CHRS - NASDAQ

Good day, and thank you for standing by. Welcome to the Q4 2023 Coherus BioSciences, Inc. Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Jamie Taylor, Head of Investor Relations for Coherus.

Thank you, operator. Good afternoon, and welcome to Coherus BioSciences fourth quarter and full-year 2023 earnings conference call. Joining me today to discuss our results are Denny Lanfear, Chief Executive Officer of Coherus; Bryan McMichael, Interim Chief Financial Officer; Paul Reider, Chief Commercial Officer; Rosh Dias, Chief Medical Officer; and Theresa LaVallee, Chief Development Officer. Before we get started, I would like to remind you that today's call includes forward-looking statements regarding Coherus’ current expectations about future events. These statements include, but are not limited to, the following: Our ability to advance our pipeline, projections of future growth, revenue, expenses, headcount, and debt levels, and the timing of any return to profitability or cash flow positivity. 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 to future performance and are subject to substantial risks and uncertainties, including risks and uncertainties inherent in the clinical drug development process that are discussed in our press release that we issued today, as well as the documents that we file 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 statement. With that, I'll turn the call over to Denny.

Thanks, Jamie, and thank you all for joining us on the call today. I'm pleased to report to you today's strong fourth quarter results, rounding out an important year of transition for Coherus, as we sharpened our focus on innovative oncology, positioning the company for new levels of efficiency and growth in 2024 and beyond. Our strategy and our mission are clear to extend the lives of cancer patients. Today, we are delivering on this strategy in every front, positioning Coherus for long-term sustainable growth as an oncology company. We believe this strategy creates long-term shareholder value as we develop and deliver next-generation oncology treatments for patients. We continue on the path that we set forward last year, which is the first drive sales growth and revenues across the oncology portfolio with new product launches of UDENYCA and LOQTOR

Thank you, Denny. Good afternoon, everyone. We ended 2023 with strong momentum to the business with the divestiture of the ophthalmology franchise. We'll use this momentum in 2024, a hyper focus on our oncology business, drive top line growth of our core oncology assets, UDENYCA and LOQTOR

Thanks very much, Paul, and good afternoon, everyone. The past few months have been an exciting time for LOQTOR

Thank you, Rosh, and good afternoon, everyone. I want to once again thank the FDA for taking the approval action in a timely manner and much faster than the PDUFA 6-month time period for the UDENYCA on-body supplement after our resubmission in October. With both the UDENYCA on-body approval and approval of LOQTOR

Thank you, Theresa, and good afternoon, everyone. I'll briefly review the results for the quarter and the full year. As Paul covered revenues, I will start with costs and expenses. Cost of goods sold increased significantly for the year to $159 million compared to $70.1 million in the prior year, driven primarily by our non-core products. Specifically, in Q4 2023, we recorded a $47 million charge for the write-down of slow-moving CIMERLI inventory and related firm purchase commitments. In addition, CIMERLI COGS included a low to mid-50% royalty on gross profits. Gross margin for the fourth quarter was 8%, excluding the $47 million write-down, gross margin for the quarter would have been 59%, including the royalty on CEMERLI gross profits mentioned earlier and the mid-single-digit royalty we pay to UDENYCA, we pay on UDENYCA net sales. We ended the year with R&D expense totaling $109.4 million, down $89.9 million from the prior year. R&D expense for Q4 2023 was $26.4 million, a decrease of $2.7 million from the same period in the prior year. The declines reflected expenditures in 2022 that did not reoccur in 2023, namely, the $35 million TIGIT option fee in Q1 2022 and other descoped co-development costs with Junshi. The cost of preparing for launches of new products that happened during 2023 and savings with reduced headcount. SG&A expense for the year was $192 million, down from $198.5 million in the prior year. For the quarter, SG&A expense was $49.5 million, down $4.1 million and 8% compared to a year ago, decreases primarily reflected savings from lower headcount, partially offset by other costs. For the fourth quarter of 2023, we reported a net loss of $79.7 million or $0.71 per share compared to a net loss of $58.9 million or $0.76 per share for the same period in 2022. Cash and cash equivalents and investments in marketable securities were $117.7 million as of December 31, 2023, compared to $192 million at December 31, 2022. Our 2023 results included $40.5 million of interest expense. We expect to reduce our cash flow borrowing costs by more than $24 million on an annualized basis following the partial paydown using proceeds from the CEMERLI divestiture. In addition, we expect to save at least $25 million on an annualized basis in OpEx due to headcount reductions associated with the divestiture and the reduction in force. After factoring in these savings in addition to those expected from the termination of the TIGIT program that we announced in January, Coherus is introducing a 2024 guidance range of combined R&D and SG&A expense of $250 million to $265 million. This guidance includes approximately $40 million of stock-based compensation expense and excludes the effects of strategic acquisitions, collaborations and investments, the exercise of rights or options related to collaboration programs and any other transactions or circumstances not yet identified or quantified. With that, I'll turn the call back over to Denny.

Thank you, Bryan. Operator, we're ready to open the line up for questions.

[Operator Instructions]. Our first question comes from Robyn Karnauskas with Truth Securities.

Hey, this is Nishant.I’m on for Robyn. So I have one on UDENYCA and one on LOQTOR

Thank you very much. Paul will be happy to address your question with respect to UDENYCA. And then secondarily, the question of launch of first-line versus second-line LOQTOR

Nishant, thanks for your question. Yes, so the effect of the net selling price quarter-over-quarter was in the mid-single-digit range. And as I mentioned in my remarks, our focus now that we've launched both and have all three presentations is that we're now going to drive the franchise to profitable market share and revenue growth. And that's going to be our plan in 2024 and beyond. We're going to do that because we have now all three presentations can access the entire market. We've locked in great payer coverage and we've been able to have a competitive ASP. So we're looking forward to a successful 2024 with UDENYCA franchise. Regarding LOQTOR

Yes, happy to. So I can tell you as a physician, doctors tend to be very evidence-based and data-driven. What I will say is that LOQTOR

Next question comes from Yigal Nochomovitz with Citigroup.

On the liver cancer study, I'm just curious, I think the key comp there is IMbrave150. Nominally, you are above those numbers. Of course, the numbers are small. I'm just curious if you could comment as to how much better you think you'd need to be than in the IMbrave150 benchmark to be on a go-forward decision with your triple combo?

Thank you, Yigal. Dias can address that.

Yes. So you're absolutely right. The IMbrave data with atezo-bev is actually the only --atezo-bev is a license indication right now. So we've shown a response rate, as I said, of 38%, 43% with M-Resist. I think we'll be looking at this is the kind of range we're actually looking for further development, right? So I think with the data that we presented at ASCO GI in January is exactly what we were looking for, and we will be following up with a further study that's going to start later this year. We're looking at that triple combination.

Yes. And if I can add to that, I think in a 30-patient study, the numbers are higher, but it's not an apples-to-apples comparison. So we were excited, as Rosh mentioned, in both the deepening of response and the improvement in response and the study continues to evaluate data. But important in a 30-patient Phase 2 study is also to look at how those responses track with IL-27 biology. So when -- while the numbers, again, are small, very provocative that we see an association of IL-27 expression with response. Additionally, this is a program that has shown preclinically that there is strong activity in HCC and multiple models, the biology of IL-27 coming from the tissue resident macrophages, so liver macrophages Kupffer cells is really one known to dampen the immune response. And that activity that was specific in preclinical models to liver cancer and lung cancer translated to humans. So I think that with the biomarker data in the responding patients showing modulation of the IL-27 pathway in association with response and the high levels of IL-27 expression has incredibly excited to do tauri atezo-bev combination.

And maybe one last thing I'll add, safety is always important. We showed a very -- it's a very clean safety profile as well.

Very important.

Okay. Can I another one. I was curious on one on CH-114. Theresa, you mentioned the dose escalation and then you're going to do the comboatory. I think in your slide deck in early January, you indicated there'd be some data in the first half of the year for the Phase 1. I wasn't sure if that was still the expectation? Or just help understand that, please?

Yes. We plan to present the dose escalation in the first half of the year at a major medical conference.

Our next question comes from Colleen Kusy with Baird.

I think revenue guidance is something you've given in the past. It looks like you're not providing revenue guidance for 2024. So can you just talk a little bit about that decision and what you think some of the levers are for revenue growth this year?

Thanks, Colleen. I'll take that one and let Paul backfill. I think the primary issue is that we have freshly launched the UDENYCA on-body. We're very excited about the enthusiasm that's been received in the market. But the ultimate trajectory of that across 2024, it is not yet known. It's only been out of the market for about a month. As Paul pointed out though, we have seen a 129% increase with respect to the auto-injector uptake. And the trailing 4-week data for UDENYCA itself is north of 25%, up from Q4. So that's a very, very compelling. I think that would give us greater certainty with respect to the trajectory and the steepness of the trajectory. Once we get a little further into Q1 and get that below us, all the indicators are positive. But I think certainly on the next call, we'll be able to give you some additional information on that. With respect to LOQTOR

That's helpful. And maybe a follow-up on the comments and just a quick clarification on cash flow positivity. I think you said the goal is cash flow positive in 2024. Can you just clarify, is that guidance for cash flow positively in 2024 or not specifically, maybe dependent on revenue or other factors?

Without being able to predict revenues, I can't really predict cash flow positivity. But I would just make the key point that I think that we've made substantial progress with respect to reducing our SG&A and R&D line, even in the face of several launches over the past 12 months. We have reduced our head count over the past three years from ‘22 to '23 to '24 from 360 to 290 and now targeting 215 FTEs by the end of this year. I mentioned our overall SG&A reductions. So I think that we are running a very, very efficient organization as we focus on oncology. At the same time, we're driving the revenues higher, as you can see. And then lastly, we're making very good progress reducing our interest cost. Bryan recapitulated that for us, but a 70% reduction in our fixed term loan interest costs where we're paying SOFR plus 8, I think that's really very significant. So we're going to continue in this direction. And just where those two lines cross, we can’t quite predict but that’s our north star and our guiding light and where we’re going.

Our next question comes from Michael Nedelcovych with TD Cowen.

Thanks for the question. You have a wealth of opportunities in terms of various combinations in various tumor types and indications where those combinations might be tested. Can you give us a sense of pipeline priorities and when those priorities might translate into discrete go/no-go trials or even pivotal trials?

Thanks for the question, Michael. I'll let Dr. Lavallee address that. Theresa?

Yes. Michael, thanks. We as we've talked about with casdozo, the lung cancer study is open. I mean that's a home run kind of strategy, a high bar, but given the monotherapy activity of casdozo, which was not expected to see in cancer patients. The LOQTOR

Our next question comes from Chris Schott with JPMorgan.

This is Ethan Brown on for Chris Schott. Just to start off, can you maybe offer some color on how you're thinking about OpEx looking past 2024, given, on one hand, you have the pipeline that you're trying to progress and then balancing that against the company's past profitability? And then I have one more question after that.

I'll let Bryan McMichael take a shot at that. Bryan?

Yes. So we're not providing guidance beyond '24 at this time, as we get into -- as we sort out some of the things we're working on with our capital structure, we'll have a better idea of how we'll move forward from there. And that will inform how we move forward in 2026.

Yes. I would say after we achieve profitability and cash flow positivity, we intend to stay profitable, if that's your question. I would offer you one other point, which is LOQTOR

That's very helpful. And then just pivoting over to UDENYCA. Is there any color you can offer on how much sales at this point is coming from the auto injector versus the traditional presentation? And maybe more broadly, just your expectations for pricing looking to 2024? And maybe more specifically, if you think Coherus is now more insulated versus other players given you have the whole suite of products approved in the market?

Yes. That's a very, very, very, very good question. It's a very observant nuance. I'll let Paul address that particular issue of the three presentations and our ability to have a sustainable franchise in the market and support pricing, Paul?

Yes. Chris, thanks for your question. So our whole strategy with UDENYCA with the three presentations is to give the customers choice so that they can choose the presentation that meets the unique needs of the patient and the doctor. And that's no other brand can do that. We saw pretty impressive growth with auto-injector in the fourth quarter, driven largely in the clinic market. And that's because now we've got nurses that we're using it a great experience with it, liked it, and it's starting to now get its foothold into the workflow in the offices. As it relates to the percent of the AI business to the total UDENYCA, it was still under 10%. So the Workhorse continue to be the prefilled syringe presentation. But as we see in 2024, that's all going to take a new shape now that we have our on-body device launched as well as the auto-injector in the prefilled syringe. But as I mentioned in my remarks, Chris, moving forward in year sixth of this brand's life cycle, we're getting that second wave of growth and our focus is really going to be around driving profitable revenue and market share growth. And we are confident we're going to do that in 2024.

Ethan, the other point that I would make is we've played the long-term game here with UDENYCA in the market as Paul said. We're six years in. We invested significantly both in the auto-injector, some $25 million in years past. It took us at least three or four years to bring forward the on-body. That was probably a $35 million investment. We underwent a number of years where we had very strong discipline around pricing and ASP management, consider ourselves as stewards of ASP. In the interim, others have exited the market with aggressive pricing, we're still there. The new market entrants really haven't had an impact on the business. And I think that the significant market share increase like the 4-week trailing 25% and our look forward here for 2024 shows that our long-term strategy is paying off. We're the only folks that have the three presentations. We're positioned for market’s stability and sustainability as we go forward now with pegfilgrastim and that's where we want to be.

[Operator Instructions] And I'm not showing any further questions. I would now like to turn the call back over to Denny Lanfear for any closing remarks.

Thank you, operator. And thank you all for joining us on our Q4 full-year 2023 call this afternoon. We’re pleased with our progress on all fronts to drive our sales higher, strictly control our expenses, reduce our debt and advance our pipeline. We are entering 2024 with strong upward momentum and a clear organizational focus on extending survival for patients with cancer. We look forward to seeing you all at the upcoming investor conferences and on our next call. Thank you.

Thank you for your participation. You may now disconnect.