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

Wonderful. Thanks, everyone, for joining us. Thanks, Denny, for taking the time. It's great to see you. Looking forward next year to be able to see you in-person again back in Boston but a good substitute to have you here virtually. So I'm joined by colleague, Georgi. Stacy, unfortunately, is at another meeting, so she couldn't join. But Georgi, Stacy and I can -- comprise our team. So anyways, Denny, wonderful seeing you. It's been many years we've been working together. The story continues to evolve in really fascinating ways. I think my experience with you has been, you actually end up almost always universally doing what you say you're going to do. There's usually like in all things in drug development, it's not just up into the right. There's a little bit of pauses and moving around. But you eventually get exactly to where you plan on getting to. I think that's appropriate as we think about -- when we get into the PD-1 conversation and how you're going approach that market. But I thought what would be best to start is to talk about background of some of your development programs and how you got there. And I wanted to start with Bioeq and Lucentis. And maybe if you can give us a little bit of a brief background, how you even find the opportunity? And then maybe bring us up to speed, the data to date. I know there's been a little bit of issues as the -- as we've had to revalidate the program with -- then you can give us the nuance of what went on with the machinery and the different issues there. But can you talk about a little bit about how you came to find the program? And then can you bring us up to speed where we stand right now?

Sure. Well, let me first say it's great to be with you again here, Ken, and have the opportunity to speak. And I do miss those in-person conferences and look forward. Hopefully, post COVID, we'll get back to that next year. But with respect to the Lucentis program, the situation was that we were doing our own Lucentis program. So we've made considerable progress on that. We had a good molecule, a good process, well laid-out Phase III and all the rest. And we had budgeted to spend about $150 million on that program over the period of time we were prosecuting that. It wasn't a lot of complications with respect to the formulation. It was a fairly straightforward program, but still, doing all of that with one of those programs, $150 million is about right. Now, right around the time that we are ready to launch UDENYCA and got busy with that, we got outreach from the Bioeq team that they wanted to talk to us about their Lucentis. And we took a look at that. And we felt that it was probably better to save that $150 million and get half of the economic -- roughly half of the economics of the Lucentis deal and spare the $150 million going forward. So that's really what we did. They had an asset that was already through a Phase III. They are prosecuting the manufacturing in Europe, obviously. So actually, it was at their instigation that contacts between the companies were established. And so we sat down with them and worked through things. It went very -- in a very straightforward fashion and so on. It went ahead and got filed. But now I think we're on pretty good footing. The FDA wanted some additional manufacturing data, as we pointed out to the Street last year. Once they made that request, the CMO took a couple of months to clear their schedule to get that work in there. They went ahead and they did it. They went -- and they did it actually in the time frame that we talked about doing it. It was actually done in the summer. But things with the FDA were moving -- because of COVID at that point were moving a little slower. There's actually been slowdowns here and there as they, I think, very appropriately focused on COVID and the vaccines and so on. So to make a long story short, they got the meeting with the FDA. I think it was last month. And that meeting went well. They laid out the -- reviewed the manufacturing progress, laid out the strategy for them and the key things they would have to do in order to go ahead and proceed with the filing. So at this point, we expect them to file sometime around midyear on that product. We look forward to it being reviewed by the FDA and approved about 12 months after that next year. So overall...

Okay. Can you talk a little bit about -- go ahead.

Yes. Excuse me, I was just going to say that, overall, it took a little longer than we'd like. But you invariably bump into a few things here and there in the business.

Okay. So obviously, with products like this, the sensitivity now to inflammation, to being not only efficacious but as safe as we would hope it to be. Can you just talk a little bit about the clinical data and what you've seen and -- not only on the efficacy side, obviously, or the biosimilarity, the tolerability or the -- I should say, inflammation or anything that we've seen in this program that would give the agency any pause?

Yes. We don't believe there's any information or clinical data which will give the agency any pause. It was a little difficult to understand investor concern over inflammation with a biosimilar to Lucentis when that was a product that's been in the market for more than a decade, maybe 2 decades, and had a great track record of safety. The data that we saw in the clinical trials with the Bioeq's Lucentis, highly comparable to the latest data from the originator. The -- I think that there was another product, though, an innovator product that went forward. Had some other innovator -- it had some other problems with respect to the inflammation. And I think that just sort of sensitized investors to look over here and pay attention. But we didn't have any concern from our review of the data. And we don't expect there to be any issues in that dimension with this product as we've gone forward.

Okay. And as you think about the market evolution, obviously, UDENYCA took quite a bit of, from a commercial standpoint, I would call it a white glove. Obviously, you had a sales force interaction, a lot of managed care interaction, a lot of hugging and -- of the clinics and the purchasers. Can you talk about retinal specialists or the retinal market? Is it more -- do you need to have that same kind of white-glove service? Or is it more of a payer-driven market? How would you describe how you're going to approach this marketplace?

Well, that's a great question. They're both, of course, Medicare Part B markets with all of the, I would say, somewhat Byzantine constructs that go away with this. There's a multitude of market participants who can be the rate-limiting step in terms of converting an established market to a biosimilar market. With our exercises with UDENYCA, as you may recall, we spent 2 years before the launch of the product, just understanding the needs of all the market constituents, whether they were the wholesalers, the distributors, the 340B hospitals, the payers, the providers, the doctors, the director of pharmacy at the hospitals, the nurse practitioners and practice managers, all these people. And you really have to understand what they all need to move your product through the system and how you're going to align everyone universally. So I think we had a very good track record of doing that. The key issue was that we were able to fashion a value proposition that we successfully prosecuted secondarily through that with those market participants. We expect this to be very similar with respect to the ophthalmology market. It's constructed in a exactly similar fashion, same sort of constituents, stakeholders with these very similar concerns. You have physicians who administer the product. You have group purchasing organizations which sit on top of the physician practices, with contracting payers, et cetera. So I think that we have a very good understanding of how to operate within that construct. It will serve us well in the PD-1 market also. But we think we're going to do just fine with respect to that in terms of the Lucentis market. The other issue too is, of course, Eylea is there. But it's sort of analogous in a way to the HUMIRA and the Enbrel situation, where one is going to be a biosimilar and one is not. Yet clearly, when HUMIRA goes biosimilar, that's going to impact Enbrel significantly because it's very much adjacent and, to a fair degree, it's therapeutically interchangeable. We see Lucentis and Eylea as highly therapeutically interchangeable. So market formation will occur a couple of years before it is for Eylea. They have patents and some things which will stay people off for a little while. But we think that we can do pretty well in what's a $2 billion market for Lucentis and additional $4 billion mark for Eylea. So we're going after the entire market, we've said that before. And we think that our expertise will be well utilized there.

And Denny, do you think with, knock on wood, the regulatory process goes well after the filing goes in, do you feel you're going to be unencumbered from a legal perspective and able to launch? And can you talk about some of the competitive dynamics as who you're aware of that may be there at market formation with you?

Well, by policy, we're not going to talk about legal issues or intellectual property issues, of course. But I'm happy to talk about the competitive dynamic. I think that a couple of competitors are going to line up. With respect to one, we have the Biogen-Samsung crowd. We don't shy away from competition. Competition is something that Coherus, I think, operates very well within. We did just fine in the UDENYCA/pegfilgrastim market. I'm not really certain. I haven't heard from those folks and when they intend to launch. But I think, again, that our relationships and our proficiency in Part B, which is a unique attribute for the folks that will go after this market, I think, we'll do just fine. So competition is great.

Okay. Good. Why don't we pivot to PD-1? And before we get into the specificity of where you landed, can you just talk about the evolution of a transaction like this? What goes on behind the scenes to even find this specific agreement? And I'm going to throw this as a very open-ended question to you, just a little bit of a history and evolution to how you got here.

Well, I think that the attractiveness of the PD-1 market in terms of immuno-oncology being fundamentally part of the oncology space was apparent to us early on. I would disclose too that we initiated a project in 2016, called [ Checkpoint Charlie ]. And in that, we took a look at all of the checkpoint inhibitors that were being developed. We became proficient in our understanding of how they worked and their mechanism of action, and we kept those in mind. So we had a strong basis for those. Now what happened next is we went ahead and got UDENYCA approved in November of '18, launched it in January of '18. By April or so of 2019, we had achieved 7% or 8% market share. The company reached profitability in the first quarter post launch. And so we had the luxury of considering then how we were going to fill the bag with additional oncology assets going forward to go sell alongside UDENYCA. We took a look at all of the oncology monoclonal antibodies that were available globally, Rituxan, Avastin, Herceptin antibodies. And eventually, that road led us to Innovent in China with their 2 assets. We hadn't forgotten about the PD-1. But we just didn't have really -- we didn't have anything that we'd put our hands on right away. In the interim, during that period of time and ongoing, we began hiring internally folks who were very confident and facile with respect to immuno-oncology and PD-1s in particular. We developed and ran assays which would allow us to take a look at all of the PD-1s that were available and how they stacked up preclinically and clinically and just how that looked. We also created a scientific advisory board of immuno-oncology experts, 4 or 5 folks that we could bounce ideas off of as we went through things. I think in overall, we took a look at KEYTRUDA and OPDIVO and several of the approved PD-1s as well as PD-1s that were preclinical, Phase I, Phase II, Phase IIIs and so on. I think it's fair to say that we probably went through about a dozen different PD-1s in which we took a look at them. And we've had an ongoing process of discussing them internally and so on, so we could zero in on something that would mean our needs. Our standards for PD-1 were very, very high. We had to have a product that showed very, very strong efficacy in the indications that we were interested in, particularly lung and so on. We wanted to have a product that had very broad therapeutic data developed for it. And one of the reasons that we did not move forward on a PD-1 earlier, when we were doing [ Checkpoint Charlie ] in 2016, is we really couldn't afford a $600 million or $800 million development program at that time. We are busy just finishing up HUMIRA and pegfilgrastim and getting ready for the launch. And we really wanted to get a product that was not early stage but really in the approval stage. And one of the things we really liked about the Junshi asset was that there was a very broad array of clinical indications they had developed. And we talked about it in our call that Junshi had 15 or more pivotal clinical trials underway with this particular asset. So indications like lung, esophageal, urethral, triple-negative breast, all these indications. And indeed, they're going to go and talk to the FDA about these now on a going-forward basis. We also liked the strategy of going forward with an orphan getting Fast Track status and facilitating that whole process to get at least one indication and get the product approved, so we could get out into the market and start talking to the oncology community about it. It did take a little longer than I'd like to get the deal done, as you said it with your opening remarks. The direction was clear and consistent, but your mileage may vary along the road a bit. And so while I would have liked to have this deal done sooner and while I talked frequently about it on my call that we're working on a large deal, it was a matter of really just having a very complete and deliberate process to make sure that we had the right product, we had the right terms, we had the right follow-on pipeline. We had a very, very, I think, cogent, short, medium and long-term plan to bring this forward because it was going to be a very important strategic focus for the company. So I'm glad that we waited. I think that we got the right asset. We're with the right company. We're very thrilled to be working with Junshi. We're really impressed by the effectiveness of their development programs. They just got approved in China, as you know, for third-line MPC. They filed the first line. We guided on our call that they'll be doing the filing this year with MPC in United States. And we're looking forward to that. As soon as we get past Hart-Scott-Rodino in next couple of weeks, we look forward to getting to go with them in a joint steering committee, getting together and sorting through the registration strategy for the remainder of these indications. So I'll stop there. But it wasn't a deal that just happened overnight. It was planned really for several years as a way to leverage our competencies in oncology commercialization for the company. And I think looking forward, we'll be -- we'll do just fine with that.

Okay. So investors are curious about, obviously, the pathway into the market in terms of U.S. studies, if they're necessary or not. Do you have to go indication by indication? Or is this one of those things where -- in lungs for instance, you can do one study, get in the front door and start running around to every room. How are the payers going to approach this? How do you believe the clinicians are going to view this? And can you give us a sense of the strategy in terms of will there have to be U.S.-centric studies or not?

Yes. Well, let me unpack that. First of all, I think with respect to the studies, what's important to keep in mind is that if you're going to bring in studies done in another country under their regulatory paradigms that haven't first been reviewed prospectively with the FDA, you have to be a little cautious. And we went to school with our first transaction, the Innovent, Avastin. We interacted with FDA. And I think that's fair to say that we came to good understanding of how the FDA would view data from China with that particular exercise. That was one of our objectives. But you have to have, first of all, the same standard of care in these other territories. And you have to have a very relevant patient population, which means that you cannot have a patient population which is treated differently with -- particularly with moieties that aren't approved in the United States, then expect to take that study and use it for registrational purposes. So you have to mimic what the practice is in United States with the same patients. The other thing, I think, that you want to watch out for is you don't want any histology-differentiating genetics, right? You don't want any indications in which -- the fact that you have primarily a Chinese population has different genetics in a certain cancer, and therefore, you don't have nonapplicable data. And that's not the case in any of these indications that I've talked about here, the lung or esophageal or triple breast or whatever. All those we think were -- will be able to be brought into the United States for registration. But that being said, that remains to be seen. These meetings have not yet occurred with the FDA. The review of that data has not happened. But in our diligence, we became convinced that these studies were appropriate for U.S. registration.

Great. And Denny, just a couple of questions. Actually, the first one is a combination of what some of our clients have asked in the portal. So given the multiple competitors in the PD-1 space, when you're looking out to, I guess, when KEYTRUDA becomes generic by 2028. Can you just talk about the pricing dynamics that you expect? You've previously spoken about KEYTRUDA and the actual likelihood of seeing biosimilars to feature by 2028. So just about the pricing perspective.

Well, I think there's a couple of things there. I think folks are very interested in when KEYTRUDA biosimilars are going to show up. I think that's going to be a bit difficult. I wouldn't say that they will never show up. But I think that the fact that you have to conduct very large clinical trials in oncology in monotherapy with -- understandably in order to go head-to-head and then show non-inferiority, I think that you can end up with a lot of patients, depending on how that conversation with the FDA goes about the margins. And of course, the second impediment you'll run into is to what degree the innovator in any of these cases has been effective in constructing patent barriers that you're going to have to go over around or under, right? That's the second thing to consider. I personally don't believe that biosimilars to KEYTRUDA will show up right on time in 2028. I think it will take -- as these matters go, it'll take a few years. AbbVie was able to put off biosimilar competition until 2023, even though composition of matter expired for HUMIRA in December of 2017. So it was about 5.5 years, and as you know, whatever it was. So I think it's a little tough. Now to your second point, though, with respect to pricing, I think that the market tends to over index a bit on pricing in terms of these kinds of things. I think that if you take a look at the UDENYCA experience and what we were able to do in the pegfilgrastim market, we've never been the low-priced person. We've got the higher ASP than Amgen right now, as a matter of fact. We were able to go into that market and get very significant market share gains, just sort of matching the price of others, right? We -- Mylan has always had prices, I think, that are a bit lower than ours. But our market share has always been much, much higher. I think what's important when you go into these markets is your mastery of your understanding particularly here of Medicare Part B and how that works. You have to have good relationships with the payers. And you have to be on the formulary. But on the other hand, what's really important is you have to have a commercial team that can pull that through, that can talk to the docs, the practice managers, the hospitals, the director of pharmacies and discuss your value proposition with them. And as you recall, we spent about 2 years prior to our launch with UDENYCA, just talking to all the various constituents. We had literally thousands of interviews in several congresses. And we talked to all facets of all people who could potentially impact conversion of that market to biosimilars. And we took from that, a strategy that we successfully first fashioned and then executed. And that's the reason we got the results. We did. We'd certainly get to that question, right, like why -- how have you done so well? And why have you done so well? You're not the lowest-cost guy. No, we've preserved our ASP as much as we can. But I think our commercial execution and our ability to pull through is really, really the issue. Chris Thompson is my head of sales. He likes to say that people buy from those they know and those they trust. And our team has very deep roots in the oncology community, and they're trusted and they're listened to. So we intend to do a very similar thing here with the PD-1. I don't believe these are markets in which you go in with steep discounts and attempt to price cut your way into market share. We certainly expect to have very healthy market share. But we may have to give a little bit of discounts here and there or something. But that -- it would not be a price-driven -- primarily a price-driven strategy. It'd be a value proposition strategy as we have done with UDENYCA.

Got it. And just one quick follow-up. So when you talk about the PD-1 opportunity and the size of the opportunity and something you alluded to, does that include the potential for combination products -- combination IL products? And if not, what sort of upside could that provide to your size that you...

Yes. So we believe that this transaction and this deal with Junshi is very well constructed. It gives us, first of all, access to the base therapy, immuno-oncology PD-1, a very, very good PD-1 with a very broad potential set of labels through all these indications that we've talked about. And we intend to take that data, submit it to the FDA and secondarily, of course, talk to the physicians about the data and about how strong that data is and what a high-quality product it is. Now that's sort of the entry fee for the immuno-oncology arena in our view. In the period from 2025 on to 2030, there's going to be a lot of activity and focus on combinations. And whether they be CTLA-4s or TIGITs or engineered IL-2s, that's really, really a key thing. I don't think you would be as successful if your sole strategy was just to go forward with the PD-1. So this deal included options on those 2 products, TIGIT and engineered IL-2. And they're going to go ahead and do the Phase Is. And then we're going to take a look at that data. And then we're going to walk along together if we option in as we go forward. And this is going to be really the way that we go forward in immuno-oncology. We will partner effectively, share costs and bring these in as combinations. One attractive thing about this particular transaction is that our commitments are limited to $25 million per product per year as far as our expenses here. So I think that's very fair and appropriate for us because we don't have the ability to spend huge sums. But with that, we get the leverage, the very broad global development that Junshi is pursuing, both in China and other parts of the world. And we're going to work on this together. So we're very thrilled to have that paradigm put in place. And we think that will work out pretty well. And lastly, I would say that Junshi is really -- of all the biotechs that we looked at that had PD-1s, we considered Junshi to be just totally high science. Junshi's Board, for example, includes Lieping Chen from Yale, who's an entrepreneur, inventor in his own right, very strong in the PD-1 space. And we think that Junshi is really the high-science team, very high scientific integrity and very strong regulatory sophistication. That's evidenced by their ability to get approvals in China, of course. But also, I think the overall U.S. registration strategy shows a fair amount of nuance and very clear thought in terms of entering with an orphan and then building the label and adding the supplemental BLAs for each indication as these studies are completed. I think that's great. Obviously, Pat Keegan, formerly FDA's, is our U.S. CMO. And I think she's just doing an excellent job helping guide the company forward with that particular regulatory strategy for the PD-1s.

Georgi, any other questions that we have online?

Yes. Just an interesting question from the queue, just very briefly. Can biosimilar Lucentis be used in Roche's Port Delivery System?

Can it be used in Roche's system?

The port delivery system that they're developing?

I won't comment on that. There may be IP issues around that, so best not to comment. Of course, it's a biosimilar, and we expect it to have exactly the same full label that the innovator has. But other than that, I will comment further in case there's potential patents lined up with Roche.

In the final couple of minutes we have, Denny, I'm going to do -- throw it into your court to what would you like to talk about in the final 2 minutes? Would you want to talk about HUMIRA market formation? Obviously, UDENYCA, we didn't touch on UDENYCA. Any other part of the portfolio that you want to highlight. We're all familiar with UDENYCA. So I don't want you to feel guilty if you don't bring it up. But why don't we throw it -- this is open, fun round for you. What would you want to touch on in the last couple of minutes that maybe we're not...

Yes. I would take a step back and look at the company through the lens of the progress that we're going to make in 2021. We filed the BLA for our HUMIRA at the end of last year, like we've said. It was accepted. We talked about that. We will have a filing this year with the PD-1. We'll also have other filings coming up next year with this. But I think that -- the Lucentis filing will be this year. But I think that there's going to be a transition of the company from a single-product company to a multiproduct company over the next 1 or 2 years, which would be very, very exciting, culminating with the launch of HUMIRA in 2023, which we're totally prepared for. We're spending a little money that we need to in order to get the scale right to supply large parts of that market. We said on our call that our objective was to exceed 10% market share with HUMIRA, and we intend to do that. We'll talk more about that post approval. But I think that you'll take a look at Coherus in next year or 2. You'll see this really as a year in which we really made a lot of -- tremendous amount of progress on the pipeline. UDENYCA is doing fine, yes. But really, the story looking forward is really a growth story with respect to these other assets. And we're very excited about immuno-oncology.

Good. I think it's a perfect place to leave it. You look very relaxed, which means that, clearly, a lot of work has been put into this year. Now you're ready to really capitalize on it. So that's my commentary. That's my visual commentary. You look like...

Well, thank you.

You're ready to rock and roll.

Thank you very much, Ken.

Thanks, Denny, for taking the time, Georgi for the good questions that you had and the audience for participating. Really appreciate it. And Denny, we'll catch up soon. Thanks again.

Thank you. Bye-bye.

Bye now.