Ladies and gentlemen, thank you for standing by. And welcome to the Coherus BioSciences Fourth Quarter Earnings Conference Call. My name is Michelle, and I will be your conference operator for the call today. At this time, all participants are in a listen-only mode. And as a reminder, this conference call is being recorded.

I would now like to turn the call over to David Arrington, Vice President of Investor Relations and Corporate Affairs. Please go ahead..

Thank you, Michelle, and good afternoon, everyone. After close of market today, we issued our fourth quarter financial results press release. This release can be found on the Coherus BioSciences Web site. Joining me today's for the call will be Coherus CEO, Denny Lanfear; and our Chief Financial Officer, Jean Viret.

Before we begin our formal remarks, I would 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 on our most recent Form 10-K, which we filed this afternoon after market close. In addition, Coherus BioSciences does not undertake any obligation to update any forward-looking statements made during this call. I will now turn the call over to Denny..

Thank you, David, and welcome everyone to our Q4 2018 call. We are very pleased today to review with you the progress in Q4 2018, which saw the approvals of the company’s first products on November 2 and subsequent launch preparations. We’re happy to update you today on our progress with respect to the launch as well as the product pipeline.

Our company’s CFO, Jean Viret, will then review our Q4 financial performance and we’ll be happy to take your questions. Now with respect to the launch, I’m pleased to say that we are executing the UDENYCA launch per plan. We’re shipping product and billing customers, patients are being treated with UDENYCA.

Overall, the sales, logistics and fulfillment processes fully meet our expectations and are proceeding smoothly.

We are pleased that our initial performance is aligned with our internal projections and we believe that we have successfully presented a robust value offering comprised of a high quality product, significant guaranteed supply, services such as Coherus Complete and attractive pricing to the market.

To remind you, the list price of UDENYCA is some 33% below that of Neulasta. Our experience to-date confirms that our value offering meets the needs of providers, payers and patients. On a personal note, I just want to say that it is immensely gratifying to see our long held thoughts and vision now implemented in the field.

I recently had the opportunity to visit several oncology clinics and hospitals throughout the country and observed firsthand the value that UDENYCA is now bringing to the healthcare system. Let me make a few comments with respect to our supply.

As per our previous 2018 guidance, our logistics center has ample stock on hand sufficient to fulfill even our highest expected demand for an extended period under any competitive scenarios. As you may recall, UDENYCA has 36 months shelf live, the longest dating of any approved biosimilar pegfilgrastim in the U.S. market.

UDENYCA has been utilized by patients in all three provider segments; oncology clinics, 340B Hospital outpatient and non-340B Hospital outpatient facilities. This is consistent with our broad-based launch strategy that we outlined earlier in 2018.

Now with respect to the payers in our previous guidance, as you know, we particularly focused on securing coverage among both Medicare and commercial insurers on both the national and regional level.

To-date, UDENYCA has coverage at parity or better to the reference biologic Neulasta in over 90% of insurers including all major national payers such as Anthem, United and Aetna. To our knowledge, there have been no rejected or unpaid claims from any payer which was an issue with previous biosimilar launches as you may recall.

Finally, it is interesting to note that given UDENYCA attractive pricing and comparative value, some payers have adopted policies to prefer biosimilars including UDENYCA over Neulasta. Now in the services side, we launched our full provider patient offering Coherus Complete in early January to support patient access to UDENYCA.

We have resourced all Coherus customer services to accommodate the anticipated demand. I am pleased to report that customer response to Coherus Complete has been very positive and is being very well utilized in the market.

With all of our Coherus service offering systems, we are supporting medical information requests, reimbursement, coding inquiries as well as requests from patients for co-pay assistance.

And I am very pleased to note that consistent with our mission to deliver healthcare savings and improve patient access, we have already provided underinsured and uninsured patients with UDENYCA at no charge. Now let me make a few remarks with respect to the adoption in sales.

As you know, prior launch we expected that a branded holistic approach for the market which considers the individual needs of each stakeholder was the best way to support and nourish biosimilar intake – uptake, I should say, and market conversion.

While we are only about two months post launch, our experience to-date has been consistent with those expectations and validated this approach.

While we’ll not provide early metrics with respect to sales today, we are pleased to report that our initial performance is well aligned with our internal projections in our broad launch strategy across all segments. We look forward to updating you in May on our Q1 call when of course we plan to report our first quarter sales.

Now let me make a few remarks with respect to the pipeline. And while I understand the UDENYCA launch is the primary interest, I just want to point out a few things in terms of the developments there. First, I’ll discuss adalimumab biosimilar CHS-1420.

As reported earlier, we have settled with AbbVie for a launch date in late 2023 and accordingly we will now sequence and prioritize our BLA efforts for this product consistent with our negotiated launch date. As we have previously guided, it’s our intent and strategy to launch our Humira biosimilar CHS-1420 ourselves.

We expect our infrastructure investment learnings from oncology will be highly relevant to the anti-TNF space. For example, the relationships that we’re building in the payer space and the patient services delivered by Coherus Complete are particularly important in the anti-TNF space and will find direct applicability.

Now with respect to the ophthalmology franchise CHS-3351, our Lucentis biosimilar, and CHS-2020, our Eylea biosimilar, we continue to advance our efforts per plan.

We believe that the branded service-oriented approach that we are pursuing in oncology will have direct applicability in ophthalmology as the buy and bill market dynamic as well as potential cost savings to this system are very similar. We’re happy to take any questions with respect to the launch in our pipeline during the Q&A.

Now let me turn things over to the company’s Chief Financial Officer, Dr. Jean Viret, who will cover the financials.

JV?.

Thank you, Denny. I will now walk you through the main financial results from this quarter. Research and development expense decreased by $4.8 million this quarter over the same quarter last year and by $52.2 million in 2018 compared to 2017.

The decrease in R&D expenses period-over-period was mainly due to a reduction in manufacturing, clinical and analytical costs associated with our anti-TNF programs; CHS-0214 and to some degree from CHS-1420. These cost decreases were partially offset by the costs associated with the manufacturing of UDENYCA.

Again, this fourth quarter, we expense all costs related to the production of UDENYCA through November 2, 2018, the date that UDENYCA was approved by the FDA.

Now that UDENYCA is approved for commercialization in the U.S., we started capitalizing those costs into inventory from November 2 forward and we had approximately $5.7 million in inventory as of December 31, 2018.

Selling, general and administrative expense increased by $18.9 million this quarter over the same quarter of last year and increased by $22.9 million in 2018 compared to 2017.

This increase was mainly attributable to the costs associated with hiring a sales force and completing the commercial functions and infrastructure to launch and sell UDENYCA in the U.S. These increases occurred mostly in the fourth and third quarter of 2018.

Cash and cash equivalents and investments in marketable securities totaled $72.4 million as of December 31, 2018, before receiving $73.1 million in net proceeds from our senior secured credit facility with healthcare royalty partners in January 2019.

Our cash on hand together with the cash we just raised represents a pro forma total of $145.5 million compared to $117.2 million as of December 30, 2018. Cash used in operations was $47.4 million during the fourth quarter of 2018 compared to $42.8 million during the third quarter of 2018.

Net loss attributable to Coherus for the fourth quarter of 2018 was $62.6 million, or $0.92 per share, compared to a net loss of $49.1 million, or $0.84 per share, for the same period in 2017. Net loss attributable to Coherus for 2018 was $209.3 million, or $3.22 per share, compared to a net loss of $238.2 million, or $4.48 per share, for 2017.

I will now turn the call back to David Arrington..

Thank you, Jean. Okay, so we will now open the lines to questions. Michelle, as the operator, could you please queue up the first question for us..

[Operator Instructions]. Our first question comes from Ken Cacciatore of Cowen and Company. Your line is open..

Thanks, guys. You sound very excited by how things are going, so I’m going to try to poke a little bit and see if I can get some responses in terms of perspective around it.

So the Street is at 70 million to 80 million for 2019 revenue, just any sense you want to give us if we’re being smarter or not smart as we try to do the expectations? And then from an SG&A and R&D run rate, should we take Q4? Is that good numbers to be using as we go into 2019? And then just lastly, any thoughts on any other competitors coming to market? Anything you’ve heard so that we understand the durability of the opportunity.

And maybe lastly, is Mylan at all altering their behavior with you in the market? Thank you..

Thank you for your questions, Ken. I counted four and so I’ll do my best to start from the top. With respect to expectations, I would make two key points. The first is, we were very clear with the Street in Q4 about how we are going to approach the market strategically in the holistic value proposition.

As you may recall from our previous meetings, we made a point to make sure that all the payers were on board and that we had appropriate incentives and alignment among providers and so on of all the key segments. We’re happy to report today that all the alignment is working quite well.

We’re very satisfied with the way we are being received by the market and the second key point that I would make is that our progress in the market is very, very consistent with our expectations. The second point with respect to the SG&A I will defer to Jean Viret for subsequent remarks.

But with respect to Mylan and some of the other – I would say other key points, I think that our approach to the market was somewhat unique and very much a branded approach to the market. And I think that that is bearing significant fruit for us.

JV, would you like to make any remarks with Ken’s point with respect to SG&A?.

So your question was about the fourth quarter, but let me step back. Obviously last year we were not launching in 2018 and this year we’re launching in 2019, and so 2019 SG&A will be obviously bigger than that of '18. Q4 we were not quite selling yet. We were getting ready to sell. So now we’re in the crux of it.

And as you can expect as you’ve probably been a keen observer of financial statements, in the first quarter of launch you get usually a one-time many large expenditures around marketing. Now that said, once you pass that, things tend to go down a little bit. So quantitatively, it will go up.

Q1 maybe slightly bigger than Q4, but then will come back down..

With respect to your other question, Ken, on competition, as you know, we plan for eventual market entry of additional competitors for a quite a long time. The last is a very large and attractive market and we feel that’s able to support additional competition.

The competition which comes in we believe exerts the most pressure on the innovator not the other participants, as they still hold over 90% of the market. And lastly, I would say that we believe that additional biosimilar entrants would most likely accelerate to conversion of the market at two biosimilars as we’ve seen before. I hope that’s helpful..

It does. Thanks so much. Congratulations on the early launch..

Thank you and we are pleased..

Our next question comes from Mohit Bansal of Citi. Your line is open..

Great. Thanks for taking my question and congrats on the progress. Just wanted to understand that your competitor talks more in terms of market share in pre-filtering markets. So far that you have two months of experience, so you have always seen the market as the whole complete market and you could take market share in the complete market.

Has anything changed or how you’re seeing your uptick in previous patients, like in the Onpro kind of segment in terms of there’s no segment there, but how are you seeing that? And I have a follow up as well..

Thanks, Mohit. As you know, we are broadly approaching the entire market not just the syringe market or the non-Onpro market but the entire market. But I’ll let Mr. Jim Hassard who’s our Senior Vice President of Market Access and Marketing make some further remarks with respect to your question.

Jim?.

Thanks, Mohit. Again, it is very early for us to comment on the launch. But again, I will parrot and reiterate Denny’s comments. We have – UDENYCA has seen adoption and uptake in all three segments or all three what we consider the segments of the U.S. oncology market; so oncology clinics, non-340B hospitals and 340B hospitals.

The broad launch has resulted in a broad entry into the marketplace overall..

Got it. This is very helpful.

And in terms of the case of Sandoz and Amgen’s Enbrel case going on, in an event of Sandoz winning the case, how soon do you think you can actually move forward and get Enbrel to the regulators?.

Thanks for that question too, Mohit. So as you may recall, we have already completed two Phase 3s with the 0214 or etanercept product. Both those Phase 3s were very successful. We have already substantially completed some additional manufacturing efforts. There’s a little more to do there.

It really depends in terms of how we react, what exactly happens in that case, what is decided and what is not decided, what sort of intellectual property lays about that has to be addressed. But overarchingly though I think once we get some clarity from that case, we’ll review our product development of filing plans for 0214 accordingly.

But that product is by and large ready for filing with some additional work to go on..

Got it. That’s helpful. Thank you..

Our next question comes from Chris Schott of JPMorgan. Your line is open..

Great. Thanks very much and congrats on the early progress here. Just a couple here.

I guess first of all, I think you touched on this earlier but the discussions you’re having with your customers at this point, how much of it is focused on UDENYCA versus – biosimilars versus the brand as compared to customers trying to decide between UDENYCA and Mylan’s biosimilars? That was my first question.

I have a couple of follow ups after that..

Jim Hassard, do you want to take a shot at that?.

Sure. Thanks, Chris. Right now, the main focus is it is a decision I would say between the brand and the biosimilars. As Denny mentioned, Neulasta still holds over 90% of the market. That’s really the choice that customers are having to make..

Okay, great.

And is there any color you can provide at this point in terms of where we should think about net pricing shaking out for the products? I guess how much of a discount we should think from the list that you came out with?.

Chris, again, I’ll take that question. It is again far too early for us to provide guidance on what the net price is. I think again, look at what the list price is. Again, the value proposition is in the difference in the list price, 33% below Neulasta for UDENYCA. That’s really where the payers and the providers are seeing the value proposition..

Okay. Perfect. And the final one from me was just on plans for an Onpro like device. Just remind us again, what type of additional clinical work we should be thinking about here and just any timelines around that type of offering? Thanks..

Thanks, Chris. We haven’t provided guidance to the market on the specific plans and requirements with respect to an Onpro device. However, if you recall that we have disclosed to the market that we are working on such.

But I think that overall we have found the market that is the market with Onpro and the syringe market both to be very receptive to our offering as it is. So we don’t really view it as a major impediment to market entry at all at this particular point.

On the provider side, we’ve seen some accounts which demonstrate, for example, 100% adoption of pegfilgrastim biosimilars in the syringe presentation. And we’ve also seen some payers who established policy just limiting the use of Onpro.

So I think we have to take it all with a grain of salt, but we’ll be happy to provide an update perhaps at a later time the next quarter or two on our own delivery system..

Very interesting. Thanks very much..

Our next question comes from Mike Ulz of Baird. Your line is open..

Great. Hi, guys. Thanks for taking the question. You mentioned you’re seeing utilization of UDENYCA across all three market segments. Just wondering if you could maybe comment a little bit on sort of the distribution across those segments.

Is it fair to assume at this point it’s evenly distributed or are you seeing more utilization potentially in 340B hospitals?.

Hi, Mike. Thanks for the question. We think it’s a little early to sort of read the tealeaves with respect to segment penetration and so we’re going to decline the metrics. There’s a number of dynamics which affected each of these segments. On the one hand, one could expect clinics to move more quickly.

On the other hand, hospitals typically have P&T committees with processes they have to work through. And then of course you’re aware of the 340Bs and the pass-through status that’s going to be effective April 1. So I think then when we get out to Q3 or Q4, we can have more cogent conversation about the segments.

But I think things are very, very lumpy as we go forward here just two months in, so we just would decline from the tealeaf reading at this particular point in time. It’s certainly a legitimate question though..

Yes, got it. That’s helpful. Thanks. And then maybe just one more question from me. What percentage of insurers are requiring step edits through biosimilars prior to getting to branded Neulasta? And would you characterize that, is it the majority at this point or is it still sort of a minority? Thanks..

Jim Hassard will take that one.

Jim?.

Sure. I’ll give you two examples, Mike. We’ve seen two payers, Aetna and also Blue Cross Blue Shield of North Carolina, both have added policies that prefer the biosimilar before going to Neulasta. Aetna, we estimate it might represent about 4% of national lives.

So it’s still small, but it is – we were seeing some precedence within the marketplace already..

We were actually somewhat surprised to see the preference put on these formularies. It’s not something that we anticipated. Our objective really was parity on all these formularies. So this is something I think that the payers have done just in reaction to long-term pricing trends with the innovator..

Got it. Great. Thanks, guys..

This concludes the questions portion. I’ll now hand it over to Denny for closing comments..

Thank you very much. Thanks for being on our call this afternoon, guys. Thank you for tuning in to hear about the launch. As I indicated, things are aligning well with our previous plans. We look forward to updating you in early May. In our first quarterly call, we’ll give you some real results. Thank you..

This concludes our call. A replay of the webcast will be available on coherus.com. Thank you..