Dr. Jean Viret - Chief Financial Officer Denny Lanfear - President and CEO Matt Hooper - SVP, General Counsel.

Chris Schott - JP Morgan Douglas Tsao - Barclays Ken Cacciatore - Cowen and Company Grant Hesser - Credit Suisse.

Good day, ladies and gentlemen. And welcome to the Q4 2015 Coherus BioSciences, Inc. Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. [Operator Instructions] I would like to introduce your host for today’s conference, Dr.

Jean Viret, Chief Financial Officer. Sir, please begin..

Thank you and good afternoon. I am Jean Viret, Chief Financial Officer. It is my pleasure to welcome you to the Coherus BioSciences fourth quarter and year-end 2015 financial results conference call. Joining me this afternoon is Denny Lanfear, President and Chief Executive Officer; Dr.

Barbara Finck, Chief Medical Officer; Matt Hooper, Senior Vice President, General Counsel; and Dr. Lisa Bell, Senior Vice President, Global Regulatory Affairs. Today, we issued two press releases.

The first press release reported that we entered into agreement for $100 million of senior notes converted at a 60% premium with new investors HealthCare Royalty Partners who led the transaction with $75 million investment and it was joined by three long time existing investors KKR, who contributed $20 million; MX II Associates contributed $4 million; and KMG Capital Partners, who contributed $1 million.

The second press release highlighted Coherus fourth quarter and full year 2015 performance. These press releases are 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 including Coherus’ expectations regarding its ability to advance its CHS-1701, CHS-0214, CHS-1420, CHS-5217, and CHS-3351 biosimilar drug candidate, initiate and complete bridging studies for CHS-0214, complete PK/PD study for CHS-1701, file BLAs for CHS-1701 in the U.S., file an MAA for CHS-0214 in the EU, file at least one IND on a second wave biosimilar pipeline candidate and enter into collaboration with CHS-1701 commercialization ex-U.S.

and for its immunology anti-TNF pipeline.

As such we are subject to the risks and uncertainties that we discuss in detail in our documents filed with the SEC, specifically Coherus’ annual report on Form 10-K for the year ended December 31, 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.

Coherus has the 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 and as required by law.

On today’s call Denny will highlight the progress and goals of our Company. I will provide financial highlights for the quarter and year ended December 31, 2015. And then we’ll open the call 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 very much, Jean. And thank you all for joining us today. I’ll start with a brief review for you and then go onto 2015 review and the 2016 guidance. I think 2015 was a good year for us. We made some significant progress on all fronts. Firstly, on the clinical trends, we advanced all three wave I assets towards the regulatory filing.

CHS-1420, as you know is in Phase 3; 1701 is moving very straightforwardly towards the BLA filings; and 0214, we’ll talk about in moment, has reported on two Phase 3 studies.

We have also talked about the pipeline a bit and we have announced two new programs there, the Avastin biosimilar and the Lucentis biosimilar, and you’ll hear more about those, as we go on in the year. On the manufacturing front, we struck a strategic agreement with KBI, ensuring commercial supply for our lead asset CHS-1701.

And, as we look forward now to the commercial operations and the commercial footprint, we’ve added some key pieces to our leadership team, I think you’ve previously seen the press release regarding Jim Daly. We have established our commercial advisory board there. And further, we have announced our therapeutic business unit strategy.

On the corporate and financial fronts, we have strengthened our capitalization to Company. We’ve brought in over $300 million of cash via non-diluted partnering, equity and our most recent private placement of convertible notes which we will discuss subsequently. Let me now talk about some of the 2015 highlights for each of the programs.

I will start with the oncology therapeutic franchise where of course the lead asset there is CHF-1701. In 2015 with study 04, we met the primary endpoint in immunogenicity study in healthy volunteers. And this study was initiated in 2015 and completed in 2016. This study now will go on to support the BLA filling.

We also met the pharmacodynamic endpoints as well as the Cmax PK endpoint in the pivotal PK/PD study that we initiated in March and we completed in October. You may recall the results of the first period Neulasta had anomalous results. We did not meet AUC for that and we will be doing a follow-on study.

However, Coherus believe that the program is acceptable as is to support the marketing authorization application in EU. In terms of study 05, we have initiated the follow-on PK/PD study in January, which will be part of the overall package to support the MAA application in the U.S.

Secondarily with the oncology therapeutic franchise, as I indicated earlier, we have announced the pipeline addition CHS-5217, which is an Avastin biosimilar. In terms of the immunology that is anti-TNF therapeutic franchise, I will start with CHS-0214, the etanercept Enbrel biosimilar.

There of course, with study 04, we met the primary endpoint in the Phase 3 trial in psoriasis and we announced those results in November of 2015. With study 02 for the Enbrel biosimilar, we met the primary endpoint in a Phase 3 study in rheumatoid arthritis and we announced such in January of 2016.

With CHS-1420, the adalimumab HUMIRA biosimilar with study 02, this is a Phase 3 study in psoriasis, we initiated this in August of 2015. And that study is now proceeding quite well. And lastly in the context of CHS-1420, as you know we filed petitions in the U.S. Patent Office for Inter Partes Review of AbbVie’s U.S.

patents 8,889,135; and 9,017,680 and 9,073,987 relating to 40 mg bi-weekly dosing of adalimumab for rheumatoid arthritis. Lastly, in terms of the ophthalmology therapeutic franchise, we have announced the additions of the pipeline of CHS-3351, which is a Lucentis biosimilar. Let me go on now to the 2016 product guidance.

First of all, in terms of the oncology therapeutic franchise, I will cover CHS-1701, the pegfilgrastim biosimilar. In the first half of this year, we intend to complete the follow-on PK/PD study, this is study 05, by the end of first half of 2016 and file the 351(k) BLA in the U.S. directly thereafter.

Further, upon that, we will initiate commercial partnering discussions for certain ex-U.S. territories for 1701.

In terms of the immunology anti-TNF therapeutic franchise for the etanercept biosimilar, we intend to complete two Phase 1 bridging studies, addressing manufacturing changes and further of course to file the MAA in late 2016 for this product.

With CHS-1420, our adalimumab biosimilar, we will complete the Phase 3 clinical trial in psoriasis, the enrollment as such in the first half of 2016 and then we will complete the Phase 3 clinical trial itself in psoriasis in the second half of 2016 with the 351(k) BLA to be filed in the U.S. directly thereafter.

Concurrently with that, we will initiate partnering discussions for the immunology anti-TNF therapeutic franchise, as we proceed through 2016. And lastly, you can expect us to file one investigational new drug IND application for second biosimilar candidate this year.

Now, let me turn my attention a little bit to the financing, as John mentioned, the $100 million in senior convertible notes. And over the last couple of months, we have received several unsolicited financial overtures from various entities, in terms of financing opportunities for the Company.

As you can see from today’s announcement, we chose two teams, first HealthCare Royalty who we have known for quite some time and together with KKR who was an existing mezzanine investor of the Company as well as others, KMG Capital Partners and MX II, both represented on our Board of Directors.

In terms of selection of these investors, what was quite important to us, our investors who understand the substantial long-term market opportunity for biosimilar. The $100 billion market opportunity that lies out there of drugs coming off patent by 2020.

We also saw investors with a very strong track record and a long-term vision that’s aligned with our milestones. We feel this is the long-term business. There’s great opportunity in the biosimilar space.

We feel that the recent advisory committee meeting with [indiscernible] demonstrates that you can advance these products to the satisfaction of the regulators. And we think therefore the time over the next couple of years will be right, as we proceed with these products to move forward.

This is a long-term business, and we selected investors with strong track records who understand this very, very clearly. Now, our objective with this financing was to complete all the activities associated with the regulatory filing, the BLA filings of our lead wave I assets, 1701, 0214 and 1420.

This includes the manufacturing exercises, the qualification labs, the preparation for the BLAs and all the requisite costs surrounding that. We expect this financing to carry us through these regulatory filings of all three of these wave I assets.

And further, we expect financing to carry the Company through the approval of our first filed asset, which was 1701, sometime in mid-2017. This was important to us because we believe this reflects -- these milestones reflect very important, relevant inflection points for our investors.

So, the reason we’ve raised $100 million is because we wanted to be in the position of delivering that inflection to our investors, as we went forward. We’ll be happy to take some additional questions about the financing during the Q&A period. But let me turn it back now to Jean Viret for the financial overview. Jean.

Thank you, Denny. I will now review financial highlights for the fourth quarter and year-end 2015. Total revenue for the fourth quarter 2015 was $10.2 million, as compared to $6.5 million in the fourth quarter of 2014.

The increase over a same period in the 2014 was due to increased recognition in Baxalta collaboration revenue, as a result of achieving three development milestones totaling $100 million in 2015, including two milestones in the fourth quarter of 2015. Total revenue for the fiscal year 2015 was $30 million as compared to $31.1 million in 2014.

The lower revenue for the full year 2015 over the same period in 2014 was due to the full recognition of a $10 million substantive milestone payment from Baxalta earned in third quarter of 2014, in addition to the collaboration and license revenue recognized over the estimated period of the collaboration.

Research and development expenses for the fourth quarter 2015 were $51.4 million, compared with $26.9 million for the same period in 2014. R&D expenses were $213.1 million in 2015 compared to $78.2 million in 2014.

Increases in R&D expenses were mainly attributable to a transition to Phase 3 and Biologics License Application enabling studies for CHS-0214, CHS-1420 and CHS-1701, as well as manufacturing efforts to support clinical trial supply and product registration activities.

Less impactful were additional costs associated with the preclinical development of second wave product pipeline and personnel expenses. General and administrative expenses for the fourth quarter 2015 were $11 million, compared to $6.2 million for the same period in 2014. G&A expenses were $36 million in 2015 compared to $17.6 million in 2014.

Changes in G&A expenses were mainly attributable to employee-related expenses, legal fees to support the intellectual property strategy, and accounting fees and services related to compliance with Section 404 of the Sarbanes-Oxley Act of 2002.

Net loss attributable to Coherus for the fourth quarter 2015 was $52.4 million, or $1.35 per share, compared to $29.1 million, or $1.47 per share, for the same period in 2014. Net loss attributable to Coherus was $223.3 million, or $6.01 per share, in 2015 compared to $87.1 million, or $10.64 per share, in 2014.

Cash and cash equivalents totaled $158.2 million as of December 31, 2015, compared to $153.7 million at September 30, 2015 and $150.4 million as of December 31, 2014. We ended the year with the cash balance that is higher than last quarter’s and last year’s balance.

In April, we announced with Baxalta an amendment to our CHS-0214 etanercept biosimilar collaboration agreement, under which, in aggregate, we could expect to receive milestone payments of $130 million.

To-date in May, we completed the enrollment of four CHS-0214 Phase 3 clinical studies in rheumatoid arthritis and psoriasis, for which we received a $35 million milestone payment from Baxalta.

In the fourth quarter, we received a second $30 million milestone payment from Baxalta that related to the successful demonstration of drug product stability for CHS-0214 and a third payment of $35 million that related to the successful achievement of certain manufacturing process goals for CHS-0214 as well.

With the $100 million proceeds from the sale of convertible notes and our strong cash position at the end of the year, we’re in a solid financial position to execute on the completion of three key development milestones that Denny highlighted, namely the completion of our BLA registration program and filing of the BLA for CHS-1701, the completion of our clinical programs and filings for BLA and MAA for CHS-1420 and CHS-0214 respectively.

Now, I would 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 from JP Morgan. Your line is open..

Just to hear first, could you just elaborate a little bit on the goal of seeking partnerships with the non-oncology products, just to elaborate a little bit more of what you are ideally looking for a partner here; is this kind of one partner per vertical, is it one partner for all the assets, just trying to see what you’re ideally looking for there? Second question is on the expanded pipeline as we think about Avastin and Lucentis.

Can you talk a little bit more about what interested the Company in these targets, what about the end markets the competitive landscape makes these ideal targets for a company like yours; it technical difficulties, it the ability to commercialize yourself, et cetera just any color there as well? Thanks very much..

First of all, in terms of potential anti-TNF partners and the issue of one partner per vertical or three partners per vertical, certainly the company we prefer to have one partner across all three verticals as opposed to parsing each of the therapeutic areas separately into separate partners.

We believe that there is significant interest for the anti-TNF franchise. And as you may recall, we primarily did the IPO to fund the Phase 3 studies for 1420, the HUMIRA biosimilar, so we would fully own that globally, which we have. We’ve also retained rights to the etanercept biosimilar in U.S., should that market open up.

We think that there is a lot of complementary therapeutic approaches on the commercial side with the anti-TNFs and we think there is several parties who would be quite interested in that alone. However, the ophthalmology franchise is interesting in and of itself as is the MS franchise.

We’ll have more to say about the MS franchise and that study, you may recall that that will readout sometime around the end of May, end of Juneish, maybe towards even the end of the first half of 2016. So, we will hear little more about that then.

In the other issues surrounding the partnering, I think we will decline from going little further with right now. But I think you can expect the Company to start to explore this more, as we go forward.

In terms of the ophthalmology though, why we chose to pursue that, we had a number of partners who approached us, I should say potential partners who approached us who were quite interested in the ophthalmology assets and their developments, and we felt that the therapeutic area was one in which could be readily partnered because of that interest.

Lastly, in terms of oncology and Avastin, we think that one of the key things that people are looking for is cost savings in the environment.

Certainly with new therapies coming forward, the opportunity to save cost with more bundled approaches to the products presents savings for the system, creates space if you will for new therapies that are coming down the line.

So, in talking to a number of market entities, GPOs and physicians and others, we felt that Avastin opportunity was one which would dovetail well with the pegfilgrastim on the commercial side and that was one of our key issues there..

One quick follow-up, biosimilar HUMIRA, I just wanted to get quick one from you, just your perspective on the Amgen IPR decision on AbbVie’s formulation patent. I guess what does this mean for the market? And could just confirm, if you need see those patents invalidated before you bring the your formulation to market here? Thanks very much..

Let me give that question to Matt Hooper, who is the Company’s General Counsel.

Matt?.

Thanks, Denny. Chris, first of all, in terms of our thoughts about the result, I think it’s fair to say that the Amgen had some very compelling arguments. But I think what happened is that the Patent Office on formal grounds felt that they had not put their case on the record effectively.

So, it turns more on formality I think than the substance of their argument. And frankly I don’t think that outcome really gives us any signals or clues how the Patent Office might handle our IPR and dosing patents..

Yes, which is to say that we don’t think that we would use that particular outcome and project it across all IPRs for HUMIRA, adalimumab et cetera. But if you read the review, you will come to some conclusions, as Matt pointed out and the remarks are clear.

I think the second part of your question, Christ, was focused on whether or not we would see the invalidation of these patents is being critical. I think this gets more to legal strategy and specifics about our own formulation developments, which we really generally are not commenting on at this time..

Okay, thanks very much..

Thank you. Our next question comes from the line of Douglas Tsao from Barclays. Your line is open..

Good afternoon. Thanks for taking the questions. To start, when we think about the second wave generation products 5217 and 3351, I think you said in terms of your 2016 guidance, you would get an IND from one in advance going to clinic.

How should we think about, which of those will necessary go into clinic first; is it just simply -- which is ready, given development, timelines or is there some sort of prioritization?.

Hi, Doug. Thank you for the question. I think that if we were prepared or otherwise wanted to go disclose which product we would go first in the clinic, we probably would have disclosed at this point. I don’t mean to avoid your question but what I’d say is by next quarter, we’ll have a little clear idea.

In general, we are parallel tracking several products of course in our wave II pipeline. There is actually, as you may imagine, more than two there. So, it takes a while to move all these forward in sort of a parallel fashion. We’ll probably make a decision on which one to advance, some time by the end of first half of this year.

We may also choose to file both of them at the same time but we’ll leave that for another day in our next call..

Okay. And then in terms of the etanercept product, we saw Sandoz submit their BLA. Just curious in terms of what would make you change your mind or incur -- get you to submit that for potentially U.S.

approval?.

Thank you for that. Well, to be clear, we intend to submit the 0214 BLA in the U.S. for approval. The question remains whether we would launch -- launch risk in the face of blackout of the patent, which I probably would decline to do.

However, we have had several meetings with the agency on 0214 that for particular program is being conducted under the office [ph] of U.S. FDA. So, we intend to file..

Okay, great.

And would that be this year?.

We have not yet provided guidance on the filing timing. And as you may well imagine, that timing is dependent upon a number of developments, some of them of course outside the control of the Company..

Okay, thank you..

Thank you. Our next question comes from the line of Ken Cacciatore from Cowen and Company. Your line is open..

I had a question around your IPR challenge of HUMIRA.

And just wanted you all to maybe educate us a bit on how this process plays itself out if they accept your petition; could you just talk about what actual interaction there is that the process itself in terms of the evidence you can present or arguments you can make either via submitted briefs or actual discussion of your expert witness in front of the folks making the decision.

Can you just talk broadly, and I’ve a follow-up question..

Yes, Ken. Thank you for that. Again, I’ll let Matt Hooper, the Company’s General Counsel, address that question.

Matt?.

Hi, Ken. Generally speaking that the ITR process is a fairly streamlined process. And the first stage that we’re obviously in right now is whether or not patent office will actually take the IPR up and that’s the institution decision.

If they in fact decide to institute the IPR, what then takes place is essentially a mini trial in the Patent Office where both sides will have an opportunity to cross examine each other’s experts. So, we expect that AbbVie to put in the declarant testimony.

And that would be an opportunity for us to pose those witnesses and challenge the content of their expert testimony and they would have obviously the same opportunity to do that with ours.

And depending upon the evidence that is generated in that process, there will be a limited ability for both sides to contribute additional evidence into the process, but it is fairly limited..

Okay.

And then, I was wondering -- and not ever thinking about the worst-case scenario but a scenario where the IPR is maybe the petition is not taken up, can you discuss your recourse at that point in terms of litigation a little bit of pathway going forward?.

Yes. Ken, actually as you know, there wouldn’t be any estoppel effect from the failure of the Patent Office to institute the IPR. So, in a situation where the Patent Office doesn’t institute, all of the legal arguments would be available to us as they would be to other parties..

Okay.

So, you can go ahead and pursue litigation in the federal court, if you so chose, at that point?.

That’s correct..

Okay, great. Thank you very much..

I just wanted to add point to the IPR conversation remarks is that we thought that both of our experts were very thoroughly grounded in the field Sharon Baughman in particularly had tremendous experience, both at Amgen and Genentech with the development, with pharmacokinetics of monoclonal antibody drugs.

So, we feel that our experts are and their testimonies are important..

Thank you. [Operator Instructions] And we do have a question from the line of Alethia Young from Credit Suisse. Your line is open..

This is Grant Hesser for Alethia. Thanks for the question. As both 1701 and 0214 headed market, can you comment on how the commercial agent strategies there might be similar but also different between the two assets? Thanks..

We would get into specifics of how we enter the market 1701 versus 0214, but I think that the key thing to keep in the mind is that the pegfilgrastim market is an episodic non-chronic care market. So, it is one which people come in for therapy, they run therapy for a while and they leave therapy.

It has concentrated sites in the clinic and the hospital, and the channels are primarily the GPO driven, as you know. On the other hand, the etanercept market is quite different. That is a multi-indication in a chronic care market.

So, you have psoriasis or rheumatoid arthritis in these markets; you have patients who are on therapies for a very long period of time. And with that presents of course the switching, if you want get to the chronic care patients versus first starts et cetera.

So, I think there is perhaps arguably higher competitive intensity with the anti-TNF market than you would see with pegfilgrastim.

However, all that being said, we think that the pegfilgrastim market is with dependent oncology focus is a good place for us to go, something that we could self commercialize within reason, whereas the anti-TNF market is a larger market and which is the reason we would seek partners who are ready in that space..

Thank you. And I am showing no further questions..

Well, thank you very much for joining us today on the call and thank you for your informed questions. I would just add that the Company will be at Cowen next week in Boston presenting and we’ll be happy to chat with the any investors or analysts who care to attend and go a little future to Company’s plans and the financing.

But thank you very much today for joining us. As we move forward to 2016, we will be sure to keep you informed and we look forward talking to on our next call. Bye-bye..

Ladies and gentlemen, thank you for joining today’s conference. This concludes the program. You may now disconnect. Everyone, have a great day..