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

Excellent. Great. Well, thank you, everyone, for joining us, joining our fireside chat with Coherus. I'm David, one of the biotech analysts here at UBS. It's our great pleasure to have Denny Lanfear, Chief Executive Officer; and Theresa Lavallee, Chief Scientific and Development Officer. Thank you for joining us. But before we start, I just want to quickly say that from just logistics for anybody who are in the room, if you have a question, please you can scan the QR code on the screen if they pop the screen here and then you can ask a question and it will show up on my iPad here. So feel free to ask away any questions you have, and I'll be happy to ask here for the management team to answer. All right. So with that out of the way, Denny, Theresa, welcome.

Thank you, David, and thank you for the invitation to be at UBS today.

Yes. Thank you.

Yes. Thank you. Great to have you here. So to start things off, maybe you can quickly give us a high-level overview of Coherus in some of your pipeline programs and also your overall strategy.

Sure. Well, first of all, let me say that Q3 was the first quarter in which we were solely an innovative oncology company having finished the divestiture of the biosimilar business in Q2. And we're very excited. We had a very good quarter. We have a considerable momentum now going into the end of the year and into next year, particularly with respect to the patient accrual with our clinical studies. As you know, we have studies across more than half a dozen indications with our CCR8 molecule, CHS-114. We have a study that's launched and doing very well with casdozokitug and liver. We're spooling up another study with a cooperative group in lung. But all of the sites are enrolling and at full bore. So we're pretty fired up. We find that the investigators are very interested in the mechanism of action of our products and how they might help the patients. So our team has been going and talking to the investigators, and they find that they're really very enthusiastic to put patients on the study and see how they work because these are really significant breakthrough therapies. But I think that Coherus presents a very unique value proposition in the oncology space for investors. We have excellent products. Our products, for example, our PD-1, toripalimab is a next-generation PD-1 has very unique binding sites to the FG loop to demonstrate activity in low PD-L1 states. And the lens that we view toripalimab, LOQTORZI through is one of both a revenue generator in nasopharyngeal cancer, but also a revenue multiplier because we're combining it with both our key assets in the pipeline. And I'll talk in a little bit about how we're also combining it with others. We're very, very open about doing combinations. And we feel that combinations of therapies are the way that we're really going to move the bar with respect to patient survival. And Theresa will say something about the various combinations that we're contemplating in a number of therapeutic areas later. But back to the drugs for just a moment. So we have a next-generation PD-1 that's doing well. And secondarily, we have a CCR8, which we think is best-in-class. Theresa talked to you a little bit about it, but 114 is highly selective. And when that molecule was brought forward, it was screened against over 5,000 other proteins on the surface of cells in your body, and it only reacts to CCR8. And this is the reason why it's so highly selective. And of course, we have some excellent data that we produced in patients, the biomarker data, which we have presented. And casdozokitug is, I think, a very interesting molecule also. It's anti-IL-27. So as it turns out, IL-27 plays a very key role in immune system homeostasis upon pathogen invasion. And so this happens, for example, of course, in barrier tissues, in liver and in lung. And it has shown really strong efficacy in lung in a particular study on a background of atezo/bev, which is standard of care, it showed, for example, a 17% complete response rate, which I think compares quite favorably with the 8% of standard of care. And we're going on and we're doing a follow-on study at 2 doses on it also. But the second key thing about the company, I think, that is unusual with the value proposition is the data catalysts we're going to come forward in mid-2026, all these studies. For example, with CHS-114, we have studies that are underway in gastric cancer, esophageal, colorectal with metastases, colorectal without metastases and of course, head and neck. So it's a very, very growing vibrant field. And as you know, the Nobel Prize was just awarded for the scientists to move this forward recently. Casdozokitug turn over some data cards next year in liver, 2 doses, as I said, again, with atezo with toripalimab. So that's exciting. And I'll talk a little bit in my closing remarks about some of the deals, which is, I think, the third very, very interesting part of the company's value proposition. Deals are important to us because unusually for a company at our state, we have global rights to these products. We haven't sold these rights off. So we have the opportunity now to develop all this data in Phase II going into pivotal studies and to do both U.S. deals and ex U.S. deals with these products. So ex U.S., particularly in some Asian countries, liver cancer, as you know, is a big issue in hepatocellular carcinoma. So we look forward to getting partners in Asia for casdozokitug. But also for CHS-114, we think there's the opportunity to do a number of things there. So I'll just stop there. But I think for a company of our size, we have a lot going for us. We put together some very strong deals over the past year, divesting the biosimilar business. We reported $198 million in cash on the balance sheet at the end of Q3. We're very strong with our financial and our fiscal management and our operations. So we look forward to turning over the data cards as we go forward.

That's great. Thanks, Denny. It's very exciting, especially coming into next year, we're going to get a lot of updates and potentially probably a little more on the deals front, too. So very excited to see what's happening in the next 12 to 18 months. Now let's talk specifically about some of the programs here. The first one, of course, is LOQTORZI, toripalimab, as mentioned, is now approved for frontline and second-line nasopharyngeal carcinoma. And so you mentioned a little bit about some of the differentiation of this drug versus other anti-PD-1s such as binding size, affinity, combinability. So you can just tell us about some of the things you're doing to expand that some of the combination strategies you're planning for toripalimab?

I'll let Theresa take that. Theresa, do you want to talk a little bit about where we're using toripalimab in conjunction with other therapeutics.

Yes. Thank you. And as you said, it's a next-generation PD-1 based on its increased potency, unique epitope and differentiated clinical activity in Phase III studies showing similar activity in both -- when in combination with chemotherapy in PD-L1 high and PD-L1 low. PD-1s are foundational as standard of care. So advancing treatment in combinations requires a PD-1, the head-to-head studies goes against standard of care, which is a PD-1. So you want to make sure your combination with a PD-1 inhibitor at least starts toe to toe. And if it's a little bit better, then your probability of success and your hazard ratio is higher. So we really see moving the field forward and treatments for patients in combinations with our own pipeline, which we'll talk about, I think, in more detail and the excitement of the data there. But also now with working with other biotechs because we're nimble, we're fast. We have a prioritized program in toripalimab. So we've announced a couple of collaborations where other people are using their unique mechanism of action, their clinical data to advance tori in tumor types that are important to us, such as head and neck, lung, liver, it really complements our own development and continues to build out the awareness and the use in the U.S., which also helps our commercial team. So we think overall, looking at these combination strategies and continuing to gather data and advance toripalimab in development as well as look to get it to other indications on the market is a really important approach for us.

Got it. Great. And so let's talk about the nasopharyngeal carcinoma. LOQTORZI is approved in that in 2023. You have seen a few quarters of revenue so far. And in the most recent quarter, you got about $11 million, up 12% quarter-over-quarter from $10 million last quarter. How has -- can you just talk a little bit more about how has the adoption been so far across different segments, including academic settings as well as community settings?

Well, first point that I would make is that LOQTORZI really has real outstanding efficacy in this disease state, nasopharyngeal cancer, really, really strong hazard ratio and further extends survival out from like 22 months, well past 48 months and so forth. So when you talk to physicians about the data and you show them the data in the studies, and by the way, there isn't another PD-1 that has this sort of data in the U.S. When you do that and you talk to them, the physicians are converted, right? They become toripalimab users in this disease state. And what we have seen them doing is use toripalimab when their additional MPC patients show up. So we launched this product in Q1 2024. So we're in the second year of launch. Now Q2 over Q1, we saw about a 36%, 37% increase in sales. A big chunk of that was inventory build because inventory had been depleted but about 20% or so of that was actual pull-through increase in demand Q2 over Q1. So that's a pretty good clip. Now what we saw last quarter, Q3 over Q2, we saw 3 of our 4 regions, and I would say we have 4 regions in the United States. 3 of 4 regions did 21% average growth, which is really, really good. We had one region that was lagging, it was flat, pulled everyone else down. But that being said, I think we were pleased with those results. If we do 10% to 15% revenue growth from here somewhere out in the middle of sort of 2028, we get to our target of $150 million to $200 million. However, we want to make sure that we get these folks and there's actually 2 segments of the toripalimab market, which are important. The first are the academics who are very cognizant of and observing of the NCCN guidelines. So we are the only first-line preferred treatment with nasopharyngeal, very strong NCCN positioning. Now these physicians are more specialists. So they're up to speed in the literature. They know exactly what's working and so on. So they're early adopters, and we've seen very good progress there. But another significant part of the physician population is the community physicians. And they treat a wide variety of cancers. They treat everything that comes in the door. So they only see a nasopharyngeal patient like 1 or 2 years. And so that's a higher bar because those physicians are sort of just not cognizant that toripalimab is on the market that this is really an outstanding therapy, and it's what they should use for their patients. When we get to those doctors, they understand they start writing scripts. But I think we needed some additional -- a couple of additional things really to get to these community physicians and make sure that these patients get treated. So we added some additional headcount across there. We also have some virtual sales reps that are going. And we've also done some additional things with our electronic efforts. But we feel confident that we'll get on the escalator with this into next year, and this will be a very nice growth rate for the product. But overall, it's really just a function that it's a very rare disease and the community guys, they just don't see it that often.

Got it. That's really good. And then just in terms of the label expansion strategies, you mentioned about the combo strategies that you combine you're thinking about. Can you help us understand what are some of the label expansion strategy you're thinking about going forward?

Yes. And so I think as we talk about the pipeline, we can look to the different indications that we're evaluating to get additional -- so -- and the important thing there is that it's a 2-for-1 strategy, right? So we invest in the pipeline, but when we get CHS-114 or casdozokitug approved, we also get toripalimab. So when we look at what it would take to take the positive Phase III studies and like toripalimab was just featured at the presidential session at ESMO with the combination with the ADC and bladder cancer, standing ovation with the PFS curves. So it just continues to deliver. Those data are beautiful. But to bring that to the U.S. as a China-only study, it would be a couple of hundred patients in a couple of years -- so we feel like it's better to keep advancing beyond the data sets that are here today, but it gives us continued confidence in the molecule seeing data like that in the New England Journal of Medicine article. So label expansion with the pipeline and others.

Got it. That's really helpful. Great. Moving on to your second program, which is the 114 and the anti-CCR8 program. Tell us a little bit about that program, a very interesting mechanism of action because you're targeting a CCR8 Treg. And apparently, the scientists who discovered this path was recently awarded Nobel prize for that, right? So -- just describe a little bit more about the target, what makes it so compelling?

I'll give you the sort of the high-level fly by, and I'll let Dr. Vale backfill a little more science. But I think that it's really significant that the whole Treg field has now moved to the fore at this point, right? There's a number of teams, as you point out, that are working on Tregs. And Tregs over the past 20 years have -- it's become very clear that Tregs play a significant role with the immune system in cancer and so on. And a lot of people have hoped that if Tregs, particularly in the tumor microenvironment were depleted, then what would happen next is the infiltration of CD8-positive T cells. You would remodel the tumor microenvironment. So this was a long-held hope. So I think the Nobel Prize fundamentally underlies the scientific impact of this and its potential therapeutic potential across these. What I like best about the Tregs in the space and Tregs depleters is it's highly targeted. You can go after cancers where there's a high percent of the Tregs present are CCR8 positive or on the other hand, you can also go where there's a lot of these high density. And so the clinical program is one of exploring just what happens when you deplete across these various cancers. And there are many cancers. There's the entire GI tract here, esophageal, gastric, colorectal, then there's pancreatic, prostate. There's a plethora of cancers that are so-called cold, where they are not immune responsive, and this is the promise of this. And so what's very interesting about CHS-114 is that it is such a highly selective molecule. So as I indicated before, when it was screened, it was screened against over 5,000 different cell surface proteins. It only engaged with CCR8. And I think this is going to be an important differentiator because a lot of the other teams, we know have molecules that react not only just against CCR8, but elsewhere in the body. So you end up with GI tox or skin tox or whatever those types of things. So having a very, very high-quality molecule, I think, is going to be a significant difference. But having this sort of highly targeted therapy where you know where to go with the rifle shot, I think, is very important. Maybe, Theresa, you want to add a little bit about the clinical product selection and the MOA?

Yes. Maybe just taking a step back for why we're so excited about the T regulatory cells getting recognized for the Nobel Prize. We were surprised and thrilled to see that happen. I actually worked with Fred Ramsdell at the Parker Institute and found it historical that he was off the grid camping, which is so typical [indiscernible] to get the call and be like Fred. So it tells you how much we didn't, as a group, think that it would be recognized. But I think it's the right time, and it's consistent with how the Nobel committee has really tried to focus on emerging areas of science that are really important. And clearly, like Alexander Rudensky is another father of Tregs, but consistent with how the Nobel is awarded to first discovery went with Fred and Sakaguchi. But the idea of T regulatory cells really holding down peripheral immune tolerance. And if you deplete them, you get rid of that. So Fred and Saka are also involved in a company to do treat with Tregs to dampen autoimmunity. Since tumors exploit this to turn off the immune system and resistance to therapy broadly, chemotherapy, radiation and of course, PD-1, right? So everybody has known this forever, but how do you get rid of Tregs only in the tumor and not cause terrible toxicity to the patient because we know we need Tregs for peripheral tolerance. CCR8 is the answer. And what was really missing is a way to just get in there and selectively target Tregs in the tumor, removing the immune suppressant and really opening it up now as you take the resistance mechanism away to potentiate therapy broadly. And our clinical program is really designed to evaluate since it's a targeted therapy, where is the target highest and also in what context. So we're -- the studies that we're doing with the different tumor types are very strategic and designed to inform us how to move forward to bring immunotherapy within PD-1 approved indications like head and neck, gastric, esophageal, but also tumor types that have really been underserved. I mean we see Tregs in a lot of breast cancers. We see it in colorectal cancer, MSS CRC. So I think there's a large opportunity here for CHS-114 across solid tumors.

Got it. Can you just help us understand some of the clinical data you've generated in head and neck cancer so far?

Yes. So I think in early phase development, you want to know, does your drug does what it said it would do? And do you get the exposure you want? And do you have the safety profile? So we've answered those target -- those questions resoundingly, yes, hits the target, tickles the target, has the safety profile to do combinations. The thing that's surprising, which usually get surprised and like, oh, it's going to be harder. We got a surprise that as we took the Tregs out of the tumor after treatment of CHS-114, this large infiltration of CD8 T cells, which we know is essential for immunotherapy to work. What's been the limitation for T cell engagers in solid tumors? There's no T cells in the tumor for them to activate. They bind the tumor, then they got to tickle the T cell, if it isn't there, CAR-Ts phenomenal in heme malignancies, how do they get into the tumor. So treatment with CHS-114 and these types of treatments can really lead that. So we've shown that. We've shown that we have the right dose. We have immune activation. We've done exactly what we said without causing terrible autoimmunity. And we've seen early signs of response with -- in combination with toripalimab. So now it's about delivering data in 2026, where do we see that efficacy signal that we can take it quickly in development.

Yes. That's helpful. So on that front, you have 4 indications that are planning to go into, right? I mentioned head and neck, gastric, esophageal, CRC which one is most exciting to you? Or do you have a favorite child?

So I think it's really important that this clinical development plan is purposeful and thoughtful. So I think that we've seen activity in head and neck. We know that there's a treatment approach that could affect disease. The question is, does toripalimab and CHS-114 in the second-line head and neck setting reverse PD-1 resistance at benchmarks that are currently being shown with Nobel agents. EGFR bispecific ADCs are hitting high ORR and duration. So we have to be competitive in that space. We're hopeful, but the data will show us if that is -- if we have sufficient activity to be competitive in second-line head and neck. And what we started with when Denny was talking about is the targeted therapy, I mean, I'll use 2 analogies of how you need to learn early in development. So Peto Merus' compound, shockingly good data in head and neck, right? The target was identified in CRC. That was the tumor type where the LGR5 EGFR bispecific was going to knock it out of the water. Head and neck did, CRC is showing some activity, not as good, right? So they've learned something about the biology. The BRAF MEK inhibitors, when they went in, you just go and treat RAS-mutated tumors, right? They have a label across solid tumors, except for colorectal. And we learned that, that's because of EGFR and then breakwater this year, got that phenomenal data and got approval now in colorectal. So some of it is about learning. It's not that it didn't work in colorectal, it's just that it needed something else, right? So our study is designed to learn. Is it the density of CCR8 positive? Is it just that? Is it the ratio of Tregs to CD8s? And then also looking in tumor types like colorectal cancer, where there's a lot of biology and no approved PD-1, is that the right context given the biology there. So I think what we want to learn next year is what's the efficacy marks we're hitting what's the dose? What's the safety profile? And what's the fastest development to advance this molecule. So the one -- I think I like all of them that show activity. The one that I'll love next year is the one that gets me to market fast.

Yes. I agree. I think that the promise is very broad with the whole CCR8 Treg depletion class. Certainly, in other people's hands, there's been excellent data in gastric. There's been very good data in panc and a number of things. So I think that overall, as Theresa said, we have a broad yet focused program. We placed bets. But the nice thing is there's very strong mechanistic justification for investigating where we're going. And we'll just have to turn over the data cards and see how that turns out. But in all these places, especially places like head and neck, where others are moving forward, CHS-114 also has potential not just to compete, but to be complementary as an additional orthogonal mechanism of action. Those drugs don't deplete Treg cells and Treg cells are a problem there. So you can go head-to-head and so on. But we're also getting -- and back to the deals for a moment. We also get good interest from companies who talk to us about potentially combining our CCR8, CHS-114 with the other products in these indications. And that's a win for us, too. I would just say as a small company, we're sort of uniquely positioned. We don't have an to grind where we have to stay just in our own space like some of these big shops, right? In the first instance, we are a small biotech. So any success broadly with the mechanism of action and the products will be disproportionately beneficial for Coherus, right? We'll get a bang for a buck than for one of the big giant pharmas go ahead. The second thing is we're free to do deals and combine with others. Theresa has a lot of very close ties throughout the scientific community and a lot of big companies. And we're very open-minded, and we really want to benefit the patients. We want to provide that step change in patient survival. So we're okay if they take CHS-114 and combine it with a bispecific or an ADC or radiation therapies, we're fine with that. That's a win-win, anything that gets you there. And so that's the kind of things that we look at. For example, we are talking about collaborations within the U.S. It's just like collaborations that we do with toripalimab. We'll just give them toripalimab, put in your studies. And when they get approved, we get approved, we get a label claim. So we think the rising tide floats all boats, and we think it's a unique strategy. But one, our company being what it is, we're able to embrace.

Got it. Got it. That's helpful. Great. And then just last question on 114. And we've seen a few different competitors from big pharma also developing CCR8 target. Can you just tell a little more about your 4 differentiation compared to other CCR8 competitors out there?

It's a good question, and we're learning about these. And Denny has mentioned a couple of times, selectivity matters. We know off-target binding can have liabilities, particularly toxicity. And we have heard chatter from a few folks. We were just at SITC and maybe some of the programs in the big pharma shops are shelving their programs because they've hit toxicity. So we know that ours is selective. We have an acceptable safety profile with the data we have to date. We also have potency, both from where it binds, it's in the picomolar range from an affinity, but it's ADCC enhanced, not all of the programs out there are ADCC enhanced. Shionogi showed data at ASCO this year with responses to CR in MSS CRC, low, nice, right? They are wild-type IgG1, not as potent as ADCC enhanced. And then there's the differences do you bind to compete with the ligand. We think it's better not to compete with the ligand because it's competition, so you don't get as much binding, and this is a bind and kill mechanism. That's also important because ligand blocking, you kill the cell. It's not going to signal. So dead cells don't signal. And then clinically, we're going to differentiate through the combinations through the approaches, we think adding it with Tori. We feel very confident and excited that we can compete and deliver data and continue to be the one showing data. We are the first to show CD8 infiltration in the tumors. Shionogi is the second. No one else has shown that yet.

I think in -- just to dovetail on Theresa's remarks, I think, David, in 2025, Coherus Oncology demonstrated significant leadership in this field. We were the first one to show depletion, then the attendant infiltration positive T cells and so on. And the SITC webinar, which just occurred 2 weeks ago, was the most highly attended. Now we have the Nobel Prize. And you will see us in 2026, continue to press forward with our scientific leadership being in panels going to meetings and moving the field forward for the benefit of patients. I think that's very important. And again, as a very high science small company, it's something that we'd love to do.

Got it. Great. We have about 2 minutes left. I just wanted to kind of touch base really quickly on casdozo, your third program. So just curious around the data expectation in your first half '26. Can you maybe set some expectations around what kind of data we should be expecting from that?

With respect to the hepatocellular carcinoma data. Theresa, do you want to chat about that?

Yes. So clearly, you mentioned the activity we've seen in the initial Phase II showing improved depth of response, improvement in ORR improvement in PFS on top of standard of care. So now we have the randomized study with tori/bev. We want to see that safety. We want to see that improvement. So initial data, we need activity equivalent to. It takes time for it to mature to see that depth and improvement in ORR. So that's what we'll be looking for, and that would be a data set that would really set us up to then design a Phase II/III and have all the appropriate health authority conversations. So a second data set that shows that profound depth of response and improvement in duration would be enough to advance development.

Got it. Now how quickly do you think you can actually move into a Phase III trial?

It's the usual metrics, right, get the data, put the package together, have the conversation. So half a year...

Very exciting.

I think that's a very interesting -- that's a very interesting molecule and a great indication. Hepatocellular carcinoma is a $4 billion space in the United States. We've shown phenomenal efficacy. We have a lot of folks interested in ex U.S. in that molecule. It's first-in-class, which I think is also very remarkable. IL-27 plays a fundamental role as I talked about with respect to pathogen infiltration into barrier proteins. The biology and the translational aspect of the biology really holds water. And I think that's why it's doing well.

Got it. Great. And just lastly, Denny, you mentioned about some of the B deals you're planning to do and some of the key catalysts over the next 12, 18 months. Maybe just highlight a little more what kind of things we should be watch for over the next 18 months?

I think we've demonstrated the ability to do outsized deals, particularly with our divestitures and a number of other things. Our acquisitions have been low. Our divestitures have been high. We have a really extraordinary portfolio here at these 2 assets. We have global rights to both these assets, and that's really important. So there's a lot of flavors that we can do, certainly ex U.S. deals. But I think the key thing with deals is that, first of all, they validate the value of the assets in the eyes of big pharma or the other partner. They bring in upfronts to offset the clinical costs. And lastly, they set us up for cost sharing for pivotal trials later on. So I think that's very good. But we have a lot of latitude with the deals. For example, as I said, we can do not just ex U.S. deals, but we're very happy, for example, to take CHS-114 and put it in the hands of other people to mutually advance their products, which I think is mutually beneficial. So we'll do those sorts of things, too. So stay tuned. As the data rolls out 6, 12, 18 months, you'll see us go chase those things down.

Great. We're looking forward to exciting 12, 18 months.

Going good so far.

Great. I think with that, we're out of time. Thank you, Denny and thank you, Theresa.

Thanks David. Thanks, UBS, for having us.

Thanks David.