Coherus Oncology, Inc. Q4 FY2021 Earnings Call

Good day, and thank you for standing by. Welcome to the Fourth Quarter and Full Year 2021 Coherus Biosciences Earnings Conference Call. Operator provided instructions. Please be advised that today’s conference may be recorded. I would now like to hand the conference over to your host today, McDavid Stilwell, Chief Financial Officer. Please go ahead, sir.

Thank you, operator. Good afternoon, everyone, and thank you for joining us. We issued our press release earlier announcing our 2021 fourth quarter and full year results. This release can be found on the Coherus BioSciences' website. Today's call includes forward-looking statements regarding Coherus' current expectations about future events. These statements include, but are not limited to, our ability to advance our product candidates through development and registration, the status of product candidate clinical profile, our timing and ability to commercialize our products and product candidates in the future, our R&D and SG&A expense guidance for 2022 and our ability to meet the same. Our projections about margin as well as our ability to draw down amounts under our new credit facility, all of which involve substantial risks and uncertainties that are beyond our control and could cause actual results, performance or achievement to differ from the results, performance or achievement implied by the forward-looking statements. These statements are not guarantees of future performance and are subject to certain risks and uncertainties that are discussed in our press release that we issued today, as well as in the documents that we file with the Securities and Exchange Commission, including those in our annual report on Form 10-K and quarterly report on Form 10-Q. The forward-looking statements provided on the call today are made as of this date, and we undertake no duty to update or revise any forward-looking statements. With me on today's call are Denny Lanfear, CEO of Coherus; Paul Reider, EVP of Commercial Operations and Theresa LaVallee, Chief Development Officer. And I will now turn the call over to Denny.

Thank you, McDavid. And thank you all for joining us this afternoon. Today, I'll describe how over the past year we've delivered our objective to transform Coherus into an innovative immuno-oncology company supported by income from a diversified portfolio of FDA-approved products. I’ll begin today with a brief review of our achievement toward our strategic initiative in immuno-oncology, detailing progress of our foundational asset toripalimab, and of our preclinical and clinical stage innovative combination agents. Then I’ll review recent progress to grow and diversify our commercial portfolio. With respect to our immuno-oncology programs, you may recall that in November, we announced the FDA granted priority review for the BLA for toripalimab for the treatment of nasopharyngeal carcinoma, an indication with no FDA-approved cancer immunotherapy options, and for which toripalimab has Breakthrough Therapy and orphan drug designation. The BLA review is progressing well towards the target action date of April 30, which is about 10 days from now. Toripalimab’s clinical profile continues to strengthen across indications. In December, we announced that toripalimab plus chemotherapy demonstrated a statistically significant overall survival benefit in a pre-specified interim analysis in the CHOICE-01 clinical trial for the first line treatment of advanced non-small cell lung cancer. This builds on other first line indications in esophageal squamous cell carcinoma and nasopharyngeal carcinoma where we have seen a robust benefit in both progression-free survival and overall survival. We've also made progress with our clinical stage mid-stage IO asset strategy. In January, we initiated the process to exercise our option to license JS006, a TIGIT-targeted antibody developed by Junshi Biosciences, our partner, which they're evaluating in a study in combination with toripalimab. Dr. Theresa LaVallee, our new Chief Development Officer, will provide additional details about JS006 and our development plans for you in just a moment. Our immuno-oncology preclinical research and development team has proven to be highly productive. In January, we announced that we're advancing an internally generated pipeline of PD-1 candidates and we expect to file the first IND in mid-2023. With toripalimab nearing its first potential approval, a TIGIT-targeted immune checkpoint blocker entering mid-stage development and our in-house early-stage immuno-oncology candidates successfully advancing towards human clinical trials, Coherus is evolving into an innovative immuno-oncology company with a broad pipeline of product candidates and the potential to drive long-term growth over this decade. I'd now like to introduce Dr. Theresa LaVallee, our recently appointed Chief Development Officer who brings more than 25 years of drug discovery and development experience and is recognized for her immuno-oncology expertise. Most recently, Dr. LaVallee was Vice President of Translational Medicine and Regulatory Affairs at the Parker Institute for Cancer Immunotherapy, where she provided scientific leadership for the clinical strategy for development of novel immuno-oncology therapies and helped establish the Institute's translational and regulatory organization. Further, from 2008 to 2013, Dr. LaVallee was a member of the immuno-oncology team developing checkpoint inhibitors and related diagnostics at MedImmune in AstraZeneca. Theresa?

Thank you, Denny. It is exciting to join Coherus as the company gains momentum and its transition to an innovative immuno-oncology leader. I believe our broadening product portfolio with early, mid and late-stage complementary IO products is well positioned to clinically succeed in immuno-oncology. Commercially, our oncology-focused organization has proven that Coherus can be very successful in highly competitive fields. Coherus has both the in-house expertise and assets needed to support a successful transformation. Antibody development for PD-1 combination and co-formulation required world class analytics, pristine science and informatics capabilities. We have that at our Camarillo, California site in the 25,000 square foot facility we moved into two years ago. On the development side, our clinical and regulatory teams have repeatedly demonstrated the ability to develop drugs that gain FDA approval. Our Scientific Advisory Board, composed of recognized IO experts from academia and industry, is actively involved in our target molecule selection, playing a key role, for example, in selecting toripalimab from a due diligence review of more than 10 PD-1 product candidates as well as vetting the TIGIT assets from Junshi. For Coherus, these investments are paying off. Toripalimab, our foundational immuno-oncology asset, is establishing an excellent safety and efficacy profile in the ongoing clinical trials. The toripalimab BLA for nasopharyngeal carcinoma, an unmet medical need with no approved immunotherapies, is under priority review by the FDA with an action date of April 30. Denny mentioned earlier that toripalimab clinical profile continues to strengthen across indications. Case in point: the positive progression-free survival and overall survival data from the JUPITER-06 study in esophageal squamous cell carcinoma, which showed a significant overall survival benefit even in low PD-1 expressing patients. We have and will continue to engage the FDA on the potential for submission later this year of a supplemental BLA for toripalimab in combination with chemotherapy for first line treatment of ESCC. Another important tumor type is hepatocellular carcinoma, which is highly prevalent in patients of Asian descent, and for which the FDA has said could warrant regulatory flexibility for new PD-1 agents. We are conducting two pivotal clinical trials evaluating toripalimab in HCC including a front line trial randomizing approximately 520 advanced HCC patients to lenvatinib plus placebo versus lenvatinib plus toripalimab. In an adjuvant setting, we have a trial with approximately 400 HCC patients randomized to toripalimab or placebo following resection. Initial clinical data from these studies are expected later this year. The February 10 ODAC meeting discussing the incoming BLA for non-small cell lung cancer provided helpful insights into the FDA expectations for sponsors seeking approval for PD-1 inhibitors for indications with available immunotherapy options. We believe it is wise to fully engage with the FDA early and prior to submission decisions to fully understand their views. We are continuing to meet with the FDA frequently for toripalimab for multiple potential indications, and we'll discuss with them this year the pathway for toripalimab in combination with chemotherapy for first line treatment of non-small cell lung cancer. Although there are FDA approved checkpoint inhibitors for non-small cell lung cancer, new and more effective treatment options are needed as the majority of patients still die rapidly from this deadly disease. We are focused on addressing unmet patient needs. Non-small cell lung cancer will be the first tumor type we pursue for the combination of toripalimab with JS006. We are excited about the development of this TIGIT antibody. TIGIT is emerging as an important checkpoint to enhance PD-1 anti-tumor immunity. After a decade of translational research in IO, the field understands better how PD-1 inhibitors work, and why they have been foundational for IO treatments. Cancer tricks and exhausts T cells prematurely. A subset of T cells that exhibit stemness have the potential to be reactivated by the unique crosstalk between PD-1 and antigen pathways. All of this is consistent with the observed improved clinical activity with PD-1 plus antigen inhibitors in the clinic and specifically in non-small cell lung cancer. In preclinical studies, JS006 has demonstrated excellent binding affinity and strong inhibition of the TIGIT pathway as well as enhanced anti-tumor activity in combination with toripalimab in preclinical mouse models. A clinical study evaluating JS006 as monotherapy and in combination with toripalimab in patients with advanced solid tumors is ongoing. The IND for JS006 is open in the United States, and we are planning to advance JS006 in combination with toripalimab in a clinical trial in the US later this year. Clinical data news flow will continue this year as results come in from trials evaluating toripalimab for first line treatment of small cell lung cancer and two additional non-small cell lung cancer studies, one in the neoadjuvant setting, as well as a trial in patients with EGFR mutations who have failed prior TKI therapy, and also pivotal studies in triple negative breast cancer, hepatocellular carcinoma and intrahepatic cholangiocarcinoma. Depending on clinical outcomes and conversations with the FDA, these studies could lead to additional indications for toripalimab in the United States. I’ll now turn the call back to Denny.

Thank you, Theresa. It's great to have you on the team directing our mid and late stage IO development efforts. Let me briefly summarize our recent accomplishments with respect to our commercial stage portfolio and our goal to grow and diversify our commercial portfolio of FDA-approved products. You may recall in December the FDA approved our second product YUSIMRY, a Humira biosimilar. Paul will address our planning for this important launch in 2023 and some of the key issues we are considering to ensure that we reach our market share objectives. The cancer biosimilar market continues to be very important to us. It has only about 50% biosimilar penetration in terms of presentation segment mix. We've had good success with additional presentation development to address all the segments. In October, UDENYCA on-body injector demonstrated pharmacokinetic and pharmacodynamic similarity in a randomized clinical trial, enabling the submission this year of prior approval supplements to the UDENYCA BLA. If it is approved we project a 2023 launch of UDENYCA on-body injector which would compete directly with Neulasta OnPro and would provide a second wave of growth for UDENYCA. UDENYCA in the prefilled syringe format continued to provide a significant source of funding for our pipeline investments and support upcoming commercial launches. Net sales of UDENYCA declined to $73 million in the fourth quarter within the context of an increasingly competitive and tight pegfilgrastim market. We anticipate UDENYCA net revenue in 2022 will decrease relative to the $327 million of net revenue generated in 2021. Our strategy is to balance price and market share to optimize long-term revenues in the PFS format in 2022 and then get significant share through accessing the untapped on-body segments in 2023. In October 2021, the FDA accepted for review the BLA for CIMERLI, a Lucentis biosimilar. A mid-cycle review meeting occurred recently and the BLA is progressing well towards the target action date in August this year. As Paul will elaborate, we plan to launch CIMERLI in the second half of this year assuming approval. We are also planning for the launch of toripalimab in NPC to further grow and diversify our product portfolio in 2022. These two launches in 2022 should be followed by the two 2023 launches of YUSIMRY and UDENYCA on-body injector, accelerating the revenue growth. We expect these four new products to be a market inflection point for revenues, fueling top line growth starting later this year. We expect growth to continue with the potential expansion of toripalimab label and project longer term growth with the JS006 for toripalimab combination and our innovative IO pipeline that we've discussed. I'll now turn the call over to Paul Reider, our Chief Commercial Officer. Paul will review UDENYCA’s fourth quarter performance and update you on the launch preparation for toripalimab, CIMERLI and YUSIMRY. Paul?

Thank you, Denny. As Denny indicated previously, UDENYCA net sales were $73 million in the fourth quarter, down 12% from the prior quarter. This was driven by a 4% decline in demand units, as well as continued price erosion due to intense competitive pressures and the tight pegfilgrastim market. Our share declined slightly from 18% to 17.5% in the fourth quarter; market share gains in the clinic segment were offset by declines in both 340B and non-340B hospitals. On a unit basis, the overall pegfilgrastim market declined modestly in the fourth quarter, a period in which historically we've seen slight market growth. We expect to return to low single digit market growth in 2022. Until COVID recedes more broadly, there will continue to be a short-term advantage favoring the originator's on-body device which retains approximately 50% share of the overall market. As Denny indicated, we expect UDENYCA sales to grow again once we introduce our UDENYCA on-body injector next year, if approved. Our strategy is to balance price and market share and optimize long-term revenues with the PFS format in 2022 and then gain significant share through accessing the untapped on-body segment in 2023. Now I'd like to talk about commercializing our pipeline. We are preparing for the launch of three new brands in the next 18 months: toripalimab, a PD-1 inhibitor for nasopharyngeal carcinoma; CIMERLI, our Lucentis biosimilar; and YUSIMRY, our Humira biosimilar. Regarding toripalimab, nasopharyngeal carcinoma, or NPC, is a rare cancer, where there are currently no PD-1 inhibitors approved by the FDA. Toripalimab not only has the potential to be the first and only PD-1 inhibitor indicated for this tumor type but has the potential to also establish a new first line standard of care. Our oncology commercial capabilities have been built to scale and the toripalimab launch effort will be efficiently integrated into our existing commercial infrastructure. Commercial launch preparations are proceeding on track. I'd also like to note that the NCCN guidelines for nasopharyngeal carcinoma recently added the JUPITER-02 study of toripalimab for the first line treatment of NPC as a reference, which serves to validate the significance of this important clinical trial. Now with respect to CIMERLI, our FDA action date in August 2022 will allow us to launch into the $1.4 billion retinal market. We entered this market in the early stages of biosimilar market formation and we look forward to competing in the retinal therapeutic area. Retinal specialist opinion leaders have expressed positive receptivity to Coherus entering this market and our documented track record of success in oncology gives them confidence that Coherus understands the dynamics of a viable market and that we will deliver a safe and effective alternative to Lucentis along with a compelling value proposition. Similar to our playbook with UDENYCA, we plan to launch a similar education campaign to the retina community in the second quarter. We've also completed our account segmentation work and intend to launch with a focused and dedicated ophthalmology sales team, while at the same time leveraging our commercial organization's existing key account, market access and patient support capabilities. Now on to YUSIMRY. We're preparing for the launch in July 2023. Humira has been the top selling drug in the United States with net sales of $17 billion in 2021, and we look forward to competing in this market. While we expect significant competition, our commercial goal is to achieve at peak at least 10% share of the overall adalimumab market. We believe payers will drive biosimilar adalimumab adoption, and we have completed extensive market research with national and regional payers as well as PBMs. The insights gleaned from this research confirm that Coherus can and expects to deliver on all of the payers' critical expectations. These include a competitive price that delivers value to key stakeholders, robust and reliable supply, high quality manufacturing, a non-stinging citrate-free formulation, prefilled syringe and auto-injector presentations with high gauge needles that are comparable to the reference product and that are comfortable, reliable, and easy for patients to use. Robust patient support services to facilitate access and to address patient out of pocket costs. Also, according to our research, interchangeability was regarded as a nice-to-have attribute, but not essential, since payers already have the mechanisms to drive product selection based on their formularies and utilization management tools that they use routinely today in multiple product categories. So to meet these expectations, Coherus has previously invested in large scale manufacturing and expects to be well positioned to compete on supply guarantees and price. We will have quality prefilled syringes and auto-injector presentations. Our YUSIMRY device uses a 29 gauge needle comparable to the originator's, and we also use our proprietary non-stinging citrate-free formulation. In addition, Coherus Complete, which is our patient and provider services offering, is considered best-in-class in the pegfilgrastim class today. We have an established and high-touch service offering to facilitate access and affordability. Some large competitors may position their adalimumab biosimilar within a portfolio offering to payers. Coherus, by contrast, will have a singular focus on competing successfully in the adalimumab market without the constraints of trying to minimize the collateral impacts of price erosion on a portfolio of premium priced branded products. Our interest is in seeing the overall adalimumab market become as large as possible. We believe this is also in the best interest of payers and patients. In short, we are confident we can deliver a compelling overall value proposition and expect results consistent with our market share forecasts for YUSIMRY. I'll now turn the call to McDavid for review of the quarter’s financial results.

Thank you, Paul. The details of our financial results are in the press release. So I'll focus now on a few highlights. For the fourth quarter and full year 2021, we reported net losses of $46 million and $287 million, respectively, on a GAAP basis. Cash used in operating activities was $52 million for the fourth quarter and $37 million for the full year 2021. As detailed earlier in the call, net revenue was $73 million for the quarter and $327 million for the year. This is a decrease for both periods reflecting lower unit volumes and lower net realized price. Wholesaler inventory remained within the normal range at year end. Cost of sales was $12 million for the quarter and $58 million for the year, resulting in gross margins of 84% and 82% respectively. Recall that in the first quarter of 2021, we depleted inventory manufactured and expensed prior to approval, and since then per unit acquisition costs are fully reflected within costs. Accordingly, cost of goods as a percentage of net revenues has increased since 2020. In the long run, starting in 2024, we expect UDENYCA prefilled syringe gross margins to return to 90% or higher as we realize the benefits of a significant manufacturing process improvement and also royalty expiration. Research and development expenses were $51 million for the quarter and $363 million for the year. This is an increase over 2020 and includes the $136 million upfront payment to Junshi for the toripalimab license, as well as costs to advance our late stage pipeline activities such as regulatory affairs and manufacturing scale up for YUSIMRY, clinical development and BLA filings for toripalimab, a clinical trial for UDENYCA on-body injector, as well as the ongoing three-way PK study evaluating CHS-305, the Avastin biosimilar. Selling, general and administrative expenses were $50 million for the quarter and $170 million for the year, an increase that was primarily driven by higher UDENYCA commercialization activities as well as stock-based compensation expense. We ended the year with $417 million in cash and cash equivalents. Recall that subsequent to year end, we entered into a credit facility agreement with Pharmakon Advisors for a $300 million term loan payable across four tranches. We drew the first $100 million tranche at closing and simultaneously paid off a $75 million term loan. Prior to April 1, we plan to draw a second $100 million tranche and simultaneously pay off the convertible notes that come due at the end of March. Two additional tranches of $15 million each will become available to us upon the FDA approval of toripalimab and CIMERLI. We are introducing full year 2022 guidance for R&D and SG&A expenses of $415 million to $450 million, not including the $35 million upfront fee to Junshi Biosciences we expected to pay later in the first quarter for rights to JS006 or the $25 million milestone payment that will become due on approval of toripalimab for NPC. This guidance range includes approximately $55 million to $60 million in non-cash stock-based compensation expense. Let me provide some additional color on these anticipated operating expenses, much of which is investment that will convert back to cash quickly with a high IRR. This year, we will spend approximately $50 million manufacturing inventory for new product launches. You'll recall that one lesson from our successful UDENYCA launch is that going to market with ample supply is a critical success factor. Also recall that low cost inventory manufacturing and expense prior to FDA approval subsequently delivers P&L benefit in the form of lower COGS. Another $40 million to $50 million of operating expense this year will fund the completion of development of additional presentations of products we expect to introduce over the next two years, as well as manufacturing scale up projects that will deliver ongoing benefits in the form of significantly lower cost of goods. Finally, from the investor relations front, we will present and host investor meetings in March at two conferences, the Cowen Conference and also the Barclays Conference. And we're planning to host the Coherus Analyst Day event in late March in New York City, hopefully in person. And I will now turn the call back to Denny for closing remarks.

Thank you, McDavid. A year ago, we told you that our vision for Coherus was to become an innovative immuno-oncology company with a commercial IO asset, promising clinical stage programs and novel in-house preclinical pipeline. With the potential approval of toripalimab in April, initiation of clinical trial evaluating TIGIT in combination with toripalimab later this year, and the advancement of the first of our in-house IO assets towards IND, we are delivering on this vision that we laid out to investors a year ago. The levers of success are now in our own hands. I am proud of the execution of my team and confident that we will fulfill the promise of our strategy. On the commercial side, we are uniquely positioned to launch multiple new products in the next 18 months. With these launches, the total addressable market opportunity by product portfolio will increase tenfold, from about $2.5 billion to more than $25 billion. Our commercial opportunity will continue to expand as additional toripalimab indications are added and as our immuno-oncology pipeline candidates advance to commercialization. This growing product portfolio will fund our continued growth in immuno-oncology through the end of this decade. Operator, we're ready for the questions.

Operator provided instructions. And our first question comes from the line of Salim Syed with Mizuho.

Hey, good afternoon, guys. Thanks so much for the color. A couple for me if I can. One on toripalimab. I'd like to understand a little bit more about the strategy here in the long post assumed NPC approval late April, specifically the prospects of getting toripalimab listed as a category two B recommendation on NCCN guidelines and the prospects of a subsequent Medicare reimbursement or off-label uptake in lung? Or do you really think you'll need an additional trial in lung that's head-to-head versus a PD-1 and how those costs would be allocated or shared? And then the second question is on the UDENYCA guidance for ’22. So Denny, I appreciate that revenues will be lower than 2021, but how are you thinking about ASP decline in ’22? In 2021, by my math there was roughly about a 20% to 30% ASP decline. So this is now the fourth year post launch, should we be thinking about that moderating in ’22, and then also with COVID cases largely declining here and the originator having 50% of the pegfilgrastim market. Just maybe you could speak about your views on units, please. Thanks so much.

Thank you for that, Salim. I would ask that follow-up questions limit themselves to one question so we can work through and then if your question is not answered, we're happy to go through. So let me direct the question on the non-small cell regulatory strategy that you posed to Dr. LaVallee. Theresa, do you want to answer that one?

Yes. Thanks, Denny, and thanks for the question. I mean, for non-small cell lung cancer, we haven't had any meetings with the FDA since the ODAC, and we look forward to discussing the path forward with them. We continue to be impressed with the data, and I think the overall tone of how the FDA is reviewing the data gives some guidance between the NPC indication and non-small cell lung cancer. So our strategy is to have frequent and often conversations with them and be aligned on the packages.

Thank you, Theresa. Any additional comment with respect to the endpoints of our study or other aspects to Salim’s question?

The endpoints that we have for overall survival were a pre-specified secondary endpoint and were part of the statistical analysis plan, which was designed to meet FDA requirements.

Thank you. Thank you for that. I think your second question, Salim, was with respect to second half of the year sales for 2022. Paul, can you offer Salim any additional color on what we see for UDENYCA through the rest of this year?

Yes, thanks for your question, Salim. I think it's reasonable to expect continued price declines in this market throughout 2022, as it's becoming increasingly competitive. If you look at our ASPs, we've been averaging mid-single digits over the last three quarters. Our strategy has really been to balance price and market share as we look to optimize longer-term revenues for UDENYCA. In 2022, it's going to be within the context of the prefilled syringe segment, but we're going to be ready to go with the launch of an on-body device in 2023, if approved, to go after that remaining 50% of the on-body market that's been relatively entrenched through the persistence of COVID. So that's what we're thinking.

I hope that answers your question, Salim. We'll be happy to loop back with you if we have a little more follow-up to that. Operator, can we have the next question?

We will move to our next question, which is Georgi Yordanov with Cowen and Company.

Hey, guys. Thank you so much for taking our questions. We're going to limit to one. So on the recently announced partnership for the TIGIT asset, could you maybe talk about how these are differentiated from the more advanced TIGIT antibodies that are in later stages of development out there? And then you mentioned your intentions to run trials here in the US in combination with toripalimab or as monotherapy? Could you remind us of the expected R&D costs associated with that development and what percentage of that you're responsible for?

Let me take the last part first with respect to cost and then I'll let Theresa describe our strategy around the TIGIT. With respect to costs, you may recall that the agreement with Junshi limits our share of clinical costs to $25 million per year per product. That is the same for toripalimab as it is for the opted-in products, which TIGIT JS006 is one. So we presume that this will be done under the auspices of the joint steering committee of the partnership and subject to those caps. Now if there's additional work that we want to do outside of that, that may be additional spend not paid for by the partnership. Junshi has the opportunity to opt back into that data later. Given that this asset will be developed internationally and globally across all markets, it's probably safe to assume that this will be primarily developed through the joint steering committee of the partnership. With respect to TIGIT development, potential differentiation, and our strategy of going into lung, Theresa, would you like to make a few comments on that?

Yes. I think the data we've seen from our partner Junshi on the TIGIT antibody shows significant potency in preclinical models. We look to develop it in tumor types such as non-small cell lung cancer to establish proof of principle in combination with toripalimab with a translational strategy to really understand where we see activity and where we do not, so that we can advance it with urgency.

Do you have any additional color to provide with respect to the TIGIT, as we have developed co-formulated approaches to the product, which would be a single vial? Operator, we're ready for the next caller.

And our next question comes from the line of Chris Schott with JPMorgan.

Great. Thanks so much. I'm going to slip up one and a half questions and come back to the toripalimab discussion earlier. Would you run a US-based head-to-head study in non-small cell lung cancer if FDA required it or is that kind of a non-starter as you think about it? I know you still need to meet with the FDA. But if that's what they're asking for, is that something that makes sense for Coherus or not? And my core question was coming back to biosimilar Humira. There's been a lot of debate about how much volume this is going to be able to capture here and how many biosimilars each payer is going to cover. So can you just elaborate a little bit more on how you think that plays out as you look out to 2023 and beyond? Do you think it's going to be a situation where there's multiple biosimilars and it's kind of a jump when it's about commercial execution? Or do you expect the payers to kind of focus in on one or two biosimilars and expect that AbbVie is going to retain a sizable portion of the market? Or do you expect that a lot of the volume in this space is going to be available to the biosimilar players? Thanks so much.

Thank you for your one and a half. Let Paul first address the YUSIMRY Humira biosimilar question for you and then we'll move back on to toripalimab.

Yes, thanks for your question. At the time of our launch in July 2023, we will expect to be one of a number of biosimilars entering the market at the same time. What we'll be prepared to do at that time is bring a value proposition that includes those factors I mentioned earlier: a very competitive price, substantial supply guarantees, and all of the prefilled syringe and auto-injector types of presentations. The non-stinging citrate-free formulation will be another differentiator. We expect to tailor our payer segmentation rather than treat payers as one-size-fits-all and deliver the value proposition that fits their particular objectives based on their plans, covered lives and businesses. Depending upon the control level of the plan, that might be a single biosimilar and a rapid conversion away from the innovator, or in the short term both Humira plus YUSIMRY could be available, in which case there'll be a slower transition over time. Either way, we'll have a portfolio of value propositions that will meet their needs. We expect to be one of the most compelling high-volume, low-cost providers at the time of commercialization mid-year and to do very well.

The other point I would make is that given the number of competitors in the market, there's going to be tremendous cost pressure all around. We wouldn't be surprised if the first two or three entrants do not capture a majority share immediately and instead the shares are distributed in a way that could result in each having perhaps 20% to 25% share. So we think a conservative estimate is a share in that kind of range. With respect to your question on toripalimab and the potential regulatory pathway, it's probably prudent for us not to preempt our conversations with the FDA. As Theresa said, we haven't really had a chance to interact with the FDA post-ODAC and we look forward to doing that. We are convinced that we have a high-quality molecule demonstrating significant efficacy and safety across a number of indications, including lung, so we're enthusiastic about talking to the FDA about that. We are planning on moving into lung with the TIGIT asset in conjunction with toripalimab and you'll be hearing more of that later this year. Theresa covered how we plan to move toward that later in the year, so stay tuned.

And our next question comes from the line of Balaji Prasad with Barclays.

Thank you. Hi, good evening, everyone. So firstly, getting back to biosimilar Humira, can you quantify better the non-stinging citrate-free formulation and what kind of advantage it provides to you? And also probably importantly, do you expect to be the only citrate-free formulation on the market next year? And two, if you can also quantify your clinical trial priorities with multiple trials going on given $417 million in cash, if you need to prioritize your clinical trials, what would be the top one or two ones that are going to advance next year? Thank you.

Thank you, Balaji. Let me first address the issue of the formulation. It's very important from the viewpoint of patient comfort upon injection that the formulation does not sting and that it's comfortable. There's anecdotal evidence that patients found prior lower-concentration formulations with citrate very uncomfortable because of stinging. So several years ago when we approached the Humira biosimilar development, we developed a proprietary non-stinging citrate-free formulation. I won't speak for others, but I think this is very important from the viewpoint of patient comfort and being able to penetrate the market as Paul said. With respect to the clinical trials in 2022 at various costs, and as McDavid pointed out there are significant spends on matters such as manufacturing, one of the ways that we succeeded with UDENYCA — you may recall we manufactured supply well in advance and stocked significant inventory prior to launch, at material manufacturing expense — and that served us very well post-launch because we were able to offer supply guarantees and did very well in that market while others were not. We think that same formula applies here with Humira; we have made those investments in large scale manufacturing and will be prepared for fierce competition on price, but we want to be the team that has the inventory and supply guarantees to capture share. Those are significant parts of our spend. But as McDavid indicated in his remarks, that pays back later as a COGS benefit; it is expensed now, but it gives you an advantage with a significant IRR. Hope that answers your question.

Our next question comes from the line of Jason Gerberry with Bank of America.

Hey, guys. Thanks for taking my question. Mine is on the NPC US market opportunity. Can you talk a little bit about your expectations here with this — do you expect toripalimab to be used more first line with the chemo combination or second line monotherapy? How many of these patients are really addressable? Is it going to be hard to find these patients because it's a pretty small population? It seems like there's a pretty big swing factor if you're first line versus second line. I think the interim PFS was 11.7 months for first line, but I think in second line it was much shorter. So just trying to get a sense of, can you frame the key parameters of an oncology forecast?

Thanks for the question. Of course, we expect to pursue first line treatment in NPC. Paul, can you fill in the rest of Jason's question with respect to the market size and addressability?

Thanks for your question, Jason. Yes, it's a rare cancer; the data suggests that there are a couple thousand patients treated with NPC annually, and about a third of those patients are treated in the first line setting. So as we expect, if approved, to be the first and only PD-1 antibody approved for NPC including first line, that's where we believe we have the potential to establish a new standard of care in combination with chemotherapy plus toripalimab as the first line regimen. Patients treated with chemotherapy only in first line are likely to progress, and then we've got data in later lines that we expect to pick them up later. But we want to get these patients treated first line. There aren't many of them, but looking at our data with about 1,500 HCPs that we surveyed regarding PD-1 use for NPC, they account for over half of the patient volume, and we've got significant overlap with our current oncology database. So we expect high overlap and a very synergistic launch with the toripalimab NPC story. The data has already been widely presented, including an ASCO Plenary in 2021; the study was published in Nature Medicine last year. And of course, NCCN guidelines adding the study provides a real tailwind going into a potential launch.

Jason, the other thing to add is we will pursue NPC holistically across lines of therapy. As Paul indicated, we think we have a strong therapeutic case with the ASCO Plenary session and Nature Medicine publication. After approval and several months in the market, we'll provide more color around forecasts. Theresa, anything to add on the PFS?

Yes, the PFS in first line was 11.7 months with a one-year PFS of 49%.

Our next question comes from the line of Douglas Tsao with H.C. Wainwright.

Now that you've added your own internal R&D capabilities in discovery and IO, I'm just curious: as you add these capabilities, how do you see your vision for growing the business versus business development? Obviously, you're going to be launching a number of products, and your cash flow should be quite significant. Do you have a bias towards focusing on internally developed assets versus ones you might want to acquire? And as the cash flow comes in, do you potentially think about business development and M&A more aggressively? Thank you.

That's a great question, Doug. It's very important to us that we have a portfolio that's balanced across all three stages of development: preclinical, early stage development represented by in-house assets, mid-stage development represented by partnerships such as the TIGIT asset, and late-stage with potential approval of toripalimab. To answer directly, we certainly would be open to business development opportunities in IO. There's a lot of opportunities out there and we have a number of folks who approach us from time to time with various assets. We haven't locked in anything so far, but we continue to look at them. Theresa, do you want to say a few things about our early stage pipeline?

Yes. One of the things that really attracted me to Coherus was the people and the talent. In addition to having great assets, what surprised me was how strong the science was in the preclinical aspects. Looking at the early pipeline, it is well put together and targets important aspects of the tumor microenvironment that the field is broadly pursuing. Starting with the T cell PD-1, where toripalimab is an excellent molecule, and coming in with TIGIT as an important way to get T cells activated and enhance anti-tumor immunity, we are also focused on combatting suppressive tumor microenvironments that hinder active T cells. I think the portfolio is exciting and as we advance the stages I'm really looking forward to getting the in-house IND next year and starting an in-house clinical trial.

The other comment is we will cover our in-house assets in more detail at our investor meeting at the end of March in New York. We'll bring key personnel that were working on this and explain mechanisms of action and other details. I think you'll find it interesting. Thank you. I am showing no further questions at this time. I would like to turn the conference back over to Denny Lanfear for any further remarks. Thank you. We want to thank you all for joining us today for our fourth quarter and full year conference call. We look forward to seeing you at the upcoming conferences in March, and we also look forward to talking to you in more detail at our Investor Day event at the end of March. Thank you.

This concludes today's conference call. Thank you for participating. You may now disconnect.