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What changed in Apellis Pharmaceuticals, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Apellis Pharmaceuticals, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+682 added−923 removedSource: 10-K (2025-02-28) vs 10-K (2024-02-27)

Top changes in Apellis Pharmaceuticals, Inc.'s 2024 10-K

682 paragraphs added · 923 removed · 496 edited across 9 sections

Item 1. Business

Business — how the company describes what it does

205 edited+62 added−163 removed399 unchanged
Biggest changeA sponsor seeking approval to market and distribute a new drug or biologic product in the United States must typically secure the following: • completion of preclinical laboratory tests, animal studies and formulation studies in compliance with the FDA’s good laboratory practice, or GLP, regulations; • design of a clinical protocol and submission to the FDA of an investigational new drug application, or IND, which must take effect before human clinical trials may begin; • approval by an independent institutional review board representing each clinical site before each clinical trial may be initiated; 23 Table of Contents • performance of adequate and well-controlled human clinical trials in accordance with good clinical practices, or GCP, to establish the safety and efficacy of the proposed drug product for each indication; • preparation and submission to the FDA of an NDA; • review of the product by an FDA advisory committee, where appropriate or if applicable; • satisfactory completion of one or more FDA inspections of the manufacturing facility or facilities at which the product, or components thereof, are produced to assess compliance with current Good Manufacturing Practices, or cGMP, requirements and to assure that the facilities, methods and controls are adequate to preserve the product’s identity, strength, quality and purity; • satisfactory completion of FDA audits of clinical trial sites to assure compliance with GCPs and the integrity of the clinical data; • payment of user fees and securing FDA approval of the NDA; and • compliance with any post-approval requirements, including Risk Evaluation and Mitigation Strategies, or REMS, and post-approval studies required by the FDA.
Biggest changeA sponsor seeking approval to market and distribute a new drug or biologic product in the United States must typically secure the following: • completion of preclinical laboratory tests, animal studies and formulation studies in compliance with the FDA’s good laboratory practice, or GLP, regulations; • design of a clinical protocol and submission to the FDA of an investigational new drug application, or IND, which must take effect before human clinical trials may begin; • approval by an independent institutional review board, or IRB, representing each clinical site before each clinical trial may be initiated; • performance of adequate and well-controlled human clinical trials in accordance with good clinical practices, or GCP, to establish the safety and efficacy of the proposed drug product for each indication; • preparation and submission to the FDA of an NDA for a new drug product, or a sNDA for a change to a previously approved drug product, which includes not only the results of the clinical trials, but also, detailed information on the chemistry, manufacture and quality controls for the product candidate and proposed labeling for one or more proposed indication(s); • review of the product by an FDA advisory committee, where appropriate or if applicable; • satisfactory completion of one or more FDA inspections of the manufacturing facility or facilities at which the product, or components thereof, are produced to assess compliance with current Good Manufacturing Practices, or cGMP, requirements and to assure that the facilities, methods and controls are adequate to preserve the product’s identity, strength, quality and purity; • satisfactory completion of FDA audits of clinical trial sites to assure compliance with GCPs and the integrity of the clinical data; • payment of application and program fees pursuant to the Prescription Drug User Fee Act, or PDUFA; • securing FDA approval of the NDA or sNDA authorizing marketing of the drug product for particular indications in the United States; and • compliance with any post-approval requirements, including Risk Evaluation and Mitigation Strategies, or REMS, and post-approval studies required by the FDA. 20 Table of Contents Preclinical Studies Before a sponsor begins testing a product candidate with potential therapeutic value in humans, the product candidate enters the preclinical testing stage.
To the extent that the Section 505(b)(2) sponsor is relying on studies conducted for an already approved product, the sponsor is required to certify to the FDA concerning any patents listed for the approved product in the Orange Book to the same extent that an ANDA sponsor would.
To the extent that the Section 505(b)(2) sponsor is relying on studies conducted for an already approved product, the sponsor is required to certify to the FDA concerning any patents listed for the approved product in the Orange Book to the same extent that an ANDA sponsor would.
Pediatric Exclusivity Pediatric exclusivity is another type of non-patent marketing exclusivity in the United States and, if granted, provides for the attachment of an additional six months of exclusivity to the term of any existing unexpired patent or regulatory exclusivity, including the non-patent and orphan exclusivity, for drug products.
Pediatric Exclusivity Pediatric exclusivity is another type of non-patent marketing exclusivity in the United States and, if granted, provides for the attachment of an additional six months of exclusivity to the term of any existing unexpired patent or regulatory exclusivity, including the orphan drug exclusivity, for drug products.
We are entitled to receive tiered, double-digit royalties (ranging from high teens to high twenties) on sales of Licensed Products outside of the United States, subject to customary deductions and third-party payment obligations, until the latest to occur of: (i) expiration of the last-to-expire of specified licensed patent rights; (ii) expiration of regulatory exclusivity; and (iii) ten (10) years after the first commercial sale of the applicable Licensed Product, in each case on a Licensed Product-by-Licensed Product and country-by-country basis.
We entitled to receive tiered, double-digit royalties (ranging from high teens to high twenties) on sales of Licensed Products outside of the United States, subject to customary deductions and third-party payment obligations, until the latest to occur of: (i) expiration of the last-to-expire of specified licensed patent rights; (ii) expiration of regulatory exclusivity; and (iii) ten (10) years after the first commercial sale of the applicable Licensed Product, in each case on a Licensed Product-by-Licensed Product and country-by-country basis.
The FDA must establish a priority review track for certain generic drugs, requiring the FDA to review a drug application within eight months for a drug that has three or fewer approved drugs listed in the Orange Book and is no longer protected by any patent or regulatory exclusivities, or is on the FDA’s drug shortage list.
The FDA must establish a priority review track for certain generic drugs, requiring the FDA to review a drug application within eight months for a drug that has three or fewer approved patents listed in the Orange Book and is no longer protected by any patent or regulatory exclusivities, or is on the FDA’s drug shortage list.
In addition, we may, subject to specified cure periods, terminate the agreement in any of China, Japan, Brazil, or Canada if Sobi materially breaches its obligation to use commercially reasonable efforts to develop, obtain regulatory approval for, and commercialize a Licensed Product for PNH and ALS in such country.
In addition, we may, subject to specified cure periods, terminate the agreement in any of China, Japan, Brazil, or Canada if Sobi materially breaches its obligation to use commercially reasonable efforts to develop, obtain regulatory approval for, and commercialize a Licensed Product for PNH in such country.
The FDCA also provides for a period of three years of exclusivity if the NDA includes reports of one or more new clinical investigations, other than bioavailability or bioequivalence studies, that were conducted by or for the sponsor and are essential to the approval of the application.
The FDCA also provides for a period of three years of regulatory exclusivity if the NDA includes reports of one or more new clinical investigations, other than bioavailability or bioequivalence studies, that were conducted by or for the sponsor and are essential to the approval of the application.
In addition, we are obligated to pay Penn a specified portion of income we receive from sublicensees. In April 2023, we paid $2.3 million for the achievement of a regulatory milestone as a result of the FDA approval of SYFOVRE in February 2023.
In addition, we are obligated to pay Penn a specified portion of income we receive from sublicensees. In April 2023, the Company paid $2.3 million for the achievement of a regulatory milestone as a result of the FDA approval of SYFOVRE in February 2023.
Phase 3 Clinical Trial – PRINCE We initiated the Phase 3 PRINCE trial in September 2019. The PRINCE trial was a 54-patient randomized, multicenter, open-label trial to evaluate the efficacy of systemic pegcetacoplan in treatment-naïve PNH patients.
We initiated the Phase 3 PRINCE trial in September 2019. The PRINCE trial was a 54-patient randomized, multicenter, open-label trial to evaluate the efficacy of systemic pegcetacoplan in treatment-naïve PNH patients.
Our Approach The complement system plays a pivotal role in both innate and adaptive immune systems. Complement proteins are produced primarily by the liver and circulate in the blood and through the body’s tissues.
Our Scientific Approach The complement system plays a pivotal role in both innate and adaptive immune systems. Complement proteins are produced primarily by the liver and circulate in the blood and through the body’s tissues.
When considering an IND application for expanded access to an investigational product with the purpose of treating a patient or a group of patients, the sponsor and treating physicians or investigators will determine suitability when all of the following criteria apply: patient(s) have a serious or immediately life-threatening disease or condition, and there is no comparable or satisfactory alternative therapy to diagnose, monitor, or treat the disease or condition; the potential patient benefit justifies the potential risks of the treatment and the potential risks are not unreasonable in the context or condition to be treated; and the expanded use of the investigational drug for the requested treatment will not interfere initiation, conduct, or completion of clinical investigations that could support marketing approval of the product or otherwise compromise the potential development of the product.
When considering an IND application for expanded access to an investigational product with the purpose of treating a patient or a group of patients, the sponsor and treating physicians or investigators will determine suitability when all of the following criteria apply: patient(s) have a serious or immediately life-threatening disease or condition, and there is no comparable or satisfactory alternative therapy to diagnose, monitor, or treat the disease or condition; the potential patient benefit justifies the potential risks of the treatment and the potential risks are not unreasonable in the context or condition to be treated; and the expanded use of the 22 Table of Contents investigational drug for the requested treatment will not interfere initiation, conduct, or completion of clinical investigations that could support marketing approval of the product or otherwise compromise the potential development of the product.
The PEGASUS trial was an 80-patient randomized head-to-head trial comparing systemic pegcetacoplan monotherapy to eculizumab monotherapy in patients with PNH currently on treatment with eculizumab who have a hemoglobin level of less than 10.5 g/dL, regarding of eculizumab dose or transfusion history. The primary efficacy endpoint of the trial was the change in hemoglobin level from baseline at week 16.
The PEGASUS trial was an 80-patient randomized head-to-head trial comparing systemic pegcetacoplan monotherapy to eculizumab monotherapy in patients with PNH currently on treatment with eculizumab who have a hemoglobin level of less than 10.5 g/dL, regardless of eculizumab dose or transfusion history. The primary efficacy endpoint of the trial was the change in hemoglobin level from baseline at week 16.
Unless earlier terminated, the initial term of the Bachem Agreement continues until December 31, 2025, or the Initial Term. Thereafter, the Bachem Agreement will automatically renew for an additional two-year term.
The initial term of the Bachem Agreement continues until December 31, 2025. Thereafter, unless terminated earlier, the Bachem Agreement will automatically renew for an additional two-year term.
State and foreign laws also govern the privacy and security of health information in some circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts. Healthcare Reform A primary trend in the United States healthcare industry and elsewhere is cost containment.
State and foreign laws also govern the privacy and security of health information in some circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts. Healthcare Reform and Pharmaceutical Pricing A primary trend in the United States healthcare industry and elsewhere is cost containment.
On June 6, 2023, Merck filed a lawsuit against HHS and CMS asserting that, among other things, the IRA’s Drug Price Negotiation Program for Medicare constitutes an uncompensated taking in violation of the Fifth Amendment of the Constitution. Subsequently, a number of other parties also filed lawsuits in various courts with similar constitutional claims against HHS and CMS.
On June 6, 2023, Merck & Co. filed a lawsuit against HHS and CMS asserting that, among other things, the IRA’s Drug Price Negotiation Program for Medicare constitutes an uncompensated taking in violation of the Fifth Amendment of the Constitution. Subsequently, other parties also filed lawsuits in various courts with similar constitutional claims against HHS and CMS.
Pediatric Exclusivity in the EU If a sponsor obtains a marketing authorization in all EU Member States, or a marketing authorization granted in the centralized procedure by the European Commission, and the study results for the pediatric population are included in the product information, 42 Table of Contents even when negative, the medicine is then eligible for an additional six-month period of qualifying patent protection through extension of the term of the Supplementary Protection Certificate, or SPC, or alternatively a one year extension of the regulatory market exclusivity from ten to eleven years, as selected by the marketing authorization holder.
Pediatric Exclusivity in the EU If a sponsor obtains a marketing authorization in all EU Member States, or a marketing authorization granted in the centralized procedure by the European Commission, and the study results for the pediatric population are included in the product information, even when negative, the medicine is then eligible for an additional six-month period of qualifying patent protection through extension of the term of the Supplementary Protection Certificate, or SPC, or alternatively a one year extension of the regulatory market exclusivity from ten to eleven years, as selected by the marketing authorization holder.
Seven of our U.S. patents are listed for SYFOVRE in the FDA’s Orange Book. We also own a patent family relating in part to use of C3 inhibitors, including pegcetacoplan, to facilitate gene therapy with AAV vectors. Patents in this family would have terms extending into 2040.
Eight of our U.S. patents are listed for SYFOVRE in the FDA’s Orange Book. We also own a patent family relating in part to use of C3 inhibitors, including pegcetacoplan, to facilitate gene therapy with AAV vectors. Patents in this family would have terms extending into 2040.
In the future, if and when our product candidates, including pegcetacoplan, receive approval by the FDA or foreign regulatory authorities, we expect to apply for patent term extensions on issued patents covering those products, depending upon the length of the clinical trials for each drug and other factors.
In the future, if and when our product candidates receive approval by the FDA or foreign regulatory authorities, we expect to apply for patent term extensions on issued patents covering those products, depending upon the length of the clinical trials for each drug and other factors.
Under the statute, a generic drug is bioequivalent to a RLD if “the rate and extent of absorption of the drug do not show a significant difference from the rate and extent of absorption of the listed drug.” Upon approval of an abbreviated new drug application, or ANDA, the FDA indicates whether the generic product is “therapeutically equivalent” to the RLD in its publication “Approved Drug Products with Therapeutic Equivalence Evaluations,” also referred to as the “Orange Book.” Physicians and pharmacists consider a therapeutic equivalent generic drug to be fully substitutable for the RLD.
Under the statute, a generic drug is bioequivalent to a RLD if “the rate and extent of absorption of the drug do not show a significant difference from the rate and extent of absorption of the listed drug.” 30 Table of Contents Upon approval of an abbreviated new drug application, or ANDA, the FDA indicates whether the generic product is “therapeutically equivalent” to the RLD in its publication “Approved Drug Products with Therapeutic Equivalence Evaluations,” also referred to as the “Orange Book.” Physicians and pharmacists consider a therapeutic equivalent generic drug to be fully substitutable for the RLD.
Reporting Clinical Trial Results Under the Public Health Service Act, or the PHSA, sponsors of clinical trials of certain FDA-regulated products, including prescription drugs and biologics, are required to register and disclose certain clinical trial information on a public registry (clinicaltrials.gov) maintained by the U.S. National Institutes of Health, or the NIH.
Reporting Clinical Trial Results Under the PHSA, sponsors of clinical trials of certain FDA-regulated products, including prescription drugs and biologics, are required to register and disclose certain clinical trial information on a public registry (clinicaltrials.gov) maintained by the U.S. National Institutes of Health, or the NIH.
Amended and Restated Commercial Supply Agreement with NOF On March 10, 2021, we entered into an amended and restated commercial supply agreement, or the NOF Agreement, with NOF to purchase PEG, which is a component of each of systemic pegcetacoplan and intravitreal pegcetacoplan. Under the NOF Agreement, NOF’s affiliate, NOF America Corporation, supplies PEG to us on a non-exclusive basis.
Amended and Restated Commercial Supply Agreement with NOF In March 2021, we entered into an amended and restated commercial supply agreement, or the NOF Agreement, with NOF to purchase PEG, which is a component of each of systemic pegcetacoplan and intravitreal pegcetacoplan. Under the NOF Agreement, NOF’s affiliate, NOF America Corporation, supplies PEG to us on a non-exclusive basis.
Under the goals and policies agreed to by the FDA under PDUFA, the FDA has ten months from the filing date in which to complete its initial review of a standard application that is a new molecular entity, and six months from the filing date for an application with “priority review.” The 30 Table of Contents review process may be extended by the FDA for three additional months to consider new information or in the case of a clarification provided by the sponsor to address an outstanding deficiency identified by the FDA following the original submission.
Under the goals and policies agreed to by the FDA under PDUFA, the FDA has ten months from the filing date in which to complete its initial review of a standard application that is a new molecular entity, and six months from the filing date for an application with “priority review.” The review process may be extended by the FDA for three additional months to consider new information or in the case of a clarification provided by the sponsor to address an outstanding deficiency identified by the FDA following the original submission.
We also became obligated to make payments to Penn aggregating up to $3.2 million based on achieving specified development and regulatory approval milestones, including $2.3 million upon approval of an NDA, and up to $5.0 million based on achieving specified annual sales milestones with respect to each licensed product, and to pay low single-digit royalties to Penn based on net sales of each licensed product by us and our affiliates and sublicensees and specified minimum quarterly royalty thresholds.
We also became obligated to make payments to Penn aggregating up to $3.2 million based on achieving specified development and regulatory approval milestones, including $2.3 million upon approval of an NDA, and up to $5.0 million based on achieving specified annual sales milestones with respect to each licensed product, and to pay low single-digit 16 Table of Contents royalties to Penn based on net sales of each licensed product by us and our affiliates and sublicensees and specified minimum quarterly royalty thresholds.
Other potential consequences include, among other things: • restrictions on the marketing or manufacturing of the product, complete withdrawal of the product from the market or product recalls; • fines, warning letters or holds on post-approval clinical trials; • refusal of the FDA to approve pending NDAs or supplements to approved NDAs, or suspension or revocation of product license approvals; • product seizure or detention, or refusal to permit the import or export of products; or 32 Table of Contents • injunctions or the imposition of civil or criminal penalties.
Other potential consequences include, among other things: • restrictions on the marketing or manufacturing of the product, complete withdrawal of the product from the market or product recalls; • fines, warning letters or holds on post-approval clinical trials; • refusal of the FDA to approve pending NDAs or supplements to approved NDAs, or suspension or revocation of product license approvals; • product seizure or detention, or refusal to permit the import or export of products; or • injunctions or the imposition of civil or criminal penalties.
Other member states allow companies to fix their own prices for drug products but monitor and control company profits and issue guidance to prescribers. The downward pressure on health care costs in general, particularly prescription drugs, has become intense. As a result, increasingly high barriers are being erected to the entry of 44 Table of Contents new products.
Other member states allow companies to fix their own prices for drug products but monitor and control company profits and issue guidance to prescribers. The downward pressure on health care costs in general, particularly prescription drugs, has become intense. As a result, increasingly high barriers are being erected to the entry of new products.
Acceptance and Review of NDAs Assuming successful completion of the required clinical testing, the results of the preclinical studies and clinical trials, along with information relating to the product’s chemistry, manufacturing, controls, safety updates, patent information, abuse information and proposed labeling, are submitted to the FDA as part of an application requesting approval to market the product candidate for one or more indications.
Acceptance and Review of NDAs Assuming successful completion of the required clinical testing, the results of the preclinical studies and clinical trials, along with information relating to the product’s chemistry, manufacturing, controls, safety updates, patent information, abuse information 26 Table of Contents and proposed labeling, are submitted to the FDA as part of an application requesting approval to market the product candidate for one or more indications.
We look forward to continuing our commitment to giving back to our local communities in 2024 and beyond. Corporate Information Our principal executive office is located at 100 Fifth Avenue, Waltham, Massachusetts, and our telephone number is 617-977-5700.
We look forward to continuing our commitment to giving back to our local communities in 2025 and beyond. Corporate Information Our principal executive office is located at 100 Fifth Avenue, Waltham, Massachusetts, and our telephone number is 617-977-5700.
Additionally, some trials are overseen by an independent group of qualified experts organized by the trial sponsor, known as a data safety monitoring board, or DSMB, or committee. This group provides authorization for whether or not a trial may move forward at designated check points based on access that only the group maintains to available data from the study.
Additionally, some trials are overseen by an independent group of qualified experts organized by the trial sponsor, known as a data monitoring committee. This group provides authorization for whether or not a trial may move forward at designated check points based on access that only the group maintains to available data from the study.
Under FDARA, orphan exclusivity will not bar approval of another orphan drug under certain circumstances, including if a subsequent product with the same drug for the same indication is shown to be clinically superior to the approved product on the basis 35 Table of Contents of greater efficacy or safety, or providing a major contribution to patient care, or if the company with orphan drug exclusivity is not able to meet market demand.
Under FDARA, orphan exclusivity will not bar approval of another orphan drug under certain circumstances, including if a subsequent product with the same drug for the same indication is shown to be clinically superior to the approved product on the basis of greater efficacy or safety, or providing a major contribution to patient care, or if the company with orphan drug exclusivity is not able to meet market demand.
The PDCO may also grant waivers when development of a medicine in children is not needed or is not appropriate because (a) the product is likely to be ineffective or unsafe in part or all of the pediatric population; (b) the disease or condition occurs only in adult population; or (c) the product does not represent a significant therapeutic benefit over existing treatments for pediatric population.
The 37 Table of Contents PDCO may also grant waivers when development of a medicine in children is not needed or is not appropriate because (a) the product is likely to be ineffective or unsafe in part or all of the pediatric population; (b) the disease or condition occurs only in adult population; or (c) the product does not represent a significant therapeutic benefit over existing treatments for pediatric population.
Even if a compound is considered to be a new chemical entity and the sponsor is able to gain the prescribed period of data exclusivity, another company nevertheless could also market another version of the product if such company can complete a full MAA with a complete database of pharmaceutical tests, preclinical tests and clinical trials and obtain marketing approval of its product.
Even if a compound is considered to be a new chemical entity and the sponsor is able to gain the prescribed period of data exclusivity, another company nevertheless 38 Table of Contents could also market another version of the product if such company can complete a full MAA with a complete database of pharmaceutical tests, preclinical tests and clinical trials and obtain marketing approval of its product.
Suspension or termination of development during any phase of clinical trials can occur if it is determined that the participants or patients are being exposed to an unacceptable health risk. Other reasons for suspension or termination may be made by us based on evolving business objectives and/or competitive climate.
Suspension or termination of development during any 21 Table of Contents phase of clinical trials can occur if it is determined that the participants or patients are being exposed to an unacceptable health risk. Other reasons for suspension or termination may be made by us based on evolving business objectives and/or competitive climate.
The GDPR 43 Table of Contents also imposes strict rules on the transfer of personal data to countries outside the European Union, including the United States, and permits data protection authorities to impose large penalties for violations of the GDPR, including potential fines of up to €20 million or 4% of annual global revenues of the respective group of companies, whichever is greater.
The GDPR also imposes strict rules on the transfer of personal data to countries outside the European Union, including the United States, and permits data protection authorities to impose large penalties for violations of the GDPR, including potential fines of up to €20 million or 4% of annual global revenues of the respective group of companies, whichever is greater.
Specifically, at 12 weeks, 80% of patients showed a reduction in C3c staining by one or more orders of magnitude of intensity from baseline and 40% of patients showed zero staining intensity, indicating that C3c deposits were cleared. Patients also showed improvements across key clinical measures, including a mean reduction in proteinuria, and stabilized kidney function.
Specifically, at 12 weeks, 80% of patients showed a reduction in C3c staining by one or more orders of magnitude of intensity from baseline, the primary endpoint, and 40% of patients showed zero staining intensity, indicating that C3c deposits were cleared. Patients also showed improvements across key clinical measures, including a mean reduction in proteinuria, and stabilized kidney function.
Hematopoietic Stem Cell Transplantation Thrombotic Microangiopathy Hematopoietic stem cell transplantation thrombotic microangiopathy, or HSCT-TMA, is rare blood disease that can be a fatal complication of a bone marrow transplant or HSCT. In HSCT-TMA, microscopic blood clots form in small blood vessels, leading to organ damage. The kidneys are commonly affected, although any organ may be involved.
EMPAVELI in Other Indications Hematopoietic stem cell transplantation thrombotic microangiopathy, or HSCT-TMA, is rare blood disease that can be a fatal complication of a bone marrow transplant or HSCT. In HSCT-TMA, microscopic blood clots form in small blood vessels, leading to organ damage. The kidneys are commonly affected, although any organ may be involved.
During the first five years of the Beam collaboration agreement, Beam is prohibited from developing on its own or with a third party any base editing therapies 17 Table of Contents associated with the items on the Target List but does not prevent Beam from licensing its intellectual property to a third-party for another purpose outside of the Target List.
During the first five years of the Beam collaboration agreement, Beam is prohibited from developing on its own or with a third party any base editing therapies associated with the items on the Target List but does not prevent Beam from licensing its intellectual property to a third-party for another purpose outside of the Target List.
We seek to protect our proprietary position in a variety of ways, including by pursuing patent protection in certain jurisdictions where it is available. For example, we file U.S. and certain foreign patent applications related to our proprietary technology, inventions and improvements that are important to the development of our business.
We seek to protect our proprietary position in a variety of ways, including by pursuing patent protection in certain jurisdictions 14 Table of Contents where it is available. For example, we file U.S. and certain foreign patent applications related to our proprietary technology, inventions and improvements that are important to the development of our business.
Additionally, each party may terminate the Bachem Agreement upon an uncured material breach of the Bachem Agreement by the other party or upon the other party’s insolvency or bankruptcy. 22 Table of Contents The Bachem Agreement also includes customary provisions relating to, among others, delivery, inspection procedures, warranties, quality, storage, handling and transport, intellectual property, confidentiality and indemnification.
Additionally, each party may terminate the Bachem Agreement upon an uncured material breach of the Bachem Agreement by the other party or upon the other party’s insolvency or bankruptcy. The Bachem Agreement also includes customary provisions relating to, among others, delivery, inspection procedures, warranties, quality, storage, handling and transport, intellectual property, confidentiality and indemnification.
In our Phase 3 trials, SYFOVRE showed a slowing of GA progression over 24 months in both every-other-month and monthly dosing. The prescribing label for SYFOVRE indicates that the recommended dose to be administered to each eye is once every 25 to 60 days.
In our Phase 3 trials, SYFOVRE showed a slowing of GA progression over 24 months in both every-other-month and monthly dosing. The prescribing label for SYFOVRE indicates that the 8 Table of Contents recommended dose to be administered to each eye is once every 25 to 60 days.
If a device modification requires the submission of a 510(k), but the modification 36 Table of Contents does not affect the intended use of the device or alter the fundamental technology of the device, then summary information that results from the design control process associated with the cleared device can serve as the basis for clearing the application.
If a device modification requires the submission of a 510(k), but the modification does not affect the intended use of the device or alter the fundamental technology of the device, then summary information that results from the design control process associated with the cleared device can serve as the basis for clearing the application.
Unless otherwise required by regulation, the pediatric data requirements do not apply to products with orphan designation, although FDA has recently taken steps to limit what it considers abuse of this statutory exemption in PREA by announcing that it does not intend to grant any additional orphan drug designations for rare pediatric subpopulations of what is otherwise a common disease.
Unless otherwise required by regulation, the pediatric data requirements do not apply to products with orphan designation intended for a non-cancer indication, although the FDA has recently taken steps to limit what it considers abuse of this statutory exemption in PREA by announcing that it does not intend to grant any additional orphan drug designations for rare pediatric subpopulations of what is otherwise a common disease.
We have entered into a commercial supply agreement with Bachem Americas, Inc., or Bachem, agreeing to purchase a significant portion of our requirements for the pegcetacoplan drug substance, and a commercial supply agreement with NOF Corporation, or NOF, to purchase activated polyethylene glycol derivative, or PEG, which is a component of pegcetacoplan.
We have entered into a commercial supply agreement with Bachem Americas, Inc., or Bachem, agreeing to purchase a significant portion of our requirements for the pegcetacoplan drug substance, and a commercial supply agreement with NOF Corporation, or NOF, to purchase activated polyethylene glycol derivative, or PEG, which is 18 Table of Contents a component of pegcetacoplan.
Under the Hatch-Waxman Amendments, the FDA may not approve an ANDA or 505(b)(2) application until any applicable period of non-patent exclusivity for the RLD has expired. The FDCA provides a period of five years of non-patent data exclusivity for a new drug containing a new chemical entity.
Under the Hatch-Waxman Amendments, the FDA may not approve an ANDA or 505(b)(2) application until any applicable period of regulatory exclusivity for the RLD has expired. The FDCA provides a period of five years of regulatory data exclusivity for a new drug containing a new chemical entity.
HIPAA also regulates standardization of data content, codes, and formats used in healthcare transactions and 37 Table of Contents standardization of identifiers for health plans and providers. HIPAA also imposes certain obligations on the business associates of covered entities that obtain protected health information in providing services to or on behalf of covered entities.
HIPAA also regulates standardization of data content, codes, and formats used in healthcare transactions and standardization of identifiers for health plans and providers. HIPAA also imposes certain obligations on the business associates of covered entities that obtain protected health information in providing services to or on behalf of covered entities.
The filing of a patent infringement lawsuit within 45 days after the receipt of a Paragraph IV certification automatically prevents the FDA from approving the ANDA until the earlier of 30 months after the receipt of the Paragraph IV notice, expiration of the patent, or a decision in the infringement case that is favorable to the ANDA sponsor.
The filing of a patent infringement lawsuit within 45 days after the receipt of a Paragraph IV certification automatically prevents the FDA from approving 31 Table of Contents the ANDA until the earlier of 30 months after the receipt of the Paragraph IV notice, expiration of the patent, or a decision in the infringement case that is favorable to the ANDA sponsor.
As in the United States, medicinal products can be marketed only if a 38 Table of Contents marketing authorization from the competent regulatory agencies has been obtained. Similar to the United States, the various phases of preclinical and clinical research in the EU are subject to significant regulatory controls.
As in the United States, medicinal products can be marketed only if a marketing authorization from the competent regulatory agencies has been obtained. Similar to the United States, the various phases of preclinical and clinical research in the EU are subject to significant regulatory controls.
We believe SYFOVRE may mitigate or prevent retinal cell death in GA, leading to a reduction in GA lesion growth over time. In our Phase 3 trials, SYFOVRE showed a slowing of GA progression, with evidence of treatment effects increasing over the 24-month period, and well-demonstrated safety profile following nearly 12,000 injections.
We believe SYFOVRE may mitigate or prevent retinal cell death in GA, leading to a reduction in GA lesion growth over time. In our Phase 3 trials, SYFOVRE showed a slowing of GA progression, with evidence of treatment effects increasing over the 24-month period, and well-demonstrated safety profile following nearly 12,000 injections. • Treatment effects observed in two dosing regimens.
Such restrictions under applicable federal and state healthcare laws and regulations, include the following: • the federal Anti-Kickback Statute, which prohibits, among other things, persons and entities from knowingly and willfully soliciting, offering, receiving or providing remuneration (including any kickback, bribe or rebate), directly or indirectly, in cash or in kind, to induce or reward either the referral of an individual for, or the purchase, lease or order of, any good or service, for which payment may be made, in whole or in part, under a federal healthcare program such as Medicare and Medicaid; • the federal civil and criminal false claims laws, including the civil False Claims Act, and civil monetary penalties laws, which prohibit individuals or entities from, among other things, knowingly presenting, or causing to be presented, to the federal government, claims for payment that are false or fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government; • HIPAA, which created additional federal criminal laws that prohibit, among other things, knowingly and willingly executing, or attempting to execute, a scheme or making false statements in connection with the delivery of or payment for health care benefits, items, or services; • HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act and its implementing regulations, which also imposes obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information on covered entities and their business associates that associates that perform certain functions or activities that involve the use or disclosure of protected health information on their behalf; • the Foreign Corrupt Practices Act, or FCPA, which prohibits companies and their intermediaries from making, or offering or promising to make improper payments to non-U.S. officials for the purpose of obtaining or retaining business or otherwise seeking favorable treatment; • the federal transparency requirements known as the federal Physician Payments Sunshine Act, under the Patient Protection and Affordable Care Act, as amended by the Health Care Education Reconciliation Act, or collectively the ACA, which requires certain manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid, or the Children’s Health Insurance Program, with specific exceptions, to report annually to the Centers for Medicare & Medicaid Services, or CMS, within HHS, information related to payments and other transfers of value to certain healthcare providers and teaching hospitals and information regarding ownership and investment interests held by physicians and their immediate family members; and • analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws, which may apply to healthcare items or services that are reimbursed by non-governmental third-party payors, including private insurers.
Such restrictions under applicable federal and state healthcare laws and regulations, include the following: • the federal Anti-Kickback Statute, which prohibits, among other things, persons and entities from knowingly and willfully soliciting, offering, receiving or providing remuneration (including any kickback, bribe or rebate), directly or indirectly, in cash or in kind, to induce or reward either the referral of an individual for, or the purchase, lease or order of, any good or service, for which payment may be made, in whole or in part, under a federal healthcare program such as Medicare and Medicaid; • the federal civil and criminal false claims laws, including the civil False Claims Act, and civil monetary penalties laws, which prohibit individuals or entities from, among other things, knowingly presenting, or causing to be presented, to the federal government, claims for payment that are false or fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government; • HIPAA, which created additional federal criminal laws that prohibit, among other things, knowingly and willingly executing, or attempting to execute, a scheme or making false statements in connection with the delivery of or payment for health care benefits, items, or services; • HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act and its implementing regulations, which also imposes obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information on covered entities and their business associates that associates that perform certain functions or activities that involve the use or disclosure of protected health information on their behalf; • the Foreign Corrupt Practices Act, or FCPA, which prohibits companies and their intermediaries from making, or offering or promising to make improper payments to non-U.S. officials for the purpose of obtaining or retaining business or otherwise seeking favorable treatment; • the federal transparency requirements known as the federal Physician Payments Sunshine Act, under the Patient Protection and Affordable Care Act, as amended by the Health Care Education Reconciliation Act, or collectively the ACA, which requires certain manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid, or the Children’s Health Insurance Program, with specific exceptions, to report annually to the Centers for Medicare & Medicaid Services, or CMS, within HHS, information related to payments and other transfers of value to certain healthcare providers and teaching hospitals and information regarding ownership and investment interests held by physicians and their immediate family members; and • analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws, which may apply to healthcare items or services that are reimbursed by non-governmental third-party payors, including private insurers. 41 Table of Contents Some state laws require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government in addition to requiring drug manufacturers to report information related to payments to physicians and other health care providers or marketing expenditures.
The complement system may be activated through three principal pathways known as the classical, lectin and alternative pathways, each of which requires the C3 protein to enable three principal immune responses: opsonization, inflammation and formation of the membrane attack complex, or MAC.
The complement system may be activated through three principal pathways known as the classical, lectin and alternative pathways, each of which requires the C3 protein to enable three 5 Table of Contents principal immune responses: opsonization, inflammation and formation of the membrane attack complex, or MAC.
Significant risk devices are devices that are substantially important in diagnosing, curing, mitigating, or treating disease or in preventing impairment to human health. Studies of devices that pose a significant risk require both FDA and an IRB approval prior to initiation of a clinical study.
Significant risk devices are devices that are substantially important in diagnosing, curing, mitigating, or treating disease or in preventing impairment to human health. Studies of devices that pose a significant risk require both FDA and an IRB approval prior to initiation of a clinical 33 Table of Contents study.
The new legislation has implications for Medicare Part D, which is a program available to individuals who are entitled to Medicare Part A or enrolled in 46 Table of Contents Medicare Part B to give them the option of paying a monthly premium for outpatient prescription drug coverage.
The new legislation has implications for Medicare Part D, which is a program available to individuals who are entitled to Medicare Part A or enrolled in Medicare Part B to give them the option of paying a monthly premium for outpatient prescription drug coverage.
Regulatory Requirements after Marketing Authorization As in the United States, both marketing authorization holders and manufacturers of medicinal products are subject to comprehensive regulatory oversight by the EMA and the competent authorities of the individual EU Member States both before and 41 Table of Contents after grant of the manufacturing and marketing authorizations.
Regulatory Requirements after Marketing Authorization As in the United States, both marketing authorization holders and manufacturers of medicinal products are subject to comprehensive regulatory oversight by the EMA and the competent authorities of the individual EU Member States both before and after grant of the manufacturing and marketing authorizations.
By focusing on such policies and practices, we strive to bring transformative medicines to patients, provide an engaging and inclusive workplace for our employees, minimize our impact on the environment, and always demonstrate integrity in our actions. Information in our ESG Sustainability Report is not incorporated by reference into this Form 10-K.
By focusing on such policies and practices, we strive to bring transformative medicines to patients, provide an engaging and inclusive workplace for our employees, minimize our impact on the environment, and always demonstrate integrity in our actions. Information in any ESG Sustainability Report that we may publish is not incorporated by reference into this Form 10-K.
Even if favorable coverage and reimbursement status is attained for one or more products for which a company or its collaborators receive regulatory approval, less favorable coverage policies and reimbursement rates may be implemented in the future. Outside the United States, ensuring adequate coverage and payment for our product candidates will face challenges.
Even if favorable coverage and reimbursement status is attained for one or more products for which a company or its collaborators receive regulatory approval, less favorable coverage policies and reimbursement rates may be implemented in the future. 40 Table of Contents Outside the United States, ensuring adequate coverage and payment for our product candidates will face challenges.
In addition to the IND requirements, an institutional review board, or IRB, representing each institution participating in the clinical trial must review and approve the plan for any clinical trial before it commences at that institution, and the IRB must conduct continuing review and reapprove the study at least annually.
In addition to the IND requirements, an IRB representing each institution participating in the clinical trial must review and approve the plan for any clinical trial before it commences at that institution, and the IRB must conduct continuing review and reapprove the study at least annually.
In addition, we regularly use our website to post information regarding our business, product development programs and governance, and we encourage investors to use our website, particularly the information in the section entitled “Investors & Media,” as a source of information about us.
In addition, we regularly use our website to post 43 Table of Contents information regarding our business, product development programs and governance, and we encourage investors to use our website, particularly the information in the section entitled “Investors & Media,” as a source of information about us.
Review and Approval of Drugs in the United States In the United States, the FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act, or FDCA, and implementing regulations.
Review, Approval and Regulation of Drug Products in the United States In the United States, the FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act, or FDCA, and implementing regulations.
This draft guidance calls for such communications to be truthful, non-misleading, factual, and unbiased and include all information necessary for healthcare providers to interpret the strengths and weaknesses and validity and utility of the information about the unapproved use.
This draft guidance calls for such communications to be truthful, 29 Table of Contents non-misleading, factual, and unbiased and include all information necessary for healthcare providers to interpret the strengths and weaknesses and validity and utility of the information about the unapproved use.
The centralized procedure is compulsory for specific products, including for medicines produced by certain biotechnological processes, products designated as orphan medicinal products, advanced 39 Table of Contents therapy products and products with a new active substance indicated for the treatment of certain diseases.
The centralized procedure is compulsory for specific products, including for medicines produced by certain biotechnological processes, products designated as orphan medicinal products, advanced therapy products and products with a new active substance indicated for the treatment of certain diseases.
Specifically, the sponsor must certify with respect to each patent that: • the required patent information has not been filed; • the listed patent has expired; 34 Table of Contents • the listed patent has not expired, but will expire on a particular date and approval is sought after patent expiration; or • the listed patent is invalid, unenforceable or will not be infringed by the new product.
Specifically, the sponsor must certify with respect to each patent that: • the required patent information has not been filed; • the listed patent has expired; • the listed patent has not expired, but will expire on a particular date and approval is sought after patent expiration; or • the listed patent is invalid, unenforceable or will not be infringed by the new product.
The Clinical Trials Regulation did not change the preexisting requirement that a sponsor must obtain prior approval from the competent national authority of the EU Member State in which the clinical trial is to be conducted.
The CTR did not change the preexisting requirement that a sponsor must obtain prior approval from the competent national authority of the EU Member State in which the clinical trial is to be conducted.
A product is eligible for this designation if it is a regenerative medicine therapy that is intended to treat, modify, reverse or cure a serious or life-threatening disease or condition and preliminary clinical evidence indicates that the product has the potential to address unmet medical needs for such disease or condition.
A product is eligible for this designation if it is a regenerative medicine therapy that is intended to treat, modify, reverse or cure a serious or life-threatening disease or condition 25 Table of Contents and preliminary clinical evidence indicates that the product has the potential to address unmet medical needs for such disease or condition.
Certain of our wholly owned subsidiaries hold rights to use our intellectual property to manage our clinical trials in certain jurisdictions or territories and exclusive rights to distribute our product with respect to specific indications within certain jurisdictions or territories.
Certain of 15 Table of Contents our wholly owned subsidiaries hold rights to use our intellectual property to manage our clinical trials in certain jurisdictions or territories and exclusive rights to distribute our product with respect to specific indications within certain jurisdictions or territories.
The FDA will base that determination on information provided by the sponsor correcting the 24 Table of Contents deficiencies previously cited or otherwise satisfying the FDA that the investigation can proceed or recommence. Occasionally, clinical holds are imposed due to manufacturing issues that may present safety issues for the clinical study subjects.
The FDA will base that determination on information provided by the sponsor correcting the deficiencies previously cited or otherwise satisfying the FDA that the investigation can proceed or recommence. Occasionally, clinical holds are imposed due to manufacturing issues that may present safety issues for the clinical study subjects.
There have been a number of federal and state proposals during the last few years regarding the pricing of pharmaceutical and biopharmaceutical products, limiting coverage and reimbursement for drugs and other medical products, government control and other changes to the healthcare system in the United States. In March 2010, the U.S.
There have been a number of federal and state proposals during the last few years regarding the pricing of pharmaceutical and biopharmaceutical products, limiting coverage and reimbursement for drugs and other medical products, government control and other changes to the healthcare system in the United States.
In connection with this assessment, the FDA review team will assemble all individual reviews 31 Table of Contents and other documents into an “action package,” which becomes the record for FDA review. The review team then issues a recommendation, and a senior FDA official makes a decision.
In connection with this assessment, the FDA review team will assemble all individual reviews and other documents into an “action package,” which becomes the record for FDA review. The review team then issues a recommendation, and a senior FDA official makes a decision.
Commercial Supply Agreement with Bachem On December 30, 2020, we entered into a commercial supply agreement, or the Bachem Agreement, with Bachem to supply the drug substance for the finished dosage form of systemic pegcetacoplan and intravitreal pegcetacoplan.
Commercial Supply Agreement with Bachem In December 2020, we entered into a commercial supply agreement, or the Bachem Agreement, with Bachem to supply the drug substance for the finished dosage form of systemic pegcetacoplan and intravitreal pegcetacoplan.
Our sales team is covering the health care professionals, or HCPs, and key treatment centers, focusing on HCPs who have patients that continue to experience breakthrough hemolysis, have persistently low hemoglobin, high fatigue, and require transfusions despite being on C5 inhibitors. Our market access team is engaging with primary and secondary payers representing a significant percentage of PNH patients.
Commercialization Our sales efforts are focused on the health care professionals, or HCPs, and key treatment centers, who have patients that continue to experience breakthrough hemolysis, have persistently low hemoglobin, high fatigue, and require transfusions despite being on C5 inhibitors. Our market access team is engaging with primary and secondary payers representing a significant percentage of PNH patients.
If the parties do not agree to jointly pursue any development activities for the Licensed Products (whether for an Initial Indication or otherwise), the party proposing to pursue such activities may conduct such activities at its sole expense (with the non-proposing party having the right to obtain rights to the data generated by such development activities by paying a specified percentage of that expense), subject to agreed-upon exceptions that limit each party’s unilateral development rights.
If the parties do not agree to jointly pursue any development activities for the Licensed Products, the party proposing to pursue such activities may conduct such activities at its sole expense (with the non-proposing party having the right to obtain rights to the data generated by such development activities by paying a specified percentage of that expense), subject to agreed-upon exceptions that limit each party’s unilateral development rights.
We also rely on trade secrets, know-how, continuing technological innovation and in-licensing opportunities to develop and maintain our proprietary position. As of December 31, 2023, we own a total of 24 U.S. patents, 25 pending U.S. patent applications, including original filings, continuations, and divisional applications, as well as numerous foreign counterparts of many of these patents and patent applications.
We also rely on trade secrets, know-how, continuing technological innovation and in-licensing opportunities to develop and maintain our proprietary position. As of December 31, 2024, we own a total of 27 U.S. patents and 35 pending U.S. patent applications, including original filings, continuations, and divisional applications, as well as numerous foreign counterparts of many of these patents and patent applications.
We received $10.0 million in royalties from Sobi during the year ended December 31, 2023. Under the Sobi collaboration agreement, we remain responsible for our license fee obligations (including royalty obligations) to the Trustees of the University of Pennsylvania (“Penn”), as a licensor of Apellis and for its payment obligations to SFJ.
Under the Sobi collaboration agreement, we remain responsible for its license fee obligations (including royalty obligations) to the Trustees of the University of Pennsylvania (“Penn”), as a licensor of Apellis. We received $18.4 million in royalties from Sobi during the year ended December 31, 2024 and $10.0 million in royalties from Sobi in the year ended December 31, 2023.
Patents issuing based on these applications would have terms extending into 2041 through 2043.
Patents issuing based on these applications would have terms extending into 2041 through 2044.
There are treatments in clinical development, including iptacopan being developed by Novartis, currently in Phase 3 clinical trials; OMS906, a MASP-3 inhibitor monoclonal antibody being developed by Omeros Corp., in a Phase 2 trial;; KP104, an anti C5-Factor H bifunctional protein being developed by Kira Pharmaceuticals, currently in a Phase 2 renal basket trial; and ARO-C3, an RNAi to reduce C3 production developed by Arrowhead Pharmaceuticals, currently in a Phase 1/2 renal basket trial.
There are treatments in clinical development, including iptacopan being developed by Novartis, which is currently under review with the FDA; OMS906, a MASP-3 inhibitor monoclonal antibody being developed by Omeros Corp., in a Phase 2 trial; KP104, an anti C5-Factor H bifunctional protein being developed by Kira Pharmaceuticals, currently in a Phase 2 renal basket trial; and ARO-C3, an RNAi to reduce C3 production developed by Arrowhead Pharmaceuticals, currently in a Phase 1/2 renal basket trial.
Item 1. B usiness. Overview We are 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.
Item 1. B usiness. Overview We are 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.
We also have a thought leader liaison team who is focused on building advocacy with key opinion leaders in the retina space and a strategic account team to identify and develop working relationships with key decision makers within targeted private equity groups and large accounts. Our marketing efforts also reach ECPs through digital and print media.
We also have a thought leader liaison team, which is focused on building advocacy with key opinion leaders in the retina space, and a strategic account team, which identifies and develops working relationships with key decision makers within targeted private equity groups and large accounts. Our marketing efforts are designed to reach ECPs through digital and print media.
Although IC-MPGN is considered a distinct disease from C3G, the underlying cause and progression of the two diseases are remarkably similar and include overactivation of the complement cascade, with excessive accumulation of C3 breakdown products in the kidney causing inflammation and damage to the organ. There are no medicines currently approved for C3G or IC-MPGN.
Although IC-MPGN is considered a distinct disease from C3G, the underlying cause and progression of the two diseases are remarkably similar and include overactivation of the complement cascade, with excessive accumulation of C3 breakdown products in the kidney causing inflammation and damage to the organ.
In October 2020, we reported data from the DISCOVERY trial in five C3G patients treated with systemic pegcetacoplan for 48 weeks. In those patients, mean (SE) proteinuria decreased from 3.48 (0.82) mg/mg at baseline to 0.93 (0.27) mg/mg at week 48, a decrease of 73.3%, as measured by 24-hour uPCR.
There were no discontinuations due to treatment-emergent adverse events. In October 2020, we reported data from the DISCOVERY trial in five C3G patients treated with systemic pegcetacoplan for 48 weeks. In those patients, mean (SE) proteinuria decreased from 3.48 (0.82) mg/mg at baseline to 0.93 (0.27) mg/mg at week 48, a decrease of 73.3%, as measured by 24-hour uPCR.
Although SPCs are available throughout the EU, sponsors must apply on a country‑by‑country basis. Similar patent term extension rights exist in certain other foreign jurisdictions outside the EU. Brexit and the Regulatory Framework in the United Kingdom The withdrawal of the United Kingdom from the European Union, took place on January 31, 2020.
Although SPCs are available throughout the EU, sponsors must apply on a country‑by‑country basis. Similar patent term extension rights exist in certain other foreign jurisdictions outside the EU. Brexit and the Regulatory Framework in the United Kingdom The UK’s withdrawal from the EU, commonly referred to as Brexit, took place on January 31, 2020.
Long-term Extension Study We are currently conducting a 36-month, open-label extension study (GALE) to evaluate the long-term safety and efficacy of intravitreal pegcetacoplan in patients with GA secondary to AMD.
Post-Marketing Studies 9 Table of Contents We are currently conducting a 36-month, open-label extension study (GALE) to evaluate the long-term safety and efficacy of intravitreal pegcetacoplan in patients with GA secondary to AMD.
Patients in each Phase 3 trial received a dose of 15 mg of pegcetacoplan injected intravitreally in a 0.1 cc volume, monthly or every other month for 24 months. In the sham-injection cohorts, patients received a simulated injection.
We enrolled 621 patients in DERBY and 637 patients in OAKS. Patients in each Phase 3 trial received a dose of 15 mg of pegcetacoplan injected intravitreally in a 0.1 cc volume, monthly or every other month for 24 months. In the sham-injection cohorts, patients received a simulated injection.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeWe anticipate that our expenses will continue to incur if and as we: • continue to commercialize EMPAVELI for the treatment of PNH in the United States and commercialize SYFOVRE for the treatment of GA in the United States; • establish and maintain sales, marketing, distribution and other commercial infrastructure for EMPAVELI and SYFOVRE and any other products for which we may obtain marketing approval; • prepare to submit additional applications for regulatory approval outside the United States and continue to build a commercial infrastructure for SYFOVRE for GA in the United States and worldwide; • continue to develop and conduct clinical trials of systemic pegcetacoplan for the treatment of C3G and IC-MPGN and other of our product candidates; • initiate and continue research and preclinical and clinical development efforts for any future product candidates; • seek to identify and develop additional product candidates for complement-dependent diseases; • seek regulatory and marketing approvals for our product candidates that successfully complete clinical trials, if any; • require the manufacture of commercial quantities of our approved products and larger quantities of product candidates for clinical development and, potentially, commercialization; • maintain, expand and protect our intellectual property portfolio; • hire and retain additional personnel, such as clinical, quality control and scientific personnel; • add operational, financial and management information systems and personnel, including personnel to support our product development and help us comply with our obligations as a public company; and • add equipment and physical infrastructure to support our research and development programs.
Biggest changeWe anticipate that we will continue to incur increasing expenses if and as we: • continue to commercialize EMPAVELI in the United States and commercialize SYFOVRE for the treatment of GA in the United States, Australia, and select other jurisdictions; • prioritize the ongoing development of systemic pegcetacoplan and focus our research initiatives on high potential opportunities; • establish and continue to build sales, marketing, distribution and other commercial infrastructure for EMPAVELI and SYFOVRE and any other products for which we may obtain marketing approval; • prepare to submit additional applications for regulatory approval for SYFOVRE outside the United States; • continue to develop and conduct research and preclinical and clinical trials of our current and future product candidates; • seek regulatory and marketing approvals for our product candidates that successfully complete clinical trials, if any; • continue to manufacture commercial quantities of our approved products and to manufacture our product candidates for clinical development and, potentially, commercialization; • maintain, expand and protect our intellectual property portfolio; • hire and retain personnel; • add operational, financial and management information systems; and • add equipment and physical infrastructure to support our research and development programs.
If EMPAVELI, SYFOVRE, or any of our product candidates for which we obtain marketing approval do achieve an adequate level of market acceptance, we may not generate significant revenues and we may not become profitable.
If EMPAVELI, SYFOVRE, or any of our product candidates for which we obtain marketing approval do not achieve an adequate level of market acceptance, we may not generate significant revenues and we may not become profitable.
The commercial success of EMPAVELI, SYFOVRE, or any our product candidates that we or any collaborator, such as Sobi, commercialize will depend substantially, both domestically and abroad, on the extent to which the costs of our product candidates will be paid by third-party payors, including government health administration authorities and private health coverage insurers.
The commercial success of EMPAVELI, SYFOVRE, or any of our product candidates that we or any collaborator, such as Sobi, commercialize will depend substantially, both domestically and abroad, on the extent to which the costs of our product candidates will be paid by third-party payors, including government health administration authorities and private health coverage insurers.
Seeking and obtaining an alternative collaborator outside the United States could also adversely impact sales of systemic pegcetacoplan and market penetration outside of the United States. Collaboration agreements may not lead to development or commercialization of product candidates in the most efficient manner or at all.
Seeking and obtaining an alternative collaborator outside the United States could also adversely impact sales of systemic pegcetacoplan and market penetration outside of the United States. Collaboration agreements may not lead to development or commercialization of product candidates in the most efficient manner at all.
Disruptions at the FDA and other agencies may also slow the time necessary for new product candidates to be reviewed and/or approved by necessary government agencies, which would adversely affect our business.
Disruptions at the FDA and other agencies may also slow the time necessary for new product candidates to be reviewed and/or approved by necessary government agencies, which would adversely affect our business.
We, or our collaborators, may experience numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent clinical development, marketing approval or commercialization of our product candidates, including: • clinical trials of our product candidates may produce unfavorable or inconclusive results; • we, or our collaborators, may decide, or regulators may require us or them, to conduct additional clinical trials or abandon product development programs; • the number of patients required for clinical trials of our product candidates may be larger than we, or our collaborators, anticipate, patient enrollment in these clinical trials may be slower than we, or our collaborators, anticipate or participants may drop out of these clinical trials at a higher rate than we, or our collaborators, anticipate; • the cost of planned clinical trials of our product candidates may be greater than we anticipate; • our third-party contractors or those of our collaborators, including those manufacturing our product candidates or components or ingredients thereof or conducting clinical trials on our behalf or on behalf of our collaborators, may deviate from the trial protocol, fail to comply with regulatory requirements or fail to meet their contractual obligations to us or our collaborators in a timely manner or at all; • regulators or institutional review boards may not authorize us, our collaborators or our or their investigators to commence a clinical trial or conduct a clinical trial at a prospective trial site; • we, or our collaborators, may have delays in reaching or fail to reach agreement on acceptable clinical trial contracts or clinical trial protocols with prospective trial sites; • patients that enroll in a clinical trial may misrepresent their eligibility to do so or may otherwise not comply with the clinical trial protocol, resulting in the need to drop the patients from the clinical trial, increase the needed enrollment size for the clinical trial or extend the clinical trial’s duration; • we, or our collaborators, may have to delay, suspend or terminate clinical trials of our product candidates for various reasons, including a finding that the participants are being exposed to unacceptable health risks, undesirable side effects or other unexpected characteristics of the product candidate; • regulators or institutional review boards may require that we, or our collaborators, or our or their investigators suspend or terminate clinical research for various reasons, including noncompliance with regulatory requirements or their standards of conduct, a finding that the participants are being exposed to unacceptable health risks, undesirable side effects or other unexpected characteristics of the product candidate or findings of undesirable effects caused by a chemically or mechanistically similar product or product candidate; • the FDA or comparable foreign regulatory authorities may disagree with our, or our collaborators’, clinical trial designs or our or their interpretation of data from preclinical studies and clinical trials; • the FDA or comparable foreign regulatory authorities may fail to approve or subsequently find fault with the manufacturing processes or facilities of third-party manufacturers with which we, or our collaborators, enter into agreements for clinical and commercial supplies; 59 Table of Contents • the supply or quality of raw materials, drug intermediates or manufactured product candidates, other products evaluated in our clinical trials or other materials necessary to conduct clinical trials of our product candidates may be insufficient, inadequate or not available at an acceptable cost, or we may experience interruptions in supply; and • the approval policies or regulations of the FDA or comparable foreign regulatory authorities may significantly change in a manner rendering our clinical data insufficient to obtain marketing approval.
We, or our collaborators, may experience numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent clinical development, marketing approval or commercialization of our product candidates, including: • clinical trials of our product candidates may produce unfavorable or inconclusive results; • we, or our collaborators, may decide, or regulators may require us or them, to conduct additional clinical trials or abandon product development programs; • the number of patients required for clinical trials of our product candidates may be larger than we, or our collaborators, anticipate, patient enrollment in these clinical trials may be slower than we, or our collaborators, anticipate or participants may drop out of these clinical trials at a higher rate than we, or our collaborators, anticipate; • the cost of planned clinical trials of our product candidates may be greater than we anticipate; • our third-party contractors or those of our collaborators, including those manufacturing our product candidates or components or ingredients thereof or conducting clinical trials on our behalf or on behalf of our collaborators, may deviate from the trial protocol, fail to comply with regulatory requirements or fail to meet their contractual obligations to us or our collaborators in a timely manner or at all; • regulators or institutional review boards may not authorize us, our collaborators or our or their investigators to commence a clinical trial or conduct a clinical trial at a prospective trial site; • we, or our collaborators, may have delays in reaching or fail to reach agreement on acceptable clinical trial contracts or clinical trial protocols with prospective trial sites; • patients that enroll in a clinical trial may misrepresent their eligibility to do so or may otherwise not comply with the clinical trial protocol, resulting in the need to drop the patients from the clinical trial, increase the needed enrollment size for the clinical trial or extend the clinical trial’s duration; 53 Table of Contents • we, or our collaborators, may have to delay, suspend or terminate clinical trials of our product candidates for various reasons, including a finding that the participants are being exposed to unacceptable health risks, undesirable side effects or other unexpected characteristics of the product candidate; • regulators or institutional review boards may require that we, or our collaborators, or our or their investigators suspend or terminate clinical research for various reasons, including noncompliance with regulatory requirements or their standards of conduct, a finding that the participants are being exposed to unacceptable health risks, undesirable side effects or other unexpected characteristics of the product candidate or findings of undesirable effects caused by a chemically or mechanistically similar product or product candidate; • the FDA or comparable foreign regulatory authorities may disagree with our, or our collaborators’, clinical trial designs or our or their interpretation of data from preclinical studies and clinical trials; • the FDA or comparable foreign regulatory authorities may fail to approve or subsequently find fault with the manufacturing processes or facilities of third-party manufacturers with which we, or our collaborators, enter into agreements for clinical and commercial supplies; • the supply or quality of raw materials, drug intermediates or manufactured product candidates, other products evaluated in our clinical trials or other materials necessary to conduct clinical trials of our product candidates may be insufficient, inadequate or not available at an acceptable cost, or we may experience interruptions in supply; and • the approval policies or regulations of the FDA or comparable foreign regulatory authorities may significantly change in a manner rendering our clinical data insufficient to obtain marketing approval.
Collaborations involving our product candidates pose a number of risks, including the following: • collaborators have significant discretion in determining the efforts and resources that they will apply to these collaborations; • collaborators may not perform their obligations as expected; • collaborators may not pursue development and commercialization of our product candidates or may elect not to continue or renew development or commercialization programs, based on clinical trial results, changes in the collaborators’ strategic focus or available funding or external factors, such as an acquisition, that divert resources or create competing priorities; • collaborators may delay clinical trials, provide insufficient funding for a clinical trial program, stop a clinical trial or abandon a product candidate, repeat or conduct new clinical trials or require a new formulation of a product candidate for clinical testing; • collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with our product candidates; • a collaborator with marketing and distribution rights to one or more products may not commit sufficient resources to the marketing and distribution of such product or products; • disagreements with collaborators, including disagreements over proprietary rights, contract interpretation or the preferred course of development, might cause delays or termination of the research, development or commercialization of product candidates, might lead to additional responsibilities for us with respect to product candidates, or might result in litigation or arbitration, any of which would be time-consuming and expensive; 68 Table of Contents • collaborators may not properly maintain or defend our intellectual property rights or may use our proprietary information in such a way as to invite litigation that could jeopardize or invalidate our intellectual property or proprietary information or expose us to potential litigation; • collaborators may infringe the intellectual property rights of third parties, which may expose us to litigation and potential liability; • disputes may arise between the collaborators and us regarding ownership of or other rights in the intellectual property generated in the course of the collaborations; and • collaborations may be terminated and, if terminated, may result in a need for additional capital to pursue further development or commercialization of the applicable product candidates.
Collaborations involving our product candidates pose a number of risks, including the following: • collaborators have significant discretion in determining the efforts and resources that they will apply to these collaborations; • collaborators may not perform their obligations as expected; • collaborators may not pursue development and commercialization of our product candidates or may elect not to continue or renew development or commercialization programs, based on clinical trial results, changes in the collaborators’ strategic focus or available funding or external factors, such as an acquisition, that divert resources or create competing priorities; • collaborators may delay clinical trials, provide insufficient funding for a clinical trial program, stop a clinical trial or abandon a product candidate, repeat or conduct new clinical trials or require a new formulation of a product candidate for clinical testing; • collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with our product candidates; • a collaborator with marketing and distribution rights to one or more products may not commit sufficient resources to the marketing and distribution of such product or products; • disagreements with collaborators, including disagreements over proprietary rights, contract interpretation or the preferred course of development, might cause delays or termination of the research, development or commercialization of product 62 Table of Contents candidates, might lead to additional responsibilities for us with respect to product candidates, or might result in litigation or arbitration, any of which would be time-consuming and expensive; • collaborators may not properly maintain or defend our intellectual property rights or may use our proprietary information in such a way as to invite litigation that could jeopardize or invalidate our intellectual property or proprietary information or expose us to potential litigation; • collaborators may infringe the intellectual property rights of third parties, which may expose us to litigation and potential liability; • disputes may arise between the collaborators and us regarding ownership of or other rights in the intellectual property generated in the course of the collaborations; and • collaborations may be terminated and, if terminated, may result in a need for additional capital to pursue further development or commercialization of the applicable product candidates.
We and our chief executive officer have been named as defendants in a purported class action lawsuit initiated in 2023 that alleges, among other things, that the defendants violated Sections 10(b) and/or 20(a) of the Exchange Act and Rule 10b-5 promulgated thereunder by misrepresenting and/or omitting certain material facts related to the design of SYFOVRE’s clinical trials and the risks associated with SYFOVRE’s commercial adoption.
We, our chief executive officer, and our directors have been named as defendants in a purported class action lawsuit initiated in 2023 that alleges, among other things, that the defendants violated Sections 10(b) and/or 20(a) of the Exchange Act and Rule 10b-5 promulgated thereunder by misrepresenting and/or omitting certain material facts related to the design of SYFOVRE’s clinical trials and the risks associated with SYFOVRE’s commercial adoption.
Bribery Act, or of U.S. and international import, export and re-export control and sanctions laws and regulations, which likelihood may increase with an increase of operations in foreign jurisdictions, directly or indirectly through third parties (whose corrupt or other illegal conduct may subject us to liability), which may involve interactions with government agencies or government-affiliated hospitals, universities and other organizations, such as conducting clinical trials, selling our products, and obtaining necessary permits, licenses, patent registrations, and other regulatory approvals • tighter restrictions on privacy and data protection, and more burdensome obligations associated with the collection, use and retention of data, including clinical data and genetic material, may apply in jurisdictions outside of North America; • production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad; • business interruptions resulting from geopolitical actions, including war, terrorism, and civil and political unrest (such as the ongoing conflicts in the Middle East and between Russia and Ukraine), or natural disasters including earthquakes, typhoons, floods and fires; and • supply and other disruptions resulting from the impact of public health epidemics, including the COVID-19 pandemic, on our strategic partners, third-party manufacturers, suppliers and other third parties upon which we rely.
Bribery Act, or of U.S. and international import, export and re-export control and sanctions laws and regulations, which likelihood may increase with an increase of operations in foreign jurisdictions, directly or indirectly through third parties (whose corrupt or other illegal conduct may subject us to liability), which may involve interactions with government agencies or government-affiliated hospitals, universities and other organizations, such as conducting clinical trials, selling our products, and obtaining necessary permits, licenses, patent registrations, and other regulatory approvals 81 Table of Contents • tighter restrictions on privacy and data protection, and more burdensome obligations associated with the collection, use and retention of data, including clinical data and genetic material, may apply in jurisdictions outside of North America; • production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad; • business interruptions resulting from geopolitical actions, including war, terrorism, and civil and political unrest (such as the ongoing conflicts in the Middle East and between Russia and Ukraine), or natural disasters including earthquakes, typhoons, floods and fires; and • supply and other disruptions resulting from the impact of public health epidemics, including the COVID-19 pandemic, on our strategic partners, third-party manufacturers, suppliers and other third parties upon which we rely.
We cannot provide any assurances that the FDA and the retinal community will believe that the expected benefits of SYFOVRE treatment outweigh its potential risks to patients in light of these reported events or other events that might arise or that our applications for marketing approval of SYFOVRE in other jurisdictions will not be adversely impacted by these events.
We cannot provide any assurances and the retinal community will believe that the expected benefits of SYFOVRE treatment outweigh its potential risks to patients in light of these reported events or other events that might arise or that our applications for marketing approval of SYFOVRE in other jurisdictions will not be adversely impacted by these events.
If we, and our collaborators, are not able to comply with post-approval regulatory requirements, we, and our collaborators, could have the marketing approvals for our products withdrawn by regulatory authorities and our, or our collaborators’, ability to market any future products could be limited, which could adversely affect our ability to achieve or sustain profitability.
If we, and our collaborators, are not able to comply with post-approval regulatory requirements, we, and our collaborators, could have the marketing approvals for our products withdrawn by regulatory authorities and our, or our collaborators’, ability to market any future products for which we receive marketing approval could be limited, which could adversely affect our ability to achieve or sustain profitability.
If we are unable to establish sales, marketing and distribution capabilities or enter into sales, marketing and distribution arrangements with third parties, we may not be successful in commercializing EMPAVELI, SYFOVRE, pegcetacoplan in other indications or any of our other product candidates for which we obtain marketing approval.
Similarly, if we are unable to establish sales, marketing and distribution capabilities or enter into sales, marketing and distribution arrangements with third parties, we may not be successful in commercializing EMPAVELI, SYFOVRE, pegcetacoplan in other indications or any of our other product candidates for which we obtain marketing approval.
Accordingly, stockholders must rely on capital appreciation, if any, for any return on their investment. We have never declared nor paid cash dividends on our capital stock. We currently plan to retain all of our future earnings, if any, to finance the operation, development and growth of our business.
Accordingly, stockholders must rely on capital appreciation, if any, for any return on their investment. We never declared nor paid cash dividends on our capital stock. We currently plan to retain all of our future earnings, if any, to finance the operation, development and growth of our business.
The degree of market acceptance of EMPAVELI, SYFOVRE, or our other product candidates for which we obtain marketing approval, will depend on a number of factors, including: • the efficacy and safety of the product; • the potential advantages of the product compared to competitive therapies; • the prevalence and severity of any side effects; • the clinical indications for which the product is approved; • whether the product is designated under physician treatment guidelines as a first-, second- or third-line therapy; • the price at which the product is offered for sale; • the product’s convenience and ease of administration compared to alternative treatments; • the willingness of the target patient population to try, and of physicians to prescribe, the product; • limitations or warnings, including distribution or use restrictions contained in the product’s approved labeling; • the strength of sales, marketing and distribution support; • the approval of other new products for the same indications; • the timing of market introduction of our approved products as well as competitive products; • adverse publicity about the product or favorable publicity about competitive products; • potential product liability claims; • changes in the standard of care for the targeted indications for the product; and • availability and amount of coverage and reimbursement from government payors, managed care plans and other third-party payors.
The degree of market acceptance of EMPAVELI, SYFOVRE, or our other product candidates for which we obtain marketing approval, will depend on a number of factors, including: • the efficacy and safety of the product; • the potential advantages of the product compared to competitive therapies; • the prevalence and severity of any side effects; • the clinical indications for which the product is approved; • whether the product is designated under physician treatment guidelines as a first-, second- or third-line therapy; • the price at which the product is offered for sale; • the product’s convenience and ease of administration compared to alternative treatments; • the willingness of the target patient population to try, and of physicians to prescribe, the product; • limitations or warnings, including distribution or use restrictions contained in the product’s approved labeling; • the strength of sales, marketing and distribution support; 50 Table of Contents • the approval of other new products for the same indications; • the timing of market introduction of our approved products as well as competitive products; • adverse publicity about the product or favorable publicity about competitive products; • potential product liability claims; • changes in the standard of care for the targeted indications for the product; and • availability and amount of coverage and reimbursement from government payors, managed care plans and other third-party payors.
If, following approval of a product candidate, we, or others, discover that the product is less effective than previously believed or causes safety issues that were not previously identified, such as the reported events of retinal vasculitis following SYFOVRE treatment, any of the following events could occur: • the target patient population may be less willing to try, and physicians may be less willing to prescribe, the product; • regulatory authorities may withdraw their approval of the product or seize the product; • we, or our collaborators, may be required to recall the product, change the way the product is administered or conduct additional clinical trials; • additional restrictions may be imposed on the marketing of, or the manufacturing processes for, the particular product; • we may be subject to fines, injunctions or the imposition of civil or criminal penalties; • regulatory authorities may require the addition of labeling statements, such as a “black box” warning or a contraindication; • we, or our collaborators, may be required to create a Medication Guide outlining the risks of the previously unidentified side effects for distribution to patients; • we, or our collaborators, could be sued and held liable for harm caused to patients; • the product may become less competitive; and 55 Table of Contents • our reputation may suffer.
If we, or others, discover that a product is less effective than previously believed or causes safety issues that were not previously identified, such as the reported events of retinal vasculitis following SYFOVRE treatment, any of the following events could occur: • the target patient population may be less willing to try, and physicians may be less willing to prescribe, the product; • regulatory authorities may withdraw their approval of the product or seize the product; • we, or our collaborators, may be required to recall the product, change the way the product is administered or conduct additional clinical trials; • additional restrictions may be imposed on the marketing of, or the manufacturing processes for, the particular product; • we may be subject to fines, injunctions or the imposition of civil or criminal penalties; 49 Table of Contents • regulatory authorities may require the addition of labeling statements, such as a “black box” warning or a contraindication; • we, or our collaborators, may be required to create a Medication Guide outlining the risks of the previously unidentified side effects for distribution to patients; • we, or our collaborators, could be sued and held liable for harm caused to patients; • the product may become less competitive; and • our reputation may suffer.
Even if we are able to establish agreements with contract manufacturers, reliance on contract manufacturers entails additional risks, including: 66 Table of Contents • manufacturing delays if our third-party contractors give greater priority to the supply of other products over EMPAVELI, SYFOVRE, or our product candidates or otherwise do not satisfactorily perform according to the terms of the agreements between us and them, or if unforeseen events in the manufacturing process arise; • the possible termination or nonrenewal of agreements by our third-party contractors at a time that is costly or inconvenient for us; • the possible breach by the third-party contractors of our agreements with them; • the failure of third-party contractors to comply with applicable regulatory requirements; • the possible mislabeling of clinical supplies, potentially resulting in the wrong dose amounts being supplied or active drug or placebo not being properly identified; • the possibility of clinical supplies not being delivered to clinical sites on time, leading to clinical trial interruptions, or of drug supplies not being distributed to commercial vendors in a timely manner, resulting in lost sales; and • the possible misappropriation of our proprietary information, including our trade secrets and know-how.
Even if we are able to establish agreements with contract manufacturers, reliance on contract manufacturers entails additional risks, including: • manufacturing delays if our third-party contractors give greater priority to the supply of other products over EMPAVELI, SYFOVRE, or our product candidates or otherwise do not satisfactorily perform according to the terms of the agreements between us and them, or if unforeseen events in the manufacturing process arise; • the possible termination or nonrenewal of agreements by our third-party contractors at a time that is costly or inconvenient for us; • the possible breach by the third-party contractors of our agreements with them; • the failure of third-party contractors to comply with applicable regulatory requirements; • the possible mislabeling of clinical supplies, potentially resulting in the wrong dose amounts being supplied or active drug or placebo not being properly identified; • the possibility of clinical supplies not being delivered to clinical sites on time, leading to clinical trial interruptions, or of drug supplies not being distributed to commercial vendors in a timely manner, resulting in lost sales; and • the possible misappropriation of our proprietary information, including our trade secrets and know-how.
Holders of the Convertible Notes have the right to require us to repurchase all or a portion of their Convertible Notes upon the occurrence of a fundamental change at a price equal to the principal amount of the Convertible Notes to be repurchased, plus accrued and unpaid interest.
Furthermore, holders of the Convertible Notes have the right to require us to repurchase all or a portion of their Convertible Notes upon the occurrence of a fundamental change at a price equal to the principal amount of the Convertible Notes to be repurchased, plus accrued and unpaid interest.
If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business and results of operations, including the imposition of significant criminal, civil and administrative sanctions including monetary penalties, damages, fines, disgorgement, individual imprisonment, and exclusion from participation in government funded healthcare programs, such as Medicare and Medicaid, additional reporting requirements and oversight if we become subject to a corporate integrity agreement or similar agreement to resolve allegations of non-compliance with these laws, reputational harm, and we may be required to curtail or restructure our operations.
If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business and results of operations, including the imposition of significant criminal, civil and administrative sanctions including monetary penalties, damages, fines, disgorgement, individual imprisonment, and exclusion from participation in government funded healthcare programs, 84 Table of Contents such as Medicare and Medicaid, additional reporting requirements and oversight if we become subject to a corporate integrity agreement or similar agreement to resolve allegations of non-compliance with these laws, reputational harm, and we may be required to curtail or restructure our operations.
Further, under the Pediatric Research Equity Act, or PREA, an NDA, biologics license application, or BLA, or supplement to an NDA or BLA for certain drugs and biological products must contain data to assess the safety and effectiveness of the drug or biological product in all relevant pediatric subpopulations and to support dosing and administration for each pediatric subpopulation for which the product is safe and effective, unless the sponsor receives a deferral or waiver from the FDA.
In addition, under the Pediatric Research Equity Act, or PREA, an NDA, biologics license application, or BLA, or supplement to an NDA or BLA for certain drugs and biological products must contain data to assess the safety and effectiveness of the drug or biological product in all relevant pediatric subpopulations and to support dosing and administration for each pediatric subpopulation for which the product is safe and effective, unless the sponsor receives a deferral or waiver from the FDA.
In cases where data from foreign clinical trials are intended to serve as the sole basis for marketing approval in the United States, the FDA will generally not approve the application on the basis of foreign data alone unless (i) the data are applicable to the U.S. population and U.S. medical practice; (ii) the trials were performed by clinical investigators of recognized competence and pursuant to good clinical practices, or GCP, regulations; and (iii) the data may be considered valid without the need for an on-site inspection by the FDA, or if the FDA considers such inspection to be necessary, the FDA is able to validate the data through an on-site inspection or other appropriate means.
In cases where data from foreign clinical trials are intended to serve as the sole basis for marketing approval in the United States, the FDA will generally not approve the application on the basis of foreign data alone unless (i) the data are applicable to the U.S. population and U.S. medical practice; (ii) the trials were performed by clinical investigators of recognized competence and pursuant to good clinical practices, or GCP, regulations; and (iii) the data may be considered valid without the need 71 Table of Contents for an on-site inspection by the FDA, or if the FDA considers such inspection to be necessary, the FDA is able to validate the data through an on-site inspection or other appropriate means.
The market price for our common stock may be influenced by many factors, including: • our success in commercializing EMPAVELI and SYFOVRE; • the timing and results of clinical trials of pegcetacoplan and any other product candidates; 93 Table of Contents • the success of existing or new competitive products or technologies; • results of discussions with regulatory authorities and regulatory actions with respect to our product candidates or our competitors’ products and product candidates; • announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures, collaborations or capital commitments; • commencement or termination of collaborations for our development programs; • failure or discontinuation of any of our product candidates or development programs; • results of clinical trials of product candidates of our competitors; • regulatory or legal developments in the United States and other countries; • developments or disputes concerning patent applications, issued patents or other proprietary rights; • the recruitment or departure of key personnel; • the level of expenses related to any of our product candidates or clinical development programs; • the results of our efforts to develop additional product candidates or products; • actual or anticipated changes in estimates as to financial results or development timelines; • announcement or expectation of additional financing efforts; • sales of our common stock by us, our insiders or other stockholders; • variations in our financial results or those of companies that are perceived to be similar to us; • short positions, hedging or other transactions in our securities in connection with our Convertible Notes; • changes in estimates or recommendations by securities analysts, if any, that cover our stock; • changes in the structure of healthcare payment systems; • market conditions in the pharmaceutical and biotechnology sectors; • general economic, industry and market conditions; and • the other factors described in this “Risk Factors” section.
The market price for our common stock may be influenced by many factors, including: • our success in commercializing EMPAVELI and SYFOVRE and obtaining regulatory approval of EMPAVELI in additional indications and jurisdictions and SYFOVRE in additional jurisdictions; • the timing and results of clinical trials of pegcetacoplan and any other product candidates; • the success of existing or new competitive products or technologies; • results of discussions with regulatory authorities and regulatory actions with respect to our product candidates or our competitors’ products and product candidates; • announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures, collaborations or capital commitments; • commencement or termination of collaborations for our development programs; • failure or discontinuation of any of our product candidates or development programs; • results of clinical trials of product candidates of our competitors; • regulatory or legal developments in the United States and other countries; • developments or disputes concerning patent applications, issued patents or other proprietary rights; • the recruitment or departure of key personnel; • the level of expenses related to any of our product candidates or clinical development programs; 85 Table of Contents • the results of our efforts to develop additional product candidates or products; • actual or anticipated changes in estimates as to financial results or development timelines; • announcement or expectation of additional financing efforts; • sales of our common stock by us, our insiders or other stockholders; • variations in our financial results or those of companies that are perceived to be similar to us; • short positions, hedging or other transactions in our securities in connection with our Convertible Notes; • changes in estimates or recommendations by securities analysts, if any, that cover our stock; • changes in the structure of healthcare payment systems; • market conditions in the pharmaceutical and biotechnology sectors; • general economic, industry and market conditions; and • the other factors described in this “Risk Factors” section.
While we monitor the financial performance and creditworthiness of our customers and provide reserves against trade receivables for expected credit losses that may result from a customer’s failure to pay, no assurances can be made that we will not experience delays in collecting payments, that we will collect the payments due to us or that our reserves will be sufficient.
While we monitor the financial performance and creditworthiness of our customers and provide reserves against trade receivables for expected credit losses that may result from a customer’s failure to pay, no assurances can be made that we will not experience delays in collecting payments, that we will collect the payments due to us.
If our or our partners’ or service providers’ privacy or data security measures fail to comply with the GDPR requirements, we may be subject to litigation, regulatory investigations, enforcement notices requiring us to change the way we use personal data and/or fines of up to 20 million Euros or up to 4% of the total worldwide annual turnover of the preceding financial year, whichever is higher, as well as compensation claims by affected individuals, negative publicity, reputational harm and a potential loss of business and goodwill.
If our or our partners’ or service providers’ privacy or data security measures fail to comply with the GDPR requirements, we may be subject to litigation, regulatory investigations, enforcement notices requiring us to change the way we use personal data and/or fines of up to 20 million Euros or up to 80 Table of Contents 4% of the total worldwide annual turnover of the preceding financial year, whichever is higher, as well as compensation claims by affected individuals, negative publicity, reputational harm and a potential loss of business and goodwill.
This may be particularly true in light of a decision from the Court of Appeals for the 11th Circuit in September 2021 finding that, for the purpose of determining the scope of exclusivity, the term “same disease or condition” means the designated “rare disease or condition” and could not be interpreted by the FDA to mean the “indication or use.” Thus, the court concluded, orphan drug exclusivity applies to the entire 80 Table of Contents designated disease or condition rather than the “indication or use.” Although there have been legislative proposals to overrule this decision, they have not been enacted into law.
This may be particularly true in light of a decision from the Court of Appeals for the 11th Circuit in September 2021 finding that, for the purpose of determining the scope of exclusivity, the term “same disease or condition” means the designated “rare disease or condition” and could not be interpreted by the FDA to mean the “indication or use.” Thus, the court concluded, orphan drug exclusivity applies to the entire designated disease or condition rather than the “indication or use.” Although there have been legislative proposals to overrule this decision, they have not been enacted into law.
The TCJA, as amended by the Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, among other things, contained significant changes to corporate taxation, including reduction of the 95 Table of Contents corporate tax rate from a top marginal rate of 35% to a flat rate of 21% for taxable years beginning after December 31, 2020 and limitation of the deduction for net operating losses to 80% of current year taxable income for losses arising in taxable years beginning after December 31, 2017 (though any such net operating losses may be carried forward indefinitely).
The TCJA, as amended by the Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, among other things, contained significant changes to corporate taxation, including reduction of the corporate tax rate from a top marginal rate of 35% to a flat rate of 21% for taxable years beginning after December 31, 2020 and limitation of the deduction for net operating losses to 80% of current year taxable income for losses arising in taxable years beginning after December 31, 2017 (though any such net operating losses may be carried forward indefinitely).
To the extent that any disruption or security breach were to result in a loss of, or damage to, our or our vendors’, collaborators’ or other contractors’ or consultants’ data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability, including litigation exposure, penalties and fines, we could become the subject of regulatory action or investigation, enrollment in our clinical trials could be negatively affected, our competitive position and reputation could be harmed and the further development and commercialization of our product candidates could be delayed.
To the extent that any disruption or security breach were to result in a loss of, or damage to, our or our vendors’, collaborators’ or other contractors’ or consultants’ data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability, including litigation exposure, penalties and fines, we could become the subject of regulatory action or investigation, enrollment in our clinical trials could be negatively affected, our competitive position and reputation could be harmed 59 Table of Contents and the further development and commercialization of our product candidates could be delayed.
The enactment of some or all of the recommendations set forth or that may be forthcoming in the Organization for Economic Cooperation and Development’s (“OECD”) project on “Base Erosion and Profit Shifting” by tax authorities in the countries in which we operate, could unfavorably impact our effective tax rate.
The enactment of some or all of the recommendations set forth or that may be forthcoming in the Organization for Economic Cooperation and Development’s, or OECD, project on “Base Erosion and Profit Shifting” by tax authorities in the countries in which we operate, could unfavorably impact our effective tax rate.
Additionally, HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act and its implementing regulations, also imposes obligations on covered entities and their business associates that perform certain functions or activities that involve the use or disclosure of protected health information on their behalf, including mandatory contractual terms and technical safeguards, with respect to maintaining the privacy, security and transmission of individually identifiable health information; Transparency Requirements.
Additionally, HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act and its implementing regulations, also imposes obligations on covered entities and their business associates that perform certain functions or activities that involve the use or disclosure of protected health information on their behalf, including mandatory contractual terms and technical safeguards, with respect to maintaining the privacy, security and transmission of individually identifiable health information; 78 Table of Contents Transparency Requirements.
If we are unable to successfully commercialize SYFOVRE and EMPAVELI, or develop, obtain marketing approval for or successfully commercialize pegcetacoplan in other indications and jurisdictions, either alone or through a collaboration, or if we experience significant delays in doing so, our business could be harmed.
If we are unable to continue to successfully commercialize SYFOVRE and EMPAVELI, or develop, obtain marketing approval for or successfully commercialize systemic pegcetacoplan in other indications and jurisdictions, either alone or through a collaboration, or if we experience significant delays in doing so, our business could be harmed.
The clinical 57 Table of Contents development of our product candidates is susceptible to the risk of failure inherent at any stage of product development, including failure to demonstrate efficacy in a clinical trial or across a broad population of patients, the occurrence of adverse events that are severe or medically or commercially unacceptable, failure to comply with protocols or applicable regulatory requirements and determination by the FDA or any comparable foreign regulatory authority that a product candidate may not continue development or is not approvable.
The clinical development of our product candidates is susceptible to the risk of failure inherent at any stage of product development, including failure to demonstrate efficacy in a clinical trial or across a broad population of patients, the occurrence of adverse events that are severe or medically or commercially unacceptable, failure to comply with protocols or applicable regulatory requirements and determination by the FDA or any comparable foreign regulatory authority that a product candidate may not continue development or is not approvable.
If Sobi is unable to meet its contractual obligations, we may be forced to focus our efforts internally to commercialize systemic pegcetacoplan outside of the United States without the assistance of a commercialization partner or seek another commercialization partner, either of which would result in us incurring greater expenses and could cause a delay in market penetration while we expand our commercial operations or seek an alternative commercialization partner.
If Sobi is unable to meet its contractual obligations, we may be forced to focus our efforts internally to 56 Table of Contents commercialize systemic pegcetacoplan outside of the United States without the assistance of a commercialization partner or seek another commercialization partner, either of which would result in us incurring greater expenses and could cause a delay in market penetration while we expand our commercial operations or seek an alternative commercialization partner.
Further, patients often acclimate to the therapy that they are currently taking and do not want to switch unless their physicians recommend switching products or they are required to switch therapies due to lack of reimbursement for existing therapies.
Further, patients often acclimate to the therapy that they are currently taking and do not want to switch unless their physicians recommend switching products, they are required to switch therapies due to lack of reimbursement for existing therapies, or they are not responding well to their existing therapy.
Even if we, or our collaborators, obtain orphan drug designation for a product candidate, such as is the case for pegcetacoplan for the treatment of PNH, we, or they, may not be able to obtain orphan drug exclusivity for that product candidate.
Even if we, or our collaborators, obtain orphan drug designation for a product candidate, such as is the case for pegcetacoplan for the treatment of PNH and C3G, we, or they, may not be able to obtain orphan drug exclusivity for that product candidate.
Even if we are not determined to have violated these laws, government investigations into these issues typically require the expenditure of significant resources and generate negative publicity, which could harm our business, financial condition, results of operations or prospects. 89 Table of Contents A variety of risks associated with international operations could materially adversely affect our business.
Even if we are not determined to have violated these laws, government investigations into these issues typically require the expenditure of significant resources and generate negative publicity, which could harm our business, financial condition, results of operations or prospects. A variety of risks associated with international operations could materially adversely affect our business.
The impact on the Company will depend on the timing of implementation, the exact nature of each country’s GloBE legislation, guidance, and regulations thereon and their application by the tax authorities either prospectively or retrospectively. We might not be able to utilize a significant portion of our net operating loss carryforwards and research and development tax credit carryforwards.
The impact on the Company will depend on the timing of implementation, the exact nature of each country’s GloBE legislation, guidance, and regulations thereon and their application by the tax authorities either prospectively or retrospectively. 87 Table of Contents We might not be able to utilize a significant portion of our net operating loss carryforwards and research and development tax credit carryforwards.
Our restated certificate of incorporation designates the state courts in the State of Delaware or, if no state court located within the State of Delaware has jurisdiction, the federal court for the District of Delaware, as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could discourage lawsuits against our company and our directors, officers and employees.
Our restated certificate of incorporation designates the state courts in the State of Delaware or, if no state court located within the State of Delaware has jurisdiction, the federal court for the District of Delaware, as the sole and exclusive forum for certain types 89 Table of Contents of actions and proceedings that may be initiated by our stockholders, which could discourage lawsuits against our company and our directors, officers and employees.
If we or our collaborators fail to comply with these laws and regulations, we or they and certain of our or their employees could be subject to substantial civil or criminal penalties, including the possible loss of export or import privileges; fines, which may be imposed on us or our collaborators and the respective responsible employees or managers; and, in extreme cases, the incarceration of responsible employees or managers.
If we or our collaborators fail to comply with these laws and regulations, we or they and certain of our 82 Table of Contents or their employees could be subject to substantial civil or criminal penalties, including the possible loss of export or import privileges; fines, which may be imposed on us or our collaborators and the respective responsible employees or managers; and, in extreme cases, the incarceration of responsible employees or managers.
Enrollment delays in our, or their, clinical trials may result in increased development costs for our product candidates, delay or halt the development of and approval processes for our product candidates and jeopardize our, or our collaborators’, ability to commence sales of and generate 60 Table of Contents revenues from our product candidates, which could cause the value of our company to decline and limit our ability to obtain additional financing, if needed.
Enrollment delays in our, or their, clinical trials may result in increased development costs for our product candidates, delay or halt the development of and approval processes for our product candidates and jeopardize our, or our collaborators’, ability to commence sales of and generate revenues from our product candidates, which could cause the value of our company to decline and limit our ability to obtain additional financing, if needed.
We may engage in these discussions and communicate with healthcare providers, payors and other constituencies in compliance with all applicable laws, regulatory guidance and industry best practices. We will need to carefully navigate the FDA’s various regulations, guidance and policies, along with recently enacted legislation, to ensure compliance with restrictions governing promotion of our products.
We may engage in these discussions and communicate with healthcare providers, payors and other constituencies in compliance with all applicable laws, regulatory guidance and industry best practices. We will need to carefully navigate the FDA’s 74 Table of Contents various regulations, guidance and policies, along with recently enacted legislation, to ensure compliance with restrictions governing promotion of our products.
As a result, we, or our collaborators, might obtain marketing approval for a product in a particular country, but then be subject to price regulations that delay commercial launch of the product, possibly for lengthy time periods, which may negatively impact the revenues we are able to generate from the sale of the product in that country.
As a result, we, or our collaborators, might obtain marketing approval for a product in a particular country, but then be subject to price 57 Table of Contents regulations that delay commercial launch of the product, possibly for lengthy time periods, which may negatively impact the revenues we are able to generate from the sale of the product in that country.
Once an NDA is approved, the product covered thereby becomes a “reference-listed drug” in the FDA’s publication, “Approved Drug Products with Therapeutic Equivalence Evaluations,” or the Orange Book. Manufacturers may seek approval of generic versions of reference-listed drugs through submission of an ANDA in the United States.
Once an NDA is approved, the product covered thereby becomes a “reference-listed drug” in the FDA’s publication, “Approved Drug Products with Therapeutic Equivalence Evaluations,” or the Orange Book. Manufacturers may seek approval of generic versions of reference-listed drugs through submission of an abbreviated new drug application, or ANDA, in the United States.
Additionally, some state and local laws require the registration of pharmaceutical sales representatives in 86 Table of Contents the jurisdiction. State and foreign laws also govern the privacy and security of health information in some circumstances, many of which differ from each other in significant ways and often are not pre-empted by HIPAA, thus complicating compliance efforts.
Additionally, some state and local laws require the registration of pharmaceutical sales representatives in the jurisdiction. State and foreign laws also govern the privacy and security of health information in some circumstances, many of which differ from each other in significant ways and often are not pre-empted by HIPAA, thus complicating compliance efforts.
Accordingly, a material weakness increases the risk that the financial information we report contains material errors. We regularly review and update our internal controls, disclosure controls and procedures, and corporate governance policies. In addition, we are required under the Sarbanes-Oxley Act of 2002 to report annually on our internal control over financial reporting.
Accordingly, a material weakness increases the risk that the financial information we report contains material errors. 86 Table of Contents We regularly review and update our internal controls, disclosure controls and procedures, and corporate governance policies. In addition, we are required under the Sarbanes-Oxley Act of 2002 to report annually on our internal control over financial reporting.
In addition, as we commercialize EMPAVELI and SYFOVRE, and if we obtain marketing approval of pegcetacoplan in other indications or jurisdictions or for our other product candidates, we expect we will incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution to the extent that such sales, marketing, manufacturing and distribution are not the responsibility of the collaborator.
In addition, as we continue to commercialize EMPAVELI and SYFOVRE, and if we obtain marketing approval of pegcetacoplan in other indications or jurisdictions or for our other product candidates, we expect we will incur significant additional commercialization expenses related to product sales, marketing, manufacturing and distribution to the extent that such sales, marketing, manufacturing and distribution are not the responsibility of a collaborator.
Therefore, our ability, and the ability of our collaborators, to commercialize EMPAVELI, SYFOVRE, or any of our product candidates will depend in part on the extent to which coverage and reimbursement for these 63 Table of Contents products and related treatments will be available from third-party payors. Third-party payors decide which medications they will cover and establish reimbursement levels.
Therefore, our ability, and the ability of our collaborators, to commercialize EMPAVELI, SYFOVRE, or any of our product candidates will depend in part on the extent to which coverage and reimbursement for these products and related treatments will be available from third-party payors. Third-party payors decide which medications they will cover and establish reimbursement levels.
Penn has requested a waiver of the U.S. manufacturing requirement, but there can be no assurance that such waiver will be granted. Changes to the patent law in the United States and other jurisdictions could diminish the value of patents in general, thereby impairing our ability to protect our products.
Penn requested a waiver of the U.S. manufacturing requirement in early 2021, but there can be no assurance that such waiver will be granted. Changes to the patent law in the United States and other jurisdictions could diminish the value of patents in general, thereby impairing our ability to protect our products.
For the purposes of the statute, the term “commercially reasonable, 87 Table of Contents market-based terms” is defined as (1) the nondiscriminatory price at or below the most recent wholesale acquisition cost for the product, (2) a delivery schedule that meets the statutorily defined timetable, and (3) no additional conditions on the sale.
For the purposes of the statute, the term “commercially reasonable, market-based terms” is defined as (1) the nondiscriminatory price at or below the most recent wholesale acquisition cost for the product, (2) a delivery schedule that meets the statutorily defined timetable, and (3) no additional conditions on the sale.
These initiatives focus on common international principles for the entitlement to tax global corporate profits and enactment of minimum global tax rate of 15%. Many countries have or are in the process of enacting legislation intended to implement the OECD Global Anti-Base Erosion (“GloBE”) Model Rules effective on January 01, 2024.
These initiatives focus on common international principles for the entitlement to tax global corporate profits and enactment of minimum global tax rate of 15%. Many countries have or are in the process of enacting legislation intended to implement the OECD Global Anti-Base Erosion, or GloBEModel Rules effective on January 01, 2024.
We have received approval for SYFOVRE for the treatment of patients with GA in the United States, but there is no assurance that we will receive regulatory approvals for SYFOVRE for the treatment of GA in other jurisdictions.
We have received approval for SYFOVRE for the treatment of patients with GA in the United States and Australia, but there is no assurance that we will receive regulatory approvals for SYFOVRE for the treatment of GA in other jurisdictions.
Refer to Note 14, “Income Taxes,” of the consolidated financial statements included in this Annual Report on Form 10-K for additional information related to our accounting for income taxes.
Refer to Note 13, “Income Taxes,” of the consolidated financial statements included in this Annual Report on Form 10-K for additional information related to our accounting for income taxes.
A delay in obtaining or failure to obtain required approvals and clearances could negatively impact our ability or that of our collaborators, including Sobi, to generate revenue from the particular product candidate, which likely would result in significant harm to our financial position and adversely impact our stock price.
A delay in obtaining or failure to obtain required approvals and clearances could negatively impact our ability or that 70 Table of Contents of our collaborators, including Sobi, to generate revenue from the particular product candidate, which likely would result in significant harm to our financial position and adversely impact our stock price.
Third-party manufacturers are required to comply with cGMPs and similar regulatory requirements outside the United States, such as the ICH. Facilities used by our third-party manufacturers must be approved by the FDA after we submit an NDA and before potential approval of the product candidate.
Third-party manufacturers are required to comply with cGMPs and similar regulatory requirements outside the United States, such as the ICH. Facilities used by our third-party manufacturers must be approved by the FDA after we submit an NDA and before 61 Table of Contents potential approval of the product candidate.
If our manufacturers cannot successfully manufacture material that conforms to our specifications or the strict regulatory requirements of the FDA and any applicable foreign regulatory authority, they may not be able to meet our supply requirements for clinical and commercial operations 67 Table of Contents and to secure the applicable approval for their manufacturing facilities.
If our manufacturers cannot successfully manufacture material that conforms to our specifications or the strict regulatory requirements of the FDA and any applicable foreign regulatory authority, they may not be able to meet our supply requirements for clinical and commercial operations and to secure the applicable approval for their manufacturing facilities.
In addition, disruptions may still result also from the recent COVID-19 pandemic or any similar event that may occur in the future. During the recent COVID-19 pandemic, a number of companies announced receipt of complete response letters due to the FDA’s inability to complete required inspections for their applications.
In addition, disruptions may still result also from the recent COVID-19 pandemic or any similar event that may occur in the future. During the recent COVID-19 pandemic, a number of companies announced receipt of complete response letters due to the 76 Table of Contents FDA’s inability to complete required inspections for their applications.
These competitors also compete with us in recruiting and retaining qualified scientific and management personnel and establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, the development of our product candidates.
These competitors also compete with us in recruiting and retaining qualified scientific and management personnel and establishing clinical trial sites and patient 51 Table of Contents registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, the development of our product candidates.
The financial exposure from the events referenced above could either not be insured against or not be fully covered through any insurance that we maintain and could have a material adverse effect on our business, financial condition, results of operations or 65 Table of Contents prospects.
The financial exposure from the events referenced above could either not be insured against or not be fully covered through any insurance that we maintain and could have a material adverse effect on our business, financial condition, results of operations or prospects.
We have not had and do not have primary control over patent prosecution and maintenance for certain of the patents and patent applications we license, and therefore cannot guarantee that these patents and applications will be prosecuted in a manner consistent with the best interests of our business.
We have not had and do not have primary control over patent 63 Table of Contents prosecution and maintenance for certain of the patents and patent applications we license, and therefore cannot guarantee that these patents and applications will be prosecuted in a manner consistent with the best interests of our business.
As a result, the inventorship or ownership of our intellectual property may be challenged in the future. Pending and future patent applications may not result in patents being issued which protect our business, in whole or in part, or which effectively prevent others from commercializing competitive products.
As a result, the inventorship or ownership of our intellectual property may be challenged in the future. 64 Table of Contents Pending and future patent applications may not result in patents being issued which protect our business, in whole or in part, or which effectively prevent others from commercializing competitive products.
This reliance on third parties increases the risk that we will not have sufficient quantities of pegcetacoplan or our other product candidates or such quantities at an acceptable cost, which could delay, prevent or impair our development or commercialization efforts.
This reliance on third parties increases the risk that we will not have sufficient quantities of 60 Table of Contents pegcetacoplan or our other product candidates or such quantities at an acceptable cost, which could delay, prevent or impair our development or commercialization efforts.
Our ability to become and remain profitable depends on our ability to generate significant product revenue. Our ability to generate significant revenue will require us to successfully commercialize EMPAVELI and SYFOVRE in the approved jurisdictions.
Our ability to become and remain profitable depends on our ability to generate significant product revenue. Our ability to generate significant revenue will require us to successfully commercialize EMPAVELI and SYFOVRE in the approved indications.
Drug products on FDA’s drug shortage list are exempt from these new provisions unless the product has been on the list for more than six continuous months, or the FDA determines that the supply of the product will help alleviate or prevent a shortage.
Drug products on FDA’s drug shortage list are exempt from these 79 Table of Contents new provisions unless the product has been on the list for more than six continuous months, or the FDA determines that the supply of the product will help alleviate or prevent a shortage.
We have received approval for EMPAVELI for the treatment of patients with PNH in several jurisdictions, but there is no assurance that we will receive regulatory approvals for EMPAVELI in other indications. Clinical testing is expensive, is difficult to design and implement, can take many years to complete and is inherently uncertain as to outcome.
We have received approval for EMPAVELI for the treatment of patients with PNH in several jurisdictions, but there is no assurance that we will receive regulatory approvals for EMPAVELI in other indications, including C3G and IC-MPGN. Clinical testing is expensive, is difficult to design and implement, can take many years to complete and is inherently uncertain as to outcome.
We or others may later discover that EMPAVELI or SYFOVRE is less effective than previously believed or causes safety issues that were not previously identified, which could compromise our ability, or that of our collaborators, to market the product.
We or others may later discover that EMPAVELI or SYFOVRE is less effective than previously believed or causes safety issues that were not identified in clinical trials, which could compromise our ability, or that of our collaborators, to market the product.
If we fail to maintain the patents and patent applications covering our products and product candidates, our competitive position would be adversely affected. 75 Table of Contents If we are unable to obtain licenses from third parties on commercially reasonable terms or fail to comply with our obligations under such agreements, our business could be harmed .
If we fail to maintain the patents and patent applications covering our products and product candidates, our competitive position would be adversely affected. If we are unable to obtain licenses from third parties on commercially reasonable terms or fail to comply with our obligations under such agreements, our business could be harmed .
The 96 Table of Contents change to existing rules, future changes, if any, or the need for us to modify a current tax or accounting position may adversely affect our reported financial results or the way we conduct our business. We do not anticipate paying any cash dividends on our capital stock in the foreseeable future.
The change to existing rules, future changes, if any, or the need for us to modify a current tax or accounting position may adversely affect our reported financial results or the way we conduct our business. We do not anticipate paying any cash dividends on our capital stock in the foreseeable future.
These requirements include submissions of safety and other post-marketing information and reports, registration and listing 81 Table of Contents requirements, requirements relating to manufacturing, quality control, quality assurance and corresponding maintenance of records and documents, requirements regarding the distribution of samples to physicians and recordkeeping.
These requirements include submissions of safety and other post-marketing information and reports, registration and listing requirements, requirements relating to manufacturing, quality control, quality assurance and corresponding maintenance of records and documents, requirements regarding the distribution of samples to physicians and recordkeeping.
In addition, failure to comply with these laws and regulations may result in substantial fines, penalties or other sanctions. Our employees or consultants may engage in misconduct or other improper activities, including non-compliance with regulatory standards and requirements, which could cause significant liability for us and harm our reputation.
In addition, failure to comply with these laws and regulations may result in substantial fines, penalties or other sanctions. 83 Table of Contents Our employees or consultants may engage in misconduct or other improper activities, including non-compliance with regulatory standards and requirements, which could cause significant liability for us and harm our reputation.
The proposed revisions remain to be agreed and adopted 77 Table of Contents by the European Parliament and European Council and the proposals may therefore be substantially revised before adoption, which is not anticipated before early 2026. The revisions may however have a significant impact on the pharmaceutical industry and our business in the long term.
The proposed revisions remain to be agreed and adopted by the European Parliament and European Council and the proposals may therefore be substantially revised before adoption, which is not anticipated before early 2026. The revisions may however have a significant impact on the pharmaceutical industry and our business in the long term.
If we are unable to successfully commercialize EMPAVELI in the United States for PNH, SYFOVRE worldwide for GA, or to develop, receive marketing approval for and successfully commercialize pegcetacoplan in other indications or jurisdictions on our own or with a collaborator, or experience delays as a result of any of these factors or otherwise, our business could be substantially harmed.
If we are unable to successfully commercialize EMPAVELI in the United States for PNH, C3G and IC-MPGN, SYFOVRE in the United States and select other jurisdictions for GA, or to develop, receive marketing approval for and successfully commercialize pegcetacoplan in other indications or jurisdictions on our own or with a collaborator, or experience delays as a result of any of these factors or otherwise, our business could be substantially harmed.
If the actual market for EMPAVELI in PNH, SYFOVRE in GA, in other indications is smaller than we expect, our product revenue may be limited, and it may be more difficult for us to achieve or maintain profitability. 56 Table of Contents We face substantial competition, which may result in others discovering, developing or commercializing products before or more successfully than we do.
If the actual market for EMPAVELI in PNH, SYFOVRE in GA, in other future indications is smaller than we expect, our product revenue may be limited, and it may be more difficult for us to achieve or maintain profitability. We face substantial competition, which may result in others discovering, developing or commercializing products before or more successfully than we do.
Many of these factors are beyond our control, including clinical development, the regulatory submission process, potential threats to our intellectual property rights and the manufacturing, marketing and sales efforts of our collaborators, including Sobi.
Many of these factors are beyond our control, including the results of clinical development, the regulatory approval process, potential threats to our intellectual property rights and the manufacturing, marketing and sales efforts of our collaborators, including Sobi.
We expect that current laws, as well as other healthcare reform measures that may be adopted in the future, may result in more rigorous coverage 83 Table of Contents criteria and in additional downward pressure on the price that we, or our collaborators, may receive for any approved products.
We expect that current laws, as well as other healthcare reform measures that may be adopted in the future, may result in more rigorous coverage criteria and in additional downward pressure on the price that we, or our collaborators, may receive for any approved products.
These products may compete with our products in jurisdictions where we do not have any issued or licensed patents and any future patent claims or other intellectual property rights may not be effective or sufficient to prevent them from so competing.
These products may compete with our products in jurisdictions 67 Table of Contents where we do not have any issued or licensed patents and any future patent claims or other intellectual property rights may not be effective or sufficient to prevent them from so competing.
A deferral may be granted 76 Table of Contents for several reasons, including a finding that the product or therapeutic candidate is ready for approval for use in adults before pediatric trials are complete or that additional safety or effectiveness data needs to be collected before the pediatric trials begin.
A deferral may be granted for several reasons, including a finding that the product or therapeutic candidate is ready for approval for use in adults before pediatric trials are complete or that additional safety or effectiveness data needs to be collected before the pediatric trials begin.
Our expectations regarding our short-term and long-term funding requirements are based on assumptions that may prove to be wrong, and we may need additional capital resources to fund our operating plans and capital expenditure requirements. We are devoting substantial resources to the commercial infrastructure for SYFOVRE for GA.
Our expectations regarding our short-term and long-term funding requirements are based on assumptions that may prove to be wrong, and we may need additional capital resources to fund our operating plans and capital expenditure requirements. We are devoting substantial resources to the commercialization of SYFOVRE for GA.
We are building focused capabilities to commercialize SYFOVRE in GA and EMPAVELI in PNH and other indications where we believe that the medical specialists for such indications are sufficiently concentrated to allow us to effectively promote the product with a targeted sales team.
We are building focused capabilities to commercialize SYFOVRE in GA and EMPAVELI in PNH, C3G and IC-MPGN where we believe that the medical specialists for such indications are sufficiently concentrated to allow us to effectively promote the product with a targeted sales team.
Even if we receive accelerated approval from the FDA, EMA or comparable regulatory authorities, if our confirmatory trials do not verify clinical benefit, or if we do not comply with rigorous post-marketing requirements, the FDA, EMA or such other regulatory authorities may seek to withdraw accelerated approval.
Even if we receive accelerated approval from the FDA, EMA or comparable regulatory 72 Table of Contents authorities, if our confirmatory trials do not verify clinical benefit, or if we do not comply with rigorous post-marketing requirements, the FDA, EMA or such other regulatory authorities may seek to withdraw accelerated approval.
Net losses and negative cash flows have had, and will continue to have, an adverse effect on our stockholders’ equity and working capital. We expect to continue to incur significant expenses and operating losses for at least this year.
Net losses and negative cash flows have had, and will continue to have, an adverse effect on our stockholders’ equity and working capital. We expect to continue to incur significant expenses for the foreseeable future and may incur operating losses for at least this year.
Compliance with such regulations may limit our exclusive rights, subject us to expenditure of resources with respect to reporting requirements and limit our ability to contract with foreign manufacturers.
Compliance with such regulations 66 Table of Contents may limit our exclusive rights, subject us to expenditure of resources with respect to reporting requirements and limit our ability to contract with foreign manufacturers.
Regulatory authorities outside the United States facing similar circumstances may adopt similar restrictions or other policy measures in response to the recent COVID-19 pandemic or a similar public health emergency and may also experience delays in their regulatory activities.
Regulatory authorities outside the United States facing similar circumstances may adopt similar restrictions or other policy measures in response to a similar public health emergency and may also experience delays in their regulatory activities.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeThe Head of Information Technology cybersecurity function brings security credentials and expertise, with broad global cybersecurity and compliance experience in life science, healthcare, and federal government. In addition to our cybersecurity 98 Table of Contents team, a managed security service provider provides us with additional coverage to monitor, detect and respond to threats and vulnerabilities.
Biggest changeThe Head of Information Technology cybersecurity function brings security credentials and expertise, with broad global cybersecurity and compliance experience in life science, healthcare, and federal government. In addition to our cybersecurity team, a managed security service provider provides us with additional coverage to monitor, detect and respond to threats and vulnerabilities.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeLeased Munich, Germany Office space 1,363 sq. m. Subleased Watertown, MA, USA Lab space 9,704 sq. ft. Leased
Biggest changeSubleased Watertown, MA, USA Lab space 9,704 sq. ft. Leased 90 Table of Contents
Item 2. Pr operties. Details of our principal properties as of December 31, 2023, are provided below: Location Function Size Property Interest Waltham, MA, USA Corporate Headquarters 77,818 sq. ft. Leased San Francisco, CA, USA Office space 9,478 sq. ft. Leased Zug, Switzerland Office space 938 sq. m. Leased Melbourne, Australia Office space 241 sq. m.
Item 2. Pr operties. Details of our principal properties as of December 31, 2024, are provided below: Location Function Size Property Interest Waltham, MA, USA Corporate Headquarters 77,818 sq. ft. Leased San Francisco, CA, USA Office space 5,044 sq. ft. Leased Zug, Switzerland Office space 938 sq. m. Leased Munich, Germany Office space 1,363 sq. m.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeThe outcome of the matter described above cannot be predicted with certainty. However, we intend to vigorously defend against the litigation. Item 4. Mine Saf ety Disclosures. Not applicable. 99 Table of Contents PART II
Biggest changeThe Court has not yet ruled on this motion to dismiss, as of the date of issuance of these consolidated financial statements. The outcome of the matters described above cannot be predicted with certainty and therefore any loss is neither probable nor reasonably estimable. However, the Company intends to vigorously defend against these matters. Item 4. Mine Saf ety Disclosures.
The Amended Complaint is brought on behalf of a class of all persons and entities who purchased or otherwise acquired Apellis common stock between January 28, 2021 and July 28, 2023, inclusive, names the Company and President and Cedric Francois, our chief executive officer, as defendants, and makes similar allegations, asserts the same claims and seeks the same relief as the Complaint.
The Amended Complaint is brought on behalf of a class of all persons and entities who purchased or otherwise acquired Apellis common stock between January 28, 2021 and July 28, 2023, inclusive, names the Company and Cedric Francois, our chief executive officer, as defendants, and makes similar allegations, asserts the same claims and seeks the same relief as the Complaint.
The Court has not yet ruled on this motion. On October 23, 2023, the Court appointed Ray Peleckas and Michigan Laborers’ Pension Fund together as Co-Lead Plaintiffs and assigned the action the caption In Apellis Pharmaceuticals, Inc. Securities Litigation, Case 1:23-cv-00834-MN. The Co-Lead Plaintiffs filed an amended complaint on February 8, 2024 (the “Amended Complaint”).
On October 23, 2023, the Court appointed Ray Peleckas and Michigan Laborers’ Pension Fund together as Co-Lead Plaintiffs and assigned the action the caption In Apellis Pharmaceuticals, Inc. Securities Litigation, Case 1:23-cv-00834-MN. The Co-Lead Plaintiffs filed an amended complaint on February 8, 2024 (the “Amended Complaint”).
Added
On May 17, 2024, the United States District Court for the District of Delaware approved the motion to transfer to the United States District Court for the District of Massachusetts. The defendants moved to dismiss the Complaint on June 12, 2024, and the Court held oral argument on this motion for November 14, 2024.
Added
The Court has not yet ruled on this motion to dismiss.
Added
On December 19, 2024, purported stockholder Patrick Campbell, and on December 30, 2024, purported stockholder Kenneth Olson filed putative stockholder derivative lawsuits in the United States District Court for the District of Massachusetts on behalf of the Company against the Company’s directors for breach of fiduciary duty, unjust enrichment, waste, and alleged violation of Section 14(a) of the Exchange Act related to the design of SYFOVRE’s clinical trials and the risks associated with SYFOVRE’s commercial adoption.
Added
The complaints seek monetary and punitive damages, and costs, including attorneys’ fees. On January 21, 2025, the cases were consolidated under the caption In re Apellis Pharmaceuticals, Inc. Derivative Litigation , No. 1:24-cv-13128-JEK. By the same order, the Court stayed the stockholder derivative litigation pending the Court’s ruling on the defendants’ motion to dismiss in the securities class action.
Added
The Company’s businesses may also be subject at any time to other commercial disputes, product liability claims, personal injury claims, third-party subpoenas or various other lawsuits arising in the ordinary course of business, including intellectual property infringement, employment or investor matters, and the Company expects that this will continue to be the case in the future.
Added
For example, in August 2024, an individual filed a civil action against the Company in the United States District Court in the Northern District of Texas, alleging personal injury claims in connection with the use of SYFOVRE. We moved to dismiss this civil action in September 2024.
Added
Not applicable. 91 Table of Contents PART II

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures 99 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 100 Item 6. Reserved 101 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 102 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 119 Item 8.
Biggest changeItem 4. Mine Safety Disclosures 91 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 92 Item 6. Reserved 93 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 94 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 107 Item 8.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeIn addition, our development agreement with SFJ contains restrictive covenants that prohibit us, subject to certain exceptions, from paying dividends on our common stock, and future debt securities or other financing arrangements could contain similar or more restrictive negative covenants.
Biggest changeIn addition, the Sixth Street Financing Agreement contains restrictive covenants that prohibit us, subject to certain exceptions, from paying dividends on our common stock, and future debt securities or other financing arrangements could contain similar or more restrictive negative covenants.
Securities Authorized for Issuance under Equity Compensation Plans Information about our equity compensation plans is incorporated by reference herein to Item 12 of Part III of this Annual Report on Form 10-K. 100 Table of Contents Stock Performance Graph The following performance graph shall not be deemed “soliciting material” or to be “filed” with the SEC for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or the Exchange Act, or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any of our future filings under the Securities Act of 1933, as amended, or the Securities Act, or the Exchange Act, except to the extent that we specifically incorporate it by reference into such filing.
Securities Authorized for Issuance under Equity Compensation Plans Information about our equity compensation plans is incorporated by reference herein to Item 12 of Part III of this Annual Report on Form 10-K. 92 Table of Contents Stock Performance Graph The following performance graph shall not be deemed “soliciting material” or to be “filed” with the SEC for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or the Exchange Act, or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any of our future filings under the Securities Act of 1933, as amended, or the Securities Act, or the Exchange Act, except to the extent that we specifically incorporate it by reference into such filing.
The graph below compares the cumulative total stockholder return on our common stock between December 30, 2018 and December 31, 2023, with the cumulative total return of (a) the Nasdaq Composite Index and (b) the Nasdaq Biotechnology Index over the same period.
The graph below compares the cumulative total stockholder return on our common stock between December 30, 2018 and December 31, 2024, with the cumulative total return of (a) the Nasdaq Composite Index and (b) the Nasdaq Biotechnology Index over the same period.
Holders of Record As of February 20, 2024, we had 5 holders of record of our common stock. The actual number of stockholders is greater than this number of record holders, and includes stockholders who are beneficial owners, but whose shares are held in street name by brokers and other nominees.
Holders of Record As of February 19, 2025, we had 2 holders of record of our common stock. The actual number of stockholders is greater than this number of record holders, and includes stockholders who are beneficial owners, but whose shares are held in street name by brokers and other nominees.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeAs of December 31, 2023, the remaining pre-FDA approved inventory was $19.4 million, which primarily consisted of raw materials. 113 Table of Contents Research and Development Expenses The following table summarizes our research and development expenses incurred during the years ended December 31, 2023 and 2022, together with the dollar increase or decrease and percentage change in those items: (In thousands) Year Ended December 31, Change Change 2023 2022 $ % Program-specific external costs: PNH $ 19,504 $ 22,954 (3,450 ) (15 %) IC-MPGN & C3G 36,160 20,872 15,288 73 % ALS 9,378 16,876 (7,498 ) (44 %) CAD 7,115 11,159 (4,044 ) (36 %) HSCT-TMA 2,842 3,314 (472 ) (14 %) GA 52,078 82,325 (30,247 ) (37 %) Other development and discovery programs 52,733 42,069 10,664 25 % Total program-specific costs 179,810 199,569 (19,759 ) (10 %) Unallocated external costs Non-program specific external costs 7,002 29,089 (22,087 ) (76 %) Total unallocated external costs 7,002 29,089 (22,087 ) (76 %) Unallocated internal costs Compensation and related personnel costs 162,515 154,504 8,011 5 % Other expenses 5,060 4,074 986 24 % Total unallocated internal costs 167,575 158,578 8,997 6 % Total research and development costs 354,387 387,236 (32,849 ) (8 %) Research and development expenses decreased by $32.8 million to $354.4 million for the year ended December 31, 2023 from $387.2 million for the year ended December 31, 2022, a decrease of 8%.
Biggest changeResearch and Development Expenses The following table summarizes our research and development expenses incurred during the years ended December 31, 2024 and 2023, together with the dollar increase or decrease and percentage change in those items: (In thousands) Year Ended December 31, Change Change 2024 2023 $ % Program-specific external costs: PNH $ 17,879 $ 19,504 $ (1,625 ) (8 %) C3G & IC-MPGN 34,507 36,160 (1,653 ) (5 %) ALS 824 9,378 (8,554 ) (91 %) CAD 21,037 7,115 13,922 196 % HSCT-TMA 2,612 2,842 (230 ) (8 %) GA 59,134 52,078 7,056 14 % Other development and discovery programs 51,463 52,733 (1,270 ) (2 %) Total program-specific costs 187,456 179,810 7,646 4 % Unallocated external costs Non-program specific external costs 6,966 7,002 (36 ) (1 %) Total unallocated external costs 6,966 7,002 (36 ) (1 %) Unallocated internal costs Compensation and related personnel costs 128,029 162,515 (34,486 ) (21 %) Other expenses 5,119 5,060 59 1 % Total unallocated internal costs 133,148 167,575 (34,427 ) (21 %) Total research and development costs $ 327,570 $ 354,387 $ (26,817 ) (8 %) Research and development expenses decreased by $26.8 million to $327.6 million for the year ended December 31, 2024 from $354.4 million for the year ended December 31, 2023, a decrease of 8%.
The net proceeds from the sale of the 2020 Convertible Notes were approximately $322.9 after deducting the purchasers’ discounts and commission of $5.7 million and offering expenses of $0.3 million. We used $43.1 million of the net proceeds from the sale to pay the cost of the additional capped call transactions in May 2020 described below.
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. We used $43.1 million of the net proceeds from the sale to pay the cost of the additional capped call transactions in May 2020 described below.
In November 2023, we entered into a sales agreement, or the sales agreement, with Cowen and Company, LLC, or Cowen, as agent, pursuant to which the Company may offer and sell shares of our common stock having an aggregate offering from of up to $300.0 million from time to time.
In November 2023, we entered into a sales agreement, or the sales agreement, with Cowen and Company, LLC, or Cowen, as agent, pursuant to which we may offer and sell shares of our common stock having an aggregate offering from of up to $300.0 million from time to time.
We are also required to make milestone payments aggregating up to $3.2 million based upon the achievement of specified development and regulatory milestones and up to $5.0 million based upon the achievement of specified annual sales milestones with respect to each licensed product, and to pay low single-digit royalties based on net sales of each licensed product and with minimum quarterly royalty thresholds.
We are required to make milestone payments aggregating up to $3.2 million based upon the achievement of specified development and regulatory milestones and up to $5.0 million based upon the achievement of specified annual sales milestones with respect to each licensed product, and to pay low single-digit royalties based on net sales of each licensed product and with minimum quarterly royalty thresholds.
Our future funding requirements and long-term capital requirements will depend on many factors, including : • our ability to successfully commercialize and sell EMPAVELI and SYFOVRE in the United States; • the cost of and our ability to obtain regulatory approvals of SYFOVRE outside of the United States and to build a commercial infrastructure for SYFOVRE for GA in the United States and worldwide; • the cost of and our ability to effectively establish and maintain, the commercial infrastructure and manufacturing capabilities required to support the commercialization of EMPAVELI, systemic pegcetacoplan and SYFOVRE and any other products for which we receive marketing approval including product sales, medical affairs, marketing, manufacturing and distribution; • the scope, progress, timing, costs and results of clinical trials of, and research and preclinical development efforts for systemic pegcetacoplan, SYFOVRE and our other product candidates; • our ability to maintain a productive collaborative relationship with Sobi with respect to systemic pegcetacoplan, including our ability to achieve milestone payments under our agreement with Sobi; • our ability to identify additional collaborators for any of our product candidates and the terms and timing of any collaboration agreement that we may establish for the development and any commercialization of such product candidates; • the number and characteristics of future product candidates that we pursue and their development requirements; • the outcome, timing and costs of clinical trials and of seeking regulatory approvals of pegcetacoplan in other jurisdictions and indications and other product candidates we may pursue; • the costs of commercialization activities for any of our product candidates that receive marketing approval to the extent such costs are not the responsibility of any collaborators, including the costs and timing of establishing product sales, marketing, distribution and manufacturing capabilities; • subject to receipt of marketing approval, revenue, if any, received from commercial sales of pegcetacoplan in other jurisdictions and indications and our other product candidates; • our headcount growth and associated costs as we expand our research and development and establish a commercial infrastructure; • the costs of preparing, filing and prosecuting patent applications, maintaining and protecting our intellectual property rights and defending against intellectual property related claims; • the effect of competing technological and market developments; 117 Table of Contents • the effect of public health crises, including pandemics and epidemics, on the healthcare system and the economy generally and on our clinical trials and other operations specifically; • our ability to obtain adequate reimbursement for EMPAVELI and SYFOVRE in the United States or any other product we commercialize; and • the costs of operating as a public company.
Our future funding requirements and long-term capital requirements will depend on many factors, including : • our ability to continue to successfully commercialize and sell EMPAVELI and SYFOVRE in the United States; • the cost of and our ability to obtain regulatory approvals of SYFOVRE outside of the United States and continue to build a commercial infrastructure for SYFOVRE for GA in the United States and worldwide; • the cost of and our ability to effectively establish and maintain, the commercial infrastructure and manufacturing capabilities required to support the continued commercialization of EMPAVELI, SYFOVRE and any other products for which we receive marketing approval including product sales, medical affairs, marketing, manufacturing and distribution; • the scope, progress, timing, costs and results of clinical trials of, and research and preclinical development efforts for systemic pegcetacoplan, SYFOVRE and our other product candidates; • our ability to maintain a productive collaborative relationship with Sobi with respect to systemic pegcetacoplan, including our ability to achieve milestone payments under our agreement with Sobi; • our ability to identify additional collaborators for any of our product candidates and the terms and timing of any collaboration agreement that we may establish for the development and any commercialization of such product candidates; 105 Table of Contents • the number and characteristics of future product candidates that we pursue and their development requirements; • the outcome, timing and costs of clinical trials and of seeking regulatory approvals of pegcetacoplan in other jurisdictions and indications and other product candidates we may pursue; • the costs of commercialization activities for any of our product candidates that receive marketing approval to the extent such costs are not the responsibility of any collaborators, including the costs and timing of establishing product sales, marketing, distribution and manufacturing capabilities; • subject to receipt of marketing approval, revenue, if any, received from commercial sales of pegcetacoplan in other jurisdictions and indications and our other product candidates; • our headcount growth and associated costs as we expand our research and development and establish a commercial infrastructure; • the costs of preparing, filing and prosecuting patent applications, maintaining and protecting our intellectual property rights and defending against intellectual property related claims; • the effect of competing technological and market developments; • the effect of public health crises, including pandemics and epidemics, on the healthcare system and the economy generally and on our clinical trials and other operations specifically; • our ability to obtain adequate reimbursement for EMPAVELI and SYFOVRE in the United States or any other product we commercialize; and • the costs of operating as a public company.
In accordance with ASC Topic 470-20, “Debt – Debt with Conversion and Other Options,” or ASC 470-20, we 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.
In accordance with FASB ASC Topic 470-20, “Debt – Debt with Conversion and Other Options,” or ASC 470-20, we 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.
We anticipate that we will continue to incur significant commercialization expenses related to sales, marketing, medical affairs, manufacturing, distribution and other commercial infrastructure associated with the commercialization of EMPAVELI for the treatment of PNH and the commercialization of SYFOVRE for the treatment of GA.
We anticipate that we will continue to incur significant commercialization expenses related to sales, marketing, medical affairs, manufacturing, distribution and other commercial infrastructure associated with the commercialization of EMPAVELI for the treatment of PNH and other indications and the commercialization of SYFOVRE for the treatment of GA.
Net Cash (Used in) Provided by Investing Activities Net cash used in investing activities during the year ended December 31, 2023 was $0.7 million due primarily to purchases of fixed assets and partially offset by proceeds from the sale of fixed assets.
Net cash used in investing activities during the year ended December 31, 2023 was $0.7 million due primarily to purchases of fixed assets and partially offset by proceeds from the sale of fixed assets.
This is due to the numerous risks and uncertainties associated with developing therapeutics, including the uncertainties of: • 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; 107 Table of Contents • 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.
This is due to the numerous risks and uncertainties associated with developing therapeutics, including the uncertainties of: • 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.
Research and Development Expenses Research and development expenses consist primarily of costs incurred for our research activities, including our drug discovery efforts, and the development of our product candidates, which include: • employee-related expenses including salaries, bonuses, benefits and share-based compensation expense related to individuals performing research and development activities; • expenses incurred under agreements with third parties, including contract research organizations, or CROs, that conduct clinical trials and research and development activities on our behalf, and contract manufacturing organizations that manufacture quantities of drug supplies for both our preclinical studies and clinical trials; • the cost of consultants, including share-based compensation expense; and • various other expenses incident to the management of our preclinical studies and clinical trials.
Research and Development Expenses Research and development expenses consist primarily of costs incurred for our research activities, including our drug discovery efforts, and the development of our product candidates, which include: • employee-related expenses including salaries, bonuses, benefits and share-based compensation expense related to individuals performing research and development activities; 98 Table of Contents • expenses incurred under agreements with third parties, including contract research organizations, or CROs, that conduct clinical trials and research and development activities on our behalf, and contract manufacturing organizations that manufacture quantities of drug supplies for both our preclinical studies and clinical trials; • the cost of consultants, including share-based compensation expense; and • various other expenses incident to the management of our preclinical studies and clinical trials.
This resulted in inventory being sold during the years ended December 31, 2023 and 2022 for which a portion of the costs had been previously expensed prior to FDA approval. We expect this to continue to impact the cost of sales as the remaining pre-FDA inventory is sold to customers.
This resulted in inventory being sold during the years ended December 31, 2024 and 2023 for which a portion of the costs had been previously expensed prior to FDA approval. We expect this to continue to impact the cost of sales as the remaining pre-FDA inventory is sold to customers.
Comparison of the Years Ended December 31, 2022 and 2021 A discussion of changes in our results of operations during the year ended December 31, 2022 compared to the year ended December 31, 2021 has been omitted from this Annual Report on Form 10-K but may be found in “Item 7.
Comparison of the Years Ended December 31, 2023 and 2022 A discussion of changes in our results of operations during the year ended December 31, 2023 compared to the year ended December 31, 2022 has been omitted from this Annual Report on Form 10-K but may be found in “Item 7.
If, however, the market price per share of our common stock, as measured under the terms of the capped call transactions, exceeds $63.14, the cap price of the capped call transactions, 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.
If, however, the market price per share of our common stock, as measured under the terms of the capped call transactions, exceeds $63.14, the cap price of the 97 Table of Contents capped call transactions, 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.
The scope of the services under the research and development contracts can be modified and the contracts cancelled by us upon 118 Table of Contents written notice. In some instances, the contracts may be cancelled by the third party upon written notice.
The scope of the services under the research and development contracts can be modified and the contracts cancelled by us upon 106 Table of Contents written notice. In some instances, the contracts may be cancelled by the third party upon written notice.
In addition, we are obligated to pay a specified portion of income it receives from sublicensees. In April 2023, we paid $2.3 million for the achievement of a regulatory milestone as a result of the FDA approval of SYFOVRE in February 2023.
In addition, we are obligated to pay a specified portion of income we receive from sublicensees. In April 2023, we paid $2.3 million for the achievement of a regulatory milestone as a result of the FDA approval of SYFOVRE in February 2023.
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 our 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 our common stock and the conversion rate on each such trading day; • if we call 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. 104 Table of Contents 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 regardless of the foregoing circumstances.
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 our 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; 96 Table of Contents • 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 our common stock and the conversion rate on each such trading day; • if we call 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.
If we are unable to generate sufficient funds from unwinding the capped call transactions and sales of EMPAVELI and SYFOVRE, or raise additional funds when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
If we are unable to generate sufficient funds from sales of EMPAVELI and SYFOVRE, or raise additional funds when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
In January 2021, July 2021 and July 2022, we entered into separate, privately negotiated exchange agreements to modify the conversion terms with certain holders of the 2019 Convertible Notes and 2020 Convertible Notes.
In January 2021, July 2021 and July 2022, we entered into separate, privately negotiated exchange agreements to modify the conversion terms with certain holders of our Convertible Notes.
We have not called for redemption any of the Convertible Notes as of December 31, 2023.
We have not called for redemption any of the Convertible Notes as of December 31, 2024.
We did not make any sales under the sales agreement during the year ended December 31, 2023.
We did not make any sales under the sales agreement during the year ended December 31, 2024.
Net Cash Provided by Financing Activities Net cash provided by financing activities was $394.5 million during the year ended December 31, 2023 and consisted primarily of proceeds from the follow-on common stock and pre-funded warrant offering in March 2023 of $384.4 million, $71.3 million proceeds upon the exercise of stock options and $5.4 million proceeds from the issuance of our common stock under the employee stock purchase plan, partially offset by payments of $55.5 million for the development liability as well as the payments of employee tax withholding related to equity-based compensation of $11.0 million. 116 Table of Contents Net cash provided by financing activities was $365.7 million during the year ended December 31, 2022 and consisted primarily of proceeds from the follow-on common stock offering in March 2022 of $380.1 million, $21.5 million of proceeds upon the exercise of stock options and $4.2 million proceeds from the issuance of common stock under the employee stock purchase plan, partially offset by payments of $34.5 million for the development liability as well as $5.7 million for the payments of employee tax withholdings related to equity-based compensation.
Net cash provided by financing activities was $394.5 million during the year ended December 31, 2023 and consisted primarily of proceeds from the follow-on common stock and pre-funded warrant offering in March 2023 of $384.4 million, $71.3 million proceeds upon the exercise of stock options and $5.4 million proceeds from the issuance of our common stock under the employee stock purchase plan, partially offset by payments of $55.5 million for the development liability as well as the payments of employee tax withholding related to equity-based compensation of $11.0 million.
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.
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.
Overview We are 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.
Overview We are 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.
In June 2022, we paid an additional $5.0 million to Penn upon the achievement of a development milestone. In January 2023, we paid $1.0 million to Penn upon the achievement of a sales milestone for EMPAVELI in 2022.
In June 2022, we paid an additional $5.0 million to Penn as a sublicense fee upon the achievement of a development milestone under the Sobi collaboration. In January 2023, we paid $1.0 million to Penn upon the achievement of a sales milestone for EMPAVELI in 2022.
As we receive inventory reports from SPs and SDs and have visibility into the inventory distribution channel, we are able to make a reasonable estimate of future potential product returns based on this on-hand channel inventory data and sell-through data obtained from SPs and SDs.
We do not allow product returns for product that has been dispensed to a patient. As we receive inventory reports from SPs and SDs and have visibility into the inventory distribution channel, we are able to make a reasonable estimate of future potential product returns based on this on-hand channel inventory data and sell-through data obtained from SPs and SDs.
If our cash and cash equivalents, cash generated from the unwind of the capped call transactions, and cash generated from sales of EMPAVELI and SYFOVRE are not sufficient to fund our planned expenditures, we will need to finance our cash needs through external sources of funds, which may include equity offerings, debt financings, collaborations, strategic alliances or licensing arrangements.
If our cash and cash equivalents, and cash generated from sales of EMPAVELI and SYFOVRE are not sufficient to fund our planned expenditures, we will need to finance our cash needs through external sources of funds, which may include equity offerings, debt financings, collaborations, strategic alliances or licensing arrangements. We currently do not have any committed external source of funds.
We recognized $366.3 million and $65.1 million of net product revenue as of December 31, 2023 and 2022, respectively. The net product revenue of $366.3 million for the year ended December 31, 2023, consists of $91.0 million in net product revenue from sales of EMPAVELI and $275.2 million in net product revenue from sales of SYFOVRE.
The net product revenue of $366.3 million for the year ended December 31, 2023, consists of $91.0 million in net product revenue from sales of EMPAVELI and $275.2 million in net product revenue from sales of SYFOVRE.
We believe that our cash and cash equivalents as of December 31, 2023 and the cash that we anticipate generating from the unwind of the capped call transactions, together with the cash that we anticipate will be generated from sales of EMPAVELI and SYFOVRE will be sufficient to fund our projected operating expenses and capital expenditure requirements for at least the next 12 months, as well as our anticipated longer-term cash requirements and obligations.
Together with the cash that we anticipate will be generated from sales of EMPAVELI and SYFOVRE, we expect that our current cash and cash equivalents will be sufficient to fund our projected operating expenses and capital expenditure requirements for at least the next 12 months, as well as our anticipated longer-term cash requirements and obligations.
As of December 31, 2023, we recorded in accrued expenses $0.5 million for a sublicense fee owed to Penn related to Sobi obtaining regulatory approval in Japan. Additionally, as of December 31, 2023, we recorded in accrued expenses $1.5 million as a result of the achievement of a sales milestone for EMPAVELI and Aspaveli.
In January 2024, we paid $0.5 million for a sublicense fee owed to Penn related to Sobi obtaining regulatory approval in Japan. Additionally, in January 2024, we paid $1.5 million as a result of the achievement of a sales milestone for EMPAVELI and Aspaveli.
In addition, we expect to continue to incur these expenses if and as we continue to develop and conduct our ongoing and planned clinical trials of pegcetacoplan and our other product candidates; initiate and continue research and preclinical and clinical development efforts for any future product candidates; seek to identify and develop additional product candidates for complement-dependent diseases; seek regulatory and marketing approvals for our product candidates that successfully complete clinical trials, if any; establish sales, marketing, distribution and other commercial infrastructure to commercialize any additional products for which we may obtain marketing approval; require the manufacture of larger quantities of product candidates for clinical development and, potentially, commercialization; maintain, expand and protect our intellectual property portfolio; hire and retain additional personnel, such as clinical, quality control, regulatory and scientific personnel; add operational, financial and management information systems and personnel, including personnel to support our product development and add equipment and physical infrastructure to support our research and development programs and commercialization. 103 Table of Contents SFJ Agreement On February 28, 2019, we entered into a development funding agreement, which we refer to as the SFJ agreement, with SFJ Pharmaceuticals Group, or SFJ, under which SFJ agreed to provide funding to us to support the development of systemic pegcetacoplan for the treatment of patients with PNH.
In addition, we expect to continue to incur these expenses if and as we continue to develop and conduct our ongoing and planned clinical trials of pegcetacoplan and our other product candidates; initiate and continue research and preclinical and clinical development efforts for any future product candidates; seek to identify and develop additional product candidates for complement-dependent diseases; seek regulatory and marketing approvals for our product candidates that successfully complete clinical trials, if any; establish sales, marketing, distribution and other commercial infrastructure to commercialize any additional products for which we may obtain marketing approval; require the manufacture of larger quantities of product candidates for clinical development and, potentially, commercialization; maintain, expand and protect our intellectual property portfolio; hire and retain additional personnel, such as clinical, quality control, regulatory and scientific personnel; add operational, financial and management information systems and personnel, including personnel to support our product development and add equipment and physical infrastructure to support our research and development programs and commercialization.
We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the 99 Table of Contents basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on February 21, 2023, which discussion is incorporated herein by reference, and which is available free of charge on the SECs website at www.sec.gov.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2023, 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”), which discussion is incorporated herein by reference, and which is available free of charge on the SECs website at www.sec.gov.
Licensing and Collaboration Revenue Licensing and other revenue is derived from our collaboration agreement with Sobi concerning the development and commercialization of pegcetacoplan and specified other compstatin analogues or derivatives for use systemically or for local non-ophthalmic administration.
Product Revenues Product revenue is derived from our sales of our commercial products, EMPAVELI and SYFOVRE, in the United States . Licensing and Collaboration Revenue Licensing and other revenue is derived from our collaboration agreement with Sobi concerning the development and commercialization of pegcetacoplan and specified other compstatin analogues or derivatives for use systemically or for local non-ophthalmic administration.
We anticipate that our general and administrative expenses will increase in the future to support continued research and development activities, potential commercialization of our product candidates and costs of operating as a public company.
Marketing and advertising costs include marketing literature, promotional activities, conferences and seminars, branding and sponsorships. We anticipate that our selling, general and administrative expenses will increase in the future to support continued research and development activities, potential commercialization of our product candidates and costs of operating as a public company.
The significant estimates in our accrued research and development expenses include the costs incurred for 110 Table of Contents services performed by CROs and contract manufacturing organizations, or CMOs, in connection with research and development activities for which we have not yet been invoiced.
The significant estimates in our accrued research and development expenses include the costs incurred for services performed by CROs and contract manufacturing organizations, or CMOs, in connection with research and development activities for which we have not yet been invoiced. 100 Table of Contents We base our expenses related to CROs and CMOs on our estimates of the services received and efforts expended pursuant to quotes and contracts with CROs and CMOs.
In 2023, we incurred $5.0 million as a result of the achievement of sales milestones for SYFOVRE of which $2.0 million was paid in October 2023 and the remainder of $3.0 million was accrued for as of December 31, 2023.
In 2023, we incurred $5.0 million as a result of the achievement of sales milestones for SYFOVRE of which we paid $2.0 million in October 2023 and the remaining $3.0 million in January 2024.
The unwind agreements will apply to the portion of the capped call transactions in a notional amount corresponding to the $426.1 million principal amount of Convertible Notes that we held in treasury as of December 31, 2023 or have been previously converted. We expect that aggregate cash proceeds to us from the unwind transactions will be approximately $100 million.
The unwind agreements applied to the portion of the capped call transactions in a notional amount corresponding to the $426.1 million principal amount of Convertible Notes that we held in treasury as of December 31, 2024 or have been previously converted.
In arriving at our estimate for product returns, we also consider historical product returns, the underlying product demand, and industry data specific to the specialty pharmaceutical distribution industry.
In arriving at our estimate for product returns, we also consider historical product returns (to the extent available) and the underlying product demand.
As of December 31, 2023, we have incurred an aggregate royalty expense of $8.9 million as a result of sales of SYFOVRE. In addition, we are also party to a license agreement with Penn for an exclusive, worldwide license to specified patent rights for the development and commercialization of products in nonophthalmic fields of use, as defined therein.
In addition, we are a party to a license agreement with Penn for an exclusive, worldwide license to specified patent rights for the development and commercialization of products in nonophthalmic fields of use, as defined therein.
Product Returns: Consistent with industry practice, we offer SPs and SDs limited product return rights for damages, shipment errors, and expiring product; provided that the return is within a specified period around the product expiration date as set forth in the applicable individual distribution agreement. We do not allow product returns for product that has been dispensed to a patient.
The following are the variable considerations with critical accounting estimates: Returns : Consistent with industry practice, we offer SPs and SDs limited product return rights for shipment errors or expiring or defective products; provided that the return is within a specified period around the product expiration date as set forth in the applicable individual distribution agreement.
The decrease in research and development expenses was primarily attributable to a $19.8 million decrease in program specific external costs and a $22.1 million decrease in non-program specific external costs, which were partially offset by a $8.0 million increase in compensation and related personnel costs and $1.0 million increase in other internal costs.
The decrease in research and development expenses was primarily attributable to a $34.5 million decrease in compensation and related personnel costs, which was partially offset by a $7.6 million increase in program specific external costs.
Cash Flows The following table provides information regarding our cash flows for the years ended December 31, 2023 and 2022: (in thousands) Year Ended December 31, 2023 2022 Net cash used in operating activities $ (594,735 ) $ (513,745 ) Net cash (used in) /provided by investing activities (674 ) 59,893 Net cash provided by financing activities 394,499 365,659 Effect of exchange rate changes on cash and cash equivalents 135 (488 ) Net decrease in cash and cash equivalents $ (200,775 ) $ (88,681 ) Net Cash Used in Operating Activities Net cash used in operating activities was $594.7 million for the year ended December 31, 2023 and consisted primarily of a net loss of $528.6 million adjusted for $134.1 million of non-cash items, including share-based compensation expense of $105.9 million, depreciation expense of $1.8 million, accretion of discount to the development liability of $26.0 million and accretion of discounts for convertible debt of $0.3 million.
Cash Flows The following table provides information regarding our cash flows for the years ended December 31, 2024 and 2023: (in thousands) Year Ended December 31, 2024 2023 Net cash used in operating activities $ (87,866 ) $ (594,735 ) Net cash used in investing activities (403 ) (674 ) Net cash provided by financing activities 149,241 394,499 Effect of exchange rate changes on cash, cash equivalents and restricted cash (659 ) 135 Net increase (decrease) in cash, cash equivalents and restricted cash $ 60,313 $ (200,775 ) Net Cash Used in Operating Activities Net cash used in operating activities was $87.9 million for the year ended December 31, 2024 and consisted primarily of a net loss of $197.9 million adjusted for $128.4 million of non-cash items, including share-based compensation expense of $114.1 million, depreciation expense of $1.8 million, loss on extinguishment of development liability of $1.9 million and accretion of discount to the development liability of $8.9 million.
The increase was primarily due to foreign currency revaluation losses. Income Tax Expense Income tax expense was $2.1 million for the year ended December 31, 2023 as compared to $0.7 million for the year ended December 31, 2022. The increase is primarily due to an expansion in state tax jurisdictions.
Other (Expense)/ Income, Net Other expense was $2.2 million for the year ended December 31, 2024 as compared to other expense of $0.7 million for the year ended December 31, 2023. The increase was primarily due to foreign currency revaluation losses.
The determination of whether inventory costs will be realizable requires estimates by management. If actual market conditions are less favorable than projected by management, additional write-downs of inventory may be required which would be recorded as a cost of sales in the consolidated statements of operations and comprehensive loss.
If actual market conditions are less favorable than projected by management, additional write-downs of inventory may be required which would be recorded as a cost of sales in the consolidated statements of operations and comprehensive loss. Accrued Research and Development Expenses As part of the process of preparing our financial statements, we are required to estimate our accrued expenses.
Licensing and other revenue of $10.3 million for the year ended December 31, 2022 consisted of $7.3 million in revenue from product supplied to Sobi and $3.0 million in royalty revenue from Sobi. Cost of Sales Cost of sales was $58.5 million and $5.6 million for the year ended December 31, 2023 and 2022, respectively.
Licensing and Other Revenue Licensing and other revenue was $71.4 million and $30.3 million for the year ended December 31, 2024 and 2023, respectively. Licensing and other revenue of $71.4 million for the year ended December 31, 2024 consisted of $53.0 million in revenue from product supplied to Sobi, and $18.4 million in royalty revenue from Sobi.
Net cash used in operating activities was $513.7 million for the year ended December 31, 2022 and consisted primarily of a net loss of $652.2 million adjusted for $154.1 million of non-cash items, including share-based compensation expense of $91.1 million, a loss on early exchange of debt of $32.9 million, the forfeiture of accrued interest in the exchange of the Convertible Notes of $1.3 million, depreciation expense of $1.6 million, amortization of discounts for convertible notes, net of financing costs of $0.3 million, and accretion of discount to the development liability of $26.9 million.
Net cash used in operating activities was $594.7 million for the year ended December 31, 2023 and consisted primarily of a net loss of $528.6 million adjusted for $134.1 million of non-cash items, including share-based compensation expense of $105.9 million, depreciation expense of $1.8 million, accretion of discount to the development liability of $26.0 million and accretion of discounts for 104 Table of Contents convertible debt of $0.3 million.
Approximately $93.9 million principal amount of Convertible Notes remained outstanding and held by third parties as of December 31, 2023. Capped Call Transactions In September 2019 and May 2020, concurrently with the pricing of the 2019 Convertible Notes and 2020 Convertible Notes, respectively, we entered into capped call transactions with two counterparties.
As of December 31, 2024 we held in treasury Convertible Notes in principal amount of $425.4 million which notes had not been cancelled. Capped Call Transactions In September 2019 and May 2020, concurrently with the pricing of the 2019 Convertible Notes and 2020 Convertible Notes, respectively, we entered into capped call transactions with two counterparties.
We remain responsible for our license fee obligations (including royalty obligations) to the University of Pennsylvania and for our payment obligations to SFJ. 106 Table of Contents Financial Operations Overview Revenue Our revenues consist of product sales of EMPAVELI and SYFOVRE, and revenues derived from our collaboration arrangement with Sobi.
We remain responsible for our license fee obligations (including royalty obligations) to the University of Pennsylvania. Financial Operations Overview Revenue Our revenues consist of product sales of EMPAVELI and SYFOVRE, and revenues derived from our collaboration arrangement with Sobi. Revenue is recognized when, or as, we satisfy a performance obligation by transferring a promised good or service to a customer.
If actual results in the future vary from estimates, we may need to adjust its estimates, which would affect net revenue in the period of adjustment.
The amount of variable consideration that is included in the transaction price may be constrained. Actual amounts of consideration ultimately received may differ from our estimates. If actual results in the future vary from estimates, we may need to adjust its estimates, which would affect net revenue in the period of adjustment.
We perform an assessment of the recoverability of capitalized inventory during each reporting period and write down any excess and obsolete inventories to their estimated realizable value in the period in which the impairment is first identified. Such impairment charges, should they occur, are recorded within cost of sales.
Inventory costs include third-party contract manufacturing, third-party packaging services, labor, overhead, and freight. We perform an assessment of the recoverability of capitalized inventory during each reporting period, and write down any excess and obsolete inventories to their estimated realizable value in the period in which the impairment is first identified.
(2) Amounts include our obligations under supply agreements with Bachem and NOF as of December 31, 2023 and obligations under supply agreements with other vendors. (3) Represents future minimum lease payments under our non-cancelable operating leases. The minimum lease payments above do not include any related common area maintenance charges or real estate taxes.
(4) Represents future minimum lease payments under our non-cancelable operating leases. The minimum lease payments above do not include any related common area maintenance charges or real estate taxes.
We are obligated to pay SFJ additional payments due on each anniversary of FDA and EC regulatory approval through 2027. Convertible Notes On September 16, 2019, we completed a private offering of convertible notes, or the 2019 Convertible Notes, with an aggregate principal amount of $220.0 million issued pursuant to an indenture, or the Indenture, with U.S.
Convertible Notes On September 16, 2019, we completed a private offering of convertible notes, or the 2019 Convertible Notes, with an aggregate principal amount of $220.0 million issued pursuant to an indenture, or the Indenture, with U.S. Bank National Association, as trustee.
If the actual timing of the performance of services or the level of effort varies from our estimate, we adjust the accrual or prepaid expense accordingly.
In accruing service fees, we estimate the time-period over which services will be performed and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from our estimate, we adjust the accrual or prepaid expense accordingly.
Under our collaboration and license agreement, or the Sobi collaboration agreement, with Swedish Orphan Biovitrum AB (Publ), or Sobi, Sobi has global co-development and exclusive ex-U.S. commercialization rights for systemic pegcetacoplan and initiated the commercial launch of EMPAVELI/Aspaveli in jurisdictions outside of the United States during the first quarter of 2022.
We have exclusive U.S. commercialization rights for EMPAVELI, and our collaboration partner, Swedish Orphan Biovitrum AB (Publ), or Sobi, has exclusive ex-U.S. commercialization rights for systemic pegcetacoplan outside of the United States.
Under the agreement, Sobi made an upfront payment of $250.0 million in November 2020, and agreed to pay up to an aggregate of $915.0 million upon the achievement of specified one-time regulatory and commercial milestone events, of which we received $50.0 million in April 2022 for the achievement of a regulatory development milestone in Europe and $5.0 million in October 2023 for the achievement of a regulatory development milestone in Japan.
Under the Sobi collaboration agreement, Sobi made an upfront payment of $250.0 million in November 2020, and agreed to pay up to an aggregate of $915.0 million upon the achievement of specified one-time regulatory and commercial milestone events, including a $50.0 million milestone payable following the first regulatory and reimbursement approval of systemic pegcetacoplan in any major European country, and to reimburse us for up to $80.0 million in development costs.
We have repaid the term loan facility and the promissory note in full, and we exchanged $425.4 million of aggregate principal amount of our Convertible Notes for shares of our common stock.
To date, we have exchanged $425.4 million and converted $0.7 million of aggregate principal amount of our Convertible Notes for shares of our common stock.
For performance obligations that are satisfied over time, we recognize revenue using an input or output measure of progress that best depicts the satisfaction of the relevant performance obligation. Product Revenues Product revenue is derived from our sales of our commercial products, EMPAVELI and SYFOVRE, in the United States .
An asset is transferred when, or as, the customer obtains control of that asset. For performance obligations that are satisfied over time, we recognize revenue using an input or output measure of progress that best depicts the satisfaction of the relevant performance obligation.
A conditional conversion feature of the Convertible Notes was triggered as of June 30, 2021, and as a result the Convertible Notes were convertible at the option of the holders until September 30, 2021.
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 not triggered as of December 31, 2024.
In June 2019 we amended the SFJ agreement to include an additional $20 million funding payment. SFJ paid us $80.0 million under the amended SFJ agreement between June 2019 and January 2020.
Under the SFJ agreement, SFJ paid us an aggregate of $140.0 million between June 2019 and January 2020.
We believe that this approach can result in broad inhibition of the principal pathways of the complement system and has the potential to effectively control diseases with high unmet need and that are driven by excessive complement activation. In February 2023, the U.S.
We believe that this approach has the potential to effectively control diseases with high unmet need and that are driven by excessive complement activation. We currently have two marketed drugs that target C3, the central protein in the complement cascade: SYFOVRE (pegcetacoplan injection), approved by the U.S.
We received total net proceeds of $384.4 million, after deducting underwriting discounts and commissions of $18.8 million and offering cost of $0.3 million.
We received total net proceeds of $384.4 million, after deducting underwriting discounts and commissions of $18.8 million and offering cost of $0.3 million. For the period ended December 31, 2024 2,299,991 shares of common stocks were issued from the exercise of pre-funded warrants.
There may be instances in which payments made to our CROs and CMOs will exceed the level of services provided and result in a prepayment of the research and development expense. In accruing service fees, we estimate the time period over which services will be performed and the level of effort to be expended in each period.
The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows. There may be instances in which payments made to our CROs and CMOs will exceed the level of services provided and result in a prepayment of the research and development expense.
Under the SFJ agreement, following regulatory approval by the FDA in May 2021 for the use of systemic pegcetacoplan as a treatment for PNH, we 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.
Following regulatory approval for the use of systemic pegcetacoplan as a treatment for PNH by the FDA in May 2021 and by the EMA in December 2021, we became obligated to pay SFJ an aggregate of $460.0 million in payments between 2021 and 2027. We paid SFJ an aggregate of $94.0 million through March 31, 2024.
Additionally, future commercial and regulatory factors beyond our control will impact our clinical development programs and plans. General and Administrative Expenses General and administrative expenses consist primarily of employee-related expenses including salaries, bonuses, benefits and share-based compensation.
Additionally, future commercial and regulatory factors beyond our control will impact our clinical development programs and plans.
To date, there have been no material differences between our estimates of such expenses and the amounts actually incurred. Convertible Notes On September 16, 2019, we completed a private offering of the 2019 Convertible Notes with an aggregate principal amount of $220.0 million.
To date, there have been no material differences between our estimates of such expenses and the amounts actually incurred.
The increase was primarily attributable to an increase in employee related costs of $84.4 million, an increase in commercialization related activity of $123.2 million, an increase in professional and consulting fees of $3.2 million, an increase in travel related expenses of $5.0 million and higher office costs of $8.2 million.
The increase was primarily attributable to an increase of $2.1 million in office expenses, an increase of $1.7 million in factoring fees, an increase of $1.2 million in travel expenses, and an increase of $1.5 million in insurance expenses, which were partially offset by a decrease of $4.6 million in professional and consulting fees and a decrease in personnel related costs of $1.7 million.
The increase in interest income was primarily attributable to increased interest rates during the year ended December 31, 2023. Interest Expense Interest expense was $29.6 million for the year ended December 31, 2023, a decrease of $3.0 million, compared to $32.6 million for the year ended December 31, 2022.
Interest Income Interest income was $12.8 million for the year ended December 31, 2024, a decrease of $8.1 million, compared to $20.9 million for the year ended December 31, 2023. The decrease in interest income was primarily attributable to decreased investments and a decline in money market rates during the year ended December 31, 2024.
For performance obligations that are satisfied over time, we recognize revenue using an input or output measure of progress that best depicts the satisfaction of the relevant performance obligation. 108 Table of Contents We recognize revenue from product sales at the net sales price which includes estimates of variable consideration for which reserves are established and reflects each of these as a reduction to the revenue.
Product Revenues We recognize revenue from product sales at the net sales price which includes estimates of variable consideration for which reserves are established and reflects each of these as a reduction to the revenue. Overall, these reserves reflect our best estimates of the amount of consideration to which we are entitled based on the terms of the contract.
Our net losses were $528.6 million, $652.2 million, and $746.4 million for the years ended December 31, 2023, 2022 and 2021, respectively. As of December 31, 2023, we had an accumulated deficit of $2.8 billion. Our operating results may fluctuate significantly from quarter to quarter and year to year.
As of December 31, 2024, we had an accumulated deficit of $3.0 billion. Our operating results may fluctuate significantly from quarter to quarter and year to year.
Other internal costs increased due to a $1.0 million increase in travel related expenses. General and Administrative Expenses General and administrative expenses increased by $223.6 million to $500.8 million for the year ended December 31, 2023, from $277.2 million for the year ended December 31, 2022, an increase of 81%.
Selling, General and Administrative Expenses Selling, general and administrative expenses increased by $0.3 million to $501.1 million for the year ended December 31, 2024, from $500.8 million for the year ended December 31, 2023.
Contractual Obligations The following table summarizes our significant contractual obligations as of payment due date by period at December 31, 2023: Payments Due by Period (In thousands) Less than More than Total 1 Year 1-3 Years 3-5 Years 5 Years SFJ agreement $ 366,000 $ 98,750 $ 212,000 $ 55,250 $ — Convertible notes (1) 102,797 3,286 99,511 — — Non-cancellable purchase commitments (2) 110,677 107,877 800 2,000 — Operating leases (3) 19,789 7,393 11,537 859 — Total $ 599,263 $ 217,306 $ 323,848 $ 58,109 $ — (1) Amounts include interest on long-term debt obligations under the debt outstanding as of December 31, 2023, applying contractual fixed interest rate and assuming scheduled payments are paid as contractually required through maturity.
Contractual Obligations The following table summarizes our significant contractual obligations as of payment due date by period at December 31, 2024: Payments Due by Period (In thousands) Less than More than Total 1 Year 1-3 Years 3-5 Years 5 Years Credit Facility (1) $ 595,778 $ 42,102 $ 84,205 $ 84,320 $ 385,151 Convertible notes (2) 99,511 3,286 96,225 — — Non-cancellable purchase commitments (3) 56,489 54,089 1,400 1,000 — Operating leases (4) 18,307 7,468 9,427 1,412 — Total $ 770,085 $ 106,945 $ 191,257 $ 86,732 $ 385,151 (1) Amounts include interest on the credit facility outstanding as of December 31, 2024, applying contractual interest rate and assuming scheduled payments are paid as contractually required through maturity.
The increase in compensation and related personnel costs was driven by a $5.2 million increase in salaries and benefits due to higher headcount compared to the prior year, a $1.9 million increase in severance costs related to the reduction in workforce announced in August 2023 and a $0.9 million increase in stock compensation expense associated with the grant of stock options and restricted stock units to employees.
The decrease in compensation and related personnel costs of $34.5 million was driven by a $32.8 million decrease in salaries and benefits due to lower headcount compared to the prior year and a $1.7 million decrease in share-based compensation expense.
We have certain non-cancelable purchase obligations related to the manufacturing of drug substance and drug product, with Bachem, agreeing to purchase a significant portion of our requirements for the pegcetacoplan drug substance over the next five years and a commercial supply agreement with NOF Corporation, or NOF, to purchase activated polyethylene glycol derivative, or PEG, which is a component of pegcetacoplan.
We have certain non-cancelable purchase obligations related to the manufacturing of drug substance and drug product. We have agreed to purchase from Bachem Americas, Inc. a significant portion of its requirements for the pegcetacoplan drug substance.
Further, it included a net decrease in operating assets of $28.1 million and an increase in accounts payable and accrued expenses of $12.3 million.
Further, it included a net increase in operating assets and liabilities of $18.4 million, which was driven by an increases in accounts receivable of $58.5 million, an increase in inventory of $10.8 million, a decrease in prepaid assets of $20.4 million, a decrease in other current assets of $10.8 million, an increase in accounts payable of $1.1 million, and an increase in accrued expenses of $18.2 million.
The decrease is primarily due to the lower outstanding principal amount of our convertible notes during the year ended December 31, 2023. Other (Expense)/ Income, Net Other expense was $0.7 million for the year ended December 31, 2023 as compared to other expense of $0.3 million for the year ended December 31, 2022.
Income Tax Expense Income tax expense was $1.2 million for the year ended December 31, 2024 as compared to $2.1 million for the year ended December 31, 2023. The decrease is primarily due to state taxes.
Net cash provided by investing activities during the year ended December 31, 2022 was $59.9 million due primarily to $393.2 million in proceeds from maturities of marketable securities, partially offset by $331.9 million in purchases of marketable securities.
Net Cash Used in Investing Activities Net cash used in investing activities during the year ended December 31, 2024 was $0.4 million due primarily to purchases of fixed assets.
The increase in cost of sales was primarily driven by a $22.9 million increase due to increased product volume from commercial sales and product provided under our patient assistance programs, a $7.0 million increase from cost of supply provided under the Sobi collaboration agreement, a $11.2 million increase in royalty expense, a $6.5 million increase due to the achievement of various sales-based milestones, a $0.5 million increase due to a sublicense fee, and a $4.9 million increase in expenses incurred related to excess or obsolete inventory.
The increase in cost of sales was primarily driven by a $6.1 million increase due to higher volume from commercial sales and product provided under our patient assistance programs, a $27.4 million increase due to higher volume of product supplied to Sobi, a $6.0 million increase in royalty expense, a $11.7 million increase in expenses incurred related to excess, obsolete or scrapped inventory, and $8.0 million incurred in connection with the termination of minimum purchase obligations. 101 Table of Contents In addition, prior to receiving FDA approval for EMPAVELI on May 14, 2021, the costs associated with the manufacture of EMPAVELI inventory were expensed as incurred as research and development expense.
The net product revenue of $65.1 million for the year ended December 31, 2023 consisted solely of net product revenue from sales of EMPAVELI. SYFOVRE was approved by the FDA in February 2023 and we did not record any net product revenue from sales of SYFOVRE in the year ended December 31, 2022.
We recognized $710.0 million and $366.3 million of net product revenue as of December 31, 2024 and 2023, respectively. The net product revenue of $710.0 million for the year ended December 31, 2024, consists of $98.1 million in net product revenue from sales of EMPAVELI and $611.9 million in net product revenue from sales of SYFOVRE.
These decreases were partially offset by increases in study costs consistent with the progression of our Phase 2 NOBLE trial and Phase 3 VALIANT trial for IC-MPGN and C3G as well as increases in other development and discovery programs.
These increases were partially offset by a $1.7 million decrease related to C3G and IC-MPGN costs, a $1.6 million decrease in PNH, a $8.6 million decrease in ALS costs due to the discontinuation of the Phase 2 MERIDIAN study, and a $1.3 million decrease in other development and discovery program costs.
Licensing and Other Revenue Licensing and other revenue was $30.3 million and $10.3 million for the year ended December 31, 2023 and 2022, respectively.
Cost of Sales Cost of sales was $117.7 million and $58.5 million for the year ended December 31, 2024 and 2023, respectively.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeDue to the short-term duration of our investment portfolio and the low risk profile of our investments, an immediate 10% change in interest rates would not have a material effect on the fair market value of our investment portfolio.
Biggest changeDue to the short-term duration of our investment portfolio and the low risk profile of our investments, an immediate 10% change in interest rates would not have a material effect on the fair market value of our investment portfolio. 107 Table of Contents
Item 7A. Quantitative and Qualita tive Disclosures About Market Risk. We are exposed to market risk related to changes in interest rates. As of December 31, 2023, we had cash and cash equivalents of $351.2 million, consisting primarily of money market funds and U.S. treasury securities.
Item 7A. Quantitative and Qualita tive Disclosures About Market Risk. We are exposed to market risk related to changes in interest rates. As of December 31, 2024, we had cash and cash equivalents of $411.3 million, consisting primarily of money market funds and U.S. treasury securities.

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