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

Thank you. Afternoon, everybody. Thanks for joining us here for the next session. Really pleased to have Coherus with us.

I'm going to turn it over to [ Rosh ] to make some opening comments, and then we can jump into Q&A. Thank you very much, Matt, and thank you for the opportunity to speak at your conference this afternoon. So Coherus is about the business of overcoming immune resistance in cancer. And we do this, I think, with three of our products, which are very interesting. First of all, of course, we have a next-generation platform, PD-1 LOQTORZI (toripalimab-tpzi), which we launched into NPC, which is moving along quite well. This has demonstrated differential activity against Keytruda in a number of settings, and we're, I think, the primarily, um, the NPC market has shown some very strong six-year survival data there and good positioning on the NCCN guidelines. However, in terms of the pipeline, we're very, very excited about tagmokitug, which is a CCR8-driven Treg depleter, again, very focused. Treg depletion is a fundamental mechanism of action to help overcome immune resistance. Tregs, as we'll talk about in just a moment, proliferate upon the destruction of tumor cells with a number of mechanisms. And it is supposed that if you were able to get rid of these Tregs selectively in a tumor microenvironment, then the anti-tumor response of T cells can be restored. And then the last product, which I like a lot, of course, is casdozokitug, which is an anti-IL-27. We're moving that forward in first-line hepatocellular carcinoma (HCC). IL-27 was discovered by Chris Hunter Penn as a fundamental mechanism for stopping immune response in barrier tissues such as liver and lung and so on. We'll have a little bit more to say about that. Importantly, though, after two, three years, after moving these things forward, this half of the year now is very exciting. We're getting ready to turn over our data cards on a number of these studies. We have six different tumors under investigation with our Treg depletor tag. And of course, we have the HCC study going with casdozo. So we're happy to answer any of your questions around that, but I think it's an eventful time, a bit stressful watching data evolve, but we're having fun with it.

Great, wonderful. So maybe we can just talk a little bit about your commercial program, and then we'll hop into the pipeline. But can you just, for everybody's benefit, talk about how big you think that product can be, and obviously, from a business standpoint, what that provides for you as you're developing the pipeline?

Sure. I think it's one of the key differentiators of Coherus' innovative oncology story, that we have a commercial product that's out in the market launching and making money. We're approved in nasopharyngeal carcinoma (NPC). We are the only available and approved therapy in the U.S. The only guys out there selling. It's about 2,000 patients a year. This translates to about $250 million in opportunity. We estimate that we'll probably be able to reach about 70% of that at maximum market share, that's perhaps $175 million per year. We've been marching that product up. Last quarter we did 15% quarter over quarter, which was pretty strong. We certainly won't do that every quarter, but we were happy to see it last quarter. When we last year, last quarter, I think we did about $13.6 million in sales. When we get to about $15 million or so in revenue from that product, the cost of the commercial team, the COGS, the royalties, and all that will all be taken care of. So any sales beyond $15 million a quarter, we start to cover the overarching SG&A, the company, which, of course, is our focus. We project that next quarter, probably in the second half, Q3 or Q4, that we'll reach $30-plus per quarter with that product. I think that's a reasonable rate to achieve. At that point, the SG&A and the core burn of the company, ex the, um, clinical trial costs will be covered. So that'll be a big deal for us in that we won't have to keep going back to the market just to keep the lights on and so on. Um, we've reduced the size of the company over the last three years to about 140-ish people from a max of about 360 as we sold off the Lucentis biosimilar, the Humira biosimilar, etc. So we've got a nice, tidy little innovative oncology company here with a very well-controlled burn. About in 2027 we'll get to $30-ish plus and have the burn covered. And then ultimately, I think in '28, somewhere along there we'll be able to, I think, hit a plateau on a quarterly basis. So, you know, that's like $40-plus per quarter. And so there's a little extra to cover things that come up here and there. And then I suppose in 2029-ish, we'll actually get up to where we max out for the year. But we're projecting $150 to, say, $200 sometime in that general timeframe, between '28 and '29. And I think that it gives us considerable operating potential. The challenges that we have in the market there is that Keytruda has been used in head and neck cancer for a long time. And these are the same physicians that are treating nasopharyngeal cancer, even though with respect to etiology it's a much different cancer. So there's an educational process upon which we show them the six-year survival data, which is over 65 months versus chemotherapy, which is 33-plus months, something like that. We show them the six-year survival data, the NCCN 1A guidelines and so on, and it's an educational process. We find them responsive once we show them that, but we do have to do that convincing, and so we're very focused this past year on, first of all, buying enough data to where you understand who all the physicians are and who's writing the scripts; understanding where we're missing the scripts and then focusing the team in a sort of multiple disciplinary fashion to block and tackle our way through that. So that's the lift that we're doing right now on that, and you'll get more updates on that as we go forward this year. The interesting thing, though, about having your own approved PD-1 is two or threefold, actually. First of all, if you go to do clinical trials, you're not buying drug from other people. You have a proprietary PD-1. And as we pivoted the company strategically, that was one of the things that was most important to us to have one. We're combining that with both tagmokitug, the anti-CCR8, and casdozo. So ultimately, if those are approved, we'll get an additional label indication approval for LOQTORZI for each of those indications and sell two vials, two moieties for each sale. So I think that's actually a very efficient way to generate additional sales and additional label indications in the future. I think that's a differentiated story. I think that there's a challenge of overcoming the contributor resistance. Absolutely. I think that once we get a little further on with the progress.

Okay, great. And then maybe just one other commercial question, just would you think about adding additional commercialized products into that sales force that you've built to gain additional leverage?

In the NPC, we'll have bandwidth to do that. We continually monitor developments in the market for additional products. We looked at a couple last year, for example. I think that you have to be very, very selective with particular products. Maybe the best ones are the ones that you developed yourself. But I think that we're open to collaborations and working with others and so on, but that certainly is top of mind.

Okay, great, great. So, um, CCR8, Tregs.

I think investors have heard a lot about Tregs. I understand sort of the biology to a certain degree, but want to understand, you know, do you have the right Tregs? Are you going to make the right impact on the tumor? What's your specific biology? So maybe we could just walk through a little bit of why you think you have the right approach here. Sure, so certainly Treg depletion, like a lot of things in oncology, is an area of, you know, tremendous promise. But oncology, by its very nature, is a prove-me sort of area. There's countless companies where people didn't think their products were going to do very well, and then they did spectacularly well. Depletion, I think, has significant promise, but the issue has to be that, um, in which particular cancers, in which particular line of therapies can its benefit be realized? So first, in that direction, you know, Treg depletion frees the immune system, potentially reactivates the T cells to go after the tumors. We were the first team to show remodeling of the tumor microenvironment. Last year we showed data in a head and neck study, fourth line, in which we showed Treg depletion and subsequent infiltration and proliferation of CD8-positive T cells. In that very same study, we saw significant diminution of a tumor. It was a 2.8 centimeter tumor in a patient's lung. So it was a head and neck patient with a lung metastasis. And we saw a diminution of that tumor, and that was really proof of concept. That happened with co-therapy with toripalimab, so the activation of T cells pursuant to PD-1 administration. But that was very, very exciting. Based on that data, [ Rosh ] and his team have gone forward now with a second-line study in head and neck, which we talked about on our call in August, and we're going to have a little bit more to say about next month. Generally speaking, though, I think that one has to be careful with Treg depletion and these CCR8 agents. This was, the discovery that the Treg regulatory cells in the tumor microenvironment were differentially expressing CCR8 on their surface was made, you know, by Rudensky and company in 2016, Memorial Sloan Kettering. And the race was then on to try to find molecules that would attach to that CCR8 and then subsequently provide effector cell-driven depletion selectively in the tumor microenvironment. And of course, we've done that. But this is a GPCR receptor, which is a very small piece of real estate putting, sitting there on the top of the cell. And so it has been very difficult to find significant, sufficiently selective agents to do that, because if you make an antibody, react with a lot of different things. As a matter of fact, we were unable to, we tried for two years, we were unable to make a selective antibody ourselves. We acquired Surface Tech Oncology and they had screened their agent against 5,280 surface cell proteins in the genome and found that it only binds to CCR8, which is quite good. So we believe we have a best-in-class asset. High affinity, textbook PK, and a lot of. And again, we've shown remodeling and so on. A couple of other players in the field, I think, are seeing various flavors of cross-reactivity, significant fusion site reactions, or other types of side effects. In general, [ Rosh ] could comment further, but in general, I think that the tolerability profile is very sufficient for us as we go forward here. But I think that is really the key. And that's why there has been attrition with respect to these CCR8 agents by a number of the players in the field. But I think there's two or three players, though, that probably have decent molecules that are going to go forward.

Count ourselves among them. Okay. Great, great. Well, maybe we should talk a little bit about the trials you're running, the tumor types you've picked, you know, and sort of how that sequences with some of the data updates we'll get.

In the near future? Sure. I'll tee it up for [ Rosh ]. So, overarchingly, there's six different tumor types that we're going after, given the proof of concept that we saw with the fourth-line head and neck. First is a second-line head and neck. We're then investigating the GI tract and number of cancers, first esophageal, second and first line gastric and finally CRC fourth line colorectal. Additionally, we did a deal with J&J and we're investigating late-line prostate cancer. So, [ Rosh ], you want to talk a little bit about the second-line head and neck study?

Sure. Yes, absolutely. Thanks, Denny. So a couple of points I'll mention up front. So we do, as Denny mentioned, we have a very broad program, but one that's well supported by the biology in that all of these tumor types have pretty good expression in terms of CCR8 levels within the tumor. The second thing I'll say is that we have two protocols then that are active and a third protocol about to start. Protocol one is the second line head and neck squamous cell program. Protocol two is the GI program that essentially Danny mentioned, which has four cohorts. It's second line upper GI adeno. It's second and first line esophageal squamous cell. And then fourth line plus CRC. And then the third protocol about to start is the prostate cancer protocol with pasritamig. Before I just kind of dive into a little bit about what we're seeing so far, um, I think it's important to bear in mind exactly what questions we are asking of this program because I think they are a little bit different depending on which cohort we're talking about. For the three cohorts that are second line specific, so that is esophageal, upper GI adeno, and head and neck, we're asking the question, can we reverse PD-L1 resistance? Because most, if not all, of these patients will have previously received a PD-1. That's a very specific question we're asking. For the first line esophageal squamous cell cohort, we're asking can we combine with chemotherapy, which then, if we can safely and effectively do so, enables us to go earlier in the treatment paradigm. And then for the colorectal cohort, very late line, the question, can we convert a cold tumor and make it into a hot tumor? Right? And then that allows us then to go earlier in the colorectal space. And of course, pasritamig, we're asking the novel, novel question. So what we've communicated so far in the second line head and neck study, the 40 patients, it's totally, fully accrued. At our last earnings call, we did communicate three things. First of all, number one, we are seeing an acceptable and manageable safety profile, which is very important in the context of the evolving CCR8 space. In fact, also in terms of the evolving head and neck space as well. Secondly, we communicated that we are seeing activity both in terms of response, but also in terms of duration. That duration is very important with IO specifically because that's historically where IO has benefited, has been in extending that duration of therapy rather than purely response rates. The third thing that we are seeing is enrichment of activity and we're seeing enrichment in two areas. Number one, those patients who are HPV positive and secondly in those patients who have a high expression of CCR8, so a lot of CCR8 within their tumor. We're calling that, we've coined the phrase TIRRI, or Tumor Immune Regulatory Index, which is a measure, fundamentally, of the CCR8 expression within the tumor. One other thing I'll say is that with HPV-positive specifically, which is where we're seeing a signal or enrichment of that signal. That is where we feel that there is significant white space. Because if you look at the EGFR bispecifics, the ADCs, et cetera, particularly the EGFR bispecifics, are being focused mainly on, or their efficacy is being driven by HPV negative. So we think that's a nice space to play in, and I think our data is guiding us towards that space specifically. Some more to come in October, but that's kind of a high level summary of what we're doing and what we've seen so far.

Okay, perfect. I guess maybe two follow-on questions with that. So, you know, we'll also likely get [ Peto ] data before the end of the year, it sounds like. So, you know, that's obviously a different. So, you know, how will that data influence how you think about head and neck as a population? And then I think the second thing is, you know, as you point, some of the tumor types you're studying, right, the standard of care is fairly robust, and others, you know, like CRC, standard of care is very, very poor. So how do you think about sort of the bar that you need to see for some of these tumor types to move ahead?

Great question. So let's take two questions into. So, first of all, [ Peto ], yes, absolutely. But that's what I was alluding to in terms of the EGFR bispecifics. So, [ Peto ] in particular, so [ Peto ] is the one that is looking at both HPV positive as well as negative. But if you look at their data so far, we still feel there's white space in the HPV positive space because their efficacy so far has been driven really by HPV negative. The second thing is the durability is hugely important. And I think, you know, I emphasize the importance of durability, but one of the key reasons for that is that is really what matters from the patient perspective. They want to live longer. It's also the approvable endpoint, right? So you don't get approved on response rate. You get approved on survival, PFS, durability, essentially. So I think that's the second point. And then the third point is there's a significant amount of toxicity. So if you speak to some of the KOLs, they will say the toxicity really needs to be managed for some of these EGFR bispecifics, rash, et cetera, et cetera. So I think that's where we could show an advantage, and that's also why I emphasized the acceptable and manageable safety profile we're seeing so far. So to the second question, I think, um, yes, we are looking at fourth line plus, as you say, for CRC, maybe earlier lines for some of the other tumor types. But we are fundamentally looking at areas where there remains a clear unmet medical need. Again, if you look at the head and neck space right now, the current standard of care is cetuximab, other chemotherapies. You're looking at a response rate of 13% to 15%. So the bar, at least in terms of response, as well as duration, I mean, the PFS is about two months, is pretty, you know, there's a lot to be improved upon, and that's where we are hoping that we can help.

Okay. As [ Rosh ] indicated, the KOLs we've talked to believe that the etiology of [ Peto ] and the other EGFR-driven bispecifics is primarily in the HPV negative space. And what's interesting with the data that we've looked at so far, as we indicated in our call, is that tagmokitug appears to be working much better in HPV positive, and there appears also to be an opportunity to select patients on the basis of CCR8. And so I think selectivity in those two dimensions is something that we'll take a look at after we turn over the rest of the data cards and look. But I think that presides – presents the opportunity, I think, for having a better impact on patients.

Got it. Got it. Okay, helpful. And then I guess the last thing maybe on CCR8 is, so could you just talk a little bit about the plan from here? So you'll get some of this data in, you know, and this is sort of what I was alluding to in the prior question, how are you going to make decisions on what you do next from here? And do you need the whole cohort across all of these tumor types, or might you take data from, say, head and neck and decide on a path forward alone with that?

Just to rotate that, that's a great question, which is difficult to answer in the absence of data. But I'll answer the hypothetical regardless. I think first of all, as [ Rosh ] indicated, we're going to develop a very good understanding where Treg depletion can be efficacious. You know, what is the immune context of each of these and what can go. I think what's very, very interesting about Treg depletion is its ultimate compatibility with some of the other therapies. If you know, ADC, KRAS, radiation, VEGF, these tumor killing modalities all generate Tregs. So therefore, it's the combinability. So we don't really feel that we're going head-to-head against [ Peto ], right, or we're going head-to-head against KRAS. That as a synergistic mechanism of action whereby the ORR generated by these therapies can have the adjunct of duration added by Treg depletion. So that's ultimately where we're going. So it's not really how we have to beat them on ORR out of the gate. It's how we combine. It is true, though, that we are combining now with our PD-1 so we can understand the activity of T cells and restoring the immune response. But we fully expect to continue to have partnership combinations as we did with J&J with T-cell engagers, right? A T-cell engager needs a T-cell to engage. And if there's not one in the tumor microenvironment because they've been excluded by Tregs, you know, that's an issue. So that's why they're very excited. All that being said, I think that would be very interesting across these tumor types, these six different tumors that [ Rosh ] is investigating, to see how the presence of CCR8 and the signal are correlated. And I think that would be very interesting. So if we see consistency, consistency, for example, from CRC and esophageal and gastric and so on, and even head and neck. And we understand how we can follow this. I think that lends more credibility to that targeted therapy. And I think that's what's particularly interesting for us. That said, we have to also keep in mind, though, that these are early stage studies. These are phase 1 studies. They're not really controlled studies, single arm. So we'll have to follow up with the appropriate phase 2 program and see what's very promising where we can roll into a.

At all. Okay, great, great. So maybe we should switch to IL-27. I think, as you referenced, the biology there is no.