Coherus Oncology, Inc. (CHRS) Q1 2021 Earnings Report, Transcript and Summary

Welcome to the Q1 2021 Coherus BioSciences, Inc. Earnings Conference Call. My name is Richard, and I'll be your operator for today's call. [Operator Instructions] I will now turn the call over to McDavid Stilwell, Chief Financial Officer. Mr. Stilwell, you may begin.

Thank you. Good afternoon, everyone, and thank you for joining us. We issued a press release earlier announcing our 2021 first quarter results. This release can be found on the Coherus BioSciences website. Today's call includes forward-looking statements regarding Coherus's current expectations. These statements include, but are not limited to, our ability to advance our biosimilar and immuno-oncology product candidates through development and registration, our commercialization of UDENYCA and other potential products in the future, our ability to meet our R&D and SG&A expense guidance for 2021 as well as our uses of capital, all of which involve certain assumptions, risks and uncertainties that are beyond our control and could cause actual results to differ from these statements. These statements are not guarantees of future performance and are subject to certain risks and uncertainties that are discussed in documents that we file with the Securities and Exchange Commission, specifically in our quarterly report on Form 10-Q for the quarter ended March 31, 2021 that we filed earlier this afternoon. The forward-looking statements stated today are made as of this date and we undertake no duty to update such information, except as required under applicable law. With me today are Coherus' CEO, Denny Lanfear; Paul Reider, Executive Vice President of Commercial Operations and Market Access; Chris Thompson, Executive Vice President of Sales; and Dr. Shah Rahimian, Senior Vice President of Immuno-Oncology Clinical Development. I'll now turn the call over to Denny.

Thank you, McDavid, and thank you all for joining us this afternoon. Today, I'll provide updates on UDENYCA commercialization, our biosimilar pipeline candidates, as well as toripalimab PD-1 antibody we've in-licensed from Junshi Biosciences earlier in the first quarter. We are making strong progress with toripalimab and our biosimilar product candidates. Over the next two years, we anticipate bringing forward new products to market in the United States, complementing UDENYCA in our commercial portfolio. The investments we are making in 2021 are expected to diversify and grow our revenues for years to come. With the clinical data and regulatory milestones over the next 12 months, we expect the key elements to come together in our unique strategy of leveraging the strong cash flows from our biosimilar products into the rapidly growing immuno-oncology market. Today, I'll start with a review of the performance of our first product, UDENYCA, which maintains its position as the most prescribed pegfilgrastim biosimilar with 20% of the overall market as reported by IQVIA. In the first quarter of 2021, we recorded $83 million in net sales of UDENYCA as compared to $110 million in the fourth quarter of 2020, $116 million in the year ago quarter. Market share for UDENYCA at 20% was relatively flat compared with the fourth quarter and within the 20% to 22% range we have experienced since the start of the COVID pandemic. The overall pegfilgrastim market grew by 1% in the first quarter. Quarter-over-quarter revenue decline for UDENYCA in Q1 was driven primarily by two factors: inventory changes and pricing. First, seasonal fluctuations, wholesale inventory and a significant impact on quarter-to-quarter ex-factory shipments. Wholesale inventory rose from 11 days on hand at the end of the third quarter 2020 to 21 days on hand in the fourth quarter and then came back down at the end of the first quarter to 12 days. Second, as we have signaled since the third quarter last year, pricing pressure has intensified across the pegfilgrastim market. The ASPs reported by the CMS show the trends across the category. Price declines have been most significant for the originator Neulasta, which now has the lowest ASP with any type of pegfilgrastim. I'd now like to introduce Paul Reider, our Executive Vice President, Commercial Operations and Market Access. Paul brings over 30 years of relevant commercial experience in oncology and other therapeutic areas to Coherus and will provide some additional color on the market dynamics we see going forward. Paul?

Thank you, Denny. I'd like to make a few comments regarding the pricing actions taken by the originator. It's highly unusual for the category leader with presumed differentiation and strong marketing capabilities to apply a value proposition of having the lowest price in the market. These actions by the originator, combined with the revenue impact and the unsustainability of price declines in a buy and bill reimbursement model, create an attractive opportunity for UDENYCA. Our strategy is to grow UDENYCA at the expense of Neulasta, while maintaining pricing discipline and overall long-term economic value providers. As you know, Neulasta retained 67% of the pegfilgrastim market, with Onpro representing approximately 55% share. During COVID, physicians used this on-body device to minimize patient visits into clinics and hospitals. Now that COVID is receding, the medical imperative to use Onpro is greatly reduced. We believe UDENYCA is well positioned to gain share in this context for the following reasons: First, UDENYCA is the number one prescribed pegfilgrastim biosimilar with approximately 20% share; Second, UDENYCA is well positioned among commercial payers with over 90% of commercial medical lives covered; Thirdly, we've earned the trust of oncologists and have built a broad customer base with over 2,400 accounts currently purchasing UDENYCA. Fourth, the majority of our field team has now been vaccinated and has resumed in-person sales calls; and lastly, patient out-of-pocket cost for UDENYCA is on average $200 lower per syringe compared to Neulasta. This is according to Symphony's data for the last half of 2020. Therefore, as COVID recedes, we expect UDENYCA will resume market share growth. Net product revenue, of course, will be a function of both volume and price. While our strategy is to maintain disciplined management of UDENYCA ASP, within the context of the competitive pegfilgrastim market, prices are variable over which we have the least control. As we pursue our strategy of growing UDENYCA penetration and make inroads into the Onpro market, we expect revenue growth in the second half of the year. Let me now hand it back over to Denny to discuss the progress in our biosimilar pipeline.

Thank you, Paul. Together with UDENYCA, our biosimilars of Lucentis, Humira and Avastin address an aggregate $28 billion in market opportunity. We've already demonstrated our ability to use our branded marketing and other commercial capabilities to penetrate the competitive areas with biosimilar. We believe we will experience similar success taking significant share in these new markets. Our strategy is to take at least 10% of each of these markets. And in some cases, as with UDENYCA, even significantly greater market share. By 2023, we expect all four of these biosimilars will be on the market, generating significant cash for Coherus. Biosimilar products play a critical role in our corporate strategy. Cash flows from this portfolio will create a diversified source of funding that we will redeploy as we enter the rapidly growing $25 billion immuno-oncology market. Having this core economic engine allows us to pursue high growth, high return opportunities, while limiting dilution to our shareholders. Let me start with our next expected biosimilar launch, CHS-201, our Lucentis biosimilar candidate. Our partner, Bioeq, continues to target mid-year 2021 for the submission of BLA filing. As we've previously reported, Bioeq held a supportive pre-BLA meeting with the FDA during the first quarter of 2021. We're very excited about the potential approval of this product in 2022 and have begun commercial planning activities, preparation for launch next year. We believe we could be among the first biosimilar Lucentis candidates to market and this could become another significant revenue opportunity for Coherus. Ophthalmology has a similar buy and bill business model to oncology, with analogous critical success factors that our commercial team understands very well. We plan to leverage much of our existing commercial infrastructure to gain significant share of the overall $6 billion anti-VEGF ophthalmology market. Now, with respect to our Humira biosimilar, CHS-1420, the FDA has accepted our BLA for review for the December 2021 action date and is making good progress. In March, the FDA conducted the on-site portion of the pre-approval drug substance CMC inspection with no 483s reported. The anti-TNF market represents a substantial commercial opportunity for Coherus. After years of double-digit price increases with Humira, there is clearly significant pent-up demand for the type of biosimilar value that Coherus will deliver in this market, where lower cost alternatives can bring down the overall cost of healthcare. Our product, our patient-focused offering and our manufacturing scale will match what payers are looking for. We are making manufacturing and supply investments to support our objective of capturing greater than 10% market share. With respect to CHS-305, our Avastin biosimilar, we're currently conducting a three-way PK study required to support the BLA filing. COVID has impacted the recruitment and we now expect to receive data toward year-end and to file the BLA in the first part of 2022. Once proved, Avastin commercial opportunities will provide additional scale for oncology commercial efforts with nearly identical sales call points as UDENYCA toripalimab. By 2023, we anticipate this diversified portfolio of four biosimilar products, plus toripalimab, our first innovative product, will be improved, marketed and generating significant cash flows to fund our growing immuno-oncology franchise, the next topic I'd like to cover with you today. Now as you know, in February, we executed the transformational first step on our strategy into a large and growing immuno-oncology market with our collaboration with Junshi Biosciences, an innovation-driven biotech company for toripalimab, their PD-1 inhibitor antibody. We spent two years conducting a rigorous assessments for global checkpoint inhibitor landscape. We defined the optimal preclinical/clinical properties for our investment in a PD-1 blocking antibody. We searched for a molecule that would ideally deliver near-term revenues for monotherapy indications, but would also provide us with clinical profile that would be ideal as a foundational asset for future combination therapies. So that is where the immuno-oncology field is heading. We reviewed over a dozen PD-1 steps. Toripalimab demonstrated high potency and unique molecular properties, which appears to translate favorably across a broad pivotal clinical development program. Toripalimab has been in development since 2015, has been evaluated in 15 registrational clinical trials across a broad range of rare and highly prevalent tumor types. As a reminder, our portion of the development cost is limited to $25 million per year, giving us rights to an extremely high-quality molecule at a reasonable and predictable cost. The toripalimab collaboration is already exceeding our expectations. They are pleased with the progress being made now the clinical data beginning to readout and the first regulatory submission in the U.S. is under way. The accumulating external validation for toripalimab includes the selection of the nasopharyngeal carcinoma abstract for ASCO's plenary session and press program, breakthrough therapy designation from FDA and the additional recent approvals in China for NPC and urothelial cancer, supplementing regional approval there for second-line melanoma. We expect toripalimab's emerging clinical validation as a potent PD-1 inhibitor to drive partnership discussions with third parties seeking to combine their portfolio with a high-quality PD-1 backbone. We are already making progress toward registration in the United States with the initiation of a rolling submission BLA for metastatic or recurrent NPC. We're also working closely with our partner on the registration strategy for multiple additional tumor types, which we will outline subsequently, and we expect to meet with FDA to discuss our registrational strategy for some of these key programs. We expect several near-term toripalimab catalysts in the areas of high unmet need, including NPC, lung cancer, esophageal cancer, triple-negative breast and urothelial carcinoma. Now let me introduce you to Dr. Shah Rahimian, our Senior Vice President in Immuno-Oncology, who is leading Coherus toripalimab development program and will provide you with an overview. Shah?

Thank you, Denny. I'm excited to speak today about a number of toripalimab studies for which we expect clinical data over the next year. Let me start with nasopharyngeal carcinoma or NPC. FDA has granted Toripalimab breakthrough therapy designation for recurrent or metastatic NPC. As a reminder, this is granted when preliminary clinical evidence reviewed by the agency indicated that the drug may demonstrate substantial improvement over available therapy on the clinically significant endpoints. Keeping that in mind, we expect the BLA submission for this indication to be completed mid-year. The first NPC BLA submission was based on the POLARIS-02 CTO 5 clinical trials. This study enrolled 190 patients to current or metastatic NPC refractory to standard chemotherapy. Results of this study were published in the Journal of Clinical Oncology in January. Toripalimab approval for this indication come as soon as first half of 2022. We also expect to submit a BLA supplement for first-line NPC based on results from the randomized JUPITER-02 CT-15 trial with 289 treatment naive patients. JUPITER-02 is a Phase III study for first-line NPC. And we're excited that the study results will be featured by ASCO as a late-breaking abstract, with a plenary program on Sunday June 6th and in ASCO's official press program. We look forward to the meeting and the opportunity to introduce toripalimab to the audience of U.S. physicians and investors. We expect toripalimab to become the first PD-1 inhibitor approved for these two NPC indications in the US. Recurrent or metastatic NPC is an orphan indication in the United States. Because toripalimab has the potential to be the first PD-1 approved for the treatment of NPC and to address an unmet need, we see this indication as an excellent opportunity to educate opinion leaders, community oncologists and payers on toripalimab. Now let me review our lung cancer program, which compromises four pivotal trials. As you know, lung cancer represents over 60% of immuno-oncology market opportunity and we believe these trials will support comprehensive label to thoroughly address this dominant segment. Now let me briefly comment on future of the studies in some detail. CT-19 is a randomized first-line non-small cell lung cancer study with 465 patients. The primary endpoint of this study is progression-free survival and the key secondary endpoint is overall survival and objective risk monitoring. This study is progressing well. In December 2020, an interim analysis showed that the primary endpoint of progression-free survival has been met. And this will be presented later this year. We expect the final data readout of this study to be available by year end. The second study, CT-25 is a randomized trial with 350 patients with EGFR mutations on failed prior treatment with tyrosine kinase inhibitors. Enrollment is expected to be completed by the end of the year, with final data expected in 2022. The third non-small cell lung cancer study CT-18, is a randomized trial of 450 patients, comparing toripalimab versus placebo in the neoadjuvant. Enrollment is expected to be completed by the end of the year with final data expected in 2022. Fourth study of the program is in small cell lung cancer. JUPITER-08 CT-28 is a randomized first-line study with 420 patients with primary endpoints of progression-free survival and overall survival. It is expected to be completed in 2022. We believe this comprehensive program will support registration paths in lung cancer in the United States. The next indication I'll discuss today is esophageal squamous cell carcinoma. Of the 80,000 patients in the United States diagnosed with esophageal cancer each year, approximately one-third have a squamous cell histology. This is an unmet medical need and approximately 95% of patients with metastatic disease die within five years of diagnosis. Last month, interim analysis of JUPITER-06 CT-21 randomized Phase III study with 500 patients met both primary endpoints of progression-free survival and overall survival. We expect the presentation of JUPITER-06 data later in 2021 and the potential supplemental BLA filing to support the labeled indications in 2022. Triple-negative breast cancer is another high unmet medical need. It accounts for approximately 10% to 15% of all breast cancers in the United States and nearly 90% of these patients with metastatic disease die within five years of diagnosis. A Phase III fourth site for CT-26 study is enrolling 600 triple-negative breast cancer patients. Data from this study are expected in 2022. Urothelial carcinoma program consists of two studies. The first study is POLARIS-02 or CT-12, a Phase II study with supported indication approval in China earlier this year. Second study, CT-38, a large Phase III evaluating toripalimab or placebo in combination with standard-of-care chemotherapy as first-line treatment which are ongoing. I'll turn the call back to Denny.

Thank you, Shah, for that very exciting review. In the second half of 2021, together with Junshi, we plan to engage with FDA to discuss the filing strategy for these and the other indications. We look forward to providing you future updates on all the clinical data and the regulatory progress of these programs. I want to say a few words about toripalimab combinations. As previously disclosed, the Junshi transaction also includes options to the anti-TIGIT antibody and engineered IL-2 cytokine, as well as certain negotiation rights with respect to additional assets. For the anti-TIGIT antibody, we expect Phase I study to begin later this year. We have the opportunity to review the data and make our opt-in decision when the study is complete. Together with Junshi or other partners, we expect to explore and develop synergistic combinations with toripalimab, particularly given its emerging strong efficacy profile and the market's direction toward combinations. Launch planning is well under way and our commercial team is excited to add toripalimab to our oncology product portfolio. There is significant overlap with our established footprint of over 2,400 accounts and inbound customer comments suggest they are eager to support competition in the anti-PD-1 market. We believe displacing entrenched competitors is one of our demonstrated commercial competencies and look forward to the market entry in 2022. Now I'll turn the call over to McDavid for a review of the quarter's financial results. McDavid?

Thanks Denny. The details of our financial results are in the press release and in the 10-Q we filed this afternoon, so I'll focus now only on a few highlights. For the first quarter of 2021, we reported $173 million net loss on a GAAP basis. On a non-GAAP basis, we reported net income of $400,000 or about a $0.01 a share on a fully diluted basis. The translation from GAAP to non-GAAP included three items, the $145 million upfront payment to Junshi Biosciences, the $11.5 million in charges related to the termination of the CHS-2020 program as part of a strategic realignment of R&D resources toward immuno-oncology, and $16.9 million in non-cash stock-based compensation. Cash flow from operating activities was $1.4 million for the first quarter of 2021. As detailed earlier in the call, net product revenue was $83 million, a decline from the prior quarter and the year-ago quarter. The decline was primarily attributable to seasonal fluctuations in wholesale inventory as well as increased allowances and discounts to customers. Research and development expenses for the first quarter of 2021 were $203.5 million compared to $33.1 million for the same period in 2020. The increase was mainly due to the $145 million upfront payment to Junshi Biosciences, the $11.5 million charge related to the termination of the CHS-2020 program, as well as development costs in support of the advancement of toripalimab and the biosimilar pipeline product candidates. Selling, general and administrative expenses were $39.4 million in the first quarter of 2021 as compared to $35.4 million in the year ago quarter. The increase was primarily driven by higher stock-based compensation expense. We ended the quarter with cash, cash equivalents and marketable securities of $399.5 million compared to a balance of $541.2 million at year-end 2020. Subsequent to quarter end, Coherus received $50 million from Junshi Biosciences acquisition of approximately 2.5 million shares at a price per share of $20.06. For financial guidance, now that we have closed the Junshi Biosciences collaboration, we are increasing our expected operating expenses for the year to a range of $370 million to $400 million, excluding the $145 million upfront payment to Junshi Biosciences in the first quarter. The expense guidance includes approximately $50 million to $55 million in stock-based compensation expense. Our external R&D spending is focused on manufacturing-related activities in preparation for the potential launch of toripalimab and CHS-1420 and development activities for CHS-305 and for additional presentations of UDENYCA. Increases in SG&A spending in 2021 are primarily driven by marketing activities and headcount to support UDENYCA and the potential launches in 2022 of toripalimab and CHS-201. In the first quarter, we exhausted the remaining inventory that was manufactured and fully expensed prior to UDENYCA approval. As a result, we estimate that the cost of goods sold as a percentage of net product revenue will be in the range of mid to high single-digits, excluding a mid single-digit royalty on net product revenue that we owe through July 1, 2024. As Paul noted earlier, we expect UDENYCA revenue and market penetration to rise in the second half of 2021, assuming treatment patterns normalize as the COVID-19 pandemic recedes and subject to pricing trends in the overall pegfilgrastim market. Finally, on the Investor Relations front, we'll be participating in the Bank of America Healthcare Conference next week with our presentation scheduled for May 12 at 1.15 PM Eastern Time. I'll now turn the call back to Denny for closing remarks.

Thank you, McDavid. As you can see, we're making strong progress with UDENYCA, our biosimilar pipeline and our strategic realignment toward immuno-oncology. On our financial side, we are focused on optimizing cash flow potential of our biosimilar product candidates to fuel our bio growth engine. With clinical data announcements, medical and scientific presentations and regulatory milestones for toripalimab and our biosimilar product candidates, we expect frequent important news flow for the remainder of the year. We look forward to engaging with you through these announcements and also to our analyst event day later this year. I'll now ask the operator to open the line for your questions.

[Operator Instructions] And our first question online comes from Mohit Bansal from Citi. Please go ahead.

Thanks for taking my question. And a couple of [technical difficulty] mentioned another contributing factor in first quarter that was the severe weather in some part of the country. I think you're not mentioning that. So the question is, is it a smaller part than previously anticipated and then pricing and inventory as to the bigger parts, first? And then as you think about the demand, so if I think about fourth quarter number and take out that inventory move, I calculate roughly 100 million multi demand. Is this a fair number of demand to think about for first quarter and beyond? Because obviously, size is an important point, but how should we think about demand there?

Hi, Mohit. Thank you. I think you cut out the first part of your question. Could you repeat the first part of your question, please?

Sorry. I mean, I just wanted to get some color on the weather, severe weather in some part of the country, which you kind of mentioned earlier in the quarter, but you are not mentioning it today. So was it a smaller portion of the - in terms of impacting the quarter number?

McDavid, you want to address that?

Sure. Mohit, it's hard to measure the effect of the weather, so we are focusing today on the two aspects of inventory and pricing. So in - the way to think about it, as we said in the script, is that at the end of the third quarter of 2020, we had about 11 days on hand in inventory which jumped in the fourth quarter to the high end of the normal range at 21 days on hand due to seasonal buy-ins from customers. And then in the first quarter, this extra inventory was depleted and now we're back into the normal range of 12 days on hand. And then additionally, UDENYCA ASP declined 6% in the first quarter versus the fourth quarter, which directionally indicates how pricing changed in the market. So this decrease, I think is accounts for the remainder of the decrease in net sales.

Thanks, McDavid. Mohit, did you have a follow-on question?

So if I can ask one more question on, so you - in this press release you are mentioning other formulations or other presentations of UDENYCA. So now that you seem to be working on that, is there anything you can disclose in terms of timelines or how you are thinking about it?

We have made no formal disclosures, as you know, with respect to these additional formulations.

Okay, got it. Thank you for that.

However, as soon as we have a material development, we will of course disclose such.

Our next question on line comes from Jason Gerberry from Bank of America. Please go ahead.

Thanks for taking my question. First just on toripalimab. Just the positive interim data in lung cancer, just wondering, do you think that's sufficient basis for a BLA or I know a number of competitors are saying that they're going to need Phase I PK bridging data in U.S. subjects. So just sort of curious if that's a gating item or something in the final topline update that you're looking to see? And then just on the pegfilgrastim ASP dynamics called out in the prepared remarks, do you have a sense of what proportion of oncology providers participated like capitated or value-based payment pilot programs? Just trying to get a rough sense of what proportion of the market Amgen might be trying to cater to with the lowest net cost offering. Thanks.

Thank you. Good question, Jason. With respect to your first question, which strikes to the issue of the lung studies in the interim analysis, I don't believe that you want to conflate that with the issue of any additional studies that others might be doing to supplant their indications. That being said, I'll let Shah make some remarks about the lung study at the interim analysis and the patient population there. Shah?

And thanks for the question. Really the short answer is that we believe that the study is well designed, well powered and was conducted within the industry and international rules and regulations. And we believe that this study is sufficient for a BLA submission. Of course, once the study is presented to the agency, the agency has the last.

The other point that I would make here, Jason, is that other people studies may not have included the appropriate subset of patients histologies. And one thing about this study, I believe, is that include both squamous and non-squamous histologies, which I think is very important. So I don't think it's really an apples-to-apples comparison when you look at other studies. But so far, no, we don't believe that we will have to do any supplemental studies and with the caveat that we will be talking to the agency later this year once we achieve, to validate that. And lastly, what I would point out is that there is three endpoint studies in lung and one small cell study. So we think there is going to be a plethora of data in the indication. Now with respect to the ASP question, Paul Reider perhaps or Chris Thompson may address that. Chris?

Thanks, Denny. Thanks for your question, Jason. You had asked us about, do we have an idea how many customers participate in value-based incentives. And I would - I'd have to say, I don't have an exact number, but many of the customers do. That's what they tell us. They participate both on the commercial side as well as on the Medicare side. With the Medicare side, sometimes going in and out of programs. But let's say this, although they are participating in value-based incentives, they evaluate not only the cost of the product, but also the revenue derived from the product and they try to balance that in their decision making. We believe that we've made the right decisions as it relates to being good stewards of ASP and we'll continue to do so. Hope that answers your question.

Our next question on line comes from Chris Schott from JPMorgan.

Thanks for the questions. On Neulasta, just directionally, are you seeing signs of either normalized pegfilgrastim usage or willingness to switch away from Onpro over to biosimilars as we've kind of moved from this environment we're in, in January, February to where we're sitting today in April and May? I guess, directionally, you're starting to see that or is that still TBD in terms of when that transition is going to start to happen? And then just a second one on pegfilgrastim just on pricing. You talked about a 6% erosion in 1Q. Has pricing stabilized at this point? Are you still seeing some erosion on the pricing front? And I just have one follow-up after that.

Great. Thanks, Chris. So I'll let Paul Reider address your first question with respect to Neulasta and so forth. Paul?

Yes. Hi, Chris. Thanks for your question. Yes, I mean, I think with respect to the shared shift with Onpro and Neulasta, you saw that in the first quarter. And so we do expect as COVID recedes, as we laid out, the opportunity for the market in that Onpro opportunity to open up to greater, greater opportunity. We believe we're well positioned there for that particular market. And as it relates to pricing, I think we expect prices to continue to erode as new competitors enter the marketplace. I think if you look at what's happened in the last quarters, the steep decline is really fueled by the Neulasta decline, but also the pandemic where these new entrants, biosimilar entrants were forced to compete for share in that smaller prefilled syringe segments. So now, again, as COVID receding, we feel we're well positioned to our market opportunity and we'll open up for more competition as the need for Onpro becomes more diminished and price decreases will moderate. We do believe price decreases will moderate over time, yes.

Thank you, Chris. Did you have a following question?

Yes, I just had a quick one on the toripalimab. Is there any thought or need in your view to think about doing a head-to-head against Keytruda, just given they are obviously dominant in many of these indications you're pursuing over time? Do you think that - does that - would that help at all from a commercial standpoint, or do you think the data will be comparable enough that you won't need that type of data?

No, we don't think so. It is an issue that we took a look at earlier on. However, our research studies, our conversations with the customers, and particularly with the providers indicated that really, they would look at the data generated with the particular PD-1 and if that data compared favorably that would combine to generate utilization. This is why we're very pleased with the data that's been generated with toripalimab. So far, it's showing very strong efficacy in each of the indication that it's been put in. So we're feeling that this will continue and we will have excellent data to go forward, particularly in lung, in some of the breast, some of these other indications. So no, we don't think there is a need to go forward with head-to-head in that. We have seen nothing in the market that indicates that.

Our next question on line comes from Salim Syed from Mizuho. Please go ahead.

This is Benet on behalf of Salim. Thank you for taking our questions. A couple if we may, although both are related. We found last month in the site, clinicalheroes.com two trials listed, one for UDENYCA administered with an autoinjector and another one using an on-body injector. But we haven't seen similar trials in clinicaltrials.gov. If we could get some color regarding this, please? And also if you could comment on the type of studies that are needed when developing an outdoor and on-body injector? I mean, it is only a Phase I PK/PD study needed or do you think a pivotal study is eventually needed as well. Thank you.

And as I indicated previously, we haven't made any formal announcements with or disclosures with respect to alternative dosage forms for UDENYCA. With respect to the requirements, I would direct you to the studies that Amgen performed when they brought forward their on-body system, which were pharmacokinetic studies. That is to say, efficacy studies are probably not required.

Our next question on line comes from Georgi Yordanov from Cowen & Company. Please go ahead.

Thank you so much for taking our questions. I guess, first, if you could talk about the opportunity for Lucentis and anti-VEGF market, do you believe that having only one of the two products as a biosimilar could allow you to have access to the whole anti-VEGF market? And then maybe if you could talk about your expectations for the competitive dynamics at a time of - at the time of launch and thereafter? And then I have a quick follow-up.

Thank you. I'll let Paul Reider offer some additional insights to Lucentis, but the short answer to your question is yes. We think that the entire market that is approximately 2 billion for Lucentis and 4 billion for Eylea is addressable to some degree with a Lucentis biosimilar. As you know that that market is stratified from reformulated Avastin at the low end all the way up to very long duration ladies at the top end, with Eylea and Lucentis in between. So we feel that Lucentis is an ideal entry point for this and we further think that it will be a couple of years before Eylea biosimilars actually get on the market. So we look forward to market formation with the Lucentis biosimilar starting sometime next year. And we are now working on our launch for next year, as we said. Paul, do you have any additional comments with respect to Lucentis?

I don't think I have much to add, Denny. I think that was very comprehensive. So nothing more to add.

Thank you so much.

Thank you. And then just a quick follow up on UDENYCA. What is your salesforce seeing in terms of marketing activity from Pfizer's competitor product and are there any other UDENYCA competitors that are not yet to market that do you expect will be coming up in the next six to 12 months?

Great question, I'll let Chris Thompson, our Executive Vice President of Sales on that one. And Chris well knows the competitors that look out there.

Thanks for your question. So you're seeing activity among all of the competitors that are out there. As Paul had mentioned earlier though, with COVID being here, it's a smaller competitive set we all have to compete with, which probably attributed to some of the price declines, but now with COVID receding and everybody getting back stated and my sales force able to get into these accounts, I think what we're going to see here is the pie gets bigger, right. The opportunity to compete for the Onpro business, that 55% of the business, really gives us an opportunity to expand, as well as the competition to expand. But we're pretty confident that based on our past history, we're going to do a pretty good job there. Thanks.

Our next question on line comes from Gregg Gilbert from Truist Securities. Please go ahead.

It's Greg Fraser on for Gregg Gilbert. The expectation for UDENYCA sales derived in the second half, is that relative to the first half or is that on a year over year basis?

Yes, would you like to take that one, Paul?

It's based on the first half, Greg.

Okay. And the operating expense guidance change, how much of that was related to the Junshi collaboration versus higher spending in other areas?

Sure. So for the Junshi collaboration, as you might recall, we have a $25 million per molecule per year, R&D expense contribution, and so that's already kicking in and then we are also preparing for commercialization there, which involve some tech transfer activities.

And then you mentioned that you could potentially do better with some of your future biosimilar launches than you've done with UDENYCA. Is Lucentis one that you put into that category where you could perhaps do better than 20%, 25% share? Thank you.

Yes, let me - so let me just correct that. What we indicated was that we felt that for any biosimilar launch, we would do at least 10%. And that would include, for example, the 1420 Humira biosimilar launch. Certainly, the Lucentis launch. And we're very proud of the UDENYCA launch. We did 20% of the first year, which was actually 50% of the syringe segment. So we did quite well there. I'd be very, very happy to replicate that success with Humira or Lucentis. But we are optimistic that our proficiency in biosimilar commercialization will be demonstrated with the Lucentis launch, the Avastin launch, the Humira biosimilar launch and so on. We feel this is our playing field and we are the folks who have demonstrated specific competencies in these areas without resorting to extraordinary price cutting.

Our next question on line comes from Douglas Tsao from HC Wainwright. Please go ahead.

Denny, so much of the strategy, certainly, and the success that you've enjoyed both UDENYCA and hopefully with some of the other biosimilars as they come to market has been driven by your sort of outreach to payers. I'm just curious, as you, since you've moved ahead in the PD-1 market and immuno-oncology. Have you engaged with payers extensively and talked to them about the sort of opportunity to sort of come to market as a value brand? And what is it, what are they looking for and their receptivity just given the significant increase in spend on - in their immuno-oncology category? Thank you.

Thanks for the question, Doug. I think that the first thing that we're going to do is going to get toripalimab approved. It's an orphan indication. It's got breakthrough status. And so we don't see a need to position it as a value brand, say, given this indication going forward. How things roll out in the future, we'll handle in the future as they come. But I think the main thing to focus on here though is that toripalimab really is being extraordinarily validated in a number of ways. It got breakthrough status from the FDA, a selection at ASCO for the plenary session, the additional approvals in China, Junshi Biosciences distribution agreement with AZ in China and so on. And so we feel that we have a very, very strong molecule on our hands. We'll be able to address each of these indications as they come up.

And our next question on line comes from Jason McCarthy from Maxim Group.

This is Michael Okunewitch on the line for Jason. Thank you for taking my question. So I'd like to see on UDENYCA, if you could provide a bit more color on how the pricing and reimbursement breaks down between UDENYCA and Neulasta now. I know you touched on that a bit before, but can you provide a bit more color?

Thank you for the question. Perhaps Paul or Chris have the actual ASP numbers for UDENYCA. Because they recently published UDENYCA versus Neulasta. Paul, do you have those?

Yes. How are you doing, Michael? I think the second quarter published prices will be coming out soon. But looking at Q1, which were publicly available, Neulasta has the lowest ASP published price among all of the, by the pegfilgrastim just a little over $2000 so. So from a - as Chris mentioned, many of these segments are quite recovery sensitive. So they look at both cost and the reimbursement on that, so. But I'll refer you to Amgen's Earnings Report for specifics around their specific ASP declines year-over-year and quarter-over-quarter.

But I think it's fair to say that we have exercised ASP pricing discipline. We've talked about that a lot. That's showing up in the numbers in our ASP as well above that of Amgen's.

And then on the competition in the biosimilar space. Historically, the idea has been that new entries come in and they're going to take share from Neulasta rather than from each other. However, with Amgen taken ASP leadership position, does that change the calculus at all when looking at the competitive dynamics?

Yes, Paul, do you want to take that one?

Yes. Sure, Michael. Yes, I mean, with - it's pretty expected with a lot of these biosimilars to compete for the overall share of it. I think with COVID and the pandemic favoring the on-body device, it caused us competition for the segment which was really for prefilled syringes. And we own that - we're the number one pegfilgrastim biosimilar. And now that COVID is receding, we believe that's why we're in the strongest position to be able to go after that 54% of Onpro share which is available to the market. So that's our state - we're not focused on the newer entrants. Our focus is on taking share from the originator who has two-thirds of the business still.

And our last question comes from Gregg Gilbert from Truist Securities.

This is the other Greg from Truist with a follow-up here. Two-part question. One is on revenue. Do you want investors to take away that you expect to sell more than four times the Q1 level of UDENYCA? I just want to make sure you have the opportunity to kind of set the stage here and reduce variability of estimates. But it sounds like second half higher than first half means most likely that your sales will be higher than Q1 sort of run rate? So that's part one. Part two is, Denny, about interchangeability, we may see for the first time ever well the biggest drug ever seen biosimilar competition, but you may also see a mix of interchangeable biosimilars and many that are not. Are you pursuing interchangeable status? I think you're not. But I'm curious on your views as to whether you would consider it and whether you think it matters? Thank you so much.

That's a great question. Let me answer the second question before the first. First, I think it's important to keep in mind that interchangeability thus far has not been a requirement at all to support biosimilar adoption. Secondarily, what we'd say is that our payer research indicates that interchangeability will not be a major impediment to biosimilar market - biosimilar adoption specifically in the Humira market. We expect payer to be very, very active in that market, but we don't expect any requirements to be interchangeability or not. And the third thing I would say is there is not interchangeability requirements in Europe and that hasn't impeded biosimilar adoption there whatsoever. So I don't - we don't really think so and no, we are not seeking any biosimilar interchangeability study or to invest in such. We don't believe it's required. With respect to first half versus second half revenues, I'll let McDavid comment on that.

Yes, I think another way of phrasing your question is whether or not we could - you could take first quarter revenue and multiply it by four. And I would say, no. We expect that the second half will have higher revenues as we penetrate into the Onpro market. Of course, that's dependent on the overall pricing environment, but we believe that revenues will rise in the second half.

Is that fine, Greg?

Thank you.

We have no further questions at this time. I'd like to turn the call over to Denny Lanfear for closing comments.

Thank you all very much for joining us today on our Q1 call. As you can see, I think we're making excellent progress with respect to toripalimab. And I think the Junshi transaction going forward will turn out to be a very positive one for the company, particularly since we are now - it's apparent that we have a very high-quality asset, which I think will give us a lot of readouts with respect to clinical programs over the next six to 12 months. And we look forward to seeing you all on our next call. We'll be at Bank of America, and also, we will have a few things to say at our R&D Day, which will be towards the end of the year, most likely Q4. We will give you some additional color on a few things. Thank you.

And thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.