Our 12-month price target for Apellis is $49, derived using a discounted cash flow (DCF) analysis. We use a weighted average cost of capital (WACC) of 10% and a -20% terminal growth rate post 2035. Apellis owns patents and patent applications covering the composition of matter for pegcetacoplan that are expected to expire in 2032 or 2033. We model patent-term extension under the Hatch-Waxman Act to 2035, which assumes 14 years of patent exclusivity following the Empaveli approval for PNH in 2021.

We rate APLS High Risk based on typically volatile nature of small-cap biotech stocks. Downside risks to our target price include: 1) To date, Apellis has reported rare cases of retinal vasculitis following treatment with Syfovre. There are still many unknowns given the root cause is unclear, and the impact on Syfovre’s launch could be more significant than we currently assume in our model. 2) Our Syfovre projections could underestimate the competitive pressures from Izervay in GA. 3) Syfovre could fail to gain approval in Europe. 4) Label expansion studies for Empaveli in additional indications could fail.