Coherus BioSciences, Inc. — Q2 2022 Form 10-Q
Reporting period: Three and six months ended June 30, 2022. Unaudited consolidated results. Revenue was primarily from UDENYCA; the company was also developing oncology candidates and preparing additional biosimilar launches.
Financial results
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Net revenue | $60.2 million | $87.6 million | $120.3 million | $170.7 million |
| Gross margin | 81% | 81% | 83% | 86% |
| Operating loss | $44.0 million | $24.2 million | $124.9 million | $191.5 million |
| Net loss | $50.2 million | $29.9 million | $146.2 million | $202.8 million |
| Basic and diluted loss per share | $0.65 | $0.40 | $1.89 | $2.73 |
| Operating cash flow | Not separately presented for Q2 | $(104.1) million | $1.2 million |
Q2 revenue fell 31% year over year, primarily because fewer UDENYCA units were sold; six-month revenue declined 30%. Q2 gross margin was unchanged, while the six-month margin decreased. Management attributed pressure to lower realized UDENYCA pricing and higher average unit costs. Q2 selling, general and administrative expense rose to $51.3 million from $40.3 million, while R&D expense declined to $41.6 million from $54.8 million. Six-month R&D was substantially lower than in 2021, which included large Junshi license costs; six-month SG&A increased to $100.0 million from $79.7 million.
Liquidity, debt and balance sheet
- At June 30, cash and cash equivalents were $275.5 million, down from $417.2 million at December 31, 2021. No marketable securities were reported at June 30.
- Six-month cash, cash equivalents and restricted cash decreased by $141.7 million. Operating activities used $104.1 million; investing activities used $36.5 million, mainly for the $35.0 million CHS-006 license option; financing activities used $1.1 million after refinancing and repaying prior debt.
- Debt carrying value was $421.0 million: $196.0 million for the 2027 Term Loans and $224.9 million for 2026 Convertible Notes. The term loans had $200 million principal outstanding; the notes had $230 million principal outstanding. Approximate net debt, calculated as debt carrying value less cash, was $145.5 million.
- The new senior secured term loans bear interest at 8.25% plus three-month LIBOR (9.25% in Q2); they are secured by substantially all assets, including intellectual property. Repayment of principal begins in 2026, subject to maturity provisions. The company reported compliance with loan covenants at quarter-end.
- Total assets were $546.0 million and total liabilities $568.6 million; stockholders’ equity was a deficit of $22.6 million. Accumulated deficit was $1.196 billion.
Business developments, outlook and risks
- Toripalimab: The FDA issued a complete response letter on April 29, 2022, requesting a manufacturing quality-process change. The FDA accepted the resubmitted application on July 6 and set a December 23, 2022 action date. Management planned a U.S. launch in Q1 2023 if approved. The company noted that COVID-related restrictions in China could affect manufacturing and FDA inspections.
- CIMERLI: After quarter-end, the FDA approved CIMERLI on August 2, 2022 as interchangeable with Lucentis for all five indications, with 12 months of interchangeability exclusivity. Launch was planned for early October 2022. Launch timing and supply remained subject to agreement conditions; approval triggered a potential €2.5 million Bioeq milestone payment if further criteria are met.
- YUSIMRY: FDA-approved in December 2021; launch was planned for on or after July 1, 2023 under the AbbVie agreement. The company began capitalizing its inventory in Q2.
- UDENYCA and outlook: Management expected revenue to decline during the remainder of 2022 versus the comparable 2021 period amid increased competition, with a potential partial offset from the planned CIMERLI launch. Full-year 2022 gross margin was expected to be below 2021; R&D was expected to be lower, while SG&A was expected to rise with commercial activity and launch preparations.
- Pipeline and portfolio: Coherus paid $35 million in March to license CHS-006, an anti-TIGIT candidate. It discontinued development of its bevacizumab biosimilar in May 2022. It expected to submit INDs for CHS-1000 in 2023 and CHS-3318 in 2024.
- Funding and commitments: Management said available cash, product-sale collections and additional funding available under the term-loan agreement were expected to cover planned expenditures and obligations for at least 12 months after the financial statements’ issuance date. This depends on assumptions; the company said future funding needs could arise sooner. Non-cancelable purchase commitments were $43.9 million, and remaining term-loan tranches were conditional.
- Contingency: Zinc Health Services sent a demand letter seeking approximately $14 million related to UDENYCA sales from October 2020 through December 2021. No lawsuit had been filed, no accrual was recorded, and the company said it could not reasonably estimate a loss.
- Other risks: Revenue concentration among three distributors was high: McKesson, AmerisourceBergen and Cardinal Health represented 99% of Q2 gross revenue. Other material risks include biosimilar price and market competition, reliance on third-party manufacturers and collaborators, clinical and regulatory uncertainty, COVID-related disruption, variable-rate debt exposure, and litigation or intellectual-property challenges. A 100-basis-point increase in variable debt rates could add up to $2.0 million in annual interest expense, based on quarter-end debt.
Key facts for investors to verify
- Whether UDENYCA sales and realized pricing stabilized or continued to weaken after Q2.
- Toripalimab’s FDA review outcome, timing, and any additional manufacturing or inspection requirements.
- CIMERLI’s actual launch timing, supply readiness, commercial uptake, and related Bioeq milestone obligations.
- Cash burn, available conditional loan tranches, covenant headroom, and the effect of variable interest rates.
- Resolution and potential financial exposure from the Zinc demand letter, plus the company’s launch and margin assumptions for 2022–2023.