Business Overview
Coherus BioSciences, Inc. (CHRS) is a commercial-stage biopharmaceutical company with a diverse portfolio of products and a promising pipeline of innovative oncology therapies. Despite facing temporary supply chain disruptions, the company has demonstrated its ability to navigate challenges and deliver solid financial results, positioning it for long-term growth.
Coherus was founded in 2010 and is headquartered in Redwood City, California. The company's commercial portfolio has expanded significantly since its inception. In November 2018, Coherus received FDA approval for its first product, UDENYCA, a biosimilar to Neulasta (pegfilgrastim), which was launched in the United States in January 2019. This milestone marked Coherus' entry into the commercial market and provided its first revenue stream.
The company continued to build its portfolio with the FDA approval of YUSIMRY, a biosimilar version of Humira (adalimumab), in December 2021. YUSIMRY was subsequently launched in the U.S. in July 2023. In August 2022, Coherus further expanded its offerings with the FDA approval of CIMERLI, a biosimilar version of Lucentis (ranibizumab), which was launched in the U.S. in October 2022.
However, in March 2024, Coherus made a strategic decision to divest its CIMERLI ophthalmology franchise. The company sold its subsidiary, Coherus Ophthalmology, to Sandoz for an upfront, all-cash consideration of $170 million, plus an additional $17.8 million for CIMERLI product inventory and prepaid manufacturing assets.
Most recently, in October 2023, Coherus achieved another significant milestone with the FDA approval of LOQTORZI, a novel PD-1 inhibitor developed in collaboration with Junshi Biosciences. LOQTORZI was approved for the treatment of nasopharyngeal carcinoma and launched in the U.S. in January 2024, further diversifying the company's commercial portfolio.
UDENYCA's Success and Supply Chain Challenges
UDENYCA, Coherus' flagship product, has been a significant driver of the company's revenue growth. In the third quarter of 2024, UDENYCA net revenue reached $66 million, a 100% increase year-over-year, reflecting the product's strong market position. UDENYCA maintained its number two spot in the pegfilgrastim class, with a nearly 30% market share.
However, in September 2024, Coherus announced a temporary supply interruption for UDENYCA due to capacity constraints at its third-party labeling and packaging contract manufacturing organization (CMO). This disruption had a significant impact on the company's fourth-quarter 2024 financial results. Nonetheless, Coherus has taken proactive steps to resolve the issue, including bringing an additional labeling and packaging CMO online. The company expects to resume UDENYCA sales in the late November to early December timeframe and anticipates substantial market share increases in 2025 and beyond.
On March 3, 2023, the FDA approved the prior approval supplement (PAS) for an autoinjector (AI) presentation of UDENYCA, which became commercially available on May 22, 2023. Additionally, on December 26, 2023, Coherus announced that the FDA approved the PAS for its third pegfilgrastim presentation, the UDENYCA on-body injector (ONBODY), which became commercially available in the first quarter of 2024. These additional presentations have contributed to UDENYCA's increased market share and revenue growth.
LOQTORZI's Successful Launch and Immuno-Oncology Pipeline Advancement
Coherus' second commercial product, LOQTORZI, a novel PD-1 inhibitor, has also demonstrated strong performance. In the third quarter of 2024, LOQTORZI net revenue grew 54% quarter-over-quarter, reaching $5.83 million, reflecting the successful execution of the company's launch strategy. LOQTORZI is the only PD-1 inhibitor approved for the treatment of nasopharyngeal carcinoma (NPC) in the United States.
LOQTORZI was developed for its ability to block PD-1 interactions with its ligands, PD-L1 and PD-L2, by binding to the FG loop on the PD-1 receptor. On October 27, 2023, Coherus announced that LOQTORZI was approved by the FDA in combination with cisplatin and gemcitabine for the first-line treatment of adults with metastatic or recurrent locally advanced nasopharyngeal carcinoma (NPC), and as monotherapy for the treatment of adults with recurrent unresectable, or metastatic NPC with disease progression on or after platinum-containing chemotherapy.
Alongside its commercial success, Coherus has made significant progress in advancing its innovative immuno-oncology pipeline. The company's lead pipeline candidates, casdozokitug (CHS-388) and CHS-114, are currently in clinical trials evaluating their potential in combination with LOQTORZI across various tumor types, including non-small cell lung cancer, hepatocellular carcinoma, and head and neck squamous cell carcinoma. Coherus expects to report data from these studies in the first half of 2025, which could serve as important catalysts for the company.
Casdozokitug is an investigational antagonist antibody targeting IL-27, an immune regulatory cytokine. The company plans to initiate a randomized Phase 2 study evaluating casdozokitug in combination with toripalimab and bevacizumab for the treatment of hepatocellular carcinoma in the fourth quarter of 2024. CHS-114 is an investigational IgG1 antibody targeting CCR8. Additionally, Coherus is developing CHS-1000, an antibody targeting human ILT4, further expanding its immuno-oncology pipeline.
Financial Performance and Outlook
In the third quarter of 2024, Coherus reported net revenue of $70.77 million, driven by a 30% increase in UDENYCA net revenue quarter-over-quarter. The company's net loss for the quarter was $10.75 million, or $0.09 per diluted share. On a non-GAAP basis, the net loss was $1.7 million, or $0.01 per diluted share.
The decrease in net revenue compared to the same period in the prior year ($74.57 million) was primarily due to the divestiture of the CIMERLI ophthalmology franchise and YUSIMRY immunology franchise, which contributed a combined $41.4 million of net revenue in the third quarter of 2023. This decrease was partially offset by the significant growth in UDENYCA sales and the launch of LOQTORZI.
Gross margin improved to 71% in the third quarter of 2024, up from 56% in the prior year period, driven by the termination of certain royalty payments and the discontinuation of the lower-margin CIMERLI and YUSIMRY products.
Research and development expenses decreased to $21.68 million in the third quarter of 2024, compared to $25.65 million in the same period of the prior year, due to reduced spending on the TIGIT program and lower personnel-related costs. Selling, general, and administrative expenses also declined to $34.74 million from $48.22 million in the prior year quarter, primarily from lower professional service fees and reduced headcount.
While the temporary UDENYCA supply interruption is expected to have a material impact on Coherus' fourth-quarter 2024 financial results, the company has reduced the high end of its expected range of combined R&D and SG&A expenses for 2024 to $250 million to $260 million. This guidance includes approximately $30 million of stock-based compensation expense and excludes certain business development activities.
Coherus plans to provide a Q4 2024 sales estimate for UDENYCA in early January and expects UDENYCA to return to market growth in 2025. The company anticipates substantial market share increases for UDENYCA in 2025 and beyond, supported by the doubling of its UDENYCA packaging capacity to over 1 million units annually through the addition of a new labeling and packaging CMO.
Liquidity
Coherus' balance sheet remains strong, with cash, cash equivalents, and investments in marketable securities of $97.69 million as of September 30, 2024. The company has also taken steps to improve its capital structure, including the planned repayment of its $230 million convertible notes due in 2026 using proceeds from the divestiture of its UDENYCA franchise.
The company's current ratio stands at 1.2485, while its quick ratio is 1.0874, indicating a relatively strong short-term liquidity position. However, Coherus reported negative operating cash flow of $62.02 million for the most recent quarter, reflecting the ongoing investments in its pipeline and commercial infrastructure.
Risks and Challenges
Coherus faces several risks and challenges, including:
1. Potential delays or setbacks in the development and regulatory approval of its pipeline candidates. 2. Intense competition in the biosimilar and immuno-oncology markets, which could impact the commercial success of its products. 3. Reliance on third-party manufacturers and the potential for supply chain disruptions, as evidenced by the temporary UDENYCA supply interruption. 4. Uncertainty around the pricing and reimbursement of its products, particularly in the evolving healthcare landscape.
Conclusion
Coherus BioSciences has demonstrated its resilience in the face of challenges, navigating the temporary UDENYCA supply interruption while continuing to advance its promising immuno-oncology pipeline. The company's strong commercial execution, diversified product portfolio, and commitment to innovation position it well for long-term growth. As Coherus navigates the road ahead, investors will closely watch the company's ability to capitalize on the opportunities presented by its pipeline and successfully manage the risks and challenges it faces.