Executive Summary / Key Takeaways

• Apellis Pharmaceuticals is leveraging its differentiated C3-targeting technology across two commercial products, SYFOVRE for geographic atrophy (GA) and EMPAVELI for paroxysmal nocturnal hemoglobinuria (PNH), and a promising pipeline, positioning the company for significant growth.
• SYFOVRE has established market leadership in GA, achieving over $130 million in U.S. net product revenue in Q1 2025 despite temporary market dynamics like inventory fluctuations and co-pay assistance challenges, with management focused on driving continued injection demand and expanding market penetration.
• EMPAVELI is poised for a potential label expansion into rare kidney diseases, C3 glomerulopathy (C3G) and primary immune complex membranoproliferative glomerulonephritis (IC-MPGN), following positive Phase 3 VALIANT data showing significant improvements across key disease markers and a Priority Review PDUFA date of July 28, 2025.
• The company has significantly strengthened its financial position through strategic non-dilutive financing activities, including a major credit facility and accounts receivable factoring, providing ample liquidity to fund operations to profitability without relying on external capital markets.
• Key factors for investors to monitor include the successful commercial execution for SYFOVRE amidst competitive dynamics, the upcoming launch of EMPAVELI in C3G/IC-MPGN, progress in the expanding nephrology and next-generation GA pipelines, and the management of operational costs and market access challenges.

The Strategic Core: Targeting C3 in Complement-Mediated Diseases

Apellis Pharmaceuticals, a commercial-stage biopharmaceutical company founded in 2009, has built its foundation on a singular, powerful idea: that inhibiting the complement system at the level of C3, the central protein in the cascade, offers a uniquely effective approach to treating a wide range of diseases driven by excessive complement activation. This core technological differentiation underpins the company's strategy and positions it distinctly within the competitive landscape of immunology and rare diseases.

The complement system is a critical part of the immune response, but its uncontrolled activation can lead to significant tissue damage in various conditions. While some competitors target components further downstream (like C5), Apellis' pegcetacoplan, the active ingredient in both its approved therapies, acts upstream at C3. This upstream inhibition is designed to broadly regulate the complement cascade, potentially offering more comprehensive control over the disease process.

This technological advantage translates into tangible benefits demonstrated in clinical trials. For SYFOVRE (intravitreal pegcetacoplan) in geographic atrophy (GA), studies showed significant reductions in lesion growth, with increasing effects over time, reaching approximately 42% reduction in non-subfoveal lesions at 24 months. The 48-month GALE extension study further highlighted this, demonstrating preservation of approximately 1.5 disc areas of retinal tissue on average in monthly dosed non-subfoveal patients – a magnitude considered highly meaningful by retina specialists. Importantly, SYFOVRE is the only GA treatment approved for flexible dosing, including every-other-month administration, which provides significant convenience for patients and physicians while maintaining strong efficacy. Real-world data is beginning to corroborate these findings, with analyses showing over 40% reduction in annualized GA growth rate by month nine and stable visual acuity over multiple injections.

For EMPAVELI (systemic pegcetacoplan) in paroxysmal nocturnal hemoglobinuria (PNH), the C3 inhibition has demonstrated efficacy in controlling both intravascular and extravascular hemolysis, addressing a limitation of C5 inhibitors. The recent Phase 3 VALIANT study in C3 glomerulopathy (C3G) and primary immune complex membranoproliferative glomerulonephritis (IC-MPGN) further underscored the power of C3 targeting in kidney diseases. VALIANT showed a statistically significant 68% reduction in proteinuria compared to placebo (p < 0.0001) at six months, stabilization of kidney function (eGFR), and a substantial reduction in C3c staining intensity (nominal p < 0.0001), indicating clearance of damaging deposits. These results were consistent across diverse patient subgroups, including different disease types, ages, and transplant statuses. Management highlights EMPAVELI's efficacy in C3G/IC-MPGN as potentially twice that of an emerging oral competitor, suggesting a significant differentiation based on the depth of complement inhibition achieved.

Apellis is not resting on its laurels, continuing to invest in its pipeline leveraging this C3 expertise. A next-generation GA therapy combining intravitreal SYFOVRE with APL-3007, a subcutaneous siRNA targeting FcRn, is in development, aiming for comprehensive complement blockade in the eye and potentially improving RPE cell protection beyond current levels. A Phase 2 trial for this combination is planned for Q2 2025. The company is also exploring other nephrology indications like FSGS and DGF, planning pivotal trials in H2 2025, and has a preclinical gene editing collaboration with Beam Therapeutics (BEAM) targeting FcRn.

For investors, this technological foundation and ongoing innovation represent a significant competitive moat. The ability to target C3 effectively provides a differentiated mechanism of action that has translated into compelling clinical data and regulatory approvals in areas of high unmet need. This technological edge supports premium pricing, drives market adoption based on clinical outcomes, and fuels a pipeline with potential for future value creation, positioning Apellis to compete effectively against larger, more diversified players like AstraZeneca (AZN), Regeneron Pharmaceuticals (REGN), and Novartis (NVS) who may target different parts of the complement cascade or compete in overlapping therapeutic areas with different modalities.

Building Commercial Momentum: SYFOVRE and EMPAVELI's Dual Thrust

Apellis' transition to a commercial-stage company began with the FDA approval and U.S. launch of EMPAVELI for PNH in 2021, followed by the landmark approval and U.S. launch of SYFOVRE for GA in 2023. These two products form the core of the company's current revenue generation and strategic focus.

SYFOVRE's launch in the U.S. has been notable, achieving nearly $900 million in sales in less than two years (as of Feb 2025) and administering over 510,000 injections through December 2024. Q1 2025 U.S. net product revenue for SYFOVRE was $130.2 million, compared to $137.5 million in Q1 2024 and $168 million in Q4 2024. While Q1 2025 revenue was below expectations, management attributed this primarily to temporary factors: a larger-than-expected drawdown of channel inventory (following a Q4 build influenced by competitor regulatory issues) and increased reliance on samples due to funding shortages at third-party co-pay assistance programs, which impacted commercial dose volume by an estimated $10 million. Despite the revenue dip, injection demand grew 4% quarter-over-quarter, indicating underlying market traction.

SYFOVRE has established clear market leadership in GA, maintaining over 60% of the overall market share and seeing new patient starts exceed 50% in Q1 2025, reaching 55% by late April. This leadership is driven by the product's differentiated efficacy, flexible dosing, and preferred positioning with key payers, including certain large Medicare Advantage plans and two large national PBMs on commercial formularies. Management is executing a multi-phase commercial strategy focused on strengthening this leadership and growing the overall GA market, which remains significantly underpenetrated (estimated <10% of diagnosed patients seen by eye care professionals are treated). Initiatives include leveraging clinical data at congresses, engaging with a broader base of eye care professionals (including optometrists and general ophthalmologists), generating real-world evidence, and launching branded DTC campaigns featuring Henry Winkler. While acknowledging that expanding adoption among the next wave of retina specialists takes time, management remains confident in SYFOVRE's long-term potential to become a multibillion-dollar drug.

EMPAVELI continues to serve PNH patients, generating $19.7 million in U.S. net product revenue in Q1 2025, compared to $25.6 million in Q1 2024. This decrease was attributed to increased competitive pressure from an oral product. Despite this, EMPAVELI maintains a high compliance rate of 97%, suggesting patients experience substantial benefit. The major near-term opportunity for EMPAVELI lies in its potential label expansion into C3G and IC-MPGN. Based on the compelling VALIANT data, Apellis submitted a supplemental NDA to the FDA in early 2025, which received Priority Review designation with a PDUFA date of July 28, 2025. This potential approval represents Apellis' third new product launch in four years and is viewed as a "second potential blockbuster opportunity." The U.S. market for C3G/IC-MPGN is estimated at 5,000 patients, and management believes EMPAVELI's strong efficacy profile will drive its use across diverse patient groups, leveraging the existing PNH commercial infrastructure for launch.

The competitive landscape for Apellis' products is dynamic. In GA, SYFOVRE competes directly with Izervay (avacincaptad pegol). While Izervay saw some tailwinds from its J-code launch, Apellis maintains a significant lead in market share and new patient starts, emphasizing SYFOVRE's superior efficacy data (including increasing effects over time and visual function benefits) and flexible dosing as key differentiators. In PNH, EMPAVELI competes with C5 inhibitors (Soliris, Ultomiris) and an oral Factor B inhibitor. While the oral option has introduced competitive pressure, EMPAVELI's C3-targeting mechanism offers a differentiated approach that has led some patients to switch back after trying the oral therapy. In C3G/IC-MPGN, EMPAVELI is poised to enter a market with no approved therapies, potentially competing with emerging therapies from companies like Novartis, where Apellis highlights its differentiated efficacy and broad patient population studied in VALIANT.

Financial Strength and Outlook

Apellis has historically incurred significant net operating losses, with an accumulated deficit of $3.10 billion as of March 31, 2025. However, the company has made substantial strides in strengthening its financial position and is now on a clear path to profitability.

Total revenue, driven primarily by SYFOVRE and EMPAVELI sales, has grown significantly. Full year 2024 total revenue was $781 million, nearly double that of 2023. Q1 2025 total revenue was $166.8 million, including $149.9 million in net product revenue ($130.2M SYFOVRE, $19.7M EMPAVELI) and $16.9 million in licensing and other revenue (primarily from the Sobi (SOBI) collaboration). Cost of sales in Q1 2025 was $34.4 million, up from $20.2 million in Q1 2024, partly due to higher volumes supplied to Sobi and increased inventory write-downs. Research and development expenses were $86.4 million in Q1 2025, a slight increase from $84.7 million in Q1 2024, reflecting ongoing pipeline investment. Selling, general and administrative expenses were $129.3 million in Q1 2025, stable compared to $129.5 million in Q1 2024, as the company balances commercial scaling with cost discipline. The net loss for Q1 2025 was $92.2 million, compared to $66.4 million in Q1 2024, influenced by revenue fluctuations and increased interest expense from the new credit facility.

As of March 31, 2025, Apellis held $358.4 million in cash and cash equivalents. The company has strategically enhanced its liquidity through non-dilutive financing. A major milestone was the May 2024 financing agreement with Sixth Street, providing a senior secured term loan facility of up to $475 million ($375 million initially drawn). Net proceeds from this draw ($358.2 million) were primarily used to buy out remaining obligations to SFJ ($326.5 million), effectively replacing near-term payments with a principal repayment pushed out to 2030. This deal, along with the unwinding of capped call transactions ($98.8 million in Q1 2024) and a factoring agreement for accounts receivable (up to $100 million outstanding as of Q1 2025), has unlocked over $475 million in non-dilutive capital since early 2024, with potential for an additional $100 million draw from Sixth Street and further factoring capacity.

Management is confident that existing cash, combined with anticipated future product sales from SYFOVRE and the potential EMPAVELI launch in C3G/IC-MPGN, will be sufficient to fund operations and capital expenditures for at least twelve months from the Q1 2025 filing date and ultimately fund the business to profitability. They expect 2025 operating expenses to remain in line with 2024 levels, balancing cost savings from EU commercial infrastructure adjustments with increased R&D for pipeline advancement and launch preparations. While not providing specific sales guidance for 2025 yet, management anticipates the C3G/IC-MPGN launch in H2 2025 will meaningfully contribute to the top line. The expected gross-to-net for SYFOVRE is projected to be in the low- to mid-20s through 2025.

Risks and Challenges

Despite significant progress, Apellis faces inherent risks. Commercial execution for SYFOVRE in a competitive market is critical. While market leadership is established, the pace of overall market growth and adoption by the next tier of retina specialists, coupled with challenges like co-pay assistance funding shortages and managing gross-to-net adjustments, could impact revenue trajectory. Competitive responses, including pricing and promotional efforts from rivals like Regeneron Pharmaceuticals and the potential for Izervay to gain traction, remain factors.

Regulatory risks persist, as evidenced by the negative CHMP opinion for SYFOVRE in Europe (though reexamination is ongoing, EU approval is not currently planned). Future approvals for pipeline candidates, including EMPAVELI in new nephrology indications and the next-generation GA therapy, are subject to clinical trial outcomes and regulatory review timelines.

Pipeline development carries inherent uncertainty and requires significant investment. While promising, the success of programs like APL-3007, FSGS, DGF, and the Beam collaboration is not guaranteed.

Financially, while liquidity has been strengthened, the company still operates at a net loss. Maintaining sufficient cash flow to meet debt obligations (including the Sixth Street facility) and fund operations to profitability is dependent on achieving anticipated sales growth and managing expenses effectively. The financial covenant under the Sixth Street agreement requires maintaining at least $50 million in liquidity if market capitalization falls below $3 billion.

Legal risks, including ongoing securities litigation and product liability claims related to SYFOVRE, could result in significant costs or liabilities. Manufacturing and supply chain risks, including purchase obligations for drug substance, also need careful management.

Conclusion

Apellis Pharmaceuticals stands at a pivotal juncture, leveraging its foundational expertise in C3 inhibition to drive growth through two commercial products and a dynamic pipeline. SYFOVRE has rapidly become the market leader in geographic atrophy, demonstrating compelling efficacy and flexible dosing that resonates with physicians and payers, while management actively addresses near-term market dynamics to ensure sustained growth. EMPAVELI is poised for a potentially transformative launch in rare kidney diseases, backed by robust Phase 3 data and a clear regulatory path. Supported by a significantly strengthened balance sheet and a focused operational strategy, Apellis is charting a credible course towards profitability. While competitive pressures, market adoption pace, and pipeline execution present ongoing challenges, the company's differentiated technology and expanding commercial footprint position it to unlock substantial value in areas of high unmet medical need, making it a compelling story for discerning investors focused on long-term growth in the biopharmaceutical sector.