Coherus Oncology Inc (CHRS) 2018 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the Coherus BioSciences First Quarter Earnings Conference Call. My name is Jimmy, and I'll be your conference operator for today. (Operator Instructions)

And as a reminder, this conference call is being recorded.

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

Thank you, Jimmy, and good afternoon, everyone.

At the close of market today, we issued the first 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, Chief Financial Officer; Matt Hooper, EVP and General Counsel; Vincent Anicetti, Chief Operating Officer; and Jim Hassard, SVP of Marketing and Market Access.

Before we begin our formal remarks, I'd like to 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 in our most recent Form 10-Q, which we filed this afternoon after market close. 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 our quarterly call. I'll first cover 3 areas with respect to CHS-1701: regulatory, manufacturing and commercial; and then I'll make some brief comments with respect to the pipeline before going to Jean Viret, who will review the company's financials.

Last week, we announced that we had resubmitted our biologics license application to FDA for our lead asset, CHS-1701, our pegfilgrastim biosimilar. I'd like to thank all the team members here at Coherus who worked diligently to complete the submission and to complete all the information requests from the FDA and the CRL. We spent the last few weeks integrating the results with the revised immunogenicity assay and the other issues addressed in our dossier and put it in a standard electronic format as required by FDA. We believe our comprehensive clinical package, as well as our excellent analytical biosimilarity data, support FDA approval for this product this year. We look forward to the acceptance or acknowledgment of the application by FDA on or before June 3, 2018, and ultimately to approval, which we believe will occur on or before November 3, 2016. In the meantime, during the review process, we will continue building product inventory and establishing our commercial infrastructure to ensure a successful product launch.

Now with respect to the European filing, we plan to submit the Day 180 responses by the end of May and expect further an opinion from CHMP on Day 210 around the end of June. Potential approval would follow a few months later from that.

Let me talk a little bit about the manufacturing situation then with 1701.

With respect to the status of our supply chain, we have recently appointed Vince Anicetti as our Chief Operating Officer with full responsibility for manufacturing quality and supply chain logistics. We have realigned our internal organization accordingly. Vince is with us today, and he'll be happy to answer any questions during the Q&A you might have in terms of the supply chain of the product.

Now with respect to our facilities. I'd first like to note that both our drug substance and our drug product CMOs have passed preapproval inspection by FDA and EMA, and we have strong processes in place to ensure we continuously meet the highest standard and performance standard.

Near term inventory buildup is going according to plan, and we are preparing to support a vigorous launch after regulatory approval.

Longer term, we believe biosimilars may grow to 75%-plus of new aftermarket over the first few years, consistent with the Zarxio experience and trajectory. We have plans in place to enable us to meet that level of demand even if we are the only biosimilar on the market.

In terms of our commercial plan, we continue to make significant progress in terms of segmenting the market and understanding the needs of each segment, hospital and clinic, large and small. Our sales leadership is in place, and the build-out of the rest of our commercial infrastructure and back office support is on track.

We have been advancing our outreach and education efforts at industry events, most recently attending the Hematology/Oncology Pharmacy Association meeting in Denver as well as the Health Connect Hospital Pharmacy Conference in Atlanta, where there was a palpable enthusiasm for biosimilars. During these meetings, we had the chance to interact with a number of pharmacists, prescribers and thought leaders, gaining important insights on key issues to address before and after the launch.

We also hired a senior team for market access to engage Medicare as well as national and regional commercial payers with the objective of establishing parity reimbursement at launch.

Lastly, I would point out that the company has not provided guidance as of this time on expected discount or pricing strategies as we have not yet completed our market analysis and the competitive landscape remains unclear. However, we will be happy to address those issues, of course, in future calls.

Jim Hassard, our Senior Vice President of Marketing and Market Access, is with us today and Jim will be happy to answer any questions you may have during Q&A.

Let me make a brief remark pursuant to the legal issues with 1701. Having adopted the magistrate judge's dismissal recommendation on March 26, on April 19 the District Court of Delaware issued a final judgment dismissing all of Amgen's patent claims against Coherus under the so-called '707 patent. We believe this successfully concludes the patent dance process for CHS-1701.

Let me make some remarks about the pipeline. With respect to that, we have previously announced that we completed the metabolite work for CHS-131, our novel oral PPAR gamma inhibitor, thereby enabling extended Phase III studies. We are currently evaluating indication selection options, which include not only neurologic indications, such as MS, but also metabolic indications such as NASH.

In addition, we have continued to build our IP estate on CHS-131, and the company's General Counsel, Matt Hooper, is here to answer any of your questions pursuant to that.

With respect to CHS-0214, our Enbrel biosimilar, as previously disclosed, our IPR on the Brockhaus patent was declined, and we are now awaiting the outcome of the Sandoz-Amgen litigation later this year.

With respect to the rest of the pipeline, we have no change in guidance at this time, but we look forward to updating you on this during our next call.

Now before we go to Q&A, let me have our Chief Financial Officer, Jean Viret, review the financials.

Thank you, Denny. I'm going to give you an update on our financial results and performance.

Research and development expense decreased this quarter over the same quarter last year by $28.3 million. The decrease in our R&D expense periods-over-periods were mainly due to the reduction in manufacturing, clinical and analytical costs associated with our anti-TNF programs with CHS-0214 and CHS-1420 and a refocus of resources to advance CHS-1701.

General and administrative expense also decreased by $2.2 million this quarter over the same quarter last year. This decrease was mainly attributable to a decrease in personnel and certain legal and consulting services as a result of cost control steps taken since June 2017.

Net loss attributable to Coherus for the first quarter of 2018 was $44.3 million or $0.74 per share compared to a net loss of $74.8 million or $1.54 per share for the same period in 2017.

Our cash and cash equivalents and marketable securities total $126.9 million as of December 31, 2017, and $95.2 million as of March 31, 2018. As you see in our Form 10-Q that we filed today after the close of market, we have pro forma cash as of March 31, 2018, of $112.1 million, which includes approximately $16.9 million in net proceeds from the sale of our common stock at the beginning of our second quarter.

Our use of cash in operations during the first quarter of 2018 was $33.6 million, in line with our guidance of $32 million to $35 million. We anticipate a use of cash in operations between $32 million and $37 million in the second quarter of 2018, up by approximately $2 million from our last guidance as we prepare for a CHS-1701 regulatory review, approval and commercial launch and continue to develop new biosimilars. We'll provide further guidance on use of cash for the second half of 2018 at our next earnings call.

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

(Operator Instructions) Our first question comes from Mohit Bansal with Citigroup.

So, I mean, one question on CHMP panel. So in your experience, does CHMP panel take things such as immunogenicity assay -- their data as well as manufacturing in consideration? Or it has more to do with the comparability data from the pivotal trial? And I have a follow-up.

Yes, Mohit, this is Denny. Thanks for your question. Could you -- we're not really clear of the point that you were trying to get to here. What is your -- what's the key issue that you want us to address with respect to peer review?

Yes. So let's just say -- I mean, what I'm trying to get to is that if CHMP gives you positive opinion, so does this mean that they have validated your immunogenicity assay as well as the outstanding manufacturing issues as well? Because if they do, do they consider those factors as well? Or this panel is more to -- or more -- it is considering things like -- just translating things like comparability data from the pivotal trial only? Or will they consider the immunogenicity data as well?

No, we believe the opinion by CHMP is fairly definitive in terms of both the immunogenicity and the manufacturing issues. We will supply them the complete dossier of all the current information. As you know, including the new, revised immunogenicity data and so on, that application very strongly mirrors the U.S. application. And as you know, there were certain time line extensions granted by the agency in order to make sure that they're in lockstep with FDA.

Got it. This is helpful. And then one follow-up on CHS-131, the PPAR gamma compound. So given that your growth strategy is biosimilars, and then you have in the past talked about partnering this asset after the initial data in MS, what -- where do you stand in terms of that strategy? And, I mean I think you're hitting NASH for the first time. So what are your plans there?

Great question. So 131, of course, is a very interesting molecule. There are PPAR gamma receptors both in the CNS and in the periphery. It has a very unique mechanism of action being a modulator of PPAR gamma, and not an absolute agonist. It has shown efficacy in diabetes and also efficacy in MS. We believe that the product has a very interesting set of potential indications. So we did 2 things. First, we resolved the metabolite issue, which allows us to go into extended dosing in Phase IIIs past 6 months. So that means that we can do extended indication exposures both in CNS indications like MS or NASH. The mechanism of action of 131 up-regulates certain endogenous proteins, which have been shown in analogous molecules, to have a very beneficial effect on NASH. That is to say that the mechanism of action in this indication is robust. Therefore, we thought it would be best to proceed with an investigation of both the potential peripheral indications, including NASH and the CNS indications, to maximize the value for future partnering. And that's what we're currently doing. In the interim, what we are doing is we have very strongly prosecuted the intellectual property estate to have a very long runway in terms of those things. For example, therapeutic use patents, composition of matter and dosage form and a number of other things that go hand in glove with that. So I think overall, this asset is moving along pretty well. We haven't talked too much about it in the future -- in the past rather, but you'll probably hear a little more about it going forward.

Our next question comes from Ken Cacciatore with Cowen and Company.

I just wanted to follow up on the European regulatory kind of process. Has there been discussions? Do you -- do they have a back-and-forth with you? I don't know if they've asked for any more additional information. It's been fairly normal. So any insights into kind of how that process is going? And then can you just confirm again -- I can check the transcript, but on manufacturing, it sounds as if you said they have had the preapproval inspections and everything has gone fine. And then lastly, just wanted to ask about an AdCom here. Do you think you will have an AdCom for 1701 or not? Just kind of how you're preparing for that.

Thanks for your question, and thanks for joining us today. So let me see if I'll run these things down for you. First of all, there's a very nice process in place with the Europeans. It's a somewhat more interactive process than you have with FDA. You also have a rapporteur. You're able to have a little more give and take and back and forth with them on things. And we've had a lot of that with them, and this -- the result of that, of course, was an extension of the Day 180 out to actually the end of May, which was fairly unusual. But they -- as I indicated earlier, they wanted to make sure they were aligned with the very same data package as FDA. So we -- our overall perception of that is that it's going fairly well, and we're in position to meet all of their information needs round about the end of May. And we'll probably have a little more to say about that as we go through May and June, particularly as we approach the opinion. Now to your second point, pursuant to the EMA inspection on the facilities, I'll let Vince Anicetti, our Chief Operating Officer, just sort of summarize for you what the inspection history has been and where that stands. Vince?

Ken, both our drug substance and drug product manufacturing sites for both U.S. and Europe -- both successfully passed their preapproval inspections. There were a few minor observations in each case, and both of those have been formally responded to. And the response was accepted by both EMA and FDA. We don't anticipate any further inspections as part of this resubmission process, but we are prepared nonetheless as we may have routine GMP inspections at those sites in the future, yes.

Any follow-up on that before I -- Ken, before I get to your AdCom panel question?

No, that was very clear.

Okay. So pursuant to your AdCom panel question, we expect the FDA will let us know at the time of acceptance if we should prepare for a panel or not. However, I would say that notice by FDA to prepare for a panel does not indicate with certainty that a panel will actually be called. We'll not be certain of that until we actually get notice of a panel. The issue of whether or not a panel is required, of course, is at the full discretion of the FDA, and it's done on a product-by-product, sponsor-by-sponsor basis. So it is, I don't think, the case that if for product A, sponsor B has a panel, then for the same biosimilar, sponsor C will also be required to have a panel. I think they do it product by product, sponsor by sponsor. And they look at the totality of the data when they're trying to ascertain whether or not a panel will be required and whether the products have been approved and things like that. We have previously discussed and disclosed that we will be prepared for an ODAC regardless. And so we're actually initiating preparations for that as we speak. So if one's required, we'll be ready, but that's about all we know. But I think they'll shed some additional light on this upon acceptance or acknowledgment of the file.

And our next question comes from Douglas Tsao with Barclays.

Denny, just maybe help clarify in terms of Europe. The June 28 recommendation -- their potential recommendation for approval is pretty quick. How quickly after that you would potentially be -- get formal EMA approval and, therefore, your thinking in terms of how quickly you can actually be on market with the product?

Yes, thanks, Doug. So to the best of our understanding, the Day 210 opinion follows directly and chronologically from Day 180. And it's our further understanding that a few months later, we will have potential approval from other parties like the EMA. We have not probed that issue further. As you know, we have been talking to a number of parties pursuant to potential EU licensing of the product. But we've been fairly focused internally on the U.S. market and the U.S. market opportunity. But that's the rough timing of it. I think it's May then filing with June [before] as we described.

And so, Denny, just as a follow-up to that. I mean, at what point do you -- or perhaps already, is there a sort of a greater urgency to sort of figure out the commercial plan ex U.S. and potentially get a partner in place?

I don't think that there's a significant amount of urgency in terms of the plan for ex U.S. We're fairly opportunistic about that. As I indicated, we've had a number of parties who are very interested. We have, for example, incoming unsolicited interest to partner this product, and we're talking to folks. So I think we're happy with the level of interest and we're happy with how things are moving along with the product.

Okay. I mean, is there a way -- I mean, I understand, obviously, the U.S. market is so attractive. But is there any reason why you don't have -- want more -- a little more focus on the ex U.S. opportunity?

Well, I think there's a couple of issues, Doug. First of all, the ex U.S. -- the U.S. opportunity is like $4 billion. The ex U.S. opportunity in Europe, I think, is in the high hundreds of millions of dollars. Secondarily, there is far less favorable pricing in Europe for the product than there is for the U.S., right. And there is also, I think, a more competition-intensive environment, I'd say, in terms of Europe. And lastly, ex U.S. partnering has benefits, but it also has obligations. And so you have to be careful that any sort of arrangements that you enter into, you're willing to live with in the long term. The up fronts, the royalties, deal structure has to be pretty much worth it. So that's some of the things that we're considering right now. But it's -- I don't believe it is the case where it's an imperative for us to license ex U.S., for example, for this particular product. But if there is significant value to be had, we're certainly in a position to talk to a number of partners because we believe that we have a successful application moving forward.

And one final, I mean...

In the U.S., we're in the lead, so.

And Denny, just as a final question, I mean on that. Are there certain tender markets where you think that you might be able to commercialize by yourself?

Yes. Let me move that question over to Jim Hassard, our Senior VP of Market and Market Access, pursuant to Europe. Jim, you want to make any comments upon the [pegfilgrastim] markets -- certain tender markets or other markets in Europe?

Yes, I think, Doug, Denny has given you a good overview of just the pros and cons of moving into Europe. Scandinavia is a market that we could enter with tenders, and we will look at that as individual opportunities versus other more demand-driven such as France, et cetera.

And the next question comes from Chris Schott with JPMorgan.

This is Chris Neyor on for Chris Schott. One of your competitors recently had a 43 on their facility for biosimilar Neulasta, and there's been some debate in the market about a potential for a product delay. For Coherus, when we look at the market formation for biosimilar Neulasta, how important is or not is first-mover advantage and the relative time to market for the product opportunity over time? And secondly, now that you have submitted your biosimilar Neulasta application, can you provide a little more color on the commercial infrastructure you'd expect to need to support the product launch? And then finally, would you anticipate building out most of this infrastructure prior to the launch?

Thanks, Chris for Chris. I'll let Mr. Hassard take a shot at this. So Jim, do you want to reply to these issues?

Yes, absolutely. So Chris, 3 questions that you had there, which was just, again, how would Mylan or approval of Mylan impact market strategy. And first of all, as Denny mentioned, Neulasta is a $4 billion U.S. market -- large, attractive opportunity. There's a great deal of room for both us and multiple players. Our plans have always incorporated multiple players. A good example is Zarxio and Granix. They've experienced significant success and have taken about 30% market share each. We really believe that that's the best analog for us, and we'll assess deeper the competitive marketplace as we move further towards November 3. I think in terms of commercial infrastructure, already we have hired our senior leadership on the sales side both in terms of sales management and also key account management. We've also hired our market access senior leadership as well. And what we intend to do is build out the ground-level team closer to our action date, November 3.

(Operator Instructions) And I am showing no further questions in the queue at this time. I'd like to turn the call back over to Mr. Lanfear for closing comments.

Thank you all for joining us today on our quarterly call, and hope you enjoyed the review of CHS-1701. I think you'd be hearing back from us probably in the next month or so. We look forward to acknowledgment and acceptance of the file with FDA. And then afterwards, we'll have a little more to say from the commercial team on the launch plans and moving forward and so forth. So thank you all very much, and we'll talk to you on the next call.

Ladies and gentlemen, that does conclude your program, and you may all disconnect. Thank you for participating. Have a good day.