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

Coherus BioSciences is selling its UDENYCA franchise to Intas Pharmaceuticals for up to $558 million, allowing the company to focus on its immuno-oncology pipeline and reduce debt.

Summary

• Coherus BioSciences has agreed to sell its UDENYCA franchise to Intas Pharmaceuticals for an upfront payment of $483.4 million, plus up to $75 million in sales-based milestone payments.
• The divestiture includes global rights to all UDENYCA products, such as the prefilled syringe, autoinjector, and ONBODY device.
• This transaction is part of Coherus's strategy to focus on its immuno-oncology portfolio, particularly its PD-1 inhibitor, LOQTORZI.
• The company plans to use the proceeds to pay down a significant portion of its debt, reducing it from $480 million to $38.7 million, and decrease annual debt servicing costs from $38 million to $5 million.
• Coherus anticipates data readouts for its pipeline in the second half of 2025, with momentum building through 2026.
• The company expects to pay less than $3 million in US federal income taxes on the transaction due to the efficient use of net operating losses.
• The company will also pay approximately $50 million to buyout the royalty of UDENYCA net sales.
• LOQTORZI is now the only preferred regimen for the treatment of advanced nasopharyngeal carcinoma (NPC) according to the NCCN guidelines.
• The company estimates the NPC market opportunity to be between $150 million and $200 million.
• Coherus expects to provide an updated Q4 2024 sales projection and Q1 2025 cash projection in early 2025.

Sentiment

Score: 8

Explanation: The document conveys a positive outlook due to the strategic divestiture, debt reduction, and focus on a promising immuno-oncology pipeline. The NCCN guideline update for LOQTORZI is also a significant positive. However, there are risks associated with the transition and pipeline development.

Positives

• The divestiture significantly improves Coherus's capital structure by reducing debt and interest payments.
• The company is focusing its resources on its immuno-oncology pipeline, which has high growth potential.
• LOQTORZI has been recognized as the only preferred treatment for advanced NPC, which should drive sales.
• The company has a strong cash position, with projections exceeding two years of cash past key data readouts in 2026.
• The company has a clear strategy for clinical development, including partnerships and internal programs.
• The company is efficiently using its net operating losses to offset taxes from the divestiture.
• The UDENYCA resupply is underway and customer response has been positive.

Negatives

• The company is losing a revenue stream from the UDENYCA franchise.
• The company will need to manage the transition of employees and operations related to the divestiture.
• The company will need to pay approximately $50 million to buyout the royalty of UDENYCA net sales.
• The company will need to ensure a smooth transition for UDENYCA customers to the new owner.
• The company is reliant on the success of its immuno-oncology pipeline for future growth.

Risks

• The divestiture may not close on time or at all.
• The company may not receive the full $75 million in sales-based milestone payments.
• The company's immuno-oncology pipeline may not be successful.
• The company may face challenges in commercializing LOQTORZI.
• The company may not be able to achieve its financial targets.
• The company may face competition in the immuno-oncology market.
• The company may experience delays in its clinical trials.
• The company may not be able to retain key personnel.

Future Outlook

Coherus expects to see important data readouts for its pipeline in the second half of 2025, with momentum building through 2026. The company projects to have over two years of cash runway past key data readouts in 2026. They will be very thoughtful about expenditures.

Management Comments

• This transaction represents the successful completion of our long-term strategy to focus our commercial and R&D resources on immuno-oncology.
• This transaction allows us to monetize and redeploy the significant value we have created with our UDENYCA franchise to maximize the opportunity ahead for our I-O portfolio.
• We must maximize the I-O opportunity because that is how we will both deliver increased patient survival benefits in tough cancers and drive significant value for our shareholders.
• We are now well positioned for success and look forward to updating you on our progress.
• We remain confident that customers will resume UDENYCA prescribing in Q4 with demand and market share acceleration in Q1 and throughout 2025.
• We reiterate our belief that LOQTORZI will follow a steady revenue ramp in the near-term, fueled by new patient acquisition with sustained growth over time.

Industry Context

This divestiture reflects a broader trend in the biopharmaceutical industry where companies are focusing on core therapeutic areas and divesting non-core assets to streamline operations and improve financial performance. Coherus is shifting from biosimilars to innovative immuno-oncology, aligning with the industry's focus on novel cancer therapies.

Comparison to Industry Standards

• The divestiture of UDENYCA is similar to other instances where companies have sold off biosimilar assets to focus on more innovative drug development, such as Amgen's sale of its biosimilar business to focus on novel therapeutics.
• The focus on immuno-oncology is consistent with the industry's shift towards targeted cancer therapies, with companies like Bristol Myers Squibb and Merck leading in this space.
• The debt reduction strategy is a common practice for companies looking to improve their financial health, similar to how Teva Pharmaceuticals has been working to reduce its debt load.
• The NCCN guideline update for LOQTORZI is a significant advantage, similar to how Keytruda's inclusion in various guidelines has driven its market success.
• The company's strategy of partnering for late-stage development is similar to how many biotech companies manage costs and risks, such as how smaller companies partner with larger ones for commercialization.

Stakeholder Impact

• Shareholders will benefit from the improved financial position and focus on high-growth areas.
• Employees involved with UDENYCA will be transferred to Accord BioPharma.
• Customers of UDENYCA will transition to Intas Pharmaceuticals.
• Patients will continue to have access to UDENYCA and LOQTORZI.
• Suppliers and partners will need to adjust to the changes in ownership of UDENYCA.

Next Steps

• Complete the divestiture of the UDENYCA franchise.
• Pay down the convertible notes.
• Continue the commercial launch of LOQTORZI.
• Advance the clinical development of the immuno-oncology pipeline.
• Provide updated sales and cash projections in early 2025.
• Work with accounts to translate NCCN guideline changes into their individual account order sets and pathways.
• Participate in the Citi Conference in Miami.

Key Dates

Keywords

UDENYCA, LOQTORZI, divestiture, immuno-oncology, biosimilar, Intas Pharmaceuticals, debt reduction, nasopharyngeal carcinoma, NCCN guidelines, pipeline, capital structure, milestone payments