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

Good morning, everybody. I'm Chris Schott at JPMorgan, and it's my pleasure to be introducing Coherus today. From the company, we have Denny Lanfear, President and CEO, who's going to make some opening remarks, and then we'll jump into a Q&A session with the broader management team after that. So with that, over to you, Denny.

Thank you, Chris, and thank you all for joining us today. Let me first apprise you of our forward-looking statements and direct you to the company's SEC filings. So I will try to remember to call out the slide numbers for those of you on the webcast since it's not concurrently broadcast. So today, I'm first going to talk a little bit and summarize the company's strategy. And then I'm going to talk about the ophthalmology franchise, which is evolving, our oncology franchise. I'll make a few comments about YUSIMRY, and then I'll focus a bit on the company's I-O franchise before I wrap up. Slide 4. I'm very proud of the progress the company has made in the last 12 months. Since the last conference, we made strong strategic progress, multiple product near-term launches. And we have made very good progress on our innovative I-O pipeline. I think I talked to you last time, within 18 months, we were going to launch 4 products. We are doing that. Our CIMERLI product, which is partnered with [indiscernible] Pharmakon, has been launched in Q4. I will talk to you a little bit about that, how that's gone. We are preparing for the launch of toripalimab. As you know, there's a hold-up there with inspections in China. Be happy to take questions during the Q&A period with Dr. Lavallee and how that is going for you. YUSIMRY is teed up for launching in July of this year into a $20 billion market. And I'll also update you on the company's on-body device. And then lastly, I'll spend a little time with our new product, Eylea biosimilar, which we have just announced. So the launches will provide us with a steady stream of revenue through the rest of this decade to support the I-O franchise. And that franchise is comprised not only of toripalimab but also CHS-006 or TIGIT, and TIGIT, as you know, is moving along well. And then ILT4 or CHS-1000. Slide 6. I'm happy to tell you about our Eylea biosimilar. This will expand access across the rest of the ophthalmology landscape that we currently do not appraise. This was just announced. Eylea, of course, is a very important product, and we expect this product to launch into this market in about mid-2025. And this product probably will address about 75% of the overall VEGF market, which is currently about $7.2 billion. Now as you know, when we first licensed in the Lucentis biosimilar, similarly, our strategy was to enter in the midpoint of this market and then expand downward into the Avastin reformulation portion of it and then later upward. And so that is moving along well. As you can see here on Slide 7, Paul Reider, my Chief Commercial Officer, is able to take your questions. But Paul and his team are making very good progress on the CIMERLI launch and so on, and we'll talk about that subsequently. But I think that adding an Eylea biosimilar will significantly increase the company's footprint in ophthalmology, which we view as a very promising buy-and-bill arena. One key thing about this market that I would direct you to in the very bottom of this slide, reformulated Avastin comprises about 40% of the units, not the dollars, but the scripts. And with the Medicare coverage here in this particular therapeutic environment, there's significant opportunity to convert the reformulated Avastin to biosimilar Lucentis. All right. On Slide 8 now, we'll talk a little bit about the synergies that we are realizing with this. First of all, when we went to launch CIMERLI, there was a considerable amount of enthusiasm from the providers for an Eylea biosimilar. And to a fair degree, our in-licensing of this asset is a reflection of us listening to our customers. The other thing, of course, though, is that there are significant synergies. We don't have to put any more boots on the ground. We can use our existing team to go ahead and do this. And it leverages further our buy-and-bill market expertise that we developed in oncology with UDENYCA. Lastly, I would point out that this still leaves us with additional bandwidth that we can use in ophthalmology for adding additional products. On Slide 9, I'll just summarize a little bit the CIMERLI situation. As you know, our team did a great job. We had not only the full label and both dosage forms, but we also obtained interchangeability with 12 months exclusivity. This gives physicians confidence that they can switch patients to a biosimilar Lucentis, which we have done to good effect. And we have projected that we will achieve in excess of $100 million in revenue for this product in 2022. Now here on Slide 10, just an update on how the launch is going so far. We're only 3 months into it. But just a couple of key points. First of all, over 3,200 sales calls have been delivered since launch. 93 accounts have purchased CIMERLI. And more importantly, we expect our Q-Code to be issued April 1 of this year. So things are a little slower because there has to be a miscellaneous code, which is a bit of a hassle for the providers to use. So we expect in Q2 and on with the Q-Code things to take off substantially. We are also making excellent progress on our insurance coverage with the payers. And over on the right panel of this slide, you see the results. As you know, with UDENYCA, we did $356 million in the first year, $476 million in the second year, achieving over 20% market share in the first year. And we believe this is tracking along very successfully for this. Now let me talk a little bit about the oncology franchise on Slide 12, starting with an update on the UDENYCA OBI. As we promised you last year, we would file the BLA in 2022, which we did. We are confident that we will get approval in 2023. And this is -- will be a very important development because it addresses a key part of the market, which is in excess of 40% that I'll talk about in the next slide. But it allows us really to leverage our existing market access, positions very straightforwardly our sales force and so on. And the point again that I would make here is there's considerable enthusiasm and pent-up demand in the environment for this device. That segment of the market comprises about 150,000 units per quarter or 600,000 per year. There's about 1.2 million units overall of pegfilgrastim per year. We believe that our device will be both differentiated and well received. We are the only team with an on-body device that has published their PK and their PD having done so last year at ASCO. Slide 14 now, let me turn just to our toripalimab asset in our I-O portfolio for you. And I want to make a few key points about I-O, first of all. Our view when we initiated our strategic pivot 2 years ago that it was absolutely essential to have a proprietary PD-1. And we looked, as you know, to over a dozen of these globally before striking a deal with my good friends at Junshi. In I-O, I believe there's a bifurcation of teams that have their own proprietary PD-1 and those that are not. And this is because PD-1s are actually the cornerstone of therapy, of course, in I-O and have to be combined in order to advance patient care. Our intent here, as I show in the bottom panel here, is to extend patient survival. And I'll talk about how we're going to do that with TIGIT and the clinical plan and also ILT4, but this is essential. Let me now though turn a little bit to the differentiated profile of toripalimab. Toripalimab has significantly extended patient survival in a number of patient settings, most prominently in nasopharyngeal cancer, and its efficacy has been very broadly recognized as prominently featured at ASCO and also in nature and medicine. And here, you can see the progression-free survival and overall survival, which we have seen in nasopharyngeal cancer. Nasopharyngeal cancer is a rare disease. It's a high unmet need. This is the first place that we will launch. Paul and his team are ready to go after this later this year as we get this done. But this market potential is about maybe $100 million to $200 million, although I would say that we expect this to grow as these patients are recognized and they go on therapy and the overall survival extends life for them. There is no FDA-approved I-O treatment for nasopharyngeal cancer currently for these unfortunate patients. Paul and his team will be able to add this figure straightforwardly to the portfolio. The call points, as you can see here, are significantly overlapping. And we are currently understanding exactly which physicians prescribe and find these patients moving forward. Now let me talk a little bit about the differentiation of toripalimab and how it is slightly different from the other PD-1s in the market. When this product was developed, it was done with the idea of focusing on a unique epitope for PD-1. That is, as you can see here, the FG loop. This is a little different than what you see with Pembro and what you see with Nivo. So when you create antibodies to one of these ligands, it's hard to predict exactly what part it will bind to. With this particular molecule, the team was focused exclusively on FG loop binding with very high affinity primarily because FG loop binding induces internalization of PD-1 off the surface of the T cell. And here, you see some very interesting data. This is toripalimab compared with Pembro in esophageal cancer. And here, you see across the top, PD-L1 high and PD-L1 low. And unlike Pembro, you see in the upper right-hand panel, this product shows very good efficacy with a hazard ratio exactly the same as the PD-L1 high population and the PD-L1 low. And in the lower right-hand panel, you can see the PD-L1 low population for Pembro. So this is very interesting, and we are currently investigating mechanistically the basis for this with the research team. Now let me make a few comments here about TIGIT. What's interesting is that TIGIT and PD-1 are both co-expressed on T cells, and they are both checkpoint inhibitors, right? And when checkpoint inhibitors engage, you get immune evasion. And when they are blocked, you can get cytotoxicity. In this slide, Slide 21, you will see very interesting mechanistic opportunities within the T cell, you can see Shp2 here. I think what's very interesting here is that PD-1 and TIGIT have crosstalk in overlapping mechanisms through Shp2. And this, I think, is very interesting from the viewpoint of how they will work in conjunction with each other. And we believe this is -- makes toripalimab an ideal candidate to go with TIGIT. And our TIGIT, of course, is silent as is some of the others that are moving forward successfully now in the clinic. Our Chief Medical Officer, Rosh, has now initiated a study with the TIGIT. And you can see here, we are in hepatic cancer, non-small cell lung cancer, small cell and some other indications in conjunction with our colleagues in China at Junshi. So this is sort of a full press effort to understand how TIGIT will behave in conjunction with toripalimab in a number of clinical indications. We just got this going and look forward to updating you next time and how this data will read out. Lastly, let me talk a little bit about another product that we're working on, and this is the first product that has come out of Coherus' research effort, and this is ILT4. So there is more going on within the tumor micro environment, of course, than just checkpoints. And what we are investigating here is the role of macrophages, particularly with respect to how to activate them. And here is ILT4. And what's interesting is that ILT4 repolarizes M2 suppressive macrophages [indiscernible] M1 inflammatory macrophages. So this has particular, I think, implications for non-small lung cancer and small cell lung cancer. ILT4 is a target that's under investigation by others, of course, in the arena, but you will hear more about this later. We intend to file this IND later on this year in 2023, and we're very proud of our team for bringing this forward. We believe that we have a very excellent ILT4 and have carefully selected, for example, the epitope. Let me touch upon YUSIMRY before I just close and offer you a summary. As you know, this is a very large market. There was a price increase at the end of this year. It was an $18 billion market. It's probably about a $20 billion market now at this time. Very large and addressable. This is a payer-driven market that is primarily focused on economics, scale, the ability to supply. And as you know, Coherus has invested in the last couple of years in very large-scale manufacturing such that we will have a very advantageous cost of goods and be able to produce at a scale suitable for the largest PBMs and payers. And then lastly, here on Slide 28, let me just make a summary before we go to the questions, and Chris and chat with you a little bit. Our near-term product launches and innovative pipeline, I think, is proceeding very, very well. Toripalimab, as you can see this year, we believe will get approved in the first half of 2023. We will launch into that market. Our TIGIT asset is moving forward in 4 different indications in the expansion study with our team. And our ILT4, which is our own proprietary product, will be filed later on this year. On the biosimilar side, which basically funds the development of the I-O business. The -- in the oncology space, of course, UDENYCA, we're getting ready with the on-body device. That is going well. We are also proceeding with CIMERLI. We expect to have additional market traction there, Q2, Q3 with acceleration after we get the Q-Code, as I said. YUSIMRY, we are poised to launch in July. We will have over 500,000 units ready to go at launch for that market. That's a go big or go home market, and Coherus has invested, I think, wisely for that. And then lastly, the Eylea biosimilar with my good colleagues here. And [indiscernible] and all, we are looking forward to that product. We project it will be launched probably in mid-'25 after the [indiscernible] are resolved and so on. So with that, Chris, we're happy to take your questions, and thank you.

Great. Thanks so much for that, Denny. So I'm going to start with just a few, and then we'll open up to the audience for anything else. I maybe wanted to start with just the CIMERLI launch, and it seems like some nice share trends that you're seeing there. What do you think is a reasonable market share opportunity for that product as we kind of -- as I think you mentioned, it seems like it's off to maybe even a stronger start than UDENYCA had and you talked about share getting into the 20s there. Is that a -- can you maybe look at the analogy of how we think about where this could go over time?

I'll let Paul comment further. Thank you for the question. But yes, we view 10% market share for any of these markets as a minimum. I think there's an advantageous environment for CIMERLI due to the fact that we have interchangeability and exclusivity. Our product comprises, I think, market formation for biosimilars. And there's a significant, I think, pent-up demand for the biosimilar conversion overall of the ophthalmology space. So we've projected at least $100 million for this year. I would, of course, hope to do better than that. But I think that we're fairly bullish on this market, given the fact that we have both dosage forms, we have both strengths and so on. Paul, any other further comments?

No, I think that's right, Denny. And the Q2 acceleration that we expect, based on the Q-Code, we think will really fuel the back half of the year. So we remain very optimistic. Our focus is on driving additional accounts and then going deeper with that. So...

The only other further comment I would make is I really wouldn't watch the weekly share trends or even monthly. I'd look a little more quarterly with the share trends to smooth out some of the noise with that market.

And maybe just elaborate on competitively what you're seeing with the other player in the space here?

Paul?

Chris, you're referencing the other biosimilar products?

Yes.

Yes, I mean, we pride ourselves on being fierce competitors as we demonstrated in -- with the UDENYCA marketplace, and we're bringing our expertise with our account management, our capabilities and expertise with pricing and contracting and developing strategic partnerships. I think you're seeing that playing out, and we'll continue to do so. So -- but at the end of the day, Chris, we're focused on getting that Lucentis business first and less focused on the other biosimilars.

I think that's right. One of the key things that gave us a success with UDENYCA is we hired an oncology team that had deep relationships with the providers, knew the doctors and really understood the market environment. And Paul has recruited a team very similar here in the retinal space, again, with deep relationships and a deep understanding of the physicians. And that's -- I think that's a very good way to leverage those relationships and really explain the value proposition to the physicians.

And then maybe just staying on the AMD market, bringing in a biosimilar Eylea. I know this is -- when you're moving into the I-O space before, I think you had made a decision to deprioritize that. And you talked about the slides. Can you elaborate a lite bit more what you kind of brought you back to this market as we think about the in-licensing?

I think the VEGF market is one of the more interesting commercial opportunities. And as we launched CIMERLI, we had the opportunity to interact with a number of the key opinion leaders and a number of the providers. And it became clear that there was a very significant pent-up demand to bring a biosimilar product into this market. At the same time, I think that the commercial synergies are really simply outstanding. We really don't have to put any more boots on the ground. We have key accounts, market access, a number of account managers already in the field. So I think it's really a great way to leverage that. Lastly, I would say that most of the lift when you launch a biosimilar into these markets, of course, is in the first year or so. And so after that, you don't want to lay your team off or idle your team. And so I think there's the opportunity to give them additional things to do and put additional things in the bag. And there may be even additional -- more additional ophthalmology assets that we pursue in the future.

Okay. Great. Maybe last question. Just as I think about the role that the high-dose Eylea is going to play in the market, how are you thinking about conversion and what opportunity is going to be available for the biosimilars on [indiscernible] think maybe beyond 2025? Is that a shrinking market? Or do you think that, that a lower-priced product can sustain a business?

Do you mean is the Eylea market itself with the existing concentration a shrinking market? Or how do we...

How are you thinking about the -- yes, how are you thinking about the high-dose launch for Regeneron in terms of what the impact that could have on the...

I'd let Paul.

Yes. Well, I think let's see how the high-dose approval proceeds and where the data nets out. Our market research and engagement with retinal specialists tell us that they still have some questions about the data, not only the efficacy and where it fits in, but some of the safety data that comes out. We know that intraocular inflammation is of vital importance. So we're going to look at the data closely, do our research, but this market is very, very big. It's continuing to grow. And if retinal specialists continue to sort of treat and then extend, then we believe the Eylea market will have sustainable large value for a biosimilar.

And maybe one more for me, and I'll open up [indiscernible]. You mentioned this idea of leveraging kind of commercial footprint in the biosimilar business. As I think about the HUMIRA market as an example, could there be a similar opportunity there, I think, whether it's STELARA or just bringing other assets into kind of extended franchises? Or is this kind of more of a unique situation with ophthalmologists?

Well, I think absolutely, there's the opportunity to leverage. We have a very competent market access team with strong relationships with the payers. I think that HUMIRA is a bit unique. It's over in Part D. It's a pharmacy benefit product as opposed to a medical benefit product. All else equal, I think that we really excel at the medical benefit side of the business, as we've seen with UDENYCA. But I also believe, though, that the relationships that we have developed with the payers and the PBMs will be put to good effect later this year as we go forward with HUMIRA. With respect to STELARA or some additional assets, I think that it's important for the company to focus in key areas. Our focus on the development side, of course, is the I-O platform with toripalimab, expansion with TIGIT and ILT4 and so on. So we spend a lot of time looking at that. And then I think the biosimilars being the revenue source, which funds that development, are another issue. So I think it would be a bit off target to take another STELARA, put it in the bag with HUMIRA and then divert the company into Part D and have to put a lot of boots on the ground and all sorts of other sorts of things. So we think that focus in Part B, all else equal, is a good idea for us strategically.

I think of this more as a kind of a one-off in that vertical, but the core focus being the I-O portfolio in terms of...

Yes. Well, it's hard to ignore an $18 billion market when you have an approved product, I would say that. I don't know, Paul, anything...

No.

Great. Why don't we open up to the audience for questions. I've got a few other topics, but let's give folks a chance to ask some here. I guess I'll keep going here. Can you actually make just an update on toripalimab in terms of what's happening with kind of inspection and the PDUFA there?

Dr. Lavallee, do you want to comment on that?

Sure. Thanks for the question. We're very appreciative of JPMorgan to be starting really January 9, when the China changed their policy January 8. So it's easier to address that. I think that the hurdle has been the travel restrictions to China. And now that, that's removed, and we're in active conversations with the FDA about how to get those inspections done with breakthrough therapy designation. It's nice because even though there's a backlog, we're at the top of the list with other folks with the same favorable regulatory designation.