Coherus BioSciences has a relatively tame PR strategy.

In 2020, the company issued just 27 press releases. That drops to 18 if announcements of employee inducement grants are excluded, and only 14 if announcements of investor conferences are cast aside, too. Tally up all press releases related to product portfolio updates and, well, you get two.

But the news flow trickle is starting to pick up as the company ramps and prepares to launch multiple new products. In the last 24 hours, the company made three announcements related to the product portfolio.

Let's dig in.

In-Licensing Assets (and Headaches)

• Coherus BioSciences and Junshi Biosciences announced the U.S. Food and Drug Administration (FDA) successfully completed an inspection of the Chinese manufacturing facility that produces toripalimab, which keeps the regulatory and commercial timeline intact for a third-quarter 2023 launch – for now.

An SEC filing revealed that regulators noted three observations during the inspection. This information is communicated in what's called FDA Form 483, which is intended to inform management of conditions that may run afoul of the Food, Drug, and Cosmetic Act and provide time to correct the deficiencies.

The regulatory document is typically made public within 30 days. Until then, an advisor to Solt DB, who's developed manufacturing processes for multiple FDA-approved drug products and worked through FDA feedback, provided more insight. He estimates 80% of observations on FDA Form 483's could be classified as Data Integrity violations, which might be higher in China. Quality Oversight is another common observation noted in these regulatory communications. If minor and addressable, then the FDA may not require reinspection.

Although FDA Form 483 is not the dreaded Complete Response Letter (CRL), regulators could still issue one to Coherus BioSciences and Junshi Biosciences. The companies expect to submit corrective actions to the FDA within days. If sufficient, then toripalimab would remain on track to launch in the third quarter of 2023.

It's important to highlight that Coherus BioSciences only manufactures drug products in the United States. Once an asset earns regulatory approval, the company completes a tech transfer to onshore manufacturing from overseas partners. Aside from initial batches to support market launch, toripalimab administered to U.S. patients will not be manufactured in China.

Nonetheless, receiving an FDA Form 483 highlights one of the disadvantages to the company's in-licensing strategy. While grabbing rights to externally-developed assets reduces development risks and makes it easier to walk away, it also requires royalty and milestone payouts. More importantly, it shifts the entire pre-approval manufacturing burden onto partners. Giving up control of one of the most important aspects of biologic drug development – biomanufacturing – represents a significant risk.

Coherus BioSciences has encountered manufacturing-related regulatory delays with both Junshi Biosciences and Bioeq, the European company that developed Cimerli. Delayed timelines for approval and launch have been frustrating for individual investors, but the nuances of the specific assets involved have avoided much worse outcomes.

• Cimerli is the only interchangeable biosimilar of Lucentis in the United States, which has helped it quickly grab market share despite delayed approval. Interchangeability is more important for ophthalmology indications during market formation compared to, say, oncology indications.
• Meanwhile, there are no approved treatments for nasopharyngeal carcinoma (NPC), which will be the first approved indication for toripalimab. The drug candidate has a relatively wide-open commercial path once it earns regulatory approval and launches. Additionally, all subsequent approvals in new indications would use data from the U.S. manufacturing site, avoiding further mishaps from Junshi Biosciences and the less stringent regulatory environment in China.

Solt DB Invest expects toripalimab to make minimal contributions in 2023 and generate only modest revenue in 2024, due to the nuances of the NPC patient population.

Yusimry to Compete on Supply and Price

• Coherus BioSciences announced a list price of $12,935 per year for Yusimry. For reference, Humira currently costs about $89,986 per year. Amgen's biosimilar Amjevita currently costs roughly $85,488 per year.

The financial media and Wall Street are relatively unimpressed by the market opportunities for biosimilars, although many concerns are disproved by data.

For example, a number of articles or research notes are skeptical of the market traction and cost savings promised by biosimilars. Although the first biosimilars launched in and before 2017 did experience a slow start, those early wrinkles have been ironed out – but biosimilars can't seem to shake the cognitive bias from years ago.

• Amgen generated full-year 2022 global revenue of over $1.7 billion from its portfolio of biosimilars. It has established a goal to grow biosimilar revenue to $4 billion per year.
• As of the end of June 2022, biosimilars were saving the U.S. healthcare system $1.2 billion per month in drug spending compared to a world without such competition.
• As of the end of June 2022, biosimilars held at least 64% market share in five of the seven approved markets. Biosimilars launched in 2019 had an average market share of 75% within 36 months.

The mismatch between perception and reality is part of the intrigue for individual investors. Succeeding in biosimilars requires solid commercial strategy and infrastructure – both of which are strengths of Coherus BioSciences. It's still easy to overlook the business because it had only one product prior to October 2022, but succeeding with a multi-product portfolio would lead to a significantly higher valuation in the next few years.

Yusimry will be one of the most important near-term growth drivers. Whereas the financial media and Wall Street are focused on the role of interchangeability status and skeptical of the cost savings that will be delivered by Humira biosimilars, Coherus BioSciences has focused its commercial strategy on large supply volumes and, now, pricing. These are the two most important metrics being considered by payers (interchangeability is the least important metric to these stakeholders).

Coherus BioSciences has come out swinging.

• The company will have 500,000 units available at launch, which is equivalent to 4.5% of the adalimumab market on an annual basis.
• The company has set the list price for Yusimry at $995 for a four-week supply, which is equivalent to $12,935 per year. That's the lowest announced list price of any adalimumab biosimilar and resets the cost of adalimumab to 2003 levels – the year Humira launched.

For reference, Humira currently costs about $89,986 per year. Amgen's biosimilar Amjevita currently costs roughly $85,488 per year.

It's an aggressive strategy, but one that's eerily close to our model. Solt DB Invest has modeled that the U.S. market for adalimumab will decline from over $18 billion per year in 2022 to $5.5 billion per year in 2025 -- well below expectations from Wall Street. If every adalimumab product adopted the list price of Yusimry, then the entire market would be valued at $5.47 billion per year.

Setting the price "very low" at launch could be intended to squeeze certain competitors out of the market. Of the nearly 10 adalimumab biosimilars, only four are expected to have significant supply available in 2023. That list includes Amgen, Pfizer, Boehringer Ingelheim, and Coherus BioSciences (and technically AbbVie). If a competitor doesn't have adequate supply and cannot drop list prices to an 85% discount to Humira as Yusimry did, then they might struggle to gain traction.

"The Other MC"

• Coherus BioSciences announced a partnership with Mark Cuban Cost Plus Drug Company (Cost Plus Drugs) to make Yusimry available for roughly $1,138 for a four-week supply or $14,801 per year (plus dispensing and shipping fees).

Investors will be able to gauge the success of Yusimry's commercial strategy through announcements of supply deals and insurance coverage. Here, too, the company has come out swinging.

Yusimry will be the first biologic drug product made available at Cost Plus Drugs, a fellow public benefit company launched by Mark Cuban. Coherus BioSciences was able to secure the distribution partnership thanks to its ample supply volumes and competitive pricing.

Margin of Safety & Allocation

(No change.)

Coherus BioSciences is considered a Growth (Speculative) position. The current Margin of Safety range for the company based on our 2023 model is below:

• Current Price (market close May 31):  $4.09 per share
• Likely Undervalued:          <$7.60 per share
• Midpoint:                            $11.02 per share
• Likely Overvalued:            >$14.45 per share
• Allocation Range:              Up to 7.5%

Coherus BioSciences reported 80.554 million shares outstanding as of April 30, 2023. It subsequently announced a public offering of common stock of 13.529 million shares, including overallotments. The Margin of Safety range above assumes 98.787 million shares outstanding, which prices in 5% dilution.

Further Reading

• June 2023 press release announcing the list price of Yusimry
• June 2023 press release announcing Yusimry will be available at Cost Plus Drugs
• May 2023 SEC filing (8-K) announcing the successful completion of the regulatory inspection of toripalimab's pre-approval manufacturing site in China
• May 2023 research note reviewing first-quarter 2023 operating results
• April 2023 research note providing more detail on Solt DB Invest's model for the adalimumab market