APELLIS PHARMACEUTICALS, INC. Management’s Discussion and Analysis of Financial Condition and Results of Operations. (form 10-Q) – Marketscreener.com

The following discussion and analysis of our financial condition and results ofoperations should be read in conjunction with our unaudited condensed financialstatements and related notes appearing elsewhere in this Quarterly Report onForm 10-Q and our audited financial statements and related notes for the yearended December 31, 2021 included in our Annual Report on Form 10-K filed withthe Securities and Exchange Commission on February 28, 2022, which we refer toas the 2021 Annual Report on Form 10-K.This Quarterly Report on Form 10-Q contains forward-looking statements thatinvolve substantial risks and uncertainties. All statements, other thanstatements of historical facts, contained in this Quarterly Report on Form 10-Q,including statements regarding our strategy, future operations, future financialposition, future revenue, projected costs, prospects, plans and objectives ofmanagement 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.We may not actually achieve the plans, intentions or expectations disclosed inour forward-looking statements, and you should not place undue reliance on ourforward-looking statements. Actual results or events could differ materiallyfrom the plans, intentions and expectations disclosed in the forward-lookingstatements we make. Please also refer to those factors described in "Part I,Item 1A. Risk Factors" of our 2021 Annual Report on Form 10-K for importantfactors that we believe could cause actual results to differ materially fromthose in our forward-looking statements.

Overview

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market authorization application, or MAA, to the European Medicines Agency, or the EMA, in the second half of 2022. We have exclusive, worldwide commercialization rights for intravitreal pegcetacoplan.

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Pipeline. We are developing pegcetacoplan in multiple indications and other product candidates targeting C3 through various routes of administration. We plan to conduct clinical trials of these compounds in additional complement-dependent indications.

SFJ Agreement

On June 7, 2019, we amended the SFJ agreement, which we refer to as the SFJ amendment. Under the SFJ amendment, SFJ agreed to make an additional $20.0 million funding payment to us to support the development of systemic pegcetacoplan for the treatment of patients with PNH.

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On June 27, 2019, we received $40.0 million from SFJ, consisting of $20.0 million as the first installment of the additional $60.0 million upon the achievement of a milestone and the $20.0 million payable under the SFJ amendment.

Collaboration Agreement with Sobi

Our revenues consist of product sales of EMPAVELI and revenues derived from our collaboration arrangement with Sobi.

Product revenue is derived from our sales of our commercial product, EMPAVELI, in the United States.

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Licensing and Other Revenue

Research and Development Expenses

the cost of consultants, including share-based compensation expense; and

various other expenses incident to the management of our preclinical studies and clinical trials.

establishing an appropriate safety profile in preclinical studies;

successful enrollment in, and completion of clinical trials;

receipt of marketing approvals from applicable regulatory authorities;

establishing commercial manufacturing capabilities or making arrangements with third-party manufacturers;

obtaining and maintaining patent and trade secret protection and regulatory exclusivity for our product candidates;

launching commercial sales of the products, if and when approved, whether alone or in collaboration with others; and

an acceptable safety profile of the products following approval.

A change in the outcome of any of these variables with respect to the development of any of our product candidates would significantly change the costs and timing associated with the development of that product candidate.

General and Administrative Expenses

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Critical Accounting Policies and Estimates

Results of Operations

Licensing and Other Revenue

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Research and Development Expenses

General and Administrative Expenses

Loss from Remeasurement of Development Derivative Liability

Interest Income

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Interest Expense

Other Income/(Expense), Net

Other income/(expense), net, increased $0.2 million during the three months ended June 30, 2022 compared to the three months ended June 30, 2021. The increase was primarily due to an increase in other taxes and foreign currency revaluation gains.

Six Months Ended June 30, 2022 and 2021 (in thousands, except percentages)

Licensing and Other Revenue

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Research and Development Expenses

(50,000 ) (100 %)

cost of research collaboration $ 192,606 $ 229,955 $ (37,349 ) (16 %)

General and Administrative Expenses

Loss on Conversion of Debt

Loss from Remeasurement of Development Derivative Liability

Interest Income

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Interest income was $1.5 million for the six months ended June 30, 2022, an increase of $1.3 million compared to $0.2 million for the six months ended June 30, 2021. The increase in interest income was primarily attributable to purchases of marketable securities during the month ended June 30, 2022.

Interest Expense

Other (Expense)/Income, Net

Income Tax Expense

Liquidity and Capital Resources

Sources of Liquidity

In April 2018, we issued and sold 5,500,000 shares of our common stock in a follow-on public offering at a public offering price of $25.50 per share for net proceeds of $131.2 million, after deducting underwriting discounts and commissions of $8.4 million and offering expenses of $0.5 million.

In March 2019, we issued and sold 6,900,000 shares of our common stock in a follow-on offering at a public offering price of $17.00. We received net proceeds of $109.6 million after deducting underwriting discounts and commissions of $7.0 million and offering costs of $0.7 million.

In September 2019, we completed a private offering of $220.0 million aggregate principal amount of Convertible Notes, or the 2019 Convertible Notes. We received net proceeds of approximately $212.9 million after deducting the initial purchasers' discounts and commissions and offering costs of $7.1 million.

In May 2020, we completed a private offering of $300.0 million aggregate principal amount of Convertible Notes, or the 2020 Convertible Notes. We received net proceeds of approximately $322.9 million, which included accrued interest March 15, 2020 to, but not including May 12, 2020, and the initial purchasers' discounts and commissions and offering costs of $6.0 million.

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Refer to Note 7 Long-term Debt in the Notes to Unaudited Condensed Consolidated Financial Statements in Part I, Item I of this Form 10-Q for additional information regarding the convertible notes and capped call transactions.

Cash Flows

The following table provides information regarding our cash flows for the six months ended June 30, 2022 and 2021 (in thousands):

June 30,

2021

Net cash used in operating activities $ (218,584 ) $

6,158

Effect of exchange rate changes on cash,

(294,709 )

Net Cash Used in Operating Activities

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Net Cash Used in Investing Activities

Net cash used in investing activities during the six months ended June 30, 2022 was $189.0 million due primarily to the purchase and maturity of marketable securities.

Net cash used in investing activities during the six months ended June 30, 2021 was $17.0 million due primarily to the purchase of marketable securities.

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APELLIS PHARMACEUTICALS, INC. Management's Discussion and Analysis of Financial Condition and Results of Operations. (form 10-Q) - Marketscreener.com