Business context and reporting period
Coherus BioSciences, Inc. (the filing registrant; described as Coherus Oncology in the request) filed this unaudited Form 10-Q for the quarter ended September 30, 2015. The company was a clinical-stage biosimilars developer with no commercial product sales; revenue came from collaboration and license agreements. Its lead candidates were CHS-0214 (etanercept), CHS-1420 (adalimumab) and CHS-1701 (pegfilgrastim).
Financial performance and condition
| Metric | Q3 2015 | Nine months 2015 | Comparable 2014 period |
|---|---|---|---|
| Revenue | $7.2 million | $19.8 million | $16.1 million quarter; $24.6 million nine months |
| Research and development | $68.2 million | $161.6 million | $18.5 million quarter; $51.4 million nine months |
| General and administrative | $10.2 million | $25.1 million | $4.0 million quarter; $11.4 million nine months |
| Net loss attributable to Coherus | $71.3 million | $170.9 million | $7.9 million quarter; $58.0 million nine months |
| Net loss per share, basic and diluted | $1.86 | $4.68 | $1.79 quarter; $13.62 nine months |
For the nine months, operating cash outflow was $113.6 million, investing outflow $5.5 million and financing inflow $122.4 million; cash increased $3.3 million. Cash and cash equivalents were $153.7 million at September 30, versus $150.4 million at December 31, 2014. Total assets were $202.3 million, total liabilities $162.3 million and stockholders’ equity $40.0 million. Current assets of $189.3 million exceeded current liabilities of $82.5 million by $106.8 million. No borrowing balance is presented; nine-month interest expense was $33,000.
Operating margins are not meaningful indicators for this precommercial company: it had no product-sales revenue and reported a $166.9 million operating loss for the first nine months. Revenue was concentrated: Baxalta accounted for 95% of Q3 revenue and 94% for the nine-month period.
Material changes versus the prior comparable period
- Q3 revenue fell $8.9 million year over year and nine-month revenue fell $4.8 million, principally because Q3 2014 included a $10.0 million Baxalta milestone; higher amortization of deferred Baxalta revenue partly offset the decline.
- R&D increased $49.7 million in Q3 and $110.3 million for nine months, driven mainly by CHS-0214 Phase 3 trials, CHS-1701 BLA-enabling work and CHS-1420 Phase 3 development.
- G&A increased $6.2 million in Q3 and $13.7 million for nine months, reflecting hiring, stock compensation, professional services and public-company costs.
- Cash used in operations shifted from $9.4 million provided in the first nine months of 2014 to $113.6 million used in 2015, alongside sharply higher clinical spending. Financing included $112.2 million net from an April follow-on offering and approximately $10 million from a September Baxalta private placement.
Outlook, commentary and risks
Management said existing cash plus expected funding under Daiichi Sankyo and Baxalta agreements should fund planned operations and obligations for at least 12 months, but stated that additional capital will be needed in the future and may not be available on acceptable terms. The company expected significant, increasing losses as development advanced.
- CHS-1701: A pivotal U.S. PK/PD study was completed in October 2015; an immunogenicity study was underway. A U.S. BLA filing was projected for Q1 2016.
- CHS-0214: Part 1 of the Phase 3 psoriasis study met its primary efficacy endpoints, with no clinically important safety issues reported; the study continued. Management expected rheumatoid arthritis results in Q1 2016 and anticipated European and Japanese filings in 2016, subject to positive results. U.S. commercialization was not expected before relevant originator patents expire in 2028 and 2029, absent a license.
- CHS-1420: A Phase 3 psoriasis study began in August 2015; management planned U.S. filing in 2016 and E.U. filing in 2017, with a bridging PK study planned for the first half of 2016.
- After quarter-end, Coherus received a $30 million Baxalta milestone on October 15, 2015 for demonstrating CHS-0214 drug-product stability. This is a subsequent event, not Q3 cash or revenue.
- Key risks include clinical or regulatory failure, biosimilarity and manufacturing challenges, reliance on single-source CROs and manufacturers, partner dependence and revenue concentration, patent litigation and market-entry delays, competition, and the need for further financing. The filing also disclosed a new Redwood City headquarters lease with approximately $12.0 million in future minimum lease payments.
Important facts for investors to verify
- Whether the clinical results and planned filing timelines for CHS-0214, CHS-1420 and CHS-1701 were achieved, and whether regulators accepted the supporting data.
- Actual cash runway and future financing needs, including the timing and conditions of expected collaboration funding and milestone payments.
- Baxalta’s share of revenue and the amounts, recognition schedule and potential refund obligations tied to deferred revenue and contingent collaborator liabilities.
- Manufacturing capacity, quality-control performance and reliance on single suppliers, including any study or regulatory impact from supply issues.
- Patent and regulatory developments that could delay or prevent U.S. market entry, particularly for CHS-0214 and the other biosimilar candidates.