What happened

Shares of Apellis Pharmaceuticals (NASDAQ:APLS) rose nearly 41% today after the company reported that its lead drug candidate proved superior to a competitor's therapy on a key clinical metric for individuals with paroxysmal nocturnal hemoglobinuria (PNH). The rare blood disease is characterized by hemolysis, or the breakdown of red blood cells, which leads to anemia and other complications caused by a lack of hemoglobin required to transport oxygen throughout the body.

Apellis Pharmaceuticals conducted a phase 3 study that pitted pegcetacoplan against Soliris from Alexion Pharmaceuticals (NASDAQ:ALXN). After 16 weeks, the experimental treatment drove a greater increase in hemoglobin levels than Soliris. 

As of 1:15 p.m. EST, the clinical-stage pharma stock had settled to a 22.6% gain.

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So what

The primary endpoint of the phase 3 trial was improvement in hemoglobin levels, which pegcetacoplan easily achieved. After 16 weeks, the experimental therapy drove an average 2.4 g/dL increase from baseline, compared to a 1.5 g/dL decrease from baseline for Soliris. 

Individuals began treatment with an average hemoglobin baseline of 8.7 g/dL, which means achieving the average increase provided by pegcetacoplan would still technically not alleviate anemia (defined as hemoglobin levels less than 12 g/dL in women and 13.5 g/dL in men). 

Nonetheless, the ability of pegcetacoplan to increase hemoglobin levels should help to reduce anemia symptoms in PNH patients. The drug candidate also demonstrated non-inferiority to Soliris on two other metrics, including the number of individuals who were transfusion-free (85% vs. 15%).

Now what

Investors are hoping that the favorable head-to-head results lead to regulatory approval and quick market success for Apellis Pharmaceuticals and pegcetacoplan.

In the first nine months of 2019, Alexion Pharmaceuticals reported that Soliris generated $2.93 billion in global revenue, including $1.46 billion in the United States. However, the drug is approved to treat four different conditions and the company is transitioning individuals with PNH to its newer drug, Ultomiris. 

In clinical trials, Ultomiris was proven to be non-inferior to Soliris, but the former has the benefit of being dosed once every four to eight weeks. The added convenience of Ultomiris might be an obstacle for pegcetacoplan (dosed twice weekly) that investors are overlooking in the immediate aftermath of the study results. Most likely, the experimental drug's approval would further segment the market between individuals requiring convenience (those who don't need blood transfusions and live far away from treatment centers might favor Ultomiris) and patients with more serious cases of the rare disease (those requiring blood transfusions might prefer pegcetacoplan).