Apellis Pharmaceuticals Inc. shares suffered their worst two-day drop on record after confirming reports that some patients experienced severe inflammation following treatment with its eye drug.

The slump is welcome news for traders betting against Apellis. The biopharmaceutical firm’s stock sank 24% on Tuesday, extending its two-day decline to 53%, erasing roughly $5.2 billion in market value.

Short sellers have gained about $414 million in paper profits during the period, according to data from S3 Partners LLC. That’s pushed the group to a 0.66% return in 2023, or paper profits of about $51 million, from a loss of about $363 million on Friday.

Prior to the abrupt selloff, Apellis had rallied for seven consecutive months and was up 63% this year through Friday’s close. Up until this week it was among the top performers in the Nasdaq Biotech Index.

Apellis shares sank a record 38% Monday after reports circulated that the American Society of Retina Specialists had sent a memo to its members regarding six cases of retinal vasculitis after using the company’s eye drug Syfovre. The stock extended those losses to a second day after confirming the cases in a filing with the US Securities and Exchange Commission.

“While these events give us pause and should not be dismissed out of hand, it may be premature to conclude this warning is going to have a significant negative impact on Syfovre’s adoption,” H.C. Wainwright & Co. analyst Douglas Tsao wrote in a note to investors.

Tsao added that he would need to revisit this stance and Syfovre’s competitive positioning if more reports come in showing the incidence of vasculitis increases meaningfully.

--With assistance from Matt Turner.

(Updates stock move at market close)