Coherus Oncology Inc (CHRS) 2015 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Coherus Biosciences First Quarter 2015 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session and instructions will follow at that time. (Operator Instructions). And as a reminder, this call is being recorded.

I would now like to turn the conference over to Susanna Chau, Associate Director of Investor Relations. Please go ahead.

Good afternoon. My name is Susanna Chau and it's my pleasure to welcome you to the Coherus Biosciences first quarter 2015 financial results conference call. Joining me this afternoon are Denny Lanfear, President and Chief Executive Officer, and Jean Viret, Chief Financial Officer.

As the close of the market today, we issued a press release highlighting Coherus' first quarter 2015 performance. This press release is posted in the investors section of our website, investors.coherus.com.

This conference all contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. This includes statements about the Company's current operating plan, financial guidance, objectives and intentions with respect to future operations and products. As such, they are subject to the risks and uncertainties that we discuss in detail in our documents filed with the SEC, specifically Coherus' quarterly report on Form 10-Q for the quarter ended March 31, 2015 and any applicable amendments which identify important risk factors that could cause actual results to differ materially from those contained in the forward-looking statements.

Coherus has a policy to not comment on financial performance or guidance during the quarter unless it is done through an appropriate public disclosure. Coherus retains its policy and practice to not update financial performance or guidance during the quarter unless required by law.

On today's call, Denny will provide a clinical and business -- will provide clinical and business highlights. Jean will provide financial highlights for the quarter ended March 31, 2015 before we open the call to your questions. Denny will then close the call with a few concluding remarks.

With that, I'd like to turn the call over to Denny.

Thank you, Susanna. Thank you very much and thank you for joining us today here at Coherus. As Susanna indicated, I'm first going to make some opening remarks and then I will recap the product development advances for each of our key products, in particular where we are with CHS-1701, our pegfilgrastim biosimilar. I have a few comments about our Wave 2 products, our pipeline as it comes along and then a few other things.

I'm happy to say the Company continues to make consistent progress according to plan in all areas. All programs are on track as previously discussed and we'll give a more granular updates as we proceed program-to-program. We'll discuss CHS-0214, the Company's etanercept biosomilar, CSH-1701, our pegfilgrastim biosimilar and lastly our CHS-1420, which of course, is our adalimumab biosimilars.

On 1701, we'll discuss the BLA-enabling studies and we'll also give a few other key details there. I would note that in terms of 1701 we continue to be highly commercially focused at this point with that product and we will have some discussion and updates a little further on in terms of our payer outreach and our commercial planning activities.

I'll give you brief recap and our take on some regulatory developments and some additional guidance as released by the FDA in biosimilars as well as a few comments. And during Q&A, we'll be happy to take any questions you have on the regulatory front also.

And then following my remarks, of course, as Susanna indicated, Jean Viret will summarize our financial statements and developments for the quarter, which are overall positive and, again, very consistent with our plan. Lastly, we'll be happy to take whatever questions you have in terms of Q&A in the business and recent developments.

So let me -- let me start now really with our CHS-0214, our etanercept biosimilar candidate. I'm happy to say that Phase 3 accrual has been completed for both rheumatoid arthritis study and for the psoriasis study. Now, accordingly, the Company received a milestone from Bax for the completion of these two in the amount of $35 million last Friday. And I believe we have a disclosure, which has come out on that.

In terms of our rheumatoid arthritis studies and our psoriasis studies now that they accrued, we're in a position to talk a little more about when we think the top line data will be available. And in terms of the rheumatoid arthritis study, as you know, there is about 619 patients there and we project top line data there around the end of Q3 2015 this year.

In terms of our psoriasis study, there's about 496 patients there and we're currently working through some details as when the data will be available for that study of top line and we'll have a little more say about that in a while.

In terms of CHS-0214, there's one other key development, which was a successful Phase 1 read out with the repeat pharmacokinetics study which the Company performed. And this study evaluated the EU production facility and the EU Enbrel. So this, again, met the requirements for biosimilarity and the Company has accordingly issued a disclosure in that regard.

And then lastly in terms of CHS-0214, you probably note that we had an amendment to our agreement with Baxter and this was actually done just at the end -- right near the end of Q1, start of Q2. This encapsulated about $130 million in milestones to both complete some clinical work, prepare for the BLA and to perform certain pre-commercialization activities. I would say that we remain highly committed with our partner, Baxter, for this product and partner our successful commercialization of this in the EU with the MAA filing targeted in mid 2016.

In terms of the CHS-1701, pegfilgrastim biosimilar, a few comments there on where we are in terms of our BLA-enabling program and when we expect things to read out. First, as you may recall, we discussed previously how we'd reach concurrence with FDA and the BLA-enabling studies in the programs. This comprises a pharmacokinetic, pharmacodynamic study, this one being in 106 subjects. And the primary end-points there are area under the curve for concentration Cmax as well as for ANC area under the curve and Cmax. So we're looking at both the concentration of the drug and we are looking at the biological response. We expect top line data from these two studies at the end of Q3 in 2015 or press for start of Q4 2015 which we believe will enable the planned BLA filing in Q4 2015 as we have previously guided and projected.

I would say, however, as we previously discussed, there is -- there is some chance that this will slip into Q1 2016 depending on things here and there with the regulators and how quickly things are turned. However, we are still staying with our Q4 2015 guidance. Currently, we are generating required data to support the BLA filing. We've actually started the actual process of filing and we anticipate discussing such data with FDA in the course of a Type 3 meeting, of course, prior to submission and developing plans [for that].

The 1701 product is a very good one for us. It's our very first product, as you know, that we intend to commercialize. And I just wanted to take a moment to recap some of the key attributes of this product in a few dimensions, which make it important to the Company and I think -- and help you to understand why it is such a significant opportunity for us.

First of all, in the marketing and commercial aspect of things, this product is in a relatively stable treatment paradigm. It is supportive care for oncology. And further, the way the product is used and how the distribution has handled in the clinics results in what we believe will be a reasonably-sized commercial footprint to address the market.

Lastly, in terms of the market in commercial, there appears to be a relatively modest competitive set compared with other biosimilars products to other folks here in the US, so we feel that?s advantageous given the size of the market opportunity.

In terms of the molecular aspects of the product and the CMC, there's also some interesting attributes, which make it very attractive here. First of all, pegfilgrastim is complex but it is reasonably well defined with limited heterogeneity for the product. One of the key things about this product is it really plays to Coherus' core scientific strength as some of my team members actually wrote some of the seminal papers on the structure of this molecule back in the mid-1990s. So I think it's fair to say when we approached the FDA that we had a very firm understanding of the molecule and were able to have very substantive scientific discussions.

Lastly, in terms of the molecular CMC dimension, interesting note that the product has an existing stable formulation, which does not having intellectual property coverage past the perceived launch date. So this actually allows you to use the innovators formulation for that, which again is another advantage.

On the scientific clinical dimension, there's also some advantages with this product. First of all, of course, it has a very well defined mechanism of action; the response of the white blood cells in the body is very well known, very predictable. This gives a very clear efficacy endpoint. And also, the product has an excellent antigenistic profile which is well known. All that translates into very executable and reasonably sized set of studies for regulators to take a look at both the safety and the efficacy of the product and we have availed ourselves of that and I think that's why we're able to have an abbreviated program.

In the legal dimension, the product is relatively well controlled and I would characterize it perhaps as moderate. The patent expirations appear clear in the short term. And the other thing that I would note here is that pegfilgrastim represents the completion of the line extension strategy from the base product pegfilgrastim. So unlike, for example, daily dosing Copaxone moving to less frequent, weekly dosing, which is the sort of line extension strategy. Here, you're dealing with the actual exploration of the line extension strategy itself. So we think that's actually quite promising and favorable.

And lastly, in the financial dimension, we find more, I think, positive attributes. This represents a near-term launch and this will allow us to actually fund our pipeline later on as we begin to gain sales, post launch with the product, which we expect in the latter half of 2016. There's potentially a very substantial revenue stream here for us given the size of the US and ex-US markets.

And then lastly, pegfilgrastim as an E. coli product, so what that translates to is a relatively low manufacturing cost of goods. This is not a cho product with glycosylation, quite a bit different. So these again are favorable. So for a variety of these reasons, we feel this represents a very, very attractive product for us.

Accordingly, we're spending some time this year as I've discussed with many of you taking a look at the commercial side of this product. So this of, course, has been something that we have focused on and will continue to do so as we look at our commercialization options going forward.

Particularly, we are highly engaged with payers; and payers, as you know, are beginning to focus more and more on biosimilars as a strategic opportunity in key categories to control their costs more effectively with the introduction of competition. So we find that the payers to be very receptive to various overtures and talking about this product and other products and you'll hear more from us in Q3 and Q4 this year about our conversations with them and how we plan to go forward.

However, I would I would offer you the following guidance in terms of what we have found so far with payers which are three primary issues. Number one, we find that payers are very interested in the highest level of product quality. Payers are not interested at substandard biosimilars. They're really interested in very, very well done biosimilars that fairly well replicate the originator's molecule.

Secondarily, we find that payers are very conscious of and it's very important to them -- is full-label extrapolation from the regulatory authorities. So one of the things that they ask us each time we talk to one of these teams is do you expect to get the full label and so forth and why; and of course, with our strategy of very precisely aligning with the originator molecules, this is -- this is, I think, a key issue and a strength of the Company.

And then lastly, thirdly, the payers are very interested in a very consistent and reliable product supply from first class facilities in regulated markets. This is something, I think, which is quite important to them. Some payers have opined to us that they will go out actually and visit facilities and so on.

So these are some of the things that we keep in mind as we move forward with 1701 and we'll have a little more conversation, as I said, about it later. But clearly, we are focused on patients and providers to ensure that we are providing the highest quality biosimilars to them and the highest patient value. As I indicated previously, we'll be completed with these efforts in Q4 2015 to say a little more about this and that will line up nicely with our expected BLA filing for that quarter.

And then in terms of 1420, our adalimumab biosimilar, we previously reported on our decision to conduct global Phase 3 in plaque psoriasis. As many of you know, you have several options for moving forward to Phase 3 with these products and selection of these. You can, for example, with an adalimumab biosimilar you could proceed with rheumatoid arthritis or psoriasis typically.

For a variety of reasons, we're moving forward with psoriasis and this is a randomized parallel group study comparing our 1420 product to the originator?s Humira product in 500 patients with plaque psoriasis. The primary end point here has been globally harmonized across a number of regulatory authorities including the US, E.U. and Canada, and we expect that a single psoriasis study will be able to fulfill the registration requirements for all these major territories. We will be posting the study design on ClinicalTrials.gov prior to its initiation and we will be providing a little more information on the key study parameters going forward.

However, I can say based on feedback from EMA and FDA as well as discussions with selected major payers, whose concern is that we address the P&T committee's acceptance biosimilar, that we have included a switch from Humira to CHS-1420 in the second part of the study and vice versa. This, of course, is one of the key things that folks want to understand as you go forward with a biosimilar in the market.

And lastly, I would note that our study startup activities have now begun. We are tracking toward the goal of initiating the study in the middle of this year. Our CRO has been engaged. The major participating countries have been decided and the number and location the sites has been determined as well as the other startup activities, which are now well underway.

In terms of timing, as I indicated, mid-2016 for the start, and we expect the filing for this product to be in the second half of 2016 along with the intended filing. We?ll have more to say about this as we go forward and get a little more clarity in the second half of 2015 in terms of our 1420 product.

Now, let me just make a few remarks about our pipeline. As you know, we recently completed on follow on financing and the primary objective there was to fund our Wave 2 assets over the next two years. We're making very good process with this effort and we have identified a group of product candidates that we are now targeting and have focused for development.

Our goal is to progress development of a sufficient number of candidates such that we will have a Phase 3 start each year of one of these products starting in 2017. So we would anticipate being able to move products into Phase 3 in each year 2017, 2018 and 2019.

And then lastly, let me just make a remark here about this Biosimilars Forum, which I think is quite important. It's recently been announced that Coherus is working with the other biosimilar entities here in the US to address key public affairs issues. The Biosimilars Forum is a nonprofit organization whose mission is to advance biosimilars in the US with the intent of expanding access and availability of these biologic medicines and improving healthcare. This forum was publicly launched May 5th this of year in 2015 and it currently consists of 11 of the leading companies involved in the development and manufacturing of biopharmaceuticals or biosimilar medicines.

Coherus is a founding member of the Biosimilars Forums and we represent a [major] of the companies in the US such as Actavis, Amgen, Boehringer Ingelheim, Serono, Hospira, Merck, Pfizer, as well as others such as Sandoz and Teva.

Now, with that, I'll go ahead and pass it over to Dr. Jean Viret, the Company's Chief Financial Officer, and Jean will give you a few more details here on the financial highlights for the quarter and some of the developments and so on. And after Jean, we'll be happy to go ahead and open the call and take your questions

Thank you, Denny. I will now review financial highlights for the first quarter of 2015. Revenue for the first quarter 2015 totaled $5.8 million as compared to $3.6 million in the first quarter of 2014. The higher revenue year-over-year was due to the recognition of increased Baxter collaboration revenue.

Research and development expenses for first quarter 2015 were $36.5 million compared with $13.9 million for the same period of 2014. Increases in R&D expenses for the quarter were mainly attributable to an increase in program cost associated with advancements of Coherus' late stage clinical product candidates, CHS-0214 and CHS 1701, as well as increased personal expenses.

General and administrative expenses for the first quarter 2015 were $6.1 million compared to $3.4 million for the same period in 2014. Increasing G&A expenses for the same period in 2014 were mainly attributable to increased legal and accounting services and increased employee-related expenses in preparation for being a public company. Net loss attributable to Coherus for first quarter 2015 was $40.7 million or $1.22 per share compared to $25.2 million or $6.03 per share for the same period in 2014.

Cash and cash equivalents totaled $115.1 million as of March 31, 2015 compared to $150.4 million as of December 31, 2014. I would like to highlight that last week we received a $35 million milestone payment under our collaboration agreement with Baxter for completion of enrollment of our CHS-0214 etanercept biosimilar candidate, which is in Phase 3 clinical studies in rheumatoid arthritis and in psoriasis. Additionally, in April, we raised approximately $112.2 million in net proceeds from a 401 public offering of $120 million of our common stock. The proceeds from the 401 public offering will be used to develop our second wave pipeline of biosimilar product candidates beyond our initial three first wave products.

I'd now like to open the call for questions and Denny will conclude the call with a few remarks.

Thank you.

Thank you. Thank you, Jean. Operator, we're happy to have any questions.

(Operator Instructions).

And the first question is from Ken Cacciatore of Cowen and Company. Your line is open.

Thanks, guys. Thanks for the review. Just a quick question. AbbVie has been making some discussion about new formulations, new device, maybe fewer injection reactions, can you just comment about their next generation strategy how that might impact what you're trying to accomplish? Thank you.

Thank you very much, Ken, for that question. We have -- we have, of course, have heard that AbbVie is developing a second generation product. I don't have any actual details about that product and so forth. I think in terms of our own product, we think that our formulation will compete favorably with those of others. And I think, I would just decline to speculate a little bit about, you know, Abbvie's actual formulation until there is some sort of a press release or public announcement regarding this. I have no first-hand knowledge. However, I can say that our own product is very stable in our formulation. And we think our formulation is quite competitive.

Great. Thank you.

Thank you. The next question is from Chris Schott of JPMorgan. Your line is open.

Thanks. This is Wendy Lin on for Chris today. Just a couple of questions. I guess first, I'm sure you've been following the biosimilar Remicade launch in major European markets. Can you talk about any updated leanings and how this might inform your commercial strategy for the 0214 and 1420 products? And second, we've heard a lot of discussion recently around label extrapolation. They've [had] conversations with regulators and with payers. How comfortable are you that your 1420 and 0214 molecules will get broad approval and reimbursement particularly in GI indications? On the last quarterly call, you mentioned that you're considering additional smaller studies for the Humira program in additional therapeutic areas, how are you thinking about this potential studies?

So thank you for that, Wendy. I think it is fair to say that the issue of indication extrapolation is very, very important to regulators and to payers and to providers and to patients. The best way to assure that you get indication extrapolation is to have a very, very close match analytically with your biosimilar which, of course, we strive to do. Our conversations with regulators would lead us to believe that if you have less than an optimum analytical match of the product or your in vitro assays do not rate out close enough to the originator product then it brings into question the underlying degree of biosimilarity that you have achieved with the particular product.

In such a case, I think that the issue of full indication extrapolation becomes a more open question than otherwise if you had a very, very exact match. So for us, we focus very, very closely, as you know, on the match that we get. We have previously disclosed that our match with our etarnecept molecule is quite close. I think that we have demonstrated that twice; first, in our pharmacokinetic study in which we achieved a 98% correlation [least scored means] there with that product. That's a tough biosimilar and I think we did very well with that. We have further commented that when we discussed this with regulatory authorities they indicated that we would get the full label extrapolated for that product without any additional clinical studies.

So -- and I think again that speaks to really the Company's technical and scientific competency. Our analytical infrastructure, which is a key part of our platform and our ability to manipulate the metabolism of the cell to glycosylate appropriately and consistently with the innovator. I think that's very difficult to do and I think you will see as time goes on a variety of biosimilars with varying degrees of similarity to the originators.

So we have not had conversations with regulators in terms of additional studies required. As a matter of fact, when we spoke to US FDA regarding our etarnecept biosimilar they opined to us that we did not need to do a second Phase 3 study. And we said, yes, we understood that. They further indicated that we could do scientific rationale studies or I should say written exercises to justify the full label. So that's what we?d do.

The other point that I would make here is that our analytical comparability in terms of our pegfilgrastim product had also been very much first rate and I think that's the reason why we are able really to have a delay enabling critical program that did not include a full on oncology study in Phase 3 along with, you know, of course, the rest of preponderance of evidence that the FDA considers.

So I believe that this is an issue that might be a little confusing for investors and analysts, but I believe that Coherus has very rightfully focused on its analytical infrastructure, being able to produce products that are extraordinarily close to the originators? products. And I think that will lead you to a very efficacious and safe product with a full label of extrapolation, if that's helpful for you.

Thanks. And then on the biosimilar Remicade launch in Europe?

I think that the key takeaway there is it's getting -- that product is getting some good uptake there. I don't have any further comment on that but I think that overall we'll be watching very closely to see how that goes on in the future. But again, we would expect to do quite well here in a market that we choose given the quality of our products. But I think that that probably is moving along quite well from all current indications.

Thank you very much.

Thank you. (Operator Instructions).

And I do show we have a question from Umer Raffat of Evercore. Your line is open.

Thanks very much. Hey, guys.

Hi, Umer.

I wanted to drill down -- hi. So I wanted to drill down IP for a minute and specifically you mentioned your platform enabled you to work around the formulation patents et cetera. So my question is this, how do you intend to get around method of use patents? And then secondly, if you could update us on the status of your pending patent applications?

Thanks. Thanks for the question, Umer. I think that, number one, if you take a look at biosimilar products in general, I think that you see a broad spectrum of intellectual property coverage. On the one hand, you see composition of matter patents, which I think are quite robust. And to your point about method of use patents, a lot of times you see method of use incorporated in those patents. You know, for example, in some cases, it's not unusual to see a method of use coupled with composition of matter in the same patent. On the other hand, at the far end of the spectrum, I think that you have dosing patents and administering the certain dose of the product and attempts to get intellectual property coverage there. And I think that those will be much harder for originators to sustain.

In terms of formulation patents, I believe that formulation patents are a primary area of intellectual property coverage and it's a place where the Company focused very early on in terms of both of its products, etarnecept, which has an argenine-based formulation from Amgen and also the AbbVie formulation patents around Humira. So our patent filings around our formulations are in the public domain. I'd be happy to send those on to you again. But I think it's fair to say that that's an area where we chose to focus early on understanding that it was a key intellectual property issue that had to be addressed.

In terms of therapeutic use patents, I think that those -- that depends I think on a case-by-cases basis how each of those would come out. I wouldn't make any blanket statements regarding those. But as I said, I think they?re probably most resilient when coupled with a composition of matter patents. But again, in the US there?s a number of therapeutic use patents pending for various biosimilars.

Got it. And then also on your patent applications, if I may?

Yes. So as I indicated, we have -- the ones that are confidential I won't tell you about today, Umer. Don't get me -- and the ones that -- and the ones that are public, I'll be happy -- I'll be happy to send on. But I think that it's fair to say as an organization and as a business strategy this is something that Coherus, as you know, has focused on very tightly. We have a scientific advisory board of veteran scientific drug developers from Amgen and Genentech and other key areas.

And for each of our products, we take a very nuanced look at all the intellectual properties surrounding that process patents, formulation patents, all sorts of things. And it's a key area that we focus on in terms of criteria for selecting product candidates. So if there is, for example, to be products that intellectual property bar would constitute something that we felt would be just too difficult or too complex or too much [risk] that would be a very -- that would be a very -- that would be a significant issue for us.

But lastly, what I would point out really here is pegfilgrastim in terms of all these dimensions that you talked about. Pegfilgrastim does not have formulation patents. The expiration of the IP appears quite straight forward. It's already a line extension strategy that's expiring. It has a very favorable competitive dynamic. So we --- and actually, it sits very close on for us. So we think pegfilgrastin has a number of very positive product attributes for us that directly impacts, I think, a lot of the things that you talk about here. And we'll be happy to talk about this a little more at some point in Q3 as we move towards our commercialization strategy. But I think it's one of the attractiveness of the product as an opportunity.

Thank you very much.

Thank you. And there are no further questions in queue at this time. I'll turn the call back over to Denny Lanfear for closing remarks.

Oh, thank you very much and thank you all for joining us today. So 2015 has started out with an excellent first quarter, I think it?s fair to say. First of all, initiation of both of our BLA-enabling studies for our pegfilgrastim biosimilar candidate. We have expanded our etarnecept biosimilar candidate collaboration with Baxter and it now includes our pre-commercialization activities that I've discussed. And lastly, with the proceeds of our follow-on, which was very successful, we're going to continue to work on additional second wave of products with the goal of putting additional product into Phase 3 in 2017, 2018 and 2019.

I would note that the Company will be presenting at the Jefferies Healthcare Conference in early June in New York City and we will also be in Europe. We will be going to the EULAR Meeting in June and we'll be meeting certain investors in Europe during the month of June. So you might hear more about that and we look forward to meeting many of you there if you are there at that time.

And thank you very much for dialing in today. And again, we'll be happy to take any other further questions that you may have, just give us a ring.

Thank you. Ladies and gentlemen, this concludes today's conference. You may now disconnect. Good day.

Thank you.

You?re welcome.