 million and offering expenses of $0.3 million. The Company used $43.1 million of the net proceeds from the sale of the 2020 Convertible Notes to pay the cost of the additional capped call transactions in May 2020 described below.

 

The 2019 Convertible Notes and the 2020 Convertible Notes are referred to together as the Convertible Notes. The Convertible Notes are senior unsecured obligations of the Company and bear interest at a rate of 3.5% per year payable semiannually in arrears on March 15 and September 15 of each year, beginning on March 15, 2020. The Convertible Notes will mature on September 15, 2026, unless converted earlier, redeemed or repurchased in accordance with their terms.

 

The Convertible Notes are convertible into shares of the Company’s common stock at an initial conversion rate of 25.3405 shares per $1,000 principal amount of Convertible Notes (equivalent to an initial conversion price of approximately $39.4625 per share of common stock). The conversion rate is subject to customary anti-dilution adjustments. In addition, following certain events that occur prior to the maturity date or if the Company delivers a notice of redemption, the Company will increase the conversion rate for a holder who elects to convert its Convertible Notes in connection with such corporate event or a notice of redemption, as the case may be, in certain circumstances as provided in the Indenture.

 

Prior to March 15, 2026, the Convertible Notes are convertible only under the following circumstances:

during any calendar quarter, if the last reported sale price of the Company’s common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day;
during the five business day period after any five consecutive trading day period in which the trading price per $1,000 principal amount of the Convertible Notes for each such trading day was less than 98% of the product of the last reported sale price of the Company’s common stock and the conversion rate on each such trading day;
if the Company calls any or all of the Convertible Notes for redemption, at any time prior to the close of business on the second scheduled trading day immediately preceding the redemption date; or
upon the occurrence of corporate events specified in the Indenture.

 

On or after March 15, 2026 until the close of business on the second scheduled trading day immediately preceding the maturity date of the Convertible Notes, holders may convert the Convertible Notes at any time. Upon conversion of the Convertible Notes, the Company will pay or deliver, as the case may be, cash, shares of the Company’s common stock or a combination of cash and shares of common stock, at the Company’s election.

 

Prior to September 20, 2023, the Company could not redeem the Convertible Notes. From and after September 20, 2023, the Company may redeem for cash all or a portion of the Convertible Notes, at its option, if the last reported sale price of the Company’s common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive), including the trading day immediately preceding the date on which the Company provides a notice of redemption, during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption. The redemption price will be equal to 100% of the principal amount of the Convertible Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. If the Company calls any Convertible Notes for redemption, it will constitute a “make-whole fundamental change” with respect to such Convertible Notes, in which case the conversion rate applicable to

12


the conversion of such Notes, if converted in connection with the redemption, will be increased in certain circumstances. The Company has not called for redemption or redeemed any of the Convertible Notes as of March 31, 2024.

 

If the Company undergoes a “fundamental change,” as defined in the Indenture, prior to maturity, subject to certain conditions, holders may require the Company to repurchase for cash all or any portion of their Convertible Notes at a fundamental change repurchase price equal to 100% of the principal amount of the notes to be repurchased, plus any accrued and unpaid interest to, but excluding, the fundamental change repurchase date.

 

In January 2021, July 2021 and July 2022, the Company entered into separate, privately negotiated exchange agreements to modify the conversion terms with certain holders of its 2019 Convertible Notes and 2020 Convertible Notes. Under the terms of these exchange agreements, in January 2021, July 2021 and July 2022, the holders exchanged approximately $126.1 million of 2019 Convertible Notes, $201.1 million of 2019 Convertible Notes and 2020 Convertible Notes, and $98.1 million of 2020 Convertible Notes, respectively, in aggregate principal amount held by them for an aggregate of 3,906,869 shares, 5,992,217 shares and 3,027,018 shares, respectively, of common stock issued by the Company. In accordance with ASC Topic 470-20, “Debt – Debt with Conversion and Other Options,” (“ASC 470-20”) the Company accounted for the exchange as an induced conversion based on the short period of time the conversion offer was open and the substantive conversion feature offer. The Company accounted for the conversion of the debt as an inducement by expensing the fair value of the shares that were issued in excess of the original terms of the Convertible Notes.

The conditional conversion feature of the Convertible Notes was triggered as of December 31, 2023, and as a result the Convertible Notes were convertible at the option of the holders until March 31, 2024. No Convertible Notes were converted during this period.

 

The conditional conversion feature of the Convertible Notes was triggered as of March 31, 2024, and as a result the Convertible Notes are convertible at the option of the holders until June 30, 2024.

As of March 31, 2024, the Company held in treasury Convertible Notes in principal amount of $425.4 million which have not been cancelled.

 

The outstanding balance of the Convertible Notes as of March 31, 2024 and December 31, 2023 consisted of the following (in thousands):

 

 

 

March 31,

 

 

December 31,

 

 

 

2024

 

 

2023

 

Liability

 

 

 

 

 

 

Principal

 

 

93,897

 

 

 

93,897

 

Less: debt discount and issuance costs, net

 

 

(788

)

 

 

(864

)

Net carrying amount

 

$

93,109

 

 

$

93,033

 

 

The following table sets forth total interest expense recognized related to the Convertible Notes during the three months ended March 31, 2024 and 2023 (in thousands):

 

 

 

 

 

 

 

 

 

Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

Amortization of debt issuance costs

 

 

76

 

 

 

73

 

Contractual interest expense

 

 

822

 

 

 

822

 

   Total interest expense

 

$

898

 

 

$

895

 

 

Future minimum payments on Convertible Notes payable as of March 31, 2024 are as follows (in thousands):

 

2024

 

 

$

 

2,465

 

2025

 

 

 

 

3,286

 

2026

 

 

 

 

96,225

 

Total future minimum payments

 

 

 

 

101,976

 

Less: interest

 

 

 

 

(8,079

)

Less: debt discount and issuance costs, net

 

 

 

 

(788

)

Less: current portion

 

 

 

 

 

  Convertible senior notes

 

 

 

 

93,109

 

 

13


Capped Call Transactions

 

On September 11, 2019 and May 6, 2020, concurrently with the pricing of the 2019 Convertible Notes and the 2020 Convertible Notes, respectively, the Company entered into capped call transactions with two counterparties. The capped call transactions are expected generally to reduce the potential dilution to the Company’s common stock upon any conversion of Convertible Notes and/or offset any cash payments the Company is required to make in excess of the principal amount of converted Convertible Notes, as the case may be, in the event that the market price per share of the Company’s common stock, as measured under the terms of the capped call transactions, is greater than the strike price of the capped call transactions, which is initially $39.4625 (the conversion price of the Convertible Notes) and is subject to anti-dilution adjustments substantially similar to those applicable to the conversion rate of such Convertible Notes. If, however, the market price per share of the Company’s common stock, as measured under the terms of the capped call transactions, exceeds the cap price of the capped call transactions, which is initially $63.14 per share, there would nevertheless be dilution and/or there would not be an offset of such potential cash payments, in each case, to the extent that such market price exceeds the cap price of the capped call transactions.

 

On February 27, 2024, the Company entered into agreements with the capped call counterparties to unwind a portion of the capped call transactions. The unwind transactions were settled based on the volume-weighted average price of the Company’s common stock over a 7-day averaging period beginning on and including February 27, 2024. The settlement of the unwind transactions was completed on March 8, 2024 at volume-weighted average price per share of $64.11, which resulted in cash proceeds to the Company of $98.8 million. As of March 31, 2024, the capped call transactions remaining is a notional amount corresponding to $93.9 million principal amount of Convertible Notes.

9. Leases

The underlying assets of the Company’s leases primarily relate to office space leases, but also include some equipment leases. The Company determines if an arrangement qualifies as a lease at its inception.

As of March 31, 2024 and December 31, 2023, all leases were classified as operating leases. Additional information related to the operating lease assets and liabilities is as follows (in thousands):

 

 

 

March 31,

 

 

December 31,

 

 

 

2024

 

 

2023

 

Right-of-use assets

 

$

14,994

 

 

$

16,745

 

Operating Lease Liabilities

 

$

16,027

 

 

$

17,895

 

Weighted Average Remaining Term in years

 

 

2.64

 

 

2.83

 

Weighted Average discount rate used to measure
    outstanding lease liabilities

 

 

7.25

%

 

 

7.20

%

 

For the three months ended March 31, 2024 and 2023, the lease cost for operating lease expense was $1.5 million and $1.7 million, respectively.

Supplemental cash flow information related to operating leases for the three months ended March 31, 2024 and 2023 is as follows (in thousands):

 

 

 

2024

 

 

2023