28 Feb Apellis lands as much as $250M in financing from drug development company

Apellis Pharmaceuticals Inc. has reached a deal with a globally oriented drug development company that could give Apellis as much as $250 million in financing through what Apellis calls “a novel, risk-sharing collaboration.”

Apellis, a Crestwood, Ky.-based clinical-stage biopharmaceutical company, said it has partnered with Pleasanton, Calif.-based SFJ Pharmaceuticals Inc. to support the development of Apellis’ signature treatment, APL-2, in rare blood and autoimmune disorders.

SFJ Pharmaceuticals’ drug-development strategy involves partnering with pharmaceutical companies to co-develop new drugs by providing funding and clinical research support, according to a filing with the Securities and Exchange Commission from Apellis. SFJ Pharmaceuticals is supported by Blackstone Life Sciences, a division of New York City-based private-equity and financial-services firm The Blackstone Group, and London-based venture capital firm Abingworth LLP.

The deal is the first time that SFJ Pharmaceuticals has partnered with a pre-revenue company, according to a news release. None of Apellis’ treatments have been approved for marketing by the Food and Drug Administration.

Apellis CEO and co-founder Cedric Francois said in an interview that SFJ Pharmaceuticals conducted extensive due diligence on Apellis’ business and research.

“As a very young public company, we have to earn our stripes, and deals like this help us do that,” Francois said. “We are excited about collaborating with SFJ on our program in PNH.”

Apellis (Nasdaq: APLS) could receive as much as $170 million in financing from SFJ Pharmaceuticals for its research into paroxysmal nocturnal hemoglobinuria, or PNH, treatments. Here’s how that breaks down:

• $60 million to support Apellis’ PNH research after the signing of the agreement;
• As much as $60 million more if Apellis reaches clinical milestones that it expects to achieve in 2019 and if it has enough cash resources to support the business for 10 months;
• An additional $50 million in PNH clinical program funding if Apellis’ PNH current trial produces favorable data by March 30, 2020.

PNH causes the body to prematurely destroy blood cells. Apellis’ research of APL-2’s treatment of PNH is in stage 3 trials. (You can read more about research phases on the FDA’s website.)

The remaining $80 million would come through a to-be-established joint-development agreement between Apellis and SFJ Pharmaceuticals. The companies have a letter of intent to negotiate terms to support Apellis’ clinical development of APL-2 in treating two rare autoimmune blood disorders: cold agglutinin disease, or CAD, and warm antibody hemolytic anemia, or wAIHA.

Apellis would get $30 million in funding after a joint-development agreement is established and as much as $50 million if Apellis achieves clinical milestones in its CAD and wAIHA research.

Apellis will retain full commercial right to all of APL-2’s treatments worldwide and will maintain financial flexibility with this deal, according to the release.

Apellis would pay $2.5 million back to SFJ Pharmaceutical for each final regulatory approval Apellis receives from the Food and Drug Administration and the European Medicines Agency, the FDA equivalent for the European Union. On top of that, Apellis would pay SFJ an additional $192.5 million in six annual payments after APL-2 is approved by the Food and Drug Administration to treat PNH.

The annual payment amount doubles to $385 million if Apellis’ PNH treatment receives approval by both agencies.

But Apellis won’t have to pay SFJ Pharmaceuticals back if PNH does not receive regulatory approval, Francois said.

“[SFJ Pharmaceutical] is also placing a bet on Apellis’ capability to commercialize to a level that will allow us to pay them back in turn,” Francois said. “By any account, this is a very innovative way to finance this project.”