Coherus BioSciences, Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023; filed May 8, 2023. Financial statements are unaudited. Coherus is a commercial-stage biopharmaceutical company developing immuno-oncology treatments and selling FDA-approved biosimilars.
Financial highlights
| Metric | Q1 2023 | Q1 2022 / comparison |
|---|---|---|
| Net revenue | $32.4 million | $60.1 million; down 46% |
| Cost of goods sold / gross margin | $16.9 million / 48% | $9.4 million / 84% |
| Research and development | $34.2 million | $82.9 million |
| Selling, general and administrative | $49.2 million | $48.8 million |
| Loss from operations | $67.7 million | $80.9 million |
| Interest expense | $9.7 million | $9.0 million |
| Net loss / loss per share | $75.7 million / $0.96 | $96.1 million / $1.24 |
| Net cash used in operating activities | $68.7 million | $54.0 million |
UDENYCA revenue was $26.2 million, down from $60.1 million; CIMERLI, launched in October 2022, contributed $6.2 million. Lower UDENYCA units and net selling prices drove the revenue decline. Lower R&D spending—particularly the absence of the prior-year $35 million CHS-006 option payment and reduced toripalimab development costs—partly explains the narrower net loss.
At March 31, cash and cash equivalents were $16.1 million and marketable securities were $111.9 million, totaling $128.1 million in cash, cash equivalents and securities, versus $191.7 million at year-end 2022. Total assets were $402.4 million; current assets were $315.9 million and current liabilities $123.4 million. Debt carrying value was $471.6 million: $245.7 million of secured term loans and $225.9 million of convertible notes. Stockholders’ deficit was $196.5 million. The company reported $1.4 billion of accumulated deficit.
Cash, cash equivalents and restricted cash decreased $47.4 million during the quarter. The company raised equity through its ATM offering and reported $7.2 million of net proceeds in the quarterly discussion; 1.13 million shares were sold at a weighted-average $6.54 per share. Shares outstanding were 80.5 million at March 31.
Changes, outlook and material developments
- Revenue declined sharply year over year, while gross margin fell from 84% to 48%. Q1 2023 cost of goods sold included $3.0 million of manufacturer contract-modification fees, $2.7 million of inventory write-offs, and higher royalty costs.
- Management expects 2023 revenue to exceed 2022, citing CIMERLI growth and planned launches of YUSIMRY, toripalimab if approved, and additional UDENYCA presentations. It expects lower full-year gross margin, lower R&D and SG&A expenses, and higher interest expense.
- UDENYCA’s autoinjector presentation received FDA approval in March, with commercial availability planned for Q2 2023. An on-body injector remained subject to FDA approval, with a 2023 launch planned if approved.
- Toripalimab’s BLA remained under FDA review after a prior complete response letter and a delayed FDA action due to required inspections in China. Manufacturing pre-approval inspection was scheduled for May 2023. Coherus targeted a Q3 2023 launch if approval was obtained by July 1; approval and timing were uncertain.
- YUSIMRY, approved in 2021, was planned for U.S. launch on or after July 1, 2023 under the AbbVie agreement. Management warned of a highly competitive adalimumab market.
- Coherus committed to a workforce reduction affecting approximately 50 employees. Q1 restructuring charges included $3.9 million cash costs and $1.5 million non-cash stock compensation, partly offset by $0.5 million in forfeiture credits.
- A binding term sheet with Klinge Biopharma contemplated U.S. commercialization rights to FYB203, an Eylea biosimilar candidate, including an approximately €30 million upfront payment in cash and stock, plus milestone and profit-sharing payments. Definitive agreements were expected in mid-2023; terms remained subject to final documentation.
Liquidity, risks and contingencies
- Management stated available cash, securities, expected product-sale collections and ATM proceeds were expected to fund planned expenditures and obligations for at least 12 months after issuance of the financial statements, while warning that assumptions could prove incorrect and additional capital might be needed.
- The term loans carry variable interest; the rate was 13.03% in Q1 and management reported 13.40% for Q2. A 100-basis-point rate increase could add up to $2.5 million in annual interest expense. The secured loans mature in 2027, but could mature in October 2025 if the specified convertible-note balance condition is met.
- Coherus obtained a waiver of the term-loan covenant requiring at least $200 million in trailing-12-month net sales for the quarter ended March 31, 2023. It reported no debt defaults and compliance with other covenants.
- Non-cancelable purchase commitments totaled $82.7 million. Legal accruals were $6.4 million. A demand letter from Zinc Health Services sought approximately $14 million over certain UDENYCA sales; Coherus said the ultimate outcome was uncertain and its accrual represented its estimated liability.
- Key risks include UDENYCA pricing and competition, launch and reimbursement execution for newer products, toripalimab regulatory and inspection delays, dependence on contract manufacturers and collaborators, inventory risk, substantial debt and cash burn, and potential dilution from further equity issuance. Coherus also cited COVID-related inspection and supply risks, foreign-exchange exposure, and broader economic and geopolitical uncertainties.
Investor verification priorities
- Track UDENYCA volume, pricing, market access and the financial impact of its manufacturing and inventory charges.
- Verify toripalimab FDA inspection completion, review status, approval timing and any resulting launch costs or milestone obligations.
- Assess actual YUSIMRY and UDENYCA presentation launch timing, uptake, pricing and contribution to revenue and gross margin.
- Monitor operating cash burn, cash and securities balances, ATM share issuance, and management’s 12-month liquidity assessment.
- Review term-loan covenant performance and waiver terms, floating-rate interest expense, and the 2025 maturity trigger tied to the 2026 notes.
- Confirm the final FYB203 agreements and upfront, milestone, royalty and profit-sharing economics; monitor the Zinc claim and related accrual.