Coherus Oncology Inc (CHRS) 2017 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the Coherus BioSciences Fourth Quarter Earnings Call. My name is Mike, and I will be your conference operator for the call today. (Operator Instructions) And 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, Mike, and good afternoon, everyone. After close of market today, we issued a fourth 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; Jean Viret, CFO; Matt Hooper, EVP and General Counsel; and Michael Fleming, EVP of Sales and Marketing.

Before we begin our formal remarks, I'd like remind you that we will 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 actual results to differ from these statements. A description of these risks can be found on our most recent Form 10-K, which we filed this afternoon after market closed. In addition, Coherus BioSciences does not undertake any obligation to update any forward-looking statements made during this call.

I would now like to turn the call over to Denny.

Thank you, Patrick, and thank you all for joining us today on the quarterly and year-end call. So we will give you a review of the CHS-1701 BLA status, and then Jean Viret, our CFO, will give you a rundown on the financial position and results. Then we'll be happy to take some additional questions for you.

So let me first start then with the review of the BLA resubmission for CHS-1701. We have completed our meetings with the FDA regarding the immunogenicity assay and the CMC-related issues. Now regarding the immunogenicity, as we've previously stated, the assay development and then the validation was complete, and the next step was review such validation with the FDA for acceptability and appropriateness process of the samples.

Now with the new -- the super 2 timelines and practices, the FDA provides preliminary feedback to sponsor's briefing documents about a week before the meeting date, which is very helpful. In this case, the written pre-meeting comments stated that the immunogenicity assay approach was acceptable, and the actual meeting, the FDA reiterated that the assay was acceptable. Consistent with previous guidance, we intend to file the resubmission directly after receipt of minutes, completion of testing and related activities, integration of the results into the submission. Now at this point, sample testing is complete, and we feel we are making very good progress in terms of analyzing and incorporating the new data into the revised file. And Dr. Finck is with us today to answer any questions you may have pursuant to that effort.

Now in terms of the data itself, we believe these data support the refiling of the BLA and, ultimately, the product's approvability. If we had developed any data that we believe would have jeopardized the acceptability or the approvability of the BLA, we would have considered that material and made such a disclosure, which we did not. However, we do want to emphasize that is the sole purview and responsibility of the FDA to determine the approvability of any clinical data in support of any BLA. Thus, we will refrain from further comment with respect to any adjudication of the data at this time.

Lastly, I would point out that with about 450 healthy volunteers exposed to CHS-1701 in studies comprising more than 600 patients altogether, we believe we have a very robust immunogenicity package. Lastly, together with our 3-arm, triple-crossover, PK/PD study, we believe that we have very robust clinical data package overall. That is my remarks relative to the BLA and 1701. We'll be happy to take any further comments.

In the interim, I'll now turn you over to Dr. Jean Viret, company's Chief Financial Officer, for the financial review. Jean?

Thank you, Denny. Let me give you an update on our financial position and results. As we indicated at the beginning of the year, our cash and cash equivalents total $126.9 million as of December 31, 2017, and our use of cash in operations and capital purchases was approximately $30 million in the fourth quarter, which compares favorably to our guidance of $35 million to $40 million. The main driver leading to our lower use of cash than our fourth quarter guidance was due to entering into an agreement with KBI, our manufacturing partner for CHS-1701, under which we settled certain manufacturing costs with shares of common stock. We continue to anticipate the use of cash in operations between $30 million and $35 million per quarter in the first and second quarters of 2018. We will provide further guidance on use of cash over second half of 2018 as we progress through the year.

Research and development expense decreased year-over-year by $92 million and by $27.5 million in the fourth quarter of 2017 compared to the same quarter in 2016. The decreases in R&D expense periods-over-periods were mainly due to the reduction in manufacturing, clinical and analytical costs associated with our anti-TNF programs, CHS-0214 and CHS-1420.

General and administrative expense increase of $19.7 million in 2017 compared to 2016 was mainly attributable to salary and stock compensation costs associated with the hiring of personnel in the first half of 2017 to support the CHS-1701 precommercial activities and costs related to legal and other professional services. As a result of cost-control steps taken in June 2017, G&A expenses decreased to pre-2017 levels in the second half of 2017.

Net loss attributable to Coherus for the fourth quarter of 2017 was $49.1 million or $0.84 per share compared to a net loss of $75.9 million or $1.71 per share for the same period in 2016. Net loss attributable to Coherus for 2017 was $238.2 million or $4.48 per share compared to a net loss of $127.3 million or $3.04 per share in 2016.

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

(Operator Instructions) Your first question comes from Ian Somaiya with BMO Capital Markets.

Steve Seedhouse on for Ian. Now that you guys have cleared the first hurdle with the FDA on the immunogenicity assay, can you share any more details about the assay itself or about the samples you've reanalyzed? How many samples, sensitivity of the assay, really anything to help us get comfortable with how elaborate the change in the assay and the amount of data to be submitted is?

Well, thank you for your question. We have previously indicated that there was a certain subset of samples that the FDA asked us to reexamine. And we've also previously indicated that they asked us to do so with a heightened sensitivity assay, and it was 5 or 10x more sensitive than the previous assay. So we talked about that. We also talked about how that assay was developed and validated, and now we've talked about how that assay was accepted by the FDA for sample processing. And now we've processed all the samples, and we've told you that there's no surprises with the sample processing, that we intend to incorporate these results into the BLA. And we're working therefore going forward on the submission. So in terms of comfort, I think that should provide substantial comfort that things are moving along as we have previously discussed. It certainly took a little time to go through all these steps and so on, but I think we're very optimistic about getting the filing done and so on.

Okay, that's great. And then in Europe, have you shared the data, I guess, with EMA? And when was the last time you spoke with them? And is there alignment there on this new assay and the data as well in Europe?

Yes, great question. As we previously indicated, the EMA asked to review the same immunogenicity reanalysis data as the U.S. FDA as those 2 authorities seek to harmonize approval, data and data requirements across jurisdictions. So the EMA has signaled to us that they will extend our application response time, such that we can include all the additional data that the FDA will see. And per our previous guidance, we continue to expect approval of 1701 in Europe sometime in the second half of 2018. So we think the EMA was accommodative in terms of their timing flexibility and wanting to see all the data that the FDA saw.

Okay, great. If I could ask a question -- just last question on the Neulasta Onpro. So more than 60% of the market now exiting 2017 and growing, it looks like, is Onpro. So how sticky do you expect that to be? And can you just remind us if you have plans or if you're already developing a similar device? And what steps would be needed to advance that forward? Or is it not necessarily a priority right now?

Yes. As we previously indicated, we have under development and consideration our own robotic injection device. However, we believe that the Onpro segment is not as sticky, perhaps, as one would imagine. I would just allow Michael Fleming to make some additional comments here pursuant to Onpro and how we see that part of the market. Michael?

Yes, sure. So I guess the first thing I'd say is Neulasta has been around for about 15 years with a prefilled syringe, and physicians were very comfortable in practicing, in the absence of an Onpro device, using a prefilled syringe. It's understandable Amgen is working to convert the market. Our own research indicates that there are really 2 fundamental value drivers that they're playing off for the conversion, one is economics and the other is patient convenience. So essentially, they're discounting the product to convert. And they're driving on both of those value drivers to convert while they're unopposed. Now we believe that when we introduce a price-competitive offering, those scales are going to balance, and we're confident that we're going to do well.

Yes. I would further say that we believe that the entire market, and not just the non-Onpro market, is addressable by us.

Your next question comes from Alethia Young with Crédit Suisse.

One, do you have like kind of any time frame you're willing to offer up as to when you think you'll be ready to file in the United States? And then secondarily, we've all debated what a panel or not means, can you just maybe talk about your perspective on -- if what -- now that you've had this meeting, maybe -- will we need a panel or will we not? Or is that a factor in determining whether there'll be a panel [later]?

Thanks for your call, Alethia. So consistent with the previous guidance, the filing timing was going to filed -- is going to follow, number one, receipt of the minutes from the FDA meetings, and then transfer of all the final data sets from the analytical CROs to Coherus. And then integration of the results into requisite clinical documents and so on, then the resubmission. So I would -- pursuant to your question, I would say that the -- this resubmission process, like the process before it, is taking about the amount of time that we anticipated. So -- and we don't have a firm date for the resubmission that I can offer you. But I can assure that we're working on that quite aggressively, Dr. Finck and her team, and I think that we're making very, very good progress, as we said. Now the second thing, pursuant to any advisories committee, that it is at the sole discretion of the FDA on a product-by-product and a sponsor-by-sponsor basis to determine whether there's going to be an ODAC and how to evaluate the totality of the data necessary to support any approvals for biosimilars. Historically, of course, FDA has had an ODAC for the first biosimilar in each class. And so on the one hand, it would lead you to believe that they would perhaps have an ODAC. However, we do not have any fresh signaling from FDA whether an ODAC would be required or not. I could -- personally, I could see that falling either way. I will say, though, that we will be very prepared for the ODAC as we were last time, and we'll begin our preparations shortly after the resubmission. And of course, if we get an ODAC, we'll announce that in the press release, set accordingly for you.

Your next question comes from Chris Schott with JPMorgan.

This is Chris on for Chris. At a high level for a biosimilar Neulasta launch, what are your expectations for the product's uptake curve? You've mentioned in the past that there's been some recent positive developments, including a unique J-code and a premium 340B hospital reimbursement for biosimilars. So for a launch, should we expect the uptake rate that's kind of similar to biosimilar Neupogen or maybe something faster?

Yes. I'm going to let Michael Fleming take that question under consideration in terms of the J-code and number of other things, but also in terms of how the uptake curves look with respect to various things. Michael?

Yes. Look, I mean -- so first of all, it's premature to offer guidance on what our uptake is going to be. I think we need to file and get closer to launch, and at that point, we can provide more specific guidance. With respect to the J-code and having a separate J-code, I mean, that -- we view that as very, very positive for our company and our industry because it essentially means that we're in command of our own pricing strategy and have an influence on the reimbursement rates. As far as 340B is concerned, I'll remind everybody that -- I think it's approximately 1/3 of Neulasta units flow through 340B, and biosimilars have been granted a path through reimbursement status within that category, which is to say they're going to get reimbursed at ASP plus 6%, as opposed to ASP minus 22.5% for the old technology in that space. So that's a significant benefit. And I think with respect to the analog that you cited, that's a very, very nice and useful analog for us. The short-acting G-CSF marketplace is a very, very big success as far as biosimilars are concerned. Both Granix and Zarxio, combined, have taken approximately 60% of the Neupogen share or 60% of the G-CSF market. And I think -- in fact, if you really look and analyze Zarxio's uptake, it could be on for roughly a 3-year time to peak, and that's something that we're analyzing now. And that's really one of the first places we start to look at when we project what are our uptake could be. It's the obvious analog. So beyond that, I can't really comment further until we get closer to market and we see what that dynamic looks like, but we're very, very encouraged by that analog.

That's helpful. And then for the pending Enbrel patent litigation, what gives you guys confidence in the upcoming IPR decision?

That's a great question. We have the company's General Counsel, Matt Hooper, here, who can address the 0214 Enbrel IPR and so on. Matt?

Thank you. I think what gives us a positive sense about the outcome on this, and it's guardedly optimistic, is that we were able to identify arguments from the original CFAD Bass IPR that were missing. I think on 2 fronts, I believe we presented a stronger case to the PTAB. The prior art that we selected were, in our view, much more of a direct hit showing the fusion construct. Secondly, the one thing that Bass did not do, he didn't really explain the arguments around unexpected results. The argument that Amgen made was that there was something unexpected about this fusion construct. We hit that really hard in our IPR, and I think that is a strong differentiator that gives us some confidence that we may get a positive decision on institution.

Yes. I would just add a dovetail with Matt's remarks that it's hard to guess or project how the PTAB will view the issue of a reasonable likelihood of success for any particular patent that you choose to appeal in this process. There's a lot of prior art which would, on one hand, argue for that. And on the other hand, you could see them taking other positions. So very, very difficult for us to sort of handicap what the outcome will be, but I think we'll know in just a little while here.

(Operator Instructions) Your next question comes from Mohit Bansal with Citigroup.

Just wondering if you could please comment on the timing of the disclosure when you file. I think your last comment was that -- I mean, you had probably provide some color when there is an acceptance of the filing by the FDA. Has anything changed there? Or do you expect to disclose when you file at this point?

Mohit, thanks for your question. Well, certainly, we intend to press release when the application has been accepted, as you point out. What we have not said is that we would press release when the application is filed. That's our current plan is just a press release upon acceptance. If that changes, we'll be certain to let you know. But we think that's the most appropriate time to make a public announcement at this particular point.

Got it. And then if I could sneak in one more. So in terms of Enbrel and HUMIRA development at this point, so you have been clear that you would seek a partner here. But in terms of the manufacturing plans, do you think you would actually go forward with those plans after you have selected a partner and then that responsibility will be at the partner? Or do you think you can move forward there?

Manufacturing is necessarily part of the BLA. How you manufacture your drug for Phase III and so on pretty much dictates how you will enter the market with a similar facility. You, of course, have the opportunity to do post-approval supplements to change manufacturing facilities post-approval. However, in the sort of longer view on these products, we're positioning the 1420 HUMIRA biosimilar for launch in second half of 2022, when we project the key patents will fall, and we are gearing our manufacturing strategies around that. So I would just lastly say that that's probably -- the manufacturing plan will probably be in place upon partnering, but we'll see how things go with 0214 here next week with the IPR.

We have time for one more question. Your last question comes from Douglas Tsao with Barclays.

Just Denny, based on the progress you've made with 1701, certainly coming out of the meeting with the FDA as well as the sort of initial take on the reanalysis, you've done a nice job in terms of pulling back the spend in the business to limit the cash burn. Are you at a point where you can start to sort of put -- start putting some money back into the business in terms of investment for and preparing for a commercial launch? Or are you going to sort of still wait a little bit more until you sort of start making those investments?

That's a -- thank you, Doug. That's a great question. We, of course, have fully developed and fleshed out plans pursuant to the financial requirements for a commercial launch. We want to make sure that we have a very successful launch. Michael and his team are making certain that all of the stakeholders are aligned, for example, that we reach out to them. It's very important that we have certain infrastructure investments put in place, certain hiring put in place in the commensurate amount of time of prior to launch. So we're keeping a very close eye on that and so on. So your point's well made. I think that we have a very keen understanding of just what those investments are. How that will dovetail into our overall financial plan? Jean and his team work on it actively. And then lastly, I would say as we get the file done and we get into the review process with FDA and heading towards approval, we'll have a little more to say about the spends and the ramp-up on the commercial side, and we'll give you little more visibility at that particular point in time. But you're absolutely correct, it's right in the crosshairs, and we're quite focused on it.

I mean, I guess just as a follow up, Denny, so should we expect to start to see some of those costs come back into the business beginning in the second quarter? Or is that more likely a second half of the year event?

JV, you want to give that one a go?

Yes. I mean, on -- with -- some of these costs will come back, but also some of the other costs may come off. As you know, sometimes manufacturing is lumpy. So we may have campaigns that start. I think in terms of magnitude of cost, manufacturing is really where you'll see no differences as we get closer to launch. We may want to -- sorry, some of the manufacturing activities, and this is where main source of cost. But in general, cost related to commercial launch outside of marketing are relatively modest to those of manufacturing, so.

Yes. Just as a historical comparator, Doug, and maybe this is what you're thinking, our burn, maybe a year ago or more, was quite substantial, $75 million a quarter and so on. We had Phase III cost for 2 anti-TNF programs on top of significant cost of 1701 program, manufacturing work on 3 programs simultaneously. So that sort of burn is what you get when you're advancing 2 or 3 programs in late stage prior to BLAs and so on. So we don't have that situation again. And I -- as JV said, that the infrastructure, headcount and other investments required on the commercial side to support the launch are far, far more modest than those sort of expenditures on the development side were historically, if that's helpful.

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

Thank you very much, and thank you all for joining us today on our quarterly call.

We're pleased to report the good progress that we've made in the 1701 program with the sample, the testing and analysis and now moving into the finalization of the resubmission. We'll certainly update you as we make progress on that.

And lastly, I would just offer that we will be at Cowen early next week, and that will be followed by Barclays in Miami mid next week.

So any further questions, please feel free. We'll get together and be happy to chat. Thank you, all.

And we look forward to talking to all of you again. Thank you all for your questions today, and we look forward to updating you on our future progress.