Apellis Pharmaceuticals (APLS) recently announced that it was allowed to resume enrollment into its clinical trials dealing with geographic atrophy (GA). GA, in essence, is advanced age-related macular degeneration (AMD) or advanced dry AMD. The trial was halted back in October of 2018, because treatment with APL-2 caused noninfectious inflammation. However, at that time, the company noted that the likely cause was found and said it would be able to resume the trial in the following months. The ability to recruit in both phase 3 studies for APL-2 is well underway again, and I believe this offers massive potential for a potential readout in 2020.

Phase 3 Studies

The AMD program is running two late-stage studies known as DERBY and OAKS, respectively. Both of these studies’ dosing was halted back in October, because it observed several patients with non-infectious inflammation with a single manufacturing lot of APL-2. The good news is that the inflammation that had occurred in patients was resolved quickly. The bad news is that the company had to temporarily pause the study itself after these cases were noted. That obviously makes sense, because the company would want to make sure that the patients are safe. In addition, it had to be taken care of. Otherwise, the FDA would have likely stepped in as well. This was all highly devastating for Apellis, but it noted that it may have known what caused the issue and would correct it. It believed that an impurity in the active pharmaceutical ingredient (API) was the problem that caused the inflammation.

In my opinion, Apellis was lucky in the sense that they were able to obtain a modified version of APL-2. This was a modified APL-2 intravitreal drug which was used in the biotech’s ongoing phase 1b study in low vision patients with GA. The reason for using this instead is that the patients in the phase 1b study who were given a single intravitreal injection of APL-2 manufactured through the modified process had no inflammation issues. With this solid finding, the independent data monitoring committee (IDMC) noted that the biotech could resume the phase 3 study with the newly manufactured APL-2. The problem is that, while the issue was resolved, it pushed up the timeline for any potential data. What that means now is that full enrollment in both studies is not expected until the end of Q1 2020.

Financials

According to the 10-K SEC Filing, Apellis Pharmaceuticals had cash and cash equivalents of $176.3 million as of December 31, 2018. With the pipeline that the biotech has, this amount of cash wasn’t going to last for long. That’s why the other day, it completed a cash raise. Specifically, it sold 6.9 million shares of its common stock at a price of $17 per share. About 900,000 shares were also offered and exercised by the underwriters in full for the same price. In total, this generated about $117.3 million before deducting underwriting discounts and commissions and expenses.

Conclusion

Apellis suffered a setback for sure, but the good news is that it got both of its phase 3 trials back on track. The downside is that the timeline for any potential data release was pushed up as a result. That means trial results for both studies are not likely expected until 2020. The downside is that there are two risks involved with the phase 3 studies. First is that it’s not guaranteed that both or one of the studies will end up being successful. In that instance, the company will have to evaluate whether it can continue with the GA program or not. The other risk goes to the changed APL-2 being given to patients. There is no guarantee that the modified drug will produce substantial results. The good thing is that Apellis has other programs in the pipeline that it can fall back on like: Paroxysmal Nocturnal Hemoglobinuria (PNH), Wet AMD, and a few others. That means the biotech should be okay even if the GA program doesn’t pull through. It will just mean that the wait for an approved product may take a bit longer.

This article is published by Terry Chrisomalis, who runs the Biotech Analysis Central pharmaceutical service on Seeking Alpha Marketplace. If you like what you read here and would like to subscribe to, I’m currently offering a two-week free trial period for subscribers to take advantage of. My service offers deep dive analysis of many pharmaceutical companies. The Biotech Analysis Central SA marketplace is $49 per month, but for those who sign up for the yearly plan will be able to take advantage of a 33.50% discount price of $399 per year.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.





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