Coherus BioSciences, Inc. — FY2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022. This is an annual report, not a standalone fourth-quarter report. The filing identifies the issuer as Coherus BioSciences, Inc.
Business context
Coherus is a U.S.-focused commercial-stage biopharmaceutical company selling biosimilars and developing oncology treatments. Its strategy is to use biosimilar sales to fund an immuno-oncology franchise. Products marketed in 2022 were UDENYCA and, following its October launch, CIMERLI. FDA-approved YUSIMRY had not yet launched.
Financial performance and liquidity
| Metric | FY2022 | FY2021 |
|---|---|---|
| Net revenue | $211.0 million | $326.6 million |
| Cost of goods sold / gross margin | $70.1 million / 67% | $57.6 million / 82% |
| Research and development | $199.4 million | $363.1 million |
| Selling, general and administrative | $198.5 million | $169.7 million |
| Operating loss | $256.9 million | $263.9 million |
| Interest expense | $32.5 million | $23.0 million |
| Net loss | $291.8 million | $287.1 million |
| Net loss per share | $3.76 | $3.81 |
- UDENYCA net sales fell to $203.8 million from $326.5 million; CIMERLI contributed $6.9 million. UDENYCA sales were $475.8 million in 2020.
- Operating cash used was $241.1 million, versus $37.4 million in 2021. Investing cash used was $166.9 million; financing cash provided was $54.3 million.
- Cash, cash equivalents and marketable securities totaled $191.7 million at year-end, down from $417.2 million. Cash and cash equivalents alone were $63.5 million.
- Debt carrying value was $471.1 million: $245.5 million of term loans and $225.6 million of convertible notes. Stockholders’ deficit was $137.4 million, compared with equity of $97.7 million in 2021.
- A $26.0 million inventory write-down in 2022 reflected UDENYCA inventory at risk of expiration; the filing says it increased the year’s net loss by $26.0 million, or $0.33 per share.
Material changes and outlook
- Revenue declined 35%, primarily from lower UDENYCA unit sales and net price amid competition and lower patient enrollment; CIMERLI partially offset the decline. Gross margin fell 15 percentage points, including the effect of the inventory write-down and product mix.
- R&D expense decreased substantially, mainly because 2021 included a $145.0 million toripalimab license expense. SG&A rose with expanded commercial staffing and infrastructure. Interest expense increased as debt balances and variable rates rose.
- Management expected 2023 revenue to increase, citing CIMERLI’s first full year and planned launches of YUSIMRY, toripalimab if approved, and additional UDENYCA presentations. It expected lower R&D expense, excluding potential milestones, and lower SG&A; it expected gross margin to decline, with UDENYCA price pressure and CIMERLI royalties among the factors.
- The toripalimab BLA remained under FDA review after the agency did not issue an action letter by its December 23, 2022 action date. A required inspection of Junshi Biosciences’ China manufacturing facility had not occurred amid COVID-related travel restrictions. Management’s U.S. launch target was Q3 2023, conditional on approval by July 1, 2023.
- YUSIMRY launch was planned on or after July 1, 2023 under the AbbVie settlement; management anticipated a highly competitive adalimumab market. UDENYCA AI was approved March 3, 2023, with commercial availability planned for Q2 2023; UDENYCA on-body injector launch was planned for 2023 if approved.
- In January 2023, Coherus signed a binding term sheet for U.S. rights to FYB203, an Eylea biosimilar candidate. The proposed upfront payment was approximately €30 million in cash and stock, plus milestones and profit-sharing royalties; definitive agreements and closing were expected in the first half of 2023.
- In March 2023, the company committed to a workforce reduction of approximately 20%, affecting about 60 employees, to focus resources on commercial products and immuno-oncology development.
Risks, contingencies and unusual items
- Coherus reported losses in 2022 and 2021, an accumulated deficit of $1.3 billion, and significant operating cash use. Management said available resources and expected product-sale cash collections were sufficient for at least 12 months after issuance of the financial statements; this depends on assumptions and execution.
- The $250.0 million principal balance of 2027 Term Loans carried a 12.00% rate in Q4 2022 and 13.03% in Q1 2023. The facility is secured by substantially all assets, includes restrictive covenants and requires minimum trailing-twelve-month sales rising to $300.0 million by Q4 2024. The company reported covenant compliance at year-end.
- A $14.0 million demand from Zinc Health Services concerned UDENYCA sales from October 2020 through December 2021. Coherus recorded an estimated $4.7 million liability at year-end; the matter’s final resolution remained uncertain.
- Non-cancelable purchase commitments were $68.8 million, including $53.7 million due in 2023. The filing also describes dependence on third-party manufacturers and, for key services, single suppliers.
- Major risks include continued UDENYCA price and volume erosion, product adoption and reimbursement, toripalimab approval and inspection timing, competitive launches, manufacturing and supply reliability, and financing needs. The audit firm issued unqualified opinions on the financial statements and internal control over financial reporting.
Investor facts to verify
- UDENYCA sales trends, realized pricing, inventory levels and any further inventory write-downs.
- FDA inspection plans and review status for toripalimab, and whether any approval or launch timeline has changed.
- YUSIMRY launch, payer access, pricing, and competitive uptake; also the commercial contribution and margins of CIMERLI and UDENYCA AI.
- Cash burn, financing activity, debt interest costs, sales-covenant headroom and the terms or completion of the FYB203 transaction.
- Resolution and final cost of the Zinc demand, plus workforce-reduction costs and effects on commercial or development plans.