erus BioSciences(US:CHRS)2022-08-03 16:00PART I FINANCIAL INFORMATION Unaudited Condensed Consolidated Financial Statements This section presents Coherus BioSciences' unaudited condensed consolidated financial statements as of June 30, 2022 Condensed Consolidated Balance Sheets The balance sheet as of June 30, 2022, shows a decrease in total assets to $546.0 million from $679.3 million at the end of 2021, primarily due to a reduction in cash and cash equivalents Condensed Consolidated Balance Sheet Highlights (in thousands) | Balance Sheet Item | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $275,484 | $417,195 | | Total current assets | $446,784 | $602,323 | | Total assets | $546,003 | $679,334 | | Liabilities & Stockholders' Equity (Deficit) | | | | Total current liabilities | $140,754 | $165,327 | | Term loans | $196,037 | $75,513 | | Convertible notes | $224,928 | $332,767 | | Total liabilities | $568,632 | $581,608 | | Total stockholders' equity (deficit) | $(22,629) | $97,726 | Condensed Consolidated Statements of Operations The company reported a net loss of $50.2 million for the three months ended June 30, 2022, and $146.2 million for the six-month period, driven by decreased revenue and R&D fluctuations Statement of Operations Summary (in thousands, except per share data) | Metric | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Net revenue | $60,151 | $87,643 | $120,266 | $170,677 | | Total costs and expenses | $104,164 | $111,807 | $245,204 | $362,201 | | Loss from operations | $(44,013) | $(24,164) | $(124,938) | $(191,524) | | Net loss | $(50,150) | $(29,900) | $(146,234) | $(202,847) | | Basic and diluted net loss per share | $(0.65) | $(0.40) | $(1.89) | $(2.73) | Condensed Consolidated Statements of Cash Flows Net cash used in operating activities was $104.1 million for the six months ended June 30, 2022, resulting in a net decrease in cash of $141.7 million Cash Flow Summary (in thousands) | Activity | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(104,082) | $1,179 | | Net cash used in investing activities | $(36,495) | $(261,890) | | Net cash (used in) provided by financing activities | $(1,134) | $49,291 | | Net decrease in cash | $(141,711) | $(211,420) | Notes to Condensed Consolidated Financial Statements The notes detail the company's strategy, revenue recognition, debt obligations, and significant collaborations, including the FDA approval of CIMERLI in August 2022 - The company's strategy is to develop and commercialize innovative cancer treatments funded with cash generated from its diversified portfolio of FDA-approved therapeutics33 - On August 2, 2022, the FDA approved CIMERLI (ranibizumab-eqrn), a Lucentis biosimilar, with a commercial launch planned for October 202233123 - In March 2022, the company paid $35.0 million to exercise its option to license CHS-006, an anti-TIGIT antibody, from Junshi Biosciences66 - In January and March 2022, the company drew down $200 million from new 2027 Term Loans to repay its 2025 Term Loan and 2022 Convertible Notes8085 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial performance and strategic direction, highlighting decreased revenue, pipeline progress, and new debt financing Overview and Business Update The company is a commercial-stage biopharmaceutical firm focused on funding its immuno-oncology franchise with cash from its FDA-approved biosimilars - The company's strategy is to build a leading immuno-oncology franchise funded with cash generated through net sales of its diversified portfolio of FDA-approved therapeutics126 - The FDA approved CIMERLI (ranibizumab-eqrn) in August 2022 as a biosimilar interchangeable with Lucentis, with a commercial launch planned for early October 2022127142 - The FDA accepted the resubmission of the BLA for toripalimab and set a PDUFA action date for December 23, 2022, with a launch planned for Q1 2023 if approved127134 - In May 2022, the company discontinued development of CHS-305, an Avastin biosimilar candidate licensed from Innovent127143 Results of Operations Net revenue decreased by $50.4 million for the six months ended June 30, 2022, primarily due to lower UDENYCA sales, while R&D expenses significantly decreased Comparison of Results (in thousands) | Line Item | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | Change | | :--- | :--- | :--- | :--- | | Net revenue | $120,266 | $170,677 | $(50,411) | | Cost of goods sold | $20,647 | $24,207 | $(3,560) | | Research and development | $124,528 | $258,258 | $(133,730) | | Selling, general and administrative | $100,029 | $79,736 | $20,293 | | Loss on debt extinguishment | $6,222 | $0 | $6,222 | - The decrease in R&D expense for the six months ended June 30, 2022, was primarily due to a $145.0 million upfront payment for the Junshi Biosciences collaboration in 2021, partially offset by a $35.0 million option exercise payment for CHS-006 in 2022175 - The increase in SG&A expense was primarily due to a $17.6 million increase in personnel, consulting, and marketing expenses to support product sales and upcoming launches179 Liquidity and Capital Resources As of June 30, 2022, the company had $275.5 million in cash and $1.2 billion accumulated deficit, with new term loans and significant contingent milestone obligations - As of June 30, 2022, the company had cash and cash equivalents of $275.5 million and total debt obligations of $421.0 million185187 - In January 2022, the company entered into a new senior secured term loan facility for up to $300.0 million, and has drawn $200.0 million as of March 31, 2022191 - The company has potential future milestone payments of $380.0 million for toripalimab and $255.0 million for CHS-006 to Junshi Biosciences, and €12.5 million to Bioeq for CIMERLI202 - With the FDA approval of CIMERLI on August 2, 2022, the company will be required to pay Bioeq a milestone payment of €2.5 million, subject to certain manufacturing and supply criteria202 Quantitative and Qualitative Disclosure About Market Risk The company is exposed to interest rate risk from its variable rate debt, with a hypothetical 100 basis point increase potentially raising annual interest expense by $2.0 million - The company has $200.0 million in variable rate debt outstanding under its 2027 Term Loans222 - A hypothetical 100 basis point increase in interest rates could increase annual interest expense by up to $2.0 million224 Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2022, with no material changes in internal control over financial reporting - The Principal Executive Officer and Principal Financial Officer concluded that the company's disclosure controls and procedures were effective as of June 30, 2022225 - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting228 PART II OTHER INFORMATION Legal Proceedings The company is evaluating a demand letter from Zinc Health Services, LLC, claiming approximately $14 million related to UDENYCA sales - In April 2022, Coherus received a demand letter from Zinc Health Services, LLC, asserting a claim for approximately $14 million related to UDENYCA sales from October 2020 through December 2021115 - The company is evaluating the claim, has not made an accrual, and cannot reasonably estimate the potential loss, if any115 Risk Factors The company faces significant risks including limited profitability, product dependence, regulatory hurdles, manufacturing reliance, intellectual property litigation, and substantial debt obligations - The company has a limited history of profitability and may not achieve it again, having incurred a net loss of $146.2 million for the six months ended June 30, 2022253 - The FDA's acceptance of clinical data generated outside the U.S., particularly from China for toripalimab, is a key risk, as the FDA may not accept the data, delaying development plans234269 - The company faces significant competition for its biosimilar products from reference product manufacturers and other biosimilar companies, and for its immuno-oncology candidates from established players like Merck and BMS239311316 - The company is highly dependent on third parties for manufacturing, clinical trials (CROs), and commercialization partnerships (e.g., Junshi Biosciences, Bioeq), exposing it to risks of non-performance, supply disruption, and regulatory non-compliance244339345 - The company's debt agreements contain restrictive covenants, including a requirement to maintain minimum trailing twelve-month net sales, which starts at $200 million and increases over time499 Unregistered Sales of Equity Securities and Use of Proceeds The company did not repurchase equity securities in Q2 2022, but 58,771 shares were surrendered to satisfy tax withholding obligations from stock-based awards - During Q2 2022, 58,771 shares were surrendered to Coherus to satisfy tax withholding obligations from stock-based awards587 Exhibits This section provides an index of exhibits filed with the Quarterly Report on Form 10-Q, including an amendment to the Loan Agreement and required certifications - An amendment to the Loan Agreement dated April 7, 2022, was filed as an exhibit590 - Certifications by the Principal Executive Officer and Principal Financial Officer as required by the Securities Exchange Act are included590