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

Good day, and thank you for standing by. Welcome to the Coherus BioSciences Second Quarter 2024 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to Jami Taylor, Head of Investor Relations. Please go ahead.

Thank you, operator. Good afternoon, and welcome to Coherus BioSciences Second Quarter 2024 Earnings Conference Call. Joining me today to discuss our results are Denny Lanfear, Chief Executive Officer of Coherus; Bryan McMichael, Chief Financial Officer; Paul Reider, Chief Commercial Officer; Dr. Rosh Dias, Chief Medical Officer; and Dr. Theresa Lavallee, Chief Development Officer. Before we get started, I would like to remind you that today's call includes forward-looking statements regarding Coherus' current expectations about future events. These statements include, but are not limited to, the following: expectations for the timing of future clinical studies, expectations about future partnerships, projections of future revenue and expenses. All of 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 those implied by the forward-looking statements. These statements are not guarantees of future performance and are subject to substantial risks and uncertainties, including risks and uncertainties inherent in the clinical drug development process that are discussed in our press release that we issued today, as well as the documents that we file with the SEC. 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 statement. And now, I'll turn the call over to Denny.

Thank you, Jami. Good afternoon, everyone, and thank you for joining us. Today, we're pleased to share updates from the second quarter of 2024, a period in which we made definitive progress in executing upon our plan to align all aspects of our business to a focus on oncology. Our strategic focus on oncology is proving its merit. With streamlined operations and a recently streamlined portfolio, we grew total sales 10% year-over-year in the second quarter from $59 million to $65 million, even without CIMERLI, the ophthalmology biosimilar we divested earlier this year. UDENYCA is delivering impressively as LOQTORZI builds very nicely. As our Chief Commercial Officer, Paul Reider, will describe shortly, the 3 presentations within our UDENYCA franchise continue to expand our opportunities in the marketplace. As the only brand offering 3 presentation options, prefilled syringe, the auto-injector and the on-body injector, we hold a clear competitive advantage that we believe will endure and increase over the long term. Our average selling price remains consistently strong and our market share is growing. As an oncology company, our mission is to extend the survival of patients with cancer. Central to the fulfillment of that mission is LOQTORZI, our first commercial immuno-oncology agent, which demonstrated a profound survival advantage in the data supporting its FDA approval late last year for the treatment of nasopharyngeal carcinoma. The launch of LOQTORZI continues to proceed according to plan, and Paul will provide further updates on this during our call today. Beyond our commercial portfolio, we maintain our strong conviction in our pipeline of innovative immuno-oncology drug candidates. We are advancing clinical studies across areas of clear unmet medical need, including head and neck cancers and small cell lung cancer and hepatocelluar carcinoma. Dr. Theresa Lavallee, our Chief Development Officer, and Dr. Rosh Dias, our Chief Medical Officer, will describe these studies further on our call today. I'm especially pleased to report today that as a direct result of our continued efforts to manage our cash, reduce both our debt and head count, Bryan McMichael will report that we ended Q2 with $159 million on the balance sheet, positioning us well for the second half of this year and beyond. I'd like to congratulate Bryan on the exceptional skill and leadership he has demonstrated since taking the role as Interim CFO earlier this year. As announced in our press release this morning, Bryan has now been appointed to the Chief Financial Officer role at Coherus and with my support, the full support of the Board of Directors. Bryan's deep financial expertise, owned throughout his time at Gilead Sciences and further demonstrated since his arrival at Coherus a few years ago, gives me great confidence. That confidence extends to our product portfolio. LOQTORZI plus our competitively positioned pipeline represents long-term value creation for shareholders. The pace of executing our strategy has been brisk, and we have strong momentum carrying us forward into the quarters ahead. And now with that, I'll turn the call over to Paul.

Thank you, Denny, and good afternoon, everyone. Our focused execution in oncology is delivering results. I am pleased to report a fifth consecutive quarter of top line revenue growth for UDENYCA, strong progress on LOQTORZI following its second quarter of commercial launch. Regarding the quarter's performance, total net revenue was $65 million, which included $58.5 million from sales of marketed products and $6.3 million from a nonrecurring upfront cash payment received for the out-licensing of LOQTORZI rights in Canada. Q2 UDENYCA net revenue was $50.9 million, a 19% increase quarter-over-quarter and a 60% increase over Q2 2023. LOQTORZI net revenue nearly doubled to $3.8 million in Q2 compared to $2 million in Q1. I'll now speak in more detail about each brand, starting with LOQTORZI. First half 2024, a top priority was setting up LOQTORZI to become the future standard of care in NPC, and we remain very confident in achieving this ambition. LOQTORZI offers unprecedented efficacy for NPC patients. Like all new product launches, requires substantial groundwork to ensure providers have access to LOQTORZI. Pleased to report that many operational milestones have been achieved, setting LOQTORZI up for future growth. And examples of these include: first, LOQTORZI was included in NCCN, ASCO and ClinPath guidelines. In NCCN, LOQTORZI is the only PD-1 with a Category 1 designation for first-line use and the only preferred regimen in second-line plus. Second, payer coverage has now been confirmed on nearly 100% targeted medical benefit lives and health plans, including Medicare Fee-For-Service, Medicare Advantage, and national and regional commercial plans. Third, product-specific permitting J-Code has been granted by CMS and took effect July 1, which will enable electronic billing and faster or predictable reimbursement for providers. Fourth, among the top academic research hospitals, LOQTORZI is now accessible in all 33 NCCN institutions. With the foundation now set to enable broad access to LOQTORZI, our efforts are solely focused on driving new patient starts in the LOQTORZI-eligible patient segments, we believe, constitute approximately 2,000 patients annually. I'll now speak in more detail of the NPC patient populations, the progress we made in Q2 and our priorities for the second half of 2024. NPC patients within the LOQTORZI-eligible indications include 3 patient segments. First, those with recurrent locally advanced disease. Majority of NPC patients are diagnosed in the local or locally advanced setting. And here, patients who were diagnosed at early stages had received radiation or chemo-plus radiation as their first treatment, with many patients being cured. These patients drop about of the NPC treatment pool unless they experience local recurs at any point in time. Then they become LOQTORZI eligible. Then will receive LOQTORZI plus chemotherapy. These patients account for approximately 1/3 of the 2,000 who are LOQTORZI eligible. The second patient segment are those with first-line metastatic disease, which could be metastatic recurrence from early-stage disease or de novo metastatic. These patients account for approximately 1/3 of the 2,000 who are LOQTORZI eligible. Historical treatment for these 2 patient subpopulations include chemotherapy or a combination of chemo plus off-label PD-1 treatment. Real-world data shows current off-label PD-1 use of approximately 25% of the segment. This is important in the near term from a sales ramp perspective as we do not expect the patients currently on an off-label PD-1 regimen will be switched to LOQTORZI if the patient is already responding to treatment. Now the third patient segment is second-line plus with metastatic disease. These patients account for the remaining 1/3 of LOQTORZI-eligible patients and will receive LOQTORZI as monotherapy. Patients in the first 2 segments I described are our primary focus for the following 2 reasons. First, based on the results of the JUPITER-02 trial, these are the patients who can derive the greatest survival benefit. And second, these patients are likely to deliver the longest duration of treatment, which is a key driver of LOQTORZI's revenue ramp over time. In Q2, the total number of LOQTORZI-treated patients more than doubled by an estimated 100 new patients, and real-world data shows 2 key findings. First, a minority of drug-treated NPC patients are new to treatment in any given quarter. So it will take time for us to acquire these new patients. Second, we are acquiring our targeted patient place with 40% of LOQTORZI patients being treated in the locally advanced setting and approximately 75% of total LOQTORZI patients being treated in combination with chemotherapy. These real-world data combined with the current off-label PD-1 use confirms our view that LOQTORZI would follow a steady revenue ramp in the near term fueled by new patient acquisition, with sustained growth over time driven by duration, as 80% of long-term value is from early line continuing patients, which we estimate will take 3 to 4 years to fully materialize. Overall, the launch is progressing well and we remain confident that LOQTORZI will achieve a dominant market share position in the NPC market that we estimate to be valued at $150 million to $200 million. In the near term, our priorities are focused on 3 revenue drivers: driving new patient share, strong HCP patient identification, ensuring LOQTORZI messaging is delivered at the time of treatment decision and optimizing the duration of LOQTORZI treatment. Now, regarding UDENYCA. UDENYCA delivered another quarter of revenue growth, driven by continued strong execution and fueled by 3 drivers: first, the commercial launch of UDENYCA On-Body; second, UDENYCA is the only pegfilgrastim brand with 3 device options to meet the unique needs of providers and patients; and third, broad payer coverage, which opens access to significantly more patient lives. As for key performance indicators for the quarter, UDENYCA franchise demand grew 25% quarter-over-quarter. All 3 product presentations grew in the quarter, with on-body representing 60% of the total unit growth. On-body and auto-injector ended the quarter at 13.5% and 10% of the total SKU mix, respectively. Franchise market share was 29%, an increase of 4 market share points quarter-over-quarter. Regarding the launch of UDENYCA On-Body, we're very pleased with the launch performance to date and customer receptivity continues to be very positive. Fueling customer adoption are innovative and differentiated features, such as UDENYCA On-Body's 5-minute injection time compared to the 45-minute delivery time for Neulasta Onpro. In summary, our long-term strategy for UDENYCA is delivering as planned and we expect continued revenue growth in the second half of 2024. I'll now turn the call to Dr. Theresa Lavallee. Theresa?

Thank you, Paul, and good afternoon, everyone. Firstly, we congratulate our partner, Junshi Biosciences, for continued progress with advancing toripalimab's development. The Committee for Medicinal Products for Human Use, or CHMP in Europe, adopted a positive opinion, recommending approval of LOQTORZI, a next-generation PD-1 inhibitor, for the first-line treatment of patients with nasopharyngeal carcinoma in combination with cisplatin and gemcitabine, and secondly, for the first-line treatment of adult patients with unresectable advanced recurrent or metastatic esophageal squamous cell carcinoma in combination with cisplatin and paclitaxel. The CHMP positive opinion is based on data from the Phase III study JUPITER-02 for NPC and JUPITER-06 for esophageal squamous cell carcinoma, demonstrating statistically significant and clinically meaningful improvement in survival in these 2 indications. Importantly, while toripalimab has demonstrated efficacy in these studies, toripalimab's safety profile is consistent with the PD-1 inhibitor class. If approved, this will expand marketing of toripalimab beyond the U.S. into the EU. This potential approval is important to further demonstrate the efficacy and safety of toripalimab as well as the quality of the drug and clinical data sets. For our tumor microenvironment targeting pipeline, we have global rights. And as we look to develop these assets in combination with toripalimab, EU approval will facilitate future approvals with novel agents, executing on our combination strategy for toripalimab indication expansion. Furthermore, while the U.S. FDA will not accept Phase III single-country data for approval, they have stated on several occasions the data sets will support contribution of component. Development of our novel pipeline in tumor types where toripalimab has data may simplify any Phase III study design. In China, toripalimab now has 10 marketed indications, following the recent approval of toripalimab in combination with paclitaxel for the first-line treatment of recurrent or metastatic triple-negative breast cancer based on the Phase III TORCHLIGHT data. Toripalimab is a foundational asset in the Coherus pipeline and now is being evaluated in Coherus-sponsored clinical studies with casdozokitug, an anti-IL-27 antagonist, and with CHS-114, an anti-CCR8 antibody, preferentially targeting tumor-resident immune suppressive T regulatory cells. In addition to our internal development and our partner Junshi's development, we have several partnership discussions ongoing and look forward to the potential to progress and advance these exciting clinical studies. For our internal efforts, casdozokitug's development with toripalimab continues. Tomorrow, at the I-O Summit Conference in Philadelphia, we have an oral presentation on the strong data package supporting development in HCC. While inhibiting cytokines is a validated approach in inflammatory diseases with multiple approved antibodies, casdozokitug is the first cytokine antagonist to show safety, immune activation and monotherapy responses in cancer patients. In preclinical models, blocking IL-27 results in immune activation in brain, liver and lung. Preclinical tumor models only show antitumor activity in response to IL-27 inhibition in liver and lung models. Three different HCC mouse models, carcinogen induced, NASH induced or Hepa 1-6 HCC cell line, show anti-tumor response to IL-27 inhibition. Further, in liver cancer, Junshi has recently announced the positive results from a Phase III study of toripalimab in first-line hepatocellular carcinoma in combination with bevacizumab. These results will be important in supporting the randomized Phase II study of casdozokitug in combination with toripalimab and bevacizumab in first-line HCC for efficacy, safety and relative contribution data. Our second key pipeline asset, CHS-114, a highly selective cytolytic anti-CCR8 antibody, continues to progress in the clinic. Eliminating immunosuppressive Treg cells in the tumor has been attempted by the field, evaluating several approaches, but with the problem of depleting Treg cells broadly, leading to autoimmune toxicity and also depleting T cells, and thus, limiting antitumor activity. The CHS-114 clinical data demonstrating peripheral depletion of CCR8-positive Treg cells and not depleting Treg cells broadly establishes proof of mechanism in cancer patients. CCR8-positive Treg cells have a high prevalence in density and in number of solid tumors, with the highest levels in head and neck, gastric and cervical cancer. For this reason, our CHS-114 dose expansion in the Phase I study is evaluating head and neck cancer, and includes pre- and on-treatment biopsies to evaluate Treg depletion in the tumor. At ASCO this year, one of the experimental therapeutics presentation that impressed me most was by LaNova Medicines, evaluating their CCR8 antibody, LM-108, in combination with toripalimab in advanced gastric cancer patients. We were encouraged by these early clinical data showing an acceptable safety profile and an overall response rate of 36.1%, which we believe demonstrates proof of principle for CCR8 targeting in combination with toripalimab in a tumor type expected to show benefit. Lastly, to update you on the internal development of our discovery agent, I'm proud of the Coherus CHS-1000 ILT4 team for submitting a quality IND package to the FDA that has been accepted, and we plan to advance CHS-1000 to the clinics to establish single-agent safety and rapidly move into combination with toripalimab for treatment of solid tumors. It is designed to block ILT4 activity and promote an active or pro-inflammatory immune response. The ILT receptor family modulates the activity of the innate and adaptive immune system and plays a role in innate immune cell mechanisms that lead to tumor escape and PD-1 resistance. This is a promising target and an antibody that Coherus discovered. I'll now turn the call to Dr. Dias, our Chief Medical Officer. Rosh?

Thank you, Theresa. LOQTORZI, with a profound survival advantage demonstrated in nasopharyngeal carcinoma and its accompanying approval across all lines of therapy for NPC, continues to form the foundation of our IO franchise and, in addition, continues to demonstrate efficacy outside NPC, most recently in first-line hepatocellular carcinoma patients, with the published Phase II toripalimab, bevacizumab, Phase III in clinical cancer research, and the Phase III HEPATORCH study meeting its primary endpoints of PFS and OS, as Theresa has pointed out. We've been clear in articulating 3 very distinct strategies for further development of our IO franchise, including development of LOQTORZI outside NPC, firstly, in combination with our internal IO pipeline of the competitively well-positioned assets, casdozokitug and CHS-114; secondly, combinations with external partners at the discovery or close to discovery stage, where we would provide LOQTORZI in combination with partner company's early-stage assets, where the partner company would fully fund development; and thirdly, combinations with external partners at a later Phase III stage of development of novel agents, trials of registration intent, where, again, we would provide LOQTORZI for combination with partner company's late-stage assets, and where, again, the partner company would fully fund development. This strategic approach enables effective resource allocation focused towards our internal pipeline development, and I'm pleased to report that we're making good progress on all 3 fronts. And further, our IL-27 targeting antibody continues to progress to plan in our combination study with LOQTORZI in second to fourth-line non-small cell lung cancer. As a reminder, this is intended to be followed by a Phase III randomized controlled trial in second-line non-small cell lung cancer. We're also on track to start the first-line HCC combination study with LOQTORZI in quarter 4 this year, building upon the impressive triplet combination data presented at ASCO GI at the start of this year. CHS-114, our CCR8 targeting antibody, has completed dose escalation and is now progressing to indication expansion into head and neck cancer versus monotherapy and in combination with LOQTORZI. Data from the dose-escalation portion of the study was presented at ASCO in June, showing an acceptable safety profile with no dose-limiting toxicities, PK dose proportionality, proof of mechanism with depletion of peripheral CCR8-positive Tregs, and a disease control rate of 47% in an advanced solid tumor population that was heavily pretreated. Our partner programs incorporating LOQTORZI in early stage with ENB Therapeutics, collaboration with the Cancer Research Institute in ovarian cancer, as well as the late-stage multinational programs in combination with BTLA in limited-stage small cell lung cancer, and with the INOVIO vaccine in HPV-positive early-stage head and neck cancer continue to plan, with the latter, in particular, being in the same physician group of head and neck oncologists who also treat NPC. We look forward to announcing further partnerships over the coming months. And with that, I'll hand over to Bryan McMichael, Chief Financial Officer. Bryan?

Thank you, Rosh, and good afternoon, everyone. Following the summary of revenues provided by Paul, I will focus on the rest of the P&L and cash. Cost of goods sold for Q2 2024 was $28.4 million, compared to $24.8 million in Q2 last year. The increase was driven primarily by increased demand for UDENYCA and nonrecurring costs related to YUSIMRY. Q2 marked the first full quarter following the divestiture of CIMERLI, a product that had a significant gross profit share in the mid-50% range, taken before internal commercial expenses. In addition, the mid-single-digit royalty on UDENYCA net revenues payable to Amgen expired this past July 1. R&D expense totaled $22 million and decreased $1.3 million and 6% from Q2 a year ago. The decrease was driven primarily by lower head count. Additionally, decreases came from cost not recurring for programs terminated in previous periods and divested products, partially offset by investments in our current pipeline. SG&A totaled $35.2 million and decreased $10 million and 22% compared to Q2 of the prior year. The decrease primarily reflects savings from lower head count, expenses for divested products that did not recur and our ongoing cost reduction efforts. Interest expense of $5.3 million, decreased $4.6 million and 46% compared to Q2 in the prior year. Q2 2024 was the first quarter we started to see savings from the full payoff of our $250 million principal amount term loan, which occurred during the quarter. The Q2 2024 net loss was $12.9 million or $0.11 per diluted share, compared to a net loss of $42.9 million or $0.49 per diluted share for the same period in 2023. Non-GAAP net loss per share, which excludes the gain on divestiture of YUSIMRY, was $16.4 million or $0.14 per diluted share in Q2 2024, compared to $32.8 million or $0.38 per diluted share for the same period in 2023. Cash, cash equivalents and investments in marketable securities were $159.2 million as of June 30, 2024, compared to $117.7 million at year-end. As a reminder, during the quarter, we paid off $250 million in term loan, as I mentioned earlier, entered into a new $38.7 million term loan due May 2029. Sold revenue rights for $37.5 million and received $40 million and $6.3 million in exchange for the sale of YUSIMRY and the out-license of the Canadian rights to LOQTORZI, respectively. Today, we are reiterating our expected range of combined 2024 R&D and SG&A expenses of $250 million to $265 million. This guidance includes approximately $40 million of stock-based compensation expense and excludes certain business development activities. These strong quarterly results are the outcome of tremendous execution on the part of our team. With that, I will turn the call back over to Denny for closing remarks.

Thank you, Bryan. I'm happy to report today we are executing very well on our 4-part plan to deliver shareholder value. First, as Paul described, driving the top line. Secondly, as Bryan just described, controlling our operating expenses. Third, as Theresa and Rosh described, advancing our pipeline of tumor microenvironment-focused assets. And lastly, making substantial improvements in our capital structure. We're proud of our accomplishments over the second quarter, and we remain dedicated to our mission of extending the survival of cancer patients. Now happy to open the line for questions. Operator?

[Operator Instructions] Our first question will come from the line of Yigal Nochomovitz with Citi.

This is Ashiq, on for Yigal. Congrats on the quarter. I just had a few on the LOQTORZI launch in NPC. Can you give us any color on which types of patients you're treating? Are they primarily newly diagnosed patients? Or are you seeing switches from other patients on off-label PD-1s? And on the same topic, where are you with the payer coverage access? And how should we think about the J-Code as an inflection point for sales growth this year?

Paul, do you want to cover the issue of the NPC launch and whether we've bumped into any switching problems, and secondarily, the payer coverage question?

Yes, sure. So the NPC launch is delivering in line with our expectations. The patient share that we're seeing is really a very heterogeneous mix as we expected. We've got patients in later lines of therapy, and these patients are getting LOQTORZI as monotherapy, but they're going to have shorter durations because they're going to be second, third, fourth line. We're also very encouraged to be seeing patients in these early launch periods of the early-line patients. And these patients are very, very important because these are the patients who will have longer durations of treatment. And as these patients continue quarter-over-quarter that long duration, that's how we see the revenue ramp over the long term. But in the short term, we see it as a steady ramp as we work through this heterogeneous mix of patients and that patient mix begins to stabilize. As it relates to the payer coverage, we have virtually no payer issues right now. We've got now nearly 100% of the targeted payer medical benefit lives across Medicare fee-for-service, the national and regional health plans, both on commercial and the Medicare Advantage. So we are very, very pleased with the unrestricted coverage we have in NPC right now. And as it relates to the J-Code, your question was, is it going to be an inflection point. The way that we see the J-Code here is really enabling the electronic billing and faster, more predictable reimbursement for providers. So I wouldn't necessarily characterize it as a significant immediate revenue inflection per se. But certainly, its availability will remove any operational barrier in any account that doesn't allow for use of products until the J-Code is in effect. So I think we're very -- I think we're really set from an access standpoint now moving into the second half of the year and feel very encouraged that those -- any of those impediments are behind us.

Paul, can you just comment a bit with respect to the issue of the switch, and I think -- which was one of Ashik's questions, and then secondarily, a progress on the NCCN formulary?

Yes, sure. As I mentioned in my prepared remarks, any patient that is currently on an off-label PD-1 or PD-1 chemo regimen, we don't believe that they're going to switch if the patient is responding to treatment. That being said, what we've seen in the real-world data here in just the first couple of quarters is that we are seeing patients who have been re-challenged after prior PD-1 treatment. And usually, the off-label PD-1 was typically prescribed in the earlier line of treatment in combination with chemotherapy. And therefore, by the time the patient was retreated with LOQTORZI, the patient had already progressed to a later line. So in these cases, we would expect a shorter duration of LOQTORZI use. That being said, we're encouraged that doctors are willing to consider retreatment with PD-1 failures and that patients were -- or the payers were approving the product. So those are encouraging signs. And then as it relates to the access on the NCCN institutions, we've now got accessibility to LOQTORZI on all 33 NCCN institutions. So again, that operational milestone was achieved here in the second quarter.

Our next question will come from the line of Brian Cheng with JPMorgan.

Maybe just one on UDENYCA unit growth that you saw this past quarter. You mentioned that most of the unit growth came from on-body. So we're just trying to better understand the dynamics here. Can you just tell us a little bit more about the biggest contributor that's driving the uptick across all 3 presentations this past quarter? And more importantly, how sustained do you think this momentum that we're seeing today across all 3 presentations?

Brad. Great question. Paul, do you want to address the issue of the SKU mix and the growth across the quarter for Brian?

Sure. Let me start just by reiterating our goal for the UDENYCA franchise, and that's to maximize the long-term profitability and sustainability of the franchise. Brian, our investments to bring these innovative device presentations to market, combined with our consistent strong execution is really what's delivering these results. UDENYCA now is strongly positioned in the pegfilgrastim market. And we said multiple times that once we launch these new devices, we're going to drive market share gains, and that's what you're seeing. We're delivering on that promise. And these market share gains are coming basically in the last 5 quarters from an 11% share to 29% share. And we remain confident that UDENYCA will continue to grow in the second half of 2024. And it's going to be fueled by 3 of these growth drivers, Brian. The first is the commercial launch of on-body. And that's really because we now can compete head-to-head and access the entire pegfilgrastim market. And secondly, the payer coverage, which nearly doubled in 2024 compared to 2023. So that opens up significantly more patient lives. And then the third is our disciplined management of ASP. And that's really important for our customers, providers, payers, et cetera, hospitals, because it provides them greater predictability, which they value. So moving forward in the second half of the year, we still are very confident that the franchise is going to grow. All 3 product presentations grew in Q2. But we see the on-body device as really being the driving force of the growth in the second half of the year, largely because of the accessibility to the entire market. That being said, we are still seeing nice uptake in the prefilled syringe and the auto-injector presentations, and we're finding now that customers are really able to now choose amongst the presentations that fit their unique needs and the needs of their patients. So we remain very confident in the second half of the year and the continued growth of the franchise.

Our next question will come from the line of Douglas Tsao with H.C. Wainwright.

Just...

Hi Doug. Can you repeat your question? We can't hear you.

It looks like Doug may have disconnected. We'll move to the next question. Next question will come from the line of Billal Jahangiri with Truist Securities.

Congrats on the quarter. We had a couple of questions here. We were wondering what differences would you expect to see from using tori versus atezo in the triplet for HCC? And given that a bunch of your pipeline targets are not -- don't have precedents of approval in the U.S., what's permutation end indication do you envision as your next Phase 3 after HCC?

Dr. Theresa Lavallee, the company's Chief Development Officer, is with us today. Theresa, can you comment on the question of tori with triplet?

Yes. So for the HCC study looking at toripalimab plus bevacizumab, casdozokitug, and obviously, in a Phase 3 study, we would compare it with atezo/bev. The differences, obviously, are PD-L1 versus PD-1. The data set for tori/bev from Junshi in a Phase 3 study has been reported positive, but we're waiting to see the data. There was a Phase 2 study that was published, showing an overall response rate in PFS that was numerically higher than what was seen with the IMbrave 150 atezo-bev Phase 3 study. So based on the data there, we would expect tori to be well suited and positioned to go against atezo and then, of course, adding because casdozokitug should add increased benefit to really extending the survival for those first-line HCC patients without an increase in toxicity, a really good tolerability to date. In terms of -- the second question was, could you repeat that? I'm sorry, was it about the next study that?

Yes. What combination or what triplet/doublet and what indication is your gut feel, I guess?

Yes. So in development right now, we're building off of the activity that's been observed in the early-phase studies for casdozokitug both in non-small cell lung cancer. So as Rosh mentioned, we're actively enrolling in the second to fourth line non-small cell lung cancer study with casdozokitug and toripalimab. We'd also like to look in other areas in non-small cell lung cancer, given the strong disease linkage there. And then the HCC study is on deck to open later this year.

Rosh has some additional comments with respect to this question for you also. Rosh, go ahead.

Yes. Just one point to add to your first question on potentially some of the differences between atezo and also tori. So one thing that we do know is that the ADA, the antidrug antibodies, with atezo is reasonably high, probably in the 40% range, whereas we also know for toripalimab it's in the single-digit range. So I think that's one additional consideration I'd add to what Teresa already mentioned about the atezo and the tori.

Our next question will come from the line of Douglas Tsao with H.C. Wainwright.

Sorry about that earlier. Just curious your perspective on now that you're all in the NCNN centers, how much of the market is there versus patients being treated in the community setting? And how quickly or how long do you think it will take to penetrate the sort of broader community for the NPC market.

Paul, do you want to give Doug a little insight on the patient proportion split in NCCN and the uptake direction?

Yes, sure. We believe that about 60% of all the NPC in the United States is treated in some kind of academic NCCN type of setting of care. 40% is still in the community. And after the first couple of quarters, our LOQTORZI business is about 2/3 in the hospital. So it's tracking very closely to that in relation to their -- to the overall treatment. I think it will -- as it relates to the uptake in the community setting, Doug, with a rare cancer, a lot of these oncologists in the community might be seeing NPC 1, maybe 2 patients a year. It's a rare cancer, as you know. So what we've got to do and our plans are all focused on is continually engaging with these community oncologists that are treating NPC. And so when they get that patient that's LOQTORZI eligible across one of those 3 patient segments that I described, we've got that LOQTORZI message, and we've got everything set up to get that new patient start. So that's where our complete focus is right now in the second half of the year is really to drive the new patient acquisition across both segments, community and the NCC and academic institutions. And I believe we're going to make great progress there as the year unfolds.

Great. That's really helpful. And Paul, maybe just on UDENYCA, I'm just curious, you guys have had a really nice recovery in terms of share and a rebound in terms of revenue performance. I'm just curious, are there particular segments where you're having more success with the on-body and auto-injector or prefilled syringe as your overall portfolio of products versus the other? Or is it pretty widespread right now?

Yes, Doug, with UDENYCA, we're seeing growth across all segments of the business. When I talked to you last in May on the Q1 call, we were only a few weeks into the call and most of the uptake at that time was in the clinics. Now, we're seeing it across all segments of the business. Auto-injector, if there's one segment where that's probably being used more than the other, it's going to be in the clinics. But essentially, the entire franchise is growing. And on-body, we're still only 1 full quarter in, but we're really, really pleased with the penetration it's making across all the segments. So I think that's where we're going to continue to see the growth in the second half of the year. We're very confident in that.

Okay. Great.

Our next question will come from the line of Mike Nedelcovych with TD Cowen.

I just have 1 on toripalimab. Can you remind us what milestones and/or royalties are owed to Junshi based on your current indication? And what obligations do you have to them relative to the development path for toripalimab for the various combinations that you plan to test?

Great question, Mike. So Junshi gets a $25 million approval milestone, which we have paid out. So we paid $12.5 million. The other $12.5 million is due in Q1 2025. And really Junshi gets a 20% royalty on net sales, which is pay as you go. With respect to your cost with -- cost sharing question in the development programs, we are not obligated to share costs, for example, of the toripalimab plus BTLA program, which is going into a segment of small cell lung. So one of the advantages of our development strategy, as Rosh pointed out in his prepared remarks, is that we sought deliberately to have others develop products and go into pivotal trials and pay for those pivotal trials. And then when the label gets done by the FDA, we can sell into these commercially. So our objective is to line up a number of these. We have, I think, 2 now, 1 with Junshi and 1 with INOVIO. We'll continue to focus on that over the next 6 to 12 months, you'll probably see more of those. But we think this is a very effective strategy for development at a reduced cost. So no, we're not obligated for further development unless we choose to.

Got it. And Junshi have any -- does the royalty extend to potential future approvals and other indications potentially in combination with your in-house assets?

The royalty extends to any toripalimab sold in the United States regardless of indication, whether it's NPC or lung or gastric or whatever. It's just simply a straightforward royalty on toripalimab sales. We're not obligated to pay any royalty, of course, on any Junshi assets.

Okay. And then are there any associated milestone payments as well? Or is it -- are those in the -- really none of them?

There are some additional sales milestones down the road. However, we don't feel that those are really relevant because most of those milestones were constructed at a time when we expected to have much larger indications, such as non-small cell lung, the number of things there, indications will take a bit to get to. So we don't think those are really economically relevant to the modeling.

Our next question will come from the line of Colleen Kusy with Baird.

Great. Congrats on the progress. For UDENYCA, can you go in on what's been resonating with prescribers when choosing the on-body? And what do you think is going to be kind of the big growth drivers for on-body adoption? And then I have a couple of development follow-up questions.

Great. Paul, do you want to talk a little bit about our experience in the field, the reaction to the customer base with on-body and the growth drivers for Colleen?

Yes, Colleen. I think what's really resonating amongst our customers is the innovative and differentiated features of UDENYCA on-body. Probably the most common feedback we've been getting from customers is how much they appreciate the 5-minute injection time for UDENYCA on-body compared to the 45-minute injection time for the innovator. That doesn't sound like it would be that important, but for a patient the next day that has to wait for this injection to occur, 5 minutes, it's done and they can then get on with their day and their lives. And so that's been one of the most important differentiated features. I think the other drivers too, Colleen, is really what I mentioned in my prepared remarks. We have now broad payer coverage. So it's highly accessible to more patients -- and equally as important is our stable ASP. So you set everything else aside and having a predictable ASP, which drives provider reimbursement, it's very, very valuable. So you put the total value proposition together, innovative device features, broad payer coverage, a consistent and stable ASP. And now you have the UDENYCA value proposition that customers are really driving towards. And so we are very pleased with the launch progress and we're very confident in the second half of the year and our continued performance there.

Got it. That's helpful. And then can you just comment for casdozo plus tori in non-small cell lung cancer. Can you comment on when we might be able to expect data from that? And then for the triplet study that's going to be starting soon in HCC, can you advise, does that have a control arm? And what you're hoping to learn from that study before starting the Phase 3?

Colleen, and I'll let our Chief Medical Officer, Dr. Rosh Dias, take that one. Rosh?

Hi Colleen. So your first question was on non-small cell lung cancer. Just as a -- just a very quick reminder, obviously, this spills upon the data that we presented at ESMO IO at the end of last year, showing a couple of monotherapy responses in PD-L1 refractory subjects. So the ongoing study is in combination with toripalimab, toripalimab plus casdozokitug in second to fourth line non-small cell lung cancer. This study is recruiting very well and continues to recruit and we anticipate results in next year, potentially in 2025. The second question was on hepatocellular carcinoma. So we are on track to start the HCC study late this year, which is what we've communicated previously. Obviously, this spills upon the very encouraging data presented at ASCO GI earlier this year. You asked about the design. So first of all, we will be looking at a couple of doses. So the current standard of care, obviously, the atezo/bev Phase 3 study will look at the comparison against that current standard of care. But prior to that, we will look at a couple of doses of casdozo in combination with tori and then also look at the contribution of components. So probably a third arm as well. And then once we've done that, we'll move on into the Phase 3, as we've discussed.

That concludes today's question-and-answer session. I'd like to turn the call back to Denny Lanfear for closing remarks.

Thank you, operator. Thank you all for joining us this afternoon for our call. As I indicated in my prepared remarks, we are very pleased with the company's progress broadly here in Q2. We're looking forward to another good quarter in Q3, and we look forward to seeing you all at the investment conferences. Bye-bye.

This concludes today's conference call. Goodbye. Thank you for participating. You may now disconnect.