Coherus Biosciences [CHRS] Conference call transcript for 2022 q1
2022-05-05 22:59:05
Fiscal: 2022 q1
Operator: Good day, and thank you for standing by. Welcome to the Coherus Biosciences Inc. First Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. I would now like to hand the conference over to your speaker today, McDavid Stilwell, Chief Financial Officer. Please go ahead, sir.
McDavid Stilwell: Thank you, operator. Good afternoon, everyone, and thank you for joining us. We issued our press release earlier announcing our financial results for the first quarter of 2022. The results can be found -- the release can be found on the Coherus BioSciences' website. 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 advance our product candidates through development and registration, the status of product candidate clinical profile, our timing and ability to commercialization our products and product candidates in the future, our R&D and SG&A expense guidance for 2022, our revenue targets for 2026, and our ability to meet the same; our projections about margin as well as our ability to drive down amounts under our new credit facility, and the timing of the resubmission and review of the toripalimab BLA. All these future events involve substantial risks and uncertainties that are beyond our control and could cause actual results, performance or achievement to differ from the results, performance or achievement 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 in the document that we file with the Securities and Exchange Commission, including those in our quarterly on Form 10-Q with today's date. The 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. With me on today's call are Denny Lanfear, CEO of Coherus; Paul Reider, Chief Commercial Officer; Theresa LaVallee, Chief Development Officer; and Dr. Rosh Dias, Chief Medical Officer. And I will now turn the call over to Denny.
Denny Lanfear: Thank you, McDavid. Good afternoon everyone and thank you all for joining today on our conference to review recent business highlights and financial results for the first quarter 2022. Today, we will provide updates on our current business while their progress transforming Coherus into an innovative immuno-oncology company, supported by revenues from a diversified portfolio FDA approved products. Now, first with respect to the complete response letter we received from the FDA pursuant to the toripalimab BLA for advanced nasal pharyngeal cancer, we are currently assembling the FDA meeting package, which will support and agency interactions occur prior to the BLA submission. We expect mid-summer filings in a six-month review timeline. As we previously communicated, we believe the requested poly process change is straightforward and readily addressable. To the development side of the business, Dr. Theresa LaVallee, our Chief Development Officer will provide additional detail regarding toripalimab BLA, as well as our work with our partner Junshi Biosciences on the development of toripalimab for other indications and in combination with CHS-006, our TIGIT-targeted antibody. On the commercial side of the business, Paul Reider, our Chief Commercial Officer will review recent UDENYCA performance and our preparation for the anticipated near-term commercial launches of first; toripalimab, which we plan the launch for MPC once approved. Similarly, on the Lucentis biosimilar candidate, where review of the CIMERLI BLA is proceeding well and progressing towards August 2nd, 2022 action date. YUSIMRY, our HUMIRA biosimilar, where we are investing heavily in inventory build as robust supply availability is a key part of our market strategy. As well as UDENYCA on-body injector presentation, significant market share growth opportunity for our UDENYCA franchise. Today, we're also announcing the termination of our license relationship with Canada for the development of the biosimilar of asset candidate 05. COVID commenced shortly after execution of this agreement and has caused significant delays to the development timeline. We have recently assessed the market dynamics and given ongoing and projected COVID-related delays. We determined that this program no longer warrants or continued investment. Lastly, McDavid Stilwell, the company's Chief Financial Officer will review our first quarter financial results, provide an update on our operating expense guidance for the remainder of 2022. Well then that of course, we happy to take your questions. So, today I want to introduce you to our new Chief Medical Officer, Dr. Rosh Dias, who is with us and we'll be happy to take your questions during the Q&A. Rosh has over 18 years' experience and oncology, Cross Medical Affairs development and commercialization. We welcome Raj to our team. Now, and at our Analyst Day event, March 29th, we introduced 2026 revenue guidance targets of $1.2 billion to $2.2 billion and further described how we will leverage our existing operational infrastructure to achieve our commercial and development objectives. With continued strong execution of the regulatory approvals and commercial launches, and the advancement of our novel immuno-oncology pipeline, we expect to transform Coherus into a rapidly growing profitable and innovative neuro-oncology company. Now, I'll turn the call over to Dr. LaVallee for an update on the tori BLA review and early development programs. Theresa?
Theresa LaVallee: Thank you, Denny. As Denny referenced, the FDA issued a complete response letter for the biologics license application for toripalimab for NPC. A CRL requests a quality process change that we believe is straightforward and readily addressable. We plan to meet with the FDA to ensure our resubmission is complete and will submit the request package in the next few days. We plan to resubmit BLA by mid-summer 2022. The agency also communicated in the CRL that the review timeline for the BLA resubmission would be six months, as required on-site inspections have been hindered by travel restrictions related to the COVID-19 pandemic in China. The FDA has indicated that the existing toripalimab clinical data are supportive of the BLA submission. Toripalimab has demonstrated clinical efficacy and multiple tumor types, including in tumors with low PDL-1 expression, this differentiated clinical activity may result from toripalimab's high binding affinity to a unique epitope that potentiate PD-1 internalization. The next clinical milestone for Toripalimab could be the readout of the PFS and OS, co-primary endpoint from the small-cell lung cancer study JUPITER-07, which is expected this year. We recently obtained orphan drug designation for this indication in the United States. JUPITER-08 is a randomized, double-blind, placebo-controlled multicenter Phase 3 clinical trial evaluating platinum chemotherapy , or in combination with Toripalimab as the first line treatment of extensive stage small cell lung cancer. This is an aggressive tumor characterized by rapid disease progression, low expression of PDL-1 and low levels of tumor infiltrating immune cells, as well as a high degree of immunosuppression. Efficacy of cancer immunotherapy has been limited in small cell lung cancer and no PD-1 inhibitors are currently approved in the United States for this indication. Regarding additional potential indications in the United States, we announced at our recent Analyst Day event that we are working with Junshi to review possibilities to amend protocols at several studies to enroll patients in the United States to satisfy the FDA needs for multi-regional clinical trials. We look forward to providing additional information on this topic in the future. At this time, we are not planning additional studies for toripalimab in combination with chemotherapy for first-line non-small cell lung cancer. However, we are planning to develop the dual I/O treatment of toripalimab in combination with our TIGIT-CHS-006 for non-small cell lung cancer leveraging the robust efficacy results reported in the CHOICE-1 study. An ongoing Phase 1 clinical trial evaluating CHS-006 and toripalimab is being conducted in China and is expected to readout next year. An IND is open in the U.S., and we expect to begin enrolling cohorts of U.S. patients later this year or early next year. Blockage of the TIGIT pathway may be a crucial underlying mechanism for overcoming PD-1 resistance. We believe the dual immunotherapy approach, TIGIT with PD-1 could enhance PD-1 efficacy with the potential to extend survival and create a new standard of care for multiple tumor types. We expect to see important clinical data from several competing TIGIT programs and commitments. And these data may inform the future direction of our CHS-006 development program. At our recent Analyst Day, we introduced several fully owned programs targeting ILT4 and CCRA that are being developed by Coherus scientists and our research center in . We expect to submit an IND for first of these CHS-1000, targeting ILT4 next year, and to file at least one new IND per year going forward. On the biosimilar development and regulatory front, we recently held the late cycle review meeting with the FDA for the CIMERLI BLA and that review is advancing towards the August action date. Upcoming in June, results of the PK/PD study evaluating our UDENYCA on-body injector device will be published in connection with the ASCO Annual Meeting. Recall that we previously announced that the study met all PK bioequivalence primary endpoints as well as the key secondary pharmacodynamic endpoint at AMC. I'll now turn the call to Paul Reider.
Paul Reider: Thank you, Theresa. UDENYCA net sales were $16 million first quarter, a decline in $73.4 million the prior quarter. This was driven by a 12% decline in demand units, as well as continued price erosion due to intense competitive pressures, the pegfilgrastim prefilled syringe market. On a unit basis, the overall pegfilgrastim market increased 1% in the first quarter, and we expect low single-digit market growth and the remainder of 2022 consistent with historical trends. Neulasta retains 59% total market share within the class with Onpro holding 47% market share based on an entrenched preference by customers, reinforced by the COVID pandemic. UDENYCA market share erosion from 17.5% to 16% in the first quarter occurred largely in the hospital segment, where competitive biosimilars have resorted to a strategy of offering irreversible significant price reductions in order to capture short-term market share. This is reflected in the quarterly ASP declines by these competitive products. With our on-body device in the pipeline, our strategy is to maintain a disciplined approach to managing price with a PFS format in 2022. This will enable us to maximize long-term revenues for the UDENYCA franchise through significant share gains that we expect in 2023 and beyond within the on-body segment, which currently represents approximately $1 billion in untapped opportunity. We expect UDENYCA market share to grow next year once we introduce our UDENYCA on-body injector if approved. Now, I'd like to talk about commercializing our pipeline. We're preparing for the launch of three new brands in the next 15 months; toripalimab or PD-1 one inhibitor nasal pharyngeal carcinoma; CIMERLI, our Lucentis biosimilar, and YUSIMRY, our HUMIRA biosimilar. Nasal pharyngeal carcinoma, or NPC, is a rare cancer where there are currently no PD-1 one inhibitors approved for use by the FDA. Toripalimab not only has the potential to be the first and only PD-1 inhibitor indicated for this tumor type, but also to establish a new first line standard-of-care. Our oncology commercial capabilities have been built to scale and there's significant overlap between our current UDENYCA customers and Toripalimab targeted prescribers. Therefore with the launch of Toripalimab, will efficiently integrated in our integrated into our existing oncology commercial infrastructure. In addition, the NCCA Guidelines Committee for NPC has added as a reference to the guidelines, the citation for the JUPITER-02 trial, which was published in Nature Medicine last year, further validating the importance and quality of the clinical trial. Commercial launch preparations are on track and the field facing teams have been fully trained. We will be ready to launch of toripalimab if approved by FDA. With respect to CIMERLI, our FDA action date is August 2nd, 2022, which, if approved, will allow us to launch an early biosimilar market formation period of the $7 billion anti-VEGF market. This is a clinic-based buy and build model, which is very similar to oncology and a core competency of ours. And we look forward to competing in this large, attractive market. Recently conducted market research confirms the opportunity exists to penetrate the entire VEGF market. Just our last call, we've continued to engage with retina thought leaders, built out additional marketing expertise and hired the Head of our Ophthalmology sales team, an experienced sales executive with over 15 years building and leading sales teams in the ophthalmology therapeutic area. Retinal specialist opinion leaders expressed positive to receptivity to Coherus entering this market and our track record of success in oncology gives them confidence that Coherus understands the dynamics of the buy and build market and that we will deliver a safe and effective alternative to a Lucentis with a compelling value proposition. Now regarding YUSIMRY, a Humira biosimilar. YUSIMRY was approved by FDA last December, and we were preparing for a launch in July 2023. Humira’s U.S. net sales were $17 billion in 2021. And we look forward to competing in this large market. We believe payers and PBMs will drive biosimilar adalimumab adoption and have completed extensive market research with national regional payers as well as PBMs. The insights gleaned from this research confirm that Coherus can deliver on the attributes most important to payers, which include a highly competitive price, robust and reliable supply and an auto injector presentation that has non-stinking citrate free formulation. YUSIMRY will have both a prefilled syringe and an auto injector presentation. And YUSIMRY device will include our proprietary non-stinking citrate free formulation and a 29 gauge needle all comparable to the originators. We also plan to introduce a high concentration presentation post launch. These are expectations to win at least 10% unit market share. We have invested more than $45 billion in large scale manufacturing and expect to be a high volume low class manufacturer, well positioned to compete on supply guarantees and price. Our first year manufacturing capacity exceeds 1 million units for about 10% of the overall adalimumab market. And we have the potential to triple that capacity in the current facility. Unlike other players in the adalimumab market, we have no portfolio of branded alternatives to Humira that we need to protect from adalimumab cannibalization. Our positioning for YUSIMRY is perfectly aligned with that of the payers and PBMs. We want to make the adalimumab market as large as possible, as quickly as possible. We see this as a source of competitive advantage. In short, we are confident that we will deliver a compelling value proposition and that we can achieve our objective to win at least 10% unit market share at PBM. I’d now turn the call to McDavid for review of the quarters financial results.
McDavid Stilwell : Thanks, Paul. I'll focus on just a few financial highlights since the details are in the press release and in the 10-Q that we filed early this afternoon. For the first quarter of 2022, we reported a $96.1 billion net loss on a GAAP basis. On a non-GAAP basis, we reported a net loss of $77 million. GAAP to non-GAAP reconciliation included two items $12.9 million in non-cash stock-based compensation expense, and a $6.2 million loss on the extinguishment of debt. Cash used in operating activities was $54 million for the first quarter of 2022. As detailed earlier in the call, net product revenues were $16.1 million, a decline from the prior quarter and the year ago quarter. The decline was primarily attributable to a decline in demand units as well as lower net realized price. Research and Development expenses for the first quarter of 2022 were $82.9 million, compared to $203.5 million for the same period in 2021. This year's first quarter included a $35 million payment to Junshi Biosciences for the license of CHS-006, or TIGIT-targeted antibody. Last year’s first quarter R&D expense included the $145 million upfront payment to Junshi for the toripalimab collaboration. Selling, general and administrative expenses were $48.8 million in the first quarter of 2022 as compared to $39.4 million in the year ago quarter. The increase was primarily driven by activities in preparation for the launches of multiple new commercial products anticipated in 2022 and 2023. We ended the quarter with cash and cash equivalents of $326 million compared to a balance of $417 million at year end 2021. Recall that in January, we entered into a credit facility agreement with Pharmakon Advisors for a $300 million term loan payable across four tranches. We drew the first $100 million tranche at closing and simultaneously paid off a $75 million term loan. At the end of March, we drew a second $100 million tranche and simultaneously paid off the 2022 convertible notes. Two additional tranches of $50 million each will become available to us upon the approval of the FDA of toripalimab and CIMERLI. As far as expectations for full year operating expenses, with the discontinuation of the CHS-305 Avastin biosimilar program and the delay in the toripalimab launch, we're lowering our projected range for full year R&D and SG&A expenses by $20 million to $395 million to $430 million. This guidance excludes both the $35 million upfront fee to Junshi Biosciences that we paid for rights to CHS-006 and the $25 million milestone payment that will become due on approval of toripalimab for nasopharyngeal carcinoma. This range also includes approximately $55 million to $60 million in non-cash stock-based compensation expense. Let me provide some additional color on these anticipated operating expenses, a significant portion of which is investment that will convert back to cash quickly with a high IRR. This year, we will spend approximately $50 million manufacturing inventory for new product launches. Recall that one lesson from our UDENYCA launch is going to market with ample supply is a critical success factor. Also recall that low cost inventory manufacturing and expense prior to approval subsequently is expected to deliver P&L benefit in the form of lower cost of goods sold. Another $40 to $50 million of operating expense this year will fund completion of development of additional presentations of products we expect to introduce over the next two years, as well as manufacturing scale up projects that will deliver ongoing benefits in the form of significantly lower COGS. I'll close by saying that on the Investor Relations front, we'll be participating in the Bank of America Healthcare Conference in Las Vegas next week on May 12, and the UBS Conference in New York on May 24, and the HCW Conference in Miami on May 25. And I'll now turn the call to Denny for closing remarks.
Denny Lanfear: Thank you, McDavid. And thank you all once again for joining us today. It's an exciting time in our company is to prepare for as many as four product launches in 2022 and 2023. And continue to make strong progress transforming Coherus into an innovative new oncology company, supported by our diversified commercial portfolio revenues. With our sharp focus on execution of this strategic transformation, the leveraging of our commercial capabilities with new products and the advancement of our novel oncology pipeline, while keeping a critical eye on our cost structure. I believe we are in excellent position to create significant shareholder value in the coming years. Operator, we're ready to take any questions. Thank you.
Operator: Your first question will come from the line of Salim Syed with Mizuho. Please proceed with your question.
Unidentified Analyst : Thanks. Hi, guys. This is for Salim. Thanks for taking our questions. Regarding requirements submission beyond an MPC. Are you still planning to submit for SEC and non-small cell lung cancer this year? Or should we expect this to happen after potential approval in nasal pharyngeal? And also, if you could provide--
Denny Lanfear: Hi. I'm sorry, I'm sorry. Let's -- I'm sorry, I'm sorry. Let's just do one question at a time.
Unidentified Analyst : Sure.
Denny Lanfear: And then we'll provide you with the opportunity for a follow-on question. So I'll let Dr. Theresa LaVallee address the question about the submissions. Did you hear the question clearly?
Theresa LaVallee : Salim, hi. Thanks for the question. Just to make sure I heard you're asking about submission for non-small cell lung cancer. Is that correct?
Unidentified Analyst : And for -- yes, and for ENCC as well, if you're planning to do it this year as well, or are you want to stay first to get the approval in MPC.
Theresa LaVallee : So as mentioned during the discussion, we don't anticipate following up with toripalimab in non-small cell lung cancer and for a filing based on the choice one data will leverage that data to look at dual immunotherapy combinations with an our TIGIT molecule CHS-006. In terms of other filings, I think at this time we're focused is engaging with the FDA on MPC, and we'll continue to have discussions about where our the clinical data really warrant Regulatory Flexibility.
Denny Lanfear: Yes. We're happy to provide you with the opportunity for a follow on question. Did you have a second one?
Unidentified Analyst : Yes. Thank you. Well, if you could provide a little bit more color on the reasons
Unidentified Analyst: Yes. Thank you. Well, if you could provide a little bit more color on the reasons behind today's and discontinuation of CHS-305? You provide more color on the discontinuation of CHS-305?
Denny Lanfear: Yes, we're happy to of course. First of all, let me say that we have a very positive relationship with an event I have a very good relationship with their events to Michael, you, we signed this agreement and directly thereafter ramped to Chinese union figures, you can resolve the COVID struck, and COVID basically impaired the progress of the of this product development, I think significantly, it was very difficult. And it was impossible, actually, for us to travel to China, clinical trials were difficult and number of things. So we lost a substantial amount of time, with the product, really, as a function of that. And when we took a look during the product review period, currently, it was simply a matter that the commercial case for the product, and the market had moved on from our prior assumptions, and given the costs that were a hand in front of us. And we felt that it was in his best interest strategically for us discontinuing, and there's really nothing more else to it. Again, we have nothing but good things to say about our data event. And you know, it's unfortunate that this particular product, then move forward, but it was simply a business decision.
Unidentified Analyst: Thank you very much.
Denny Lanfear: Thank you.
Operator: Your next question will come from the lineup are Balaji Prasad with Barclays. Please proceed with their question.
Balaji Prasad: Good evening. And just a couple of questions from my side. Firstly, on FDA inspections, are there any pending for either CIMERLI or YUSIMRY? I’ll stick to one question. Thanks.
Denny Lanfear : Yes. Theresa, you want to answer that one with respect to CIMERLI inspections?
Theresa LaVallee: Yes, we feel that we're more complete at this time.
Balaji Prasad: And so complete from both?
Denny Lanfear : The CIMERLI inspections have been completed, and there's no issues of comparing the approval.
Theresa LaVallee: YUSIMRY is approved,
Denny Lanfear : YUSIMRY is already approved,
Balaji Prasad: Of course, my bad. Yes. Thanks.
Operator: Your next question will come from the line of Jason Gerberry with Bank of America. Please proceed with your question.
Jason Gerberry: Hey, guys, thanks for taking my questions. I guess, my first would just be looking at the run rate that you have for UDENYCA right now 1Q. Do you see any reason why that would get better for the remainder of the year before you have the OBI launch, which will be a 2023 event? So just curious do you see that run rate improving? I know there was some commentary about I think, sort of market unit volume trends is growing. But I'm just curious to specifically your own run rate, how that pans out to the rest of the year?
Denny Lanfear: Well, I think Jason, for that Paul, you want to take that one.
Paul Reider: Sure. Thanks for your question, Jason. So yes, as we indicated, during our Q4 call, where we stated that our UDENYCA sales in 2022 will be less than they, the sales in 2021. We're not offering any updates to that guidance at this time. The market grew 1% remaining relatively stable. So we're expecting that to pick up, but that's where we're at right now. No, no further updates on guides.
Jason Gerberry: Okay, and then I guess if I can get a follow-up question, just based on the commentary about sort of the maybe irrational competitive pricing behaviors in the UDENYCA market? Thinking ahead to HUMIRA just given the sheer volume of players? Do you see this as a profitable market beyond 2024? Like, I think most people could probably say 2023 and 2024. Could be interesting, but there's sort of an expectation amongst investors that perhaps pricing could get so compressed in that category that it might be not particularly profitable beyond 2024. So curious if you guys have a view there, based on your learning's from the UDENYCA, I guess, market launch?
Denny Lanfear: I would let Paul add some additional remarks. But I would – I would point to two things. First of all, we've already made previous investments that we outlined in order to be the high volume, low cost producer, we made significant progress in driving the cost down before he loaded and released auto injector, which I think the price will be significantly larger than the – the second issue, though, I think it's Paul might want to go ahead and address.
Paul Reider: Yes, no, I think they Denny articulated very well, Jason, this is -- there's a two pronged approach to success, with the adalimumab biosimilar entry, its price and its supply. And so, we're going to be coming to market offering supply guarantees, and it will react to whatever price is going to be in the market at that particular time. And we're very prepared to compete on that price to gain rapid, you know, rapid adoption on the formularies, the second half of 2023 with real acceleration, occurring in 2024 and beyond. So, we see the opportunity for significant revenue growth in this. But we expect that – we expected our cost structure to remain profitable for a number of years on this product, given our high volume and low cost capabilities. And the fact that -- we don't expect--
Denny Lanfear: But we also don't expect to build a Salesforce.
Jason Gerberry: Yes. Okay, guys. Thanks.
Operator: Yes, next question will come from the line of Georgi Yordanov with Cowen and Company. Please proceed with your question.
Georgi Yordanov: Hey, guys, thank you so much for being here questions. So I guess the first one, regarding the review process for biosimilar centers, are there any additional updates or color you could provide around interactions with the agency and specifically, have you been part of these discussions and has your partner receives clearance around the manufacturing issue that was identified in the previous CRL? And then if I could have a follow-up?
Denny Lanfear: To be clear, I’ll let, Dr. LaVallee addressed this in more detail to – to be clear, yes, we are confident that the previous issues with respect to the manufacturing CRL have been a fully addressed. There has been an inspection. The facility and the manufacturing inspection, we do not believe are any elements to approval whatsoever. Theresa do any additional comment with respect to CIMERLI approval?
Theresa LaVallee: Yes, we just completed the late cycle meeting and I am optimistic as continuing engagement with the FDA through the review process for the August super day.
Georgi Yordanov: Great. And then just around the opportunity for biosimilars centers. Do not there any other competitors except Biogen Samsung that might be launching in the near term. And given that limited competition? Could you potentially see a similar ramp up as we saw with identical over next two to three years?
Denny Lanfear: Well, I would say that our understanding is, Biogen will probably be in a position to come into market of the foreign, just how much we're uncertain but oppress a bit. But as you point out, as you point, we were a second to market with you, UDENYCA, is very, very well with that launch with that product and dominated that, that similar market, you know, up until this point. So I think that we're fairly optimistic about how well, Paul and his team will perform with some many launch based on our demonstrated expertise. On the additional point you want to make them suddenly? I don't think so. I think I mean, we're, we're in the market formation period. And that and that's key for, you know, for short, long term success with biosimilars? So we're going to be prepared to come in at that mark information period, with our track record of our expertise and, you know, clinic based buy and build markets, with our expertise, with contracting with discipline there as well as ASP management and delivering retinal specialists a very compelling value proposition. So just one note, the first similarly filing did not receive a complete response letter, there was additional manufacturing data requested by the agency. That data was subsequently developed in conjunction with the agency. They were conferred with. There was submitted, it was accepted, and we look forward to approval.
Georgi Yordanov: Thank you so much.
Operator: And at this time, there are no further questions in queue. I would now like to turn it back over to the panel for closing remarks.
Denny Lanfear: Thank you, operator and thank you, everybody, for joining us today. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
