Coherus Oncology Inc (CHRS) 2015 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Coherus BioSciences Q2 2015 Financial Conference Call. (Operator Instructions).

I would now like to turn the conference over to Mr. Jean Viret, Chief Financial Officer. Please go ahead.

Thank you Sabrina and good afternoon. I am Jean Viret, Chief Financial Officer, and it is my pleasure to welcome you to the Coherus BioSciences Second Quarter 2015 Financial Results Conference Call. Joining me this afternoon is Denny Lanfear, President and Chief Executive Officer.

At the close of the market today, we issued a press release highlighting Coherus's second quarter 2015 performance. This press release is posted in the investor section of our Website at investors.coherus.com.

This conference call 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, we are subject to the risks and uncertainties that we discussed in detail in our documents filed with the SEC, specifically Coherus' Quarterly Report on Form 10-Q for the quarter ended June 30, 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 the clinical and business highlights. I will provide financial highlights for the quarter ended in June 30, 2015 and then we will 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 Jean and welcome everyone to our second quarter call for 2015. I'm going to make a few opening remarks here and then I will review our CHS-1701 pegfilgrastim biosimilar followed by our CHS-1420 adalimumab biosimilar and then finally our CHS-0214 etanercept biosimilar. I'll make a few remarks on our wave two plans and what can you expect to see of the pipeline in the future and then of course we'll be happy to take some of your calls -- or your questions rather.

Overall, I would characterize the quarter as somewhat uneventful with things staying on track significantly. As you know, in terms of our 1701 biosimilar that we had proceeded along with understanding with the FDA and our clinical development program intended to enable the BLA, we maintained guidance that BLA should be filed either in the fourth quarter of this year 2015 or in first quarter of 2016.

At this time, Coherus, consistent with that plan, we do not believe we will be required to perform a Phase 3 study in the oncology patients. As you know, there are two key studies in the BLA-enabling program for 1701. The first is a pivotal PK/PD single-dose, crossover study in a 106 healthy subjects. Dosing has now been completed for that study.

And on the second group is an immunogenicity study which we continue to work on and we are guiding here to completing the immunogenicity study by the end of 2015. And as I indicated earlier, we maintain our guidance in terms of the overall BLA filing date.

A couple of other developments in the pegfilgrastim environment that you may be aware of in terms of other opportunities and other participants and I would happy to take some [calls] (inaudible) remarks if there's time to that. In terms of the 1420 adalimumab biosimilar program, we previously talked about our decision to conduct a global Phase 3 in plaque psoriasis. We continue with plans to proceed with that.

This is a parallel group randomized study of course in 500 patients with psoriasis. Primary endpoint is the [paji] score. It's very similar to our etanercept program. This program of course contains a crossover portion as we have previously discussed and disclosed in our conferences.

We're further -- we're planning the bridging of PK study, comparing our Phase 3 clinical material to U.S. and EU Humira and we expected to start this before the end of the first half of 2016. And we believe that we are on track to file our BLA in the U.S. in the second half of 2016.

In the adalimumab environment of course, there have also been some legal developments and I'll be happy to take a few questions there, although we don't have much to say about other folk's legal proceedings. Lastly, let me talk a little bit about 0214, the etanercept biosimilar program.

This is moving along well. At the end of April, beginning of May, we completed enrollment in both pivotal studies for CHS-0214. So, there's a rheumatoid arthritis study underway as well as a psoriasis study. The rheumatoid arthritis study having some 619 patients and the psoriasis study having about 496 patients.

In April of this year, 2015, we obtained positive results from the Phase 1 PK bridging study comparing EU manufactured CHS-0214 to EU Enbrel. This study was initiated due to the change in manufacturing location from the U.S. to the EU for the 0214 product and compared EU-produced 0214 with [a lot of] Enbrel manufacture in Europe. This design was a single-dose, crossover study that enrolled 53 healthy volunteers, 44 which completed the study.

The study had been all about bioequivalence criteria such as a 90% competence intervals of the ratio for all parameters, that is the maximum serum concentration, Cmax, area under curve at the time [zero] and last time point measured et cetera, also within 80 to 125% criteria. These studies will support filing of MAA in Europe in mid 2016 to NDA in Japan in the second half of 2016 as we have previously guided.

In terms of the (inaudible) program, as you may recall we also with the completion of enrollment received a $35 million milestone payment from our partners at Baxter in May, so all things track along there. In terms of our projections for that product, we will see the psoriasis primary endpoint readout in fourth quarter of this year as we expect. We will see the Phase 3 RA primary endpoint top line data readout in the first quarter of 2016 and then we are on track for the MAA filing in the second half of 2016.

In terms of the pipeline products, as you know and as we've discussed previously, we are (inaudible) in the development of a number of products three or so additional. These are in IND preparation and we expect to have some additional progress in this area with the second wave of products and some announcements regarding IND filings and other progress with the pipeline in the first half of 2016.

So now with that, I will just hand it back over to Jean Viret and Jean perhaps you like to review the financial results.

I will. Thank you Denny and I will now review the financial highlights for the second quarter of 2015. Revenue from the second quarter 2015 totaled $6.9 million as compared to $5 million in the second quarter of 2014. The higher revenue year over year was due to recognition of increased collaboration revenue from Baxalta formerly Baxter as a result of additional milestone payments received and amortized since the end of the second quarter of 2014.

Research and development expenses for the second quarter 2015 was $56.9 million compared to $18.9 million for the same of period in 2014. Increases in R&D expenses for the quarter were primarily attributable to an increase in program cost associated with the advancements of Coherus late-stage clinical product candidates, CHS-0214, CHS-1701 and CHS-1420.

General and administrative expenses for the second quarter of 2015 were $8.8 million, compared to $4 million for the same period in 2014. Increasing G&A expenses over the same period in 2014 were mainly attributable to increased employee related expenses and increased legal and accounting services in support of being a public company.

Net loss attributable to Coherus for the second quarter 2015 was $58.8 million, or $1.56 per share compared to $25.0 million or $5.96 per share, for the same period in 2014.

Cash and cash equivalents totaled $206.1 million at June 30, 2015, compared to $115.1 million at March 31, 2015 and $150.4 million as of December 31, 2014. Recall that in April we raised approximately $112 million in net proceeds from a follow-on public offering of $120 million of our common stock. The proceeds from the follow-on public offering are being used to develop our second wave pipeline of biosimilar product candidate beyond our initial three first wave products.

Also in April as Denny just said, we announced with Baxalta, an amendment to our CHS-0214 etanercept biosimilar collaboration agreement. In aggregate, the revised milestone payments of $130 million may exceed the previous Baxalta funding obligations by approximately $12 million. In May, we completed the enrollment of CHS-0214 Phase 3 clinical studies for rheumatoid arthritis and psoriasis which received a $35 million milestone payments from Baxalta.

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

Thank you. Ladies and gentlemen, if you have a question at this time, please press star and then one on your telephone keypad. If your question has been answered or you wish to remove yourself from the queue, please press the pound key. One moment for questions.

And our first question comes from the line of Chris Schott of J.P. Morgan. Your line is now open.

Thanks for the question. This is Wendy Lin on for Chris Schott today, just a couple of questions. Can you talk about your views on the CMS proposed changes to Part B reimbursement recently made public in the Federal Register, how did you see these changes affecting the 1701 biosimilar in the [U. S.], the opportunity? And also how does the Sandoz-Amgen verdict affect their understanding of the patent process and your IP strategy going forward? Thank you.

Hi, thank you Wendy, thank you very much for your question. First of all as you know the statute calls for an individual J-code for each of the biosimilar products in the view of ourselves and the Biosimilar Forum, the CMS has come out with this guidance I think as an opening and we're currently in the comment period.

Further, I think there's some good news here in terms of the J-code in so far as the WAC pricing for the first three quarters of the product and so on which I think is quite favorable. However, we believe as the Biosimilar Forum that these products are licensed individually and they really should be had their own J-code for each one.

So, we'll see how that all comes out but anyway it comes out we think of that as favorable. Our position of course is that we produced very high quality biosimilars and we'll do fine in the market regardless of the J-codes.

In terms of the Amgen-Sandoz litigation, as you know this is now the second [volley] which has gone forward. The patent dance has found the optional from both the first two rounds. So, I supposed you could say that we expect that position to remain in place as we go forward. As you also know, it is Coherus' position always to avoid intellectual property of others and originators for example, and 1701 is no exception to this, we do this of course with all of our products.

We are going to preserve our optionality in terms of embracing the patent exchange process or not and probably make that decision a little later on when we actually get to our filing date. But, we think overall this is a favorable development in terms of the biosimilar industry and the 180-day clock in terms of approval, I mean that's another one that probably will get further elucidation as time goes on. Thanks.

Thank you and our next question comes from the line of Ken Cacciatore of Cowen and Company. Your line is now open.

Hey guys, it's Ken. I just had a question, a lot of companies focused on one issue or they have a platform technology that solves kind of one problem. I'm just wondering as we take -- try to step back and take a broader view, what's the rate limiting step for you in terms of really going after a lot of opportunities. Is it getting the personnel literally, geographically, is it -- is it capital with a larger entity if they were looking at you realized how much more value you could bring and could you explain that to them, if the resources and the personnel were extended, can you just talk big picture about just kind of value creation in terms of what's limiting and what could be done if there was even more resources applied? Thank you.

Hi Ken, thank you very much for your questions. It's a good one, let me -- let me just take a step back into [request] to that -- from the fifty-thousand view. I think we put -- we started The Company with six products and I think that we only had a few people at the time. And that half of them would move forward and half of them would not which is what happened.

We put those into Phase 3 with a rather small team here but of course as time goes on and the Phase 3 go on with [somewhat] commercial organization, you got to leverage up the whole organization. So what we have done at Coherus that we prepared The Company for commercialization in a couple of different dimensions.

Particularly, in terms of manufacturing and quality which have seen substantial enhancements organizationally and structurally as we are prepared for the launch. We're now also, as you know, taking a look at the commercial side of things and understanding of what it would take to launch a pegfilgrastim biosimilar and how best to approach the [estimation] and value of some of the rest of the things in the pipeline.

In terms of the early stage work up through the Phase 1 pivotal PK studies, as we have spoken before, that can take somewhere, you know, 12-month to 24 months. And then once you get these things into Phase 3, you find yourself running 500 patients, 600 patients in Phase 3, you can easily have quite a few folks tracking and managing those studies and doing all the manufacturing and so on.

And our organization is very, very flat and we are focused very much on having the very high-impact effective company, I think we've done all right with that. I think that we can probably as we've indicated advance the three products in the pipeline straightforwardly over the next, let's say, 12 to 24 months. In a perfect world, I would like to be able to put a product per year into Phase 3 but I think that's a very fast clip.

I think there's a number of these products that are good candidates but not all of them are good candidates. My feeling is that if we take The Company and do some leveraging and continue to increase the size of The Company at the pace that we have, we'll probably get to the point to where we can do something like that.

I haven't made any promises or offering guidance in that regard but you raised a very good point in that it is difficult to the very highest quality people to come together and work on things. And it's one thing we've done here at Coherus, we focus on getting people whose competency is in the 98th percentile and I think that's the reason why we've been as effective as we have been.

So, I would like to run as fast as I can and do as many of these products as I can and I think putting three products in Phase 3 or BLA-enabling studies over the past two years is a pretty fair clip. I would like to go ahead and put another product into Phase 3 every year going forward from here but you raised a good point and I think we are probably running this as fast as we can at this point. And I think five years from now we'll have a pretty substantial pipeline of these assets either in registration studies and at least a few of them approved, I hope that (inaudible).

Yes, congrats --

Thank you. As a reminder if you have a question at this time, please press star then one on your telephone keypad. Our next question comes from the line of [Douglas Shaw] of Barclays, excuse me. Your line is now open.

Hi, good afternoon, thanks for taking the question. Just first a little bit of a housekeeping question just curious at your arrangements with Baxalta had a change of control provision in it and then second -- [and maybe] perhaps, obviously we'll learn more about the wave two pipeline next year but just maybe sort of at a high level how you might be thinking about wave two differently from a product selection standpoint, then when you went about sort of selecting the first wave of product that you move into development?

Thanks for that Doug, the question. Let me take the Baxalta question first. The agreement that we have with Baxter of course had the ability to be assumed by subsequent organizations and Baxalta has done that. I won't comment further on the change of control issues surrounding that agreement as we have not publicly stated those.

In terms of the pipeline, I would like to [appear] the impression and say, yes, you can select the products to go forward but unfortunately that's not the case. I think you're lucky if you got 500 in terms of selecting the right product which is what we did with the first tranche of products. We might be able to do a little better with the second tranche of products but the long and short of it is there's always either development with the molecules or in the market or things that go under the knife as you go along which takes a molecule out of contention.

I can tell you that because I got three or four of them in the freezer but I haven't moved forward on. I think that, however, one of the things that differentiate Coherus is of course we are very, very nuance in looking at the products. We have for example taken a very good look at the intellectual property landscape of difficulty analytics are for molecule and how tough the Phase 3 are, whether they can be partnered, whether or not if they are partnered, whether they can be sold, whether the therapeutic paradigms will stay in place for especially long period to pay back investments and a number of other things.

So, we are [not] one of these companies that just ran out and pursued pump molecules that had large top lines and early patent expirations, I think we're a little more careful. I can assure you we're just as careful with the second tranche of products that we have underway.

And I like to tell you more about which product they are but for competitive reasons I will not. Although when we do get the IND filed or take other actions that are required for disclosure, we'll certainly do that. So you have to wait and take a look but I think all the products that we moved forward [within] pretty high probability of them moving forward up through Phase 3. I hope that's helpful.

Yes, thank you very much.

Thank you. As a reminder if you have a question at this time, please press star then one on your telephone keypad. One moment for questions. I'm showing no further questions at this time. I would now like to turn the call back over to Coherus Biosciences for closing remarks.

Hello, thank you very much. Thank you all for joining us today in our second quarter call. I just reiterated here briefly that in terms of CHS-1701, the studies are ongoing. We [maintained] guidance for the filing Q4, Q1 as pointed out to 2015 and 2016 (technical difficulty). In mid 2015, we'll have more to say about that in a bit. BLA on track for the second half of 2016.

And then of course the 0214 product, the etanercept biosimilar, enrollments had been completed. We have good progress there. We [brought] in the milestone from our partners and we have BLA on track for the second half of 2016. The pipeline is starting to shape up. I would point out that we just finished the rate to support the pipeline a few months ago, so it's going to take 6 to 12 months actually to bring some of that investment to fruition and you should see some activity as I indicated in the first half of 2016.

We thank you all very much for your support, your investment in The Company. We look forward to continuing to execute for you and we'll see you on the next call. Thank you.

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may all disconnect. Everyone have a great day.