Executive Summary / Key Takeaways

• Apellis Pharmaceuticals is establishing itself as a leader in complement science, leveraging its proprietary C3-targeting platform to develop and commercialize two approved medicines, SYFOVRE and EMPAVELI, for multiple serious diseases.
• SYFOVRE, the first and only FDA-approved treatment for geographic atrophy (GA), continues to demonstrate market leadership with robust long-term efficacy data and is poised for renewed growth through strategic initiatives and pipeline advancements like APL-3007.
• EMPAVELI recently secured a significant label expansion for C3 glomerulopathy (C3G) and primary immune complex membranoproliferative glomerulonephritis (IC-MPGN), opening a new blockbuster opportunity in rare nephrology with a highly differentiated efficacy profile.
• The company is actively expanding its pipeline with pivotal trials for EMPAVELI in focal segmental glomerulosclerosis (FSGS) and delayed graft function (DGF), alongside innovative gene-editing collaborations, underscoring its commitment to addressing high unmet needs.
• Despite facing commercial headwinds from co-pay assistance funding shortages and initial inventory dynamics, Apellis maintains a disciplined financial approach, with strong liquidity and a clear path to sustainable profitability, supported by strategic partnerships and growing product sales.

A New Era in Complement Therapeutics

Apellis Pharmaceuticals, Inc. is at the forefront of revolutionizing treatment for complement-mediated diseases, a broad range of serious conditions driven by an overactive immune system. Founded in 2009, Apellis has strategically built its foundation on a singular, powerful idea: to address complement-driven diseases at their source by targeting C3, the central protein where all complement pathways converge. This approach, embodied in its first-in-class C3 inhibitor, pegcetacoplan, offers comprehensive disease control while preserving essential immune function, a significant technological feat that differentiates it from conventional C5 or Factor B inhibitors that act downstream or narrowly within the cascade.

The company's journey from a discovery-focused entity to a commercial-stage biopharmaceutical leader has been marked by strategic capital raises, including convertible notes in 2019 and 2020, and a pivotal collaboration with Swedish Orphan Biovitrum AB (Sobi) in 2020 for ex-U.S. development and commercialization of pegcetacoplan. This partnership provided an upfront payment of $250 million in November 2020 and a $50 million regulatory milestone in April 2022. Apellis achieved its first major commercial milestone with the FDA approval of EMPAVELI (systemic pegcetacoplan) in May 2021 for paroxysmal nocturnal hemoglobinuria (PNH). This was followed by the landmark FDA approval of SYFOVRE (intravitreal pegcetacoplan injection) in February 2023 for geographic atrophy (GA), a leading cause of blindness.

The company's core technology, pegcetacoplan, offers tangible and quantifiable benefits across its approved indications. For SYFOVRE, it is the first-ever treatment for GA, demonstrating robust, sustained, and increasing benefits with every-other-month dosing. The 48-month GALE extension study data revealed a preservation of retina tissue at magnitudes of approximately 1.5 disc areas on average in monthly dosed GA patients, an amount considered highly meaningful by retinal specialists. Real-world data further supports this, showing SYFOVRE reduced the annualized growth rate of GA by over 40% by month nine of treatment. For EMPAVELI, it has demonstrated best-in-class hemoglobin improvement in PNH and the ability to completely clear C3 deposits from the kidney. The VALIANT study in C3G and IC-MPGN showed an unprecedented 68% reduction in proteinuria, stabilization of kidney function, and substantial clearing of C3c staining, with up to 70% of patients having no detectable C3 deposits after six months. These technological advantages form the bedrock of Apellis's competitive moat, driving superior efficacy, patient convenience, and market differentiation.

Expanding Horizons: SYFOVRE's Leadership and EMPAVELI's Nephrology Breakthrough

Apellis's strategic focus revolves around three pillars: transforming GA treatment with SYFOVRE, maximizing EMPAVELI's impact in rare diseases, and advancing its innovative pipeline. SYFOVRE has rapidly established itself as the market-leading treatment for GA in the U.S., generating nearly $900 million in sales in less than two years. Despite this success, the GA market remains significantly underserved, with only about 10% of diagnosed patients currently receiving treatment. This presents a substantial long-term growth opportunity, which Apellis aims to capture by expanding the prescriber base and increasing adoption.

In the third quarter of 2025, SYFOVRE generated $150.9 million in U.S. net product revenue, with approximately 101,000 total doses delivered, including 86,000 commercial doses and 15,000 free goods doses. Total injection demand grew 4% sequentially during the quarter, predominantly driven by free goods. This elevated use of free goods, attributed to funding shortages at third-party co-pay assistance programs, resulted in an approximate $15 million headwind to reported SYFOVRE revenue in Q3 2025, and an estimated nearly $40 million headwind through the first three quarters of the year. The company expects this headwind to persist, impacting quarterly revenue throughout the remainder of 2025. SYFOVRE maintains an estimated 52% of new patient starts and over 60% of the overall GA market.

The company is actively pursuing initiatives to reinvigorate SYFOVRE's growth. These include developing a prefilled syringe to enhance administration convenience and safety, and artificial intelligence tools to help physicians and patients visualize treatment benefits. A significant R&D initiative is the Phase 2 study, initiated in June 2025, combining SYFOVRE with APL-3007, a small interfering RNA (siRNA) product. APL-3007 has demonstrated over 90% knockdown of C3 products in Phase 1 studies. This combination aims to achieve comprehensive complement blockade in the retina and choroid, potentially improving efficacy beyond the current 30-40% lesion growth reduction and enabling less frequent dosing, such as every three months.

EMPAVELI marked a pivotal moment with its FDA approval on July 28, 2025, for C3G and IC-MPGN in patients 12 years and older. This approval expands EMPAVELI's addressable market by an estimated 5,000 patients in the U.S. and represents a breakthrough therapy, offering the first and only approved treatment for approximately two-thirds of this patient population. The VALIANT study's "trifecta" of outcomes—68% proteinuria reduction, eGFR stabilization, and substantial C3 deposit clearance—is resonating strongly with the nephrology community. The launch for these new indications commenced in Q3 2025, with 152 patient start forms received by the end of September, including approximately 50 patients transitioning from an expanded access program. Apellis expects to reach 225 cumulative start forms or more by year-end 2025. EMPAVELI's on-body auto-injector and twice-weekly dosing flexibility further enhance its appeal, differentiating it from oral alternatives that require twice-daily dosing and have shown lower efficacy. For its PNH indication, EMPAVELI generated $26.8 million in U.S. net product revenue in Q3 2025, maintaining high patient compliance rates of 97% despite competitive pressure from oral products.

Competitive Landscape and Strategic Positioning

Apellis operates in a highly competitive biopharmaceutical landscape, facing both large, diversified pharmaceutical companies and specialized biotechnology firms. Its primary competitive advantage lies in its differentiated C3 inhibition technology, which offers a unique mechanism of action compared to competitors.

In the PNH market, Apellis competes with AstraZeneca (AZN) (via Alexion (ALXN)), which markets C5 inhibitors like Ultomiris. While AstraZeneca benefits from a broader global presence and established commercial infrastructure, Apellis's EMPAVELI offers a potentially superior efficacy profile by targeting C3, leading to best-in-class hemoglobin improvement and the ability to clear C3 deposits. This has resulted in patients switching back to EMPAVELI after trying oral Factor B inhibitors, underscoring its differentiated efficacy.

For GA, Apellis's SYFOVRE is the clear market leader, competing with Regeneron Pharmaceuticals (REGN). Apellis highlights SYFOVRE's robust, sustained, and increasing effects over time, flexible every-other-month dosing, and preferred payer positioning as key differentiators. Management notes that the competitive product's data is "4 years old" and its label does not include every-other-month dosing, which is a significant advantage for SYFOVRE in terms of patient convenience and compliance. Apellis's tracking of competitive dynamics, based on a larger database representing approximately 50% of injections, provides a more comprehensive view of market share compared to competitors' estimates.

In the rare nephrology space (C3G/IC-MPGN), EMPAVELI's broad label and "trifecta" efficacy position it strongly against any potential alternatives. Apellis believes EMPAVELI is the only approved therapy for approximately two-thirds of the 5,000 U.S. patient population, and offers highly differentiated efficacy for the remaining one-third. The convenience of its on-body auto-injector for self-administration also provides a competitive edge.

Apellis's strategic partnerships, such as the collaboration with Beam Therapeutics (BEAM) for FcRn gene editing, further bolster its long-term competitive positioning by exploring first-in-class, one-time dosing treatments in new areas. While larger competitors like Roche (RHHBY) and AstraZeneca possess greater financial scale and broader portfolios, Apellis's agility and focused innovation in complement science allow it to carve out significant market share in niche, high-unmet-need indications.

Financial Performance and Outlook

Apellis's financial trajectory reflects its transition to a commercial-stage company, marked by significant investments in R&D and commercialization. As of September 30, 2025, the company reported cash and cash equivalents of $479.17 million.

The third quarter of 2025 saw a net income of $215.72 million, a substantial improvement from a net loss of $57.40 million in Q3 2024, primarily driven by a $275 million upfront payment from Sobi (SOBI) under a Royalty Buy-Down Agreement. This agreement, which reduced Sobi's ex-U.S. royalty obligations for Aspaveli by 90% (subject to caps), provided significant operational flexibility and allowed Apellis to discontinue factoring, realizing approximately $5 million in annual cost savings.

For the nine months ended September 30, 2025, total revenue reached $803.87 million, up significantly from $568.84 million in the prior year period. This increase was largely due to the Sobi royalty monetization. Operating expenses for Q3 2025 were $235.40 million, a decrease from $244.11 million in Q3 2024, reflecting disciplined cost management. Research and development expenses decreased by 23% in Q3 2025 and 12% for the nine months ended September 30, 2025, primarily due to lower costs associated with the VALIANT study and the discontinuation of the ALS and CAD programs, partially offset by increased investment in GA product lifecycle development and the Beam FcRn collaboration. Selling, general and administrative expenses increased by 17% in Q3 2025 and 6% for the nine months ended September 30, 2025, supporting commercial activities for approved products.

Looking ahead, Apellis expects SYFOVRE's total injection growth to be in the low to mid-single-digit range for Q4 2025, with revenue broadly in line with Q3 2025. The gross-to-net percentage is anticipated to trend slightly above the prior range in Q4 2025 but remain in the low to mid-20s through 2025. For EMPAVELI, the nephrology opportunity is expected to normalize into a gradual ramp after the initial wave of early adopters. The company projects 225 cumulative patient start forms or more by year-end 2025 for C3G/IC-MPGN. Apellis maintains its guidance for full-year 2025 operating expenses to be in line with 2024 levels. Management is confident that existing cash, combined with future product sales and ex-U.S. royalties, will be sufficient to fund the business to sustainable profitability.

Risks and Challenges

Despite its strong position, Apellis faces several risks. The adoption of SYFOVRE in GA is challenged by a "wait-and-see approach" among retina specialists, with only about 10% of diagnosed GA patients currently treated. Commercialization efforts are also impacted by funding shortages at third-party co-pay assistance programs, leading to increased reliance on samples and creating logistical and financial headwinds for physicians and patients. This situation is not expected to resolve in the near term, requiring Apellis to implement education programs to help practices navigate patient reimbursement.

Legal proceedings, including a putative class action and stockholder derivative lawsuits related to SYFOVRE's clinical trials and commercial adoption, pose ongoing risks, though the class action was dismissed and is currently under appeal. The company's reliance on external financing for future growth, if current sales and cash are insufficient, remains a factor, and the biotechnology industry inherently carries risks related to R&D success, regulatory approvals, and market acceptance.

Conclusion

Apellis Pharmaceuticals is charting a compelling course, driven by its innovative C3-targeting platform and a dual-blockbuster strategy with SYFOVRE and EMPAVELI. The company's technological leadership, particularly in comprehensive complement inhibition, provides a strong competitive moat against established players. SYFOVRE's continued market leadership in GA, supported by robust long-term efficacy data and a pipeline of next-generation therapies, positions it for sustained growth. Concurrently, EMPAVELI's recent FDA approval for C3G and IC-MPGN unlocks a significant new market opportunity in rare nephrology, propelled by its highly differentiated efficacy and broad label.

While commercial headwinds, such as co-pay assistance funding shortages, present near-term challenges, Apellis's disciplined financial management and strategic initiatives are designed to overcome these. The ongoing expansion of EMPAVELI into FSGS and DGF, coupled with cutting-edge gene-editing collaborations, underscores a robust technological roadmap aimed at addressing critical unmet needs. Investors should recognize Apellis's unique scientific foundation and its potential to translate this innovation into long-term market leadership and sustainable profitability, making it a compelling investment in the evolving landscape of complement-mediated diseases.