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Hawk’s Nest

Apellis (APLS) Traders Position Ahead of Key Q3 Data

by | Jun 4, 2021

Apellis (APLS) spread on 6/3 saw 1000 October $25 puts sold to buy the $60/$85 call spread for a net $5, nice strength lately and finding support at the 8-EMA today. APLS saw another large spread recently targeting October including the $55/$65/$35/$22.50 iron condor opening 3000X on 5/20. APLS has a major catalyst in Q3, the DERBY/OAKS trial, a Phase 3 readout for their targeted C3 therapy pegcetacoplan in patients with geographic atrophy secondary to age-related macular degeneration. GA is a chronic, progressive degeneration of the macula and a late-stage part of age-related macular degeneration. According to the company GA affects approximately five million people globally. There are no approved therapies for GA. It often leads to irreversible vision loss and remains the most significant unmet need in vision-care. APLS believes that targeting the C3 complement has the potential to control the activation within the body responsible for growth of lesions. 18-month data from their Phase 1b study in October 2020 showed a 52% decrease in mean lesion growth in seven patients with bilateral GA. The Phase 2 study showed significant reduction in growth relative to untreated peers at 12-months. APLS has a $4.5B market cap and trades 18X sales and 6.3X cash. Hedge fund ownership fell modestly in Q1. Hillhouse is a top holder with 4.55M shares. Analysts are mostly bullish the name. UBS starting at Buy recently noting that lead asset APL-2 targets a core piece in the complement system, which she believes has significant potential across many diseases. RayJay has a $115 PT for shares and Goldman at $143 modeling a relatively slower ramp for Empaveli than consensus in 2021 and 2022 but conviction that the drug will in time prove to be best-in-class in PNH. Regarding the DERBY/OAKS readout, the firm likes the risk/reward and upside potential on a Phase 3 win would be significant with downside limited by their pipeline. Citi in April talking about the trial noted their survey of 67 U.S. ophthalmologists to assess market perception of pegcetacoplan’s efficacy/safety profile skews positive for pent-up demand for novel therapies for geographic atrophy generally and for pegcetacoplan’s benefit/risk proposition. JP Morgan handicapping the reaction sees Apellis shares going to $80-$110 on homerun data scenarios versus downside to low-teens to $25 in a trial failure scenario.