Good day, ladies and gentlemen, and welcome to the Coherus Biosciences Q2 2015 Financial Conference Call. [Operator Instructions].

I would now like to turn the conference over to Mr. Jean Viret, Chief Financial Officer. Please go ahead. .

Thank you, Sabrina, and good afternoon. I am Jean Viret, Chief Financial Officer, and it is my pleasure to welcome you to the Coherus Biosciences Second Quarter 2015 Financial Results Conference Call. Joining me this afternoon is Denny Lanfear, President and Chief Executive Officer. .

At the close of the market today, we issued a press release highlighting Coherus' second quarter 2015 performance. This press release is posted in the Investors section of our website at investors.coherus.com. .

This conference call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. This includes statements about the company's current operating plans, financial guidance, objectives and intentions with respect to future operations and products.

As such, they are subject to risks and uncertainties that we discussed in detail in our documents filed with the SEC, specifically Coherus' quarterly report on Form 10-Q for the quarter ended June 30, 2015, and any applicable amendments which identify important risk factors that could cause actual results to differ materially from those contained in the forward-looking statements.

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Coherus has a policy to not comment on financial performance or guidance during the quarter, unless it is done through an appropriate public disclosure. Coherus retains its policy and practice to not update financial performance or guidance during the quarter unless required by law. .

On today's call, Denny will provide the clinical and business highlights. I will provide financial highlights for the quarter ended June 30, 2015, and then we will open the call for your -- to your questions. Denny will then close the call with a few concluding remarks. .

With that, I'd like to turn the call over to Denny. .

Thank you, Jean, and welcome, everyone, to our second quarter call for 2015. I'm going to make a few opening remarks here, and then I will review our CHS-1701 pegfilgrastim biosimilar followed by our CHS-1420 adalimumab biosimilar, and then finally, our CHS-0214 etanercept biosimilar.

I'll make a few remarks on our wave 2 plans and what you can expect to see about the pipeline in the future. And then, of course, we'll be happy to take some of your calls -- or your questions, rather. .

Overall, I would characterize the quarter as somewhat uneventful with things staying on track significantly. As you know, in terms of our CHS-1701 biosimilar, we have proceeded along with understanding with the FDA in a clinical development program intended to enable the BLA.

We maintain guidance that, that BLA should be filed either in the fourth quarter of this year 2015 or in the first quarter of 2016. At this time, Coherus, consistent with that plan, we do not believe will be required to perform a Phase III study in the oncology patients. .

As you know, there are 2 key studies in the BLA-enabling program for CHS-1701. The first is a pivotal PK/PD single-dose crossover study in 106 healthy subjects.

Dosing has now been completed for that study, and then the second group is an immunogenicity study, which we continue to work on, and we are guiding here to completing the immunogenicity study by the end of 2015, and as I indicated earlier, we maintain our guidance in terms of the overall BLA filing date.

A couple other developments in the pegfilgrastim environment that you may be aware of in terms of other opportunities and other participants and we're happy to take some calls, but I will limit our remarks at this time to that. .

In terms of the CHS-1420 adalimumab biosimilar program, we've previously talked about our decision to conduct a global Phase III in plaque psoriasis. We continue with plans to proceed with that. This is a parallel group randomized study of course in 500 patients with psoriasis. Primary endpoint is the PASI score, very similar to our etanercept program.

This program, of course, contains a crossover portion, as we have previously discussed and disclosed in our conferences. .

Further, we're planning a bridging PK study comparing our Phase III clinical material to U.S. Humira, and we expected to start this before the end of the first half of 2016, and we believe that we are on track to file a BLA in the U.S. in the second half of 2016. .

In the adalimumab environment, of course, there has also been some legal development, and I'd be happy to take a few questions there, although we don't have much to say about other folks' legal proceedings. .

Lastly, let me talk a little bit about CHS-0214, the etanercept biosimilar program. This is moving along well. At the end of April, beginning of May, we completed enrollment in both pivotal studies for CHS-0214. So there's a rheumatoid arthritis study underway as well as a psoriasis study.

The rheumatoid arthritis study having some 619 patients and the psoriasis study having about 496 patients. .

In April of this year 2015, we obtained positive results in the Phase I PK bridging study comparing EU manufactured CHS-0214 to EU Enbrel. This study was initiated due to change in manufacturing location from the U.S. to the EU for the CHS-0214 product and compared to EU-produced CHS-0214 with a lot of Enbrel manufactured in Europe.

This design was a single-dose crossover study that enrolled 53 healthy volunteers, 44 of which completed the study.

This study met all bioequivalence criteria such as 90% confidence interval ratio for all parameters that is the maximum serum concentration, Cmax, carry on in the curve at the time 0 and the last point measured et cetera, all fell within the 80% to 125% criteria.

But these studies will support filing of MAA in Europe in mid-2016, JNDA in Japan in the second half of 2016 as we have previously guided. .

In terms of the etanercept program, as you may recall, we also, with the completion of enrollment received a $35 million milestone payment from our partner Baxter in May. So all things track along there. In terms of our projections for that product, we will see the psoriasis primary endpoint readout in fourth quarter of this year as we expect.

We will see the Phase III RA primary endpoint top line data readout in the first quarter of 2016 and then we are on track for the MAA filing in the second half of '16..

In terms of the pipeline products, as you know, and as we've discussed previously, we're prosecuting the development of a number of products -- 3 or so additional.

These are in IND preparation, and we expect to have some additional progress in this area with the second wave of products and some announcements regarding IND filings and other progress with the pipeline in the first half of 2016..

So now with that, I will just hand it back over to Jean Viret, and Jean, perhaps, you'd like to review the financial results. .

I will. Thank you, Denny, and I will now review the financial highlights for the second quarter of 2015. Revenue for the second quarter 2015 totaled $6.9 million as compared to $5 million in the second quarter of 2014.

The higher revenue year-over-year was due to recognition of increased collaboration revenue from Baxalta, formerly Baxter, as a result of additional milestone payments received and amortized since the end of the second quarter of 2014. .

Research and development expenses for the second quarter 2015 were $56.9 million compared to $18.9 million for the same period in 2014.

Increases in R&D expenses for the quarter were primarily attributable to an increase in program costs associated with the advancements of Coherus late-stage clinical product candidates, CHS-0214, CHS-1701 and CHS-1420. .

General and administrative expenses for the second quarter 2015 were $8.8 million compared to $4 million for the same period in 2014. Increase in G&A expenses over the same period in 2014 were mainly attributable to increased employee-related expenses and increased legal and accounting services in support of being a public company. .

Net loss attributable to Coherus for the second quarter 2015 was $58.8 million or $1.56 per share compared to $25 million or $5.96 per share over the same period in 2014. Cash and cash equivalents totaled $206.1 million at June 30 2015, compared to $115.1 million at March 31, 2015, and $150.4 million as of December 31 2014.

Recall that in April we raised approximately $112 million in net proceeds from the 4-1 [ph] offering of $120 million of our common stock. The proceeds from the follow-up public offering are being used to develop our second wave pipeline product of biosimilar product candidates beyond our initial 3 first wave products.

Also in April, as Denny has just said, we announced with Baxalta an amendment to our CHS-0214 etanercept biosimilar collaboration agreement. In aggregate, the revised milestone payments of $120 million may exceed the previous Baxalta funding obligations by approximately $12 million.

In May, we completed the enrollment of CHS-0214 Phase III clinical studies, rheumatoid arthritis and psoriasis, for which we received a $35 million milestone payment from Baxalta. .

And I'd now like to open the call for questions, and then Denny will conclude the call with a few remarks. .

[Operator Instructions] And our first question comes from the line of Chris Schott of JPMorgan. .

This is Wendy Lin, on for Chris Schott today. Just a couple of questions.

Can you talk about your view on the CMS-proposed changes to Part D reimbursement recently made public in the Federal Register? How do you see these changes affecting the CHS-1701 biosimilar Neulasta opportunity? And also, how does the Sandoz Amgen verdict affect your understanding of the patent process and your IT strategy going forward?.

Thank you, Wendy. Thank you very much for your question. First of all, as you know, the statute calls for an individual J code for each of the biosimilar products in the view of ourselves and the Biosimilar Forum. The CMS has come out with this guidance I think as an opening and we're currently in the comment period.

Further, I think there's some good news here in terms of the -- it's the J code insofar as the WACC pricing for the first 3 quarters of the product and so on, which I think is quite favorable. And however, we believe as does Biosimilar Forum that these products are licensed individually and they really should be -- have their own J code for each one.

So we'll see how that all comes out, but anyway it comes out, we think that is favorable. Our position, of course, is that we produce very high-quality biosimilars and we'll do fine in the market regardless of the J code. In terms of the Amgen Sandoz litigation, as you know, this is now the second volley, which has gone forward.

The patent dance has found to be optional for both the first 2 rounds, so I suppose you could say that we expect that position to remain in place as we go forward. As you also know, it is Coherus' position always to avoid the intellectual property of others, the originators, for example, and CHS-1701 is no exception to this.

We do this, of course, with all of our products, and we are going to preserve our optionality in terms of embracing the patent exchange process or not and probably make that decision a little later on when we actually get to our filing date, but we think, overall, this is a favorable development in terms of the biosimilar industry and the 180-day clock in terms of approval, I think that's another one that probably will get further elucidation as time goes on.

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And our next question comes from the line of Ken Cacciatore of Cowen and Company. .

It's Ken, just had a question. A lot of companies focus on one issue or they have they have a platform technology that solves kind of one problem.

Just wondering if we take -- try to step back and take a broader view, what's the rate limiting step for you in terms of really going after a lot of opportunities? Is it getting the personnel literally geographically? Is it capital? Would a larger entity, if they were looking at you, realize how much more value you could bring? And could you explain that to them if the resources and the personnel were expanded? Can you just talk big picture about kind of value creation in terms of what's limiting and what could be done if there were even more resources applied?.

Ken, thank you very much for your question. It's a good one. Let me just take a step back since you requested it from a 50,000-foot view. I think we put -- we started the company with 6 products and I think that we only had a few people at the time. And the bet was half of them would move forward and half of them would not which is what happened.

We put those into Phase III with a rather small team here but, of course, as time goes on and the Phase III goes on to become a commercial organization, you have to leverage up the whole organization.

So what we have done at Coherus is we've prepared the company for commercialization in a couple of different dimensions, particularly in terms of manufacturing and quality, which have seen substantial enhancements organizationally and structurally as we have prepared for the launch.

We're now also, as you know, taking a look at the commercial side of things and understanding what it would take to launch our pegfilgrastim biosimilar and how best to approach the maximization of the value of some of the rest of the things in the pipeline.

In terms of the early-stage work up through the Phase I pivotal PK studies, as we've spoken before, that can take somewhere 12 months to 24 months. And then once you get these things into Phase III, you find yourself running 500 patients, 600 patients, Phase IIIs.

You can easily have quite a few folks tracking and managing those studies and doing all the manufacturing and so on. And our organization is very, very flat, and we are focused very much on having a very high impact effective company, and I think we've done all right with that.

I think that we can probably, as we've indicated, advance the 3 products in the pipeline, straightforwardly over the next, let's say, 12 to 24 months. In a perfect world, I'd like to be able to put a product per year into Phase IIIs, but I think that's a very fast clip.

I think there's a number of these products that are good candidates, but not all of them are good candidates. My feeling is that if we take the company and do some leveraging and continued to increase the size of the company at the pace that we have, we could probably get to the point to where we can do something like that.

I haven't made any promise or offered any guidance in that regard. But you raised a very good point in that is difficult to get the very highest quality people to come together and work on things. It's one thing that we've done here at Coherus.

We focused on getting people whose competency is in the 90th percentile, and I think that's the reason why we've been as effective as we have been. So I would like to run as fast as I can and do as many of these products as I can. I think putting 3 products in Phase III or BLA-enabling studies over the past 2 years is a pretty fair clip.

I would like to go ahead and put another product in the Phase III every year going forward from here. But you raised a good point, and I think we're probably growing as fast as we can at this point.

And I think 5 years from now, we'll have a pretty substantial pipeline of these assets, either in registration studies and at least a few of them approved. I hope that's helpful. .

[Operator Instructions] Our next question comes from the line of Douglas Tsao of Barclays. .

Just first a little bit of a housekeeping question. Just curious if your arrangement with Baxalta has the change of control provision in it.

And then second, can you maybe perhaps obviously we'll learn more about the wave 2 pipeline next year, but just maybe sort of at a high level, how you might be thinking about wave 2 differently from a product selection standpoint than when you went about sort of selecting the first wave of products that you moved into development. .

Thanks for that, Doug, question. Let me take the Baxalta question first. The agreement that we had with Baxter, of course, had the ability to be assumed by its subsequent organizations and Baxalta has done that. I won't comment further on the change of control, the issue surrounding that agreement as we have not publicly stated those.

In terms of the pipeline, I would like to appear very prescient and say, "Yes, you can select the products that go forward." But unfortunately, that's not the case. I think you're lucky if you bet 500 in terms of selecting the right products, which is what we did with the first tranche of products.

Now we might be able to do a little bit better with that with the second tranche of products, but the long and the short of it is, there is always either developments with the molecules or in the markets or things that go bump in the night as you go along which take a molecule out of contention.

I can tell you that because I've got 3 or 4 of them in the freezer that I haven't moved forward on. I think that, however, one of the things that differentiates Coherus is, of course, we are very, very nuanced in looking at the products.

We have, for example, taken a very good look at the intellectual property landscape, how difficult the analytics are for molecules, how tough the Phase IIIs are, whether they can be partnered, whether or not if -- they are partnered, whether they can be sold, whether the therapeutic paradigms will stay in place for an especially long period to pay back investments and a number of other things.

So we're not one of these companies that just ran out and pursued molecules that had large top lines and early patent expirations. I think we're a little more careful. I can assure you, we're just as careful with the second tranche of products that we have underway, and I'd like to tell you more about which products they are.

But for competitive reasons, I will not, although when we do get the IND filed or take other actions that are required for disclosure, we'll certainly do that. So you have to wait and take a look, but I think all the products that we move forward will have a pretty high probability of moving forward up through Phase IIIs. I hope that's helpful. .

[Operator Instructions] I'm showing no further questions at this time. .

I would now like to turn the call back over to Coherus Biosciences for closing remarks. .

Hello, thank you very much. Thank you, all, for joining us today in our second quarter call. I'd just reiterate here briefly that in terms of CHS-1701, the studies are ongoing and we're taking guidance for the filing Q4, Q1 as pointed out. '15 and '16 -- in mid-2015, we'll have more to say about that in a bit. BLA on track for the second half of 2016.

And then, of course, the CHS-0214 product, the etanercept biosimilar. Enrollment has been completed. We have good progress there. We brought in the milestone from our partners, and we have the MAA on track for the second half of 2016. The pipeline is starting to shape up.

I would point out that we just finished the rates to support the pipeline a few months ago, so it's going to take 6 to 12 months actually to bring some of that investment to fruition and you should see some activity as I indicated, in the first half of 2016. We thank you all very much for your support, your investment in the company.

We look forward to continuing to advocate for you and we'll see you on the next call. Thank you. .

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may all disconnect. Everyone, have a great day..