APELLIS PHARMACEUTICALS, INC. Management's Discussion and Analysis of Financial Condition and Results of Operations. (form 10-Q)

The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our unaudited condensed financial
statements and related notes appearing elsewhere in this Quarterly Report on
Form 10-Q and our audited financial statements and related notes for the year
ended December 31, 2021 included in our Annual Report on Form 10-K filed with
the Securities and Exchange Commission on February 28, 2022, which we refer to
as the 2021 Annual Report on Form 10-K.

This Quarterly Report on Form 10-Q contains forward-looking statements that
involve substantial risks and uncertainties. All statements, other than
statements of historical facts, contained in this Quarterly Report on Form 10-Q,
including statements regarding our strategy, future operations, future financial
position, future revenue, projected costs, prospects, plans and objectives of
management and expected market growth are forward-looking statements. The words
"anticipate," "believe," "continue," "could," "estimate," "expect," "intend,"
"may," "plan," "potential," "predict," "project," "should," "target," "would"
and similar expressions are intended to identify forward-looking statements,
although not all forward-looking statements contain these identifying words.

We may not actually achieve the plans, intentions or expectations disclosed in
our forward-looking statements, and you should not place undue reliance on our
forward-looking statements. Actual results or events could differ materially
from the plans, intentions and expectations disclosed in the forward-looking
statements we make. Please also refer to those factors described in "Part I,
Item 1A. Risk Factors" of our 2021 Annual Report on Form 10-K for important
factors that we believe could cause actual results to differ materially from
those in our forward-looking statements.

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. 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 a broad array of
complement-dependent autoimmune and inflammatory diseases.

In May 2021, the U.S. Food and Drug Administration, or the FDA, approved
EMPAVELI® (pegcetacoplan), the first targeted C3 therapy and our first approved
product, for the treatment of paroxysmal nocturnal hemoglobinuria, or PNH.
EMPAVELI is approved for use in adults with PNH and can be used by patients who
are either treatment-naïve or who are switching from C5 inhibitors eculizumab or
ravulizumab. We believe that EMPAVELI has the potential to elevate the standard
of care in PNH and are seeking to establish EMPAVELI as the preferred first-line
treatment for patients. In the United States, there are approximately 1,500
patients with PNH currently being treated with C5 inhibitors and another 150
patients who are expected to be newly diagnosed each year. Since our launch of
EMPAVELI in May 2021 through September 30, 2022, we generated $60.5 million in
net product revenue from sales. For the three and nine months ended September
30, 2022, we generated $17.7 million and $45.4 million, respectively, in net
product revenue from sales of EMPAVELI.

In December 2021, the European Commission, or the EC, approved Aspaveli®
(pegcetacoplan) for the treatment of adults with PNH who are anemic after
treatment with a C5 inhibitor for at least three months. To date, systemic
pegcetacoplan has also been approved for the treatment of PNH in Saudi Arabia,
Australia, and the United Kingdom. Systemic pegcetacoplan is currently marketed
under the trade name EMPAVELI™ in the United States, Saudi Arabia and Australia
and Aspaveli in the European Union and United Kingdom. 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 commercialization rights for
systemic pegcetacoplan in the United States.

We also are leveraging our expertise in targeting C3 to advance intravitreal
pegcetacoplan as the first potential treatment for geographic atrophy, or GA,
secondary to age-related macular degeneration, or AMD. We believe that
intravitreal pegcetacoplan has the potential to be a breakthrough for patients
with GA, a disease that affects approximately one million people in the United
States and five million people worldwide. Based on the results of our Phase 3
(DERBY and OAKS) and Phase 2 (FILLY) clinical trials of intravitreal
pegcetacoplan, we submitted a new drug application, or NDA, to the FDA in June
2022 with a request for six-month priority review. In July 2022, the FDA
accepted the NDA and granted priority review with a Prescription Drug User Fee
Act (PDUFA) target action date of November 26, 2022. In August 2022, we
announced 24-month top-line data showing increased effects over time with
intravitreal pegcetacoplan in the Phase 3 DERBY and OAKS clinical trials in GA.
We plan to submit the 24-month efficacy data from DERBY and OAKS in a major
amendment to the NDA, which would extend the review period by three months

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with an expected PDUFA target action date in February 2023. The 24-month safety
data were previously submitted as part of the 120-day update. The FDA has stated
that it is not planning to hold an advisory committee meeting to discuss the
NDA. We plan to submit a market authorization application, or MAA, to the
European Medicines Agency, or the EMA, in December 2022.

We have exclusive, worldwide commercialization rights for intravitreal pegcetacoplan.

We believe that inhibition of the complement system by targeting C3 may enable a
broad range of therapeutic approaches, and that pegcetacoplan has the potential
to address the limitations of existing treatment options or provide a treatment
option in indications where there currently are none. Under our collaboration
with Sobi, we are co-developing systemic pegcetacoplan for cold agglutinin
disease, or CAD, and hematopoietic stem cell transplantation-associated
thrombotic microangiopathy, or HSCT-TMA, in hematology; C3 glomerulopathy, or
C3G, and immune complex membranoproliferative glomerulonephritis, or IC-MPGN, in
nephrology; and amyotrophic lateral sclerosis, or ALS, in neurology.

We are also evaluating the administration of systemic pegcetacoplan as an
approach to enabling adeno-associated virus, or AAV, vector administration for
gene therapies. We believe complement inhibition may yield important benefits
when used in combination with AAV-delivered gene therapies, such as increasing
the safety of AAV-delivered gene therapies, decreasing the required AAV dose
needed to achieve a therapeutic effect, and allowing for dosing in patients who
have pre-existing antibodies. In collaboration with commercial and academic
researchers, we are advancing pre-clinical studies to assess the impact of
complement inhibition on AAV-delivered gene therapies.

Lastly, we are developing additional product candidates with other routes of
administration and plan to conduct clinical trials of these product candidates,
including the combination of EMPAVELI and a small interfering RNA, or siRNA,
which may offer the potential to reduce the treatment frequency of EMPAVELI by
reducing the production of C3 proteins in the liver. Furthermore, we are
collaborating with Beam Therapeutics, Inc., or Beam, on up to six research
programs focused on C3 and other complement targets in the eye, liver and brain,
using Beam's proprietary base editing technology to discover new treatments for
complement-driven diseases.

Intravitreal Pegcetacoplan. In September 2021, we reported top-line data from our Phase 3 clinical program consisting of two Phase 3 clinical trials evaluating intravitreal pegcetacoplan in patients with GA.

In August 2022, we announced top-line data at 24 months from DERBY and OAKS
showing increased effects over time with intravitreal pegcetacoplan in GA (all
p-values are nominal). In OAKS, monthly and every-other-month treatment with
intravitreal pegcetacoplan reduced GA lesion growth by 22% (p<0.0001) and 18%
(p=0.0002), respectively. In DERBY, monthly and every-other-month treatment with
intravitreal pegcetacoplan reduced GA lesion growth by 19% (p=0.0004) and 16%
(p=0.0030), respectively.

Between months 18-24, the pegcetacoplan treatment effect accelerated compared to
previous six-month periods, with reductions of GA lesion growth of 30% and 24%
in the monthly and every-other-month arms, respectively, with nominal p-values
of <0.0001 in both arms, when compared against pooled sham (all p-values are
nominal). Additionally, the reduction of GA lesion growth in patients with
extrafoveal lesions (28% monthly; 28% every-other-month) was comparable to the
reduction in patients with foveal lesions (34% monthly; 28% every-other-month)
in the combined studies between months 18-24.

Consistent with expectations, no clinically meaningful difference was observed
between pegcetacoplan and sham in the key secondary outcomes measuring visual
function at 24 months, including best corrected visual acuity and
microperimetry. Studies show that GA lesion growth is correlated with loss of
visual function over longer periods of time. The visual function outcomes at 24
months are believed to be due to the limitations of the endpoints when used for
GA and the relatively early assessment timeframe.

Pegcetacoplan continued to demonstrate a favorable safety profile, consistent
with safety data to date and longer-term exposure to intravitreal injections.
The combined rate of new-onset exudations at month 24 was 11.9%, 6.7%, and 3.1%
in the pegcetacoplan monthly, every-other-month, and sham groups, respectively.

Patients will be treated with pegcetacoplan in the GALE open label extension
study for an additional three years. All patients who completed the DERBY or
OAKS studies were invited to participate in the GALE study.

The results at 24 months will be included in the marketing authorization application, or MAA, that the Company plans to submit to the European Medicines Agency, or EMA, in December 2022.

At the American Academy of Ophthalmology Annual Meeting in October 2022, two
post hoc analyses were presented providing further evidence that treatment of GA
with intravitreal pegcetacoplan reduces photoreceptor loss and has the potential
to preserve visual function. This included an analysis of microperimetry data at
24 months demonstrating that both every-other-month and

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monthly pegcetacoplan treatment preserved visual function of retinal cells near
the GA lesion border compared to sham. Additionally, a post hoc AI-guided
analysis of OCT images from DERBY and OAKS at 12 months showed a substantial and
rapid reduction in photoreceptor loss for both monthly and every-other-month
pegcetacoplan in GA patients, reinforcing the robust efficacy of pegcetacoplan
in preserving photoreceptors, which are responsible for vision. This second
analysis was conducted by The Medical University of Vienna and RetinSight Inc.

In November 2022, we announced our plans to submit the 24-month efficacy data
from DERBY and OAKS in a major amendment to the NDA, which would extend the
review period by three months with an expected PDUFA target action date in
February 2023. The 24-month safety data were previously submitted as part of the
120-day update.

We have built out our ophthalmology team in the United States with leadership
positions in place across medical affairs, marketing and sales, and market
access, and we have also begun to build out our European team and affiliates in
Germany and Australia.

Systemic Pegcetacoplan. In addition to PNH, for which we obtained approval in
the United States, we are developing systemic pegcetacoplan in collaboration
with Sobi in several other indications, including C3G, IC-MPGN, ALS, CAD and
HSCT-TMA.

PNH. In May 2021, the FDA approved systemic pegcetacoplan for the treatment of
adult patients with PNH. EMPAVELI is approved for use in adults with PNH and can
be used by patients who are either treatment-naïve or who are switching from C5
inhibitors eculizumab or ravulizumab. We believe that EMPAVELI has the potential
to elevate the standard of care in PNH and are seeking to establish EMPAVELI as
the preferred first-line treatment for patients. In the United States, there are
approximately 1,500 patients with PNH currently being treated with C5 inhibitors
and another 150 patients who are expected to be newly diagnosed each year.

In December 2021, the EC approved Aspaveli for the treatment of adults with PNH
who are anemic after treatment with a C5 inhibitor for at least three months. To
date, systemic pegcetacoplan has also been approved for the treatment of PNH in
Saudi Arabia, Australia, and the United Kingdom. Systemic pegcetacoplan is
currently marketed under the trade name EMPAVELI™ in the United States, Saudi
Arabia and Australia and Aspaveli in the European Union and United Kingdom.
Under our collaboration and license agreement with Sobi, Sobi has global
co-development and exclusive ex-U.S. commercialization rights for systemic
pegcetacoplan and initiated the commercial launch of Aspaveli in jurisdictions
outside of the United States during the first quarter of 2022. We have
commercialization rights for systemic pegcetacoplan in the United States.

C3G/IC-MPGN. We have initiated and plan to continue to lead our registrational
program in C3G / IC-MPGN. We dosed the first patient in the NOBLE trial in up to
12 patients with post-kidney transplant recurrence of C3G or IC-MPGN in
September of 2021. In June 2022, we dosed the first patient in our Phase 3
VALIANT trial. VALIANT is a randomized, placebo-controlled, double-blinded,
multi-center Phase 3 trial being conducted in approximately 90 patients who are
12 years of age and older with primary IC-MPGN or C3G. VALIANT is the only study
to include both native kidney patients and patients who have recurrent disease
after receiving a kidney transplant.

ALS. In March 2022, we completed enrollment in MERIDIAN, our randomized,
placebo-controlled Phase 2 clinical trial of systemic pegcetacoplan in adults
with sporadic ALS. The trial enrolled approximately 250 adults. Trial
participants are randomized in a 2:1 ratio to receive pegcetacoplan or placebo
while continuing to receive their existing standard of care treatment for ALS.
After 52 weeks of blinded treatment, all patients in the study will receive
pegcetacoplan. We expect to report top-line data from this trial in mid-2023.

CAD and HSCT-TMA. Sobi is leading development activities for a Phase 3 clinical
trial in CAD and a Phase 2 clinical trial in HSCT-TMA. In early 2022, Sobi dosed
the first patient in the Phase 2 clinical trial of systemic pegcetacoplan in
patients with HSCT-TMA. In October 2022, Sobi dosed the first patient in the
Phase 3 clinical trial of systemic pegcetacoplan in patients with CAD.

Pipeline. We are developing pegcetacoplan in multiple indications and other product candidates targeting C3 through various routes of administration. We plan to conduct clinical trials of our product candidates in additional complement-dependent indications.

We plan to advance up to three new product candidates into clinical development
in 2023. These candidates include a siRNA treatment designed to reduce the
production of C3 proteins by the liver; an oral alternative pathway inhibitor
for certain renal conditions; and a novel compound designed to treat both GA and
wet AMD by intravitreal administration. We also plan to continue our research
activities under collaboration with Beam to develop gene-editing therapies in
multiple therapeutic areas.

Since our commencement of operations in May 2010, we have devoted substantially
all of our resources to developing our proprietary technology, developing
product candidates, undertaking preclinical studies and conducting clinical
trials for pegcetacoplan, building our intellectual property portfolio,
organizing and staffing our company, business planning, raising capital,
preparing for and executing the commercial launch of our products and providing
general and administrative support for these operations.


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As of September 30, 2022, we had cash, cash equivalents and marketable
securities of $708.6 million. We believe that our cash and cash equivalents and
marketable securities, along with cash anticipated to be generated from sales of
EMPAVELI and from intravitreal pegcetacoplan for the treatment of geographic
atrophy (GA) secondary to age-related macular degeneration (AMD) and, committed
development reimbursement payments from Sobi as of September 30, 2022, will be
sufficient to enable us to fund our current operations at least into the first
quarter of 2024. We have based this estimate on assumptions that may prove to be
wrong, and we could exhaust our available capital resources sooner than we
expect. For additional information see "Liquidity and Capital Resources."

Since the launch of EMPAVELI in May 2021 through September 30, 2022, we have
generated $60.5 million of net product revenue from sales. We have incurred
significant annual net operating losses in each year since our inception and
expect to continue to incur net operating losses for the foreseeable future. Our
net losses were $191.3 million and $195.6 million for the three months ended
September 30, 2022 and, 2021, respectively, and $486.2 million and $598.4
million for the nine months ended September 30, 2022 and 2021, respectively. As
of September 30, 2022, we had an accumulated deficit of $2.1 billion.

Our net losses may fluctuate significantly from quarter to quarter and year to
year. We anticipate that our expenses will increase significantly particularly
as we continue to incur significant commercialization expenses related to
building sales, marketing, medical affairs, manufacturing, distribution and
other commercial infrastructure associated with the commercialization of
EMPAVELI for the treatment of PNH. We are incurring significant expenses for the
commercialization and further development of intravitreal pegcetacoplan. In
addition, we expect our expenses to increase 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 temporarily closed our facilities in March 2020 in respect to the COVID-19
pandemic. We have since reopened our facilities, subject to compliance with
strict safety guidelines, but many of our employees continue to work remotely.
As of the date of this Quarterly Report on Form 10-Q, we do not believe that the
COVID-19 pandemic has had a significant impact upon our operations, including
sales of EMPAVELI (except to the extent that our representatives' access to the
offices of health care providers was limited during the omicron wave of the
pandemic), our ongoing clinical trials (except for the delay of the clinical
trials for ALS) and the manufacture and supply of our product candidates.

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. Pursuant to the agreement,
SFJ paid us $60.0 million following the signing of the agreement and agreed to
pay us up to an additional $60.0 million in the aggregate in three equal
installments upon the achievement of specified development milestones with
respect to our Phase 3 program for pegcetacoplan in PNH and subject to our
having cash resources at the time sufficient to fund at least 10 months of our
operations.

On June 7, 2019, we amended the SFJ agreement, which we refer to as the SFJ amendment. Under the SFJ amendment, SFJ agreed to make an additional $20.0 million funding payment to us to support the development of systemic pegcetacoplan for the treatment of patients with PNH.

On June 27, 2019, we received $40.0 million from SFJ, consisting of $20.0 million as the first installment of the additional $60.0 million upon the achievement of a milestone and the $20.0 million payable under the SFJ amendment.

In September 2019, we received $20.0 million from SFJ, as the second installment
of the additional $60.0 million due to the achievement of a milestone and in
January 2020 received the remaining $20.0 million installment of the additional
$60.0 million upon the announcement of the results of the PEGASUS phase 3 trial.

Under the SFJ agreement, following regulatory approvals by the FDA and the EMA
for the use of systemic pegcetacoplan as a treatment for PNH, we paid SFJ $4.0
million in 2021 in connection with the FDA approval in May 2021. During the nine
months ended September 30, 2022, we have paid SFJ $16.5 million which consisted
of $5.0 million in connection with the EMA approval in

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December 2021 and $11.5 million in connection with the one-year anniversary of
the FDA approval, respectively. We are obligated to pay SFJ an additional $439.5
million in the aggregate in eleven semi-annual payments with the majority of the
payments being made from the third anniversary to the sixth anniversary of
regulatory approval. We are obligated to pay a total of $18.0 million to SFJ in
connection with the one-year anniversary of the EMA approval.

Collaboration Agreement with Sobi

On October 27, 2020, we entered into the Sobi collaboration agreement,
concerning the development and commercialization of pegcetacoplan and specified
other structurally and functionally similar compstatin analogues or derivatives
for use systemically or for local non-ophthalmological administration,
collectively referred to as the licensed products. We granted Sobi an exclusive
(subject to certain rights retained by us), sublicensable license of certain
patent rights and know-how to develop and commercialize licensed products in all
countries outside of the United States. We retained the right to commercialize
licensed products in the United States, and, subject to specified limitations,
to develop licensed products worldwide for commercialization in the United
States. 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 which would be payable
following the first regulatory and reimbursement approval of system
pegcetacoplan in any major European country, and to reimburse us for up to $80.0
million in development costs. In January 2021 we received a $25.0 million
development reimbursement payment from Sobi and in January 2022 we received a
$20.0 million development reimbursement payment. We expect to receive the
balance annually in installments over the next two years, subject to certain
conditions.

European Commission approval of systemic pegcetacoplan for the treatment of PNH
was received in December 2021. In March 2022, we earned a $50.0 million payment
from Sobi related to the first regulatory and reimbursement milestone in Europe.
We considered the reimbursement approval to be probable at December 31, 2021,
and recorded revenue at that time. We received the $50.0 million payment in
April 2022. We are also 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 remain responsible for our license fee obligations
(including royalty obligations) to the University of Pennsylvania and for our
payment obligations to SFJ.

Financial Operations Overview

Revenue

Our revenues consist of product sales of EMPAVELI, 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. 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.

Product Revenues

Product revenue is derived from our sales of our commercial product, EMPAVELI, in the United States.

Licensing and Other 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.

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;

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•

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 costs are expensed as incurred. Nonrefundable advance
payments for goods or services to be received in the future for use in research
and development activities are deferred and capitalized. The capitalized amounts
are expensed as the related goods are delivered or the services are performed.
We have not provided program costs since inception because historically we have
not tracked or recorded our research and development expenses on a
program-by-program basis.

The successful development of our product candidates in clinical development is
highly uncertain. Accordingly, at this time, we cannot reasonably estimate the
nature, timing and costs of the efforts that will be necessary to complete the
remainder of the clinical development of these product candidates. We are also
unable to predict when, if ever, material net cash inflows will commence from
pegcetacoplan in other jurisdictions and indications or any other potential
product candidates. 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.

A change in the outcome of any of these variables with respect to the development of any of our product candidates would significantly change the costs and timing associated with the development of that product candidate.

Research and development activities are central to our business model. Product
candidates in later stages of clinical development generally have higher
development costs than those in earlier stages of clinical development,
primarily due to the increased size and duration of later-stage clinical trials.
We expect research and development costs to increase for the foreseeable future
as our product candidate development programs progress. However, we do not
believe that it is possible at this time to accurately project total
program-specific expenses through commercialization. There are numerous factors
associated with the successful commercialization of any of our product
candidates, including future trial design and various regulatory requirements,
many of which cannot be determined with accuracy at this time based on our stage
of development. 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.
Other significant costs include facility costs not otherwise included in
research and development expenses, legal fees relating to patent and corporate
matters, and fees for accounting and consulting services.

We anticipate that our general and administrative expenses will increase in the
future to support the commercialization of EMPAVELI in PNH and, if approved,
intravitreal pegcetacoplan, continued research and development activities,
potential commercialization of our other product candidates and costs of
operating as a public company.

Critical Accounting Policies and Estimates

This discussion and analysis of our financial condition and results of
operations is based on our financial statements, which we have prepared in
accordance with U.S. generally accepted accounting principles. The preparation
of these financial statements requires us to make estimates and assumptions that
affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements, as
well as the reported amounts of expenses during the reported periods. On an
ongoing basis, we evaluate our estimates and judgments, including those related
to product revenue, licensing revenue, costs of research collaboration
arrangements, inventory, accrued research and development expenses, convertible
notes, capped call

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transactions and the development derivative liability and development liability,
which we described in our 2021 Annual Report on Form 10-K. 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.

Our significant accounting policies are described in Note 2 of Part I, Item 1 of
this Quarterly Report on Form 10-Q and in Part I, Item 7, "Critical Accounting
Policies and Estimates" in our 2021 Annual Report on Form 10-K. There have been
no changes to our critical accounting policies and estimates since our 2021
Annual Report on Form 10-K.

Results of Operations

Three Months Ended September 30, 2022 and 2021 (in thousands, except
percentages)

                                         For the Three Months Ended
                                                September 30,              Change        Change
                                           2022              2021             $             %
Revenue:
Product revenue, net                    $    17,676       $     5,314     $  12,362           233 %
Licensing and other revenue                   4,380               336         4,044          1204 %
Total revenue:                               22,056             5,650        16,406           290 %
Operating expenses:
Cost of sales                                 1,381               149         1,232           827 %
Research and development                     95,207            87,733         7,474             9 %
General and administrative                   78,406            45,763        32,643            71 %
Total operating expenses:                   174,994           133,645        41,349            31 %
Net operating loss                         (152,938 )        (127,995 )     (24,943 )          19 %
Loss on conversion of debt                  (32,890 )         (61,102 )      28,212           (46 %)
Loss from remeasurement of development
derivative liability                              -            (4,219 )       4,219          (100 %)
Interest income                               2,809               144         2,665         1,851 %
Interest expense                             (7,903 )          (2,282 )      (5,621 )         246 %
Other income/(expense), net                      99              (117 )         216          (185 %)
Net loss before taxes                      (190,823 )        (195,571 )       4,748            (2 %)
Income tax expense                              446                 -           446           100 %
Net loss                                $  (191,269 )     $  (195,571 )   $   4,302            (2 %)


Product Revenue, Net

Our product revenue, net is derived from EMPAVELI sales in the United States
which was launched in May 2021. We recognized $17.7 million and $5.3 million of
net product revenue for the three months ended September 30, 2022 and 2021,
respectively.

Licensing and Other Revenue

Licensing and other revenue of $4.4 million for the three months ended September
30, 2022 includes $3.6 million in revenue from product supplied to Sobi and $0.8
million in royalty revenue from Sobi. Licensing and other revenue for the three
months ended September 30, 2021 includes $0.4 million in revenues for product
supplied to Sobi.

Cost of Sales

Cost of sales was $1.4 million for the three months ended September 30, 2022 and
$0.1 million for the three months ended September 30, 2021. The increase in cost
of sales was primarily driven by an increase in product sales volume and royalty
expense of $1.1 million.

Research and Development Expenses

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The following table summarizes our research and development expenses incurred
during the three months ended September 30, 2022 and 2021 (in thousands, except
percentages):


                                                For the Three Months Ended
                                                      September 30,               Change        Change
                                                 2022               2021             $             %
Clinical trial costs                          $   19,495         $    28,393     $  (8,898 )         (31 %)
Compensation and related personnel costs          40,731              28,421        12,310            43 %
Contract manufacturing                            11,317              15,076        (3,759 )         (25 %)
Sobi development milestone                             -              (6,447 )       6,447          (100 %)
Research / innovation costs                        6,228               3,991         2,237            56 %
Other development costs                           13,573              14,903        (1,330 )          (9 %)
Pre-clinical study expenses                        2,428               3,287          (859 )         (26 %)
Device development expenses                        1,435                

109 1,326 1,217 %

Total research and development expenses $ 95,207 $ 87,733 $ 7,474

             9 %




Research and development expenses increased by $7.5 million to $95.2 million for
the three months ended September 30, 2022 from $87.7 million for the three
months ended September 30, 2021, an increase of 9.0%. The increase was primarily
attributable to an increase of $12.3 million in personnel related costs due to
having more employees in the three months ended September 30, 2022, an increase
of $2.2 million in research and innovation costs, and an increase of $1.4
million in device development expenses. In addition, we recorded no contra
research and development expenses under the Sobi collaboration for the three
months ended September 30, 2022 as compared to $6.4 million for the three months
ended September 30, 2021. The increases were partially offset by a decrease of
$8.9 million in clinical trial costs due to the completion of our Phase 3 DERBY
and OAKS trials, a decrease of $3.8 million in contract manufacturing expenses
due primarily to the timing of drug supply and analytical activity, a decrease
of $1.3 million in other development costs, and a decrease of $0.8 million in
preclinical study expenses.

General and Administrative Expenses

General and administrative expenses increased by $32.6 million to $78.4 million
for the three months ended September 30, 2022, from $45.8 million for the three
months ended September 30, 2021, an increase of 71%. The increase was primarily
attributable to higher employee related costs of $15.7 million, an increase in
professional and consulting fees and general commercial preparation activities
of $15.1 million, higher office costs of $1.0 million, an increase in travel
related expenses of $1.2 million, and higher insurance costs of $0.3 million.
The increase was partially offset by lower director stock option compensation of
$0.7 million. The increase in employee related costs of $15.7 million consisted
of a $12.2 million increase in salaries and benefits primarily due to the higher
number of employees in the current period, an increase of $0.1 million in
recruiting expenses, and $3.4 million related to stock compensation expense
associated with the grant of stock options and restricted stock units to
employees. The increase in other professional and consulting fees and general
commercial preparation activities of $15.1 million was primarily related to
higher commercialization related activity of $16.9 million and was partially
offset by a decrease in general professional fees of $1.8 million.

Loss on Conversion of Debt

Loss on conversion of debt was $32.9 million for the three months ended
September 30, 2022. Loss on conversion of debt was $61.1 million for the three
months ended September 30, 2021. See Note 7 Long-term Debt in the Notes to
Unaudited Condensed Consolidated Financial Statements included in Item 1 of this
Quarterly Report on Form 10-Q for additional details regarding the conversion of
debt in the three months ended September 30, 2022 and 2021, respectively.

Loss from Remeasurement of Development Derivative Liability

Loss from remeasurement of development derivative liability was $4.2 million for
the three months ended September 30, 2021. On December 15, 2021, the development
derivative liability was reclassified to development liability and no longer
remeasured to fair value at the end of each quarter. See Note 6 Development
Liability and Development Derivative Liability in the Notes to Unaudited
Condensed Consolidated Financial Statements included in Item 1 of this Quarterly
Report on Form 10-Q for additional details regarding the development derivative
liability.

Interest Income

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Interest income was $2.8 million for the three months ended September 30, 2022,
an increase of $2.7 million, compared to $0.1 million for the three months ended
September 30, 2021. The increase in interest income was primarily attributable
to purchases of marketable securities and increased money market rates during
the three months ended September 30, 2022.

Interest Expense

Interest expense was $7.9 million for the three months ended September 30, 2022
and $2.3 million for the three months ended September 30, 2021. The increase is
primarily due to accretion of the development liability discount related to the
SFJ agreement in the current period.

Other Income/(Expense), Net

Other income/(expense), net, increased $0.2 million during the three months ended September 30, 2022 compared to the three months ended September 30, 2021. The increase was primarily due to an increase in other taxes and foreign currency revaluation gains.

Income Tax Expense

Income tax expense increased by $0.4 million during the three months ended
September 30, 2022 compared to the three months ended September 30, 2021. The
increase primarily pertained to federal and state income taxes where the
utilization of net operating losses and research and development tax credits are
limited.


Nine Months Ended September 30, 2022 and 2021 (in thousands, except percentages)

                                          For the Nine Months Ended
                                                September 30,              Change         Change
                                           2022              2021             $              %
Revenue:
Product revenue, net                    $    45,439       $     5,937     $  39,502             665 %
Licensing and other revenue                   7,320               336         6,984            2079 %
Total revenue:                               52,759             6,273        46,486             741 %
Operating expenses:
Cost of sales                                 2,711               149         2,562            1719 %
Research and development                    287,813           267,688        20,125               8 %
Cost of research collaboration                    -            50,000       (50,000 )          (100 %)
General and administrative                  192,795           135,309        57,486              42 %
  Total operating expenses:                 483,319           453,146        30,173               7 %
Net operating loss                         (430,560 )        (446,873 )      16,313              (4 %)
Loss on conversion of debt                  (32,890 )        (100,589 )      67,699             (67 %)
Loss from remeasurement of development
derivative liability                              -           (42,483 )      42,483            (100 %)
Interest income                               4,339               381         3,958            1039 %
Interest expense                            (24,888 )         (10,223 )     (14,665 )           143 %
Other (expense)/ income, net                    (42 )           1,366        (1,408 )          (103 %)
Net loss before taxes                   $  (484,041 )     $  (598,421 )   $ 114,380             (19 %)
Income tax expense                            2,140                 -         2,140             100 %
Net loss                                $  (486,181 )     $  (598,421 )   $ 112,240             (19 %)




Product Revenue, Net

Our product revenue, net is derived from EMPAVELI sales in the United States
which was launched in May 2021. We recognized $45.4 million and $5.9 million of
net product revenue for the nine months ended September 30, 2022 and 2021.

Licensing and Other Revenue

Licensing and other revenue of $7.3 million during the nine months ended
September 30, 2022 includes $5.7 million in revenue for product supplied to Sobi
and $1.6 million in royalty revenue. Licensing and other revenue includes $0.4
million revenue for product supplied to Sobi during the nine months ended
September 30, 2021.

Cost of Sales

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Cost of sales was $2.7 million for the nine months ended September 30, 2022 and
$0.1 million for the nine months ended September 30, 2021. The increase in cost
of sales was driven by an increase in product sales volume, an increase in
royalty expense of $1.8 million and an increase in scrap.

Research and Development Expenses

The following table summarizes our research and development expenses incurred
during the nine months ended September 30, 2022 and 2021 (in thousands, except
percentages):

                                              For the Nine Months Ended
                                                    September 30,               Change         Change
                                              2022                2021             $             %
Clinical trial costs                       $    68,929         $    89,102     $ (20,173 )          (23 %)
Compensation and related personnel costs       117,626              78,891        38,735             49 %
Contract manufacturing                          34,922              60,726       (25,804 )          (42 %)
Sobi development milestone                      (4,993 )           (23,613 )      18,620            (79 %)
Research / innovation costs                     15,296              13,342         1,954             15 %
Other development costs                         46,122              39,621         6,501             16 %
Pre-clinical study expenses                      8,209               9,314        (1,105 )          (12 %)
Device development expenses                      1,702                 305         1,397            458 %
    Research and development expenses          287,813             267,688        20,125              8 %
Cost of research collaboration                       -              50,000  

(50,000 ) (100 %)

    Total research and development
expenses including
      cost of research collaboration       $   287,813         $   317,688     $ (29,875 )           (9 %)



Research and development expenses decreased by $29.9 million to $287.8 million
for the nine months ended September 30, 2022 from $317.7 million for the nine
months ended September 30, 2021, a decrease of 9%. The decrease was primarily
attributable to the $50.0 million cost of research collaboration associated with
the Beam arrangement recorded in the prior period, a decrease of $25.8 million
in contract manufacturing expenses due primarily to the timing of drug supply
and analytical activity, a decrease of $20.2 million in clinical trial costs due
to the completion of our Phase 3 DERBY and OAKS trials, and a decrease of $1.1
million in pre-clinical study expenses. The decrease was partially offset by a
$38.7 million increase in personnel related costs due to having more employees
in the nine months ended September 30, 2022, an increase of $2.0 million in
research and innovation cost, an increase of $1.4 million in device development
expenses, and an increase of $6.5 million in other research and development
supporting activities primarily driven by regulatory, quality and medical
affairs expenses. In addition, contra research and development expenses under
the Sobi collaboration were $5.0 million for the nine months ended September 30,
2022 compared to $23.6 million for the nine months ended September 30, 2021.

General and Administrative Expenses

General and administrative expenses increased by $57.5 million to $192.8 million
for the nine months ended September 30, 2022, from $135.3 million for the nine
months ended September 30, 2021, an increase of 42%. The increase was primarily
attributable to an increase in employee related costs of $30.2 million, an
increase in professional and consulting fees and general commercial preparation
activities of $24.1 million, an increase in travel related expenses of $3.0
million, higher office costs of $2.0 million, and an increase in insurance costs
of $0.7 million. The increase was partially offset by lower director stock
option compensation of $2.5 million. The increase in employee related costs of
$30.2 million consisted of a $19.6 million increase in salaries and benefits
primarily due to the higher number of employees in the current period, an
increase of $8.7 million related to stock compensation expense associated with
the grant of stock options and restricted stock units to employees, and an
increase of $1.9 million in recruiting expenses. The increase in other
professional and consulting fees and general commercial preparation activities
of $24.1 million primarily related to higher commercialization related activity
of $27.6 million, partially offset by a decrease in general professional fees of
$3.5 million.

Loss on Conversion of Debt

Loss on conversion of debt was $32.9 million for the nine months ended September
30, 2022. Loss on conversion of debt was $100.6 million for the nine months
ended September 30, 2021. See Note 7 Long-term Debt in the Notes to Unaudited
Condensed Consolidated Financial Statements included in Item 1 of this Quarterly
Report on Form 10-Q for additional details regarding the conversion of debt in
the nine months ended September 30, 2022 and 2021, respectively.

Loss from Remeasurement of Development Derivative Liability

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Loss from remeasurement of development derivative liability was $42.5 million
for the nine months ended September 30, 2021. On December 15, 2021, the
development derivative liability was reclassified to development liability and
no longer remeasured to fair value at the end of each quarter. See Note 6
Development Liability and Development Derivative Liability in the Notes to
Unaudited Condensed Consolidated Financial Statements included in Item 1 of this
Quarterly Report on Form 10-Q for additional details regarding the development
derivative liability.

Interest Income

Interest income was $4.4 million for the nine months ended September 30, 2022,
an increase of $4.0 million compared to $0.4 million for the nine months ended
September 30, 2021. The increase in interest income was primarily attributable
to purchases of marketable securities and increased money market rates during
the three months ended September 30, 2022.

Interest Expense

Interest expense was $24.9 million for the nine months ended September 30, 2022
and $10.2 million for the nine months ended September 30, 2021. The increase was
primarily due to accretion of the development liability discount related to the
SFJ agreement in the current period.

Other (Expense)/Income, Net

Other (expense)/income, net during the nine months ended September 30, 2022 decreased $1.4 million compared to the nine months ended September 30, 2021. The decrease was primarily due to foreign currency revaluation losses.

Income Tax Expense

Income tax expense increased by $2.1 million during the nine months ended
September 30, 2022 compared to the nine months ended September 30, 2021. The
increase primarily pertained to federal and state income taxes where the
utilization of net operating losses and research and development tax credits are
limited.

Liquidity and Capital Resources

Sources of Liquidity

To date, we have financed our operations primarily through $1.6 billion in net
proceeds from public offerings of our common stock, including our initial public
offering, or IPO, $535.8 million in net proceeds from offerings of Convertible
Notes, a $250.0 million up-front payment and a $45.0 million development
reimbursement payment from Sobi pursuant to the Sobi collaboration agreement,
$112.6 million in proceeds from the private placement of shares of our
convertible preferred stock prior to our IPO, $140.0 million under the SFJ
agreement, $20.0 million in proceeds from borrowings under a term loan facility
with Silicon Valley Bank, and $7.0 million in proceeds from our issuance and
sale of a promissory note. 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.

In April 2018, we issued and sold 5,500,000 shares of our common stock in a follow-on public offering at a public offering price of $25.50 per share for net proceeds of $131.2 million, after deducting underwriting discounts and commissions of $8.4 million and offering expenses of $0.5 million.

In March 2019, we issued and sold 6,900,000 shares of our common stock in a follow-on offering at a public offering price of $17.00. We received net proceeds of $109.6 million after deducting underwriting discounts and commissions of $7.0 million and offering costs of $0.7 million.

In September 2019, we completed a private offering of $220.0 million aggregate principal amount of Convertible Notes, or the 2019 Convertible Notes. We received net proceeds of approximately $212.9 million after deducting the initial purchasers' discounts and commissions and offering costs of $7.1 million.

In January 2020, we issued and sold 10,925,000 shares of our common stock in a
follow-on offering at a public offering price of $37.00, including 1,425,000
shares sold pursuant to the underwriters' exercise in full of their option to
purchase additional shares of common stock. We received total net proceeds of
$381.4 million after deducting underwriting discounts and commissions of $22.2
million and offering costs of $0.5 million.

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In May 2020, we completed a private offering of $300.0 million aggregate principal amount of Convertible Notes, or the 2020 Convertible Notes. We received net proceeds of approximately $322.9 million, which included accrued interest March 15, 2020 to, but not including May 12, 2020, and the initial purchasers' discounts and commissions and offering costs of $6.0 million.

In January 2021, we entered into separate, privately negotiated exchange
agreements with certain holders of our 2019 Convertible Notes. Under the terms
of these exchange agreements, the holders exchanged approximately $126.1 million
in aggregate principal amount of 2019 Convertible Notes held by them for an
aggregate of 3,906,869 shares of our common stock. These exchange transactions
closed in January 2021.

In July 2021, we entered into separate, privately negotiated exchange agreements
to modify the conversion terms with certain holders of the Convertible Notes.
Under the terms of these exchange agreements, the holders exchanged
approximately $201.1 million in aggregate principal amount of Convertible Notes
held by them for an aggregate of 5,992,217 shares of common stock. These
exchange transactions closed in July 2021.

In November 2021, we issued and sold 10,062,500 shares of our common stock in a
follow-on offering at a public offering price of $40.00, including 1,312,500
shares sold pursuant to the underwriters' exercise in full of their option to
purchase additional shares of common stock. We received total net proceeds of
$380.4 million after deducting underwriting discounts and commissions of $22.1
million and offering costs of $0.6 million.

In March 2022, we issued and sold 8,563,830 shares of our common stock in a
follow-on offering at a public offering price of $47.00, including 1,117,021
shares sold pursuant to the underwriters' exercise in full of their option to
purchase additional shares of common stock. We received total net proceeds of
$380.1 million after deducting underwriting discounts and commissions of $22.1
million and offering costs of $0.3 million.

In July 2022, we entered into separate, privately negotiated exchange agreements
with certain holders of Convertible Notes pursuant to which the holders
exchanged approximately $98.1 million in aggregate principal amount of
Convertible Notes held by them for an aggregate of 3,027,018 shares of common
stock. These exchange transactions closed in August 2022. As of September 30,
2022, there was $93.9 million in aggregate principal amount of Convertible Notes
outstanding and held by third parties.

The capped call transactions that we entered into concurrently with the issuance
of the Convertible Notes are expected generally to reduce the potential dilution
to our common stock upon any conversion of the Convertible Notes and/or offset
any cash payments we are required to make in excess of the principal amount of
converted convertible notes, as the case may be, in the event that the market
price per share of our common stock, as measured under the terms of the capped
call transactions, is greater than the strike price of the capped call
transactions, which is initially $39.4625, the conversion price of the
convertible notes.

Refer to Note 7 Long-term Debt in the Notes to Unaudited Condensed Consolidated
Financial Statements in Part I, Item I of this Quarterly Report on Form 10-Q for
additional information regarding the convertible notes and capped call
transactions.

Cash Flows

The following table provides information regarding our cash flows for the nine months ended September 30, 2022 and 2021 (in thousands):

                                                         For the Nine 

Months Ended September 30,

                                                             2022                      2021
Net cash used in operating activities                 $          (373,001 )     $          (450,627 )
Net cash (used in) investing activities                           (64,236 )                 162,636
Net cash provided by financing activities                         381,605                     8,278

Effect of exchange rate changes on cash,

 cash equivalents and restricted cash                                (675 )                  (2,024 )

Net decrease in cash, cash equivalents

 and restricted cash                                  $           (56,307 ) 

$ (281,737 )

Net Cash Used in Operating Activities

Net cash used in operating activities was $373.0 million for the nine months
ended September 30, 2022 and consisted primarily of a net loss of $486.2 million
adjusted for $124.4 million of non-cash items, including share-based
compensation expense of $66.8 million, a loss on early exchange of debt of $32.9
million, the forfeiture of accrued interest in the exchange of the Convertible
Notes

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of $1.3 million, depreciation expense of $1.2 million, accretion of discount to
the development liability of $20.1 million, and other liabilities of $1.9
million. Further, it includes a net decrease in current operating assets of $1.5
million, an increase in other assets of $15.9 million, a decrease in accounts
payable of $4.4 million and a decrease in accrued expenses of $21.3 million.

Net cash used in operating activities was $450.6 million for the nine months
ended September 30, 2021 and consisted primarily of a net loss of $598.4 million
adjusted for $200.5 million of non-cash items, including a loss on early
exchange of debt of $100.6 million and a loss from remeasurement of development
derivative liability of $42.5 million, share-based compensation expense of $51.4
million, and the forfeiture of accrued interest in the exchange of the
Convertible Notes of $4.2 million, a net decrease in current operating assets of
$3.4 million, an decrease in other assets of $4.0 million, a decrease in
accounts payable of $3.2 million and an decrease in accrued expenses of $42.1
million.

Net Cash Used in Investing Activities

Net cash used in investing activities during the nine months ended September 30, 2022 was $64.2 million primarily due to $331.9 million in purchases of marketable securities, partially offset by $268.3 million in proceeds from maturity of marketable proceeds.

Net cash provided by investing activities during the nine months ended September
30, 2021 was $162.6 million primarily due to $335.0 million in proceeds from
maturities of marketable securities, partially offset by 171.3 million in
purchases of marketable securities.

Net Cash Provided by Financing Activities

Net cash provided by financing activities was $381.6 million during the nine
months ended September 30, 2022 and consisted primarily of proceeds from the
follow-on common stock offering in March 2022 of $380.1 million, $19.4 million
proceeds upon the exercise of stock options and $2.6 million proceeds from the
issuance of common stock under the employee stock purchase plan partially offset
by payments of $16.5 million for the development liability as well as $4.0
million for the payments of employee tax withholding related to equity-based
compensation.

Net cash provided by financing activities was $8.3 million during the nine
months ended September 30, 2021 and consisted primarily of $12.1 million upon
the exercise of stock options and $1.7 million sales of common stock under the
employee stock purchase plan, offset by $4.0 million for the payment on the
development derivative liability as well as $1.5 million for the payment of
employee tax withholding related to equity-based compensation.

Funding Requirements

We expect our expenses to increase in connection with our ongoing activities,
particularly as we continue to incur significant commercialization expenses
related to product manufacturing, marketing, sales and distribution of EMPAVELI
and pre-commercialization activities related to intravitreal pegcetacoplan for
GA. In addition, we expect our expenses to increase as we continue the research
and development of, and seek marketing approval for, our product candidates.
Accordingly, we will need to obtain substantial additional funding in connection
with our continuing operations. If we are unable to raise capital when needed or
on attractive terms, we would be forced to delay, reduce or eliminate our
research and development programs or commercialization efforts.

We believe that our cash, cash equivalents and marketable securities as of
September 30, 2022, along with cash anticipated to be generated from sales of
EMPAVELI and from intravitreal pegcetacoplan for the treatment of geographic
atrophy (GA) secondary to age-related macular degeneration (AMD), as well as
committed development reimbursement payments from Sobi, will enable us to fund
our operating expenses and capital expenditure requirements at least into the
first quarter of 2024. We have based this estimate on assumptions that may prove
to be wrong, and we may use our available capital resources sooner than we
currently expect. We are devoting resources to the building of a commercial
infrastructure for intravitreal pegcetacoplan for GA. We will incur substantial
additional commercialization expenses for intravitreal pegcetacoplan if we
obtain regulatory approval for GA. We are also devoting additional resources to
the development of our product candidates. We will need to seek additional
funding to conduct these activities. Because of the numerous risks and
uncertainties associated with the commercialization of EMPAVELI, the development
of intravitreal pegcetacoplan and other product candidates, and because the
extent to which we may enter into collaborations with third parties for the
development of these product candidates is unknown, we are unable to estimate
the amounts of increased capital outlays and operating expenses associated with
completing the research and development of our product candidates. Our future
funding requirements will depend on many factors, including:

•

our ability to successfully commercialize and sell EMPAVELI in the United States;

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•

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 intravitreal
pegcetacoplan 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 pegcetacoplan, and future 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 pegcetacoplan in additional indications or any of our other product candidates that receive marketing approval to the extent such costs are not the responsibility of our 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 the COVID-19 pandemic 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 in the United States or any other product we commercialize; and

•

the costs of operating as a public company.

Until such time, if ever, as we can generate substantial product revenues, we
expect to finance our cash needs through a combination of equity offerings, debt
financings, collaborations, strategic alliances and licensing arrangements. We
currently do not have any committed external source of funds. To the extent that
we raise additional capital through the sale of equity or convertible debt
securities, our stockholders' ownership interests will be diluted, and the terms
of these securities may include liquidation or other preferences that adversely
affect our stockholders' rights. Debt financing, if available, would result in
fixed payment obligations and may involve agreements that include restrictive
covenants that limit our ability to take specific actions, such as incurring
additional debt, making capital expenditures or declaring dividends, that could
adversely impact our ability to conduct our business.


If we raise funds through collaborations, strategic alliances or licensing
arrangements with third parties, we may have to relinquish valuable rights to
our technologies, future revenue streams, research programs or product
candidates or to grant licenses on terms that may not be favorable to us. If we
are unable to raise additional funds through equity or debt financings 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.

Contractual Obligations

The disclosure of our contractual obligations and commitments is set forth under
the heading "Management's Discussion and Analysis of Financial Condition and
Results of Operations-Contractual Obligations" in our 2021 Annual Report on Form
10-K. See Note 14 Commitments and Contingencies in the Notes to Unaudited
Condensed Consolidated Financial Statements in Part I, Item I of this Form 10-Q
for a discussion of obligations and commitments.

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