Coherus Oncology Inc (CHRS) 2016 Q2 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the Coherus BioSciences second-quarter earnings conference call. My name is Shane, and I will be your conference operator for the call today. (Operator Instructions). As a reminder, this conference call is being recorded.

I would now like to turn the call over to Patrick O'Brien, Senior Vice President of Investor Relations. Please go ahead.

Thank you, Shawn, and good afternoon, everyone. At close of market today we issued a second-quarter financial results press release. This release can be found on the Coherus BioSciences website.

Joining me for today's call will be Denny Lanfear, President, CEO and Chairman; Barbara Finck, Chief Medical Officer; Lisa Bell, EVP of Global Regulatory Affairs; Jean Viret, CFO; Michael Fleming, SVP of Commercial Strategy; and Matt Hooper, EVP and General Counsel.

Before we begin our formal remarks, I'd like to remind you that we'll be making forward-looking statements with respect to product development plans, all of which involve certain assumptions, risks and uncertainties that are beyond our control and could cause our actual results to differ from these statements. A discussion of these risks can be found on our most Form 10-Q on file with the SEC. In addition, Coherus BioSciences does not undertake any obligation to update any forward-looking statement made during this call.

I will now turn the call over to Denny.

Thank you. Thank you very, very much, Patrick. So, we had a very exciting quarter, and I'm happy to recap some of the key developments for you here today.

Firstly, of course, we recently released data from the 1701-05 study. This was a PK/PD study that demonstrated very good results in terms of comparability to the originator. 1701 and the originator were very well-matched -- and I think you saw the data and the press release that came out -- and we believe this will lead to full label extrapolation.

Additionally, as indicated in the press release this morning, we have now submitted the BLA for this product to US FDA. Assuming the acceptance of this filing, we anticipate approval in Q2 2017.

I would also note that, given recent competitive setbacks, including complete response letters and so on, we believe that there is the potential for us to be the first approved and launched biosimilar to Neulasta in the US. Neulasta, as you know, is currently the largest oncology product in the US, and we will be providing some additional color on our commercial strategy for this program a little later in the year.

And the other thing I would like to mention upon this is, we are also proceeding with our licensing for this product, as well as our oncology franchise, ex-US, particularly in the EU territories.

Now -- and then, lastly, I should also recap for you that, as you are aware from our previous conversations, the manufacturing strategic relationships are in place to make up to $1 billion a year of Neulasta.

Let me turn my attention now to 1410, our adalimumab, or Humira, biosimilar candidate. As you know, yesterday we released a press release announcing positive Phase 3 results in patient with psoriasis. I have with me today the Company's Chief Medical Officer, Dr. Barbara Finck, and we're happy to take questions later and provide more color on that study. We'll be filing the BLA and anticipate that that filing will be accepted sometime in the first half of 2017. We will get that BLA done directly thereafter finishing up the Phase 3 study, which we've talked about before is going to be completed in the second half of 2016.

We've received several favorable decisions from the Patent Trial and Review Board in the US, instituting our IPRs on various patents of AbbVie's, in particular the '135 dosing patent, and the issuance of the '680 and the '987 patents.

Now, if we see any patent that might be in the way for launch plans, we may file IPRs, but I would just remind you that the Company's legal strategy is confidential, so we will not be discussing or taking questions on this topic. However, I think it's safe to say that we believe that we have the strongest patent estate of any biosimilar company currently pursuing Humira biosimilars. We fully anticipate to have this product launch-ready in 2018.

We were issued three US patents -- '611, '612 and '880 -- for the formulation of adalimumab. I believe from my previous remarks you understand that we felt that formulation was a key battleground for Humira biosimilars, so we think these are quite important in terms of launch-readiness. We believe that these patents validate the Company's platform and intellectual property strategy, as well as demonstrate its clinical and scientific capabilities.

And finally, regarding 1420, as you know, we'll be looking to out-license this product along with 0214 in 2016, and we anticipate having a transaction completed in late -- I should say, first half of 2017.

In terms of the status of that, we've just started the process of offering high-level 1420 fly-bys to various parties now that the data is in, just to see who might be interested in little -- taking a little closer look later. For example, we had one review with Lilly, and we are very early on with everyone, and we've yet not asked to begin to deal negotiations with any party. As I said, we don't expect these to go on until first half of 2017.

Turning my attention now to CHS-0214, our etanercept biosimilar, I'm happy to report that this program is on track. Earlier this year, we completed a randomized, double-blind, two-party study in patients with moderate to severe RA who had inadequate response to methotrexate and were naive to biologics. We demonstrated equivalence to Enbrel as measured by the primary endpoint, and the second endpoint also supported this evidence in regard to safety and immunogenicity. And then lastly, pursuant to 0214, we intend to file the MAA in the second half of 2016, most likely in Q4.

Now, lastly, I'd like to turn my attention to a non-core asset, CHS-131, which is a novel, first-in-class, breakthrough, once-daily oral drug candidate for MS, and it has anti-inflammatory activity in the CNS and has been demonstrated to cross the blood-brain barrier. You may recall that we issued a release on this and saw positive Phase 2b results in a trial against placebo at two doses of 131. The possible applications of this asset are broad, and we are now currently understanding where it fits into the continuous care for MS, and exploring relationships with potential partners.

For this product, on a strategic note, our intent here is to license and monetize, and not to proceed with self-funded Phase 3s in MS. We will also be publishing this data in abstract form at an upcoming (inaudible) conference in London, and Dr. -- and I'm sorry -- September 16. Yes. We will be doing that on September 16. Dr. Finck will be happy to take questions regarding that.

So, with that, I will now hand back over to Jean Viret as the Company's Chief Financial Officer, who will comment on some of the financials.

Thank you, Denny. Cash and cash equivalents totaled $220.9 million as of June 30, 2016, compared to $179.6 million as of March 31, 2016. Cash used in operations was $27.4 million in the second quarter of 2016, as compared to $76.3 million in the first quarter of 2015.

Excluding the $30 million milestone payment received from Baxalta this quarter, in Q2, the cash used in operations was approximately 25% less in the second quarter compared to the first quarter of 2016. We reiterate that cash used in operations over the next 2 quarters will be lower than for the first quarter of this year.

Total revenue for the second quarter of 2016 was $14.1 million as compared to $6.9 million in the second quarter of 2015. The increase over the same period in 2015 was due to increased recognition in Baxalta collaboration revenue as a result of receiving four development milestone payments totaling $130 million since March 31, 2015.

Research and development expenses for the second quarter of 2016 were $65.5 million, compared to $56.9 million for the same period in 2015. Increases in R&D expenses were mainly attributable to proceeding with clinical activities associated with our Phase 3 clinical study in psoriasis for CHS-1420, advances in other product candidates in our pipeline, and hiring additional personnel to support both late-development and early-stage activities, and these were offset by a decrease in costs related to BLA-enabling studies for CHS-1701.

General and administrative expenses for the second quarter of 2016 were $11.3 million, compared to $8.8 million for the same period in 2015. Changes in G&A expenses were mainly attributable to hiring employees to support legal, pre-commercial and accounting activities, costs associated with stock options granted since the first quarter of 2015, legal fees to support the intellectual property strategy, and accounting fees and service fees related to compliance with Section 404 of the Sarbanes-Oxley Act of 2002.

Net loss attributable to Coherus for the second quarter of 2016 was $70 million, or $1.72 per share, compared to $58.8 million, or $1.56 per share, for the same period in 2015.

We will now turn the call to Q&A. Operator, you may now open the call to questions.

(Operator Instructions). Chris Schott, JPMorgan.

Thanks for the questions. This is Wendy Lin on for Chris. Can you talk about any learnings from the recently-announced AbbVie/Amgen litigation, and can you remind us of the next catalyst on the legal front?

And then, based on your competitor research, what do you know about the designer competitor of biosimilar Humira molecules that could affect their ultimate IP hurdles to market? Thank you.

Yes. Hi, Wendy. This is Denny. Thank you very much. Could you just repeat the second part of your question? I didn't quite get that.

Just, based on your competitor research or market research, what do you know about the design of competitor biosimilar Humira molecules, and how could that affect their ultimate hurdles to market?

Design of their molecules. Okay. So, the Company's General Counsel is here with us today, Matt Hooper, and Matt will be happy to make some brief remarks regarding your first question.

Thank you, Denny. In regards to the litigation that was filed on August 4, I can tell you that none of the patents that AbbVie has asserted against Amgen came as any surprise to us. We've been watching this space for nearly 5 years, and all of the patents that were asserted by AbbVie have been on our radar. And we believe none of them would preclude us from launching our Humira biosimilar in 2018.

Regarding your question on the design of molecules, I'll just take a stab at that, Wendy. In the recent advisory committee, there was data presented with Amgen's Humira molecule, as you know, and there was also I think a unanimous decision by the advisory committee for full label extrapolation.

I can say that we have been very, very careful with the glycosylation and the engineering of our molecule. As you know, we have spent quite a bit of time with the manufacturing and the molecule itself and its attributes, so we would expect that we would do very well in that same forum with our molecule; certainly as well as Amgen. We think that we have a -- really, an excellent match on this particular molecule.

In terms of other folks and their matches on their molecules, I really can't comment on that. People don't really sell their molecules yet, so it's impossible to get samples of their molecules and take a look at them, or to analyze them, unless of course they're on the market in another area, and so on. Those that are, we sometimes take a look at from here or there. But in general, I think our focus is on making our molecule the most precise mirror match of the originator that we can.

Sorry. Just as a follow- up, I was actually asking about how their molecular design could affect their hurdles to market in terms of IP.

How their molecular design --?

Or the design of, like, how their formulation, or how they went about --

Well, formulations, of course -- that -- well, that of course is a separate issue from molecular design, which -- and so on. But in terms of formulations, I think that, as you know, we have for some time noted that the key -- some of the key intellectual property battles for Humira would be on the formulation front. And so, we were very careful there. Our very first formulation patent application included a number of embodiments which we are now prosecuting into patents -- successfully, I would say.

I believe that it is fair to say that Coherus is differentiated among biosimilar developers by our focus on intellectual property, and our anticipation of these kinds of legal battles. So, I think we're very well prepared. Matt Hooper and I have looked at the formulation landscape for a number of years -- 5 years back, as he indicated.

In terms of other teams, I think that if you take a look at the patent filings from a number of the other Humira biosimilar players, you will see that they appear to have formulations that are impacted either by '157 or '158. So, I suppose the argument can be made that they were going to bump into those on the way. And I think that that's fairly true. As you know, our patents avoid '157 and '158. As I said, that's a very clear differentiator, and I think it's one of the reasons we believe that we'll be able to get on the market post-approval in 2018.

So, I -- just sort of leaving it there. We try not to comment too much on other people's legal strategies. But I do believe it's fair to say that Coherus is differentiated by the very rigorous and disciplined approach that we take to intellectual property, and how we integrate that into our development plan, review that -- those development plans with the regulators, and then go forward.

Great. Thank you.

Mohit Bansal, Citigroup.

Thanks for taking my question, and congratulations on the progress you made this quarter. So, quick question on Neulasta biosimilar. Now that you have five, have you decided whether or not you would be involved in the patent dance or not? And do you intend to inform investors if you decide that? Thank you.

Thank you very much, Mohit. I'll let the Company's General Counsel, Matt Hooper, field that one.

Hi, Mohit. We're not going to announce our strategy with regard to whether we're going to go into the dance or not. So, this is generally consistent with our philosophy that we won't announce our legal strategies until you see us actually executing them.

That being said, Mohit, I would make two further points. The first is that the key piece of intellectual property protecting pegfilgrastim, which is the Olaf Kinstler patent, expired in 2015.

The second point that I would make is, the Company is on record that we do not violate the various refolding and process patents that Amgen is litigating against the other market participants. We, of course, were very careful about that. Those are things that we were careful not to [practice].

So, I'll just leave you with those two things. And as Matt indicated, the patent exchange process and the patent dance is part and parcel of the Company's legal strategy and it -- so, we will probably just not have comments on our legal strategy for any of our products.

Got it. And then, if I may ask one more follow- up, if -- what are the next steps for the IPR against the '135 patent, and when will we hear more about that IPR challenge? Thank you.

I'll take that one, Denny. The '135 is now -- the IPR is now in the trial phase. And in that process, we are waiting now for the submission of the patent owner statement, which is due on September 13.

So, the process -- it works like this. The patent owner has an opportunity to depose our expert that we use to support our IPR, and after that deposition, can mount a full response to the IPR. Their initial response was filed, but now they have an opportunity as the patent owner to put in a full response. We'll have a similar opportunity to depose their experts that they use in their response, and we'll have an opportunity to file a -- our own response to their response.

When those two major submissions are in, then the patent office will hold oral hearings to review the evidence. And that is all required to happen within about a year timeframe, which would place the oral hearing sometime in the first quarter of 2017, with a final decision on the IPR in May of 2017.

Got it. Very helpful. Thank you.

Yes. The last thing that I would note on this general topic, Mohit, is that, as you know, we look forward to the institution of the '166 IPR around in -- I think, what, the first week of November, Matt?

Yes.

In first -- November 2016, also.

Alethia Young, Credit Suisse.

Thanks for taking my question, and lots of good progress over the quarter, so congrats on that. I just wanted to ask a little bit about, in broad strokes -- I know you kind of mentioned Lilly briefly, but just, what are you kind of looking for in partners -- expertise in biosimilars; certain geographies; therapeutic skills? Just, like, maybe you can just give us a framework of how you're thinking about it. Thanks.

Thanks for the question, Alethia. Yes. I think this is -- we just want to signal that we're talking to people. And we're very early days with these things. And what we've done is, we're going to [elect to] start with sort of top-line fly-bys, as I said, and see who's interested. I think a lot of the big firms, though, that are in the -- broadly in the anti-TNF space, either with biologics or with small molecules, would be fairly interested as a complementary therapeutic. I think that 1420 will fit nicely in the bag with those things. And in this particular biosimilar -- in this case, we think that's the best way to exploit the value.

So, we're relatively open-minded. It would be premature to make any comments that -- any further than that. But I'll be happy to say something more, maybe around Q1 of 2017, about this particular topic.

Great. And then just another question on your next wave. I mean, is that kind of related to some of the conversations you're having, or is it kind of separate and internal to Coherus, about what some of the next-wave biosimilars will be for you guys?

Well, as you know, we have announced an Avastin biosimilar and a Lucentis biosimilar. And so, in the context of the licensing, the pegfilgrastim biosimilar, ex-US -- it might make sense to include follow-on biosimilars in that same oncology space such as the Avastin biosimilar, or not, depending -- I think that there's good interest for a number of these biosimilars, and I think that Coherus is very well-positioned as a premier, world-class biosimilar developer.

So, we've -- I think it's fair to say that we have good interest across the portfolio for these things. I can't really provide you any further guidance in terms of our progress and plans on that. But, as I guided earlier, we will have something to say in the second half of this year, about our progress on those announced moieties.

Great. Thanks.

Tyler Van Buren, Cowen and Company.

Congratulations on all the progress made since last quarter. I had a question specifically related to the Humira biosimilar program. Clearly, you all just reported positive results from the first part of the psoriasis study, but you have the period 2 ongoing.

I'm specifically curious about the switch portion of the study. One of your competitors has talked about potentially using a switch study like that for substitutability eventually. So, curious to have you guys discuss a little bit more about that second portion of the study. What type of data we'll see at year end, potentially; as well as, more broadly, your thoughts on potentially getting substitutability down the road, and how long that could take. Thank you.

Thanks for that question, Tyler. I'll let Barbara Finck, Company's Chief Medical Officer, just give you the quick review here on the design of the 1420 psoriasis trial, in particular the second and third portions of it. And then I'll let one of my other teammates talk about the substitutability question.

So, as you've noted, we have press-released the top line results (part 1 of the study, and we're very pleased that the study met the primary endpoint of the -- meeting the PASI-75; that there was no significant difference, and that the confidence intervals were well within the margins that were predefined.

In the second half of this study, which is ongoing, the Humira -- the patients who were originally randomized to receive Humira -- half of that group crosses over to our 1420 molecule. And that goes on for another 2 months. And the reason that we did that was to show that it was safe and that they would not lose efficacy, as if they were then a chronic patient on Humira -- that they could cross over safely to the biosimilar. And so, that study's ongoing. I don't have any results to report on that yet. But that was the purpose of that study -- that part of the study.

The important thing is that we really don't know what the requirements are for substitution or interchangeability yet. We're waiting on the guidance from the agencies to -- or from the FDA, to tell us really what those requirements are. And we know that there are a lot of companies trying to set standards for what they anticipate the agencies will require. But we actually don't know that yet.

So, this is a first step to understand that it's safe to -- for a patient who's a chronic patient on Humira to switch to a biosimilar. We think that is very important data to have for a filing. But, with respect to interchangeability or substitution, we don't have any guidance yet, so we really cannot comment.

We also have the Company's Executive Vice President, Global Regulatory Affairs, Dr. Lisa Bell, with us. Lisa, do you have any additional comments on this topic?

Yes. So, as Barbara alluded to -- so, we know that there is a -- going to be a regulatory standard applied to the labeling for -- what's sufficient data to enable interchangability. That's a separate regulatory standard in terms of the approval status for biosimilars. Our immediate goal right now is focused on getting biosimilarity in terms of this particular program.

And as the Agency comes forth with their own guidance on what's needed, which -- honestly, we don't know if it's going to align with the data that's been presented, because people are taking actions and we -- there's not really yet a guidance to refer back to on what's the minimal, or the reasonable, amount of data that's needed to support this.

I guess I'm just kind of surprised that they haven't come out with guidance yet, given how rapidly your program's advancing as well as a couple of others that are behind you all, or one in front. Do you have any idea on kind of the timelines with respect to the Agency? Do they have -- are there any upcoming events either this year or next year, or is it still pretty vague on your side?

Lisa, would you go ahead?

Yes. So, the Agency has a list that they publish every year about what's on their docket in terms of guidance documents that they are planning to issue. They have, by their own admission, a process that they go through, that involves the writing, the review and broader acceptance -- getting that input internally on any guidance content that's going to be issued. And this one, as you can imagine, is one that they really want to be thoughtful about, because it has implications.

So, I think that it's appropriate to give them the time to think through, what is the right amount of data to inform physicians, to inform patients, and to make sure that the playing field is level in terms of what's scientifically rigorous and robust and defensible. So, I would expect that, according to their timeline, they're going to try their best to hit this year. And we just need to give them the time to do that.

Great. Thanks, everyone.

(Operator Instructions). Douglas Tsao, Barclays.

Thanks for taking the questions. Denny, I know you talked about the filing of the IND for the -- for one of the wave 2 products in the back half of the year. Just curious, what is the lens that you're sort of determining? Is it more of a commercial, is it simply a stage of development that you're going to decide which candidates you're going to move ahead in development?

I'm sorry, Doug. Which products I move ahead into development is --?

In terms of the wave 2 products. I mean, are you thinking about things from a commercial standpoint now, or is it simply, which products are simply ready to move into clinical development?

I think -- and we've discussed this previously, as you know. And I think that we are fairly nuanced in how we select products to go forward with. There's a combination of things that you have to look at, which -- the technical feasibility is one; the clinical feasibility is another; whether or not there is a relatively stable market for the product, or is it there's some paradigm shift by new technology that's coming into some of these products; whether it's partnerable, and how the payers feel -- a whole number of considerations that we take a look at.

In terms of our Avastin biosimilar, we felt that that fit very, very well with our focus in US oncology. That was something, when we talked to key opinion leaders and payers and other entities in that space, they all had a fair amount of enthusiasm for us to pursue.

So, it wouldn't be surprising for us to continue to enhance our oncology portfolio with another mab. I think that I previously commented on our Lucentis biosimilar. We were approached by a number of folks for ophthalmology and to develop products there. So, that also plays a key role in things.

So, I think that we are very, very focused on the end game when we select these products. And if we go forward with them, we're fairly certain that we're going to carry them through.

Now, the other key question, of course, is just when, in the development of a product, do you choose to license? And there's arguments made for licensing early, and there's arguments made for licensing a little later. With 0214, we were able to license that product with a very nice upfront from Baxter, as you recall, prior even to the readout of the Phase 1 data.

So, you can either do it before that or after that, when it's Phase 3-ready. In general, I would say we would probably do licenses when products are more Phase 3-ready for these; but certainly that's not a hard and fast rule.

And then, in terms of -- you had indicated that you would potentially have been interested in the MS space as a biosimilar -- for a biosimilar, hinging on the data for CHS-131. Now that we've seen that, what's your updated thoughts there?

The -- great question. So, we are currently taking a very careful look at the mechanism of action for INT-131. This is a CNS anti-inflammatory which is quite novel. So, we are engaged with a number of KOLs over that MOA and the complementarity of it for other existing therapeutics in the field, and that will drive our decision in terms of our own portfolio around MS. But I think it's important to note that this product, we believe, is anti-inflammatory, without being immune-suppressive, and may have a broad application in the CNS.

So, I would just ask for a little patience while we work through the data, which -- we've just provided top line data. We're still (inaudible) this. Go through the data, and we'll probably have a little more to say about this on the next call.

Okay. Great. Thank you very much.

With no additional questions, I will now turn the call back over to Mr. Lanfear for closing comments.

Thank you all for joining us today, and thank you for your interest in Coherus. I think that we've had a very good quarter here.

As you can see, the Company has continued to focus very, very sharply on execution across the product portfolio through Q1 and Q2. We have a number of positive readouts in terms of our Phase 3s. Certainly the two 0214 readouts in psoriasis and RA; 1420 in terms of psoriasis. We have two successful BLA-enabling studies now with 1701; the PK/PD study, which, really, the data came out very, very nice. And lastly, the immunogenicity data with 1701; and now the BLA.

So, I want to thank my team for their efforts here. There's a lot of folks pulling very hard on the oars, here at Coherus. We look forward to continued strong execution through the remainder of the year, and we look forward to giving you all another update on the next quarterly call. Thank you very much.

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