Coherus Oncology, Inc. (CHRS) Q1 2015 Earnings Report, Transcript and Summary

: Good day, ladies and gentlemen, and welcome to the Coherus BioSciences First Quarter 2015 Financial Results Conference Call. [Operator Instructions] And as a reminder, this call is being recorded. I would now like to turn the conference over to Susanna Chau, Associate Director of Investor Relations. Please go ahead.

: Good afternoon. My name is Susanna Chau and it's my pleasure to welcome you to the Coherus Biosciences First Quarter 2015 Financial Results Conference Call. Joining me this afternoon are Denny Lanfear, President and Chief Executive Officer; and Jean Viret, Chief Financial Officer. At the close of the market today, we issued a press release highlighting Coherus' first quarter 2015 performance. This press release is posted in the Investors section of our website, investors.coherus.com. This conference call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. This includes statements about the company's current operating plans, financial guidance, objectives and intentions with respect to future operations and products. As such, they are subject to the risks and uncertainties that we discussed in detail in our documents filed with the SEC, specifically, Coherus' quarterly report on Form 10-Q for the quarter ended March 31, 2015, and any applicable amendments, which identify important risk factors that could cause actual results to differ materially from those contained in the forward-looking statements. Coherus has a policy to not comment on financial performance or guidance during the quarter, unless it is done through an appropriate public disclosure. Coherus retains its policy and practice to not update financial performance or guidance during the quarter, unless required by law. On today's call, Denny will provide clinical and business highlights. Jean will provide financial highlights for the quarter ended March 31, 2015, before we open the call to your questions. Denny will then close the call with a few concluding remarks. With that, I'd like to turn the call over to Denny.

: Thank you, Susanna. Thank you very much, and thank you for joining us today here at Coherus. As Susanna indicated, I'm first going to make some opening remarks, and then I will recap the product development advances for each of our key products, in particular where we are with CHS-1701, our pegfilgrastim biosimilar. I have a few comments about our wave 2 products, our pipeline as it comes along and then a few other things. I'm happy to say the company continues to make consistent progress according to plan in all areas. All programs are on track as previously discussed, and we'll give more granular updates as we proceed, program-to-program. We'll discuss CHS-0214, the company's etanercept biosimilar, CHS-1701, our pegfilgrastim biosimilar and lastly, our CHS-1420, which, of course, is our adalimumab biosimilar. On 1701, we'll discuss the BLA-enabling studies and we'll also give a few other key details there. I would note that in terms of 1701, we continue to be highly commercially focused at this point with that product, and we will have some discussion and updates a little further on in terms of our payer outreach and our commercial planning activities. I will give you brief recap and our take on some regulatory developments and some additional guidances released by the FDA in biosimilars, as well as other few comments. And during Q&A, we'll be happy to take any questions you have on the regulatory front also. And then following my remarks, of course, as Susanna indicated, Jean Viret will summarize our financial statements and developments for the quarter, which are overall positive and again very consistent with our plan. And lastly, we'll be happy to take whatever questions you have in terms of Q&A and the business, recent developments. So let me start now really with our CHS-0214, our etanercept biosimilar candidate. I'm happy to say that Phase III accrual has been completed for both the rheumatoid arthritis study and for the psoriasis study. Accordingly, the company received a milestone from Baxter for the completion of these 2 in the amount of $35 million last Friday. And I believe we have a disclosure, which has come out on that. In terms of our rheumatoid arthritis studies and our psoriasis studies, now that they are accrued, we're in a position to talk a little more about when we think the top line data will be available. And in terms of the rheumatoid arthritis study, as you know, there is about 619 patients there. And we project top line data there around the end of Q3 2015, this year. In terms of our psoriasis study, there is about 496 many patients there. And we're currently working through some details as when the data will be available for that study, top line, and we'll have little more to say about that in a while. In terms of CHS-0214, there is one other key development, which was a successful Phase I readout with a repeat pharmacokinetic study which the company performed. And this study evaluated the EU production facility and the EU Enbrel. So this again met the requirements for biosimilarity, and the company has accordingly issued a disclosure in that regard. And then lastly, in terms of CHS-0214. You probably know that we had an amendment to our agreement with Baxter. And this was actually done just at the end, right near the end of Q1, start of Q2. This encapsulated about a $130 million in milestones to both complete some clinical work, prepare for the BLA and to perform certain pre-commercialization activities. I would say that we remain highly committed with our partner Baxter for this product and partner our successful commercialization of this in the EU, with the MAA filing targeted in mid-2016. In terms of the CHS-1701, pegfilgrastim biosimilar. A few comments there on where we are in terms of our BLA-enabling program and when we expect things to readout. First, as you may recall, we discussed previously how we'd reach concurrence with FDA on the BLA-enabling studies in the programs. This comprises a pharmacokinetic, pharmacodynamic study. This one being in 106 subjects. And the primary endpoints there are the area under the curve for concentration, cMAT, as well as for ANC, area under the curve, and cMAT. So we're looking at both the concentration of the drug, and we are looking at the biological response. We expect topline data from these 2 studies at the end of Q3 2015 or perhaps the start of Q4 2015, which we believe will enable the planned BLA filing in Q4 2015, as we have previously guided and projected. I would say however, as we previously discussed, there is some chance that this will slip into Q1 2016, depending on things here and there with the regulators and how quickly things are turned. However, we are still staying with our Q4 2015 guidance. Currently, we are generating required data to support the BLA filing, we've actually started the actual process of filing. And we anticipate discussing such data with FDA in the course of the type 3 meeting, of course, prior to submission. We're developing plans for that. The 1701 product is a very good one for us. It's our very first product, as you know, that we intend to commercialize. And I just wanted to take a moment to recap some of the key attributes of this product in a few dimensions, which make it important to the company, and I think -- and help you to understand why it is such a significant opportunity for us. First of all, in the marketing and commercial aspect of things, this product is in a relatively stable treatment paradigm. It is supportive care for oncology. And further, the way the product is used and how the distribution is handled in the clinics results in what we believe will be a reasonably sized commercial footprint to address the market. Lastly, in terms of the market in commercial, there appears to be a relatively modest competitive set compared with other biosimilars products. Two other folks here in the U.S. So we feel that's advantageous given the size of the market opportunity. In terms of the molecular aspects of the product in the CMC, there's also some interesting attributes, which make it very attractive here. First of all, pegfilgrastim is complex but it is reasonably well-defined with limited heterogeneity for the product. One of the key things about this product is it really plays to Coherus' core scientific strength, as some of my team members actually wrote some papers on the structure of this molecule back in the mid-'90s. So I think it's fair to say, when we approach the FDA, that we had a very firm understanding of the molecule and we're able to have very substantive scientific discussions. Lastly, in terms of the molecular CMC dimension, interesting to note that the product has an existing stable formulation, which does not have an intellectual property coverage past the perceived launch date. So this actually allows you to use the innovators' formulation for that, which again is another advantage. On the scientific clinical dimension, there is also advantages with this product. First of all, of course, it has a very well-defined mechanism of action. The response of the white blood cells in the body is very well-known, very predictable. This gives a very clear efficacy endpoint. And also, the product has an excellent antagonistic profile, which is well known. All that translates into very executable and reasonably set, reasonably sized set of studies for the regulators to take a look at both the safety and the efficacy of the product. And we have availed ourselves of that. I think that's why we are able to have an abbreviated program. In the legal dimension, the product is relatively well controlled and I would characterize it perhaps as moderate. The patent expirations appear clear in the short term. And the other thing that I would note here is that pegfilgrastim represents the completion of the line extension strategy from the base product filgrastim. So unlike for example, daily dosing Copaxone moving to less frequent weekly dosing, which is the sort of line extension strategy, here you're dealing with the actual expiration of the line extension strategy itself. So we think that's actually quite promising and favorable. And lastly, in the financial dimension, we find more, I think, positive attributes. This represents a near-term launch and this will allow us to actually fund our pipeline later on, as we begin to gain sales post launch with the product, which we expect in the latter half of 2016. There's potentially a very substantial revenue stream here for us, given the size of the U.S. and x U.S. market. And then lastly, pegfilgrastim is an e-coli product. So what that translates to is a relatively low manufacturing cost of goods. This is not a CHO product with glycosylation, quite a bit different. This is going to be favorable. So for a variety of these reasons, we feel this represents a very, very attractive product for us. Accordingly, we're spending some time this year as I've discussed with many of you, taking a look at the commercial side of this product. So this, of course, has been something that we are focused on and we'll continue to do so, as we look at our commercialization options going forward. Particularly, we are highly engaged with payers and payers, as you know, are beginning to focus more and more on biosimilars as a strategic opportunity in key categories to control their cost more effectively and with the introduction of competition. So we find the payers to be very receptive to various overtures and talking about this product and other products. And you'll hear more from us in Q3 and Q4 this year about our conversations with them and how we plan to go forward. However, I would offer you the following guidance in terms of what we have found so far with payers, which are 3 primary issues. Number one, we find that payers are very interested in the highest level of product quality. Payers are not interested at substandard biosimilars, they're really interested in very, very well done biosimilars that fairly well replicate the originators' molecule. Secondarily, we find that payers are very conscious of and what's very important to them is full label extrapolation from the regulatory authorities. So one of the things that they ask us each time we talk to one of these teams is do you expect to get the full label and so forth and why. And of course, with our strategy of very precisely aligning with the originator molecules, this is, I think, a key issue and a strength for the company. And then lastly -- thirdly, the payers are very interested and are very consistent in reliable product supply from first-class facilities in regulated markets. This is something, I think, which is quite important to them. Some payers have opined to us that they will go out actually and visit facilities and so on. So these are some of the things that we keep in mind as we move forward with 1701, and we'll have a little more conversation, as I said, about it later. But clearly, we are focused on patients and providers to ensure that we are providing the highest quality biosimilars to them, and the highest patient value. As I indicated previously, we'll be completed with these efforts in Q4 2015 and say a little more about this and that will line up nicely with our expected BLA filing for that quarter. And then, in terms of 1420, our adalimumab biosimilar, we previously reported our decision to conduct global Phase III in plaque psoriasis. As many of you know, you have several options for moving forward in Phase IIIs with these products and selection of these. You can -- for example with a adalimumab biosimilar, you could proceed with rheumatoid arthritis or psoriasis typically. For a variety of reasons, we're moving forward with psoriasis, and this is a randomized parallel group study comparing our 1420 product to the originators' Humira product in 500 patients with plaque psoriasis. The primary endpoint here has been globally harmonized across a number of regulatory authorities including the U.S., EU and Canada. And we expect that a single psoriasis study will be able to fulfill the registration requirements for all these major territories. We will be posting the study design and clinical trial data prior to its initiation, and we'll be providing a little more information on the key study parameters going forward. However, I can say, based on feedback from EMA and FDA as well as discussions with selected major payers, with -- whose concern is that we address the P&T Committee's acceptance of biosimilar, that we have included a switch from HUMIRA to CHS-1420 in the second part of the study and vice versa. This, of course, is one of the key things that folks want to understand as you go forward with the biosimilar in the market. And lastly, I would note that our study startup activities have now begun. We are tracking toward the goal initiating the study in the middle of this year. Our CRO has been engaged. The major participating countries have been decided. And a number of locations, the sites have been determined as well as the other startup activities, which are now well underway. In terms of timing, as I indicated, mid-2016 for the start. And we expect the filing for this product to be in the second half of 2016 along with the intended filing. We'll have more to say about this program as we go forward and get a little more clarity in the second half of 2015 in terms of 1420 product. Now let me just make a few remarks about our pipeline. As you know, we recently completed our follow-on financing. And the primary objective there was to fund our wave 2 assets over the next 2 years. We're making very good progress there with this effort, and we have identified a group of product candidates that we are now targeting and are focused for development. Our goal is to progress development of a sufficient number of candidates, such that we will have a Phase III start each year on one of these products starting in 2017. So we would anticipate being able to move products in the Phase III in each year 2017, 2018 and 2019. And then lastly, let me just make a remark here about this Biosimilars Forum, which I think is quite important. It's recently been announced that Coherus is working with the other biosimilar entities here in the U.S. to address key public affairs issues. The Biosimilars Forum is a nonprofit organization. Its mission is to advance biosimilars in the U.S. with the intent of expanding access and availability of these biologic medicines in improving health care. This forum was publicly launched May 5 of this year in 2015, and it currently consists of 11 leading companies involved in the development and manufacturing of biopharmaceuticals of biosimilar medicines. Coherus is a founding member of the Biosimilars Forum and we represent major other companies in the U.S. such as Actavis, Amgen,[indiscernible] Pfizer as well as such as Sandoz and Teva. Now with that, I'll go ahead and pass it over to Dr. Jean Viret, the company's Chief Financial Officer. And Jean will give you a few more details here on the financial highlights for the quarter, some of the developments and so on. And then, after Jean, we'll be happy to go ahead and open the call, and take your questions. Jean? Jean-Frédéric Viret: : Thank you, Denny. I will now review financial highlights for the first quarter of 2015. Revenue for the first quarter 2015 totaled $5.8 million as compared to $3.6 million in the first quarter of 2014. The higher revenue year-over-year was due to the recognition of increased Baxter collaboration revenue. Research and development expenses for the first quarter 2015 were at $36.5 million compared with $13.9 million for the same period of 2014. Increases in R&D expenses for the quarter were mainly attributable to an increase in program costs associated with the advancements of Coherus late-stage clinical product candidates, CHS-0214 and CHS-1701 as well as increased personnel expenses. General and administrative expenses for the first quarter 2015 were $6.1 million compared to $3.4 million for the same period in 2014. Increase in G&A expenses for the same period in 2014 were mainly attributable to increased legal and accounting services and increased employee-related expenses in preparation for being a public company. Net loss attributable to Coherus for the first quarter 2015 was $40.7 million or $1.22 per share compared to $25.2 million or $6.03 per share for the same period in 2014. Cash and cash equivalents total $115.1 million as of March 31, 2015 compared to $150.4 million as of December 31, 2014. I would like to highlight that last week we received a $35 million milestone payment under our collaboration agreement with Baxter for completion of enrollment of our CHS-0214 etanercept biosimilar candidate, which is in Phase III clinical studies in rheumatoid arthritis and in psoriasis. Additionally, in April, we raised approximately $112.2 million in net proceeds from the follow-on public offering of $120 million of our common stock. The proceeds from the follow-on public offering will be used to develop our second wave pipeline of biosimilar product candidates beyond our initial 3 first wave products. I'd now like to open the call for questions, and Denny will conclude the call with a few remarks.

: Thank you, Jean. Operator, we're happy to have any questions.

: [Operator Instructions] And the first question is from Ken Cacciatore of Cowen and Company.

: Just a quick question. AbbVie has been making some discussion about new formulations, new device, maybe fewer injection reactions. Can you just comment about their next-generation strategy, how that might impact what you're trying to accomplish?

: Thank you very much, Ken, for that question. We have, of course, have heard that AbbVie is developing a second-generation product. I don't have any actual details about that product and so forth. I think in terms of our own product, we think that our formulation will compete favorably with those of others. And I think I would just decline to speculate a little bit about -- of AbbVie's actual formulation until there is some sort of a press release or a public announcement regarding its use, I have no first-hand knowledge. However, I can say that our own product is very stable in our formulation, and we think our formulation is quite competitive.

: And the next question is from Chris Schott of JPMorgan.

: This is a Wendy Lin, on for Chris today. Just a couple of questions. I guess first, I'm sure you have been following the biosimilar Remicade launch in major European markets. Can you talk about any update of learnings and how this might inform your commercial strategy for the 0214 and 1420 products? And second, we've heard a lot of discussion recently around label extrapolation. Based on your conversations with regulators and the payers, how comfortable are you that 1420 and 0214 molecule will get broad approval and reimbursement, particularly on GI indications? On the last quarterly call, you mentioned that you're considering additional smaller studies for the HUMIRA program in additional therapeutic areas. How are you thinking about these potential studies?

: Well, thank you for that Wendy. I think that it is fair to say that the issue of indication extrapolation is very, very important to regulators and to payers and to providers and to patients. The best way to assure that you get indication extrapolation is to have a very, very close match analytically with your biosimilar which, of course, we strive to do. Our conversations with regulators would lead us to believe that, if you have less than an optimum analytical match of the product or your in vitro assays do not read out close enough to the originator product, then it brings into question the underlying degree of biosimilarity that you have achieved with particular product. In such a case, I think that the issue of full indication extrapolation becomes a more open question than otherwise if you had a very, very exact match. So for us, we focus very, very closely, as you know, on the match that we get. We have previously disclosed that our match with our etanercept molecule is quite close. I think that we have demonstrated that twice, first, in our pharmacokinetic study, in which we achieved a 98% correlation [indiscernible] there with that product, that's a tough biosimilar, and I think we did very well with that. We have further commented that when we discussed with regulatory authorities, they indicated that we would get the full label extrapolated for that product without any additional clinical studies. So -- and I think, again, that speaks to really the company's technical and scientific competency. Our analytical infrastructure, which is a key part of our platform and our ability to manipulate the metabolism of the cell to glycosylate appropriately and consistently with the innovator, I think that's very difficult to do. And I think you will see, as time goes on, a variety of biosimilars with varying degrees of similarity to the originators. So we have not had conversations with regulators in terms of additional studies required. As a matter of fact, when we spoke to U.S. FDA regarding our etanercept biosimilar, they opined to us that we did not need to do a second Phase III study, and we said, yes, we understood that. And they further indicated that, we could do scientific rationale studies or I should say written exercises to justify the full label. So that's what we do. The other point that I would make here is that our analytical comparability in terms of our pegfilgrastim product has also been very much first rate, and I think that's the reason why we were able really to have a BLA-enabling clinical program that did not include a full-on oncology study in Phase III, along with, of course, the rest of the preponderance of evidence what the FDA considers. So I believe that this is an issue, might be a little confusing for investors and analysts, but I believe that Coherus has very rightly focused on its analytical infrastructure, being able to produce products that are extraordinarily close to the originators' products. And I think that will lead you to a very efficacious and safe product with the full label extrapolation. If that's helpful for you.

: And then on the biosimilar Remicade launch in Europe?

: I think that the key takeaway there is it's getting -- that product is getting some good uptake there. I don't have any further comment on that. But I think that overall, we will be watching very closely to see how that goes on in the future. But again, we would expect to do quite well here in the markets that we choose, given the quality of our products. But I think that, that product is moving along quite well from all current indications.

: [Operator Instructions] And I do show we have a question from [indiscernible] of Evercore.

: So I wanted to drill down the IP for a minute. And specifically, you mentioned your platform enables you to work around the formulation patents, et cetera. And so my question is this, how do you intend to get around method of use patents? And then secondly, if you could update us on the status of your pending patent applications.

: Thanks for the question. I think that, number one, if you take a look at biosimilar products in general, I think that you see a broad spectrum of intellectual property coverage. On the one hand, you see composition of matter patents, which I think are quite robust. And to your point about method of use patents, a lot of times you see method of use incorporated in those patents. For example, in some cases it's not unusual to see the method of use coupled with composition matter in the same patent. On the other hand at the far end of the spectrum, I think that you have dosing patents and administering a certain dose of the product and attempts to get intellectual property coverage there, I think that those will be much harder for originators to sustain. In terms of formulation patents, I believe that formulation patents are a primary area of intellectual property coverage. And it's a place where the company focused very early on in terms of both of its products, etanercept, which has an arginine-based formulation from Amgen and also the AbbVie formulation patents around HUMIRA. So our patent filings around our formulations are in the public domain, be happy to send those on to you again. But I think, it's fair to say that that's an area where we chose to focus early on, understanding that it was a key intellectual property issue that had to be addressed. In terms of therapeutic use patents, I think that those -- that depends, I think, on a case-by-case basis how each of those would come out. I wouldn't make any blanket statements regarding those. But as I said, I think they are probably most resilient when coupled with the composition of matter patents. But again, in the U.S., there is a number of therapeutic use patents pending for various biosimilars.

: Got it. And then also on your patent applications, if I may.

: Yes. So as I indicated, we have -- the ones that are confidential I won't tell you about today and the ones that are public, I'll be happy to send on. But I think that it's fair to say, as an organization and as a business strategy, this is something that Coherus, as you know, has focused on very tightly. We have a scientific advisory board of veteran scientific drug developers from Amgen and Genentech, in other key areas. And for each of our products, we take a very nuanced look at all the intellectual properties surrounding that process patents, formulation patents, so all sorts of things. And it's a key area that we focus on in terms of criteria for selecting product candidates. So if there is, for example, to be products that the intellectual property bar would constitute something that we think would be just too difficult or too complex or too much risk, that would be a very -- that would be a significant issue for us. But lastly, what I would point out really here is pegfilgrastim in terms of all these dimensions that you talked about. Pegfilgrastim does not have formulation patents. The expiration of the IP appears quite straightforward, it's already a line extension strategy that's expiring, has a very favorable competitive dynamic. So we -- and actually, it sits very close on for us. So we think pegfilgrastim has a number of very positive product attributes for us that directly impact, I think, a lot of the things that you talk about here. And we'll be happy to talk about this a little more at some point in Q3 as we move towards our commercialization strategy. But I think it's one of the attractiveness of the product as an opportunity.

: And there are no further questions in queue. At this time, I'll turn the call back over to Denny Lanfear for closing remarks.

: Thank you very much, and thank you, all, for joining us today. So 2015 has started out with an excellent first quarter, I think it's fair to say. First of all, initiation of both our BLA-enabling studies for our pegfilgrastim biosimilar candidate. We have expanded our etanercept biosimilar candidate collaboration with Baxter and it now includes our pre-commercialization activities that I've discussed. And lastly, with the proceeds of our follow-on, which is very successful, we're going to continue to work on additional second wave products with the goal of putting additional product into Phase III in 2017, '18 and '19. I would note that the company will be presenting at the Jefferies Healthcare Conference in early June in New York City. And we will also be in Europe, we will be going to the EULAR Meeting in June, and we'll be meeting certain investors in Europe during the month of June, so you might hear more about that. And we look forward to meeting many of you there, if you're there at that time. And thank you very much for dialing in today. And again, we will be happy to take any other further questions that you may have, just give us a ring.

: Thank you. Ladies and gentlemen, this concludes today's conference. you may now disconnect. Good day.

: Thank you.

: You're welcome.