Coherus Oncology, Inc. Q4 FY2020 Earnings Call

Thank you all for being here, and welcome to the Fourth Quarter and Full Year 2020 Coherus Biosciences Conference Call. I will now hand it over to your host today, Mr. McDavid Stilwell. Please proceed, sir.

Thank you. Good afternoon, everyone, and thank you for joining us. We issued a press release earlier announcing our 2020 fiscal year and fourth quarter results and the release can be found on the Coherus Biosciences website. Today’s call includes forward-looking statements regarding Coherus' current expectations. These statements include, but are not limited to, our ability to advance our biosimilar and immuno-oncology product candidates through development and registration; our commercialization of UDENYCA and other potential products in the future. Our ability to meet our R&D and SG&A expense guidance for 2021 as well as our uses 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. Joining me for today's call are Denny Lanfear, Chief Executive Officer; Jean Viret, Chief Financial Officer; Vin Anicetti, Chief Operating Officer; and Chris Thompson, Executive Vice President of Sales. I'll now turn the call over to Denny.

Thank you, McDavid, and welcome everyone to our call. This afternoon I will review recent business highlights and pipeline progress. Chris will provide his perspective on pegfilgrastim market dynamics and fourth quarter UDENYCA performance. And Jean Viret will discuss fourth quarter and full year 2020 financial results, as well as expense guidance for 2021. We will then open the call for questions. Certainly, COVID-19 made 2020 a difficult year for UDENYCA, impacting our ability to grow market share as planned in the face of new competitive entrants. While there will be some continued price share competitive pressure on UDENYCA sales in early 2021, we expect that as COVID recedes, we will reserve market share growth largely coming at the expense of Neulasta Onpro. We see 2021 as a year of fundamental transition and an inflection point for Coherus. We are extending our mission and expanding our late-stage pipeline to include immuno-oncology. We recently announced a collaboration with Junshi Biosciences for U.S and Canada rights to their PD-1 inhibitor, toripalimab. The transaction is projected to close later this quarter. Toripalimab has been evaluated for a wide range of tumor types in 15 ongoing or completed registrational trials. We eagerly anticipate the first BLA to be filed this year for nasopharyngeal carcinoma, which has been granted breakthrough therapy designation by the FDA. Earlier this month, toripalimab was approved in China for this indication, and regulatory authorities there have also begun a review of toripalimab for first-line treatment of nasopharyngeal carcinoma. Over the next few years, we expect this extensive clinical development program to support multiple BLA submissions for rare and highly relevant tumor types, including lung cancer. As the label expands with new indications, we project significant revenue and a sustained growth trajectory will follow. Evaluating toripalimab combination with other immuno-oncology agents will provide longer-term growth opportunities. As part of the collaboration, we will obtain options on anti-TIGIT antibody and engineered IL-2 cytokine as well as certain negotiation rights to two other immuno-oncology molecules. Once the transaction is closed, Junshi Biosciences will purchase $50 million of Coherus common stock, an investment they wanted to make to share our future growth and mutual success with these programs. Now later this year, we plan to host an Analyst Day event to provide a deeper look at all aspects of our business. Our biosimilars, toripalimab, the option programs and our immuno-oncology strategy. Turning now to our core biosimilar business, I'm pleased with how our team performed in the face of COVID-19 headwinds through most of 2020. UDENYCA net sales of $476 million for 2020 drove $154 million in cash flow from operations for the year. Chris will describe UDENYCA performance in more detail in just a few moments for you. First of all, let me review recent pipeline progress in our biosimilar business. With respect to our Humira biosimilar, CHS-1420, the FDA has accepted our BLA for review with a December 2021 action date. Now the anti-TNF market represents a substantial opportunity for Coherus. After years of double-digit price increases with Humira, there is clearly significant pent-up demand for the type of biosimilar value that Coherus will deliver. There will be payer-driven dynamics and they are heavily incentivized to force switching from the brand to biosimilars. Our product, our patient-focused offering and our manufacturing scale will match what payers are looking for. We are making manufacturing and supply investments to support our objective of capturing greater than a 10% market share. I'm also pleased to provide an update on our Lucentis biosimilar product candidate being developed by our partner Bioeq. The FYB201 BLA is on track for a mid-year 2021 submission, following a supportive pre-BLA meeting with the FDA earlier this quarter. As the sponsor of the BLA, Bioeq reviewed multiple elements of the plan filing, including the manufacturing data that the FDA requested last year. We're very excited about the potential approval of this product in 2022. Ophthalmology has a similar buy and build business model to oncology with analogous critical success factors that our commercial team understands very well. We plan to leverage much of our existing infrastructure and core sales and marketing skills to gain a significant share of the overall $6 billion anti-VEGF ophthalmology market. Regarding IBI-305, part of the Avastin biosimilar product candidate in partnership with Innovent, we have initiated a three-way PK study, and we expect to provide additional updates on this program later this year. Our biosimilar portfolio, which includes UDENYCA and biosimilars of Lucentis, Avastin and Humira, addresses a $28 billion market opportunity. We've already demonstrated our ability to use our branded marketing and other commercial capabilities to penetrate competitive markets with the biosimilar. We believe we will experience similar success taking significant share in these new markets. We plan to invest the cash flows from the biosimilar business to build a robust and growing immuno-oncology franchise. Our strong UDENYCA performance and advanced biosimilar pipeline, together with toripalimab demonstrates solid progress on the strategy as we pursue the $25 billion PD-1 market opportunity. I'll now turn the call over to Chris Thompson for an overview of the UDENYCA performance and the pegfilgrastim market dynamics. Chris?

Thank you, Denny. 2020 was a successful year for UDENYCA despite the challenges of COVID. In the fourth quarter, we delivered $110 million in net sales, driven by an increase in units that was offset by price decrease, and a larger percentage of our units coming from 340B accounts. Share remained relatively stable in the fourth quarter, while the overall pegfilgrastim market grew 4% quarter-over-quarter in volume. We ended the year with wholesale inventory at the higher end of the normal range as is typically seen with most drugs in December, as we saw in 2019 as well. In retrospect, the primary impact that COVID had on our business last year was to make it more difficult for biosimilar prefilled syringe competitors to take market share from Amgen's on-body device during the spring and fall surges. To a lesser extent, overall market volume was impacted with full year growth at 1%, down from the historical mid-single-digit growth rates. Looking forward, as vaccination rates increase and COVID recedes, we anticipate greater customer desire to capture the potential savings represented by biosimilars in general and UDENYCA in particular. Specifically, we see greater than 50% share currently represented by Neulasta Onpro as a highly accessible source of UDENYCA growth in 2021. While we're not providing specific revenue guidance, we do expect UDENYCA revenues in 2021 compared to 2020 to be lower. While the first quarter will remain challenging due to COVID-19, seasonal impacts gross to net and a depletion of the inventory that's built up at the end of the year, we expect revenue growth to resume in the second quarter. As post-COVID behavior normalizes, we expect to see share gains resume going forward, primarily at the expense of Neulasta and to see the market return to historical growth rates. The most challenging variable for us to forecast, and the one over which we have the least control is, of course, price. That said, our goal is to remain disciplined as we have been in our long-term management of ASP, while also remaining competitive. We would expect our competitors to operate in this rational manner as well. With that, I'll turn the call over to Jean.

Thank you, Chris. In addition to the brief financial overview, I will provide on the call today, you can read additional detail on our fourth quarter and year-end financial results in our press release issued earlier today and in our Form 10-K, which we plan to file with the SEC tomorrow. We recorded $110 million of net sales of UDENYCA for the fourth quarter of 2020 compared to $124 million for the same period in 2019. The decline was primarily due to a decrease in net selling price due to increased competition partially offset by an increase in the number of units of UDENYCA sold. For 2020, we recorded $176 million in UDENYCA net sales compared to $356 million for 2019, an increase of $120 million. The increase was primarily due to an increase in the number of units of UDENYCA sold, partially offset by a decrease in net selling price. R&D expense rose in the fourth quarter of 2020 to $45 million compared to $35 million for the same period in 2019. The increase was primarily attributable to clinical development activities, as well as payments for certain negotiation rights for pipeline development. For the full year 2020, we recorded $143 million in R&D expense, an increase of $49 million compared to 2019. The increase was primarily attributable to activities supporting the BLA submission for CHS-1420 and development activities related to other biosimilar product candidates. Selling, general and administrative expense was relatively unchanged quarter-over-quarter, $38 million in the fourth quarter of 2020 versus $36 million in the same period in 2019, and year-over-year $139 million in 2020 versus $137 million in 2019. We reported a net income of $10 million of $0.12 per share on a diluted basis in the fourth quarter of 2020 and $132 million, or $1.62 per share on a diluted basis for the full year 2020. We generated $154 million in cash flow from operations in 2020, and at year-end, we had a strong balance sheet with $541 million of cash and cash equivalents. I'll now turn the call to McDavid to provide you with expense guidance for 2021.

Thank you, Jean. In 2021, we anticipate combined R&D and SG&A expenses in the range of $310 million to $350 million, excluding upfront milestones and development expenses related to the recently announced collaboration with Junshi Biosciences, which is expected to close in the first quarter. We project $45 million to $50 million of stock compensation expense for the year. The increase that we project in our operating expenses is primarily attributable to activities to advance our late-stage biosimilar portfolio, including manufacturing-related activities in preparation for the potential launch of CHS-1420, if approved, and development activities for IBI-305. For UDENYCA, we are investing in marketing activities and in the development of additional presentations of the product. Before I close, on the IR front, on those that we're scheduled to present at the Cowen Healthcare Conference on March 1 at 4 PM Eastern Time, and at the Barclays Conference on March 9 at 1:15 PM Eastern Time. I will now turn the call back to Denny.

Thank you, McDavid. As you can see we're successfully positioning Coherus for sustained future revenue growth. On the biosimilar side of the business, over the course of 2021, our progress towards growing and diversifying our product portfolio will become increasingly visible. In the next 2 years, we have the potential for approvals for biosimilars of Humira, Lucentis, and Avastin. We believe that this product portfolio will deliver significant revenue growth and strong cash flows for our continued investment in immuno-oncology. For immuno-oncology, we expect the first toripalimab BLA filing this year for nasopharyngeal carcinoma with potential approval in 2022. 15 pivotal clinical trials are underway. Additional BLAs will fall over the next 3 years for both rare and highly prevalent cancers, including non-small cell lung cancer. Several interactions with the FDA are planned for the remainder of this year as we finalize the registration strategy for these additional indications. We believe PD-1s will be the foundation for immuno-oncology therapy for the foreseeable future, increasingly used in combination with novel agents that synergistically enhance their activity. We are excited by the option programs we have with Junshi Biosciences for their TIGIT targeted antibody and their engineered IL-2 cytokines in combination with toripalimab. We also anticipate that other companies or academic institutions may well bring forward novel compounds to evaluate in combination with toripalimab. Strategically, we see such business development activities as another way to extend our immuno-oncology franchise and to drive additional toripalimab share and to advance our new treatments for the benefit of patients. After launch, we expect toripalimab to grow consistently into an expanding market year after year, as additional indications are added to the label. And finally, before we turn to your questions, I want to thank my good friend Jean Viret for his years at Coherus. Jean joined before our IPO and brought his considerable capabilities to bear as we commercialized our first product. Under JV's leadership, Coherus developed a very strong finance and accounting function, and for that we are especially grateful. Jean leaves us in very good favor and we wish him the very best. Thank you, JV. I will now ask the operator to open the call to your questions.

First question comes from the line of Chris Schott from JPMorgan. Your line is now open. You may ask the question.

Great. Thanks so much for the question. On, I guess, the first one on UDENYCA sales. Can you just provide maybe a bit more context around 1Q? I'm trying to get a sense of it sounds like it's kind of dipping in 1Q and then kind of recovering from there. So just maybe a little bit more color of how much of a step down should we think about relative to 4Q as we think about some of the inventory dynamics, etc., that you mentioned. And I just have one follow-up from there.

Thanks, Chris. Mr. Thompson, do you want to take that question about the dynamics of Q1? Make a few comments.

Yes. Yes, sure. Thanks, Denny, and thanks for your question, Chris. I think in 1Q, we're going to really see a sort of a paradigm shift here as COVID recedes and the population gets vaccinated. I think what we're going to see is a dynamic where we have this huge opportunity with Neulasta Onpro. They've got a stable share in the mid-50% range, which represents a huge reservoir of opportunity for us. And I think that we'll start to see that evolving, especially we go from Q1 to Q2. But given some of the surges that we saw in Q1 with COVID, I think that that will definitely have somewhat of an impact on Q1 for us. Keep in mind that when we think about Onpro, it's just the big thing relative to what's actually happening in the marketplace now. We're sort of relegated to really trading share with each other, the biosimilars. As it relates to inventory, we feel confident that inventory is going to return to normal state and already has, so we're in good shape there. I don't know if that answered your question.

Thanks, Mr. Thompson. I would just make one further remark, Chris Schott, is that last year between COVID waves we saw Onpro recede significantly between those waves. And so we are quite confident that as the vaccinations progress and people get back to normal, we will see this happen once again, perhaps with greater rapidity. We think that the incentives are already priced into the market for that, and we believe that we are very well-positioned to capitalize on that as soon as COVID fades.

Great. And just my follow-up question was, when we think about the PD-1, your initial indication is a fairly small one, you've got some obviously much larger ones to follow. So I guess how should we be thinking about that ramp of that first indication? And how indicative or not will this initial ramp be for future larger indications? I'm trying to get a sense of basically, does this first indication tell us much about the potential for kind of a new PD-1 in the market or do we really need to see the bigger indications before we get a better sense of how this is going to play in the marketplace versus some of the existing kind of entrenched competition?

Great question, Chris. I believe we will perform exceptionally well with our execution regarding the first indication. Coherus has proven to excel in the biosimilar business, particularly in the Medicare Part D and buy and build areas. We will be the team with the labeled indication for this orphan, which may be small, but I am confident we will succeed with it. More importantly, we will begin to introduce our brand to the market. We will engage with payers, providers, physicians, and nurses, making this a great entry point for us moving forward. I anticipate we will ramp up quickly with the PD-1, and it will be exciting as we begin to add additional indications. We expect to file at least one new indication each year, with the largest one prioritized. So, stay tuned for that. Overall, we are very optimistic about our prospects in this market.

Thank you. Next question comes from the line of Mohit Bansal from Citi. Your line is now open. You may ask the question.

Thank you for taking my question. Before I begin, I want to express my gratitude to Jean for all your help over the years. I appreciate it. Now, regarding UDENYCA, the market share has remained relatively stable in the 20% to 22% range over the last few quarters, while other biosimilars have slowly been making their way into the market, although they aren't experiencing significant growth either. You mentioned that this stability is likely due to Onpro. Given that context, how do you plan to grow your market share in the post-COVID environment? What makes you confident that you can capture a larger share from Onpro? Additionally, do you believe that having an on-body injector is essential for increasing your share from Onpro at this point?

I will address that first and then Mr. Thompson can provide additional insights. Looking back at 2020, we experienced fluctuations due to COVID. We managed to produce strong results despite the challenges in Q2, even as COVID resurfaced. As we have noted previously, the pandemic created a stagnant environment, making it difficult for new players to gain significant market share. This allowed established competitors like Amgen to leverage the advantages of the Onpro system. Overall, we believe we did a commendable job maintaining our market share during 2020 and did not face the same degree of price reductions that others did to hold onto our share. As we move into 2021, our progress will largely depend on the pace of vaccinations. The outlook appears optimistic, especially as we approach Q1, and I anticipate continued improvement in Q2. We expect growth in the subsequent quarters throughout 2021. While I wouldn’t necessarily say the market is going to come to us, I’m confident that we are well-positioned to succeed as we advance this year.

Yes, I was going to say, I agree with everything that Denny says. But you know, if you think about it, we've already run the experiment, Q1, Q2 last year, you could see that we were making significant inroads on Onpro share, because it really is a better value proposition for the providers. We anticipate as the vaccination program expands, as the COVID spikes recede, that we're going to pick up where we left off and make significant inroads in there. We are the biosimilar market leader at 21% share and we're pretty excited about the fact that we're going to expand upon that market leadership position. I'll just give you an anecdote as well. There's several large institutions in the Midwest and I'm out there talking to customers all the time. And these institutions had made virtually a total conversion to UDENYCA early last year, and obviously, with the spikes in COVID and all the problems we had with COVID and the convenience of Onpro, they were forced to actually go to more Onpro. We lost share there. And I'm happy to report right now and speaking with these customers that they've already started to move back to UDENYCA in a pretty large way. To me, that's sort of the canary in the coal mine, that's indicative of what's going to happen with accounts across the United States because it's such a compelling value proposition for our customers. Onpro is going to go from a very inexpensive necessity when COVID was around to really inexpensive convenience. And most folks now, given the economic states they're in, whether it's a clinic or a hospital, they've got to be looking at the economics and UDENYCA provides the best economics for these customers.

Thanks, Mohit.

Thank you. Next question comes from the line of Salim Syed from Mizuho. Your line is now open. You may ask a question.

Good afternoon, everyone. I want to thank Jean and congratulate McDavid on his new role. I have a couple of questions, Denny, if you don’t mind. First, regarding the biosimilars industry, after two years of launching UDENYCA, at what point did you decide to pursue a novel strategy rather than continuing as a pure play biosimilars company, which some investors favored? I’m interested in what led to that decision. Secondly, regarding the CFO transition, McDavid, should we anticipate any changes as you take on this role? Also, I have a quick housekeeping question that some people have been asking about.

Yes, I don't believe there was a breaking point with respect to strategy. The company was founded with a mission of delivering savings to the health care system and greater access to the patients. That was really the key issue. We always felt very, very strongly about that. All my co-founders that came out of Amgen and Genentech, who had worked in those shops, they all felt that this was the moral high ground and really the right thing to do. I think that as early as 2016, we began to look at PD-1s and the evolving landscape and so on and how they looked. Our view is that there is substantial value to be delivered to the health care system. There's good to be done by delivering on a PD-1 because they're becoming ubiquitous across immuno-oncology. So we see very, very broad utilization for our product because we can deliver a value proposition as we have with UDENYCA, right. We have a very high quality product, very broad label. We've got a great partner that has invested heavily. I think that really the market is going to welcome us with open arms. We're going to start small, we're going to expand, but you'll see continued growth. But I don't really think that there was sort of a religious dedication to biosimilars. Biosimilars are a way to deliver value, and that's what we saw. And so if we can leverage the capabilities across the organization, protein science, clinical regulatory expertise, and primarily, our commercial capabilities, which are quite strong, as you know. We think that's the way to go in terms of increasing shareholder value. And it really wasn't any more complex than that. I'll let McDavid speak for himself as far as how he's going to follow in the large footsteps left by JV. McDavid?

Yes. As Denny said, we're very grateful that Jean created such a strong accounting and finance function at Coherus and I am very much looking forward to working closely with all of those team members, and with our external partners, such as EY, and others. So I'm very pleased with the state of that organization and I'm really looking forward to being a part of that team. I'm going to be spending a lot of time also with investors and analysts as our story evolves, and it's evolving very quickly in 2021. And connecting investors to the promise of the story as the potential approvals come along with biosimilars, Lucentis, Avastin, Humira, and also as potential approvals come through the toripalimab program, which will begin to stack up we believe very quickly. And so there's a great deal of value that we believe we're creating with this growing and diversified portfolio of product candidates that's moving through. And I want to spend a lot of time with investors and analysts and make sure that they understand that value. So that's a big part of my job.

Yes, Salim, regarding the announcement of our entry into immuno-oncology and the PD-1 space, we've received very positive outreach from our oncology customer base. They seem to be quite receptive. We’ve had discussions with some large teams, and I believe the environment is well-prepared for this approach. It's been successful in biosimilars, and I am confident we will perform well in the PD-1 area. I think we are the right solution at the right time.

Next question comes from the line of Balaji Prasad from Barclays. Your line is now open. You may ask a question.

Good afternoon and thanks for taking the questions. Firstly, again, Jean Viret, all the best, and it was great speaking to you over the past couple of years. And coming to …

Absolutely.

...yes. Coming to the questions, one lining of statement caught my interest where you said that your R&D spending will increase on additional presentations of UDENYCA. So just want to understand, I would imagine that this is the onboarding device and I want to compare this with what you had said earlier recently that you will not be investing further dollars in biosimilars. So I take the base of one-off exception. Second, I would like to understand your degree of confidence and the guiding factors for each of the three BLAs that you plan to submit this year, Lucentis, Avastin, and toripalimab? I think, probably we will need some assurance on that front. I'll stop here with these two. Thanks.

Thank you for that, Balaji. We have previously shared our satisfaction with the progress on on-body technology. This indicates that we have made investments that will be reflected in our financial statements, and we plan to allocate resources to continue this progress. However, this is not the same as committing substantial funds to a Phase 3 trial for an Eylea product. I do not see any conflicts regarding line extensions or additional presentations of UDENYCA. We are actively pursuing these opportunities, as they are consistent with our approved products. Regarding the confidence in the BLAs, I will first discuss the toripalimab BLA and then allow Vincent Anicetti, our Chief Operating Officer, to provide further insights on the others. Concerning the toripalimab BLA, we are in a positive position. Our partner Junshi has engaged in numerous discussions with the FDA about the nasopharyngeal indication for over a year. They have received breakthrough status and orphan designation. Junshi has solid data and has gained approval in China, with a follow-on first-line submission already made. The current challenge for approval lies in obtaining an inspection of the facilities where the product is manufactured in China. The FDA needs to complete this inspection effectively and promptly. This product addresses an unmet medical need, and we are optimistic they will resolve this. We understand the FDA's focus on various priorities, including the J&J vaccine, and we appreciate the tremendous effort they are putting in. Overall, I believe they will come to a resolution. Additionally, the 1420 BLA for Humira has been submitted and accepted. I'll let Vince elaborate on that. We also have the Lucentis BLA set to be filed by Bioeq, and I will ask Vince to comment on both the 1420 and Lucentis.

Yes, thank you, Denny. So with our Humira biosimilar, CHS-1420, as we announced, the FDA accepted that for a review, which means they found everything within the BLA in order and all of the necessary information there. We also have had a number of meetings over the last year with the FDA reviewing our development program both on the clinical and the manufacturing analytical side. We received a lot of guidance from the FDA. They gave us a very good roadmap. So we're receiving questions from them now. And I would characterize them as routine and we expect the review to go well, I would say, and hopefully get a positive decision from the FDA in December on our action date. In regard to the Bioeq Lucentis biosimilar, in a similar fashion Bioeq has been working with the FDA very closely to resolve all of the prior issues with their prior submission, prior to their decision to withdraw. And in a very recent meeting, in Q1, reviewing all of the work that was done to remediate those deficiencies, FDA felt that the work was done in an acceptable way and agreed that Bioeq could go forward and submit that BLA for review, which we see as a very positive sign. So that will go in midyear and we expect that review to go well too.

Yes. Does that help on those questions with BLAs, Balaji?

The question has been withdrawn. And next question, we have Jason Gerberry from Bank of America. Your line is now open. You may ask a question.

Thank you for taking my questions. I also want to express my gratitude to JV for all the help over the years and wish him the best in his future endeavors. Denny, I estimate that there are four PD-1s expected to enter the U.S. market for lung cancer under the BLA pathway in the next two years. This tumor type represents about 50% of Keytruda's revenues. When we examine these molecules, they show comparable progression-free survival data across histologies, which I believe is the best method for conducting cross-trial comparisons without encountering issues from post-progression therapies. My question is, how do you think this will affect the U.S. lung cancer market? It's clearly a significant aspect of it. These are major companies that have historically been willing to compete on price in large categories based on net price. I also noticed in your last call that you mentioned cancer might be an underappreciated category in terms of price sensitivity. I’m curious if you could share your overall thoughts on that topic. Thank you.

Thank you for the question, Jason. The short answer is that we've shown in the biosimilar business that we are strong and capable competitors who do not rely on price leverage to gain market share. We have a deep understanding of our customers' needs and the value we provide. Prior to launching in that market, we spent two years assessing customer requirements, shaping our value proposition, and building relationships, which we then implemented successfully. I believe you'll see us apply the same approach here. We'll delve into the market and truly grasp the needs of all stakeholders in Medicare Part B, delivering a comprehensive solution. This positions us well. I'm not certain about the extent of the impact in other areas or the specific needs, but I see this market aligning perfectly with our commercial strengths. Additionally, we are well-prepared to meet the demands. We will certainly enhance our MSL teams and reimbursement teams, but structurally, our organization is designed to scale for these challenges. We are optimistic and confident about our prospects. I'll provide more details once we advance further in our progress and after we file. As we continue our market research, we will keep you informed about our plans. I believe we will perform well, and we are not deterred by competition; we are competitive and skilled in this field.

Got it. Okay. So basically wait till the files and before we get a better sense of what the customers really need, and what that unmet need you'll be solving for is?

Yes, I don't believe there's an unmet need, but there may be a lack of a comprehensive solution that these individuals are looking for. I'd like to reference the comments made by Chris Thompson, who mentioned that when we announced our transaction and our entry into the PD-1 space, we received significant support from various areas of oncology and clinical teams, as well as large organizations that welcomed us into this market segment. Therefore, I think these individuals are pleased that we are entering this field.

Yes, Denny, it's Chris. If I could add, prior to signing the deal with Junshi, we were doing a lot of outreach, trying to understand what providers, what physicians we are looking for as it relates to PD-1. And in doing so they were very excited that we were entering this market. I mean, in oncology, folks buy from whom they trust and who they know. And we've established a great relationship with oncologists as it relates to UDENYCA, and we just got a sense that there is a lot of excitement for entering this market.

Yes, I would like to emphasize that we excel in competing in markets with minimal therapeutic differentiation. This is where we thrive. Biosimilars exemplify a scenario with little to no therapeutic distinction. As you noted, the progression-free survival across these products shows very similar outcomes and mechanisms of action. This works to our advantage.

Thank you. And the next question comes from the line of Greg Gilbert from Truist Securities. Your line is now open. You may ask a question.

Great, thanks. I have two questions up front. My first question is about Humira. I'm interested in how you see the UDENYCA example relating to Humira, considering the different channels and incentives. Can you discuss the differences in out-of-pocket costs for patients? I'm unsure what it means for the system to save money in one instance compared to another, especially since middlemen seem to benefit from new companies. I'm curious about the patient-level costs between these two. Additionally, Denny, I found your comments in the last call about the potential for biosimilars to Keytruda not appearing in 2028 intriguing. If you were mistaken and biosimilars to Keytruda do emerge in 2028, does that influence your development strategy? And is your development strategy considering co-formulations, as it seems Coherus is focused heavily on that direction? Thank you.

Yes, those are excellent questions. Firstly, if biosimilars to Keytruda appear in 2028 or 2029, which is four or five years sooner than we initially planned, I think that's manageable. It’s important to consider the PD-1s collectively, particularly when exploring combinations. This rationale underscores our partnership with Junshi, which provides us access to combinations such as TIGITs and engineered IL-2s. We are open to partnering with other entities, whether they are large institutions or small companies, who are interested in collaborative studies involving combinations. From 2025 onward, we expect the focus to shift from monotherapy to combination therapies. Our PD-1, in collaboration with Junshi, is strong, and we are optimistic about our success. While biosimilars may emerge, the emphasis should be on combination therapies, and we have a promising pipeline to that effect. Regarding Humira, I prefer not to disclose too much as we are refining our strategy, but I’ll highlight a couple of points. Many people have assumed that patients stable on Humira would remain on it until they are naturally switched to another treatment, which would slow market penetration due to the need for new patients. However, we believe that major payers will adopt a high formulary positioning for biosimilars by the time we reach 2023, potentially necessitating switches to realize significant savings. We're prepared to serve a large segment of the market with reliable supply, high-quality products, a state-of-the-art auto-injector, and a non-sting formulation. Our approach to success in this sector revolves around engaging with customers to understand their needs better. We are actively working to align our strategies with the requirements of payers, patients, and providers. We've set a goal to capture at least a 10% market share and are preparing our manufacturing to support this. We believe this market holds great potential and offers considerable savings in the Humira segment.

Thank you. And the next question comes from the line of George Yordanov from Cowen & Company. Your line is now open. You may ask a question.

Hey, guys. Thank you so much for taking my question. So, I guess, as it relates to Lucentis and PD-1, if you think about the opportunity and your expertise, UDENYCA likely has somewhat different institutional engagement versus sales force and payer effort requirements. Could you characterize for us how the promotional effort and payer engagement might differ or be similar with Lucentis and the PD-1 asset? And then, on the Junshi collaboration, we notice that the majority of clinical trials they're running are China-based. Would it be possible to use the data from these trials for FDA approvals in the U.S? Or would you have to run smaller U.S based trials, especially for those larger indications?

Okay, let me clarify that a bit. First, regarding the trials conducted worldwide, the focus is less on histology-driven genetics, which can sometimes be a factor. The key considerations are whether you have the same standard of care and if the patient population is relevant and transferable. Junshi has thoroughly evaluated this, and we believe that lung, NPC, esophageal, urethral, and triple-negative breast cancer indications are very transferable. We are confident that the pivotal clinical trials will be applicable in the United States. Moving forward for the rest of 2021, Junshi and our team will engage with the FDA to discuss registration strategies on a case-by-case basis. However, I wouldn’t expect that significant additional clinical work is necessary for indications like NPC. While there may be challenges with histology-driven genetics, overall, these trials are high-quality and transferable. Regarding the Lucentis biosimilar and the PD-1 biosimilar, I’ll first address the PD-1 biosimilar in relation to Medicare Part B, then I’ll let Chris Thompson discuss Lucentis. We believe that the PD-1 biosimilar will effectively leverage our current oncology sales force, call points, GPO contracts, and payer relationships. All these elements align well with the PD-1 product, leading us to be optimistic about its market fit. We’ve received positive feedback from our various partners. Chris, would you like to discuss the Lucentis market structure and the specifics of Medicare Part B?

Yes, thanks, Denny. Obviously, we've been very successful being the market leader with UDENYCA, being that it's a Part B drug and our capabilities around that are recognized by our customers as being outstanding and understanding that market, understanding the importance of ASP, understanding their business models on how they generate revenue within their clinics. We think all of this expertise is transferable to Lucentis. As a matter of fact, two days ago, we're part of presenting to a focus group of retinal specialists and talking with them and trying to understand their business models. They're very excited about Coherus entering with a biosimilar in the future. We did get some good points from them on things we want to consider in our value proposition with that specialty. And we pride ourselves in being able to really shape great value for whatever specialty we enter, but if you think about the skills that are necessary to be successful here, we have those, we have that experience in Part B. And the same will relate to our payer team who works with on the medical benefits side, on the commercial side, right? It's the same business as UDENYCA. And we have those relationships in place, and we believe that they're very anxious to have that type of competition in the marketplace.

Yes. Hey, Chris, just one more thing. Can you comment on the applicability of Coherus complete in our reimbursement efforts and how well those transfer?

Yes, I'm glad you asked that, Denny. One of the key points that stood out during our recent discussions with healthcare professionals and retinal specialists is our Coherus complete program. This hub for patient services offers a range of support, including copay assistance, care for indigent patients, benefit verification, and prior authorizations. When we combine all these services, they fit seamlessly into the workflow of a retinal specialist's office, reducing the manual tasks they have to handle. We've also recently made our benefits verifications and prior authorizations more efficient by enabling electronic processing. This significantly alleviates the workload for their office staff and enhances their overall efficiency. Our customers consistently express their enthusiasm for this streamlined workflow.

Okay. Thank you.

Thank you. Next question comes from the line of Douglas Tsao from H.C. Wainwright. Your line is now open. You may ask a question.

Hi, good afternoon. I want to wish JV well and echo everyone’s sentiments about how great it’s been working with him. Denny, regarding the Junshi partnership, I’m curious about the comments you made in the last call about the characteristics of the PD-1 that attracted you. Are you able to share any insights about the TIGIT and IL-2? Specifically, are there any unique characteristics that make these molecules particularly appealing?

Thank you for your question, Doug. I need to be a bit cautious about this since we haven't received clearance under Hart-Scott Rodino yet. We should have more information as we collect more data later this year. However, I believe there are precedents in the literature, such as the synergy seen with TIGITs in lung cancer treatments with PD-1s, or with engineered IL-2s. There's a wealth of data available on these topics. I can arrange for one of my team members to direct you to some relevant publications if needed. There are many complementary combination products being developed at Junshi, and what's particularly appealing about the transaction structure is that our annual expenditures are capped at $25 million per product. This allows us to maintain a reasonable level of predictability in our profit and loss statements over the next few years while monitoring our spending. This situation positions us well to engage in global development programs with these assets while keeping costs under control, which is beneficial for us and our investors. I will stop there for now, but we should have more to discuss in the next call, and in the meantime, we're happy to share some scientific literature with you.

Okay. That would be really helpful. As a follow-up regarding the Lucentis opportunity, when should we consider an increase in SG&A or commercial infrastructure as we approach BLA submission? Will this increase be noticeable, or can it be managed efficiently? It shouldn't have too much impact, especially considering our hope for UDENYCA to start growing again next year. Thank you.

Thank you for your question. I would say the impact is not very significant. We have already made considerable investments in our information technology, infrastructure, and dashboard systems. We will definitely need a marketing manager to focus on various aspects, but we haven't determined the exact scale needed. We have previously mentioned the concentration of accounts, which might involve around 20 to 25 people, but we have yet to finalize the approach. If we meet the filing timeline around midyear, as we mentioned, we'll provide more details then. Regardless, we don't anticipate a significant increase in expenses for this initiative. As Chris Thompson indicated, we have already begun engaging with the ophthalmology community to understand what the value proposition should entail. Crafting that value proposition is currently our main priority, and we are concentrating our efforts there.

And the last question comes from the line of Balaji Prasad from Barclays. Your line is now open. You may ask a question.

Thank you. I wanted to respond to Denny regarding your question about UDENYCA. The third BLA I mentioned was Avastin, and I would like to hear your thoughts on our level of confidence regarding that. I found your responses to be very helpful. Thank you.

Thank you for that. We disclosed today that we are currently conducting the three-way PK study. We experienced some delays last year due to COVID. We made the deal, and then after the Chinese New Year, COVID caused everything to come to a standstill, which slowed down the process as the FDA had to adjust. I can say that things were progressing well throughout this period, and we are making good progress on the trial. We'll provide an update in our next call once we have more clarity on the situation. Last year, this was primarily affected by COVID, but things are moving along well now.

Understood. Thank you.

Alright. Thank you.

Thank you. No further questions at this time, I will now turn the call over to Mr. McDavid Stilwell for any closing remarks.

Thank you everybody for joining us on the call today. I look forward to speaking to you again in the near future.

Thanks, guys. Bye, bye.

Thanks.

Thank you.

Thanks. Thank you, ladies and gentlemen. That concludes today's conference call. Thank you all for participating. You may now disconnect.