DEFA14A: Coherus BioSciences to Divest UDENYCA Franchise for Up to $558 Million, Shifts Focus to Immuno-Oncology

Coherus BioSciences has agreed to sell its UDENYCA franchise to Intas Pharmaceuticals for up to $558 million, allowing the company to focus on its immuno-oncology portfolio and reduce debt.

Summary

• Coherus BioSciences has announced the divestiture of its UDENYCA franchise to Intas Pharmaceuticals for a total consideration of up to $558 million, with $483 million upfront.
• The transaction is expected to close by the end of Q1 2025, subject to customary closing conditions and shareholder approval.
• This strategic move allows Coherus to concentrate on its immuno-oncology (I/O) portfolio, particularly LOQTORZI, and its combination programs.
• The divestiture will enable Coherus to repay $230 million in convertible debt due in April 2026 and $49.1 million to buy out certain royalty obligations related to UDENYCA.
• Selected Coherus employees may have the opportunity to transfer to Accord Biopharma, Intas' U.S. subsidiary, to continue working with UDENYCA.
• Coherus will continue to operate the UDENYCA business as usual until the transaction closes, ensuring a seamless transition for customers.
• Shareholder approval is required for this transaction due to the size of the UDENYCA asset, as per Delaware General Corporation Law.
• Employees transferring to Accord will receive a Contingency Offer Letter and will transition to Accord's payroll and benefits programs on the day of the deal close.
• Coherus will pay any earned Q4 2024 incentive bonuses and the 2024 401K match for employees who remain with the company through the end of 2024.
• The company is also planning to pay out accrued PTO for employees who transfer to Accord.

Sentiment

Score: 7

Explanation: The sentiment is positive due to the strategic divestiture, debt reduction, and focus on a high-growth area like immuno-oncology. However, there are risks associated with the transaction and the need for shareholder approval, which tempers the overall sentiment.

Positives

• The divestiture of UDENYCA will provide Coherus with significant capital to focus on its immuno-oncology pipeline.
• The company will be able to repay $230 million in convertible debt, improving its financial position.
• The transaction allows Coherus to maximize the value of its I/O portfolio, particularly LOQTORZI.
• The company will be able to accelerate the development of its I/O pipeline in combination with LOQTORZI.
• The deal is expected to provide a seamless transition for customers of UDENYCA.
• Employees who transfer to Accord will have their pay and benefits continue without interruption.
• Coherus will honor previously approved vacation days for employees transferring to Accord.
• The company will pay out accrued PTO for employees who transfer to Accord.
• The 401K match for 2024 will be received at the end of March 2025 for eligible employees.

Negatives

• The transaction requires shareholder approval, which introduces a potential risk of the deal not closing.
• Employees transferring to Accord will not receive stock options as Accord is privately held.
• Employees transferring to Accord will have their ESPP deductions refunded and will not be able to participate in an ESPP plan with Accord.
• Coherus employees will lose access to their Coherus data and files when they join Accord.
• There is a risk that the company may not realize the anticipated benefits of the proposed transaction.
• The transaction could potentially disrupt the company's current plans and operations.
• There is a risk of negative effects on the market price of the company's common stock.

Risks

• There are uncertainties regarding the timing of the completion of the proposed transaction.
• The company may not obtain the required shareholder approval for the transaction.
• Competing offers from third parties could emerge.
• There is uncertainty regarding the payment of earn-outs in the future.
• The asset purchase agreement could be terminated by either party.
• Governmental entities may delay or refuse to grant approval for the transaction.
• The transaction could disrupt the company's current plans and operations.
• The company may not realize the anticipated benefits of the transaction.
• The transaction could negatively impact relationships with employees, suppliers, and other partners.
• There is a risk of litigation related to the transaction.
• The market price of the company's common stock could be negatively affected by the announcement or consummation of the transaction.

Future Outlook

Coherus will focus on its immuno-oncology portfolio, particularly LOQTORZI, and its combination programs, with the goal of driving increased patient survival and shareholder value. The company plans to advance its pipeline of immunotherapies across a number of single agent and combination mid-stage clinical studies.

Management Comments

• Denny Lanfear, CEO of Coherus, stated that the transaction represents the successful completion of their long-term strategy to focus on immuno-oncology.
• Lanfear also mentioned that the transaction allows them to monetize and re-deploy the value created with the UDENYCA franchise.
• Management emphasized the importance of maximizing the I/O opportunity to deliver increased patient survival and drive significant value for shareholders.
• Management highlighted the company's commitment to developing and delivering therapies that extend the lives of patients.

Industry Context

This divestiture reflects a broader trend in the pharmaceutical industry where companies are streamlining their portfolios to focus on core therapeutic areas and innovative products. Coherus's move to prioritize immuno-oncology aligns with the growing importance of this field in cancer treatment. The sale of UDENYCA allows Coherus to compete more effectively with companies focused on innovative oncology therapies.

Comparison to Industry Standards

• The divestiture of a biosimilar asset like UDENYCA to focus on innovative oncology is a strategic move similar to other companies that have divested non-core assets to fund research and development in high-growth areas.
• The $558 million valuation for UDENYCA is a significant transaction, but the actual value will depend on the performance of the product under Intas' ownership.
• The focus on LOQTORZI and its combination therapies positions Coherus to compete with companies like Merck (Keytruda) and Bristol Myers Squibb (Opdivo) in the PD-1 inhibitor market, although these companies have a much larger market share and more advanced pipelines.
• The repayment of $230 million in convertible debt is a positive step for Coherus, as it reduces financial risk and improves the company's balance sheet, which is a common goal for companies in the biotech sector.

Stakeholder Impact

• Shareholders will benefit from the company's focus on high-growth areas and improved financial position.
• Employees may have the opportunity to transfer to Accord, with continued employment and benefits.
• Customers of UDENYCA will experience a seamless transition with no immediate changes to contracts or support programs.
• Creditors will benefit from the repayment of $230 million in convertible debt.

Next Steps

• Coherus will seek shareholder approval for the transaction.
• The company will work with Intas to ensure a smooth transition of the UDENYCA business.
• Selected Coherus employees will have the opportunity to meet with the Accord hiring team in mid-January or February 2025.
• Coherus will continue to operate the UDENYCA business as usual until the transaction closes.
• The company will file a proxy statement with the SEC related to the transaction.

Key Dates

Keywords

UDENYCA, Coherus BioSciences, Intas Pharmaceuticals, Accord BioPharma, Divestiture, Immuno-oncology, LOQTORZI, Asset Purchase Agreement, Shareholder Approval, Convertible Debt, Biosimilars, Oncology