Patrick O’Brien - SVP of IR Dennis Lanfear - Chairman, CEO and President Jean-Frédéric Viret - CFO Michael Fleming - EVP, Sales and Marketing Lisa Bell - EVP of Global Regulatory Affairs.

Mohit Bansal - Citigroup Steven Seedhouse - BMO Capital Markets Christopher Schott - JPMorgan Chase & Co. Tyler Van Buren - Cowen and Company Douglas Tsao - Barclays PLC.

Ladies and gentlemen, thank you for standing by, and welcome to the Coherus BioSciences Third Quarter Earnings Conference Call. My name is James, and I will be your conference operator for the call today. [Operator Instructions]. And as a reminder, this conference call is being recorded.

I would now like to turn the call over to Patrick O’Brien, Senior Vice President of Investor Relations. Please go ahead..

Thank you, James, and good afternoon, everyone. After close of market today, we issued a third quarter financial results press release. This release can be found on the Coherus BioSciences' website. Joining me for today's call will be Dennis Lanfear, President and CEO and Chairman; Jean Viret, CFO.

Before we begin our formal remarks, I'd like to remind you that we will be making forward-looking statements with respect to product development plans, all of which involve certain assumptions, risks and uncertainties that are beyond our control and could cause actual results to differ from these statements.

A description of these risks can be found in our most recent Form 10-Q on file with the SEC. In addition, Coherus BioSciences does not undertake any obligation to update any forward-looking statement made during this call. I would now like to turn the call over to Denny..

Thank you, Patrick, and thank you all for joining us this afternoon. Today, we're going to talk about three key areas. First of all, I'm going to share with you an update on our lead asset, CHS-1701, including the status of the BLA resubmission. Secondly, we'll discuss certain advancements in our pipeline.

And then lastly, our Chief Financial Officer, Jean Viret, will present a few highlights of this quarter's good financial results. So let me first start to discuss 1701 and the progress on the resubmission. As you may recall, there's 2 parts of the CRL, the immunogenicity and the CMC-related questions. I'll first address the immunogenicity issues.

As you may recall, we stated on our last call that we have successfully completed developments of the immunogenicity assay and that validation with a subsequent step followed by a meeting with the agency and processing the samples.

We have now successfully completed the validation of the immunogenicity assay, and we believe these results are consistent with the expectations for higher sensitivity, consistent with the FDA's request. Now pursuant to the additional manufacturing and process-related issues, which comprised the second part of the CRL, I have an update there for you.

We have now completed these analyses and reports. And as discussed, we are confident in our approach to these issues and plan to validate such with the agency in upcoming discussions.

In terms of next step with the agencies, upon meeting and reaching concurrence with the FDA and completed the sample analysis, we plan to do the resubmission directly thereafter. We are tracking closely to our prior guidance for the end-of-the-year submission plus some scheduling allowance with a submission date of mid-Q1 2018.

We will announce the acceptance of the BLA by the FDA, which should be 30 days after submission. And as previously stated, we expect the FDA review timing to be 6 months. Now with respect to the 1701 MAA and European update, as you know, the EU and the U.S. filings are progressing in parallel as we previously noted.

Consistent with our earlier remarks, the MAA would like to align data sets with the FDA, including those with respect to immunogenicity. Thus, we expect the MAA opinion in roughly the same time frame as targeted for FDA approval. Now let me cover a couple of other matters regarding the 1701 product.

First, the FDA has formally denied Apotex's citizen's petition without comment. We interpret this as a lack of requirement for clinical data in patients who demonstrate biosimilar of pegfilgrastim, which in turn supports our development plan.

And as we have stated previously, the FDA did not suggest in the CRL that we would need to complete a Phase III study in patients. Secondly, we were very pleased at November 1, 2017, CMS adopted a final policy to establish separate J-codes for each biosimilar biological products for particular reference product beginning January 1, 2018.

This means that a physician reimbursement of our product under CMS will not be linked to the price of a biosimilar competitor product in the same class. The ASP of our product, upon which reimbursement is based, will thus be more fully under our control.

This is a very important step for us in the biosimilar industry and has the potential to accelerate development and adoption of our products. Michael Fleming, our Executive Vice President of Sales and Marketing, is with us who'll be happy to provide more color during the Q&A session. Now let me make a few remarks pursuant to our pipeline priorities.

We are prioritizing our efforts in ophthalmology and our franchise there and are currently focused in our Lucentis biosimilar, CHS-3351. We believe ophthalmology is an attractive market well-suited to our portfolio, both from the viewpoint of unmet patient needs, cost of goods as well as competitive dynamics and other key selection criteria.

We'll be updating you on the clinical and regulatory timing on this product on subsequent calls.

Now with respect to CHS-1420, our adalimumab biosimilar program, we were disappointed during the quarter that the patent office decided not to institute our '619 IPRs, given the abundant [indiscernible] signed the petition, which specifically disclosed the feasibility in motivation for making buffered protein formulations.

Our view is that the PTAB's rationale applied in [indiscernible] low standard of patentability that is not consistent with decades of established legal process. Numerous cases in the Fed Circuit have held that [indiscernible] can render the event as obvious without the certainty of success, even if some experimentation is needed.

However, in line with these '619 IPR outcomes, we're now going to focus on securing a competitive HUMIRA biosimilar launch when certain formulation patents expire in mid-2022. And our near-term spend on 1420 has been redirected to our ophthalmology franchise. Now let me talk a little bit about CHS-0214.

With respect to our etanercept biosimilar product, we are expanding our efforts on the U.S. market. To support this opportunity and as previously discussed, we filed IPRs on 2 engine-controlled patents directed to the etanercept protein. The so-called '522 and '182 Brockhaus patents, which expire in 2028 and 2029.

Institution decisions are expected on these in March of '18. As I said, I'd be happy to take additional questions during the Q&A. And with that, I will hand it over to Jean Viret, our CFO, for the financial results summary.

Jean?.

Thank you, Denny. Let me give you an update on our financial position and results. Cash, cash equivalents and investments and marketable securities totaled $150.1 million as of September 30, 2017, as compared to $118.3 million as of June 30, 2017.

Cash used in operations was $41.5 million in the third quarter, consistent with our guidance, down 25% from the $55.6 million used in the second quarter of 2017, and down 43% from the $73.3 million used in the first quarter of 2017.

In August 2017, we announced that Temasek, the investment company headquartered in Singapore, plans to invest up to $150 million over 2 tranches. We received a first tranche of $75 million in aggregate proceeds on August 24, 2017.

The second tranche is projected to be funded following receipt of the FDA's marketing approval for CHS-1701 pegfilgrastim biosimilar product candidate, subject to market pricing and that certain closing conditions at that time, including each party's final approval.

We anticipate cash used in operations of approximately $35 million to $40 million in the fourth quarter of 2017, down approximately $5 million from previous guidance, and $30 million to $35 million per quarter in the first quarter of 2018.

Research and development expenses for the third quarter of 2017 were $42.6 million as compared to $64.6 million over the same period in 2016. R&D expenses for the 9 months ended September 30, 2017, were $130.9 million as compared to $195.4 million in the same period in 2016.

Decreases in R&D expenses were mainly attributable to a decline and end of clinical activities for CHS-0214, CHS-1420 and CHS-131 during the preceding 12 months. We continue to produce bio drug substance and drug product for CHS-1701 in order to prepare for commercialization.

And the cost associated with these products are expense in R&D until such time we receive regulatory approval on this cost or capitalized as inventory. General and administrative expenses for the third quarter of 2017 were $14 million as compared to $13.6 million for the same period in 2016.

G&A expenses for the 9 months ended September 30, 2017, were $56.3 million as compared to $36.3 million for the same period in 2016.

Changes in G&A expenses were mainly attributable to legal and other professional fees to support intellectual property litigation and IPRs as well as personnel-related costs to support CHS-1701 pre-commercial activities in the first 6 months of 2017.

We continued to prepare for CHS-1701 launch, and as a result, we have maintained certain pre-commercial activities that are essential to prepare for successful launch.

Net loss attributable to Coherus for the third quarter of 2017 was $59 million or $1.09 per share as compared to a net income attributable to Coherus of $83.9 million or $1.67 per share for the same period in 2016. We will now turn the call to Q&A. Operator, you may open the call to questions..

[Operator Instructions]. Your first question comes from Mohit Bansal..

So Denny, one quick question for you is like, have you already requested a meeting with the FDA and do you plan to communicate when such a meeting will take? Therefore, do you plan to communicate to the street as and when this meeting happens?.

Mohit, thank you very much. We are currently discussing meetings with the FDA. We do not plan to offer updates as we have those meetings. I think what you can look forward to is announcements pursuant to the filing or acceptance of the BLA.

But with -- we are currently in process with them, and we'll offer updates if required, but that is not our plan right now..

Got it. And then if I can ask 1 follow-up. So maybe I couldn't understand it, but you mentioned that sample runs are being done right now.

So is it done already? Or you have completed the assay validation at this point and the sample runs would -- are happening right now and that will continue until the end of the year?.

So as we have previously stated, the development -- the assay issue was in three parts. First, the development; secondarily, the validation; and then thirdly, the actual running the samples, meetings with the FDA, et cetera. So we have successfully completed the first part, which was development of the assay. We talked about that in the last call.

We said that we would go ahead and get the assay validated in this time frame. We're reporting to you today that we have successfully now validated the assay, and then we're moving forward. So we look forward to going forward with the program. But you no, we have not yet initiated that..

Our next question comes from Ian Somaiya with BMO Capital Markets..

It's Steve on for Ian actually.

Have you guys have discussions with the FDA about Amgen's manufacturing in Puerto Rico and whether or not that's increasing the sense of urgency to approving your last biosimilar?.

We would not comment on any discussions pursuant to our policy of discussing things with the FDA regardless of topic, including this topic that you cite..

Okay, no problem. What about -- so -- maybe a more general question then regarding interaction with the FDA.

When you submit the BLA, when we hear from you guys about acceptance or validation, is it -- does FDA look at the day that you submit before validating? In other words, will they check the assay specifications and the data and confirm that it's roughly aligned with their expectations? Or what's your expectations be between hearing about validation and ultimately the decision on the BLA?.

I'll let the company's Executive Vice President of Global Regulatory, Dr. Lisa Bell, answer that.

Lisa?.

Hi there.

So the process leading up to resubmission in response to a complete response letter, that one and FDA's SOPs, and essentially what it boils down to is that the sponsors required to meet with the FDA to make sure that you have agreement on the content of the resubmission, so that way, they -- both parties are clear on what the expectations are and that what is going to be provided is going to be sufficient.

So yes, we will have -- be having conversations with them to make sure that we are ensuring that prior to the resubmission going into them..

Okay. And one more question, real quick, if I could.

Have you -- have the assay been validated at multiple sites or at a single site? And are you moving ahead with the sample testing at 1 or more sites? And if 1 site, is it due to any differences and the assay is being utilized at different sites? Or are there no differences maybe you can point to?.

What we have disclosed today is that we have completed validation of the assay and we have made no further comment with any other aspect of this assay. We believe that the assay has validated as suitable for processing the samples..

[Operator Instructions]. Our next question comes from Chris Schott with JPMorgan..

Just two questions here. Speaking on 1701 on the commercial side, maybe just elaborate a little bit more on the separate J-code in terms of what that could mean to your commercial approach and just commercial dynamics around the product once it's launched. And then my thoughts there -- I'm sorry, I'll ask separate..

Yes, no, go ahead, Chris. You can ahead with your second question..

I was just saying the second one was just a similar competitive landscape question.

Just you mentioned Apotex, but as we -- as you look in the competitive landscape from what's been publicly disclosed, how are you thinking about the market here between Sandoz and some of the recent Mylan updates?.

Yes. Thanks for the comments or the questions here, Chris. I'll ask Michael Fleming, our Executive Vice President of Sales and Marketing, take the questions on J-code and simplifications, and then I'll follow-up with competitive snapshot.

Michael?.

Chris, thanks for the question. So yes, this is a very significant outcome for the biosimilar industry. Because we have and will be assigned our own J-code, it means essentially that we'll be fully in control of our product price. We will not be dependent or linked to a competitor's price.

This means that we would expect less pricing volatility, and it will allow us and our customers to have a more orderly plan for pricing and adoption dynamics in the marketplace. So essentially, this means that we're masters of our domain. And it means that our industry is going to be able to accelerate investment in our products going forward.

We also know and we've seen market research to demonstrate that physicians will have higher adoption rate of biosimilars if they had their own similar J-codes. This means we would expect better adoption in the marketplace. We've seen that through our market research, and I believe Sandoz has run similar research and found the same thing.

So all in all, this is a very, very significant outcome for us..

Very, very positive one. Chris, pursuant to your question with respect to competition, to the best that we can tell, the -- there's 2 or 3 other teams that are involved here. First of all, of course, there's Sandoz that withdrew their file, and I believe that Sandoz has announced that they're going to refile sometime in early 2019.

And then there's Mylan. And of course, Mylan received a complete response letter last month and made additional comments, I think, on their call. And I would direct you to Mylan themselves for additional comment on there. Now in terms of Apotex, they're a private company.

And to the best of our knowledge, they haven't made any public pronouncements one way or another about what's going on with their application, which was filed, I think, in the second half of 2014 or other issues. So for us, those are the 3 that are on our radar right now.

So we're very hopeful in a positive outcome of our resubmission and getting on the market..

Our next question comes from Tyler Van Buren with Cowen and Company..

Just wanted to spend a little bit time perhaps on the Lucentis -- biosimilar Lucentis opportunities since there's going to be an increase focus on that.

Perhaps you could just give us maybe a broad picture in terms of the time line to development when you think it could potentially reach the market as well as the -- clearly, the opportunity is large, but maybe just what you're seeing on the competitive landscape in terms of how many potential players there are..

Tyler, thanks for the question. As I said in my prepared remarks, we will, in the future, provide additional guidance regarding the timing of the clinical program, certain regulatory developments and so on. I think it's fair to say that we've been focused on that and gave a little bit of attention.

I think that we have a -- developing a very good understanding of the clinical implications and so on for this product. We like this product a lot for a number of reasons. We like the -- first of all, it's an unmet need for the patients. So it's a great product. It also has a very well-controlled COGS price ratio, which is advantageous.

It has high scientific hurdles and a few challenges, which we think are actually advantageous. A lot along, for example, the CHS-1701 have progressed in experience. We see in the U.S., there's probably 1, maybe 2 other competitors, so we see a limited set there.

We think that there's a very strong market for it, with the products in this category selling up to, I don't know, $8 billion or $10 billion a year. And then we believe that it's a very good product for us for a number of reasons and a number of sales call points and whatever. So I appreciate your patience.

We'd be filing some additional updates on the timing of this product going forward..

We have time for one more question. Our next question comes from Douglas Tsao of Barclays..

Just maybe a little bit of an update at exactly where things stand in terms of development of 1420. Certainly, perhaps more so from the commercial standpoint in terms of potentially looking to partner it and how you sort of look at it now investing in that product given where we are with the IPRs..

Thanks for the question, Doug. And so as I said in the call, in my prepared remarks, we believe that the most prudent path forward for us is to prepare for our launch in mid-2022 when certain patents come off and expire. We have redirected some of the intended spend for 1420 towards the ophthalmology program.

We think that our product would be highly competitive at the time that it comes on the market. We have a very nice product. It's been successful in a number of clinical trials. However, we think that the refocusing of the emphasis on the ophthalmology portfolio is warranted. And we believe that, that's the best use of our focus.

So it's actually, I think the anti-TNFs are third focus in our portfolio at the present time..

Okay.

And then in terms of development of the Lucentis or thinking about bringing that forward or commercializing that, would that be something that, given the nature of the physician base and the specialist, that you could perhaps pursue on your own similar to 1701? Or would that be one where you feel like a partner might be necessary from a commercial standpoint?.

Yes, I'll let Michael Fleming take that one. Michael, you want to make some comments about the [indiscernible].

Yes, I'll do it very briefly, Doug. So yes, this is something that we would commercialize ourselves. It's a very attractable commercial opportunity. Very, very highly concentrated, delivered through ophthalmology and retinal specialist. They have to be able to do this. It's Medicare-based. Roughly 80% of this business is Medicare.

And so it's commercially very attractable for us, and we would do that..

Thank you. With no additional questions, I'll turn the call back over to Mr. Lanfear for closing comments..

Thank you very much. And thank you for, all, being with us today. I think that we've had a very good quarter. We've had excellent progress on the complete response letter issues. The validation is now completed. We've also had very good success with the CMC issues. We look forward to getting guided with the FDA, as Dr.

Bell pointed out, prior to the resubmission. And then secondarily, on the financial side, I think that Dr. Viret and his team have done a very nice job. We've controlled the burn. We've come right in the guidance, and we've guided down for the next quarter and we've also been very successful in fundraising with a large international team.

And thirdly, I think we refocused our portfolio appropriately and brought forward with more emphasis the ophthalmology program. So look forward to seeing you all next call, and thank you very much..

Thank you. Ladies and gentlemen, that does conclude today's conference. Thank you very much for your participation. You may all disconnect. Have a wonderful day..