Coherus BioSciences, Inc. — Q2 2015 Form 10-Q
Reporting period: Three and six months ended June 30, 2015. The filing identifies the registrant as Coherus BioSciences, Inc. Financial statements are unaudited and presented in U.S. dollars.
Business context
Coherus was a clinical-stage biosimilars developer with no commercial product sales. Its lead candidates were CHS-0214 (etanercept/Enbrel), CHS-1420 (adalimumab/Humira), and CHS-1701 (pegfilgrastim/Neulasta). Revenue came from collaboration and license arrangements, primarily with Baxalta.
Financial results
Amounts below are in millions except per-share data.
| Metric | Q2 2015 | Q2 2014 | Six months 2015 | Six months 2014 |
|---|---|---|---|---|
| Revenue | $6.9 | $5.0 | $12.7 | $8.6 |
| Research and development expense | $56.9 | $18.9 | $93.4 | $32.9 |
| General and administrative expense | $8.8 | $4.0 | $14.9 | $7.4 |
| Net loss attributable to Coherus | $58.8 | $25.0 | $99.5 | $50.1 |
| Net loss per share, basic and diluted | $1.56 | $5.96 | $2.80 | $11.99 |
| Operating cash flow | Not stated for quarter | Not stated for quarter | $(53.9) | $14.5 |
Revenue increased 38% in Q2 and 48% for the first half, mainly from amortization of deferred Baxalta revenue. R&D spending rose sharply as CHS-0214 Phase 3 trials continued and BLA-enabling work for CHS-1701 and Phase 3 preparation for CHS-1420 advanced. There was no interest expense in 2015; 2014 expense reflected convertible notes that converted in May 2014. No product gross margin was reported because the company had no commercial sales.
Balance sheet, liquidity and funding
- Cash and cash equivalents were $206.1 million at June 30, 2015, versus $150.4 million at December 31, 2014. Total assets were $249.5 million; total liabilities were $153.2 million; stockholders’ equity was $96.4 million.
- The company reported no interest-bearing debt on the balance sheet. Current liabilities were $69.9 million, including $31.0 million of deferred revenue; deferred revenue was $38.5 million non-current.
- Operating activities used $53.9 million in the first half, while financing activities provided $111.9 million, principally from the April follow-on offering. Net offering proceeds were reported as $112.2 million in the notes and $112.8 million in the cash-flow statement; the filing’s figures do not fully reconcile in the text.
- Management believed available cash would fund planned operations and obligations for at least 12 months, but said additional funding would be needed in the future and might not be available on acceptable terms.
Changes, outlook and risks
- In May, Coherus received a $35 million Baxalta milestone after completing enrollment in CHS-0214 Phase 3 studies. Approximately $15.8 million was recorded as a contingent liability to Baxalta because of potential repayment provisions; the company reported total contingent liability to collaborator of $43.5 million at quarter-end.
- CHS-0214 had positive repeat Phase 1 pharmacokinetic bioequivalence results following a manufacturing-location change. The company expected CHS-0214 trial results, if positive, to support European and Japanese marketing applications in 2016. It did not expect U.S. commercialization before expiry of certain originator-controlled patents in 2028 and 2029 absent a license.
- Management planned to initiate a CHS-1420 Phase 3 psoriasis study in mid-2015, targeting U.S. filing in 2016 and E.U. filing in 2017. CHS-1701 pivotal PK/PD work was underway, with an additional immunogenicity study expected to complete dosing in 2015. These are forward-looking plans, not assured outcomes.
- Key risks include clinical or regulatory failure and delay, biosimilarity and manufacturing challenges, reliance on single-source contractors, competition and patent litigation, partner dependence, and the need for future capital. Baxalta accounted for 94% of Q2 revenue and 93% of first-half revenue.
- A new seven-year headquarters lease was signed in July 2015, with first-year base rent of approximately $1.6 million and total future minimum lease payments of approximately $12.2 million. The filing reported no material litigation and no material indemnification claims.
Most important facts for investors to verify
- Whether clinical progress and regulatory plans for CHS-0214, CHS-1420 and CHS-1701 remain on schedule, and whether trial results support filings.
- Cash runway under actual development spending, the timing and terms of future financing, and the reconciliation of reported follow-on proceeds.
- Baxalta milestone, deferred-revenue and potential claw-back terms, including the $43.5 million collaborator liability and revenue concentration.
- Manufacturing readiness, availability of alternate suppliers, and the effect of relevant patents and litigation on commercialization timing.