Coherus BioSciences, Inc. — Q1 2015 Form 10-Q
Reporting period: Three months ended March 31, 2015; comparisons are with Q1 2014 unless stated otherwise. The filing is by Coherus BioSciences, Inc., a clinical-stage biosimilar developer. It had no approved products and generated no commercial product sales; revenue came from collaboration and license agreements.
Key financial results
| Metric | Q1 2015 | Q1 2014 |
|---|---|---|
| Collaboration and license revenue | $5.8 million | $3.6 million |
| Research and development expense | $36.5 million | $13.9 million |
| General and administrative expense | $6.1 million | $3.4 million |
| Operating loss | $36.7 million | $13.8 million |
| Net loss | $40.8 million | $25.2 million |
| Net loss attributable to Coherus per share, basic and diluted | $1.22 | $6.03 |
| Cash used in operating activities | $33.1 million | Cash provided: $14.7 million |
Revenue increased $2.2 million, primarily from amortization of Baxter deferred revenue. R&D expense rose $22.5 million, mainly with CHS-0214 Phase 3 activity, CHS-1701 BLA-enabling work, CHS-1420 development, and increased staffing and infrastructure. G&A increased $2.7 million, including higher professional-service and personnel costs. Interest expense was zero, down from $2.7 million, after the 2013 convertible notes converted to preferred stock in May 2014. Other expense was $4.1 million, including a $4.2 million fair-value remeasurement of InteKrin contingent consideration. The prior-year period included $8.7 million of warrant-liability remeasurement expense.
No product gross margin is reported because the company had no commercial product revenue. At March 31, cash and cash equivalents were $115.1 million, down from $150.4 million at December 31, 2014. Current assets were $143.9 million and current liabilities $51.9 million. Total liabilities were $115.2 million; the balance sheet does not present a separate borrowing balance. Accumulated deficit was $227.5 million.
Liquidity, financing and material developments
- Operating cash use was $33.1 million in Q1 2015; investing cash use was $1.3 million, primarily for equipment and leasehold improvements. Cash and cash equivalents declined by $35.3 million during the quarter.
- After quarter-end, the April 7 follow-on offering sold 4,137,931 shares at $29 per share and generated approximately $112.2 million in net proceeds. Management said available cash, including offering proceeds, was expected to fund planned expenditures and obligations for at least 12 months, while noting that additional funding would be needed in the future and spending might need to be reduced if results fell short.
- In April, Coherus amended its Baxter license agreement. The revised milestone structure totals $130 million, and Baxter agreed to purchase $10 million of common stock within six months at the trading price on the purchase date. In May, completion of CHS-0214 Phase 3 enrollment triggered a $35 million Baxter milestone payment; this was subsequent to the quarter-end.
- On March 6, the INT-131 Phase 2 first-patient dosing triggered an InteKrin earn-out settlement valued at approximately $9.8 million, paid in shares and cash. The company issued 358,384 common shares and recorded the fair-value remeasurement noted above.
Pipeline, outlook and risks
- CHS-1701: A pegfilgrastim (Neulasta) biosimilar candidate. A pivotal U.S. PK/PD study had begun; an additional immunogenicity study was planned for 2015. The company was pursuing a 351(k) biosimilar pathway, but acknowledged that successful execution and supporting data remained uncertain.
- CHS-0214: An etanercept (Enbrel) biosimilar candidate partnered with Baxter and Daiichi Sankyo outside the U.S. Two Phase 3 trials were underway, with European and Japanese filings targeted for 2016 if results supported them. A repeat Phase 1 bioequivalence study following a manufacturing-location change had positive results on April 14. U.S. commercialization was constrained by originator-controlled patents the company said could remain in force until 2028 and 2029, absent a license or other outcome.
- CHS-1420: An adalimumab (Humira) biosimilar candidate. After a Phase 1 PK study met its primary endpoint, the company planned to start a psoriasis Phase 3 study in mid-2015, targeting U.S. filing in 2016 and E.U. filing in 2017.
- Management expected significant and increasing losses as development advanced. Principal risks include clinical or regulatory failure, manufacturing and supply interruptions, reliance on CROs and single-source vendors, biosimilar competition, patent disputes, reimbursement and pricing uncertainty, and the need for future capital. The filing describes an earlier CHS-0214 particulate observation that temporarily paused Phase 3 dosing; trials resumed in December 2014 after investigation and consultation with the FDA.
- The company reported no material legal proceedings. Management concluded disclosure controls were effective and reported no material weakness identified for the quarter; it said a previously identified weakness involving complex-security valuation had been addressed.
Important facts for investors to verify
- Whether CHS-0214, CHS-1701 and CHS-1420 achieve their clinical, manufacturing and regulatory milestones on the stated timelines.
- Receipt and terms of the $35 million Baxter milestone, the amended milestone schedule, and the contemplated $10 million Baxter stock purchase.
- Cash runway assumptions, quarterly cash burn and timing and terms of any additional financing.
- Share count and potential dilution following the offering, earn-out share issuance, option exercises and other equity awards.
- Patent exposure and commercial-entry limits, particularly for CHS-0214 in the U.S., as well as competitor progress and biosimilar regulatory requirements.