Coherus BioSciences, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024. Unaudited results. The filing identifies the registrant as Coherus BioSciences, Inc.
Business context
Coherus is a commercial-stage biopharmaceutical company developing oncology immunotherapies. Its marketed U.S. products during the quarter were UDENYCA, YUSIMRY and newly launched LOQTORZI. The company sold its CIMERLI ophthalmology franchise to Sandoz on March 1, 2024; CIMERLI revenue was recognized only through that date. Pipeline programs include casdozokitug, CHS-114 and CHS-1000.
Financial results and liquidity
| Metric | Q1 2024 | Q1 2023 |
|---|---|---|
| Net revenue | $77.1 million | $32.4 million |
| Gross margin | 55% | 48% |
| Research and development | $28.5 million | $34.2 million |
| Selling, general and administrative | $56.5 million | $49.2 million |
| Loss from operations | $(42.5) million | $(67.7) million |
| Net income (loss) | $102.9 million | $(75.7) million |
| Operating cash flow | $(46.8) million | $(68.7) million |
Revenue rose $44.6 million year over year, driven principally by CIMERLI (+$22.0 million) and UDENYCA (+$16.5 million), with YUSIMRY contributing $3.9 million and LOQTORZI $2.0 million. UDENYCA revenue was $42.7 million; CIMERLI $28.2 million; YUSIMRY $3.9 million; and LOQTORZI $2.0 million.
Q1 net income was not an indication of recurring operating profitability: it included a $153.6 million net gain on the CIMERLI sale. Excluding that gain, the company reported an operating loss of $42.5 million and interest expense of $11.1 million. Net income per diluted share was $0.83, versus a diluted loss per share of $0.96 in Q1 2023.
Cash and cash equivalents were $259.8 million at March 31, 2024, compared with $102.9 million at December 31, 2023; cash, cash equivalents and restricted cash totaled $260.2 million. Investing activities provided $202.8 million, primarily from $187.8 million of sale proceeds. Operating activities used $46.8 million. Total debt carrying value was $474.7 million at quarter-end: $247.5 million on the 2027 Term Loans and $227.2 million on the 2026 Convertible Notes. Stockholders’ deficit narrowed to $81.8 million from $193.4 million.
Material changes and subsequent financing
- The CIMERLI sale generated $170.0 million upfront plus $17.8 million for inventory and prepaid manufacturing assets; the company recorded a $153.6 million net gain. Final consideration adjustments remained subject to settlement.
- After quarter-end, Coherus repaid $175.0 million of the 2027 Term Loans on April 1, paying a $6.8 million prepayment premium and make-whole amount. On May 8 it repaid the remaining $75.0 million, paying a further $3.5 million premium and make-whole amount.
- On May 8, the company entered a $38.7 million secured 2029 Term Loan, with $37.5 million net proceeds, bearing interest at 8.00% plus three-month SOFR and maturing May 8, 2029. It has quarterly interest-only payments and a cash-maintenance covenant.
- Also on May 8, Coherus agreed to receive $37.5 million in exchange for a mid-single-digit percentage of U.S. UDENYCA and LOQTORZI sales. Payments end when the purchaser has received 2.25 times the purchase price; the company may buy out the payment right.
Outlook, commentary and risks
- Management expects 2024 revenue to be lower than 2023, mainly because CIMERLI was divested, partly offset by anticipated UDENYCA share growth and sales growth from LOQTORZI and YUSIMRY.
- Management expects gross margin to increase in 2024, citing the prior-year $47.0 million YUSIMRY inventory and purchase-commitment charge and a higher expected average gross margin for retained products. The mid-single-digit UDENYCA royalty expires June 30, 2024.
- Management expects 2024 R&D and SG&A expenses to be lower than 2023, subject to clinical progress, cost-containment actions and other factors. It expects interest expense to decline following the 2027 Term Loan repayments.
- Management stated that cash, expected product collections and available financing resources should fund planned expenditures and obligations for at least 12 months after the financial statements’ issuance date, while cautioning that assumptions may change and additional capital may be needed.
- Coherus terminated work on the Junshi TIGIT program CHS-006, while continuing its LOQTORZI collaboration. A $25.0 million toripalimab approval milestone was split into two $12.5 million installments; one was paid in Q2 2024 and the other is due in Q1 2025.
- The filing reports a $6.8 million net impairment charge related to the NZV930 out-license asset and CVR liability. It states the Novartis license termination was effective October 2, 2024; this date is after the filing date and warrants verification.
- Key risks include intense biosimilar and oncology competition, pricing and reimbursement pressure, reliance on third-party manufacturers and collaborators, clinical and regulatory uncertainty, debt and liquidity needs, and potential dilution. Three customers represented 98% of gross product revenue in Q1: McKesson 42%, Cencora 42% and Cardinal Health 14%.
- The company disclosed a Zinc Health Services demand letter seeking approximately $14.0 million for historical UDENYCA sales; no proceeding had been filed, and the final outcome was uncertain. The company reported a $6.4 million accrual for legal proceedings and claims overall; the filing does not clearly allocate that amount to the Zinc matter.
Important facts for investors to verify
- Whether retained-product growth, especially UDENYCA and LOQTORZI, can offset the loss of CIMERLI revenue and support the stated 2024 outlook.
- Post-repayment debt, interest costs, covenant headroom and liquidity after the May 2024 refinancing and revenue-participation transaction, including the implications of pledging substantially all assets for the term loan.
- The final CIMERLI sale adjustments and the amount and timing of transition-service reimbursements and costs.
- The NZV930 termination date and related impairment, and the status, cost and milestones of the remaining clinical pipeline.
- The status and potential exposure from the Zinc demand, and whether the recorded contingency remains adequate.