Coherus BioSciences, Inc. (Nasdaq: CHRS) — FY 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. This is an annual report, not a standalone fourth-quarter filing. The filing identifies the issuer as Coherus BioSciences, Inc.; the request metadata says Coherus Oncology, Inc.
Business context
Coherus is a commercial-stage biopharmaceutical company pursuing an oncology-focused strategy, funded in part by sales of approved products. FY 2023 sales included UDENYCA, CIMERLI and newly launched YUSIMRY; LOQTORZI received FDA approval in October 2023 and generated limited distributor revenue before its U.S. launch on January 2, 2024. The September acquisition of Surface Oncology added clinical-stage immuno-oncology candidates casdozokitug and CHS-114, as well as CHS-1000 in earlier development.
Financial performance and liquidity
| Metric | FY 2023 | FY 2022 |
|---|---|---|
| Net revenue | $257.2 million | $211.0 million |
| Cost of goods sold | $159.0 million | $70.1 million |
| Gross margin | 38% | 67% |
| Research and development | $109.4 million | $199.4 million |
| Selling, general and administrative | $192.0 million | $198.5 million |
| Operating loss | $203.2 million | $256.9 million |
| Interest expense | $40.5 million | $32.5 million |
| Net loss | $237.9 million | $291.8 million |
| Net loss per share | $2.53 | $3.76 |
| Cash used in operating activities | $174.9 million | $241.1 million |
- Revenue by product: UDENYCA $127.1 million; CIMERLI $125.4 million; YUSIMRY $3.6 million; LOQTORZI $0.6 million. UDENYCA sales fell $76.8 million year over year, primarily due to lower average net selling price; CIMERLI contributed $118.4 million more than in 2022.
- Cash, cash equivalents and marketable securities totaled $117.7 million at year-end, versus $191.7 million a year earlier. Total debt obligations were $473.4 million: $250.0 million principal under variable-rate term loans and $230.0 million principal of 1.5% convertible notes due 2026.
- Current assets were $475.6 million and current liabilities $331.8 million. Trade receivables were $260.5 million, including significant product rebate and chargeback estimates; year-end reserves included $74.0 million of estimated chargebacks and $121.1 million of estimated rebates.
- Management stated that available liquidity and expected product-sale collections were expected to fund planned operations for at least 12 months from the financial-statement issuance date, while cautioning that assumptions could change and additional capital may be needed.
Material changes and notable items
- Revenue rose 22% year over year, but gross margin declined 29 percentage points. Cost of goods sold included a $47.0 million fourth-quarter charge for slow-moving YUSIMRY inventory and related firm purchase commitments. Total inventory write-downs, net, were $52.6 million in 2023.
- R&D expense fell $89.9 million, reflecting lower licensing, development, manufacturing and personnel costs; SG&A declined $6.5 million. These reductions helped narrow operating and net losses.
- On March 1, 2024, after year-end, Coherus completed the CIMERLI franchise sale to Sandoz for $170.0 million cash plus $17.8 million for inventory and prepaid manufacturing assets, subject to closing adjustments. Under a February 2024 loan amendment, the sale triggered a $175.0 million term-loan principal repayment plus a $6.8 million premium and make-whole amount, due on or before April 1, 2024. The company said it planned to make that payment.
- The Surface acquisition was accounted for as a business combination with $64.6 million of consideration, primarily Coherus shares and contingent value rights. Acquired assets included $26.2 million of in-process R&D and $13.5 million of out-licenses. Surface contributed no revenue and $5.9 million of operating losses from acquisition through year-end, excluding acquisition costs.
- Coherus raised $53.6 million net in a May 2023 public offering and received $18.9 million net from its ATM offering during 2023. Shares outstanding increased from 78.9 million at year-end 2022 to 112.2 million at year-end 2023.
Outlook, risks and contingencies
- Management expected 2024 revenue to decline, mainly because CIMERLI was sold, partly offset by expected UDENYCA share growth, LOQTORZI’s launch and a full year of YUSIMRY sales. It expected gross margin to improve and R&D and SG&A expenses to be lower than in 2023.
- Management also expected lower 2024 R&D expense following termination of the CHS-006 TIGIT collaboration and continued cost containment. Coherus plans to submit an IND for CHS-1000 in the second quarter of 2024; this is a stated plan, not a guarantee.
- Key risks include intense biosimilar and immuno-oncology competition, uncertain uptake and reimbursement, manufacturing concentration and supply risks, further inventory charges, clinical and regulatory uncertainty, intellectual-property disputes, and dependence on additional financing. Term-loan covenants include minimum sales requirements; the amended agreement adds LOQTORZI sales testing beginning with the quarter ended December 31, 2024.
- Coherus disclosed an unresolved Zinc Health Services demand asserting approximately $14.0 million related to certain UDENYCA sales; the company is evaluating the claims and says the outcome is uncertain. The filing reports a $6.4 million accrual for legal proceedings and claims overall at December 31, 2023, not a separately stated Zinc accrual.
- A dispute with AbbVie over the YUSIMRY settlement and license agreement remained ongoing. Coherus said the parties had not guaranteed a resolution. The filing also identifies a $25.0 million Junshi milestone liability, scheduled in two $12.5 million installments in 2024 and 2025.
- The independent auditor issued an unqualified opinion on the financial statements and internal controls; management and the auditor concluded internal control over financial reporting was effective as of year-end.
Important facts for investors to verify
- Whether the CIMERLI sale proceeds, closing adjustments and $181.8 million debt-related payment were completed as planned, and the resulting cash balance, debt balance and covenant headroom.
- Actual 2024 product revenue and margins after CIMERLI’s divestiture, including UDENYCA pricing and volume, YUSIMRY demand and inventory, and LOQTORZI launch uptake.
- Whether the $47.0 million YUSIMRY inventory and purchase-commitment charge signals further demand or forecasting risk, and whether additional write-downs arise.
- Quarterly operating cash burn, rebate and chargeback reserve movements, and the assumptions underlying management’s liquidity forecast.
- Developments in the Zinc and AbbVie matters, Junshi milestone payments, loan covenants, and potential dilution from equity financing or convertible notes.