1. Nature of Organization and Operations Apellis Pharmaceuticals, Inc. (the Company) is a clinical-stage biopharmaceutical company focused on the development of novel therapeutic compounds to treat disease 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. The Company was incorporated in September 2009 under the laws of the State of Delaware and has its principal office in Waltham, Massachusetts. The Companys operations since inception have been limited to organizing and staffing the Company, acquiring rights to product candidates, business planning, raising capital and developing its product candidates. The Company is subject to risks common in the biotechnology industry including, but not limited to, raising additional capital, development by its competitors of new technological innovations, its ability to successfully complete preclinical and clinical development of product candidates and receive timely regulatory approval of products, market acceptance of the Companys products, protection of proprietary technology, healthcare cost containment initiatives, and compliance with governmental regulations, including those of the U.S. Food and Drug Administration (FDA). Additionally, the Company is subject to risks arising from the Coronavirus Disease 2019 (COVID-19) pandemic, which could have adverse effects upon its business and operations, including on its ability to initiate, conduct and complete clinical trials, delay the initiation of planned and future clinical trials or disrupt regulatory activities. Convertible Notes Offering On May 12, 2020, the Company completed a private offering of $300.0 million aggregate principal amount of 3.5% convertible senior notes due 2026 (the 2020 Convertible Notes). The aggregate purchase price of the 2020 Convertible Notes was $328.9 million, which amount includes accrued interest from March 15, 2020 to, but not including, May 12, 2020. The net proceeds from the sale of the 2020 Convertible Notes were approximately $322.9 million after deducting the initial purchasers discounts and commissions and offering expenses payable by the Company. The Company used $43.1 million of the net proceeds from the offering to pay the cost of the capped call transactions described below. The 2020 Convertible Notes form a single series with, and have the same terms as, the Companys $220.0 million aggregate principal amount of 3.500% convertible senior notes due 2026 issued on September 16, 2019, (the 2019 Convertible Notes, and together with the 2020 Convertible Notes, the Convertible Notes), but have a different issue date, issue price, CUSIP number and different restrictions on transfer. The 2020 Convertible Notes were issued as additional notes under the indenture (the Indenture), dated as of September 16, 2019, by and between the Company and U.S. Bank National Association, as trustee (the Trustee), under which the 2019 Convertible Notes were issued. The 2020 Convertible Notes rank equal in right of payment to the 2019 Convertible Notes. The 2020 Convertible Notes are senior unsecured obligations of the Company and bear interest at a rate of 3.5% per year payable semiannually in arrears on March 15 and September 15 of each year, beginning on March 15, 2020. The Convertible Notes will mature on September 15, 2026, unless earlier converted, redeemed or repurchased in accordance with their terms. See Note 5  Long-term Debt for additional information . Capped Call Transactions On May 6, 2020, concurrently with the pricing of the 2020 Convertible Notes, the Company entered into capped call transactions with two counterparties. The capped call transactions are expected generally to reduce the potential dilution to the Companys common stock upon any conversion of the 2020 Convertible Notes and/or offset any cash payments the Company is required to make in excess of the principal amount of converted 2020 Convertible Notes, as the case may be, in the event that the market price per share of the Companys 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 2020 Convertible Notes) and is subject to anti-dilution adjustments substantially similar to those applicable to the conversion rate of such 2020 Convertible Notes. Follow-on Public Offerings On January 13, 2020, the Company issued and sold 10,925,000 shares of its common stock at a price per share to the public of $37.00 in a follow-on public offering including an additional 1,425,000 shares of its common stock that were sold at the follow-on public offering price of $37.00 per share pursuant to the underwriters in full exercise of their option to purchase additional shares of common stock. The Company received net proceeds of $381.5 million after deducting underwriting discounts and commissions of $22.2 million and offering costs of $0.5 million for these transactions. Liquidity and Financial Condition The accompanying unaudited condensed consolidated financial statements have been prepared on the basis of the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. As of November 2, 2020, the date of issuance of these unaudited condensed consolidated financial statements, the Company believes that its cash and cash equivalents of $415.6 million and marketable securities of $312.6 million as of September 30, 2020, together with the $250 million upfront payment and subsequent committed development reimbursement payments that Swedish Orphan Biovitrum AB (Publ), (Sobi) has agreed to pay the Company under the collaboration and license agreement with Sobi as discussed in Note 14, Subsequent Events, will be sufficient to fund its operations and capital expenditure requirements for at least the next twelve months from the date of issuance of the unaudited interim consolidated financial statements. The future viability of the Company beyond that point is dependent on its ability to raise additional capital to finance its operations. The Company is subject to risks common to other life science companies in the development stage including, but not limited to, uncertainty of product development and commercialization, lack of marketing and sales history, development by its competitors of new technological innovations, dependence on key personnel, market acceptance of products, product liability, protection of proprietary technology, ability to raise additional financing, and compliance with FDA and other government regulations. If the Company does not successfully commercialize any of its product candidates, it will be unable to generate recurring product revenue or achieve profitability. Managements plans in order to meet its short-term and longer-term operating cash flow requirements include obtaining additional funding. There are uncertainties associated with the Companys ability to (1) obtain additional debt or equity financing on terms that are favorable to the Company (2) enter into collaborative agreements with strategic partners to obtain funding, and (3) succeed in its future operations. If the Company is not able to obtain the required funding for its operations on a timely basis on terms that are favorable to the Company or at all, it could be forced to delay, reduce or eliminate its research and development programs or future commercialization efforts and its business could be materially harmed.