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erus BioSciences(CHRS) - 2025 Q2 - Quarterly Report

Cautionary Note Regarding Forward-Looking Statements Forward-Looking Statements Overview This section outlines the nature and inherent risks of forward-looking statements, which are future predictions - Forward-looking statements cover areas such as maintaining/increasing product sales, developing product candidates, obtaining/maintaining regulatory approval, government and third-party payer coverage, manufacturing capabilities, market size, debt obligations, financial performance (gross margins, cash reserves, R&D, SG&A), strategic plans, clinical study timing/results, potential earnout payments from UDENYCA divestiture, intellectual property, litigation outcomes, and competitive landscape710 - These statements are based on current expectations but are not guarantees of future performance and involve risks, uncertainties, and assumptions that are difficult to predict8 - The company does not undertake any obligation to update these statements after the report's distribution, except as required by federal securities laws8 Part I. Financial Information This section presents unaudited financial statements and management's discussion and analysis Item 1. Unaudited Condensed Consolidated Financial Statements This section presents unaudited financial statements and related notes for the reporting period Condensed Consolidated Balance Sheets This section presents the company's financial position, detailing assets, liabilities, and equity Condensed Consolidated Balance Sheets (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :----------------------------------- | :------------ | :------------------ | | Assets | | | | Cash and cash equivalents | $216,893 | $125,987 | | Investments in marketable securities | $20,744 | — | | Trade receivables, net | $5,109 | $111,324 | | TSA receivables, net | $114,530 | $11,010 | | Inventory | $4,513 | $4,207 | | Total current assets | $380,205 | $341,583 | | Total assets | $439,464 | $448,533 | | Liabilities and Stockholders' Equity (Deficit) | | | | Accounts payable | $37,622 | $28,456 | | Accrued rebates, fees and reserves | $96,814 | $164,867 | | TSA payables and accrued liabilities | $103,999 | $11,026 | | Total current liabilities | $263,629 | $282,981 | | Convertible notes, non-current | — | $228,229 | | Total liabilities | $319,637 | $580,523 | | Total stockholders' equity (deficit) | $119,827 | $(131,990) | | Total liabilities and stockholders' equity (deficit) | $439,464 | $448,533 | - Total assets decreased slightly from $448.5 million at December 31, 2024, to $439.5 million at June 30, 202512 - Total liabilities significantly decreased from $580.5 million to $319.6 million, primarily due to the repayment of convertible notes12 - Stockholders' equity shifted from a deficit of $(132.0) million to a positive $119.8 million12 Condensed Consolidated Statements of Operations This section details the company's financial performance, including revenue, expenses, and net income Condensed Consolidated Statements of Operations (in thousands, except per share data) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net revenue | $10,254 | $10,296 | $17,853 | $12,604 | | Total costs and expenses | $55,740 | $49,922 | $108,774 | $120,017 | | Loss from operations | $(45,486) | $(39,626) | $(90,921) | $(107,413) | | Net loss from continuing operations | $(44,862) | $(54,851) | $(92,260) | $(122,887) | | Net income from discontinued operations, net of tax | $342,629 | $41,930 | $333,458 | $212,841 | | Net income (loss) | $297,767 | $(12,921) | $241,198 | $89,954 | | Net income (loss) per share - basic and diluted | $2.57 | $(0.11) | $2.08 | $0.79 | - Net income significantly improved to $297.8 million for the three months ended June 30, 2025, compared to a net loss of $(12.9) million in the prior year, primarily driven by a substantial net income from discontinued operations of $342.6 million13 - For the six months ended June 30, 2025, net income was $241.2 million, up from $89.9 million in the prior year, also largely due to discontinued operations13 Condensed Consolidated Statements of Comprehensive Income (Loss) This section presents net income or loss and other comprehensive income for the reporting periods Condensed Consolidated Statements of Comprehensive Income (Loss) (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) | $297,767 | $(12,921) | $241,198 | $89,954 | | Other comprehensive income (loss): Unrealized loss on available-for-sale securities, net of tax | — | — | — | $(24) | | Comprehensive income (loss) | $297,767 | $(12,921) | $241,198 | $89,930 | - Comprehensive income for the three and six months ended June 30, 2025, significantly increased to $297.8 million and $241.2 million, respectively, compared to the prior year periods, mirroring the improvements in net income15 Condensed Consolidated Statements of Stockholders' Equity (Deficit) This section outlines changes in stockholders' equity or deficit, reflecting transactions and net income Condensed Consolidated Statements of Stockholders' Equity (Deficit) (in thousands) | Metric | December 31, 2024 | March 31, 2025 | June 30, 2025 | | :------------------------------------------ | :------------------ | :------------- | :------------ | | Total Stockholders' Equity (Deficit) | $(131,990) | $(183,470) | $119,827 | | Accumulated Deficit | $(1,550,993) | $(1,607,562) | $(1,309,795) | | Common Stock Shares Outstanding | 115,614,548 | 115,907,216 | 116,222,726 | - Total stockholders' equity (deficit) improved from a deficit of $(131.99) million at December 31, 2024, to a positive $119.83 million at June 30, 2025, primarily due to net income generated during the period17 - The accumulated deficit decreased from $(1,550.99) million to $(1,309.80) million over the six months, reflecting the period's net income17 Condensed Consolidated Statements of Cash Flows This section presents cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows (in thousands) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------ | :----------------------------- | :----------------------------- | | Net cash (used in) provided by operating activities | $(72,458) | $12,968 | | Net cash provided by investing activities | $445,152 | $230,419 | | Net cash used in financing activities | $(281,788) | $(187,038) | | Net increase in cash, cash equivalents and restricted cash | $90,906 | $56,349 | | Cash, cash equivalents and restricted cash at end of period | $217,156 | $159,692 | - Net cash used in operating activities was $(72.5) million for the six months ended June 30, 2025, a significant change from $13.0 million provided in the prior year, primarily due to the adjustment for the net gain on Sale Transactions18162 - Net cash provided by investing activities increased to $445.2 million, up from $230.4 million, largely driven by $483.4 million cash received from the UDENYCA Sale18165 - Net cash used in financing activities increased to $(281.8) million, up from $(187.0) million, mainly due to the repayment of 2026 Convertible Notes and the UDENYCA Buy-out18167 Notes to Condensed Consolidated Financial Statements This section provides detailed explanations and disclosures supporting the financial statements 1. Organization and Summary of Significant Accounting Policies This section details the company's organizational structure and significant accounting policies - Coherus Oncology, Inc. changed its name from Coherus BioSciences, Inc. on May 29, 2025, to align with its exclusive focus on proprietary innovative immuno-oncology medicines, following the divestiture of its biosimilar businesses20 - The company completed the divestiture of the UDENYCA franchise to Intas for $483.4 million cash on April 11, 2025, and is eligible for two additional $37.5 million earnout payments based on future net sales thresholds21 - The UDENYCA Sale, along with previous YUSIMRY and CIMERLI sales, represents a strategic shift, leading to the classification of these operations as discontinued in the financial statements2133 - The One Big Beautiful Bill Act (OBBBA) was signed into law on July 4, 2025, allowing immediate expensing of domestic R&D and 100% bonus depreciation, with impacts to be reflected starting Q3 202535 2. Revenue This section details revenue recognition policies and provides a breakdown of net revenue sources Net Revenue from Continuing Operations (in thousands) | Product | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | LOQTORZI | $9,959 | $3,789 | $17,307 | $5,777 | | Other revenue | $295 | $6,507 | $546 | $6,827 | | Total net revenue | $10,254 | $10,296 | $17,853 | $12,604 | - LOQTORZI net revenue increased by $6.17 million (162.8%) for the three months and $11.53 million (199.6%) for the six months ended June 30, 2025, compared to the prior year, driven by volume growth since its December 2023 launch39129 - Other revenue decreased significantly due to a $6.3 million sale of rights to commercialize toripalimab in Canada on June 27, 202439129 Gross Product Revenues by Significant Customers (Continuing Operations) | Customer | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | McKesson Corporation | 44% | 44% | 45% | 39% | | Cencora (AmeriSource Bergen) | 39% | 45% | 37% | 44% | | Cardinal Health, Inc. | 15% | 11% | 17% | 15% | 3. Fair Value Measurements This section describes methodologies and inputs for fair value measurements of financial instruments - The company classifies financial instruments into Level 1, 2, or 3 based on input observability4448 - Contingent consideration liabilities related to CVRs from the Surface Oncology acquisition are Level 3 measurements, determined using Monte Carlo simulations46 - The Royalty Fee Derivative Liability, embedded in the Revenue Purchase and Sale Agreement, is also a Level 3 measurement, with its fair value estimated using Monte Carlo simulation models47 - Its fair value decreased from $13.6 million at December 31, 2024, to $1.5 million at June 30, 2025, partly due to the derecognition of the UDENYCA portion49 4. Inventory This section provides details on the composition and valuation of the company's inventory assets Inventory (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :-------- | :------------ | :------------------ | | Finished goods | $4,513 | $4,207 | | Prepaid manufacturing | $6,700 | $6,653 | - Inventory consisted entirely of finished goods, increasing slightly from $4.2 million to $4.5 million5152 - Prepaid manufacturing remained stable at approximately $6.7 million, with $1.1 million expected to convert to inventory within 12 months and $5.6 million for R&D5152 5. Balance Sheet Components This section provides detailed breakdowns of property, intangible, and liability components Property and Equipment, Net (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :------------------------------------------ | :------------ | :------------------ | | Total property and equipment, net - subtotal | $1,907 | $2,837 | | Less: Property and equipment, net from discontinued operations | — | $(261) | | Property and equipment, net | $1,907 | $2,576 | Intangible Assets, Net (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :------------------------------------------ | :------------ | :------------------ | | Finite-lived assets, net | $23,453 | $24,787 | | Indefinite-lived assets - in-process R&D | $28,859 | $28,859 | | Total Intangible assets, net | $52,312 | $53,646 | - Property and equipment, net, decreased from $2.58 million to $1.91 million53 - Intangible assets, net, decreased from $53.65 million to $52.31 million, with amortization expense of $1.3 million for the six months ended June 30, 20255556 - Accrued and other current liabilities significantly decreased from $60.29 million to $14.18 million, primarily due to the derecognition of the Royalty Fee Derivative Liability (current portion) and accrued co-development costs/milestone payments58 - Other liabilities, non-current, decreased from $29.33 million to $16.74 million, mainly due to a reduction in revenue participation liability59 6. Discontinued Operations This section details the financial impact and strategic rationale behind discontinued operations - The company completed the divestiture of the UDENYCA Business on April 11, 2025, for $483.4 million cash, recognizing a net gain of $339.1 million60 - Two additional earnout payments of $37.5 million each are possible based on future UDENYCA net sales60 - Previous divestitures include the YUSIMRY franchise (June 26, 2024, for $40.0 million cash) and the CIMERLI ophthalmology franchise (March 1, 2024, for $187.8 million cash)6163 - These divestitures represent a strategic shift, leading to the classification of these businesses as discontinued operations for all periods presented64 Net Income from Discontinued Operations (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net revenue | $23,094 | $54,683 | $55,228 | $129,438 | | Net income from discontinued operations, net of tax | $342,629 | $41,930 | $333,458 | $212,841 | - Net income from discontinued operations for the six months ended June 30, 2025, was $333.5 million, significantly higher than $212.8 million in the prior year, primarily due to the UDENYCA divestiture gain66 7. Collaborations and Other Arrangements This section outlines key collaboration agreements and other contractual arrangements - The company amended its Collaboration Agreement with Junshi Biosciences, revising the $25.0 million milestone payment for LOQTORZI's FDA approval into two $12.5 million installments, with the second paid in January 202572 - Accrued royalty obligation to Junshi Biosciences was $2.0 million as of June 30, 2025, up from $1.5 million at December 31, 202474 8. Financial Liabilities This section provides a detailed overview of the company's debt and other financial liabilities Summary of Debt Obligations (in thousands) | Debt Type | Principal Amount (June 30, 2025) | Carrying Value (June 30, 2025) | Principal Amount (Dec 31, 2024) | Carrying Value (Dec 31, 2024) | | :-------------------- | :------------------------------- | :----------------------------- | :------------------------------ | :------------------------------ | | 2029 Term Loan | $38,660 | $36,867 | $38,660 | $36,698 | | 2026 Convertible Notes | $121 | $121 | $230,000 | $228,229 | - The 2029 Term Loan, entered into on May 8, 2024, for $38.7 million, matures on May 8, 2029, with interest at 8.0% plus three-month SOFR7677 - The company repurchased $170.0 million of 2026 Convertible Notes on April 15, 2025, and an additional $59.9 million on May 15, 2025, reducing the outstanding principal to $0.1 million as of June 30, 202591 - A $4.7 million loss on debt extinguishment was recorded91 - The Revenue Purchase and Sale Agreement involved a $37.5 million payment to the company in exchange for rights to 5.0% of U.S. net sales of UDENYCA and LOQTORZI79 - The UDENYCA portion was bought out for $47.7 million on April 15, 202581 9. Commitments and Contingencies This section details contractual commitments and potential contingent legal liabilities Non-Cancelable Purchase Commitments (in thousands) | Year Ending December 31, | Amount | | :----------------------- | :----- | | 2025 | $8,195 | | 2026 | $260 | | Total obligations | $8,455 | - The company has non-cancelable purchase commitments totaling $8.46 million, primarily for manufacturing services, with the majority ($8.20 million) due in 202593 - An accrual of $6.4 million was established as of June 30, 2025, for legal proceedings and claims, including a demand letter from Zinc Health Services, LLC for approximately $14.0 million related to UDENYCA sales9596 10. Stockholders' Equity (Deficit) This section details changes in stockholders' equity or deficit, including share issuances ATM Offering Summary (in thousands, except share and per share data) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------ | :----------------------------- | :----------------------------- | | Number of common stock shares sold | — | 650,005 | | Gross proceeds | — | $1,589 | | Net proceeds | — | $1,549 | - No shares were sold under the ATM Offering during the six months ended June 30, 202599 - Approximately $64.9 million of common stock remains available for sale under the ATM Offering as of June 30, 202599 11. Stock-Based Compensation This section outlines stock-based compensation expense across R&D and administrative functions Stock-Based Compensation Expense (in thousands) | Classification | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Research and development | $2,131 | $2,266 | $3,841 | $4,460 | | Selling, general and administrative | $3,184 | $4,661 | $6,584 | $9,538 | | Total stock-based compensation expense from continuing operations | $5,166 | $6,859 | $10,212 | $13,675 | - Total stock-based compensation expense from continuing operations decreased by $1.69 million for the three months and $3.46 million for the six months ended June 30, 2025, compared to the prior year100 12. Net Income (Loss) Per Share This section presents basic and diluted net income or loss per share from operations Net Income (Loss) Per Share (basic and diluted) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net loss from continuing operations - basic and diluted | $(0.39) | $(0.48) | $(0.80) | $(1.08) | | Net income from discontinued operations - basic and diluted | $2.95 | $0.37 | $2.88 | $1.87 | | Net income (loss) per share - basic and diluted | $2.57 | $(0.11) | $2.08 | $0.79 | - Diluted EPS from continuing operations improved from $(0.48) to $(0.39) for the three months and from $(1.08) to $(0.80) for the six months ended June 30, 2025102 - Diluted EPS from discontinued operations significantly increased from $0.37 to $2.95 for the three months and from $1.87 to $2.88 for the six months ended June 30, 2025, primarily due to the UDENYCA divestiture gain102 - Total diluted EPS was $2.57 for the three months and $2.08 for the six months ended June 30, 2025, a substantial improvement from $(0.11) and $0.79, respectively, in the prior year102 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial condition, operational results, and strategic shift to immuno-oncology Overview This section provides an overview of the company's strategic transformation to immuno-oncology - Coherus Oncology, Inc. is now a fully integrated commercial-stage innovative oncology company, focused on its approved PD-1 inhibitor, LOQTORZI, and two mid-stage clinical candidates (casdozokitug and CHS-114)104 - The company changed its name from Coherus BioSciences, Inc. on May 29, 2025, to reflect its exclusive focus on immuno-oncology after divesting its biosimilar businesses104 Product and Product Candidates This section details LOQTORZI and key immuno-oncology pipeline candidates - LOQTORZI (toripalimab-tpzi) was FDA-approved on October 27, 2023, for metastatic or recurrent locally advanced nasopharyngeal carcinoma (NPC) and launched in the U.S. on January 2, 2024106 - It is the only preferred Category 1 first-line treatment option for NPC in combination with chemotherapy, as per NCCN guidelines106 - Casdozokitug (CHS-388) is an investigational IL-27 targeting antibody with Orphan Drug and Fast Track designations for hepatocellular carcinoma (HCC)112 - It is currently in three clinical studies, including a Phase 2 study in HCC and a randomized Phase 2 study in combination with toripalimab and bevacizumab112 - CHS-114 is an investigational CCR8-targeting antibody designed to deplete intra-tumoral Treg cells112 - It is being evaluated in Phase 1b clinical studies in combination with toripalimab for second-line HNSCC and advanced solid tumors112 - The company has an exclusive license from Junshi Biosciences for LOQTORZI in the U.S. and Canada, with potential milestone payments up to $380.0 million and low twenty percent range royalties on net sales114 Key Business Updates This section summarizes recent business developments, including divestitures and debt management - The UDENYCA Sale was completed on April 11, 2025, for $483.4 million cash, with eligibility for two additional $37.5 million earnout payments116 - On April 15, 2025, the company paid $47.7 million to buy out the UDENYCA portion of the Revenue Purchase and Sale Agreement, while the LOQTORZI portion remains active117 - The company repurchased $170.0 million of 2026 Convertible Notes on April 15, 2025, and $59.9 million on May 15, 2025, leaving $0.1 million outstanding as of June 30, 2025118 Financial Operations Overview This section provides an overview of key components and accounting treatments in financial operations - The UDENYCA Sale, as the last significant biosimilar divestiture, led to the classification of biosimilar businesses as discontinued operations119 - Cost of goods sold includes third-party manufacturing, distribution, royalties (low twenty percent range on LOQTORZI net sales), and overhead121 - Research and development expenses are recognized as incurred, with external costs primarily for collaborators, CROs, manufacturing supplies, and upfront/milestone payments122123 - Internal costs cover personnel and facilities123 - Selling, general and administrative expenses include personnel, allocated facilities, professional services, and commercialization costs for LOQTORZI, with TSA reimbursements reducing these expenses126 - Interest expense includes interest on debt, Revenue Purchase and Sale Agreement, and non-cash amortization of debt discount/issuance costs127 - Other income (expense), net, includes interest income, accretion of discount on marketable securities, foreign exchange gains/losses, changes in fair value of derivatives, and gains/losses from asset disposals128 Results of Operations This section analyzes the company's financial performance, including revenue, expenses, and net income Net Revenue (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change | | :------- | :------------------------------- | :------------------------------- | :----- | | LOQTORZI | $9,959 | $3,789 | $6,170 | | Other revenue | $295 | $6,507 | $(6,212) | | Total net revenue | $10,254 | $10,296 | $(42) | - LOQTORZI net revenue increased by $6.17 million (162.8%) for the three months ended June 30, 2025, due to volume growth129 - Other revenue decreased by $6.21 million due to the sale of Canadian commercialization rights129 Cost of Goods Sold and Gross Margin (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change | | :--------------- | :------------------------------- | :------------------------------- | :----- | | Cost of goods sold | $3,395 | $1,809 | $1,586 | | Gross margin | 67% | 82% | -15% | | Six Months Ended June 30, 2025 | $6,048 | $3,248 | $2,800 | | Gross margin | 66% | 74% | -8% | - Cost of goods sold increased by $1.59 million (87.7%) for the three months and $2.80 million (86.2%) for the six months, driven by LOQTORZI volume growth131 - Gross margin decreased due to higher cost of goods sold relative to revenue131 Research and Development Expense (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change | | :------------------------ | :------------------------------- | :------------------------------- | :----- | | Research and development | $26,306 | $20,598 | $5,708 | | Six Months Ended June 30, 2025 | $50,662 | $49,022 | $1,640 | - R&D expense increased by $5.71 million (27.7%) for the three months, primarily due to increased development for casdozokitug ($4.8 million) and CHS-114 ($4.0 million), partially offset by decreases in facilities and co-development costs133134 - R&D expense increased by $1.64 million (3.3%) for the six months, driven by CHS-114 ($9.0 million) and casdozokitug ($6.8 million) development, offset by reduced co-development costs for toripalimab/CHS-006 and lower personnel/infrastructure expenses133134 Selling, General and Administrative Expense (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change | | :-------------------------------- | :------------------------------- | :------------------------------- | :------- | | Selling, general and administrative | $26,039 | $27,515 | $(1,476) | | Six Months Ended June 30, 2025 | $52,064 | $67,747 | $(15,683) | - SG&A expense decreased by $1.48 million (5.4%) for the three months, mainly due to lower employee-related costs136 - SG&A expense decreased by $15.68 million (23.1%) for the six months, primarily due to a $6.8 million impairment charge in Q1 2024, lower headcount-related costs ($5.5 million), and reduced professional fees and infrastructure expenses137 Interest Expense (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change | | :------------- | :------------------------------- | :------------------------------- | :------- | | Interest expense | $2,277 | $4,062 | $(1,785) | | Six Months Ended June 30, 2025 | $4,427 | $7,180 | $(2,753) | - Interest expense from continuing operations decreased by $1.79 million (43.9%) for the three months and $2.75 million (38.3%) for the six months, mainly due to the prepayment of 2027 Term Loans, partially offset by new interest on the 2029 Term Loan and LOQTORZI Revenue Purchase and Sale Agreement139 Net Income from Discontinued Operations, net of tax (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change | | :------------------------------------------ | :------------------------------- | :------------------------------- | :--------- | | Net income from discontinued operations, net of tax | $342,629 | $41,930 | $300,699 | | Six Months Ended June 30, 2025 | $333,458 | $212,841 | $120,617 | - Net income from discontinued operations increased by $300.70 million (717.1%) for the three months and $120.62 million (56.7%) for the six months, primarily due to the $339.1 million net gain on the UDENYCA divestiture in April 2025146 Liquidity and Capital Resources This section assesses the company's cash position, capital resources, and ability to fund operations Liquidity and Capital Resources (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :------------------------------------------ | :------------ | :------------------ | | Total Cash, cash equivalents and marketable securities | $237,637 | $125,987 | | Total Financial liabilities | $50,089 | $293,670 | - Cash, cash equivalents, and marketable securities increased to $237.6 million at June 30, 2025, from $126.0 million at December 31, 2024148 - Total financial liabilities significantly decreased to $50.1 million from $293.7 million, primarily due to the repayment of 2026 Convertible Notes and the UDENYCA Buy-out148149 - The company believes its available cash, product sales, and ATM Offering proceeds will fund operations for at least the next twelve months152 - Key liquidity events include the UDENYCA Sale ($483.4 million cash), UDENYCA royalty buy-out ($47.7 million payment), 2026 Convertible Notes repurchases ($229.9 million), and the 2029 Term Loan ($38.7 million proceeds)153 Summary Statement of Cash Flows (in thousands) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------ | :----------------------------- | :----------------------------- | | Net cash (used in) provided by operating activities | $(72,458) | $12,968 | | Net cash provided by investing activities | $445,152 | $230,419 | | Net cash used in financing activities | $(281,788) | $(187,038) | | Net increase in cash, cash equivalents and restricted cash | $90,906 | $56,349 | Critical Accounting Policies and Significant Judgments and Estimates This section outlines critical accounting policies and significant judgments and estimates - The preparation of financial statements requires management to make judgments, estimates, and assumptions affecting reported amounts of assets, liabilities, revenue, and expenses170 - No significant changes to critical accounting estimates occurred during the six months ended June 30, 2025, compared to the 2024 Form 10-K171 Recent Accounting Pronouncements This section details evaluation of recent accounting pronouncements and their potential impact - The company is evaluating ASU 2023-09 (Income Taxes) effective for annual periods after December 15, 2024, which enhances income tax disclosures36 - The company is evaluating ASU 2024-03 (Income Statement - Expense Disaggregation) effective for annual periods after December 15, 2026, which requires disaggregated disclosure of certain costs and expenses37 Item 3. Quantitative and Qualitative Disclosure About Market Risk As a smaller reporting company, the company elects not to provide disclosures on market risk - The company qualifies as a 'smaller reporting company' and has elected not to provide disclosures about market risk173 Item 4. Controls and Procedures This section evaluates disclosure controls and internal control, noting a material weakness - The company's disclosure controls and procedures were deemed not effective as of June 30, 2025, due to a material weakness in the operating effectiveness of procedures related to documentation and review of certain inventory account reconciliations177179 - Despite the material weakness, management concluded that the condensed consolidated financial statements fairly present the financial condition, results of operations, and cash flows177 - Remediation measures include additional training and enhancement of documentation procedures, but the deficient inventory control was decommissioned with the UDENYCA Sale, preventing retesting of its operating effectiveness180 - No other changes in internal control over financial reporting materially affected, or are reasonably likely to materially affect, the company's internal control during the quarter ended June 30, 2025181 Part II. Other Information This section includes legal proceedings, risk factors, equity sales, and other required disclosures Item 1. Legal Proceedings This section incorporates legal proceedings information by reference from Note 9 - Information on legal proceedings is incorporated by reference from Note 9. Commitments and Contingencies182 Item 1A. Risk Factors This section details significant risks impacting the company's business, financial condition, and prospects Risk Factor Summary This section provides a concise summary of the most critical risks facing the company - Key risks include limited profitability history, dependence on market acceptance of LOQTORZI, reliance on collaborators for development, ongoing regulatory scrutiny, potential disruptions at government agencies, intense competition from immuno-oncology biologics, healthcare reform impacts (e.g., IRA), dependence on key personnel, reliance on third-party CROs and manufacturers, manufacturing risks, and potential delisting from Nasdaq183188 Risks Related to Our Financial Condition and Capital Requirements This section outlines risks concerning financial stability, profitability, and capital funding - The company has a limited history of profitability, with significant operating losses in most years, and an accumulated deficit of $1.3 billion as of June 30, 2025186187191 - Future profitability is uncertain, especially after the UDENYCA Sale191 - Future expenses will increase substantially with commercialization efforts, R&D, manufacturing, regulatory approvals, and intellectual property protection192 - The company is dependent on raising additional funds, which may not be available on acceptable terms, potentially forcing delays or termination of product development and commercialization efforts194198 - Future funding requirements depend on factors like product sales, debt obligations, manufacturing costs, clinical trial progress, regulatory approvals, and potential earnout payments from the UDENYCA Business sale156196 Risks Related to Launch and Commercialization of our Product and our Product Candidates This section addresses risks with product launch, market acceptance, and regulatory approvals - The company has a limited operating history in immuno-oncology, with LOQTORZI as its only approved product199 - Generating meaningful revenue depends on successful marketing, regulatory approvals for pipeline candidates (casdozokitug, CHS-114, toripalimab in non-NPC indications), and market acceptance200201 - Commercial success hinges on market acceptance by physicians, patients, and third-party payers, influenced by product safety, efficacy, side effects, clinical indications, competition, cost, and reimbursement policies204206 - Failure to obtain or maintain adequate third-party coverage and reimbursement for LOQTORZI or future products could limit market access and revenue generation, with significant uncertainty surrounding new product reimbursement209212213 - Approved products remain subject to ongoing regulatory requirements (manufacturing, labeling, promotion, post-marketing studies), and non-compliance could lead to sanctions, market withdrawal, or delays216221 - Disruptions at the FDA and other government agencies (e.g., funding shortages, shutdowns) could hinder regulatory review and approval processes, negatively impacting the business225227228 Risks Related to Competitive Activity This section details risks from intense competition in immuno-oncology and biosimilar entry - LOQTORZI faces significant competition in the immuno-oncology market from established anti-PD-1/PD-L1 antibody drugs (e.g., Keytruda, Opdivo) and other novel drugs in development229230 - Casdozokitug and CHS-114, if approved, will also face competition from existing immuno-oncology products and other programs targeting similar mechanisms (e.g., CCR8)231232 - Competitors often have greater financial, technical, and marketing resources, potentially leading to faster regulatory approvals, more effective sales, and the development of superior or lower-cost therapies233234 - The BPCIA provides 12 years of exclusivity for reference biologic products, but this could be shortened, or the company's products may not qualify, leading to earlier biosimilar competition236239 Risks Related to Our Ability to Hire and Retain Highly Qualified Personnel This section addresses risks related to attracting, retaining, and managing key personnel - The company is highly dependent on its key executives and scientific staff, including President and CEO Dennis M. Lanfear240 - Loss of these individuals or inability to attract new qualified personnel could harm the business240 - Difficulties in managing changes in employee numbers, particularly due to divestitures, reductions in force, and turnover (e.g., 51 employees decreased since Dec 31, 2024), could disrupt operations and increase expenses243245 Risks Related to Reliance on Third Parties This section outlines risks associated with dependence on third-party manufacturers and partners - The company relies on single third-party manufacturers for nonclinical, clinical, and commercial drug supplies246 - Failure to provide sufficient quantities, acceptable quality, or timely supply could harm the business247 - Reliance on third-party manufacturers carries risks including regulatory non-compliance, breach of agreements, and termination, which could delay development or commercialization248 - The company relies on third-party CROs for nonclinical and clinical studies252 - Failure by CROs to meet contractual duties, deadlines, or regulatory requirements could delay or terminate studies and harm the business253 - Dependence on Junshi Biosciences for LOQTORZI commercialization means that issues with their supply or collaboration could materially affect the business255257 Risks Related to Our Future Operations Following the UDENYCA Sale This section addresses operational and financial risks following the UDENYCA sale - There is no guarantee of receiving the two $37.5 million earnout payments from the UDENYCA Sale, as they are contingent on specific net sales thresholds being met259 - Risks associated with the UDENYCA Transition Services Agreement (TSA) include diverting management time, providing significant support services, and potential unanticipated costs260262 Risks Related to Manufacturing and Supply Chain This section details risks concerning complex manufacturing, supply chain, and inventory - Manufacturing processes are complex and highly regulated, subject to risks like contamination, equipment failure, natural disasters, and supply chain disruptions, which could increase costs and limit supply264265269 - Inaccurate sales forecasting can lead to excess or obsolete inventory, requiring write-downs and charges related to firm purchase commitments, impacting financial results266267 - Reliance on single suppliers for manufacturing, clinical trials, and testing creates vulnerability; loss of any supplier could cause significant delays and adverse business impacts271 - Contract manufacturers must comply with cGMP regulations and pass regulatory inspections272 - Failure to do so could delay or prevent regulatory approval or lead to suspension of production275 Risks Related to Adverse Events This section outlines risks with undesirable side effects, product liability, and adverse events - Undesirable side effects from products or product candidates could delay or prevent regulatory approval, lead to restrictive labeling, or result in significant negative consequences post-marketing, including product liability lawsuits278282 - Failure to report adverse events within prescribed timeframes could lead to regulatory actions, penalties, and delays in future product approvals283 - Adverse events involving other anti-PD-1 or PD-L1 antibody products could negatively affect the company's product due to perceived comparability and potential regulatory scrutiny284 Risks Related to Intellectual Property This section addresses risks concerning patent infringement, IP validity, and trade secrets - The company's commercial success depends on avoiding infringement of third-party patents285 - Claims of infringement could lead to substantial expenses, monetary damages, or force delays/cessation of development/commercialization287291293 - The validity and enforceability of patents are uncertain298 - Patents may be challenged, invalidated, or circumvented, limiting the ability to prevent competitors from marketing similar products409 - Reliance on trade secrets for non-patentable technology carries risks of discovery by competitors, misappropriation, or unauthorized disclosure, which could impair competitive position299398422 - Failure to comply with obligations in intellectual property license agreements could result in loss of critical license rights307 - The company may not successfully obtain or maintain necessary intellectual property rights through acquisitions and in-licenses, potentially forcing abandonment of development programs309311 - The European Unitary Patent system and Unified Patent Court (UPC) introduce new complexities and risks, including central revocation of European patents and pan-European injunctions412414 Risks Related to the Discovery and Development of Our Product Candidates This section details risks in discovery, clinical development, and regulatory approval - Future success is highly dependent on the development, clinical success, regulatory approval, and commercial success of product candidates (casdozokitug, CHS-114, toripalimab in non-NPC indications), none of which have initiated Phase 3 trials312313314 - The regulatory approval processes are lengthy, time-consuming, and unpredictable316 - Failure to obtain approval in targeted jurisdictions would prevent marketing to larger patient populations and reduce commercial opportunities317319332 - Clinical drug development is expensive and lengthy, with inherent uncertainty and a high failure rate321 - Delays or failures in clinical studies can occur at any stage due to various factors, including patient enrollment difficulties, adverse events, or regulatory changes322325326327328 - The company may not be successful in identifying, developing, or commercializing additional product candidates, potentially leading to abandonment of programs or cessation of operations333334 Risks Related to Our Compliance with Applicable Laws This section outlines risks with healthcare reform, fraud and abuse laws, and government pricing - Healthcare reform measures, including the Inflation Reduction Act of 2022 (IRA) and the One Big Beautiful Bill Act (OBBBA), may increase costs, affect pricing, and materially impact the business by requiring price negotiations with Medicare, imposing rebates, and reducing Medicaid funding215335338339 - The company is subject to federal and state healthcare fraud and abuse laws (e.g., Anti-Kickback Statute, False Claims Act, HIPAA, Sunshine Act)344 - Non-compliance could lead to substantial penalties, fines, exclusion from government programs, and operational restructuring349347 - Failure to comply with reporting and payment obligations under government pricing programs (Medicaid Drug Rebate Program, 340B, VA FSS) could result in additional reimbursement requirements, penalties, and fines351352353357 Risks Related to Ownership of Our Common Stock This section addresses risks related to stock price volatility, internal control, and delisting - The market price of the common stock is highly volatile, influenced by clinical trial results, funding, regulatory decisions, competition, financial projections, and macroeconomic conditions358359 - A material weakness in internal control over financial reporting (related to inventory account reconciliations) has been identified, which could lead to misstatements or failure to meet reporting obligations, harming investor confidence and stock price360361365431 - The company received a Nasdaq notice for failing to meet the minimum $1.00 bid price requirement367 - Failure to regain compliance by December 29, 2025, could lead to delisting, adversely affecting financing, trading, and stock value368371372 - Indebtedness could adversely affect financial condition, ability to raise capital, and operations, potentially diverting cash flow for debt payments and limiting flexibility374376377 - Future sales and issuances of common stock (e.g., through ATM Offering, equity incentive plans) could dilute existing stockholders' ownership and cause the stock price to fall378379380383 - Adverse developments in the financial services industry could impact the company's access to cash and liquidity, affecting operations and financial condition385 - Provisions in the company's corporate documents and Delaware law could make it more difficult or costly for a third party to acquire the company387389390 General Risk Factors This section covers broad operational, international, technological, and macroeconomic risks - Dependence on a limited number of wholesalers for a significant portion of revenue means the loss of any major wholesaler or reduction in their purchases could harm the business392394 - International business operations expose the company to various risks, including conflicting laws, regulatory hurdles, intellectual property enforcement challenges, financial risks (e.g., currency fluctuations), and geopolitical instability395 - Investor expectations regarding environmental, social, and governance (ESG) factors may impose additional costs, expose the company to new risks, and affect investment strategies or ratings396397 - Reliance on third parties necessitates sharing trade secrets, increasing the risk of discovery by competitors or misappropriation398 - The issuance of 'submarine' patents to competitors could significantly alter launch timing, reduce market size, or block the company from the market399400401 - Failure to identify or correctly interpret relevant patents could adversely affect the ability to develop and market products402403404405 - Operating as a public company incurs significant costs and requires substantial management time for compliance, including Section 404 of Sarbanes-Oxley, with potential sanctions for non-compliance428430431432 - Information technology systems are vulnerable to security breaches and cyberattacks, exacerbated by geopolitical tensions, which could disrupt operations, lead to data loss, and incur significant liabilities434435436437438439 - Compliance with evolving global privacy, data protection, and information security laws (e.g., GDPR, CCPA) is rigorous and costly, with non-compliance potentially leading to fines, litigation, and reputational harm440441442444445447 - Continued inflation could adversely impact product demand, labor/material costs, margins, and interest expenses on variable rate indebtedness448450 - Failure to comply with environmental, health, and safety laws could result in fines, penalties, or costly clean-up liabilities451 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds, and Issuer Purchases of Equity Securities This section reports no unregistered equity sales or issuer purchases during Q2 2025 - No unregistered sales of equity securities or issuer purchases of equity securities occurred during Q2 2025452 - 16,519 shares were surrendered to satisfy minimum tax withholding obligations related to stock-based awards452 Item 3. Defaults Upon Senior Securities This item is marked 'Not applicable,' indicating no defaults on senior securities - Not applicable, indicating no defaults upon senior securities453 Item 4. Mine Safety Disclosures This item is marked as 'Not applicable,' indicating no mine safety disclosures are required - Not applicable, indicating no mine safety disclosures453 Item 5. Other Information This section confirms no director or officer adopted or terminated Rule 10b5-1 arrangements - No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the three months ended June 30, 2025453 Item 6. Exhibits This section provides an index of exhibits filed with Form 10-Q - The exhibit index lists various documents, including the Asset Purchase Agreement for UDENYCA, amended corporate certificates and bylaws, indenture for convertible notes, equity incentive plans, and certifications455