Q3 2019 Earnings Call
And as a reminder, this conference call is being recorded I would now like to turn the call over to David Arrington, Vice President of Investor Relations in Corporate Affairs. Please go ahead Sir.
Operator: This conference call is being recorded. I would now like to turn the call over to David Errington, Vice President of Investor Relations and Corporate Affairs. Please go ahead, sir.
David Errington: Thank you, Julianne, and good afternoon, everyone. After the close of the market today, we issued a press release on the third quarter financial results. This release can be found on the Coherus Biosciences website. Joining me for today's call will be Dennis Lanfear, Coherus CEO; Dr. Jean Baret, Chief Financial Officer; Jim Hazzard, SVP of Commercial; and Thomas Fitzpatrick, Chief Legal Officer. Before we begin our formal remarks, I would like to remind you that we will be making forward-looking statements with respect to product development plans, all of which involve certain assumptions, risks, and uncertainties that are beyond our control and could cause actual results to differ from these statements. A description of these risks can be found in our most recent filings with the SEC. In addition, Coherus Biosciences does not undertake any obligation to update any forward-looking statements made during this conference. I will now turn the call over to Denny.
Thank you Julie and good afternoon, everyone. After close of market today, we issued a press release on the third quarter financial result, this release can be found on the Coherus Biosciences website.
Joining me for today's call will be done you inferior go here CEO .
Dr., John Bray, Chief Financial Officer, Jim Hazard SVP of commercial.
Thomas its Patrick Chief legal officer.
Before we begin our formal remarks I would like to remind you that we'll be making forward looking statements with respect to product development plans all of which involves certain assumptions risks and uncertainties that are beyond our control and could cause actual results to differ from these statements.
A description of these risks can be found on our most recent filings with the FCC.
In addition, Coherus biosciences does not undertake any obligation to update any forward looking statements made during this call.
I'll now turn the call over today.
Dennis M. Lanfear: Thank you, David, and welcome everyone to our QC earnings call. Today, we'll cover four broad areas for you. First, we'll review for you the Q3 2019 Udenica results, which saw the company achieve a 20% unit market share, one quarter ahead of guidance, and we expect to see additional growth in Q4.
Thank you David and welcome everyone to our Q3 earnings call today will cover for broad areas for you.
First I will review for you. The Q3 2019, you done a good results, which saw the company achieved 20% unit market share one quarter ahead of guidance and we expect to see additional growth in Q4.
Dennis M. Lanfear: Secondly, we'll discuss our ophthalmology licensing agreement that we announced today, which signals the initiation of the commercial phase of our ophthalmology franchise in preparation for a 2021 launch. With respect to that, we will discuss the rationale and benefits of the agreement. Further, we will describe the similarities between the ophthalmology and oncology markets and why we believe these two therapeutic areas are synergistic with respect to our existing commercial infrastructure. I have with me today our CSPP of Commercial, Mr. Jim Hazard, who will walk you through the commercial case for ophthalmology and provide some additional color. Third, we'll make some remarks regarding the company's inflammation portfolio and CHS1420, our Humira Bous. After that, we'll turn the call over to our Chief Financial Officer, Dr. Jean Baret, who will review our quarterly and year-to-date financial performance. And then lastly, we will provide you with a key takeaway summary before, of course, going to the Q&A. Now, I'll let Mr. Hazard review for you the Udenica progress in Q3.
Secondly, we will discuss our ophthalmology licensing agreement that we announced today.
Which signals the initiation of the commercial phase of our ophthalmology franchise in preparation for a 2021 launch.
With respect to that we will provide the rationale and benefits through the agreement.
Further we will describe the similarities between ophthalmology and oncology markets and why we believe these two therapeutic areas are synergistic with respect to our existing commercial infrastructure.
I have with me today, our since VP of commercial Mr., Jim Hazard, who will walk you through the commercial case in ophthalmology and provide some additional color.
Third we'll make some remarks regarding the company's inflammation portfolio and CHS 14, 20 are Humira biosimilar.
After that we'll turn the call over to our Chief Financial Officer, Dr. jump right.
Who will review, our quarterly and year to date financial performance.
And then lastly, we will provide you with a key take away summary, before of course going to the Q in there.
Now I'll, let Mr. Hazard review for you you done a good progress in Q3 Jim.
Jim Hazzard: Jim?
Jim Hazzard: Thank you, Denny. As Denny mentioned, we reached our 20% unit share in the last weeks of the third quarter. We continue to be disciplined in competitive contracting, as demonstrated by the evolution of the Udenica average selling price. Quarter over quarter, the Udenica average selling price declined by only about 3%, consistent with the average selling price decline of approximately 2% for new last year.
Thank you Denny.
Ginny mentioned, we reached our 20% unit share in the last weeks of the third quarter.
We continue to be disciplined in competitive contracting as demonstrated by the evolution of the you deneke average selling price quarter over quarter, you Deneke average selling price declined by only about 3% consistent with the average selling price decline of approximately 2% for now.
Last.
Jim Hazzard: Udenica's share growth in the third quarter resulted from penetration into both NuLasta OnPro and NuLasta pre-filled syringe segments. We believe the formula for Udenica's success lies in our approach to branded biosimilars. The marketplace continues to value certainty of supply and patient and provider services. Therefore, opportunity continues to lie within all three key segments. 340B Hospitals, Non-340B Hospitals, and Oncology Community Clinics. And there is opportunity in both accounts that have already adopted Udenica and those that have not yet initiated utilization. I would also note that we have seen growth in the overall Peg-Fulgraston marketplace, suggesting that biosimilar entrants have increased patient access. Denny, back to you.
Your deneke share growth in the third quarter resulted from penetration into both Neulasta Onpro and Neulasta Prefilled syringe segments.
We believe the Formula for your Deneke success lies in our approach to branded bio similars. The marketplace continues to value certainty of supply and patient and provider services.
Opportunity continues to lie within all three key segments 340 be hospitals, non 340 be hospitals and oncology community clinics.
And there is opportunity in both accounts that have already adopted you deneke and those that have not yet initiated utilization.
I would also note that we have seen growth in the overall pegfilgrastim marketplace, suggesting that bio similar entrants have increased patient access dating back to you.
Dennis M. Lanfear: Thanks, Jim. Now, let me make a few remarks about our ophthalmology franchise. As you see in today's press release, we have concluded a license agreement for the leading U.S. Lucentis Biosimilar product candidate, enabling the company to have a Q4 2019 VLA filing and a planned 2021 product launch. We believe there are a number of compelling reasons for executing the deal at this time, which I'd like to review for you now.
Thanks, Jim now, let me make a few remarks about her ophthalmology franchise.
As you see in today's press release, we have concluded license agreement for the leading U.S. Lucentis Biosimilar product candidate.
Enabling the company to have a Q4 2019, CLA filing and a planned 2021 product launch.
We believe there are a number of compelling reasons for executing the deal at this time, which I'd like to review for you now.
Dennis M. Lanfear: First, this transaction effectively pulls forward our previous Lucentis Biosimilar timeline by approximately two years, allowing us to play a key role in the market formation for the first Antibes VEGF ophthalmology biosimilar. Secondly, a Lucentis biosimilar enjoys a relatively low manufacturing cost of goods as a result of monthly dosing intervals and the relatively small amount of protein injected per dose. This translates into an attractive gross margin. Additionally, the competitive set and ultimate number of market entrants is expected to be relatively limited.
First this transaction effectively pull sport our previous Lucentis biosimilar timeline by approximately two years, allowing us to play a key role in the market formation for the first anti that Jeff Ophthalmology Biosimilar.
Secondly.
Lucentis Biosimilar enjoys a relatively low manufacturing cost of goods as result of monthly dosing intervals and the relatively small amount of protein injected per dose.
This translates to attractive gross margins.
Additionally, the competitive set an ultimate number of market entrance is expected to be relatively limited.
Dennis M. Lanfear: Given the technical complexity of these molecules and the development challenges. Finally, given our own Lucentis Biosimilar efforts with CHS 3351, we are able to fully leverage our existing analytical platform and in-house clinical regulatory expertise to support the filing and approval of this product. On the financial side, this transaction saves well over $150 million in projected development spending over the next few years and allows us to sharply focus our in-house development efforts on our own wholly-owned ILEA BioSciences. Most importantly, we view this transaction as highly transformative by adding not only a second product to our near-term commercial portfolio but accelerating the launch of a second therapeutic area for the company. $6 billion anti-VEGF ophthalmology market, which is even a larger product category than the current $4 billion Udenica. With all that being said, I'll now allow Mr. Hazard to discuss the Lucentis Biosimilar commercial case in more detail.
Given that technical complexity these molecules and the development challenges.
Finally, given our own Lucentis biosimilar efforts with CHF 30 351.
We are able to fully leverage our existing analytical platform and in house clinical regulatory expertise to support the filing an approval of this product.
On the financial side. This transaction say, it's well over 150 million in projected development spending over the next few years and allows us to sharply focused our in house development efforts on our own wholly owned I leave a biosimilar.
Most importantly, we view this transaction is highly transformative by adding not only a second product to our near term commercial portfolio, but accelerating the launch of a second therapeutic area for the company.
6 billion dollar anti VEGF ophthalmology market, which has even a larger product category than the current 4 billion dollar you've done a good market.
With all that being said I will now allow mr. hazard to discuss Lucentis biosimilar commercial case in more detail.
Jim Hazzard: Thanks, Denny. There are three primary reasons why we believe the ophthalmology market is commercially compelling. First, the Lucentis market is approximately two billion dollars, a subset of the broader anti-VEGF market for severe retinal disease, which itself is greater than six billion dollars in the United States. We believe the primary differentiator between Lucentis and ILEA is the dosing regimen, monthly versus bimonthly.
Thanks Denny.
There are three primary reasons why we believe the ophthalmology market is commercially compelling first lucentis market is approximately $2 billion a subset of the broader anti VEGF market for severe retinal disease, which itself is greater than $6 billion in the United States.
We believe the primary differentiator between Lucentis and I Leah is the dosing regimen monthly versus bimonthly.
Jim Hazzard: It is a differentiation of convenience that lower cost might overcome. Secondly, in the United States, treatment of retinal disease follows the buy-and-bill model, analogous with the business model for oncology. We believe it is an ideal opportunity to leverage our commercialization competencies. We plan on applying the same winning strategy for our Lucentis Biosimilar in ophthalmology as we did for Udenica in oncology. This includes the internal platform that we've developed, including Coherus Complete, contracting capabilities, and proven commercial analytics infrastructure. It also includes our payer infrastructure, both at the national and regional level, which has been a key component of our Udenica success story. This is critical, as we expect payers to be pro-biosimilar in this ophthalmology space, especially Medicare, which pays for 65% of ophthalmology care with favorable demographics.
It is a differentiation of convenience that lower cost might overcome.
Secondly, in the United States treatment of retinal disease follows the buy and Bill model analogous with the business model for oncology. We believe it is an ideal opportunity to leverage our commercialization competencies. We plan on applying the same winning strategy for our Lucentis biosimilar in.
Ophthalmology as we did for you deneke in oncology.
This includes the internal platform that we've developed including Coherus complete our contracting capabilities and our proven commercial analytics infrastructure.
It also includes our peer infrastructure, both at the National and regional level, which has been a key component of our you Deneke success story.
This is critical as we expect payers to be pro Biosimilar in this ophthalmology space, especially Medicare, which pays for 65% of ophthalmology lives with favorable demographics.
Dennis M. Lanfear: Third and finally, the ophthalmology market is four times more concentrated than the Peckfield-Grastham market. Approximately 90% of Lucenta sales are driven by only 450 accounts. By comparison, approximately 2,000 accounts drive 90% of Pegg-Filgrastom sales. This means we anticipate leveraging our current sales infrastructure, requiring modest additional resources. Denny? Thank you.
Third and finally, the ophthalmology market is four times more concentrated the pegfilgrastim market.
Approximately 90% of incentive sales are driven by only 450 accounts by comparison approximately 2000 accounts drive 90% of Pegfilgrastim sales. This means we anticipate leveraging our current sales infrastructure.
Requiring modest additional resources.
Denny.
Dennis M. Lanfear: Thank you, Jim. We'll be happy to take additional questions during the Q&A. Now let me make a few remarks about our information franchise. The company's third therapeutic area is, as you know, inflammation, where we expect to launch our CHS1420 Humira Biosimilar in mid-2023, alongside others, into a $15 billion market. We believe we can gain significant market share with a targeted strategy against certain segments, leading to $500 million to $1 billion in top line sales in subsequent years. This space, this therapeutic area, has been the subject of egregious price increases over the past decade, with annual patient costs increasing four to five times since launch. This makes this particular therapeutic area attractive for biosimilar adoption and the realization of savings for patients and the overall health care system. Similarly to oncology and ophthalmology, inflammation decision makers are relatively concentrated.
Thank you John we'll be happy to take additional questions. During the Q in a now let me make a few remarks about our inflammation franchise.
The company's third therapeutic area is as you know inflammation, where we expect to launch our CHF 14, 20, Humira Biosimilar in mid 2023, alongside others into a $15 billion market.
We believe we can gained significant market share with a targeted strategy against certain segments.
Leading to 500 million $2 billion and topline sales in subsequent years.
This space. This therapeutic area has been a subject of agreed as price increases over the past decades with annual patient costs, increasing four to five times since launch.
This makes this particular therapeutic area attractive for Biosimilar adoption and the realization of savings for patients and the overall health care system.
Similarly to oncology and ophthalmology inflammation decision makers are relatively concentrated therefore conforming to our existing commercial footprint requirements and infrastructure.
Jean Baret: Therefore, conforming to our existing commercial footprint requirements and information, the company plans to file the BLA for CHS 1420 in 2020, in support of the mid-2023 launch, and we'll have further comments about this on future calls. I'd like to point out one further development in our information portfolio. Today, we announced that Coherus and Pfizer have entered into a license and settlement agreement relating to patents and applications for patents directed to the Adalimab formulation. With that, I'll let the company's Chief Financial Officer, Dr. Jean Baret, review the quarterly and year-to-date financial... Thank you, John.
The company plans to file to be lay for CHS 14, 20, and 2020 and supported the mid 2023 launch and we'll have further comments about this on future calls.
I'd like to point out one further development and our inflammation portfolio today, we announced that coherence and Pfizer have entered into a license and settlement agreement relating to patents and applications for patent directed to add a little mab formulations.
With that I'll, let the company's Chief Financial Officer, Dr., John Bray review, the quarterly and year to date financials John .
Jean Baret: Thank you, Denny. I will now review the main financial results for our third quarter since we launched Udenica. Net product revenue for the third quarter of 2019 was $111.7 million. This represents an annual run rate of nearly $450 million. Cost of goods sold for the third quarter of 2019 was $6.4 million, resulting in a gross profit margin of 94% for the third quarter. Research and development expense for the third quarter of 2019 was $21.6 million compared to $31.6 million for the same period in 2018. R&D expenses for the nine months ended September 30, 2019 were $59.2 million as compared to $83.6 million for the same period in 2018. The decrease in R&D expense in both periods was primarily due to the capitalization of Udenica manufacturing costs since the approval of Udenica on November 2, 2018, and a decrease in costs related to impairment losses, facilities, supplies, and materials.
Thank you Denny.
Ill now review the main financial results for our third quarter since we launched good any kind of.
Net product revenue for the third quarter of 2019 was $111.7 million. This represents an annual run rate nearly $450 million.
Cost of goods sold for the third quarter of 2019 was $6.4 million, resulting in a gross profit margin of 94% over third quarter.
Research and development expense for the third quarter, 2019 was $21.6 million compared to $31.6 million over same period in 2018 R&D expenses for nine months ended September 32019 were $59.2 million as compared to 83 point.
$6 million over some period in 2018.
The decrease in R&D expense in both periods was primarily due to the capitalization of should that he can manufacturing costs since the approval of bidding on November two 2918, and a decrease in cost related to impairment loss facilities supplies and materials.
Jean Baret: Selling, General, and Administrative Expense for the third quarter of 2019 was $31.8 million as compared to $25.4 million for the same period in 2018. SG&A Expense for the nine months ended September 30, 2019 was $101 million as compared to $60.3 million for the same period in 2018. The increase in SG&A expense in 2019 was primarily attributable to the costs related to commercializing Udenica in the United States, which included personnel and third-party services costs for commercial and marketing initiatives.
Selling general and administrative expense over third quarter of 2019 was $31.8 million as compared to $25.4 million most impurity 2018.
Gionee expense for nine months ended September 32019 was $101 million as compared to $60.3 million, who is impaired in 2018.
The increase in SGN expense in 2019 was primarily attributable to the costs related to commercializing new Denny tuck in the United States, which include personnel and third party services cost for commercial and marketing initiatives.
Jean Baret: Overall, operating expenses excluding cost of sales were $53.4 million for the third quarter. Cash equivalents and investments in marketable securities for the third quarter totaled $170.5 million at September 30, 2019, as compared to only $111.9 million at June 30, 2019, a more than 50% increase in balance. Cash flow from operations year-to-date is $10.6 million. Cash flow from operations for the third quarter of 2019 stood at nearly $55 million. The income attributable to the company for the third quarter of 2019 was $47 million, or $0.63 per share on a fully diluted basis, compared to a net loss of $58.8 million, or
Overall.
Operating expenses, excluding cost of sales were $53.4 million for third quarter.
Cash cash equivalents and investments in marketable securities over third quarter totaled $170.5 billion at September 32019, as compared to only on an $11.9 million at June 32019, or more of and 50% increase in balances.
Cash flow from operations year to date is $10.6 million cash flow from operations for three quarter for the third quarter of 2019 stood at nearly $55 million.
Net income attributable to the company from a third quarter of 2019 was $47 million or 63 cents per share on a fully diluted basis compared to a net loss of $58.8 million art.
Dennis M. Lanfear: A loss of 87 cents per share on a basic and fully diluted basis for the same period in 2018. Now, I would like to turn the call back to Denny for his concluding remarks.
The loss of 87 cents per share on a basic and fully diluted basis for same period in 2018, now I would like to turn the call back to Denny for his concluding remarks.
Dennis M. Lanfear: Thanks, JB. Let me make a few points in summary before we go to the Q&A. We believe the company is firing on all cylinders as we continue to deliver on our strategic objectives. First, we have achieved solid financial results, including gaining 20% unit market share for Udenica earlier than expected. We are generating significant cash, which you are now able to strategically allocate towards ophthalmology and other areas, which will leverage the value of our platform and expand our franchises in the future. We expect to see modest investment in our infrastructure that will not greatly impact our cash flow profile.
Thanks, JV, let me make a few points in summary, before we go to the Q and eight.
We believe the company's firing all cylinders as we continued to deliver on our strategic objectives.
First we have achieved solid financial results, including gaining 20% unit market share for you deneke earlier than expected.
We are generating significant cash, which are now able to strategically allocate towards ophthalmology and other areas, which will leverage the value of our platform and expand our franchises in the future.
We expect to see modest investment in our infrastructure that will not greatly impact our cash flow profile.
Dennis M. Lanfear: Lastly, we have completed our first significant in-licensing deal, providing the company with a near-term revenue catalyst in a second therapeutic area. The company's track record in biosimilar commercialization has made us an attractive potential partner, and our deal flow is moving faster than previously expected. In fact, it appears to us that there are more high-quality opportunities available than there are companies capable of successful biosimilar commercialization in the United States. We believe it is prudent and opportune to invest the cash generated from our commercial operations into additional external product growth opportunities that complement our internal program. We will update you on subsequent calls as we advance our strategic objectives of delivering long-term sustainable growth while providing savings to the healthcare system and increasing patient access. And with that, we're happy to go to the Q&A. David
Lastly, we have completed our first significant in licensing deal providing the company near term revenue catalyst in a second therapeutic area.
The company's track record and Biosimilar commercialization has made us an attractive potential partner and our deal flow is moving faster than previously expected.
In fact, it appears to us that there are more high quality opportunities available than there are companies capable of successful biosimilar commercialization in the United States.
We believe it is prudent and opportune to invest the cash generated from our commercial operations into additional external product growth opportunities that complement our internal programs.
We will update you on subsequent calls as we advance our strategic objectives of delivering long term sustainable growth, while providing savings that health care system and increasing patient access.
With that we're happy to go to the clean a.
David.
Thank you operator, Julian would you like to.
Thank you I'd like to ask a question at this time. Please press star followed by the number one on your telephone keypad. If you would like to withdraw your question. Please press the pound Keith will pause for just a moment to compile the kuni roster.
Operator: Thank you, Operator. Julian, would you like to...
Your first question comes from Chris Schott from Jpmorgan. Your line is open.
Operator: If you would like to ask a question at this time, please press star followed by the number one on your telephone keypad. If you would like to withdraw your question, please press the pound key. We will pause for just a moment to compile the Q&A roster. Your first question comes from Chris Schott from J.P. Morgan. Your line is open. Good.
Great. Thanks, very much for the questions and congrats on the transaction today.
My first question was just on the Lucentis opportunity can first of all just is there any IP issues. We have to think about on this opportunity or is this a pretty certain kind of timeline as we think about the 2021 launch.
Thanks for your question there, Chris I'll, let Tom Fitzpatrick to companies Chief legal officer answer that time.
Chris. Thank you, there's no unique IP issues or anything that's the special too.
Christopher Thomas Schott: Thanks very much for the questions and congratulations on the transaction today. My first question was just on the Lucentis opportunity. First of all, are there any IP issues we have to think about with this opportunity, or is this a pretty certain kind of timeline as we think about the 2021 launch?
This this portfolio so I'm not sure.
What you mean.
Now, let's say.
Yes.
Okay, Chris internally I think internally I think our view is that the.
The intellectual property.
Profile these centers, it's probably.
More constrained than other biosimilars.
Times Ben so.
Tom Fitzpatrick: Thanks for your question there, Chris. I'll let Tom Fitzpatrick, the company's chief legal officer, answer that. Tom?
We feel there for that Theres.
Good strategy legal strategy going forward with the legal of course, we won't comment on but I would I would think I would characterize that as.
Tom Fitzpatrick: Chris, thank you. There are no unique IP issues or anything that's special to this portfolio, so I'm not sure what you mean.
As well constrained as opposed to.
Other products, which you know which had more vigorous activity. Okay. Perfect and then my second question just on Lucentis or just me a broader question is just on R&D spending it seems like this obviously pulls forward your launch and saves quite a bit of development cost just help me think a little bit about how I should be thinking about R&D spending going forward and when we should be thinking about.
Dennis M. Lanfear: I was going to say, J. J. J.
Christopher Thomas Schott: Chris, in general, I think our view is that the intellectual property profile of the incentives is probably more constrained than other biosimilars have sometimes been. So we feel therefore that there's a good strategy, legal strategy going forward with the regulatory, of course, we will comment on. But I would think I would characterize it as too constrained as opposed to other products, which you know, which have more vigor.
With that.
The idea ramp up but just in general, but R&D spend at the company.
And like I can comment specifically about the.
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Ilias spend for R&D. So we we have circled about the same 150 million for I Elliot spread over approximately three years across manufacturing clinical process validation lots preparation for commercialization and filing.
Dennis M. Lanfear: I can comment specifically about the ILEA spend for R&D. We have circled about $150 million for ILEA spread over approximately 3 years across manufacturing, clinical, process validation lots, preparation for commercialization, and filing. So that $150 million allocation would have been similarly distributed across Lucentis. But that's one way to look at it. That is the one program that we expect, and we can see, will go into Phase 3 over the next year or two.
So that 150 million allocation I would have been similarly distributed across lucentis, but thats one way to look at it that is the one program that we expect it we can see will go into phase threes over the next year to.
Dennis M. Lanfear: And then just my final question, just pivoting to the Udenica opportunity, maybe just update expectations of where you expect share to be as you exit 2019, and should we be able to think about further share gains for that product in 2020 with another competitor coming in the space?
Perfect and then just my final question, just pivoting to that the the.
Seneca opportunity, maybe just updated expectations of where you expect share to be as you exit 2019 and should be able to think about further share gains for that product in 2020 with another competitor coming in the space.
Dennis M. Lanfear: Yeah, we haven't revised our guidance for 2019. We would expect to provide additional guidance on 2020 on our Q4 call, which will probably happen sometime around February 2020. We can say we expect to see continued growth in Q4 with Udenica. I think it's going very well, and I think that we have previously signaled what our thoughts are about 2020, which was 20% or greater growth. So overall, we are pleased with the way the Udenica story is shaping up. Great Thanks so much.
Yes, we haven't revise our guidance for for 2019, we would expect to provide additional guidance on 2020 on our Q4 call, which will probably happen sometime around February 2020, we can say, we expect to see continued growth over Q4 with you Deneke think it's going very well.
And I think that we have a previously signal what our thoughts are about 2020, which was 20% or greater growth. So overall, we are pleased with the with you Deneke story is shaping up.
Great. Thanks, so much.
Your next question comes from Douglas Tsao from H.C. Wainwright. Your line is open.
Douglas Dylan Tsao: Your next question comes from Douglas Tsao from H.C. Wainwright. Your line is open. Hi, good afternoon, and thanks for taking the questions. Just, you know, maybe a little perspective on how you think the new competitor might affect the marketplace. Are there sort of strategies that you've put in place and think about defending the share that you've already captured? And, you know, in terms of Jim's comment that you've seen the PEG-Philgraston market grow, do you think that's come at the expense of the short-acting Philgraston market, which seems to have sort of, you know, kind of flattened recently?
Hi, good afternoon, and thanks for taking the questions just.
Maybe a little perspective on how you think the new competitor might affect the marketplace are there sort of strategies that youve put in place and think about defending the share that you've already captured and you know in terms of Jim's comment that you've seen the pegfilgrastim market grow.
Do you think that's common at the expense of of the truth of the short acting filgrastim market, which seems to a sort of.
Kind of flattened recently.
Jim Hazzard: I'll let Mr. Hazard address those two questions, Jim. Maybe you want to take the first and last one first.
Yes, I'll, let mr. hazard to address those two questions Jim maybe you want to take the.
The first the last one for Okay short acting yeah, you bet. Thanks.
Jim Hazzard: Yeah, you bet. Thanks, Doug.
Jim Hazzard: So, in terms of growth of PEG-filgrastim, we think that maybe it's a function of not necessarily the short-acting but actually additional patients within the PEG-filgrastim space. That's either due to clinical practice, or it could be perhaps also just in terms of cost and payers loosening up things a little bit. In terms of additional competition, again, I'll remind you that we always expected additional competitors in this space, and our models have always assumed that Sandos would launch. I will remind you that, again, Amgen still maintains 75 percent of the market share, so that's where we expect Sandos to go. We have put in place some mechanisms to defend the current share that we have, and we do believe that the value proposition that we've established will continue to be a competitive advantage for us in terms of, again, our supply, the service offering that we provide, as well as our contracting and pricing.
In terms of.
Growth of Pegfilgrastim, we think that maybe its a.
Function of not necessarily the short acting but in fact additional patients within the Pegfilgrastim space.
Thats, either due to perhaps clinical practice or it could be perhaps also just in terms of cost and payers loosening up things a little bit.
In terms of additional competition.
Again, I'll remind you that we always expected additional competitors in this space.
And our models have always assume that sandoz would launch.
I will remind you that again amgen still maintain 75% of the market share. So that's where we expect sandoz to go.
We have put him in the in place some some mechanisms to defend the current share that we have.
We do believe that our value proposition.
We've established will continue to be a competitive advantage for us in terms of again.
Our supply the service.
Offering that we provide.
Jim Hazzard: Okay.
Douglas Dylan Tsao: Okay, great. And then just one final question, Denny, maybe if you could provide a little bit of context around the settlement with Pfizer and a little bit of background on, you know, where that sort of origination of that came from, and are there meaningful financial implications for the company?
As well as our contracting and pricing.
Okay, Great and then just one final question Danny maybe if you could provide a little bit of context around the settlement with Pfizer.
And a little bit little background of where that.
The.
Origination of that and our they're meaningful financial implications for the company.
Dennis M. Lanfear: Yeah, let me let Tom handle that.
Yes, let me, let me, let Tom handle that.
Tom Fitzpatrick: Thank you.
Thank you.
Tom Fitzpatrick: Obviously, the details of the agreement are confidential, but I think what I can say is that we've always believed in the value of our portfolio, and we will continue to look for opportunities to monetize that portfolio. So, I mean, I wasn't aware of the litigation; should we presume that you are in conversations with potentially other companies developing biosimilars to add a little MIMAB? We don't want to comment on any conversations that we're having. But suffice to say, as I mentioned, we will continue to look for opportunities to monitor. And is there anything meaningful in this agreement?
Obviously the details of agreement are confidential I think what I can say is that we've always believed in the value of our portfolio and we'll continue to look for opportunities to monetize that portfolio.
So I mean, I wasn't aware of litigation should we presume that yard and conversations with potentially other.
Companies developing biosimilars to add aluminum.
We don't want to comment on on any conversations that we're having with respect to the portfolio but.
As I mentioned, we will continue to look for opportunities to monetize it.
And is there anything meaningful from disagreement.
Tom Fitzpatrick: [inaudible] Again, the details of the agreement are confidential, so we couldn't comment on that. Okay, great. Thank you.
Meaningful.
Financial.
We again with the details of the of the agreement are confidential. So we couldn't comment on that.
Okay, great. Thank you.
Dennis M. Lanfear: Thanks Doug. I just want to make one additional remark. It's pointed out to me I may have misspoken with respect to 2020. The company reiterates its earlier guidance of exiting 2019 at 20% or greater share and having additional growth beyond that for 2020, that is that 20%. Additionally, I would add that we expect further growth in Q4 of 2019, okay? Great.
Thanks, Doug I, just want to make one additional remark I.
Point out to me I may have missed spoken with respect to 2020 the company generates its earlier guidance of exiting.
2019 at 20% or greater share and having additional growth beyond that for 2020 that 20% secondarily I would add that we expect further growth in Q4 2090, okay.
Very well great.
Your next question comes from Mohit Bansal from Citigroup. Your line is open.
Mohit Bansal: Your next question comes from Mohit Bansal from Citigroup. Your line is open. Great, thanks for taking my question and congrats on the deal. Maybe, maybe if, if, if you, Danny, you could comment on the manufacturing readiness of the Lucentis product that you are getting, or who would be manufacturing it? You are the partner here, and could it be a rate-limiting step in terms of filing? And I have a follow-up after that.
Great. Thanks for taking my question and congrats on the deed.
Maybe.
If you see Danny you could comment on the manufacturing readiness off.
You said, despite that you had getting who would be manufacturing jewel box and could it be really fiddling with that in terms of fighting and I have a follow up after that.
Dennis M. Lanfear: At this point, we haven't disclosed the manufacturing strategy for this product, but I would indicate to you that we expect to approach the market with a very similar supply philosophy that was shown to be successful with Udenica. That is, to have robust, high-quality supply, to have very, very good track records with all the regulatory inspections, etc. We'll have subsequent disclosures around manufacturing, I'm sure, but not at this time.
Yes.
At this point Mohit, we havent disclosed the manufacturing strategy for this product, but I I would indicate to you that we expect to approach the market.
With a very similar supply philosophy that was shown to be successful with you deneke that is to have robust high quality supply to have very very good track records with all the regulatory inspections et cetera.
We will have subsequent disclosures around manufacturing I'm sure, but not at this time.
But given that you are filing.
Dennis M. Lanfear: But given that you are filing before this year, do you have it ready at this point? Or do you have to have manufacturing ready at this point before you file?
Q4 this year.
Do you have a journey at this point really.
Sure.
You have to have manufacturing ready at this point.
Yes.
Yes.
Dennis M. Lanfear: Yes, manufacturing. That's correct. Manufacturing has to be ready when one files, and one can expect subsequent inspections upon filing.
Yes manufacturing Thats correct manufacturing.
Manufacturing has to be ready when one files and one can't expect subsequent inspections upon filing.
Mohit Bansal: Golly, very helpful. And then one more follow-up on Udanica. So if I look at the market share exit rates, it seems like your volume, unit share, kind of unit volume grew probably at a 50 to 60 percent rate, but that is not reflected in the dollar increase. Is there a further pricing discount this quarter, or is there some kind of inventory that we are missing, if you can help us understand that part?
Very helpful. And then one more follow up on the Danica.
Look at the market share exit rate.
It seems like you're.
Units shipped kind of unit volume grew probably at 50% to 60% rate.
But that is not reflecting in the diluted.
Please.
Pricing.
Bison discounts this quarter or is there some kind of invented that we had missing if you can help us.
I understand that five.
Jim Hazzard: Yeah, I'll let, let me see, Jim, you're probably the best person to handle that question. Jim Hazzard?
Yes.
Outlet and let me see Jim you're probably the best to handle that question Jim Hazard.
Jim Hazzard: Yeah, well, we'll say, Mohit, that in the last couple of quarters, we have established performance-based rebate contracts within the marketplace, and you can expect those are, you know, the results of those are now rolling into the gross to net. But I will remind you, it's performance-based, so we only pay a rebate when we have sales. That's the strategy, and that's what we're now executing. Again, you know, moving forward, some of the gross to net or revenues will be a little bit lumpy, but again, as Denny said, we continue to expect continued growth.
Yes, we'll see more heat that.
In the latest quarters, we have established performance based rebate contracts within the marketplace.
And you can expect those are the results of those are nail rolling into the gross the gross to net but I will remind you. Its performance based so we only pay a rebate when we have sales.
That's the strategy and that's what we're now executing.
Again, moving forward you know some of the gross to net or the revenues will be a little bit lumpy, but again as Denny said, we continue to expect continued growth and Steve.
Dennis M. Lanfear: The additional point that I would make there, Mohit, as we've said before, with respect to a quarter, you can expect lumpiness month to month and that sort of linear trajectory across months for growth. And similarly, quarter to quarter, you can expect a bit of lumpiness, either for seasonality or buy-ins or other sorts of things. So I think you have to take more of a 50,000-foot view on all these sorts of tra
Yes, the additional points I would make their mohit as we've said before.
With respect to a quarter you can expect lumpiness month to month in that sort of linear trajectory across months for growth and similarly quarter to quarter, you can expect a bit of lumpiness, either for a seasonality or buy ins or other sorts of things. So I think you have to take that more of a 50000 foot view on all these sort of.
Mohit Bansal: God is very helpful. Thank you and congrats on the progress. Otha.
Directories.
Very helpful. Thank you and congrats on the progress.
Mohit Bansal: Oh, thanks Mohit.
Okay. Thanks plant.
Your next question comes from 10 territory from Cowen and company. Your line is open.
Ken Cacciatore: Your next question comes from Ken Cacciatore from Cowan & Company. Your line is open.
Dennis M. Lanfear: Hey guys, just wondering if you could give us some sense of what's going on from a Mylan perspective and their supply situation. I know you don't like to talk about competitors, but it would help us understand, as we go into 2020, maybe how the competitive landscape will evolve. And then on Lucentis, I'm sure Denny, you all know exactly who you think is going to be there and how many.
Hey, guys. Just wondering if you could give us some sense of what's going on from Mylan perspective, and their supply situation. I know you don't like to Cook to talk about competitors, but it would help us understand as we go into 2020, maybe how the evolution of the kind of competitive landscape and then on Lucentis I'm sure. Denny you all know exactly who you think is going to be there.
How many can you give us a little bit more nuance on the evolution of that marketplace. You said, it's going to be obviously, a healthy one but can you give us a sense of how many file of how many potential competitors, who will have there and then lastly, you made an interesting comment about more deals and being a little bit constraints more than you.
Dennis M. Lanfear: Can you give us a little bit more nuance on the evolution of that marketplace? You said it's going to be, obviously, a healthy one, but can you give us a sense of how many potential competitors you will have there? And then lastly, you made an interesting comment about more deals and being a little bit constrained, more than you can handle, I think you said. Can you talk about, is it more just getting outside of different therapeutic areas, meaning having to build kind of a sales force, or give us maybe a little bit of an understanding of what some of the rate-limiting issues would be? Thanks.
Can handle I think is what you said.
Just talked about is it more just getting outside of different therapeutic areas, meaning having to build kind of a sales force or.
Give us maybe a little bit of an understanding of what some of the rate limiting issues would be thanks.
Dennis M. Lanfear: Thanks, Ken. Let me start at the beginning with the supply issues. We don't have visibility into myelin supply capability one way or another. We have no inside confidential information on exactly what is going on.
Thanks, Ken Let me, let me, let me start beginning with the supply issues, we don't have visibility on two mile and.
Supply capability, one way or another we have no inside confidential information on.
Exactly what is going on I believe is what we have done is as you know invest heavily in our own supply chain and our own quality systems to make sure that we have a very robust supply and you are familiar with the fact that we actually launch this product with about 350000 syringes.
Dennis M. Lanfear: I believe what we have done is, as you know, invested heavily in our own supply chain and our own quality systems to make sure that we have a very robust supply. And you are familiar with the fact that we actually launched this product with about 350,000 syringes in stock. And I think that's been a very potent strategy in the market, and that is a value that the market embraces. With respect to your second question and Lucenza's potential market participants, probably at least one other, maybe not a third, biosimilar. I think these are tough molecules to do.
In stock.
I think thats been a very potent strategy in the market and that has a value that the market embraces.
With respect to your second question and new centers potential market participants.
Probably at least one other maybe not a third biosimilar I think these are tough molecules to do.
Dennis M. Lanfear: There's been additional announcements in the space, you know, so far to date with that. But this isn't an area where we'd see three or four market entrants, I do not believe. I think it's going to be somewhat constrained. And what we want to communicate here is that we think that we can do fairly well in this market given its similarity to the oncology market, the way that it's structured, its buy-and-build nature, the way that our infrastructure is structured and really put together to match those needs. And so we think that we'll be able to put our best foot forward as we go forward.
There has been additional announcements in the space so far to date with that but this isn't an area, where we'd see three or four market entrants I do not believe I think it's going to be somewhat constrained and I think in what we want to communicate here as we we think that we can do fairly well in this market.
Given its similarity to the oncology market the way that it's the way that it's structured its buy and bill nature. The way that our infrastructure is structured and really put together.
To match those needs and so we think that will have.
Be able to put our best foot forward as we go forward and I think it's very important to be near the front. So you can participate in market formation.
Ken Cacciatore: Great, congrats on all the progress.
Great. Congrats on the last product with the left with your last question with respect to deal flow.
Dennis M. Lanfear: With respect to your last question with respect to deal flow, I think that we've seen a lot of potential deal flow come our way. Certainly, Udenica has been the benchmark for the highest performing biosimilar launch. And to have that come from a small company and be able to do as well as we have in the first year, I think demonstrates that, as we've said before, the best way to be successful in the biosimilar business is to be a biosimilar company. So folks have come forward, unsolicited or not, with their biosimilars for us in various areas, in oncology or ophthalmology or even other areas, and we' So I think, number one, our commercialization competence and expertise are broadly recognized.
So I think that we've seen a lot of potential deal flow come our way certainly.
You Deneke has been the benchmark highest performing biosimilar launch and have that come from a small company and be able to do as well as we have in the first year I think it demonstrates that as we've said before that the best way to be successful in the Biosimilar business is to be a biosimilar company. So folks have come forward on sling.
They're not with are about somewhere as far as in various areas.
College, GE or ophthalmology or even other other areas and we've taken a look at those.
So I think number one our commercialization competency and expertise is broadly recognized but number two as we said theres more potential deals that then there are companies, who can potentially successfully commercialize them because I think bio similars are difficult and take specialized expertise.
Dennis M. Lanfear: But number two, as we said, there are more potential deals than there are companies. The other remark that I made to give you a little more color on, you know, we said that deal flow is moving faster than expected. I probably, you know, six months ago when we first started talking about our desire to do additional deals for the pipeline, I probably would not have guided you to completing the deal within three or six months, as we managed to do here. But I think we're very pleased with the deal flow, very high-quality deal flow, and so we'll keep you informed on the calls. We won't say too much, if anything at all, before those deals are done, but I think that we're busy over here with the deal.
The other direct I made to give you little more color on we said that deal flow is moving faster than expected.
I probably.
Six months ago, we first started talking about our desire to do additional deals for the pipeline I, probably would not have guided of completing the deal within three or six months as we managed to do here.
But I think we're very pleased with the deal flow very high quality deal flow and so we'll keep you informed the calls we won't say too much if anything it all before those deals are done, but I think that were busy over here with the deals.
Your next question comes from Michael is from Baird. Your line is open.
Michael Thomas Nedelcovych: Your next question comes from Mike Old from Baird. Your line is open.
Michael Thomas Nedelcovych: Hey guys, thanks for taking the question and congrats on all the progress as well. And just with respect to the in-licensed Lucentis Biosimilar, you mentioned launching in 2021. Should we be thinking early 21? They're just considering that the BLA is going to be filed by the end of this year. I'm just trying to get a sense of whether there are other factors here other than approval that will sort of determine the timing of the launch.
Hey, guys. Thanks for taking the question and congrats on the progress as well.
Thanks for letting for spec.
Then just with respect to the in licensed Lucentis Biosimilar.
You mentioned launching in 2021 should we be thinking early 21.
They're just considering the BLM is going to be filed by the end of this year.
Im just trying to get a sense of are there other factors here other than approval that will sort of determine the timing as.
Dennis M. Lanfear: Thanks. Well,
Well.
Dennis M. Lanfear: It's, of course, a good question. If I had a little more granularity for you, I may be tempted to offer it. I would say that we're going to launch this product as early as we can in 21. It was identified by the company on the last call and the call before that 21 represents the midpoint between the 2019 launch of Udenica and the 2023 launch of our Humira biosimilar, both of which are substantial product opportunities. As you know, as we said, we were targeting 21, and the message we're conveying here is that we feel we've hit that bogeyman, and we think that's very important in providing continued growth for our investors.
It's a it's of course a good question if I had a little more granularity for you.
May be tempted to offer it.
I would I would say the re launch this product as early as we can in 21. It was identified by the company on the last call the called for that 21, representing the midpoint between the 2019 launch of you Deneke 2023 launch of our Humira Biosimilar, both of which are substantial.
Product opportunities. So as you know as we said we were targeting 21 and the message. We're conveying here as we feel we've hit that bogey and we think thats very important in providing very continued growth.
Michael Thomas Nedelcovych: Got it. Thanks.
For our investors.
Michael Thomas Nedelcovych: Thank you, Mike.
Got it thanks.
Salim Qader Syed: Your next question comes from Salim Syed from Mizuho Securities. Your line is open.
Thank you Mike.
Your next question comes from Liam said from Mizuho Securities. Your line is open.
Hey, guys. Thanks for taking my question Congrats on the progress just one for me Denny on just kind of higher level I think Oh I think there were some investors who are thinking that if you were going to do some M&A it would be more down the oncology path and not the ophthalmology path I was just thinking.
Salim Qader Syed: Hey guys, thanks for taking my question and congrats on the progress. Just one for me, Denny, on a kind of higher level, I think there were at least some investors who were thinking that if you were going to do some M&A, it would be more down the oncology path and not the ophthalmology path. So I was just thinking, Was there a reason why you wanted to go down the ophthalmology path? Is there some, is there, or what exactly was your thinking there? Because right now, you only have one drug in oncology, and you could get synergies if you got something else there. Like, what was the exact thinking to go down the ophthalmology route and not do oncology for this first deal? Thank you.
Was there a reason why you wanted to go down the ophthalmology path.
Is there some is there or what exactly where the thinking there because the right now you only have one drug in oncology you could get synergies if you bought something else there, but what was exactly the thinking to go down.
The margin not do oncology for this for steel. Thank you.
Dennis M. Lanfear: Well, I think it's a fair question. I would first say that it's not an either-or proposition. The fact of the matter is we were developing several product licensing opportunities in oncology and product opportunities in ophthalmology. However, for a variety of reasons, this particular product opportunity came to fruition earlier. We're very pleased to be working with BioAcc. We had great chemistry with the team, and great chemistry with the company. I met with them several times, and I think it moved along quite quickly.
Well I think I think it's a fair question.
I would for I would first say that it's not an either or a proposition affect the matter is we were developing several product licensing opportunities.
In oncology and.
Product opportunities in ophthalmology.
For a variety of reasons.
In particular product opportunity came to fruition earlier, we're very pleased to be working with biotech.
Great chemistry with the team.
Great chemistry, with the company met with them several times and I think it moved along quite quickly.
Dennis M. Lanfear: As I indicated, we have not done this at the exclusion of oncology. We remain very focused on oncology and biosimilars in oncology, as a matter of fact. And I wouldn't say too much to lead you on, but I would say that it's an area of a lot of activity for us in the future, and I would probably manage your expectations to say that the next deal you see would be an oncology biosimilar deal of some flavor.
As I indicated we didnt have not done this at the exclusion of oncology, we remain very focused on oncology and bio similar as an oncology as a matter of fact and I Wouldnt say too much the league on but I'd say that it's an area of a lot of activity for us in the future and I would I would probably.
Manage your expectations that the next June see would be an oncology biosimilar deal some flavor.
Salim Qader Syed: Okay, got it. Thanks so much. First across the line, basically. I got it.
Okay got it thanks, so much.
First across the line basically here.
Salim Qader Syed: Got it. Thanks so much, guys. Thank you. We have no further questions, and this will conclude our call. A replay of the webcast will be available on Coherus.com. Thank you, and have a great day.
Got it thanks, so much.
Thank you.
We have no further questions and this will conclude our call a replay of this webcast will be available on Coherus dotcom. Thank you would have a great day.
Thank you.
Yeah.