Ladies and gentlemen, thank you for standing by, and welcome to the Coherus Biosciences 2020 Third Quarter Earnings Conference Call. My name is Ashley, and I will be your conference operator for the call today. As a reminder, this conference call is being recorded. I would now like to turn the call over to McDavid Stilwell, Executive Vice President of Corporate Development; Investor Relations and Financial Strategy at Coherus. Please go ahead.

Thank you. Good afternoon, everyone, and thank you for joining us. After the close of market today, we issued a press release with our third quarter financial results. This release can be found on the Coherus Biosciences website. This call includes forward-looking statements regarding Coherus' current expectations. These statements include, but are not limited to, statements relating to the effects of the evolving COVID-19 pandemic, our plans and expectations regarding our ongoing commercialization of UDENYCA, product candidate pipeline, product development plans, financial projections, and the use of capital. All of which involve certain assumptions, risks, and uncertainties that are beyond our control and could cause actual results to differ from these statements. These statements are not guarantees of future performance and are subject to certain risks and uncertainties that are discussed in documents that we file with the Securities and Exchange Commission. Specifically in our quarterly report on Form 10-Q for the quarter ended September 30, 2020. The forward-looking statements stated today are made as of this date, and we undertake no duty to update such information, except as required under applicable law. Please also note that the non-GAAP financial measures included in our press release should be used to help you understand Coherus' business performance and should not be a substitute for your review of our GAAP financial measures. The GAAP to non-GAAP reconciliations are also provided in the earnings press release. Joining me for today's call are Denny Lanfear, Coherus' Chief Executive Officer; Jean Viret, Chief Financial Officer; Chris Thompson, Executive Vice President of Sales; and Dinesh Purandare, Executive Vice President of Commercial Strategy and Operations. On today's call, we'll first review our results for the third quarter of 2020 and provide commentary on the pegfilgrastim market. We'll then update you on our company financials, our pipeline progress, and lastly, close with a few comments about Coherus' growth strategy. And I'll now turn the call over to Denny.

Thanks, McDavid, and thanks to everyone for joining us on the call today. In September, Coherus celebrated its 10th year anniversary, and I'm thrilled by what we have accomplished at this milestone. Coherus is a fully integrated company with competencies in research, development, and commercialization. And we are successfully fulfilling our mission to deliver value to patients by providing them with access to cost-effective drugs that can have a major impact on their lives. Moreover, our UDENYCA business is generating significant cash flow, which will fund pipeline investments to expand our addressable market opportunity from $4 billion to about $30 billion over our 5-year planning period. With respect to our third quarter 2020 business results, our diluted earnings per share was $0.33 on a GAAP basis, $0.47 on a non-GAAP basis. We ended the quarter with cash, cash equivalents, and short-term investments of $503 million, above the $0.5 billion mark for the first time in the company's history. UDENYCA's net product revenue was $114 million in the third quarter. Our commercial team continues to execute and demonstrate a remarkable ability to adapt to the volatility of the COVID-19 environment. Compared to the prior quarter, the overall pegfilgrastim market declined by 7%. UDENYCA ex-factory unit sales rose by 2%, and our market share increased from 20% to 22%. As we approach 2 years of experience commercializing UDENYCA, I'd like to reflect on the question that many of you were asking us at launch. Can a small first launch, pure-play biosimilar company compete with much larger entrenched originators and established biosimilar competitors? With UDENYCA achieving a 20% exit market share after the first year and approaching a market share range of 23% to 24% as we close out year 2, I believe we have answered that question affirmatively. We have demonstrated our ability to be a trusted and reliable partner, delivering value to providers and payers. Two years in, the key question has shifted. We are now asked, what is the shape of the life cycle curve with biosimilars? And are your revenues sustainable? While we are not at this time providing formal revenue guidance for 2021, a task made difficult by COVID, we'll share with you what we know and what we believe about the 3 key drivers of future revenue growth. Firstly, the pegfilgrastim market growth has been unusually volatile this year, shifting from 3% growth in the second quarter to a 7% decline in the third quarter. We believe that over the longer term, pegfilgrastim unit sales will return to the historical low single-digit growth rate. In the near term, while new cancer patient diagnosis and referrals may fluctuate as the COVID pandemic impacts the health care system, these patients will ultimately be diagnosed and treated, albeit at a more advanced stage. Secondly, while we anticipate continued price pressure in the market, we expect the rate of price erosion to slow over time. As any competitor's base of business grows, incremental price concessions become increasingly costly, both directly and in terms of ASP decline. Thirdly, we remain highly confident that our value proposition, choice without compromise, will drive continued share gains for UDENYCA at the expense of the originator in both its formats, which still remains a significant opportunity. The pressure in the health care system to find meaningful cost savings that do not compromise patient outcomes has never been greater and will continue for the future. Taken together, we believe that these 3 key drivers - market growth, price, and share, and overall product value will net out to a base case scenario of relatively sustainable revenues through 2021, subject to the caveats of COVID uncertainty. I'll now turn the call over to Chris Thompson, our Executive Vice President of Sales for a more in-depth discussion of the UDENYCA business trends. Chris?

Thanks Denny. Resilience and excellence in execution have become a hallmark of Coherus. In the third quarter, customer engagement interactions increased over the previous quarter, and we've been proud to see our efforts continue to pay off as we're delivering for our customers, even within the context of the COVID-19 pandemic. Our team's execution translated into continued strong performance with stable to rising market share for UDENYCA in recent quarters. With respect to Coherus market share, there's always a quarter-to-quarter ebb and flow across all segments, 340B, non-340B hospitals, and clinics. 340B as a share of our business was down in the second quarter and has returned in the third quarter. A core strategy for UDENYCA is to pursue growth in all segments, balancing our efforts across them. According to IQVIA data, our share gains in the third quarter appear to have come from both Neulasta Onpro and prefilled syringe formats. Pre-COVID, Onpro market share had fallen to almost 50%. In the early months of the COVID crisis, Onpro recaptured some of that lost share. However, as practices have adapted to the pandemic, Onpro use has trended back down toward pre-COVID levels. Overall, we expect biosimilars to continue to gain unit share against the originator, with about 70% of the market still available for conversion. We believe our publicly reported ASP is the best barometer of pricing trends in the market. For the 12 months through the third quarter 2020, the UDENYCA ASP has declined by approximately 4% per quarter. In the current quarter, the UDENYCA ASP decline is less than that of Amgen or Mylan. Consistent with our strategy of selling based on our branded value proposition, we will continue to execute our UDENYCA commercial strategy with a disciplined and balanced approach. We continue to enjoy healthy market access for UDENYCA with regional and national payers. In 2 recent examples, we are delighted that UDENYCA will hold co-preferred position alongside Neulasta for Anthem commercial and Medicare Advantage plans covering approximately 30 million lives. As that UDENYCA will retain parity and preferred positioning with prime health plans covering approximately 28 million lives. Looking ahead, we expect the pegfilgrastim market to resume the historical trend of low single-digit annual pegfilgrastim market growth, albeit with some quarter-to-quarter volatility. We also expect UDENYCA to continue to grow unit share, and we plan to maintain pricing discipline. I'll now turn the call over to our CFO, Jean Viret, for a review of the quarter's financials.

Thank you, Chris. Details of our third quarter financials are included in our press release and in our Form 10-Q. So I'll focus today on the review of highlights for the third quarter of 2020. This quarter, we have had solid execution with UDENYCA, and we continue to make investments to advance our pipeline. Our confidence in our financial position and the growth potential of our business remains strong. Net product revenue was $114 million with non-GAAP net income of $40 million and diluted non-GAAP earnings per share of $0.47. Net revenue for the third quarter of 2019 was $112 million, with a non-GAAP net income of $56 million and diluted non-GAAP earnings per share of $0.74. Wholesale inventory was stable compared to the prior quarter. Research and development expenses for the third quarter 2020 were $39 million compared to $22 million for the same period in 2019. Selling, general, and administrative expenses for the third quarter of 2020 and the same period in 2019 were $32 million. We anticipate that R&D and SG&A expenses, combined for the full fiscal year 2020, will come in at the low end of our stated range of $285 million to $310 million. Looking ahead, for the fourth quarter, we are projecting relative SG&A expense stability, while R&D expense will increase moderately as we continue our work advancing our pipeline. Our operating activities continue to generate cash, and we are pleased to have ended the quarter with $503 million in cash, cash equivalents, and short-term investments, up $47 million from the end of the second quarter. I'll now turn it back to Denny.

Thank you, Jean. I'd like to provide a few updates and highlights regarding our pipeline of biosimilar product candidates. We've made very good progress across our pipeline, particularly on programs where Coherus is the sponsor with the FDA. Our Avastin biosimilar, which we in-license from Innovent, will further expand our oncology franchise and leverage our commercial infrastructure. As the U.S. sponsor of the product, we are continuing to work with Innovent towards Coherus' expected BLA filing next year with the FDA. Precise timing of our filing is dependent on the scheduling and outcome of required interactions with the FDA, the completion of a 3-way pharmacokinetic study, as well as the completion of analytical similarity exercises. Moving to ophthalmology, we have 2 product candidates in the pipeline addressing an aggregate USD 6 billion opportunity, a Lucentis biosimilar and an Eylea biosimilar. We in-licensed the Lucentis biosimilar last year from Bioeq. Bioeq is the BLA sponsor, and they are actively proceeding with the FDA required activities to resubmit the BLA. Manufacturing work to refile the BLA has recently been completed. Bioeq has informed us that the required pre-filing meetings with the FDA are now expected to take place in early 2021. Our CHS 2020 biosimilar candidate to Eylea continues to make progress. We project the initiation of a Phase III clinical trial in 2021, with a potential commercial launch in 2025, if approved. Lastly, with respect to immunology and CHS-1420, our internally developed Humira biosimilar candidate, we plan to submit the BLA by year-end, consistent with our prior guidance. We have made additional progress on our manufacturing strategy for this product as we prepare for a large-scale launch anticipated on or after July 1, 2023, as well as our launch strategy. We expect this to be an $18 billion market in the U.S. by the time of our launch, and we believe we can gain significant share. This 2023 launch is an important focus for the company, and we expect to do well. Before taking questions, let me offer you a few closing thoughts. UDENYCA has been the benchmark of a high-performing biosimilar, and we believe the strong UDENYCA launch demonstrates our competitive competency and pre-stages success with our future products. We remain focused on continued commercial execution in today's environment, while also advancing our pipeline. As the assets in our pipeline progress towards commercialization over the next 4 years, we anticipate our addressable market will grow from $4 billion today to about $30 billion in 2025. Our durable cash flow and strong balance sheet enable us to consider attractive new investments, which would leverage our capabilities in research, development, and commercialization, creating significant shareholder value. We are actively pursuing multiple opportunities but remain highly disciplined with respect to future licensing deals and investments. I look forward to providing additional updates to you on our progress. Operator, this concludes our prepared remarks. Please open the line for questions.

Your first question comes from Mohit Bansal with Citi Group. Your line is now open.

And congratulations on the progress. So just wanted to do a little bit deeper into the quarter-over-quarter trends here. So you mentioned that the pricing trend, the ASP is going down, which I understand. The unit share is - unit volume is increasing. So unit volume is increasing by 2%. But if you look at quarter-over-quarter, even accounting for that $13 million one-time item in the second quarter, it seems like there was an 8% decline in quarter-over-quarter revenues. So is it all due to the payer mix fix? Or is there any other dynamic that is playing out here?

Mohit, thank you very much for your question. I'll let McDavid Stilwell take that one for you. McDavid?

Thank you. Without question, COVID continues to have an influence. COVID caused a contraction of the overall pegfilgrastim market in the third quarter. The other factor contributing to the quarter-to-quarter change in revenue includes a shift in the mix, with a higher portion of revenue coming through 340B hospitals.

So that explains it. So again, Denny, you mentioned that going forward, you expect the price erosion to slow down here. And if I may, could you comment on that as well? You mentioned that the price decline has been about 4% or so per quarter for the last 12 months; that's like 15% per year. So when you say slowdown, you're talking about mid-single-digit eventually, or maybe like 3%, 4%? How should we think about this? Because 15% annually is pretty high, actually, if you look at pricing?

Yes. I'm sorry, Mohit, is your question, what the cost decline will be going forward? Or...

Yes. So you said it will slow down, but when you say slow down, what number are you talking - I don't want a special number, but I mean, how are you thinking, is it more like mid-single-digit? Or is it going to be a high single-digit kind of decline going forward for pricing?

I would offer you that it is difficult for us to control pricing, and that's controlled by the other competitors in the market as we go forward. And secondarily, what I would say is that we maintain probably the strongest ASP price discipline in the market. As you heard, our ASP price discipline was better than that of both Mylan and Amgen. I'm unable to predict the actual decline in prices. That is dependent, of course, upon competitor behavior. But I would further point out though that in the actual Medicare Part B segment, there is a bit of a self-regulation in terms of price capping because there is less value to distribute among the whole value chain there with those particular parts of the value chain. So overall, I think over time, you will see a gradual decline in the price change and more stabilization as you go forward. But I think we've done an very good job maintaining our price in the face of competition.

Our next question comes from the line of Balaji Prasad with Barclays. Your line is open.

Firstly, could we start with an update on the filing, please? While I'm cognizant that COVID has played a role, are there any other gating factors, which remain with biosimilar Lucentis? And also, could you be - is there a way for you to narrow the range with the biosimilar Avastin filing?

Yes. I'm sorry, Balaji, could you repeat your last part of your question?

I mean, could you narrow the range with when you expect to file biosimilar Avastin?

Okay. Well, and you wanted to start out with the Bioeq Lucentis, correct?

That is right. Yes. So the - as you know, the Bioeq Lucentis sponsor is our partner. That's one product where we do not interact directly with the FDA and so on. However, I think they've made very good progress on the manufacturing issues there. They finished those up. They've written those up. They're in the process of submitting those documents to the FDA. And as I indicated to you, they're going to actually interact with the FDA early in the year here on that product. So I think that's basically moving forward. The COVID situation in Europe, with the manufacturing facility, did cost them some time, but I think they've gotten past that.

With respect to the Avastin biosimilar that we in-license from Innovent, I think it's fair to say that we're pleased with the progress on that product. There are certain interactions that have gone back and forth with the FDA. As you know, we have a planned pharmacokinetic study with that product, and we'll probably have something to say about that when it's completed. But with respect to the actual BLA filing, the best I can do right now is the 2021 for you. But after we get past a few more interactions with the FDA and complete the PK study, I'll be able to give you some more granularity around that one.

So on UDENYCA, so we've been speaking to multiple experts on the biosimilar side. And clearly, the analysts view is that biosimilars will expand markets, especially in oncology. And we have had this discussion in the past about what we also saw with Amgen's comments that both new and mid-course patients are shifting to biosimilars. So you would have seen probably greater share coming through this quarter. But apparently, it doesn't seem to have happened. Is there anything else that's happening that we're missing out here?

This quarter is a little complicated due to COVID, as has been this year. But I'll let Dinesh offer you some comments and color on that. Dinesh?

Yes. Thank you for the question, Balaji. We believe that there is still a significant opportunity with UDENYCA. UDENYCA, as you know, is a trusted and reliable brand delivering value in the pegfilgrastim market in which the originator still controls about 70% market share, and it offers a huge opportunity for us moving forward. As you look at our first year launch, UDENYCA exited the market share - with a market share of 20%, which was pretty substantial. And our market share continues to grow as we speak. So we are pretty confident about what lies ahead of us despite the headwinds of COVID and despite the entry of competition as well. So - and to your point, additionally, with the expansion of NCCN guidelines, we believe the market will continue to grow.

I would talk to you that COVID, COVID overhangs the market. You just see these fluctuations. There's an ebb and flow to various parts of the market. COVID basically creates a very fluid sort of dynamic that makes quarter-to-quarter trends, very, very difficult to project. But overall, I think that we've done an excellent job executing in the face of COVID. Clearly, you saw that last quarter. And I think next year, we'll probably get on the other side of COVID and things will straighten out a little bit. Our unit share continues to grow and so on. But there's a little turbulence here, and I think that's just unavoidable.

I understand that. Maybe one final question, almost my traditional inevitable question. Where are you with your biosimilar Onpro?

The question that's always asked, but never answered, right, right Balaji?

Yes. It would be good if you answer that.

We continue to make progress with that. We don't have any comments for you right now. We'll certainly have something to say if there's a material development with the company. But I think, afraid, you'll have to stay tuned for the time being.

Your next question comes from Jason Gerberry with Bank of America. Your line is open.

One question I just wanted to follow up on the Lucentis. When you do get the resubmission? And can you comment on the likely or assumed time line for review? Is there a possibility of an accelerated review there? And then can you comment on your CMO, KBI for UDENYCA, which got some Form 43 observations? Where do you think that - are the manufacturing lines with UDENYCA in any way impacted there and your level of engagement to make sure that, that doesn't go from a small issue to a bigger issue over time? If you can comment on that, that would be great.

I can absolutely assure you unequivocally that KBI is in great shape. They're an excellent manufacturing partner. We will have no manufacturing disruptions there. They continue to execute well. We have substantial stock already, both in terms of bulk drug and finished syringe product. So absolutely and totally not a problem. With respect to lucentis biosimilar, our current assumption is that's a 12-month review cycle with that product. We have - I am not aware of any conversations with the FDA in which a fast track or abbreviated cycle could be embraced. If so, we would certainly let you know. But our current assumptions are that is a 12-month standard review issue for that product.

Your next question comes from Greg Gilbert with Truist Securities. Your line is open.

Denny, thanks for drawing a line in the sand on your expectation for flat revenues next year. I was hoping you could provide some preliminary color on how much operating expenses could rise next year? And then I have a couple of follow-ups.

Just to correct you, we did not state flat revenues for next year. We observed that there were 3 key dynamics in play for next year. First of all, it was the overall market growth, which we expect to resume; the second was market share, which we expect to improve; and the third was price discipline, which we continue to embrace.

Let me rephrase then. I guess I misheard your prediction of stable revenues. What do you expect revenues to do next year after highlighting the factors that you just reiterated?

Well, we, of course, have not guided to next year's revenues. We think that there's considerable COVID overhang, which keeps us from doing that. But I think, though, however, the UDENYCA revenues will do very well in the environment that they're in. Just as we've done in the last year, I think you'll see similar execution.

And on expenses, I assume you'll say we'll talk about that early next year, unless you have any preliminary color on the magnitude of expense growth next year?

I don't - I don't think that we have actually projected or provided the market at this point with expense projections. This year, I think we did that on the Q1 call. So I would tune - in the February Q4 closeout call, we'll probably have something to say about that. As you know, in the fall, companies typically look at their 2021 budgeting process. We're not quite done with that. And so as soon as we get that finished up, then we'll talk about that. You'll probably see that in February, on the call.

Okay. And then two more. I was hoping you could discuss your - the assumptions behind your biosimilar Eylea launch in 2025? And what's some of the key, both regulatory and legal factors? I know there are some other companies that assume they could be there sooner, but I don't know what their assumptions are either. So maybe you could talk about those factors and then close with comments on BD and whether your focus and the opportunity set is more and focused on pre-Humira timeline or later in the decade kinds of things?

That's a great question, Chris. I think, first of all, that the fact that the company continues to throw off substantial amounts of cash and build a very strong balance sheet gives us a lot of leverage and a lot of latitude and optionality as we look at what's available and how we've gone forward. We've also said that we like oncology quite a bit for additional products for the company. I think that you make a very good point, right, that is the overall portfolio enhancement of product is a very, very important part of the deals. We have latitude to do larger deals, if we like, or smaller deals. I think one thing about us is, as you know, we're very careful about how we spend our investors' money. We, for example, are very opportunistic, but we're very, very disciplined. We just don't run off and buy things. So I think that if deals came by that had long-term portfolio opportunities there, strong revenue growth, we'd take a very careful look at them. And I think that cash-wise, we have the ability to do that. But yes, I think that's how we think strategically about our business. We think that the products we have, particularly UDENYCA and the other biosimilar products, give us the ability to generate substantial amounts of cash, as you've seen, to be deployed against future pipeline and opportunities, product development opportunities. You'll hear more about that, I think, certainly next year, but that's definitely what our thinking is.

Your next question comes from George Yordanov with Cowen & Company. Your line is open.

So I guess, first for UDENYCA, given the higher number of competitors out there now with Pfizer, what are you seeing from your competitors in terms of marketing activity? Are you seeing more aggressiveness? And in general, how sticky do you anticipate your market share to be given that the originator still has plenty of share to give away?

Thank you very much for that question. Chris Thompson, our Executive Vice President of Sales, interacts with the field quite a bit and gets that information. Chris, can you take a shot at answering that one for him?

Sure. Thanks for your question. As it relates to the competition, whether it's Sandoz or Mylan, their activity in the field, and that's what I see on a day-to-day basis, has been somewhat muted, in my opinion. And I think that when our providers speak with us, what they really like about Coherus and the UDENYCA brand is that we're not only bringing economic value to their practices or to their hospitals, but we also bring a value proposition, choice without compromise in all the patient services as well as stability of supply, which is very important during these uncertain times like COVID. And they know we have a track record there of always supplying every patient every time. But suffice it to say, we'll continue as we have to make market share increases here. We have a huge reservoir efficient with 70% share out of the originator, just a huge opportunity out there, and we're going to continue to take share bit by bit steadily over time.

And do you have any idea of what is the reason for that muted activity on their side? Are they waiting for maybe the pandemic to cool down and start seeing growth in the market again? Or is there some other factors that I think...

I think you should ask them. I really can't project what - why they may be a little bit quieter. I will tell you that Coherus being a pure-play biosimilar company and maybe being a smaller company, we're very nimble. We're very nimble, and we've adapted to COVID. Our customer interactions are even higher than they were in previous quarters as we adapt to this new environment. So we're on top of it.

Got it. And for Lucentis, can you, Denny, remind us of your expectation for potential launch timing? Is there any outstanding IP that you need to circumvent to clearly path to launch? And in terms of the BLA submission, should we do expect any additional delays in terms of size and inspection? And lastly, I know we've asked this before, but are there any updates on the inflammation rates you have observed in your clinical trials, especially given the recent issues that we have observed in the market?

We don't have any further comments for you with respect to the Lucentis BLA from Bioeq other than remarks that we offered previously. We do not have an update either on the clinical trials, inflammation rates and so on, which I think were lower than the original ones seen with the originator, Lucentis, but consistent with the most recent clinical experience. And we have not offered further dates for launches with Lucentis' product at this point. We'll probably do that after it gets filed.

And then in terms of your pending IP?

We actually do not comment on intellectual property issues around these products.

That brings us to the end of the Q&A session of today's call. I will now turn the call over to CEO, Denny Lanfear for closing remarks.

Thank you very much for joining us today on Coherus' Q3 call. We look forward to updating you on our next call in February, and we appreciate you listening in today. Thank you.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.