Coherus Oncology, Inc. (CHRS) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by, and welcome to the Coherus BioSciences, Inc. conference call. [Operator Instructions] I would now like to hand the conference over to your first speaker for today, Mr. McDavid Stilwell. Please go ahead.

Thank you, operator. Good morning, everyone, and thank you for joining us. We issued a press release earlier announcing our collaboration with Junshi BioSciences. This release can be found on the Coherus BioSciences website. Today's call includes forward-looking statements regarding Coherus' current expectations. These statements include, but are not limited to, statements relating to our collaboration with Junshi BioSciences, the stock purchase agreement between Coherus and Junshi BioSciences, our co-development of toripalimab monotherapy and combinations, our ability to successfully register toripalimab in the United States and Canada, our ability to successfully commercialize toripalimab and other licensed compounds and our success registering and commercializing our late-stage biosimilar product candidates as well as our uses of capital, all of which involve certain assumptions, risks and uncertainties that are beyond our control and could cause actual results to differ from these statements. These statements are not guarantees of future performance and are subject to certain risks and uncertainties that are discussed in documents that we file with the Securities and Exchange Commission, specifically in our quarterly report on Form 10-Q for the quarter ended September 30, 2020. The forward-looking statements stated today are made as of this date, and we undertake no duty to update such information, except as required under applicable law. Joining me for today's call are Denny Lanfear, Coherus' Chief Executive Officer; and Dinesh Purandare, Executive Vice President of Commercial Strategy and Operations. And I'll turn the call over to Dennis.

Well, thank you, David, and thank you, everyone, for joining us on the call this morning. Our mission at Coherus has been to expand patient access to life-changing medicines and to deliver significant savings to the health care system. We have been successful in delivering on that promise with our first product, UDENYCA. And today, I'm very excited to announce that we are expanding our mission to immuno-oncology. We have entered into a collaboration agreement with Junshi BioSciences to acquire exclusive rights in the United States and Canada to toripalimab, the anti PD-1 antibody, Junshi BioSciences has been developing in extensive pivotal clinical development program across multiple indications. In addition to toripalimab rights, we will also acquire options to 2 exciting pipeline programs for potential combination with toripalimab. The first is an anti-TIGIT antibody that is expected to enter development in the United States later this year. And the second is a next-generation engineered IL-2 cytokine. We also have obtained certain negotiation rights to 2 preclinical, checkpoint antibody programs -- checkpoint inhibitor antibody programs. We will pay Junshi BioSciences $150 million in cash upfront, a 20% royalty on net sales of toripalimab in the U.S. and Canada and up to $380 million for the achievement of certain development, regulatory and sales milestones, of which, $290 million are payable on attainment of certain sales thresholds. The option exercise fee for the anti-TIGIT antibody and the IL-2 cytokine is $35 million per program, exercisable prior to Phase II studies. Assuming we exercise the options, we will pay a portion of future development costs, an 18% royalty on net sales and up to $255 million per program for achievement of certain development, regulatory and sales milestones, of which $170 million are payable on attainment of certain sales thresholds. Junshi BioSciences and Coherus will co-develop toripalimab and licensed compounds, and Coherus will pay a portion of the development costs, up to $25 million per year per compound. This is a transformational transaction, which expands our pipeline to include the rapidly growing checkpoint inhibitor market, which is expected to exceed $25 billion by 2025 and provides us the essential PD-1 backbone for development of next-generation combination therapies. We are excited to partner with Junshi BioSciences. They are a leading Chinese biotech company, with a dedication to innovation and global clinical capabilities. Their mission is to provide patients with better treatment options that cost less, which is very consistent with our own. Junshi BioSciences has a broad pipeline, which includes not only immuno-oncology but also immunology, cardiology and the CNS therapeutic areas. They also have deep experience with drug development and with the U.S. FDA. Dr. Li Ning, Junshi BioSciences' CEO, worked at FDA for 13 years. And Dr. Patricia Keegan, their Medical Officer -- their Chief Medical Officer, was an oncology reviewer and a Director at FDA for more than 30 years. Dr. Keegan also served 16 years as Division Director of Oncology Products. And most recently, she was acting Associate Director of Medical Policy for the Oncology Center of Excellence. Toripalimab has a compelling late-stage profile. That is being developed in an extensive clinical program that is well underway, with more than 2,100 patients having received toripalimab in 15 pivotal trials in multiple settings in tumor types, including cancers of the lung, esophagus, nasal fairings, breast, bladder, kidney, liver and skin. In China, toripalimab is already approved for the second-line treatment of unresectable or metastatic melanoma. In the United States, we expect the first BLA to be filed later this year, for nasal fairing GEO carcinoma, an unmet need for which FDA has granted breakthrough designation for toripalimab. Following nasal fairing GEO carcinoma, Coherus and Junshi expect to file additional BLAs over the next several years for multiple rare and prevalent cancers, including non-small cell lung cancer. Toripalimab will fit very well with our existing commercial infrastructure that has been very successful in the promotion of UDENYCA. We have a commercial team of approximately 140 employees, including nearly 100 who are field based. We expect to fashion a well-rounded value proposition as we did with UDENYCA to ensure commercial success of toripalimab. We have well-developed relationships with group purchasing organizations, independent delivery networks, payers and prescribers. And we are confident that our team will be able to deliver the toripalimab proposition for the benefit of patients. The options on JS006, an anti-TIGIT antibody, and JS01A (sic) [ JS018 ], an IL-2 cytokine, are potential long-term drivers of growth for Coherus. TIGIT is a clinically validated target that has shown synergistic antitumor activity with PD-1 inhibitors. We expect clinical development of JS006 to begin in the United States this year. JS018 is a next-generation engineered IL-2 cytokine, designed to inhibit stimulation of regulatory T cells while retaining stimulatory activity on effector T cells and natural killer, so-called NK cells. The future opt-in cost for Coherus will be $35 million per program, and the option must be exercised following an evaluation period prior to initiation of Phase II development. This will be an exciting transition for our company. Our progression into immuno-oncology will be marked by multiple milestones, as the toripalimab monotherapy and combination programs advance through key clinical development readouts and regulatory submissions. Later this year, we plan to have an Analyst Day event to focus on our immuno-oncology programs. Before I turn the call to your questions, let me make a point about the implication of today's announcement on our corporate strategy. We plan to invest cash generated by our successful biosimilar commercial business to build a focused immuno-oncology franchise, which will leverage our proven commercial capabilities into large and growing markets. We will prudently allocate our R&D resources to realize the exciting potential of toripalimab monotherapy in [Audio Gap] With respect to biosimilars, our focus will be on commercialization, as we continue to pursue identical market share growth and prepare for projected launches through 2023 of biosimilars of HUMIRA, Avastin and Lucentis, if approved. Our partnership with Junshi BioSciences for toripalimab and potential combinations is a tremendous opportunity for our company, and I'm excited to discuss it with you all now. Operator, this concludes our prepared remarks. Please open the line for questions.

[Operator Instructions] Your first question comes from Mr. Jason Gerberry of Bank of America.

This is Ash Verma on for Jason. I had 2 questions. One is just in terms of the initial opportunity, the BLA that you are planning to file for the third line nasopharyngeal carcinoma, what is the patient size in the U.S. and Canada for this? So that's my first question. And then the second one, which BLA can we expect to be the next and which indications would it focus on?

Thank you for your question. I will let Dinesh address the issue of the size of the markets. Dinesh?

Yes. So thank you. This is Dinesh. Thank you very much for your question. As you well know nasopharyngeal carcinoma is a high unmet need area. It's a niche indication for which we have a breakthrough designation. And the U.S. incident generally is in the range of 7 patients per million. So that's the total population in the market.

Thank you, Dinesh. With respect to further follow-on BLA filings or indications, Junshi is currently prosecuting the development of therapies in a number of areas, as I outlined, including lung, esophageal, et cetera. Subject to certain conversations and deliberations with the FDA, we will jointly decide on which additional indications will be filed, in what sequence. And during our Investor Day, a little later this year, we'll be happy to give you a clear snapshot of how we see these indications and BLAs rolling out over the next couple of years.

Your next question comes from Mohit Bansal of Citi.

Congrats on the deal. This is James on. Could you give us any updates on the Lucentis program real quick? And then secondly, if we can go back to toripalimab, I know you just kind of said the readout timing -- or sorry, the BLA timings will be disclosed at an investor event. But can you go over maybe some potential readout dates for the non-small cell lung cancer trials?

Thank you very much for the question. With respect to the Lucentis program, we'll be providing an update on that on our quarterly call. As you recall, there was meetings with FDA that were scheduled. I can say that those meetings did occur. Secondarily, with respect to the timing of the follow-on indications. We have a number of clinical trials that are reading out. And we think that it's best to take the opportunity a little later to delineate all those in conjunction with Junshi for you. So stay tuned.

Got it. Just 1 more. Could you disclose if JS006 has an active or silent Fc region?

I cannot disclose such at this time.

Got it. Congrats on the deal.

Your next question comes from Salim Syed of Mizuho.

Denny, congrats on the deal. Just a couple for me, if I can. So just one high-level strategy question here. As you're thinking about the future of this business, should we be thinking now that you're -- you no longer want to acquire additional biosimilars, but you want to build your business around the novel oncology market. And sort of what does that say? If that's so, like, what does that say about the strategy in biosimilars? Is there something about them, biosimilars in general, that has caused you to go down this path of going into novel therapies? And then the second question is just on the discontinuation of Eylea. Was there a particular reason to discontinue Eylea other than resources? Or is this an asset that you plan to divest at some point?

Thanks, Salim. Excellent questions. So first of all, with respect to Eylea, we had penciled in approximately $200 million in R&D expenditures, including Phase III clinical trials for that program over the next couple of years. And I think on previous calls, we've discussed that with you. When that product went to market, that product would go into perhaps a $4 billion, $5 billion, $6 billion market, where we already have Lucentis product coming forward as we've disclosed. We felt that it was much better to invest those dollars, particularly those R&D dollars in immuno-oncology products, keeping in mind, of course, that PD-1 is a proven target with a very large market, and the TIGIT and the other targets are also -- have seen very good clinical efficacy. It really is a question of using our dollars to approach, say, a $30 billion product opportunity as opposed to a $4 billion or $5 billion product opportunity. We plan to continue with Lucentis in the ophthalmology space, which, of course, we have apprised you of our progress there. And I think what it says mostly for our strategy in terms of these things is that we will deploy investors' capital and the cash generated from the biosimilar business into markets and therapeutic areas, which are growth markets in which we feel we can deliver our value proposition on the commercial side with a lot of confidence. I don't think that you will see us using our R&D dollars for further biosimilar developments in the early stage side, but you will see us continuing to commercialize biosimilars and to harvest the value of our previous investments with 1420, for example, our HUMIRA biosimilar, where the BLA was filed, et cetera. Is that helpful?

Yes, super helpful.

Your next question comes from Balaji Prasad of Barclays.

Congrats on the deal. Denny, I just wanted to go back to the previous question, and tie up with some of our past conversations, your flagged biosimilar Eylea as a bigger opportunity in the past and that Lucentis would be a learning experience to launch your own biosimilar Eylea. I can't help but think that there is a reversal of stance on biosimilars. So you mentioned that you won't be using R&D dollars for future biosimilars. Would we also be rolling out any kind of approved commercial biosimilar licensing to piggy back on your commercial strength? And I'll come back to the next set of the questions.

Yes, that's a great question, thank you. I think it's more of an issue for us of the appropriate allocation of R&D resources and the cash flows from our biosimilar business. As I said, we feel that the immuno-oncology area presents us with the opportunity of prosecuting our proven value proposition commercially into much larger and growing markets. With respect to biosimilars, let me be clear, we're still quite open to biosimilar deals and commercialization and so forth going forward. But those don't really require the sort of R&D spends that the Eylea program would have. So you will see us using our R&D primarily for the immuno-oncology, and we will see us commercializing and harvesting the value of our biosimilar portfolio. If we see other biosimilars come by, which we think are very accretive. We'll look at those very carefully. But that's an excellent question.

Thanks, Denny. Second part of my question on toripalimab. There are multiple checkpoint inhibitors in the market, and you have laid out a few areas where you think there is most promise. But with the amount of IO drugs in the -- in development in the market, where exactly would you stand with the commercial opportunity with the drug?

I think that it's fair to say that we're fairly confident in translating our commercial value proposition into these markets. We did very well against an entrenched competitor, as you know, with UDENYCA. And we feel that our competency really is displaced and entrenched competitors in the market. So we are not afraid of competition. We think that we are fierce and very, very confident competitors. I think that our commercial team has demonstrated their capabilities, both with the initial launch, as you recall, of UDENYCA, we exceeded 20% market share in the first year, our performance during COVID, during some very adverse conditions. So we think that the immuno-oncology arena is ripe, a, for savings; and b, for the sort of holistic well-rounded value proposition that Coherus has a very strong track record of delivery.

Your next question comes from Georgi Yordanov of Cowen & Company.

Congratulations on the deal. So just a couple from us. So I guess one of -- just following up on the previous question. How do you see the long-term pricing dynamics play out in the PD-1 space given those multiple competitors in development?

That's an excellent -- okay. Great. That's an excellent question. I'm going to allow Dinesh to make some comments about that with respect to the pricing and so forth. Dinesh?

Yes. Thank you, Denny. So we are still -- we -- at this point in time, it's hard to pinpoint on the pricing strategy. But what I can talk about is our strategy and success with UDENYCA that positions us very well in this marketplace to compete with the entrenched bio -- other immuno-oncology molecules. As Denny mentioned, I mean, we plan to deploy a holistic approach to deliver our value proposition. We have a very good and strong commercial footprint already out there, which we believe fits our needs in the initial indications.

Thanks, Dinesh. I'll just make a further comment here. In the UDENYCA space with pegfilgrastim, as you can see, we have been very disciplined in terms of price and discounting. As a matter of fact, our ASP, I think, right now, is actually above that of the competitors, particularly Amgen. So our strategy will be to deliver value, not necessarily price cuts and so forth. We think these markets will be receptive to value. Further, we think that we will have a very well-rounded label. Junshi has a very complete development program for this asset. There are some 15 pivotal trials ongoing that already have 2,100 patients. There'll be over 5,000 patients, when enrollment is completed, over a whole number of cancers. So I think that we'll have a very fulsome label with which to approach the oncology environment.

And I guess, just a slightly broader question. What are some of the key challenges you anticipate in marketing an immuno-oncology product from a commercial perspective? And I guess, what is your strategy, how that would be different from your UDENYCA strategy?

Yes. We'll decline to go further with respect to our market penetration strategy and our competitive strategies at this time. We think it probably would be appropriate to get too far into that as we presage these things. And we are going to focus on the co-development with our partner, Junshi, and focused on getting the BLAs filed and approved. But we will have more to say from time to time on our competitive strategies, of course, with these products. The last point that I would make, however, to you is that we looked at a number of PD-1s over the past 2 years. We have been investigating this space for quite some time. And we think that it was very, very important for us to get a very, very good PD-1, and not all PD-1s are created equal. So one of the things you may note is that this was a transaction that took us some time to complete. On our quarterly calls, we have presaged that we were looking at various areas for quite some time. We felt that it was very important to get the right molecule with the right clinical and preclinical profile and the right partner. And one of the reasons that it took some time to accomplish this is we were very, I think, very careful in our partner selection, and we're very happy with Junshi, both the company and the molecule toripalimab.