The era of strategic silence is over. Investors might want to be careful what they wish for.

Coherus BioSciences had been tight-lipped about regulatory and commercial plans for Udenyca Onbody in recent years, only making necessary disclosures such as announcing the complete response letter (CRL) issued in September 2023. Due to loopholes in data disclosure laws, drug developers aren't legally required to reveal regulatory filings or even regulatory approvals. Not even a mighty Freedom of Information Act (FOIA) request with the U.S. Food and Drug Administration can break through. I know, I tried.

The loopholes weren't part of a master design by lobbyists. They only exist because disclosures usually aren't a problem. After all, keeping investors updated on timelines is almost always beneficial to a company's share price, and drug developers are blabbermouths. Coherus BioSciences saw things differently for Udenyca Onbody.

Of the nine unique products approved in the pegfilgrastim market, only one is an on-body injector (OBI) formulation – Amgen's Neulasta Onpro. It'll end 2023 with nearly 40% market share, primarily because there's no direct competition. The company also owns a relatively broad patent estate covering on-body devices that dispense and inject pegfilgrastim. Therefore, Coherus BioSciences' policy of strategic silence would've given Amgen the least amount of time to prepare a potential legal challenge.

Whether it worked remains to be seen. But the company's day-after-Christmas announcement of FDA approval for Udenyca Onbody marks a decisive end to strategic silence. It could mark the beginning of a messy 2024 battle for the OBI market.

What Makes Udenyca Onbody Important?

Pegfilgrastim is what's known as a granulocyte colonystimulating factor (GCSF). It helps to rebuild a patient's immune system after chemotherapy.

Although chemotherapy is a common and effective treatment for cancer, especially after surgical removal of tumors, it often wipes out a patient's white blood cells. White blood cells are among the most important parts of your immune system, so chemotherapy leaves individuals more susceptible to infections. This was a large share of the "immune compromised" population you heard so much about during the coronavirus pandemic.

(BioRender coming soon)

The original FDA approvals were granted to two unique formulations:

• Pre-filled syringe (PFS) units are administered in a doctor's office. They're quick, but pegfilgrastim must be administered 24 hours after receiving chemotherapy. This requirement is an inconvenience for individuals who live far from where care is received, who are more active, or who have better shit to do than hawk around America's overpriced medical infrastructure for two days.
• On-body injector (OBI) units comprise a small, wearable device attached to a patient after they receive chemotherapy. The device dispenses and injects a proper dose of pegfilgrastim the next day, which is generally more convenient than a PFS unit.

There were nearly 1.3 million pegfilgrastim units sold across both formulations in 2022. Of that, roughly 700,000 units were split between five PFS products, including four biosimilars. The remaining 600,000 or so units were Neulasta Onpro.

The market has shifted slightly in 2023, but the formulation split outlined above means Udenyca Onbody will compete head-to-head with Neulasta Onpro for over 40% of the entire pegfilgrastim market. The remaining 60% of the market is an absolute slugfest between Neulasta (the original PFS product) and six biosimilar PFS products after two more launched in 2023. This is an important nuance to understand given the gloomy attitude toward the stock in 2023.

Coherus BioSciences wields the leading PFS product (Udenyca), as well as the market's only autoinjector (AI) formulation (Udenyca AI). The latter enables individuals who want the convenience of an OBI formulation without a wearable device. It figures to grab market share from both PFS and OBI units.

In other words, there are only three products that can compete with PFS formulations on convenience: Neulasta Onpro, Udenyca AI, and Udenyca Onbody.

The Udenyca franchise ended September 2023 with 16.5% market share across all pegfilgrastim units sold, although limited insurance coverage for Udenyca AI kept it from making meaningful contributions. The duo should easily power the franchise to more than 20% market share in 2024. If and when Udenyca Onbody launches and ramps, then investors can expect the franchise to grab at least 40% market share.

Importantly, the franchise's revenue shouldn't dip below $150 million per year (vs. full-year 2023 revenue of roughly $127 million) once all three products are fully available. The value of the Udenyca franchise will shift from growth to stable cash flow, but sales have almost certainly bottomed.

Why Should Investors Remain Grounded?

Amgen owns a pretty hefty patent estate. Coherus BioSciences might be able to navigate it, but it won't be easy.

For example, U.S. patent 9,061,097 B2 covers the primary mechanics of a drug delivery device and specifically mentions a pegylated GCSF (meaning pegfilgrastim). This is considered a foundational patent, which is the trickiest to circumnavigate. I'm an inventor on the foundational patents for a conformal filter in hyperspectral imaging, which covers everything from airport security cameras to explosive detection at warzone checkpoints to smartphone bedbug detectors.

Patent '097 isn't the only patent. It's possible Coherus BioSciences can mount a successful defense, but a likely legal challenge by Amgen injects a significant amount of uncertainty. The statistical fog complicates any attempt to model the performance of Udenyca Onbody, which is why Solt DB Invest simply assumes it won't contribute its first dollar of revenue until 2025.

There are simpler outcomes. For example, Amgen could mount a legal challenge with the sole intent of wrestling royalties out of Coherus BioSciences. The company already pays royalties to Amgen for Udenyca (expiring soon), as well as to AbbVie for Yusimry, Roche for Cimerli, and others.

Coherus BioSciences has publicly argued Udenyca Onbody is novel and proprietary. For example, the new on-body medical device invented by the company administers pegfilgrastim in five minutes. Neulasta Onpro requires 45 minutes to administer treatment. That's a significant and meaningful difference.

For now, it simply doesn't make sense to assume a frictionless launch and ramp as the base case for the product.

Margin of Safety & Allocation

Coherus BioSciences is considered a Growth (Quality) position. The current modeled fair valuation for the company based on our 2023 model is below:

• Market close December 26: $2.18 per share
• Modeled Fair Valuation: $13.15 per share
• Allocation Range: Up to 15%

Coherus BioSciences reported 111.364 million shares outstanding as of October 31, 2023. The modeled fair valuation above assumes 116.932 million shares outstanding, which is equivalent to 5% dilution.

Further Reading

• December 2023 press release announcing FDA approval of Udenyca Onbody
• October 2023 press release announcing resubmission of BLA for Udenyca Onbody
• September 2023 press release announcing CRL for Udenyca Onbody
• August 2022 research note describing our analysis of the intellectual property landscape for Udenyca OBI / Onbody and Neulasta Onpro