Is Apellis Pharmaceuticals Stock A Buy?

Apellis Pharmaceuticals Inc (NASDAQ:APLS) is a biopharmaceutical company that started 2020 with a bang.

Its lead drug candidate for paroxysmal nocturnal hemoglobinuria (PNH) beat the competition from Alexion Pharmaceuticals (NASDAQ:ALXN), a $23 billion pharmaceutical giant.

This set off a volatile share price that had its ups and downs throughout the year. But what now, is Apellis Pharmaceuticals stock a Buy?

The company’s C3 therapies are showing positive results across the board. In fact, a November 2020 announcement for pegcetacoplan targeted a March 2021 release with full approval from the FDA.

It will replace C5 inhibitors for patients with persistently low hemoglobin to combat fatigue and cut the need for blood transfusions.

While its cause is certainly noble, the pharmaceutical industry is brutal. It’s taking market share from much larger companies, and the battle won’t be easy. Let’s put the company under the microscope to decide if it is worth the buy at virtually an all-time high market capitalization.

Apellis Pharmaceuticals 

Apellis Pharmaceuticals is a global biopharmaceutical company based in Waltham, Massachusetts that is leading the way in C3 therapies. The C3 gene contains instructions to build C3 proteins, which play a key role in our body’s immune response.

The most popular biopharmacological treatments are currently C5 inhibitors. Anti-C5 monoclonal antibodies help block intravascular hemolysis and stabilize hemoglobin levels in many patients. But it’s not always the final answer, and this is where C3 genes come into play.

C3 proteins must be regulated to ensure they only attack foreign substances in your body to keep them clean.

If things are out of whack, they could start attacking healthy body cells and create chaos within your body. This became more of a reality than a theory when the FDA provided approval for its usage to treat PNH.

PNH is a rare blood disease that causes red blood cells to break down, which often results in anemia. It only affects one in a million people and is typically diagnosed between the ages of 35 and 50. The only approved treatment up until now were Soliris and Ultomiris, both owned by Alexion Pharmaceuticals (ALXN).

Here’s an overview of the company’s financials to determine its market value.

Is Apellis Pharmaceuticals Stock A Buy?

Apellis Pharmaceuticals is experiencing a near all-time high market capitalization of over $3.5 billion. It jumped from a share prices of $16.85 at the low of the market collapse to highs approaching $50 per share.

The company had $648 million in cash and cash equivalents in March 2020, but that number dropped to $434 million by September.

However, it’s only gaining with investors willing to pay more to get in on the prospects of good news being announced. While the bulk of the gains have already been realized, there is arguably plenty of upside left for the company.

Now that efficacy is proven, it can continue to broaden its research funnel and global footprint, while enjoying the fruits of its labor as it begins to sell its treatments. Of course, this is all easier said than done.

Just because the floodgates to one revenue stream may be ready to open doesn’t mean it will automatically increase sales.

It still needs to continue pushing through trials to gain a larger portfolio. It could also attempt mergers and acquisitions to increase its battle chest. The market is wide open in 2021, and all Apellis has to do is capitalize.

Nevertheless, it won’t be an unencumbered journey – there are still plenty of obstacles to overcome.

Risks Of Buying Apellis Pharmaceuticals Stock

Investing in Apellis Pharmaceuticals below $30 was an enticing bet. Now that the APLS share price has ballooned higher, the reward to risk ratio is much less attractive.

Investors jumping in now need to depend on the company’s sales soaring next year as it continues with good news in its research and development funnel.

Its pegcetacoplan may beat Soliris in clinical trials, but it still needs to beat Alexion Pharmaceuticals in the sales and marketing game. Both require more treatments than Ultomiris, and there is a higher risk for adverse reactions.

With Alexion still dominating the market with two thirds of the treatments, this odd duck will have an uphill battle facing it.

Should it succeed, market analysts believe it could achieve over $300 million in annual sales. That’s not nothing, but it’s also not enough to grow and scale the company the way investors will want.

And then there’s the competition.

Does APLS Have A Competitive Advantage?

Alexion Pharmaceuticals (ALXN) is in direct competition for the company’s first FDA-approved treatment. But it also has competition coming from startups like CalciMedica, InteKrin Therapeutics Inc, and Precision Biologics.

While each company on its own may present a smaller threat, a larger company could easily scoop them up.

Johnson & Johnson (JNJ), Pfizer (PFE), and Roche are among the industry giants who dwarf even Alexion. They could see an opportunity and buy a startup to integrate into their expansive networks as a subsidiary.

This could spell doom for Apellis, which would have growth stunted and may need to seek a buyout of its own to stay competitive.

Is Apellis Pharmaceuticals Stock A Buy? The Bottom Line

Apellis Pharmaceuticals is a U.S.-based biopharmaceutical company that focuses on C3 treatments for blood diseases.

Many of these diseases are currently treated with C5 inhibitors, and the replacement or addition of C3 could help many patients recover.

It’s more than just marketing buzzwords too, as the FDA cleared the treatment for sales as soon as March 2021.

The stock price already reflects this news though, and investors jumping on board now will have a bumpier ride to the top.

Sales have a ceiling, and the market is dominated by one big player selling two treatments. Breaking through this monopoly will be an expensive endeavor.

Apellis has great growth potential, but it also faces big competition. It’ll be a rocky road in the short term with possibly big gains in the long run. 

---

The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.