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 this morning. From the company, we have Denny Lanfear, President and CEO, who's going to make some opening remarks, and we're going to jump into a Q&A session from there with the broader management team. So with that, happy New Year, Denny, and over to you.

Thank you, Chris, and thank you once again for having us at the conference this year. Let me first, of course, apprise you of the forward-looking statements, which will address issues with the revenue projections, product development time lines, the various assets, the future of those products and so on. And then we, of course, refer you to the company's regulatory filings. So today, what I'd like to do is, first of all, give you a flyby summary of the company. We've made substantial progress on our strategy of -- moving to an oncology company. We are a revenue stage oncology company now. And so I'll be happy to recap for you the progress that we have made over the past 2, 3 years on that and review for you our core oncology business, which will include, of course, LOQTORZI, our PD-1, recently approved, as well as UDENYCA, our pegfilgrastim business. And then also, I will take the opportunity to review for you our R&D outlook. In particular, my team and I will be happy to take questions with respect to casdozo, our IL-27 asset as well as our CCR8, CHS-114 and our ILT4. So we'll talk to you about the development plans there. And our overall strategy to address the tumor microenvironment to provide the next step in patients revival. I'll also do for you a review of our noncore projects, our ophthalmology asset, CIMERLI, which is moving along quite well as well as YUSIMRY, then offer you some concluding remarks. So we are now a revenue stage, fully integrated oncology company with a robust portfolio of oncology products. Of course, we're very proud to have LOQTORZI approved in the United States, the first PD-1 for nasopharyngeal cancer. I'll talk to you about that in just a moment. LOQTORZI really is an excellent PD-1, has put together a really impressive track record of efficacy and safety across a number of indications in the hands of my partners, and we will continue with that. And of course, UDENYCA, I'll talk just a moment about the 3 different presentations that we have for that product, but we look forward to that product growing over 2024 and 2025. Those 2 products underlie our franchise in oncology, allowing us to develop in conjunction with them 3 key assets. First of all, casdozo, or IL-27, which is in Phase II as well as CHS-114, our CCR8. And then our ILT4, which is still in preclinical phase, and I'll give you an update on all these. And Dr. Lavallee, my Chief Development Officer, will be happy to take questions during the Q&A. We have very -- we have been very focused in 2023 on delivering on our long-term strategy, and that is to launch products, grow revenues and manage our spend. And I'm very proud of my team for having done that. First of all, with respect to execution, we are very happy with our regulatory developments here. We have 5 FDA approvals, and we have now launched 4 products. 18 months ago, we were here, and we were talking to folks about the things that we are going to do. We have now fulfilled the promise of all of those products. UDENYCA OBI was approved in Q4 2023. It took 2 bites of the apple there as we worked our way through a complete response letter. But nonetheless, that's a very promising product and is going to address some 42% of the market share in the United States, of some 1.2 million units. LOQTORZI has been approved and now has launched and also the UDENYCA autoinjector approval and launch. So this is a very, very interesting presentation, I'll talk to you about it in just a moment, of course. But we see the autoinjector ultimately as the future of the pegfilgrastim business in the United States. We also have, of course, the approval and the launch of the CIMERLI, ophthalmology asset. CIMERLI has moved along quite well. We had some very good results here quarter-over-quarter-over-quarter growth throughout 2023. And I think we're very satisfied with the results that we've seen that in Q4. And then lastly, YUSIMRY approval and launch. YUSIMRY had number of things that we finished up, and we went ahead and we launched that. I will just offer you 1 caveat with respect to YUSIMRY is that things are going to be a little shallow to flat until we get to 2025, and there's some additional reforms in the health care system, which will facilitate further uptake. All these products, though, the key issue here is allow us to have long-term revenue drivers. LOQTORZI, this quarter, we've already had sales of last year. But we look forward to continued growth quarter-over-quarter, year-over-year for the foreseeable future. And also with UDENYCA with the 3 presentations, and our noncore products, CIMERLI and YUSIMRY also consistently. Lastly, financial discipline is very important to us, particularly with respect to the balance sheet. The company took on some debt prior to the FDA changing their position on the applicability of PD-1 data developed ex U.S. And so that left us at a bit of a position where we have a little more debt than we'd like. And so we are really focused on 2 things that I'll talk about today. Number one, portfolio prioritization to optimize our R&D spend and save money without unduly slowing down progress on these assets and also very, very tight SG&A management. We are very focused, as I indicated, on aligning our capital structure with the strategy. And one of the things that we have the opportunity to do is to monetize ex U.S. rights and other rights to our products without jeopardizing our core U.S. business, bringing in additional funds, which we would intend to apply directly to our debt structure, which I think is very, very important. One point that I would make with respect to portfolio prioritization, optimizing the spend, we announced last night that we have discontinued our TIGIT asset, and we have given that back to Junshi. And it's not that TIGIT is not a good asset or a TIGIT will not find application in some cancers. It's just for us, it's a highly competitive space. We felt that our funds were best spent, for example, on our IL-27, which we have global rights to and which we think is first in class and has some very promising data developed. But I would just point out that tough decisions are necessary in this business and Junshi has been a very good partner for us. But regretfully, for us, it was time to part with that particular asset. So I'm very happy about the growth we've seen in 2023 on the revenue side. We preannounced revenues just last night. We have come in at the upper side of our range, which was $250 million to $260 million. We're going to come up nearly around about $260 million. Very happy about that. Our Q4 is about $90 million. Quarter-over-quarter revenue growth with CIMERLI after garnering the Q-Code in April 2023 as we promised, quarter-over-quarter net revenue growth with UDENYCA. Also, I think with respect to UDENYCA, we have done a very good job at managing the average selling price, which directly impacts reimbursement. And we now have 3 presentations to provide long-term market share increases. With respect to LOQTORZI, the distributors are stocked, patients are dosed, sales ramp has been initiated, and we recorded modest sales already in 2023. Now let me talk about the core oncology business. This is our UDENYCA on-body injector. We're very proud of this device. This was something that was very difficult to develop. We spent substantially to develop this and reengineer it. This is a de novo device with the most modern technology to address the issues. This cost us about $25 million or $35 million to develop this. And what we did is, we took the opportunity to really see what the patient experience was with the current devices that are available in the market and to offer something that was much better. That is the patient interaction portions of this are far better, the ability for the patient to understand just what the device is doing, if it's full, if it's going off and whatnot. The key benefits of this product is that it has an injection time of about 5 minutes versus 45 minutes for the innovator device. Secondarily, what's very interesting about this device is the needle is not inserted until the time of administration. So the needle inserts, the device goes for 5 minutes and then the needle retracts. So what you don't have is what you have like with the current device, whereby there's a cannula that's inserted, the patient walks around for a day with the cannula. It's irritating and so forth. And this is, I think, going to offer the patients much greater comfort. We've also made improvements on the adhesive of this device. One of the key issues here, you want to make sure it stays on, these patients can be taking showers and so on. And so this is a very important part of the [indiscernible] products, which you see here for the administration of UDENYCA, our pegfilgrastim. Of course, the workhorse of this particular segment is the prefilled syringe. This is really for patients and physicians who want to have -- they have the opportunity to come back the next day post chemo 24 hours. Many times, depending on the indication in the patient, the doctor wants the patient to come back and then administer the pegfilgrastim, so this has been a dominant treatment paradigm so far. You know that the patient was administered. However, there's other patients who are much more active, and these patients very modern, perhaps, their moms and they want to go and have their autoinjector and pull out of their purse and administer it, during their kid's soccer game or something. So there's a certain segment of these patients in which the autoinjector is very, very convenient. So that's meant for them. And then lastly, there's the on-body and this really combines the best of both worlds. You put the device on and the device goes off some 24, 25 hours later. And this is for patients who are unable to come back to the office. So maybe they live remotely 50 or 100 miles away, maybe they're on an Indian reservation in Arizona, 50 miles away and can't drive back. So our strategy here with this really is to have all 3 presentations and present a total solution for the physicians and the patients, allowing us to do 2 things: drive long-term share growth and long-term profitability in this particular segment as there is now ongoing consolidation. The UDENYCA business is strong and is growing. We recorded quarter-after-quarter market share increases, you see here from 11.5% in Q1, 12.2%, 16.5%, of trailing 4 weeks for 2023 was about 17.3%, we haven't bottled up the total number for the market share for then. But this is really a great business. This is -- I think this really is something will be around for a long time. Chemotherapy is not going anywhere. People are going to need these pegfilgrastims for the foreseeable future. The other thing that I would say -- make 2 key points here. First of all, our autoinjector is a new paradigm. So that's taken a while to get off the ground as we work through issues of the insurance coverage and changing the paradigms with the patient and the physicians in the clinic. But secondarily, we're also making very good progress with respect to increasing our payer coverage. One of the advantages of having these various presentations is the payers are much more willing, of course, to provide coverage. We're doing well on that. But the big thing we're really excited about, of course, is LOQTORZI. I just want to commend my team for this. It was very difficult working through COVID for such a long period of time for the FDA to get to China for all the requisite inspections, both the CMC inspections and the clinical inspections. And we are very proud, and we are very happy to bring this product to these patients who have no therapy. There's 2,000 patients or more in the United States with nasopharyngeal cancer, and they don't even have chemotherapy on label with the FDA. Our focus at Coherus is always to be there for the patients. And we think this is really, really important. This is not an enormous indication, but we think that $200 million opportunity for the foreseeable future is really excellent. This is a very, very stable market, we intend to own this market, maximize this market, and we see this going on for the foreseeable future. Commercially, what's very interesting about is it allows us to leverage our footprint. There's about 95% overlap between our pegfilgrastim business with UDENYCA and these LOQTORZI users. This is the only I-O treatment with preferred Category 1 under NCCN. That is a very big deal. I want to thank my CMO, Rosh Dias, who actually worked with NCCN on this, but this is great. And we are only a preferred NCCN regimen for second line. We have all lines of therapy here in NPC. 2,000 treated patients. And what's really gratifying for us that we have seen is the reaction of the physicians who are committed to these patients and the patients themselves. So we are focused commercially on very rapid LOQTORZI adoption. There's about 2,200 physicians, which represent about 80% of the market. We are quite focused on getting to these doctors. We spent a lot of time over the last 2 years, reaching these docs with the KOLs and getting to them. We understand who the early adopters are, the nonearly adopters. The chemo users are particularly important. That's about 60% of the patient population, and this drug can be used in conjunction with chemo, which means these patients can go right on therapy. Also, as I put on the right panel of this slide, we also have developed sophisticated tools to identify these patients, the ICD N codes. So when a patient is diagnosed in a physician's office, with NPC. This code is immediately registered, okay? We get that ping right there, and we are able to have an account manager, a salesperson, show up in less than a week at that physician. So just think about that. That's an early warning system to identify these patients as they come out. And of course, we have focused a lot on engaging the patients and educating the patients. Rare diseases are about engaging and educating patients, and this is really where we have invested while we have waited for approval. We had npcfacts.com. We had thousands upon thousands of hits to that. We have now identified over 2,100 NPC patients and their caregivers. And so this is why we are, I think, very optimistic about our ability to get into this market, own this market and very quickly bring it to fruition. Let me talk a little bit now about the R&D outlook and our pipeline. And so one of the key things that we want to accomplish now that we have LOQTORZI approved is to use it in combination with tumor microenvironment agents, to extend cancer patient survival. We think that the next step and the next generation and survival benefit for patients will come from the TME. And you can see it here with the graph that's illustrated on the left side of this diagram, but you see where each of our products are; casdozo, we will talk about the IL-27 in just a moment as well as our CCR8 but this is really our focus. And I talked about the discontinuation of TIGIT. And the reason for that is because we are focused on first in-class and competitively positioned assets that have very strong data, right? And I think we'll show you a little bit about data coming out with casdozo now. So this is very interesting. Here we go. First of all, we have LOQTORZI, which is on the left side. This is, of course, a checkpoint, there you have a T cell, right? And casdozo, generally speaking, diffuses some of the anti-inflammatory aspects in the TME, and I'll talk about that in just a second. CHS-114, our CCR8 addresses Tregs, right? And Tregs proliferate and what they do basically is turn off immune response. And then, of course, our anti-ILT4. So we're happy to take a few more questions about this from Dr. Lavallee here during the Q&A period. But the mechanism of tumor suppression really, first of all, is IL-27 upregulates checkpoint receptors. PD-L1s, TIGITs, Lags and so on. And you can see that by the data diagram below. It also downregulates pro-inflammatory cytokines, right? And lastly, it constrained natural killer cell immune surveillance. So these are 3 key MOAs that make IL-27 very promising. And IL-27 for us is focused in 2 key areas. One is lung. Here, you see the non-small cell lung cancer data and second is liver. What's really interesting about this IL-27 asset, casdozo, is demonstrated monotherapy activity in lung, which is really where something like TIGIT, for example, does not have monotherapy activity, and this really bodes well for it. We've had 2 confirmed partial responses so far, 22% ORR, right? And we've had clinical demonstration of proof of mechanism. Yes. Now on the liver side, we have an even more impressive data. And here we see some data generated in conjunction with atezo and Avastin. And you can see here, we have 50% of these patients looking good. We have 27% ORR. And what's interesting is next week at ASCO have a more mature data set to show you that we're very, very excited about. But just take a look at these green bars and the response that we're seeing out of this product. This is a very, very high unmet need. Let me talk -- let me just stop for a second here on our overall strategy for developing LOQTORZI. It is in a small indication, but we have high ambitions for expanding it outwardly. First of all, we just announced a deal with INOVIO. And what we'll do there is basically supply them drug and then they will do a Phase III. And then when approved, we will get on the label. So this basically allows us to move forward with these assets with LOQTORZI, you should say, clinically with only the cost associated with supplying drug. And what we have found, frankly, is that there's a lot of teams very enthusiastic about using LOQTORZI in conjunction with their novel agents and I think you will see more of these types of arrangements and partnerships as we go forward in various types of moieties, whether they be ADCs or TCEs or whatever. Top right, you also see our partner, Junshi, a very good partner. Junshi is also involved in moving forward with LOQTORZI in the United States in conjunction with BTLA in small cell lung and that also would be a very significant indication if approved for us. And then, of course, as I just spoke, we also have our own TME agents. So we're very excited about our pipeline. There's a number of things that are going to be reading out over the next 12 months. Our launch of NPC, a number of research collaborations reading out in Q1. And then with casdozo, this HCC liver data coming out in Q1, the small cell data coming out later on in the year. With the CCR8 molecule, that's in Phase I. We'll continue to see data in the first half of this year. There will be a meeting, a large oncology meeting that you'll see that by midyear. And then our IND filing is on track for our ILT4, CHS-1000. Let me talk briefly about our noncore products before we go to the questions. We are doing well with CIMERLI, as I just indicated, CIMERLI has now accumulated over $125 million in net annual revenue through Q4 and about 29% market share, it is actually probably marginally higher than that. We're doing very well in the class competitively with this product, over 190,000 doses shipped since launch. And this is really, really important with respect to ophthalmologists because ophthalmologists have been burdened time and again by novel agents that come on the market and then what happens is you get 10,000, 20,000 patients treated, you start seeing ill effects and adverse events. So this -- what this has allowed us to do really is to instill confidence in this product, confidence in our company that we have a high-quality product. This was the first product with full interchangeability, both dosage forms, all indications. So this really puts us in a very strong position in the ophthalmology world. With respect to YUSIMRY, we were the innovators of the Low WAC strategy. We, of course, did a deal with Mark Cuban Cost Plus Drug Company. I recently talked to Mark in Dallas. We're both very happy with the way this is proceeding, contemplating ways to expand that relationship. But as I indicated before, I think that the HUMIRA biosimilar market is going to be tough out and through 2025 as we work our way through these formulary issues and so on. And let me just make my concluding remarks before we go to the questions. We feel very positive about how we have executed the strategy over the past 3 years. Two years ago, we announced our PD-1 deal with Junshi at this conference, so we are now 2 years hence. We have an approval in hand. We have a very nice indication. We are actually selling and shipping that drug. We have done like another deal since then. The Surface Oncology merger brought in a number of very promising top-level TME agents. I think we have a very strong pipeline. We've gotten to different presentations of UDENYCA approved, the on-body plus the auto-injector. We've launched CIMERLI. We got that approved. So I think last 2 years in particular, we're firing all cylinders as far as the execution is concerned. We have now seen strong growth quarter after quarter after quarter after quarter throughout 2023. we look forward to that in 2024. And then once again, I would emphasize our fiscal discipline. We're on a very tight ship at Coherus. We did a reference and restructuring last year. We're looking at ways to drive the shop back to cash flow positivity in the second half of this year, it's very important to us as we look at ways to do that. So thank you very much, and we're happy to take some questions.

Great. So anyone who has questions, can raise their hands. In the meantime, I'll throw out a few here. I guess, maybe bigger picture, you highlighted a number of interesting assets on the oncology front. Talk a little bit about how you kind of feel balancing developing these assets relative as just being cognizant of the operating expenditure base, the goal to get to profitability? How do you kind of manage that tension, I guess, between the 2?

That's a great question. I think that we're very cognizant of the development cost for all these products. And as you saw in one of the slides, we have now other folks that are developing LOQTORZI in conjunction with their agents at minimal, if any, cost to us. So the INOVIO agreement was the first one. There's a few more of those queued up. As I indicated, Junshi is also going to develop LOQTORZI in the United States with indications. So it allows us really to take -- Chris, to take a very targeted focus at our development. And we intend to continue to build our revenues going forward and really bring alignment really back into our cost structure and our expense structure without slowing down development. But I think that the underlying potency and efficacy and safety of LOQTORZI puts us in a very strong position for some of these partnering opportunities. And then secondarily, I would point once again at our ex U.S. opportunities, we have global rights to all of our TIM assets. We came up with ILT4 for ourselves. So we have the opportunity to monetize certain rights ex U.S. and again, bring additional capital.

Great. Maybe another one for me. On casdozo, just maybe elaborate a little bit more tox profile. We think about the drug, seems like some promising early efficacy...

Maybe Dr. Lavallee can address casdozo.

Yes. So I think it's an incredibly exciting program in that we've seen immune activation in patients as well as single-agent responses. And the safety profile has been well tolerated, no limitations, good combination with atezo/bev as well as monotherapy. So we don't see any limitations in terms of combinations broadly. So for looking at partnerships, even with TKIs or ADCs, all of those with the immune activation really lends itself. And the other thing that we're really excited about casdozo in your question about development spend, I mean, I think the thing that's underappreciated in oncology is the hardest thing is who to treat. So when we talk about activating antitumor immunity that applies broadly, but even with PD-1s, we have hot tumors, well, how we characterize those. Where do we go with the other agents. And for casdozo, the preclinical data and disease linkage really told us liver and lung were the places where activity was seen, and that's translated to the clinic. So we have a very focused development and I've seen early signs of activity. So I think it's incredibly exciting.

Great. And can you just elaborate on the next steps of development. You've got a couple of data kind of readout, some maturity coming this year. But kind of where do you go once you get these readouts on the way?

So these, again, give us a great signal, so to really add LOQTORZI. So clearly, the data that was presented in December and the lung cancer data that Denny shared with you, Surface had originally written the protocol and had 5 patients treated with pembro. Roche's team has amended that protocol and it's open now with LOQTORZI. So second-line lung cancer with LOQTORZI. And then after we present the data next week on the HCC data set, really setting it up with the atezo/bev looking at adding LOQTORZI given that it's shown such good activity in HCC, developing it within our own pipeline is where we'll take it.

Great. Great. Questions out there. Otherwise, I'll keep going. Maybe on LOQTORZI. Can you just -- following the approval and now NCCN coverage, just how do we think about the ramp of this drug? How quickly can you get to those patients?

Paul Reider, our Chief Commercial Officer, would be happy to address that. What's our thoughts on the ramp, Paul?

Yes, because there's no FDA-approved products, we believe we have a clear shot to be able to implement LOQTORZI in addition to the chemotherapy regimens. So the other important thing that Denny mentioned is we have indications for all line of therapy. So you got patients today in first line getting chemo only. We'll want to add LOQTORZI to that regimen. Other patients are receiving second line, third line. Those patients if they're getting chemo only we can add it to them. They're sicker though. When they're in the second, third line, duration of use might be a little bit shorter than the first-line patients, but that's really to focus, Chris. So given the tools that we have to identify these patients and the receptivity by the oncologist for this product, we anticipate no payer concerns. We would expect a fairly steep ramp here as we gear up over time. Those second-line patients, third-line patients will sort of wash out. And then the first-line patients will become the dominant portion over the next few years as we continue on.

Great. Maybe just pivoting over to UDENYCA, the on-body device, and it seems like you -- as you highlighted, it's got a really nice profile. How do you go about, I guess, maximizing the value there. So from a payer level, is there a willing acknowledgment this is a kind of a better mousetrap? Or is the goal to kind of get the physicians drawn in and that will help on the payer side.

Yes. I would characterize the approval of the UDENYCA on-body device as an enthusiastic reception. And Paul can comment a little further as far as the market. This is something that folks, the oncologists and the patients have waited for a long time. The existing device has been out a decade or whenever. I don't -- we don't perceive any impediments with respect to the payer coverage should drop and right behind the PFS, it has the same WAC and so on as the PFS. And I think if anything, we'll probably find ourselves selling this much as we can make that product as fast as we can. Paul, any more further color on the market.