Coherus BioSciences, Inc. — FY2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. The filing is an annual report, not a standalone fourth-quarter report. The company is a commercial-stage biopharmaceutical business; all 2021 revenue came from UDENYCA. The filing identifies the registrant as Coherus BioSciences, Inc.
Key financial results
| Metric | FY2021 | FY2020 |
|---|---|---|
| Net revenue | $326.6 million | $475.8 million |
| Gross margin | 82% | 92% |
| Research and development expense | $363.1 million | $142.8 million |
| Selling, general and administrative expense | $169.7 million | $139.1 million |
| Operating income (loss) | $(263.9) million | $156.3 million |
| Net income (loss) | $(287.1) million | $132.2 million |
| Operating cash flow | $(37.4) million | $154.1 million |
| Investing cash flow | $(138.4) million | $(14.4) million |
| Financing cash flow | $51.9 million | $223.9 million |
- Revenue and margins: UDENYCA net sales fell 31% year over year, from $475.8 million to $326.6 million, driven by fewer units sold and lower realized pricing amid competition and COVID-19 effects. Gross margin declined as previously expensed inventory was exhausted and current manufacturing costs flowed through cost of goods sold.
- Liquidity: Cash and cash equivalents were $417.2 million at year-end, down from $541.2 million. Total assets were $679.3 million and stockholders’ equity was $97.7 million. Management said available cash and expected UDENYCA receipts should fund planned operations for at least 12 months after issuance of the financial statements.
- Debt: Year-end debt carrying value was $408.3 million: $75.5 million under the 2025 term loan, $108.5 million under 2022 convertible notes, and $224.3 million under 2026 convertible notes. In January 2022, the company used new borrowing to repay the 2025 term loan and expected to use a further tranche to refinance or redeem the 2022 notes.
Material changes and business developments
- Revenue dropped from $475.8 million in 2020 to $326.6 million in 2021, while net income of $132.2 million turned into a net loss of $287.1 million. Operating cash flow also shifted from $154.1 million provided to $37.4 million used.
- R&D expense rose to $363.1 million, principally reflecting the $145.0 million toripalimab license expense, $43.4 million in toripalimab development, regulatory and technology-transfer costs, and increased spending on UDENYCA presentations and YUSIMRY.
- Coherus paid Junshi Biosciences $150 million upfront for toripalimab rights in the United States and Canada and issued Junshi shares for approximately $50 million. It initiated the process to exercise its JS006 option in January 2022, with a $35 million option fee expected.
- YUSIMRY received FDA approval in December 2021, but its U.S. launch is planned no earlier than July 1, 2023 under the AbbVie agreement. CIMERLI’s BLA was accepted for review with an August 2022 target action date. Toripalimab received Priority Review, with an April 30, 2022 target action date.
Outlook, risks and unusual items
- Management expected UDENYCA revenue and gross margin to decline in 2022 due to competition, pricing pressure and higher per-unit costs. R&D expense was expected to be lower than in 2021 because 2021 included the exceptional toripalimab upfront license expense; SG&A was expected to rise with commercial activity.
- The January 2022 secured loan facility provides up to $400 million, including a $100 million uncommitted facility. Committed tranches are conditional in part on refinancing existing debt and FDA approvals. The facility carries interest of 8.25% plus three-month LIBOR, has security over substantially all assets including intellectual property, and includes minimum trailing-sales tests and other restrictive covenants.
- Major risks include UDENYCA’s concentrated revenue base and competition; uncertainty around FDA decisions and acceptance of clinical data generated abroad; development and commercialization execution for toripalimab and pipeline products; reliance on collaborators and single-source manufacturers; reimbursement and pricing pressure; and COVID-19-related disruption.
- Unusual expense and cash-flow items include the toripalimab license accounting, inventory write-offs of $5.1 million, and the Amgen settlement royalty, which is a mid-single-digit royalty on UDENYCA net revenue through mid-2024. The company reported no material pending legal proceedings. The auditor issued an unqualified opinion and reported effective internal control over financial reporting.
Important facts for investors to verify
- Whether UDENYCA sales, realized pricing and gross margin stabilize or continue to decline, and how much sales depend on the three major wholesalers.
- FDA outcomes and timing for toripalimab and CIMERLI, and whether any approval supports the anticipated launch and commercial economics.
- Whether the 2027 term-loan tranches funded as expected, the 2022 notes were repaid or refinanced, and the company remains compliant with loan sales covenants.
- Cash use and future commitments for toripalimab, JS006 and other collaborations, including contingent milestones, royalties and development costs.
- How inventory demand forecasts and sales-rebate estimates perform: year-end inventory was $93.3 million, and estimated chargebacks and rebates were significant.