Apellis Pharmaceuticals Refinances Existing Debt with Up to $475 Million Non-Dilutive Credit Facility from Sixth Street
Apellis Pharmaceuticals announced a new non-dilutive senior secured credit facility with Sixth Street for up to $475 million, with $375 million received at closing. Apellis can access an additional $100 million before September 2025 under certain conditions and another $100 million through a third-party working capital facility. The majority of the proceeds will buy out a $326 million development liability to SFJ Pharmaceuticals, eliminating $366 million in payments through 2027. This improves Apellis' liquidity without needing additional capital markets funding. The credit facility matures in 2030 with a 3-month SOFR + 5.75% interest rate and is secured by Apellis' assets. As of March 31, 2024, Apellis had $325.9 million in cash and equivalents.
- Received $375 million at closing from Sixth Street.
- Can access an additional $100 million before September 2025.
- Eliminates $366 million in SFJ payments through 2027.
- Net proceeds at closing amount to $32 million.
- Improves liquidity without diluting shareholders.
- Interest rate set at 3-month SOFR + 5.75%, which is manageable.
- No scheduled amortization payments during the credit facility term.
- Secured by substantially all assets of Apellis, providing a strong collateral base.
- Maturity date set for May 2030.
- High interest rate at SOFR + 5.75% could increase financial burden.
- Entire principal amount due at maturity could strain future financials.
- Eliminating SFJ payments costs $326 million upfront, depleting liquidity.
- Only $32 million net proceeds left after the transaction.
- Risks associated with securing company's assets for the credit facility.
- Affirmative and negative covenants could restrict operational flexibility.
Insights
Apellis Pharmaceuticals' refinancing deal with Sixth Street is significant from a financial perspective. The company secured up to
From an investor standpoint, the refinancing is notable due to its non-dilutive nature. Non-dilutive financing means Apellis did not have to issue additional shares, which could dilute existing shareholders' equity. This is particularly favorable during volatile market conditions, as it exhibits fiscal prudence.
The immediate boost to liquidity, coupled with the elimination of significant future liabilities, positions Apellis favorably to concentrate on its core operations. The interest rate tied to the SOFR + 5.75%, with a 1.00% floor, is relatively competitive given current market conditions. Additionally, the lack of scheduled amortization payments until maturity in 2030 provides Apellis with financial flexibility to invest in growth and operational initiatives without short-term pressure.
Overall, this move demonstrates Apellis' strategic foresight and robust financial management, positively impacting its financial health and investor confidence.
Apellis' decision to enter into the credit facility agreement with Sixth Street is a noteworthy development in the life sciences and biopharmaceutical sector. The arrangement underscores investor confidence in Apellis, particularly in light of its commercial success with SYFOVRE®, a drug for geographic atrophy.
SYFOVRE®'s performance, having significantly helped patients within its first year of commercial availability, showcases the potential of Apellis' product pipeline. This deal supports further commercialization and development efforts, contributing to long-term growth prospects.
The partnership with Sixth Street, a prominent player in healthcare and life sciences financing, also lends credibility and may encourage other institutional investors to look favorably upon Apellis. This can potentially open doors for future funding opportunities under favorable terms, enhancing the company's market positioning.
Given the competitive landscape, Apellis' ability to secure such terms indicates a strong market position and investor trust, which could have positive repercussions for its market share and brand reputation.
The legal structure of the new credit facility involves senior secured debt, which is of higher priority in the event of liquidation, making it a safer investment for lenders like Sixth Street. This structure is bolstered by affirmative and negative covenants designed to protect the interests of both parties.
Additionally, the elimination of the SFJ Pharmaceuticals development liability reduces Apellis' contractual obligations. This move not only lowers debt but also streamlines Apellis' financial commitments, enhancing its overall creditworthiness. The maturity date set for 2030 provides a clear timeline for Apellis to capitalize on its business objectives without immediate pressure to repay.
Investors should note that while the credit facility enhances liquidity and removes significant liabilities, it also imposes certain covenants, which might limit operational flexibility to a degree. However, these covenants are standard for such agreements and are generally intended to ensure financial stability and discipline.
In summary, the legal structuring of this deal is robust, strategically sound and indicative of a well-negotiated agreement, beneficial for Apellis' long-term stability.
- Apellis received
$375 million in funding at close, with ability to access an additional$100 million - Majority of initial proceeds used to buy out existing SFJ Pharmaceuticals development liability
- Significantly improves liquidity profile by eliminating
$366 million in SFJ payments through 2027
WALTHAM, Mass., May 14, 2024 (GLOBE NEWSWIRE) -- Apellis Pharmaceuticals, Inc. (Nasdaq: APLS), today announced that it has entered into a non-dilutive, senior secured credit facility with Sixth Street, a leading global investment firm, of up to
Apellis used the majority of the net proceeds to buy out the existing SFJ Pharmaceuticals development liability for approximately
“With this transaction, we believe we are uniquely positioned to fund our core operations to positive cash flow without the need to access the capital markets. This marks a pivotal milestone for Apellis,” said Tim Sullivan, chief financial officer of Apellis. “Sixth Street is one of the top capital providers within the life sciences sector. Executing this type of deal with market-leading economic terms underscores the quality of our business and the aligned confidence in the opportunities that we have to create meaningful, long-term shareholder value.”
“We are proud to be supporting Apellis as it successfully commercializes two life-changing medicines. We are particularly enthusiastic about SYFOVRE® (pegcetacoplan injection), which in its first year has already helped many people living with geographic atrophy in the U.S. and has the potential to benefit millions of patients worldwide,” said Jeff Pootoolal, partner at Sixth Street. “We greatly value our partnership with the Apellis team and look forward to continuing to help them drive further growth and to realize their commercial and development goals.”
The new senior secured credit facility matures on May 13, 2030, and bears interest at an annual rate equal to the 3-month Secured Overnight Financing Rate (SOFR) +
As of March 31, 2024, Apellis had cash and cash equivalents of
TD Cowen acted as financial advisor and Wilmer Hale served as legal advisor to Apellis. Proskauer Rose LLP acted as legal advisors to Sixth Street.
About SFJ Pharmaceuticals Collaboration
In February 2019, Apellis entered into a development collaboration with SFJ Pharmaceuticals, a global drug development company backed by Blackstone Life Sciences and Abingworth, to support the development of pegcetacoplan for the treatment of patients with paroxysmal nocturnal hemoglobinuria (PNH). Under the SFJ agreement, SFJ paid Apellis a total of
About Sixth Street
Sixth Street is a global investment firm with over
U.S. Important Safety Information for SYFOVRE® (pegcetacoplan injection)
CONTRAINDICATIONS
- SYFOVRE is contraindicated in patients with ocular or periocular infections, and in patients with active intraocular inflammation
WARNINGS AND PRECAUTIONS
- Endophthalmitis and Retinal Detachments
- Intravitreal injections, including those with SYFOVRE, may be associated with endophthalmitis and retinal detachments. Proper aseptic injection technique must always be used when administering SYFOVRE to minimize the risk of endophthalmitis. Patients should be instructed to report any symptoms suggestive of endophthalmitis or retinal detachment without delay and should be managed appropriately.
- Retinal Vasculitis and/or Retinal Vascular Occlusion
- Retinal vasculitis and/or retinal vascular occlusion, typically in the presence of intraocular inflammation, have been reported with the use of SYFOVRE. Cases may occur with the first dose of SYFOVRE and may result in severe vision loss. Discontinue treatment with SYFOVRE in patients who develop these events. Patients should be instructed to report any change in vision without delay.
- Neovascular AMD
- In clinical trials, use of SYFOVRE was associated with increased rates of neovascular (wet) AMD or choroidal neovascularization (
12% when administered monthly,7% when administered every other month and3% in the control group) by Month 24. Patients receiving SYFOVRE should be monitored for signs of neovascular AMD. In case anti-Vascular Endothelial Growth Factor (anti-VEGF) is required, it should be given separately from SYFOVRE administration.
- In clinical trials, use of SYFOVRE was associated with increased rates of neovascular (wet) AMD or choroidal neovascularization (
- Intraocular Inflammation
- In clinical trials, use of SYFOVRE was associated with episodes of intraocular inflammation including: vitritis, vitreal cells, iridocyclitis, uveitis, anterior chamber cells, iritis, and anterior chamber flare. After inflammation resolves, patients may resume treatment with SYFOVRE.
- Increased Intraocular Pressure
- Acute increase in IOP may occur within minutes of any intravitreal injection, including with SYFOVRE. Perfusion of the optic nerve head should be monitored following the injection and managed as needed.
About Apellis
Apellis Pharmaceuticals, Inc. is a global biopharmaceutical company that combines courageous science and compassion to develop life-changing therapies for some of the most challenging diseases patients face. We ushered in the first new class of complement medicine in 15 years and now have two approved medicines targeting C3. These include the first-ever therapy for geographic atrophy, a leading cause of blindness around the world. We believe we have only begun to unlock the potential of targeting C3 across serious retinal, rare, and neurological diseases. For more information, please visit http://apellis.com or follow us on Twitter and LinkedIn.
Apellis Forward-Looking Statement
Statements in this press release about future expectations, plans and prospects, as well as any other statements regarding matters that are not historical facts, may constitute “forward-looking statements” within the meaning of The Private Securities Litigation Reform Act of 1995. These statements include, but are not limited to, statements regarding the anticipated benefits of the credit facility and the use of proceeds therefrom, including the buyout of the SFJ liability, the ability of the Company to achieve positive cash flow, the Company’s need to access the capital markets and whether the Company will access additional funding by entering into a separate working capital facility. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will,” “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Actual results may differ materially from those indicated by such forward-looking statements as a result of various important factors, including whether the Company will be able to comply with the obligations, covenants and conditions under its credit facility, including its ability to repay the credit facility at maturity; whether the Company’s clinical trials will be completed when anticipated; whether results obtained in clinical trials will be indicative of results that will be generated in future clinical trials; whether pegcetacoplan will successfully advance through the clinical trial process on a timely basis, or at all; whether the results of the Company’s clinical trials will warrant regulatory submissions and whether systemic pegcetacoplan will receive approval from the FDA or equivalent foreign regulatory agencies for C3G and IC-MPGN or any other indication when expected or at all; the period for which the Company believes that its cash resources will be sufficient to fund its operations; the impact of general macroeconomic conditions, changes in interest rates and uncertain credit and financial markets on the Company’s business and financial position; and other factors discussed in the “Risk Factors” section of Apellis’ Annual Report on Form 10-K with the Securities and Exchange Commission on February 27, 2024 and the risks described in other filings that Apellis may make with the Securities and Exchange Commission. Any forward-looking statements contained in this press release speak only as of the date hereof, and Apellis specifically disclaims any obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise.
Media Contact:
Lissa Pavluk
media@apellis.com
617.977.6764
Investor Contact:
Meredith Kaya
meredith.kaya@apellis.com
617.599.8178
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