erus BioSciences(CHRS) - 2021 Q1 - Quarterly Report

PART I FINANCIAL INFORMATION This section provides the company's unaudited financial statements, management's analysis of financial performance, market risk disclosures, and internal control evaluations Unaudited Condensed Consolidated Financial Statements This section presents the company's unaudited financial statements, detailing a net loss of $172,947 thousand and significant shifts in assets and equity Condensed Consolidated Balance Sheet Highlights (in thousands) | Balance Sheet Item | March 31, 2021 (unaudited) | December 31, 2020 | | :--- | :--- | :--- | | Cash and cash equivalents | $259,489 | $541,158 | | Total current assets | $617,261 | $767,479 | | Total assets | $693,303 | $841,649 | | Total current liabilities | $257,601 | $145,653 | | Total liabilities | $565,632 | $560,675 | | Total stockholders' equity | $127,671 | $280,974 | Condensed Consolidated Statement of Operations (in thousands, except per share data) | Income Statement Item | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | Net product revenue | $83,034 | $116,180 | | Total operating expenses | $250,394 | $75,312 | | (Loss) income from operations | $(167,360) | $40,868 | | Net (loss) income | $(172,947) | $35,572 | | Basic net (loss) income per share | $(2.37) | $0.50 | | Diluted net (loss) income per share | $(2.37) | $0.48 | Condensed Consolidated Statement of Cash Flows Highlights (in thousands) | Cash Flow Item | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $1,367 | $13,477 | | Net cash used in investing activities | $(285,475) | $(1,616) | | Net cash provided by financing activities | $2,439 | $3,923 | | Net (decrease) increase in cash | $(281,669) | $15,784 | Notes to Condensed Consolidated Financial Statements This section details accounting policies, significant events like the $150,000 thousand toripalimab license, and the company's debt structure - Coherus is a commercial-stage biotherapeutics company focused on the biosimilar and immuno-oncology market Its commercial product is UDENYCA® (pegfilgrastim-cbqv), and its pipeline includes biosimilars for Humira, Lucentis, and Avastin, as well as the anti-PD-1 antibody toripalimab[34][35] - In February 2021, the company entered into a collaboration with Shanghai Junshi Biosciences for toripalimab, paying a $150,000 thousand upfront fee This was accounted for as an asset acquisition, with $145,000 thousand recognized as R&D expense in Q1 2021[72][73][75] - The company discontinued the development of CHS-2020, a biosimilar of Eylea®, in February 2021 This resulted in an impairment charge of $3,200 thousand for prepaid manufacturing and an $8,300 thousand expense for purchase order cancellations, both recognized within R&D expenses[64] Debt Structure as of March 31, 2021 (in thousands) | Debt Instrument | Net Carrying Amount | | :--- | :--- | | 1.5% Convertible Notes due 2026 | $223,341 | | 8.2% Convertible Notes due 2022 | $106,987 | | Term Loan | $74,696 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2021 financial results, noting a $33,146 thousand revenue decrease and a $170,385 thousand R&D expense increase, while confirming sufficient liquidity - The company is investing cash flows from its commercial biosimilar business (UDENYCA®) to build a leading immuno-oncology franchise, highlighted by the in-licensing of toripalimab from Junshi Biosciences[147] Comparison of Operating Results (in thousands) | Metric | Q1 2021 | Q1 2020 | Change | | :--- | :--- | :--- | :--- | | Net product revenue | $83,034 | $116,180 | $(33,146) | | Cost of goods sold | $7,511 | $6,855 | $656 | | Research and development | $203,492 | $33,107 | $170,385 | | Selling, general and administrative | $39,391 | $35,350 | $4,041 | - The significant increase in R&D expense was primarily due to a $145,000 thousand upfront license fee for the collaboration with Junshi Biosciences, compared to a $5,000 thousand fee to Innovent in the prior-year period[187] - As of March 31, 2021, the company had $259,489 thousand in cash and cash equivalents and $140,000 thousand in marketable securities Management believes this is sufficient to fund planned expenditures for at least the next 12 months[198] Quantitative and Qualitative Disclosures About Market Risk This section addresses the company's market risk exposure, primarily interest rate risk on its $399,500 thousand investment portfolio, deemed insignificant - As of March 31, 2021, the company's primary market risk is interest rate risk on its $399,500 thousand in cash, cash equivalents, and marketable securities Management considers this risk to be insignificant due to the short-term nature of the investments[224] Controls and Procedures Management concluded that disclosure controls and procedures were effective, with no material changes to internal control over financial reporting - The company's CEO and CFO concluded that disclosure controls and procedures were effective as of the end of the period covered by the report[225] - There were no changes in internal control over financial reporting during the quarter that materially affected, or are reasonably likely to materially affect, internal controls[230] PART II OTHER INFORMATION This section provides disclosures on legal proceedings and a comprehensive overview of the company's significant risk factors Legal Proceedings The company reports no material legal proceedings as of the report date - As of the report date, the company is not a party to any material legal proceedings[233] Risk Factors This section details significant risks including COVID-19 impacts, reliance on UDENYCA®, intense competition, development hurdles, intellectual property litigation, and third-party dependencies - The COVID-19 pandemic poses a significant risk to the business, potentially decreasing sales of UDENYCA®, delaying clinical trials, and disrupting supply chains[235][247] - The company faces intense competition for UDENYCA® from the reference product (Neulasta®) and other biosimilars, which could prevent significant market penetration and harm financial results[237][302][307] - The business is highly dependent on third parties for conducting clinical trials and manufacturing products Failure by these third parties to perform could substantially harm development and commercialization efforts[240][331][336] - The company is exposed to risks of infringing third-party intellectual property rights, which could lead to costly litigation and delay or prevent the commercialization of its product candidates[243][378] - The development of biosimilars is subject to a complex and evolving regulatory pathway (BPCIA), which includes an elaborate patent dispute mechanism that could significantly delay or prevent product launches[408][439]