Coherus BioSciences, Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022. The filing identifies the registrant as Coherus BioSciences, Inc., a commercial-stage biopharmaceutical company pursuing an immuno-oncology pipeline funded in part by biosimilar sales.
Financial performance and position
| Metric | Q1 2022 | Q1 2021 |
|---|---|---|
| Net revenue | $60.1 million | $83.0 million |
| Cost of goods sold | $9.4 million | $7.5 million |
| Gross margin | 84% | 91% |
| Research and development | $82.9 million | $203.5 million |
| Selling, general and administrative | $48.8 million | $39.4 million |
| Operating loss | $80.9 million | $167.4 million |
| Net loss | $96.1 million | $172.9 million |
| Basic and diluted loss per share | $1.24 | $2.37 |
| Net cash used in operating activities | $54.0 million | Net cash provided: $1.4 million |
- Revenue was from UDENYCA, the company’s marketed pegfilgrastim biosimilar. The decline reflected fewer units sold; management also cited competitive and pricing pressure.
- Gross margin declined partly because Q1 2021 included UDENYCA inventory whose manufacturing costs had previously been expensed as R&D. Those zero-basis-cost units were fully used by the end of Q1 2021; the filing estimates their acquisition cost at $3.3 million.
- R&D fell mainly because Q1 2021 included substantial toripalimab license expense. Q1 2022 included a $35.0 million CHS-006 option exercise payment. SG&A rose with commercial staffing and related costs.
- At March 31, cash and cash equivalents were $325.7 million; current assets were $512.4 million and current liabilities $153.7 million. Stockholders’ equity was $12.6 million, down from $97.7 million at year-end 2021.
- Total debt carrying value was $420.5 million: $195.8 million of term loans and $224.6 million of convertible notes. The company had $230 million principal outstanding on its 2026 notes. The new term loans carry variable interest of 8.25% plus three-month LIBOR, with a 1% floor; the rate was 9.25% at quarter-end.
Material changes and outlook
- In Q1, Coherus borrowed $200 million under a new senior secured term-loan facility, repaid its $75 million 2025 term loan and repaid the $100 million 2022 convertible notes. The term loans are secured by substantially all company assets, including intellectual property, and include minimum trailing-12-month sales covenants. Coherus reported compliance at March 31, 2022.
- Management said available cash, expected UDENYCA collections and additional funding under the term-loan agreement should fund planned expenditures and obligations for at least 12 months after issuance of the statements, while cautioning that assumptions could prove wrong.
- For 2022, management expected revenue and gross margin to decline versus 2021, R&D expense to be lower, and SG&A expense to be higher. A potential CIMERLI launch in the second half of 2022 could partly offset revenue pressure, subject to FDA approval and import timing. The filing gives no numeric revenue or earnings forecast.
- After quarter-end, the FDA issued a complete response letter for toripalimab on April 29, requesting a quality-process change. Coherus and Junshi expected to address it and resubmit by mid-summer 2022; the FDA indicated a six-month review, with inspections affected by COVID-19-related travel restrictions in China.
- CIMERLI’s FDA target action date was August 2022. YUSIMRY was approved in December 2021, but launch was planned for on or after July 1, 2023 under the AbbVie agreement. Coherus planned to seek FDA authorization for UDENYCA’s on-body injector presentation.
- In May 2022, Coherus gave notice terminating its Innovent license and discontinued development of its bevacizumab biosimilar candidate. It also received a late-April demand letter from Zinc Health Services asserting approximately $14 million in claims related to UDENYCA sales; the company was evaluating the claims.
Key risks and unusual items
- Revenue concentration: three distributors accounted for 99% of gross revenue in Q1 2022: AmerisourceBergen 43%, McKesson 39%, and Cardinal Health 17%.
- The term-loan agreement imposes escalating minimum sales covenants, restrictive operating covenants and potential acceleration following default; the debt is variable-rate and unhedged.
- COVID-19-related inspection and supply disruptions in China could delay toripalimab review and development. Other disclosed risks include competition and pricing pressure, dependence on third-party manufacturers and collaborators, clinical and regulatory uncertainty, and potential supply-chain and cyber risks.
- The $6.2 million loss on debt extinguishment arose from the January repayment of the 2025 term loan. Q1 interest expense was $9.0 million, versus $5.6 million a year earlier.
- R&D expense included the $35.0 million CHS-006 option fee and $50.1 million of total Junshi-related R&D expense. Future potential milestone and royalty obligations are contingent and were not recorded at quarter-end.
Important facts for investors to verify
- UDENYCA unit volumes, realized pricing, competitive share and the basis for management’s expected 2022 revenue and margin declines.
- Whether the FDA accepts the toripalimab resubmission and whether inspections or other issues extend the review timeline; also verify the CIMERLI decision and launch/import schedule.
- Cash burn and liquidity against the stated 12-month funding outlook, including access to conditional term-loan tranches and compliance with sales covenants.
- The merits, potential exposure and any subsequent resolution of Zinc’s approximately $14 million demand.
- Potential dilution from outstanding equity awards and conversion of the 2026 notes, as well as future Junshi milestones, royalties and development costs.