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

Good day, and thank you for standing by. Welcome to the Coherus BioSciences, Inc. Q3 2022 Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Marek Ciszewski, Senior Vice President of Investor Relations. Marek, please go ahead.

Thank you, Rael. Good afternoon, everyone, and thank you for joining us. We issued a press release earlier today announcing our financial results for the third quarter of 2022. This release can be found on the Coherus BioSciences website and is also attached to our Form 8-K. Today's call includes forward-looking statements regarding Coherus' current expectations about future events. These statements include, but are not limited to, our ability to gain approval for multiple new products and launch them, timing of the end of our decline in revenue and timing of our ability to gain market share for any of our approved products, expectations about revenue growth, projections of expenses and revenue, our future manufacturing capacity and our ability to return to profitability in 2024. All these forward-looking statements involve substantial risks and uncertainties that are beyond our control and could cause actual results, performance or achievements to differ from results, performance or achievements implied by the forward-looking statements. These statements are not guarantees of future performance and are subject to substantial risks and uncertainties that are discussed in our press release that we should say as well as the documents that we file with the SEC, including those in our quarterly report on Form 10-Q for the third quarter that we filed today. Forward-looking statements provided on the call today are made as of this date, and we undertake no duty to update or revise any forward-looking statements. Quarterly results for the third quarter are not necessarily indicative of results for future periods. With me today on today's call are Denny Lanfear, CEO of Coherus, Dr. Theresa Lavallee, Chief Development Officer; Dr. Rosh Dias, Chief Medical Officer; Paul Reider, Chief Commercial Officer; and McDavid Stilwell, Chief Financial Officer. I will now turn the call over to Denny.

Thank you, Marek, and good afternoon, everyone. Thank you all for joining us on our Q3 2022 conference call. Today, I'll first review for you the market situation with respect to our 2 products and provide a little color for you. Following that, our CFO Mr. Stilwell, will discuss our financials in further detail, particularly in our efforts to reduce expenses as we focus on driving back to profitability. Our Chief Commercial Officer Mr. Reider will provide an update of our CIMERLI launch progress and UDENYCA market overview. And finally, our Chief Development Officer Dr. Theresa Lavallee and our Chief Medical Officer Dr. Rosh Dias will review our I-O pipeline progress. This past quarter, we became a multiproduct company as we continue to effectively execute on our strategy of funding our innovative I-O pipeline with revenues from our approved products, thereby positioning Coherus for long-term growth. Now last quarter, the pegfilgrastim market became increasingly more competitive in anticipation of upcoming launches and new competitors. The incumbents in the market intensified their price discounting, which impacted UDENYCA's revenues for the quarter. We continue our strategy to manage pricing for UDENYCA to support the expected on-body injector launch in 2023, which we believe will serve as the next wave of UDENYCA market share growth. We project the Q3 2022 to be our revenue nature as we will have now begun a series of launches making us a multiproduct company. Our second commercial asset, CIMERLI, has now launched into the $7 billion anti-VEGF retinal market, and we look forward to the subsequent planned launches over the coming months. As we move through this period with anticipated revenue inflection, we continue our efforts to identify efficiencies in the business and reduce expenditures. This effort is bearing fruit, and Mr. Stilwell will provide additional details on an additional $75 million in expense reductions per our plan through year-end 2023. This quarter, the company's revenue growth driver baton passed from UDENYCA to CIMERLI. Our initial launch trajectory for CIMERLI suggests that we are on pace to deliver at least $100 million in revenue in 2023 from this product. With the anticipated launches of toripalimab, YUSIMRY and UDENYCA OBI next year, we look forward to growing our top line revenue to at least $275 million across the portfolio, which represents the lower bound of our internal forecast for 2023. Given our projected top line growth and active management of expenses, we are projecting a return to profitability in 2024. I'll now turn the call over to Mr. Stilwell for a review of the company's financial results. McDavid?

Thank you, Denny. The details of our financial results are in the press release, 8-K and 10-Q we filed this afternoon. So I'll focus on just a few highlights. For the third quarter of 2022, we reported an $86.7 million net loss on a GAAP basis or $1.11 per share compared to a net loss of $38.5 million or $0.49 per share in the third quarter of 2021. Cash used in operating activities was $37 million for the third quarter of 2022. UDENYCA net revenues were $45 million, a decline from the prior quarter resulting from lower share and lower net price due to increased competition in the pegfilgrastim market. UDENYCA cost of goods sold increased significantly in the third quarter of 2022 to $35.2 million due to the write-down of $26 million downwards of inventory at risk of reaching expiration prior to sale. Recall that our UDENYCA strategy includes careful stewardship of our average selling price. The write-down is in large part the result of our choice to not pursue larger volumes of sales at steeply discounted prices. The inventory we wrote down originated through manufacturing orders placed in 2019 and early 2020 before the COVID pandemic impacted our business. Gross margin for the third quarter was 22%. Excluding the $26 million write-down, gross margin for the quarter would have been 80%, including the mid-single-digit royalty we pay on UDENYCA net sales. Research and development expense for the 3 months ended September 30, 2022, was $45.8 million as compared to $54.1 million in the same period of 2021. The decrease was driven by lower development costs as several clinical studies were completed in 2021, partially offset by higher compensation expense. Selling, general and administrative expense for the 3 months ended September 30, 2022, was $44.8 million compared to $39.9 million for the same period in 2021. The increase was primarily driven by higher commercialization expenses to prepare for multiple anticipated new product launches in 2022 and 2023. We ended the quarter with cash and cash equivalents of $287 million compared to a balance of $275.5 million at the end of the prior quarter. The FDA's approval of CIMERLI during the third quarter was a milestone that opened access to a $50 million tranche of debt through our credit facility with Pharmakon Advisors, which we drew in late September. We are reducing our combined SG&A and R&D expense guidance for 2022 from a range of $375 million to $395 million previously to $375 million to $385 million. We continuously review processes, programs, vendors and headcount for additional opportunities to reduce costs without impacting our launches and overarching strategy. For 2023, we have identified an additional $75 million in such expense reductions, and we expect total combined R&D and SG&A expenses to decline next year relative to 2022. Today's reduction in 2022 R&D and SG&A expense guidance results from identification of cost savings across the company. With anticipated rapid top line revenue growth expected from multiple new product launches through next year as well as the reduction in 2023 operating expenses, we believe we have the ability to execute our new product launches and continue our R&D investments. As Denny indicated earlier, we project these developments will return us to profitability in the first half of 2024. With that, I'll turn the call to Paul Reider, our Chief Commercial Officer. Paul?

Thank you, McDavid, and good afternoon. We are continuing to make excellent progress on the commercialization of our product pipeline and plan to launch 4 new products over the next 12 months, led by CIMERLI, which launched into the retina market on October 3. Let me begin with UDENYCA. Our strategy is to maximize long-term value of UDENYCA franchise and to optimize the trade-off between price and share and to maintain a base share that will enable growth for our on-body device launches in 2023. Neulasta Onpro retains 45% market share. So the on-body segment will serve as the next wave of market share growth for the UDENYCA franchise. While quarterly fluctuations with ASP can be expected, evidence of our overall pricing discipline is reflected in UDENYCA's ASP, which currently holds the second highest ASP in the class. This is important because a higher ASP will be a competitive advantage against Neulasta Onpro when we launch our on-body device upon FDA approval. For the third quarter, UDENYCA net sales were $45 million compared to $60 million in the prior quarter. The majority of the sequential decline was driven by a 12% decline in demand and a 9% decline in net selling price. Market share was 13.5%, a 1.5% decline from the prior quarter. Overall demand units in the third quarter declined 12%, primarily in the clinic and non-340B segments, respectively, which were impacted by irreversible price discounting by competitor biosimilars and reduced commercial payer coverage in some markets. Now I'd like to talk about the rest of our product portfolio, which includes CIMERLI, our Lucentis biosimilar; toripalimab, our PD-1 inhibitor, and YUSIMRY, our HUMIRA biosimilar. As Denny indicated, CIMERLI is now a revenue growth driver as we enter the $7 billion anti-VEGF market. Biosimilar market formation is now well underway, and we are very pleased with the commercial launch, which commenced on October 3. As you know, CIMERLI was FDA approved as the first and only fully interchangeable biosimilar to Lucentis and with all 5 FDA-approved indications on dosage strengths and 12 months of interchangeability exclusivity. This complete label has been well received by retinal specialists, giving them the confidence that they can safely transition currently treated Lucentis patients to CIMERLI and expect the same clinical outcomes. While we're only 6 weeks into the launch, let me share with you some very encouraging early data points. First is sales. Launch to date, we sold over 1,800 units. In our first month, our market share was greater than the Biogen biosimilar, which launched in July. Second, we're getting excellent access to prescribers as our sales in key account teams have delivered more than 1,600 CIMERLI presentation to targeted retinal specialists. This reinforces our decision to hire an experienced and dedicated retina sales team who have extensive retina experience and existing customer relationships. By reallocating resources from UDENYCA, we were able to achieve this with no incremental increase in total headcount. Third is market access. CIMERLI has confirmed coverage now on 100% of Medicare fee-for-service lives, enabling the reimbursement pathway for claims submitted under Medicare Part B, which is the majority of patients with wet AMD and 40% of Lucentis business. Our application for a permanent Q-code has been submitted, and we expect to launch the code in Q2 2023. Given this positive reception of CIMERLI by providers and the success of the launch so far, we project that 2023 revenues will be at least $100 million. We will, of course, keep you updated from time to time as launch progresses into 2023. Now regarding toripalimab. We're very excited about the potential to bring to oncologists and patients what would be the first and only PD-1 inhibitor indicated for nasopharyngeal carcinoma and to establish a new standard of care in all lines of therapy, including first line. Our oncology commercial capabilities have been built to scale with significant overlap between UDENYCA customers and toripalimab targeted prescribers. Therefore, the launch of toripalimab will be efficiently integrated into our existing oncology commercial infrastructure. Commercial launch preparations are on track, and the field-facing teams have been fully trained. We will be ready to launch toripalimab directly upon FDA approval. Now regarding YUSIMRY, our HUMIRA biosimilar. YUSIMRY was approved by FDA last December, and we were preparing for launch in July 2023. HUMIRA's U.S. net sales were $17 billion in 2021, and we look forward to competing in this large market. We continue to believe that price, supply and product presentation will serve as the key criteria used in making formulary decisions, and YUSIMRY is positioned well to compete on each of these criteria. With respect to supply, we are prepared to commit to supply guarantees and have invested more than $45 million in large-scale, state-of-the-art manufacturing. Our first year manufacturing capacity exceeds 1 million units or about 10% of the overall market, and we have the potential to triple that capacity in the current facility. At the time of launch, we will have 500,000 YUSIMRY units ready for distribution. We will be a high-volume, low-cost manufacturer enabling us the ability to also deliver a highly competitive price. Our YUSIMRY strategy is thus well aligned with the formulary decision makers, payers and PBMs as we both seek to make the adalimumab biosimilar market as large as possible, as quickly as possible. We see this alignment as a source of competitive advantage. In short, we are confident we will deliver a compelling value proposition and be a significant competitor in the marketplace. I'll now turn the call over to Dr. Lavallee for an update on the development of our pipeline. Theresa?

Thank you, Paul, and good afternoon, everyone. I would like to begin with an update on our toripalimab inspections. As you know, the FDA's PDUFA date for our toripalimab MPC application is December 23, 2022. As we have previously noted, travel restrictions related to the COVID-19 pandemic have hindered the FDA's ability to complete inspections in China for the toripalimab BLA as well as the FDA's review of other BLAs. Coherus and our partner, Junshi BioSciences are currently engaged with the agency regarding creative approaches for the completion of the inspection. The FDA granted toripalimab breakthrough therapy designation and has consistently recognized the strength of the clinical data and the unmet need for patients with MPC. With respect to our early-stage pipeline, our proprietary ILT4 antibody, CHS-1000, a tumor microenvironment modulator, is progressing towards IND. We are on track for filing in 2023. While the field has focus on T-cell checkpoint inhibitors, myeloid checkpoint inhibitor such as ILT4 may serve as an important approach for overcoming PD-1 resistance. ILT4 is expressed on 2 important myeloid cell types: Dendritic cells that present antigens to T cells and macrophages that can dampen T-cell activation. We believe the mechanism of this myeloid modulator will be complementary with toripalimab and plan to explore the combination in a broad range of solid tumors, including lung cancer. The CHOICE-01 toripalimab non-small cell lung cancer data was recently published in the Journal of Clinical Oncology, a top-tier peer-reviewed journal that is highly respected and widely read by oncologists. The publication reflects the importance of this data set in the context of combination therapies. I'll now turn it over to Dr. Rosh Dias, our Chief Medical Officer, to discuss the toripalimab combination studies in further detail.

Thank you, Theresa. So it's important to realize that the CHOICE-01 data in non-small cell lung cancer showed meaningful efficacy irrespective of PD-L1 status. The data set is one of the reasons why we think there is a significant rationale to explore toripalimab in combination with other I-O agents and specifically TIGIT and in particular, as a potential treatment for lung cancer. TIGIT is an important checkpoint and the data and the literature both support that it's important to antitumor activity. As both PD-1 and TIGIT disrupt co-stimulatory receptors through very distinct mechanisms, this provides the rationale for the antitumor potential of dual PD-1 TIGIT blockade. With our PD-1 with its mechanistic points of differentiation, together with our Fc silence TIGIT, exploring the patient subsets that are suited for I-O combinations will be a key focus of our toripalimab TIGIT clinical studies. We're on target to begin our Phase I/IIa study of toripalimab in combination with TIGIT in multiple tumor types including non-small cell lung cancer, small cell lung cancer, hepatocellular carcinoma and [ all comers ] late this year or early next year. Our partner, Junshi, is also making good progress with their TIGIT antibody trial in combination with toripalimab in a dose expansion study in China, exploring complementary tumor types, including non-small cell lung cancer and esophageal carcinoma, and we look forward to emerging data sets in the first half of 2023. I'll now turn the call back to Denny for some closing remarks. Denny?

Thank you, Rosh. We believe this quarter marks an inflection point for Coherus. CIMERLI is our new revenue growth driver, and we are now a multiproduct company. With 3 more product launches projected over the next 12 months, an increasingly diversified portfolio will drive top line revenue growth in 2023 and beyond, putting us on a path to profitability in 2024. And with that, I'd like to open the call to questions. Operator?

[Operator Instructions] Our first question comes from Salim Syed with Mizuho.

Great. I guess I'll ask my question on the toripalimab inspection, if I can. Just curious what you guys -- when you guys talk about opportunities or creative approaches, just curious what the book ends here on what is being discussed with the FDA, in particular, have they ruled out virtual inspection? Or is that still in the cards? And then I guess I'll just like lump it in here, if I can. Just also that when you say opportunities, does it have any regards to timing here just given COVID cases are -- seem to be rising again in China?

Thanks, Salim. Excellent question. We first want to praise the FDA for the very creative response they have taken in terms of addressing the COVID situation in China. We have a very strong collaboration ongoing with them. I'll let Dr. Lavallee provide you a little more color to the best we can on that and then [ address your ] time. Theresa?

Yes. So while the COVID-19 pandemic has hindered travel, we are encouraged that the situation is improving while there are certain outbreaks that are not in all regions. The quarantine time is decreasing, and we're seeing more folks travel to China. All I can say about our discussions with the FDA is that they are engaged, and we are pursuing creative approaches to try to meet the requirements to get through the approval process.

Okay. And then I guess for my follow-up there, your guidance seems to still exclude the $25 million milestone payment, so is your base case that approval is not going to happen in 2022?

Our guidance excludes that milestone the whole time.

Our next question comes from Douglas Tsao with H.C. Wainwright.

Just wanted to start with a question on CIMERLI. I'm just curious what you're seeing in the early days of the launch. Is the volume that you're seeing and interest coming from accounts that were already using a significant amount of Lucentis. And just curious if they -- are they using CIMERLI just basically -- just to the swap out from Lucentis? Or is it just creating an opportunity for them to re-think broadly their uses and selection of anti-digest?

Let me first say that we are very pleased with launch of CIMERLI. I think Paul and his team have just done a great job there. As we pointed out with our prepared remarks, we surpassed the other [indiscernible] market Biogen after 1 month in terms of market share. You recall that with UDENYCA we had a large pharma that fell out some 6 months ahead of us, and it took us 4 months to surpass them in terms of market share. So we are very bullish about the trajectory here with CIMERLI and how that is going and the people that Paul has been able to recruit and go forward and provide the education, particularly with respect to the label, the interchangeability and so on, which is really key to the biosimilar market conversion. With respect to your specific question and the particular patients and so on, I'll let Paul make some additional remarks. Paul?

Thanks, Denny. Yes, as you recall from previous conversations, our focus at the time of launch was on around 450 accounts that were driving 80% of the Lucentis business. So that's where our focus has been. That's been where the receptivity, and we'll be looking forward to update you guys as the launch progresses forward.

Did you have a follow-up, Doug?

No, that's it.

Thank you.

Our next question comes from Georgi Yordanov with Cowen.

Maybe starting on CIMERLI. Our consultant checks indicate that basically we see like 2 camps of retinal specialists. Those who is prescribing is largely dictated by the insurance companies and feel comfortable prescribing a biosimilar and then those who are willing to go through the insurance hoops to get patients with the product they want to prescribe. So maybe -- are you -- is that -- does it match what you guys are seeing? And maybe if you can talk about your strategy in tackling both of these groups. And maybe related to that, as we think about those insurance and payers, have you provided any guidance in terms of where do you expect to be with coverage in both commercial and Medicare?

Thank you for that question, Georgi. I think one of the remarkable things about this market is there's an incredible reservoir of patients that are on reformulated Avastin, about 44%. And I think that the conversion of this market to biosimilar Lucentis, similarly, I think is well positioned to take advantage of that. With respect to your question -- your first part of your question, I'll let Paul go ahead and take that, and go on and talk a little bit about insurance coverage. Paul?

Yes. So I think retinal specialists have a mix within their patient base of payers. They've got patients that are pure Medicare fee-for-service, others that are commercial Medicare Advantage. So where we're focusing our efforts is around really the bulk of the Lucentis prescribers that have the mix of those, which is really important based on my earlier comments, we were able to get 100% of policy coverage for the Medicare fee-for-service population. That's the majority of wet AMD, which is the biggest bulk of this market and were 40% of the Lucentis businesses. So now that reimbursement pathway is underway. With respect to the commercial coverage, if the doctor has to use off-label Avastin because of a step edit, they will very often transition those patients to a branded agent because of efficacy or safety parameters. And so switching is very common. And our plan is to be the next in line after that Avastin trial. So as for commercial and Medicare Advantage, coverage, those negotiations are in way with commercial players. Payers usually takes a quarter or so to get those online, but I'm very encouraged by the dialogue that's occurring.

And maybe as a follow-up to that. I guess some of the things that we've also heard in our checks is that some of the doctors are already seeing that insurance companies are requiring a step through biosimilar Lucentis before you can use Lucentis. Do you have any data on that? And like what percent -- like when you're talking about coverage, there is a majority of the coverage in a similar fashion where they require a step through you before you can go to branded products?

I think it's a little early to quantify the full impact of the payer coverages. That's all occurring right now as the commercial and Medicare Advantage payers are sorting out their formularies. But suffice it to say, with our differentiated label, it's certainly putting CIMERLI in a very advantageous position as it relates to our clinical profile there. So we'll keep you apprised of this as the payer coverage unfolds.

Our next question comes from Jason Gerberry with Bank of America.

This is [ Boland ] on for Jason Gerberry. So my first question is with regards to UDENYCA. Just wondering if you have any follow-ups regarding the status of the OBI filing in calendar year 2022. And then my second question is with regards to biosimilar HUMIRA. Can you speak to launch preparations and what you are doing to prepare for the launch? And how you envision payers adopting biosimilars that launch mid-2023 when they can only start contracting midyear? Is it your sense that PBMs will contract annually and look to avoid having more than 3 product offerings?

I'll handle the first one. We have consistently guided to a 2022 filing for the OBI and a 2023 launch, and we stand by that guidance. And I think that we are quite certain of that. And so we have no further comments upon that. I'll let Paul address your issues with respect to the HUMIRA market and the payers and so on. Paul?

Yes. Thank you for your question. So yes, I mean, we're in full launch in operational and executional mode. And we intend to launch with a comprehensive commercial and patient services infrastructure to support the YUSIMRY launch. But as you would imagine, it's a pretty competitive market. So I'm not going to provide specific details at this time, but suffice it to say we will be ready July 2023 to commercialize the launch with our team and with ample supply guarantees for payers. So we do expect that there will be biosimilars on commercial formularies and Medicare Advantage formularies in 2023. I think because most of us, including YUSIMRY will be launching midyear. You'll see a half year effect, but we expect YUSIMRY to deliver meaningful contribution in the second half year with accelerated uptake beyond that. As for formulary designs, too early to tell right now, obviously, because those formularies aren't announced. But I'd expect to see both biosimilars on many of those formularies.

The only additional comment I would make with respect to the payers and YUSIMRY is that I think that we very prudently planned and invested in very large capacity manufacturing. So we're one of the few teams that can provide, I think, a significant percentage of the market, even to the largest payers with our ability to do so. And I think that will benefit us with respect to our conversations with payers and so on.

Our next question comes from Chris Schott with JPMorgan.

My first one was on UDENYCA. And I was trying to get my hands around how you're thinking about on-body device pricing versus other biosimilars. I guess I'm asking less about a specific price. But I'm just trying to understand, as we see kind of pricing continuing to decline across the broader UDENYCA market, does that have a read across in terms of the size of the opportunity for on-body? Or is that on-body market is almost an independent market relative to what we are seeing today? And then I have one follow-up after that.

Thanks to your question, Chris. Paul, you want to talk to Chris a little bit about pricing on-body, how we do things and how we have kept ASP up?

Thanks, Chris. That's -- I think what we've seen really from the COVID pandemic was the creation of 2 distinct markets and segments within the pegfilgrastim class. You had your on-body segment where Onpro still retains 45% of the market share. That is where the reservoir of new market share growth will come from when we launch our on-body device in 2023. So that's where we're going to get our gains there, and that's where the opportunity is. How you price it? It's expected that the reimbursement, which is really the most important thing is what's going to drive it, and that's why we've been maintaining a disciplined price approach because a lower price today results in a lower reimbursement tomorrow. We want to position our on-body injector device in a favorable position compared to Neulasta Onpro.

Okay. And the second one is -- the second was just wondering is about the -- I think I heard you say at least $275 million in 2023, say, $100 million for -- with CIMERLI. And I'm just trying to get my hands around, I guess, that would leave about $175 million for UDENYCA as well as biosimilar HUMIRA and tori. So can you just elaborate on the dynamics there? Was that just like kind of a floor number? Or I'm trying to get my kind of hands around on that figure.

Thanks, Chris. Yes, that's the floor. And yes, you've got that right. That's $100 million. Given the -- for CIMERLI, given the trajectory of YUSIMRY at this point, although we're only a month or so into launch, we feel comfortable talking about floor for YUSIMRY -- I'm sorry, CIMERLI of $100 million. And also the rest of the portfolio in aggregate, as you point out, we will, of course, update you as time goes on. We'll have more visibility with the CIMERLI launch, particularly once we get the J code in, which should happen right from the end of, I think, Q1 in 2023. But we're feeling pretty good about it, and we're thus able toput the floor under it.

Our next question comes from [indiscernible] with Barclays.

Good afternoon. This is [indiscernible] for Balaji Prasad. Here's a quick one for toripalimab. With the positive Phase III data in NSCLC that we saw in CHOICE-01, could you add some color on potential supplemental BLA application for NSCLC and potential filing pathway?

Thank you very much. Great question. I'll let Dr. Lavallee address that. Theresa?

Yes, we agree. The data are compelling and so distinct overall survival advantage. But the FDA, as they've indicated from the February ODAC have stated a single-country data without the applicability to U.S. medical practice. It does not warrant regulatory flexibility for non-small cell lung cancer. So while the CHOICE-01 study in the U.S. would not be ready for submission, what it can be leveraged is in terms of looking at our combination, it establishes the contribution of component of toripalimab and really positions us for our pipeline with our TIGIT study about to open in non-small cell lung cancer and looking at other opportunities for doing additional studies in non-small cell lung cancer.

[Operator Instructions] Our next question comes from Ash Verma with UBS.

Guys, congrats on all the progress. I have 2. So I guess like on CIMERLI, wanted to understand 30 days, if there is anything that surprised you in the marketplace compared to your previous assumptions. Is interchangeability helping? Or do you think full label still an advantage? The vial formulation, do you think that's still not a hurdle? And if biosimilar Avastin is any kind of like a hindrance at all for your uptake? And then on the second one, so YUSIMRY, so the high concentration, are you still investing behind that? The $75 million cost optimization that you mentioned, is that general savings across the board? Or are you rationalizing some programs here?

Thank you very much for the question, Ash. I'll let Paul address your CIMERLI questions secondarily, and I will address your YUSIMRY questions first. Yes, we continue to invest and have some ongoing efforts with respect to high concentration. We think that's important to have that in the market as we go forward. And we anticipate having that directly after launch in the U.S. With -- Paul, you want to call -- you want to talk a little bit about the CIMERLI situation, the vials and the market and so on?

Yes. Sure, Denny. I think we were really prepared coming into this launch. That's what Coherus does great. We enter markets with a deep understanding of the customer. We do our diligence. We talk to them, and we were very prepared for this. I think if there's one thing that did surprise me, it's that how quickly retinal specialists are getting comfortable with biosimilars. So the education that we're doing with them is really lowering their concerns. They're responding very favorably to our complete label and differentiated clinical profile. The interchangeability is giving them greater confidence that they can safely switch currently treated Lucentis patients and expect the same outcomes. So all of that, I think, has just been very reinforced and so that's why it's given us confidence to provide the target projections for 2023.

Let me get to your question on the $75 million savings. I'll let Mr. Stilwell address that. McDavid?

Sure. Yes. Thank you for that, Ash. As we said, the $75 million in 2023 expense reductions come from across the company. We are continuously reviewing processes, programs, vendors and headcount. It's safe to say that Denny and I scrub every dollar before it heads out the door. And when we can find opportunities to reduce costs without impacting launches and overall strategy, we're going to do so. So I have the options to defer certain investments. And when I can identify those options without impacting our launches, I will make those -- I will defer those costs. For instance, there are certain manufacturing activities, which we have the opportunity to delay into subsequent years. and so we can take advantage of that. That's just an example, but the expense reductions come from across the company, and they are opportunistic.

I think just one more point, Ash. I think that our program spends are really super targeted and, as David said, very well spread. So we haven't really cut any programs per se here. We did a few -- may do a few things differently here and there. So I think the key take-home message that McDavid delivers is we're very careful not to impact the commercial launches, particularly you've seen, CIMERLI off to a strong start. We're not going to cut things that are really, really important, particularly to the top line, but we're going to be fairly relentless with respect to squeezing things out of the middle line that we possibly can.

Our last question comes from Doug Tsao at H.C. Wainwright.

Just a quick question. I think I heard -- I just wanted to clarify that you said that there was some loss of coverage for UDENYCA in some markets. Can you just provide a little more color on that?

Paul?

Yes. Sure, Doug. Yes. As you know, these health plans undergo formulary reviews periodically. And there's -- we evaluate those on a business case. And sometimes we choose not to participate because of the discount rebates that are required. And so I think most of the -- any of the reduction in coverage that we did see were more in the regional areas spotted throughout the country. That being said, we still have very strong and robust coverage for UDENYCA across the country, 100% on all the Medicare fee-for-service lives, strong coverage in commercial as well as Medicare Advantage. So we're going to continue to balance those pricing trade-offs.

The last point I'd add, Doug, is we're going to make sure that we're in a strong position for the launch of the on-body system in 2023. And Paul and his team are actively reviewing the coverage in that context.

At this time, I would now like to turn the call back over to Denny Lanfear, CEO, for closing remarks.

Thank you, operator, and thanks, everyone, for attending our call. We look forward to keeping you all updated as we continue progress in the coming months with the launch of CIMERLI and the next 3 launches coming up. Thank you. Bye-bye.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.