Executive Summary / Key Takeaways

• Balance Sheet Transformation Complete: Coherus Oncology has surgically removed its biosimilar past. Proceeds from the UDENYCA divestiture, along with other biosimilar asset sales, were used to eliminate $230 million in convertible debt and $48 million in royalty obligations, resulting in a post-divestiture cash position of $192 million to fund its oncology pivot through key pipeline readouts in 2026.

• LOQTORZI's Nascent Domination: The company's sole commercial asset grew Q3 revenue 92% year-over-year to $11.2 million, capturing over 90% of NCCN institutions, but the nasopharyngeal carcinoma market remains small and competitive, requiring flawless execution to reach management's $150-200 million annual target.

• Pipeline Promise vs. Cash Burn Reality: With R&D spending up 24% to $27 million quarterly and SG&A still at $25 million, the company burns approximately $45 million per quarter from continuing operations, giving it roughly one year of runway to prove its first-in-class CCR8 and IL-27 candidates can deliver meaningful data.

• Competitive Moats in Niche Indications: LOQTORZI's unique FG-loop binding epitope and NCCN Category 1 preferred status create defensible positioning in NPC, while CHS-114's selective CCR8 targeting and casdozokitug's orphan designation in hepatocellular carcinoma offer genuine scientific differentiation in crowded immuno-oncology fields.

• Execution Risk at Inflection Point: The investment thesis hinges entirely on whether a 140-person company can simultaneously scale LOQTORZI sales, manage a global supply chain for a single oncology product, and advance two mid-stage pipeline assets through critical 2026 data readouts without the operational cushion of its former biosimilar cash flows.

Setting the Scene: From Biosimilar Factory to Oncology Specialist

Coherus Oncology, incorporated in 2010 as Coherus BioSciences, spent its first decade mastering the art of biosimilar manufacturing and commercialization. This history matters because it forged a regulatory-first culture and cost-disciplined operating model that now underpin its oncology pivot. The company launched UDENYCA in 2019, built a $194 million annual biosimilar franchise by 2024, then systematically dismantled it—selling CIMERLI for $188 million in March 2024, YUSIMRY for $40 million in June 2024, and finally UDENYCA for $483 million in April 2025. This wasn't retreat; it was a deliberate strategic withdrawal to concentrate all resources on immuno-oncology.

The company now operates as a pure-play innovative oncology company at a moment when the PD-1 inhibitor market faces both maturity and fragmentation. LOQTORZI (toripalimab-tpzi) competes against entrenched players like Merck 's Keytruda and Bristol Myers (BMY)' Opdivo, which collectively dominate over 80% of the $36 billion global PD-1 market. Yet Coherus isn't trying to outmuscle these giants in broad indications. Instead, it has carved out nasopharyngeal carcinoma (NPC), a rare head and neck cancer with approximately 2,000 new metastatic cases annually in the U.S., where LOQTORZI holds the only FDA-approved PD-1 label and NCCN Category 1 preferred status.

This positioning reflects a deeper industry shift: as PD-1 inhibitors become commoditized in large indications like lung and melanoma, value creation migrates to novel combinations and underserved niches. Coherus's strategy exploits this migration by using LOQTORZI as a combination backbone for its proprietary pipeline—CHS-114 (anti-CCR8) and casdozokitug (anti-IL-27)—while simultaneously supplying the drug to external partners for cost-effective label expansion. The company essentially aims to turn its PD-1 asset into an immuno-oncology platform, capturing value from both direct sales and partnership-enabled indication growth.

Technology, Products, and Strategic Differentiation

LOQTORZI: More Than Just Another PD-1

LOQTORZI's differentiation extends beyond its FDA approval in NPC. The antibody binds a unique FG-loop epitope on the PD-1 receptor, translating into enhanced potency in low PD-L1 expressing tumors—a characteristic that distinguishes it from Keytruda and Opdivo in combination strategies. The pivotal JUPITER-02 trial demonstrated a 37% improvement in overall survival versus chemotherapy alone, with six-year follow-up data showing LOQTORZI plus chemotherapy nearly doubled median overall survival to 64.8 months versus 33.7 months for chemotherapy, representing a 31-month improvement and 38% reduction in death risk (HR 0.62).

This data underpins LOQTORZI's NCCN Category 1 preferred status, which management emphasizes is the only such designation for first-line NPC treatment. While competitors like penpulimab (Akeso Biopharma (9926.HK)) received FDA approval for NPC in April 2025, and camrelizumab (Elevar Therapeutics) seeks entry, LOQTORZI maintains a first-mover advantage with established reimbursement and physician relationships. More importantly, the drug's safety profile shows potentially fewer immune-related adverse events than earlier PD-1 inhibitors, a qualitative advantage that resonates in community oncology settings where managing toxicity drives treatment decisions.

The larger commercial case for LOQTORZI lies in its role as a combination agent. Coherus supplies toripalimab to partners like INOVIO (INO), Cancer Research Institute, and STORM Therapeutics for clinical trials, expanding its label without funding development costs. This "capital-efficient indication expansion strategy" positions LOQTORZI as the PD-1 backbone of choice for novel combinations, particularly as the industry shifts toward bispecific antibodies and targeted T-cell engagers that require a PD-1 component.

CHS-114: Selectivity as Moat

CHS-114 targets CCR8, a chemokine receptor highly expressed on regulatory T cells (Tregs) within the tumor microenvironment. What makes this asset potentially best-in-class is its absolute selectivity—management claims it is the only known CCR8 antibody with no off-target binding. This matters because competitors like Bristol Myers, Gilead (GILD), and Shionogi (4507.T) have reported dose-limiting toxicities and off-target effects in their CCR8 programs, creating development delays that Coherus aims to exploit.

Preclinical data shows CHS-114 can deplete intra-tumoral Tregs and increase CD8-positive T-cell infiltration , effectively "turning tumors hot." In an initial safety cohort of seven U.S. patients with head and neck squamous cell carcinoma (HNSCC), CHS-114 plus LOQTORZI produced a partial response in a fourth-line patient—a promising signal in a heavily pre-treated population. The company is on track to report efficacy and safety data from its Phase 1b HNSCC study in the first half of 2026, with expansion into colorectal cancer (CRC) planned based on Dr. Alexander Rudensky's preclinical work characterizing Tregs' immunosuppressive role in CRC.

The competitive landscape includes at least ten companies with CCR8 programs, but Coherus argues its high selectivity provides a development timing advantage and cleaner safety profile. If 2026 data confirms this, CHS-114 could become the first approved CCR8-targeting agent, capturing a market opportunity in HNSCC and CRC that management estimates could exceed $1 billion annually.

Casdozokitug: First-In-Class IL-27 Antagonist

Casdozokitug represents a genuinely novel mechanism in immuno-oncology. As the only IL-27 antagonist in clinical development, it targets a cytokine that facilitates tumor growth by inducing checkpoint expression (PD-1, LAG-3) and suppressing natural killer (NK) cell function . The drug received orphan designation for hepatocellular carcinoma (HCC) in October 2020, positioning it in a market where PD-1 combinations have become standard but complete response rates remain low.

Phase 2 data in first-line HCC showed casdozokitug combined with atezolizumab and bevacizumab achieved a 38% overall response rate and 17% complete response rate, comparing favorably to historical benchmarks of 30% and 8% for atezolizumab alone. Management emphasizes that casdozokitug treatment results in strong NK cell activation, providing a mechanistic explanation for the more than doubling of complete response rates. A randomized Phase 2 study with LOQTORZI and bevacizumab is recruiting, with early efficacy and safety data expected in the first half of 2026.

The IL-27 target's novelty creates both opportunity and risk. With no approved competitors, success would establish Coherus as the category creator in IL-27 antagonism. However, the lack of clinical precedent also increases development uncertainty, particularly around optimal dosing and patient selection. The company's Type C meeting with the FDA aligned on dose definition, suggesting regulatory clarity, but 2026 data will be the first real test of this first-in-class hypothesis.

Financial Performance & Segment Dynamics: The Clean Slate

Continuing Operations: LOQTORZI Carries the Load

The financial transformation is stark. Continuing operations generated $11.6 million in Q3 2025 revenue, up 91% year-over-year, with LOQTORZI contributing $11.2 million (97% of the total). Gross margin expanded to 68% from 55% in Q3 2024, reflecting LOQTORZI's premium pricing and improving manufacturing efficiency. This margin structure supports management's assertion that LOQTORZI can fund its own commercial infrastructure while contributing to pipeline development.

However, the cost structure reveals the challenge of scaling a single-product oncology company. R&D expenses increased 24% to $27.3 million, driven by $4.1 million in CHS-114 development and $2.6 million for casdozokitug. SG&A decreased 11% to $24.9 million due to lower headcount, but still consumes 215% of quarterly revenue. The net loss from continuing operations was $44.5 million, implying a quarterly cash burn of approximately $45 million when adjusted for working capital changes.

The math is unforgiving: at current burn rates, the $192 million cash position provides roughly one year of runway to reach profitability or secure partnership funding. Management's guidance for 2025 SG&A of $90-100 million (down from $96 million in 2024) and continued R&D investment suggests burn rates will remain elevated through 2026, making pipeline data readouts critical for either justifying further investment or attracting ex-U.S. licensing deals.

Discontinued Operations: The Ghost of Biosimilars Past

The discontinued operations segment contributed $9 million in net income in Q3 2025, but this was entirely due to an $8.7 million non-cash accrual release from the UDENYCA divestiture. For the nine months ended September 30, 2025, discontinued operations generated $342 million in net income, driven by the $162 million gain on the UDENYCA sale and $51.5 million in lower cost of goods sold as manufacturing wound down.

These numbers matter because they highlight the absence of biosimilar cash flow going forward. The company has gone from generating $194 million in annual biosimilar revenue (2024) to zero, while its net cash position after debt repayment and royalty buyouts stands at $192 million. The transformation is complete, but the financial cushion is thinner than the headline divestiture numbers suggest.

Balance Sheet: Fortress or Fragile?

Post-divestiture, Coherus carries $192 million in cash and marketable securities against no debt—a dramatic improvement from the $250 million in 2027 Term Loans outstanding in early 2024. The company also has $13 million in non-cancelable purchase commitments through 2026, primarily related to LOQTORZI manufacturing, and $97 million in accrued rebates, fees, and reserves from the UDENYCA business that will settle over the next 18 months.

The clean balance sheet provides strategic optionality. Management can fund CHS-114 and casdozokitug through Phase 2 data without immediate partnership pressure, preserving full economics if the assets succeed. However, the limited cash also means failed trials or slower-than-expected LOQTORZI growth would force dilutive equity raises or fire-sale partnerships, destroying shareholder value.

Outlook, Management Guidance, and Execution Risk

LOQTORZI Revenue Trajectory: The $150 Million Question

Management projects LOQTORZI will achieve a dominant share in the $150-200 million NPC market over the next three years, implying 10-15% quarterly demand growth. Q3 2025's 12% quarter-over-quarter growth suggests this is achievable, but the base remains small. Sameer Goregaoker, Chief Commercial Officer, noted that Q3 growth was "almost entirely from end customer demand" after Q2's inventory accumulation, and that "post-restructure vacancies" in one region that caused flat demand have been addressed.

The commercial strategy involves expanding the sales force by 15% in select geographies, onboarding remote teams, and using KOL-driven digital programs to educate community physicians. With over 90% of NCCN institutions already using LOQTORZI, growth must come from deeper penetration within these centers and expanding duration of therapy. The company expects 2025 revenue from continuing operations to exceed 2024's $18.7 million, but reaching even $50 million annually would require accelerating the current trajectory.

Pipeline Catalysts: Make-or-Break 2026

The investment timeline converges on the first half of 2026. Coherus expects:

• Early efficacy and safety data for casdozokitug in first-line HCC
• Efficacy and safety data for CHS-114 in second-line HNSCC
• Recommended Phase 2 dose definition for CHS-114
• Junshi (1877.HK)'s Phase 3 data for LOQTORZI plus Lenvatinib in liver cancer

These catalysts will determine whether Coherus can license ex-U.S. rights for non-dilutive funding or must fund expensive Phase 3 trials alone. The company's global rights to both pipeline assets provide maximum optionality, but also maximum risk if data disappoints.

Cost Structure: The 140-Person Challenge

Management is tracking toward fewer than 140 full-time employees by year-end 2025, down from approximately 225 pre-divestiture. This lean structure is necessary given the revenue base, but it creates execution risk. A 140-person company must simultaneously manage LOQTORZI manufacturing, supply chain, regulatory compliance, clinical development for two pipeline assets, and commercial expansion. Any operational misstep—such as the Q4 2024 UDENYCA supply interruption that "lost a bit of momentum"—could derail the entire thesis.

Risks and Asymmetries: How the Story Breaks

Single Product Dependency

With LOQTORZI generating 97% of continuing revenue, any safety signal, manufacturing issue, or competitive entry could collapse the company's valuation. The FDA's ongoing staffing limitations and potential government shutdowns create regulatory risk, while the Inflation Reduction Act and One Big Beautiful Bill Act (OBBBA) could impose pricing pressures that LOQTORZI's small patient population cannot absorb through volume.

Competitive Pressure in NPC

While LOQTORZI is currently the only approved PD-1 for NPC, Keytruda is used off-label despite "failed Phase II data," according to CEO Dennis Lanfear. Physicians' comfort with off-label Keytruda use represents a persistent headwind, particularly as Merck's field force is 20-30 times larger than Coherus's. The April 2025 approval of penpulimab and potential entry of camrelizumab could fragment the market before LOQTORZI reaches scale.

Pipeline Execution Risk

CHS-114 and casdozokitug face competition from well-funded programs at Bristol Myers, Gilead, and Roche (RHHBY). If 2026 data shows inferior efficacy or unexpected toxicity, Coherus would have no fallback assets and limited cash to pivot. The company's reliance on single suppliers for manufacturing and clinical trial services adds supply chain vulnerability.

Cash Burn and Financing Risk

At $45 million quarterly burn, the $192 million cash position provides limited margin for error. If LOQTORZI growth stalls or pipeline data delays, Coherus would need to raise equity at a potentially distressed valuation (current market cap: $163 million) or accept unfavorable partnership terms that cede economics. The material weakness in internal controls identified in 2024, while "decommissioned" with the UDENYCA sale, suggests operational infrastructure remains immature for a public company.

Valuation Context: Optionality at $1.35

Trading at $1.35 per share, Coherus Oncology carries a $163 million market capitalization and a negative enterprise value of approximately $29 million (net of cash). The stock trades at approximately 8.7 times trailing twelve-month sales from continuing operations (based on 2024 revenue of $18.7 million), a multiple that reflects both the early-stage nature of the business and the market's skepticism about its ability to scale.

For an unprofitable, single-product oncology company, traditional metrics like P/E are meaningless. The valuation must be assessed on three factors:

1. Cash Runway: $192 million cash against ~$180 million annual burn provides roughly one year to reach pipeline inflection. This is adequate but not generous, implying the market assigns little value to the pipeline's optionality.

2. LOQTORZI's Implied Value: If management's $150-200 million NPC market target is achievable, and LOQTORZI captures 50% share, the product could generate $75-100 million in annual revenue. At typical oncology biotech valuations of 3-5x sales, LOQTORZI alone could justify a $300-500 million enterprise value, suggesting the current valuation embeds significant pipeline discount.

3. Pipeline Optionality: CHS-114 and casdozokitug represent first-in-class and best-in-class opportunities in large markets (HCC, HNSCC, CRC). Preclinical competitors have shown promising but early data, and Coherus's selectivity claims could prove valuable. The market appears to assign minimal value to these assets, creating potential asymmetry if 2026 data is positive.

Peers like Merck (MRK) trade at 13x sales with 30% operating margins, while immuno-oncology pure-plays like some clinical-stage biotechs trade at 5-10x sales pre-profitability. Coherus's negative enterprise-to-revenue multiple (due to its net cash position) reflects its precarious position but also creates upside if execution validates the pipeline.

Conclusion: A High-Conviction Bet on Focus

Coherus Oncology has executed one of the cleanest strategic transformations in biotech, converting a diversified biosimilar business into a focused immuno-oncology platform with a differentiated commercial asset and a high-potential pipeline. The balance sheet repair removes the overhang that plagued the stock, while LOQTORZI's 92% growth and NCCN preferred status provide a credible foundation for scaling in NPC.

However, the company now faces the ultimate test of focus: can a 140-person organization with $11 million in quarterly revenue and $45 million in quarterly burn simultaneously commercialize a niche oncology product, develop two novel pipeline assets, and outmaneuver competitors with 100-fold larger resources? The 2026 data readouts for CHS-114 and casdozokitug will determine whether this transformation creates lasting value or merely delays an inevitable financing.

For investors, the thesis boils down to a simple asymmetry: at $1.35, the market prices LOQTORZI as a struggling single-product company while essentially ignoring a first-in-class pipeline. If management delivers on its $150-200 million NPC target and either pipeline asset shows compelling Phase 2 data, the stock could re-rate dramatically. If not, the cash runway provides one year to find out, but little margin for operational error. The transformation is complete; now comes the hard part.