5Source: Credit Suisse Research
Apellis (APLS)
Bull Thesis
APL-2 established clear differentiation and benefit in PNH, has
shown strong efficacy in GA, and carries substantial pipeline
optionality – this is the next big product in complement! With PNH
offering a floor, and a home-run scenario if GA hits, stock offers
an attractive benefit/risk. APLS is also an attractive M&A target
with near-commercial opportunities and a pipeline-in-a-product.
APL-2 established superiority to Soliris by offering a clinically
meaningful benefit over C5 inhibition. It may take over much
larger share than originally expected – why would anyone not start
on a superior drug?
APL-2 has demonstrated a promising efficacy profile in one of the
largest Phase 2 studies in geographic atrophy (GA), a progressive
eye disease with high unmet need. With ~1m subjects in the US
suffering from the disease, the TAM is a multi-billion dollar
opportunity.
C3 is a central convergence point for the complement cascade,
regardless of pathway activation. Targeting C3 may address a
broader range of indications compared to other complement
inhibitors currently on the market and in development.
Bear Thesis
Commercial opportunity for APL-2 in PNH is limited, and GA
studies are low probability considering all the safety/tolerability
unknowns. Expansion opportunities for C3 franchise are
facing a high degree of competition.
There is some regulatory uncertainty in PNH, and commercial
opportunity might be fairly small (subset a subjects with
clinically meaningful EVH). There are questions on the dosing
regimen appeal for systemic applications, and an uphill battle
against market leader Alexion for share.
Despite a big theoretical TAM in geographic atrophy program,
slow progressing nature and potentially high treatment burden
are likely going to limit persistence. It’s difficult to have high
conviction on the probability of success and final product
profile given new onset exudation (“wAMD conversion”),
potential inflammation issues, and the early manufacturing
set-back in the trial.
COVID-19 might have a relevant impact on the ongoing GA
Ph3 studies (both enrollment and data integrity/trial conduct),
as it target a potential at-risk population.
Despite theoretical optionality in C3-inhibition, competition
from more selective complement inhibitors and potential
safety concerns may limit role/pricing power for APL-2
across indications.
