Business Context and Reporting Period
Coherus BioSciences, Inc. filed this Form 8-K on January 7, 2019, to disclose the entry into a material definitive agreement. The company is a biopharmaceutical firm focused on its pegfilgrastim biosimilar, UDENYCA.
Key Financial Metrics and Debt Structure
The company secured a six-year term loan facility with an aggregate principal amount of $75,000,000 from affiliates of Healthcare Royalty Partners. The filing does not provide current revenue, profit, cash flow, or liquidity metrics, as this report focuses solely on the new debt instrument.
- Principal Amount: $75,000,000
- Interest Rate: 7.00% per annum plus LIBOR (reducible to 6.75% + LIBOR if 2019 UDENYCA sales exceed $250 million).
- Upfront Costs: $1,125,000 closing fee paid to lenders.
- Exit Fee: 4.00% of total principal upon prepayment or repayment.
- Collateral: Lien on substantially all tangible and intangible property, including intellectual property.
Material Changes and Covenant Requirements
The agreement introduces significant debt obligations and restrictive covenants not present in prior periods. Principal payments are deferred until the fourth anniversary of the closing date (January 7, 2023), unless 2021 UDENYCA sales fall below $375 million, in which case payments begin on the third anniversary. The maturity date is January 7, 2025.
The loan includes mandatory minimum sales covenants for UDENYCA:
- Fiscal Year 2019: Minimum $70,000,000
- Fiscal Year 2020: Minimum $125,000,000
- Fiscal Year 2021 and thereafter: Minimum $150,000,000
Failure to meet these sales thresholds could result in the immediate acceleration of the debt.
Guidance, Risks, and Unusual Items
The agreement restricts the company's ability to incur additional indebtedness, create liens, make loans or investments, engage in mergers or asset sales, and declare dividends or repurchase stock without lender consent. Prepayment penalties apply, ranging from 5.00% (if prepaid within the first three years) down to 1.25% (after the fifth year), plus accrued interest in certain scenarios.
Investor Verification Checklist
- Verify current UDENYCA sales performance against the $70 million minimum covenant for fiscal year 2019.
- Assess the impact of the 7.00% + LIBOR interest rate on future cash flow projections.
- Review the company's ability to meet the $125 million and $150 million sales covenants for 2020 and 2021.
- Confirm the status of the $1,125,000 closing fee payment and its impact on immediate liquidity.
- Monitor for any potential triggers for early principal repayment based on 2021 sales performance.