Coherus (CHRS): Launch Of Humira Biosimilar May Boost Stock

Former biosimilar-only developer Coherus Biosciences (NASDAQ:CHRS) went into business with Chinese partner Junshi to develop toripalimab, an anti-PD-1 antibody that had a PDUFA date on December 23 targeting first-line treatment for advanced recurrent or metastatic nasopharyngeal carcinoma or NPC. Toripalimab is manufactured in China, and that has turned out to be bad luck and trouble for the beleaguered company because, given the pandemic situation in China, the FDA cannot let its inspectors go to that country, wait 8 days in quarantine as is mandatory for overseas travelers, and then inspect the manufacturing site. So the stock is stagnating.

I have been covering the Coherus story on Seeking Alpha for over two years. In that time, I have seen the company move from an exclusively biosim player to one that is doing R&D, although through a Chinese partner. Even so, biosim is what still moves the stock; as I noted last time, CHRS stock climbed up after Cimerli, its biosimilar for Lucentis, got FDA approval for all five Lucentis indications. This gives Cimerli one year “biosimilar exclusivity” due to its interchangeability, during which no other biosimilar is allowed into the market, in a bid to incentivise biosimilar development. These five indications are Neovascular (wet) Age-Related Macular Degeneration, Macular Edema following Retinal Vein Occlusion, Diabetic Macular Edema, Diabetic Retinopathy, and Myopic Choroidal Neovascularization. Lucentis has more than $2bn in annual global sales in these indications.

Coming to tori, I said before that this could have been a test case for how kindly the FDA takes to Chinese trial data for US approvals. In May, however, tori received a CRL for a “quality process change;” which the company quickly addressed. Now, if tori gets delayed because of site inspection issues, my test case scenario is not going to work out. Coherus is not exactly in a cash-comfortable situation right now, and the pandemic restrictions in China do not seem to have a way of easing anytime soon. With China’s notorious wall of information silence, nothing is easy to figure out. There could be an announcement on Global Times tomorrow that the corona is over, and China could open up for business. Or it could be two more years before that happens. The silence hinders us from understanding things. So tori is right now in pandemic limbo, and meanwhile, CHRS keeps bleeding cash.

There’s another major angle to tori that is not widely discussed. Its first target indication, NPC, is not a common American disease. According to research, NPC is almost exclusively an ex-US disease:

Specifically, 71% of new nasopharynx cancer cases are recorded in East and Southeast Asia, and 29% are diagnosed in South and Central Asia and North and East Africa. Nasopharynx cancer is native to Southeast Asia, where the prevalence rate is 15-50 cases per 100,000 people. For the United States and the rest of the world, the incidence of less than 1 case per 100,000 people per year is reported

So there are less than 3000 US patients for nasopharynx cancer, and fewer still for metastatic disease. Thus, for this indication, tori falls clearly in orphan territory. The molecule does have orphan designation for NPC in both the US and EU, see here and here. Indeed, it has orphan drug designation for 6 indications in the US. So, assuming this specific demographic has health insurance in the US, Coherus can get a good price for toripalimab. Traditional radiation, chemo and surgery are the mainstays of the various stages of NPC; there are no drugs approved specific to the cancer type.

So all that is good, but the stock is down 30% from my previous coverage because the FDA is unable to inspect that Chinese facility.

Another big news for Coherus is the launch of Humira biosimilar YUSIMRY in 2023:

Coherus plans to launch YUSIMRY in the U.S. on or after July 1, 2023, per the terms of an agreement with Humira® manufacturer, AbbVie.

YUSIMRY is indicated for plaque psoriasis, psoriatic arthritis, rheumatoid arthritis, juvenile idiopathic arthritis, ankylosing spondylitis, Crohn’s disease, and ulcerative colitis.

As Paul Reider, Chief Commercial Officer of Coherus, noted in 2020:

Humira is the top-selling drug in the U.S. with 2020 net sales exceeding $16 billion, and demand is high across the healthcare ecosystem for a less expensive Humira biosimilar.

I have also noted that despite trying its luck at R&D, CHRS is still a major biosimilar company, netting $200mn+ in revenue from the biosim business last year. Thus, a new biosim launch will move the stock considerably. Given that it is trading near 52-week lows despite the recent spike, that piece of news makes for a compelling investment thesis.

Financials

CHRS has a market cap of $777mn and a cash reserve of $286mn. In November, Coherus revised the guidance range of combined 2022 R&D and SG&A expenses from $375 – $395 million to a range of $375 – $385 million. At that rate, they have less than 3 quarters of cash left. However, they also added $45mn in revenue in the previous quarter, all from UDENYCA, its Neulasta biosimilar. CIMERLI was launched in October, so its addition to the revenue stream will reflect next quarter – the company guided for an additional $100mn in 2023. Some notes:

While we are only 6 weeks into the launch, let me share with you some very encouraging early data points. First is sales. Launch to-date, we sold over 1,800 units. And in our first month, our market share was greater than the Biogen biosimilar, which launched in July.

UDENYCA sales decreased from $253.2 million to $165.7 million during the nine months ended September 30, 2022 and 2021, respectively, mainly due to increased competition due to the loss of the biosim exclusivity.

Bottom Line

I thought 2022 would be a make-or-break year for CHRS. That would have been true if the FDA had been able to inspect their Chinese facility. Not having been able to do so, the FDA has kept tori – and CHRS – in limbo. Meanwhile, they may be able to launch their Humira biosimilar and start generating revenue from CIMERLI. All of that actually makes Coherus attractive in 2023.