Coherus BioSciences, Inc. (NASDAQ:CHRS) Q4 2022 Earnings Call Transcript

Coherus BioSciences, Inc. (NASDAQ:CHRS) Q4 2022 Earnings Call Transcript March 6, 2023

Operator: Thank you for standing by, and welcome to Coherus Biosciences Fourth Quarter and Fiscal Year 2022 Earnings Conference Call. I would now like to hand the call over to SVP, Investor Relations, Marek Ciszewski. Please go ahead.

Marek Ciszewski: Thank you, Latif, and good afternoon, everyone, and thank you for joining us. We issued a press release earlier today announcing our financial results for the fourth quarter of 2022. This release can be found on the Coherus Biosciences’ website and is also attached to our Form 8-K. Today’s call includes forward-looking statements regarding Coherus’ current expectations about future events. These statements include but are not limited to our ability to gain approval for multiple new products and launch them, the ability of the FDA to complete required inspections in China for our BLA for Toripalimab, timing of the end of our decline in revenues and timing of our ability to gain market share for any of our approved products, expectations about revenue growth, projections of expenses and revenue, our future manufacturing capacity, and whether we can return to profitability and the timing of any return to profitability.

All of these forward-looking statements involve substantial risks and uncertainties that are beyond our control and could cause actual results, performance, or achievements to differ from those implied by the forward-looking statements. These statements are not guarantees of future performance and are subject to substantial risks and uncertainties that are discussed in our press release that we issued today, as well as the documents that we filed with the SEC. Forward-looking statements provided on the call today are made as of this date and we undertake no duty to update or revise any forward-looking statements. Fourth quarter and full year 2022 results are not necessarily indicative of results for future periods. With me on today’s call are Denny Lanfear, CEO of Coherus; Dr. Theresa Lavallee, Chief Development Officer; Dr. Rosh Dias, Chief Medical Officer; Paul Reider, Chief Commercial Officer; and McDavid Stilwell, Chief Financial Officer.

I will now turn the call over to Denny.

Denny Lanfear: Thank you, Marek, and thank you all for joining us on our Q4 2022 call. For Q4 ’22, we continued our efforts to first drive top line revenues across our products. Secondly, to actively manage expenses without jeopardizing our product launches or sales potential. And then third, to drive towards profitability in 2024. Coherus strategy is to create long-term shareholder value with immuno-oncology products that extend patient survival and the fund development these products with the sales of biosimilars or other innovative products across diversified therapeutic areas. We have continued to make good progress with both our development efforts and our biosimilar sales efforts this quarter. Following my opening remarks, Paul Reider, our Chief Commercial Officer will update you on the similarly launch and progress on obtaining our permanent reimbursement Q code, which we expect to drive sales starting in Q2, and on through 2023.

Paul will then further update you on UDENYCA sales and trends for Q4 ’22, as well as our plans for our newly approved UDENYCA auto injector. As you know, the pegfilgrastim market has become increasingly more competitive with market participants continuing to discount prices. As Paul will explain our strategy is to provide multiple product presentations to fully address market needs maximizing UDENYCA utilization. Dr. Theresa Lavallee, our Chief Development Officer will update you on two key items. First and most importantly, Toripalimab inspections and approval, and secondly, ILT4 IND progress, as well as certain other pipeline developments. With respect to clinical development, our Chief Medical Officer, Dr. Rosh Dias will then update on recently announced final MPC data as well as progress in our TIGIT Toripalimab combination study.

As I indicated, we have been tightly focused on actively managing expenses without jeopardizing our product sales potential. Accordingly, McDavid Stilwell, our Chief Financial Officer will provide greater detail on our expense management efforts. However, the top line results of these exercises is that we are revising our previous 2023 SG&A expense forecast to $315 million to $335 million, a reduction for the 12 months of 2023 of nearly $100 million compared to previous guidance. This has been achieved by both reducing headcount by approximately 20% as well as realizing savings including R&D across the board. Last quarter, we told you that our goal was to launch four products or presentations by the end of 2023 and significantly reduce our cost structure.

This quarter, we report that we continue to successfully track to those goals while adding yet another launch of our auto injector presentation UDENYCA. With that, I will now turn the call over to Paul Reider, our Chief Commercial Officer. Paul?

Paul Reider: Thank you, Denny. I’ll start with CIMERLI, the first and only interchangeable biosimilar to Lucentis approved by the FDA with all five indications both dosage strengths and with 12 months of first interchangeability exclusivity. This complete label has been well received by retinal specialists, giving them the confidence that they can safely transition currently treated Lucentis patients to CIMERLI and expect the same clinical outcomes. Our strategic approach to the market is twofold. First, maximize the conversion of existing Lucentis business, which currently represents greater than 1 million units annually. And second, grow share through new patient starts or conversion from other anti-VEGF products. For the fourth quarter, sales of CIMERLI were $7 million and market share ended the quarter at 2.4% with channel inventory levels at the end of the quarter above the normal range due to launch stocking and anticipated demand.

Payer coverage is expanding which is creating greater access opportunities for CIMERLI. We have confirmed coverage on 100% of Medicare fee-for-service lives enabling the reimbursement pathway for claims submitted under Medicare Part B, which is the majority of patients with wet AMD and 40% of Lucentis business. In addition, coverage achieved thus far for commercial and Medicare Advantage is 61% and 47% of lives respectively. Importantly, similarly received its permanent product specific Q-code from CMS, which will go into effect on April 1 providing retinal specialists more efficient electronic billing processes and faster reimbursement for submitted claims. We see this as a catalyst for accelerated growth in 2023 beginning in Q2. Given this, we continue to expect that in 2023 CIMERLI revenues will be at least $100 million.

I’ll now turn to our oncology franchise beginning with UDENYCA. For the fourth quarter, UDENYCA net sales were $38.3 million which included a $4.7 million charge for a contingent liability related to resolving a dispute arising from certain sales which occurred from October 2020 through December 2021. This compared to $45 million in the prior quarter. The majority of the decline was driven by, first, an 8% decline in demand, primarily in the clinic and non-340B segments, respectively. And secondly, a 14% decline in net selling price required to maintain a competitive position in the pre-filled syringe segment. Market share for the quarter was 12.4%, a 1% decline from the prior quarter. Channel inventory levels at the end of the quarter increased slightly above the normal range due to end of the year holiday stocking at wholesalers.

As Denny mentioned, we are excited to announce FDA approval of UDENYCA auto injector which represents the first product presentation innovation in the pegfilgrastim class in eight years, commercial launch will occur in the coming weeks. UDENYCA will be the only pegfilgrastim brand with both prefilled syringe and auto injector presentations, offering greater choice and flexibility for providers and patients enabling them to tailor the pegfilgrastim treatment approach to their unique needs, whether it’s in the clinic or at home. We believe that the UDENYCA auto injector can effectively complete for net Neulasta Onpro share in some of the clinical and patient settings. This year, when we launched our on-body device, if approved, the UDENYCA brand will become the only pegfilgrastim product with three presentations, providing a total solution for customers and enabling UDENYCA to compete head to head with Neulasta Onpro which currently maintains 44% of the market.

Now regarding Toripalimab. We remain excited about the potential to bring to oncologists and patients what would be the first and only PD1 inhibitor approved in the U.S. indicated for Nasopharyngeal Carcinoma and to establish a new standard of care in all lines of therapy including first line. Our oncology commercial capabilities have been built to scale with significant overlap between UDENYCA customers and Toripalimab targeted prescribers. Therefore, the launch of Toripalimab will be efficiently integrated into our existing oncology commercial infrastructure. We maintain a state of commercial launch readiness and we’ll be ready to launch Toripalimab directly upon FDA approval. Now, I’ll end with YUSIMRY, our Humira biosimilar which is on track to launch in July.

We continue to believe that price, supply robustness, and product presentation will serve as the key criteria used in making formulary decisions and YUSIMRY is well positioned to compete on each of these criteria. YUSIMRY will have a state-of-the-art auto injector presentation, which was approved by FDA last month on schedule and includes our proprietary non-stinging citrate free formulation and a 29 gauge needle for maximal patient comfort. We will have substantial supply volumes at launch with 500,000 YUSIMRY units ready for distribution in July. Despite the high competitive intensity of this market, we are confident that we will deliver a compelling YUSIMRY value proposition and we’ll share more details as we get closer to launch. I’ll now turn the call over to Theresa.

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Theresa Lavallee: Thank you, Paul, and good afternoon, everyone. I would like to begin with an update on our Toripalimab inspections. As you know, the FDA midst the PDUFA date for our Toripalimab MPC application in December of 2022. As we have previously noted, travel restrictions related to the COVID-19 pandemic have hindered the FDA’s ability to complete inspections in China for the Toripalimab BLA. However, as of January 8, 2023, China’s COVID policies were listed with complete elimination of the quarantine requirement upon entering the country or in response to a positive COVID tests. Coherus and our partners Junshi Biosciences are currently engaged with the agency regarding the scheduling of the inspection. The FDA has notified the company of planned dates in the second quarter of 2023 for the manufacturing inspections in China.

The FDA granted Toripalimab Breakthrough Therapy designation and has consistently recognized the unmet need for patients with MPC and the strength of the clinical data, which has been further supported by the positive final overall survival data. While we are very optimistic that the Toripalimab will be approved for MPC of rare cancer an unmet need with no approved immunotherapy options in 2023. The FDA in 2022, the FDA made clear its position that it will generally require multi-regional clinical trials to support other U.S. registration that do not warrant regulatory flexibility. Consistent with the FDA’s position, we have recently worked with our partner Junshi to streamline the Toripalimab development plan and focus on the two studies that support the Nasopharyngeal Carcinoma BLA as well as a small solid tumor study currently being conducted in the United States.

The development plan scope reductions significantly reduces our Toripalimab related clinical trial expenses going forward as McDavid will describe later in the call. Toripalimab, a PD1 with a differentiated mechanism of action and impressive survival benefit in multiple tumor types provides an essential foundation to our I-O pipeline. We continue to look at development opportunities to expand beyond MPC for Toripalimab by investigating novel combinations with our partner Junshi with our TIGIT CHS-006 program with new partners that have clinical data and Coherus new molecular entities. With respect to our early stage pipeline, CHS-1000 are proprietary ILT4 antibody, a tumor microenvironment modulator is progressing towards IND and we are on track for filing in 2023.

While the field has focused on T-cell checkpoint inhibitors, myeloid checkpoint inhibitors such as ILT4 may serve as an important approach for overcoming PD1 resistance. We believe the mechanism of this myeloid modulator will be complementary with Toripalimab and plan to explore the combination in a broad range of solid tumors including lung cancer. I’ll now turn it over to Dr. Rosh Dias to discuss the Toripalimab combination studies in further detail.

Rosh Dias: Thanks very much, Theresa, and good afternoon, everyone. Toripalimab continues to form the backbone of our immuno-oncology franchise. We recently announced that we have positive final overall survival results of JUPITER-02 in nasopharyngeal carcinoma to build upon the positive PFS data published in Nature Medicine and presented at the 2021 ASCO plenary session and which we will be communicating in detail at the forthcoming Congress. With regards to our TIGIT program, we remain excited about our Toripalimab TIGIT study which is currently active in the U.S. and we’re continuing to open U.S. sites. We anticipate data from this U.S. study being available beginning in 2024 as previously communicated and emerging datasets from the Companion China Toripalimab TIGIT study being available throughout 2023.

And finally, we continue to be active in exploring academic collaborations as well as partnership opportunities for Toripalimab clinical trials with novel combinations across multiple tumor types, including non-small cell lung cancer. I’ll now turn the call over to our Chief Financial Officer, McDavid Stilwell. McDavid?

McDavid Stilwell: Thank you, Rosh. The details of our financial results are in the press release, the 8-K, and the 10-K we filed this afternoon, so I’ll focus on just a few highlights. For the fourth quarter and full year 2022, we reported net losses of $58.9 million and $291.8 million respectively on a GAAP basis. Net revenue for the fourth quarter was $45.4 million. UDENYCA net product revenue for the quarter was $38.3 million and was reduced by $4.7 million charge for a contingent liability related to resolving a dispute regarding certain sales that occurred in 2020 and 2021. Net product revenue of CIMERLI which launched October 3, was $6.9 million. Cost of sales was $14.2 million for the quarter and $70.1 million for the year, resulting in gross margins of 69% and 67% respectively.

COGS for the full year 2022 included a $26 million write-down taken in the third quarter for inventory at risk of exploration. Recall that UDENYCA COGS includes a mid-single-digit royalty paid on net sales through mid-year 2024 and similarly COGS includes low to mid 50% royalties on gross profits. Research and development expenses were $29 million for the fourth quarter and $199.4 million for the year. Excluding upfront license fees in both years, R&D costs declined in 2022 relative to 2021 due to lower development expenses for UDENYCA and YUSIMRY. Selling, general, and administrative expenses were $53.6 million for the quarter and $198 million for the year, an increase compared to the prior year. It was driven by higher commercialization expenses in preparation for launches of CIMERLI in late 2022 and multiple new product launches in 2023 including Toripalimab, YUSIMRY, and the auto injector and on-body injector presentations of UDENYCA.

We ended the year with $192 million in cash, cash equivalents, and marketable securities. Looking ahead for 2023, we continue to project net product revenue to exceed $275 million, including at least $100 million in net sales of CIMERLI. In the last three months, we have implemented important measures to significantly reduce our operating expenses and cash outlays. As Theresa described, we have worked with our partner Junshi to streamline the U.S. Toripalimab development plan, which forms the basis for our Toripalimab related clinical trial reimbursements. We expect this change in scope will reduce our expenses for this asset by approximately $100 million over the next five years, including by $23 million this year in 2023. On our last call, we reported to you that we have reduced expenditures but would continue to work on generating more savings and I can report today that we are reducing head count by about 20% initiating a reduction in force impacting about 60 staff numbers effective March 10.

We have also reduced other internal and external SG&A expenses throughout the company. Additionally, we have worked with our manufacturing partners to reduce expenses and shift production schedules to minimize near term cash outlays. As a result of these measures, our projected operating expenses are significantly reduced compared to the five year operating cost structure that we illustrated at our April 2022 Analyst Day event. For 2023, the difference is nearly $100 million. We project total combined SG&A and R&D GAAP operating expenses of $315 million to $335 million for this year, excluding upfront or milestone payments to collaborators and including approximately $50 million in noncash stock compensation expense. As 2023 progresses, we expect our operating losses to moderate rapidly and we continue to manage Coherus to become profitable again in 2024.

I’ll now turn the call to Denny for closing remarks.

Denny Lanfear: Thank you, McDavid, and thank you all for joining us on our Q4 2022 earnings call. We are pleased with our progress in the last quarter with the launch of our second product CIMERLI, our Lucentis biosimilar. We’re also pleased that we have obtained approval for a new and innovative product presentation, UDENYCA auto injector which will launch next quarter addressing the unmet patient and physician needs. Through thoughtful and disciplined cost and expense control, we have significantly reduced our 2023 expenses by about $100 million to about $325 million and we’ll continue to look for more efficiencies in savings. In 2023, we look forward to the approval and launch of other products and we continue our efforts to drive revenue increases while controlling the expenditures to achieve profitability in 2024. Operator, we’re ready for the questions.

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Q&A Session

Operator: Our first question comes from the line of Salim Syed of Mizuho. Your question please, Salim?

Salim Syed: Thanks so much for the question, guys. I guess I’ll use my one question on the auto injector and my follow-up for if I can. On the autoinjector, guys, can you just remind us is the predominant – first I guess – first can you tell us when you filed this, I don’t recall you guys actually every time as when you filed for the autoinjector. I’m just trying to understand how quickly the FDA may have gotten through this particular approval process? I’ll just leave it there. And then I guess for my follow-up, just curious if you can give us an update on how you’re pursuing NCCN coverage as a category TB drug for lung for Toripalimab now that you have the inspection on the docket? Thank you.

Denny Lanfear: Yes. Thanks, Salim. Actually, Salim, I want to remind you that you detected the auto injector clinical trial some time ago, if I recall. If I recall correctly, and you also detected the on-body clinical trial at a similar timeframe. We have not disclosed the filing timing, but I’ll let Dr. Lavallee make any further comments with respect to things. Yes, Theresa?

Theresa Lavallee: Yes, thanks Salim for that question. For competitive reasons, we didn’t talk about the auto injector a lot and with the approval of in terms of review timelines, it’s dynamic and it changed in October. So I think the important thing is that we got the approval this over the weekend. So we’re excited to see this launched, and continue to get to develop the UDENYCA franchise.

Denny Lanfear: I think before we have Rosh address the issue of NCCN, I would just invite Paul Reider to make some comments about where the auto injector fits in to the product presentations that we’re working on and the needs in the market. Paul?

Paul Reider: Sure. Hi Salim. So the market for pegfilgrastim since COVID has really bifurcated into two segments. You’ve got your pre-filled syringe segment, which is around 55% of the business that’s where patients come back to the clinic or the office 24 hours after chemotherapy to get their injection. And then you’ve got the at home segment where the patients will get the Onpro device supplied. And that is injected approximately 24 hours later. What became clear is that while the on-body device, it was very useful. It has certain restrictions and limitations. And we believe that the auto injector presentation will meet the needs of patients who desire an alternative to Onpro and these are patients that might be very active in their lifestyle, don’t want to wear a device, where they have had problems previously with the Onpro device or they just want more control over their treatment where they can administer their pegfilgrastim injection when and where they want and not be beholden to the timing of when the device is program to go off.

So we feel like this is going to serve an unmet need for a number of patients, and we look forward to working with patients and doctors’ office to bring this to market.

Denny Lanfear: Thanks, Paul. Rosh, can you address Salim’s question regarding the NCCN?

Rosh Dias: Sure. Salim, hi, and thanks for the questions. So Salim, we will obviously first of all, wait for our NPC approval and once that’s happened, we can submit other published data sets to the NCCN and I’ll remind you that we have – we’ve published data sets in several high tier journal. So that’s the timing in terms of NCCN.

Denny Lanfear: Did you have a follow up, Salim?

Salim Syed: No. I thought you used that. I’ll respect from my peers, I’ll get back in the queue, but thanks so much for the color, guys, and super helpful. Thank you.

Denny Lanfear: Okay.