Q1 2020 Earnings Call

Ladies and gentlemen, thank you for standing buying and welcome to the call Harris Bio Sciences, 2021st quarter Earnings Conference call. My name is Laurie and I will be a conference operator for the call today as a reminder, this conference call is being recorded I wouldn't.

Operator: Ladies and gentlemen, thank you for standing by, and welcome to the Coherus BioSciences 2020 first quarter earnings conference call. My name is Lori, and I will be your conference operator for the call today. As a reminder, this conference call is being recorded. I would now like to turn the call over to David Arrington, Coherus Investor Relations and Corporate Affairs. Please go ahead.

I'd like to trickle over to David Abington, Coherus Investor Relations and corporate Affairs. Please go ahead.

David Arrington: Thank you, Lori, and good afternoon, everyone. After the close of the market today, we issued a press release on our first quarter financial results. This release can be found on the Coherus Biosciences website. Joining me for today's call will be Denny Lanfear, Coherus's CEO; Dr. Jean Baret, Chief Financial Officer; Thomas Fitzpatrick, Chief Legal Officer; and Chris Thompson, Executive Vice President, Sales and Market Act. Before we begin our formal remarks, I would like to remind you that we will be making forward-looking statements, including risks and uncertainties related to the impact of the COVID-19 pandemic on Coherus's business and results of the operation. In addition, other forward-looking statements, such as our plans and expectations with regard to our ongoing commercialization of Udenica, the Product Candidate Pipeline, Product Development Plans, 2020 Financial Projections, and Use of Capital, all involve certain assumptions, risks, and uncertainties that are beyond our control and could cause actual results to differ from these statements.

Thank you Laurie and good afternoon, everyone. After close of market today, we issued a press release on our first quarter financial results.

This release can be found on the Coherus Biosciences website.

Joining me for today's call will be done he lumpier Coherus, a CEO Dr., John Perry Chief Financial Officer, Thomas Patrick Chief Legal Officer, and Chris Thompson, Executive Vice President sales and market access.

Before we begin our formal remarks, I would like to remind you that we'll be making forward looking statements, including risks and uncertainties related to the impact of Kobin 19 pandemic on Coherus his business and results of operation.

Addition, other forward looking statements such as our plans and expectations with regard to our ongoing commercialization of you deneke.

Product candidate pipeline product development plan 2020 financial projection and use of capital all involve certain assumptions risks and uncertainties that are beyond our control and could cause actual results to differ from these statements.

David Arrington: A description of these risks can be found in the earnings press release and our latest SEC disclosure document. Please also note that the non-GAAP financial measures included in our press release should be used to help you understand Coherus' business performance and should not be a substitute for your review of our GAAP financial measures. GAAP to non-GAAP reconciliations are also provided in the earnings press release. I will now turn the call over to Denny.

Description of these risks can be found any earnings press release, and our latest FCC disclosure documents. Please also note that the non-GAAP financial measures included in our press release should be used to help you understand the coherus business performance and should not be a subsystem review.

[laughter] GAAP to non-GAAP Reconciliations are also provided in the earnings press release.

I'll now turn the call over to Denny.

Dennis M. Lanfear: Thank you, David, and welcome everyone to our Q1 earnings call. First, I'd like to thank our frontline providers for all they're doing during this pandemic, and I'd like to acknowledge our internal teams who have so rapidly and effectively adapted to the new environment. Our first quarter performance reflects strong demand for Udenica and continued success in executing on our plan. We increased market share, and we maintained a high gross margin. We continue to make good progress on our core mission and advance our five-year strategy. Today, I will discuss our first quarter performance in our pipeline, and then I will turn the call over to John Marek, the company's CFO, to discuss our financial performance.

Thank you David and welcome everyone to our Q1 earnings call first I'd like to thank our frontline providers for all they're doing during this pandemic and I'd like to acknowledge our internal teams, we have so rapidly and effectively adapted to the new environment.

First quarter performance reflects the strong demand for your Deneke continued success in executing our plan.

We increased market share and we maintained high gross margins.

We continue to make good progress on a core mission and advance our five year strategy.

Today.

I'll discuss our first quarter performance in or pipeline and then I will turn the corner over to me I'll turn the call over to John Moran companies CFO to discuss our financial performance.

Dennis M. Lanfear: We'll then conclude with a few comments on the remaining quarters for 2020, which will include SG&A and R&D guidance for the remainder of the year. Let's review first quarter performance and note where COVID had a modest impact and where it was immaterial. First, let me comment on unit growth in the overall Pikesville-Grafton market. While market dynamics are fluid, overall market unit growth is in the low single digits, notwithstanding COVID, consistent with previous quarters. There are signs around the health care system that various treatments are being temporarily postponed due to the pandemic. As you'd expect, cancer treatment is much less vulnerable than other therapeutic areas to this phenomenon, as cancers typically grow very fast, and a treatment delay is dangerous to patients.

I will then conclude with a few comments on the remaining quarters for 2020.

Which will include asked your name and R&D guidance for the remainder of the year.

[noise], Let's review first quarter performance and nowhere <unk> had a modest impact and were impact was immaterial.

First let me comment on unit growth of the overall pegfilgrastim market.

Well market dynamics are fluid the overall market unit growth isn't the low single digits notwithstanding call good consistent with previous quarters.

There are signs around the health care system, the various treatments are being temporarily postponed due the pandemic.

As you'd expect cancer treatment is much less vulnerable than other therapeutic areas to this phenomena as cancers, typically grow very fast and a treatment delays dangerous to patients.

Dennis M. Lanfear: Secondly, our market share was up from approximately 20% at the end of the year to about 22% over the quarter. There was a slight uptick in on-pro share related to COVID near the end of Q1. We'll discuss this in a little more detail later.

Secondly, our market share was up from approximately 20% at the end of the year to about 22% over the quarter.

There was a slight uptick in 'em proshare related to cobot near the end of Q1 will discuss this little more detail later.

Third with respect to unit sales in price I would first say, we saw significant stocking inventory decrease at the end of Q1 relative to Q4.

Dennis M. Lanfear: Third, with respect to unit sales and price, I would first say we saw a significant stocking inventory decrease at the end of Q1 relative to Q4. We also sold more units on a relative basis to the 340B hospital segment during the quarter. And finally, we realize a modest increase in discounts, as well as a typical increase in co-pay assistance, as patient's deductibles are reset with the new calendar year. We anticipate that demand will continue to grow through the end of 2020 as cancer patients and providers continue to benefit from the value provided by Udenica and as cancer patients return for treatment. Now, let me turn to our long-term growth and discuss the company's internally developed pipeline as well as our partnered products. Overall, we continue to make good progress on our plan to have six FDA-approved biosimilars on the market by the end of 2025. Together, these six assets represent more than $30 billion in U.S. market opportunities.

We also sold more units on a relative basis to the 340 be hospital segment during the quarter.

And finally, we realized a modest increase in discount.

As well as a typical increase in co pay assistance.

As patients deductibles are reset with the new calendar year.

We anticipate that demand will continue to grow through the end of 2020.

As cancer patients and providers continue to benefit from the value provided by you deneke and as cancer patients return for treatment.

Now, let me turn to our long term growth and discuss the Companys internally developed pipeline as well as our partnered products.

Overall, we continue to make good progress on our plan to have six ft APRU bio similars on the market by the end of 2025.

Together these six assets represent more than approximately 30 billion in U.S. market opportunity.

Dennis M. Lanfear: In terms of ophthalmology, and with respect to our Lucentis Biosimilar in-license from BioEck, we continue to work with BioEck and its manufacturing partner on the resubmission of the BLA. Together, we are interacting with the FDA and are currently focused on supporting our partner to generate the additional manufacturing data as requested by FDA and required for the resubmission. We currently anticipate BioEc will file the BLA with the FDA in the fourth quarter of 2020 upon completion of these efforts and certain regulatory interactions. Now, with respect to the company's internally developed ophthalmology program, CHS 2020, is an ILEA biosimilar.

In terms of technology and with respect to our Lucentis Biosimilar in license from biotech, we continued to work with biotech and its manufacturing partner on the Resubmission of the B.L.A.

Together, we're interacting with the FDA and are currently focused on supporting our partner to generate the additional manufacturing data as requested by the FDA required for the Resubmission.

We currently anticipate by work, we'll file the B.L.A. with the FDA and the fourth quarter of 2020 upon completion of these efforts and certain regulatory interactions.

Now with respect to the Companys internally developed ophthalmology program CHS 2020.

I only a bio similar we're very pleased with our product our progress towards expected phase three clinical trial initiation and 2021.

Dennis M. Lanfear: We are very pleased with our project, and our progress towards an expected phase three clinical trial initiation in 2021. To support that objective, we have advanced preliminary biosimilarity exercises and initiated the commercial-scale manufacturing efforts necessary to supply the Phase III trial and, ultimately, to supply the market. The cost of these efforts is reflected in our R&D guidance for the remainder of 2020, which we will provide later. Our Lucentis Biosimilar entry into the $6 billion anti-VEGF ophthalmology market will enable the company to have a significant role in the formation of the biosimilar market and lays the groundwork for our subsequent ILEA Biosimilar market entry. There is a portfolio value in having both Lucentis and an ILEA biosimilar. Our two ophthalmology assets constitute a complete product offering to better serve the needs of patients and providers. Coherus believes its proven commercial expertise in oncology will translate well into ophthalmology as both therapeutic areas share the same reimbursement dynamic. We expect a relatively efficient commercial investment will be needed to address the ophthalmology marketplace, as more than 80% of the VEGF market units are concentrated in a little more than 400 accounts.

To support that objective, we advanced preliminary biosimilarity exercises and initiated the commercial scale manufacturing efforts necessary to supply the phase III trial, and the multiple mainly to supply the market.

The cost of these efforts are reflected in our R&D guidance for the remainder of 2020, which will provide later.

Are they said this biosimilar entry into the 6 billion dollar anti VEGF ophthalmology market will enable the company to have a significant role in the Biosimilar market formation and lays the groundwork for a subsequent ideally about similar market entry.

There was a portfolio value of having both lucentis and and I leave a bio similar.

Our two ophthalmology assets constitute a complete product offerings to better serve the needs of patients and providers.

Well here's believes its proven commercial expertise oncology will translate well into ophthalmology as both therapeutic areas share the same reimbursement dynamics.

We expect a relatively efficient commercial investment will be needed to address the ophthalmology marketplace.

As more than 80% of the vet, Jeff market units are concentrated in a little more than 400 accounts.

Let me turn now to our immunology products CHS 14, 20 internally developed Biosimilar candidate Humira addressing an 18 billion dollar market.

Dennis M. Lanfear: Let me turn now to our immunology product, CHS1420, an internally-developed biosimilar candidate for Humira, addressing an $18 billion market. We have now gained concurrence with FDA on the analytical and clinical strategy to support a BLA final. We are currently drafting and reviewing key sections of the BLA, which we project to file in the second half of 2020. Concurrently, we continue to implement our manufacturing strategy to enable large-scale competitive market entry in the United States on or after July 1, 2023. Costs associated with advancing this product are reflected in the R&D and SG&A guidance we will provide for the rest of the meeting.

We have now gain concurrence with F.D.A. on the analytical and clinical strategy to support a P.L.A. finally.

We are currently drafting and reviewing key sections of the be law, which we project the file the second half 2020.

Concurrently we continue to implement our manufacturing strategy to enable large scale competitive market entry in the United States on or after July Onest 2023.

[noise] cost associated with advancing this product are reflected in the R&D Ines unit guidance, we will provide for rest of the year.

Now let me go back to one colleague and make a few additional remarks with respect to business development.

Jean Baret: Now let me go back to oncology and make a few additional remarks with respect to business development. As you know, in Q1, we completed a license agreement with InnoVent Biologics to commercialize its biosimilar candidate for Avastin in the United States and Canada. We are currently engaged with InnoVent on preparations to file an IND as a precursor to filing the BLA. We expect to initiate a three-way PK study using the innovator Avastin from the United States and China compared to the events of Avastin Biosimilar. We will also perform additional biosimilarity exercises. We expect to submit the BLA in 2021, depending on the outcome of these exercises and the timing of required interactions with FDA. Additionally, we continue to diligence the option to complete the development and commercialization of Innovents Rituxan Oncology Biosimilar in the United States. However, we have no further updates on that program for you at this time. Now I'll let the company's Chief Financial Officer, Jean Baret, summarize the Q1 financials. Jean? Thank you, Denny.

As you know in Q1, we completed a license agreement with Innovent biologics to commercialize its biosimilar candidate to a vast and in the United States in Canada.

We are currently engaged with an event preparations to filed I, India's a precursor to filing to be ally.

Expect initiate a three way PK study using the interview Interbasin from the United States in China compared to in events Avastin Biosimilar.

We will also perform additional analytical biosimilarity exercises.

We expect to submit to be lay in 2021, depending on the outcome of these exercises and the timing of required interactions with FDA.

Additionally, we continue to diligence the option to complete the development and commercialize in events were talks and oncology biosimilar in the United States. However, we have no further updates on that program for you at this time.

Now I'll, let the company's Chief Financial Officer, John Bray summarize the Q1 financials John.

Jean Baret: Thank you, Denny. First, let me preface that it has now been a full year earnings reporting cycle since we launched and commercialized Udenica. With that context, I will now review the main financial results for the first quarter of 2020. Net product revenue for the first quarter of 2020 was $116.2 million, with non-GAAP net income of $49.8 million and related diluted non-GAAP earnings of $0.67 per diluted share. Net revenue for the first quarter of 2019 was $37.1 million with a non-gap debt loss of $10.5 million and a non-gap debt loss of $0.15 per share. Our gross profit margin remained high at approximately 94% for each quarter.

Thank you Denny first let me pre phase, but it has now been a full year earnings reporting cycle since we launched and commercialize for deneke.

But that context I will now review the main financial results for first quarter of Twentytwenty.

Net product revenue for first quarter 20 of Twentytwenty was 16.2 million with non-GAAP net income of 49.8 million.

Really the diluted non-GAAP earnings of 67 cents per diluted shares.

Net revenue for first quarter 2019 was 37.1 million with a non-GAAP. That's also of 10.5 million non-GAAP net loss of 15 cents per diluted share.

Our gross profit margin remained high at approximately 94% for each quarter net product revenue increased year over year markedly as a result of market penetration and our disciplined pricing strategy.

Jean Baret: Net product revenue increased year-over-year markedly as a result of market penetration and our disciplined pricing strategy. Research and development expenses for the first quarter of 2020 were $33.1 million, as compared to $18.8 million for the same period in 2019. The increase in R&D expenses was largely due to an upfront payment obligation of $5 million pursuant to the InnoVent License Agreement and increased expenses related to preparations for the filing of the CHS 1420 BLA and the development of other biosimilar product candidates. Selling general and administrative expenses for the first quarter of 2020 were $35.4 million as compared to $32.7 million over the same period in 2019, when we initially launched Udenica. We anticipate that R&D and SG&A expenses combined together will range between $285 million and $310 million for the full fiscal year 2020, excluding upfronts or milestones from any potential new collaboration.

Research and development expenses from first quarter Twentytwenty were 33.1 million as compared to 18.8 million over same period in 2000 2019, increasing R&D expenses was largely due to an upfront payment obligation of 5 million pursuant to the event.

License agreement, an increased expenses related to preparations probably farming over CHF 14, 20, BLE and the development of altered by a similar product candidates.

Selling general and administrative expenses for the first quarter of Twentytwenty were 35.4 million as compared to 32.7 million over same period in 2019, when we initially launch deneke.

We anticipate but R&D and as Jim expenses combined together will range between 285 million and 210 million for the full fiscal year Twentytwenty, excluding upfronts for Merrell soon.

From any potential new collaborations.

We started our first quarter with 177.7 million in cash and cash equivalents and ended the quarter with hundred 93.3 million. A 15.6 million increase this is a fourth quarter no rule with positive cash flow from operations.

Jean Baret: We started our first quarter with $177.7 million in cash and cash equivalents and ended the quarter with $193.3 million, a $15.6 million increase. This was our fourth quarter in a row with positive cash flow from operations. We used net cash generated from the sales of Udenica to increase our inventory by $9.6 million and paid down $5 million of our accounts payable, which together represent another $15.6 million increase in net current assets. Finally, I would like to mention that our strong balance sheet and discipline in the allocation of our capital have positioned us to continue to grow and build the business. We remain very confident in the durability of our business and expect to continue to generate positive operating cash flow during 2020. Now, I would like to turn the call back to Denny.

We used that cash generated from a sales fell through deneke to increase our inventory by 9.6 million and pay down 5 million of our accounts payable, which together represent another 15.6 million increase in net current assets.

Finally, I would like to mention that our strong balance sheet and discipline and allocation of our capital as position us to continue to grow and built the business.

We remain very confident in the durability of our business and expect to continue to generate positive operating cash flow bring twentytwenty.

Now I would like to turn the call back to Denny.

Thank you John now, let's take a look ahead to the remainder of 2020.

Overall, we expect continued unit share growth through 2020, However, Q2 results so far appear to be modestly impacted by the pandemic.

Which by quarter end May result, in lower utilization of you deneke than had the pandemic not occurred.

The two primary drivers of this or first a reduction in cancer treatments as the healthcare system reacted in late March in early April to the Koby crisis.

Dennis M. Lanfear: Thank you, Sean. Now, let's take a look ahead to the remainder of 2020. Overall, we expect continuing unit share growth through 2020. However, Q2 results so far appear to be modestly impacted by the pandemic, which by quarter end may result in lower utilization of Udentica than had the pandemic not occurred. The two primary drivers of this are, first, a reduction in cancer as the health care system reacted in late March and early April to the COVID crisis. Secondly, we saw what we believe to be a transient increase in UNPRO use that we expect will reverse upon market normalization. COVID is impacting patients' ability to access hospitals in certain parts of the country, particularly in the Northeast and the Upper Midwest.

Secondly, we saw what we believed to be a transient increase and I'm probably use that we expect will reverse upon market normalization.

Codes impacting patients ability to access hospitals in certain parts of the country, particularly in the northeast and the upper Midwest.

However, we expect you Dentek has a strong momentum will resume as these patients returned to be treated and as referrals returned to normal.

As one would expect all of the therapeutic areas in the healthcare systems, such as cardiology, dermatology and others oncology appears to be the least impacted in terms of treatment delays.

Now, let me make a few comments with respect to our strategic deployment of capital.

We believe it is prudent for the company to have a strong balance sheet at a time of overall economic uncertainty.

As announced in April we completed a convertible notes financing of 230 million at a 1.5% coupon.

Dennis M. Lanfear: However, we expect Udenica's strong momentum to resume as these patients return to be treated and as referrals return to normal. As one would expect, all of the therapeutic areas in the health care system, such as cardiology, dermatology, and others, oncology appears to be the least impacted in terms of treatment delays.

The excellent terms, we were able to negotiate provided us with additional flexibility to raise the strike price to $25.93 well above our 52 week high.

Thereby protecting our equity investors.

We believe that this it makes sense when capital is well priced and dilution is low to bolster our balance sheet and we did so opportunistically.

Dennis M. Lanfear: Now, let me make a few comments with respect to our strategic deployment of capital. We believe it is prudent for the company to have a strong balance sheet at a time of overall economic uncertainty. As announced in April, we completed a convertible notes financing of $230 million at a 1.5% QPI.

With this financing we are well positioned for additional pipeline acquisitions and given our successful track record with your deneke, we're largely seen as the oncology partner of choice in the United States.

However, I would point out that our financing was disciplined an opportunistic and our use of capital will be disciplined and opportunistic as well.

Dennis M. Lanfear: The excellent terms we were able to negotiate provided us with additional flexibility to raise the strike price to $25.93, well above our 52-week high, thereby protecting our equity investment. We believe that this makes sense when capital is well priced and dilution is low, bolstering our balance sheet, and we did so opportunistically. With this financing, we are well positioned for additional pipeline acquisitions, and given our successful track record with Udenica, we are largely seen as the oncology partner of choice in the United States. However, I would point out that our financing was disciplined in opportunities, and our use of capital will be disciplined and opportunistic as well. In terms of our future growth trajectory, the total addressable market available to Coherus will expand to about $10 billion in 2022 and will expand further to about $30 billion in 2023. Over our five-year planning horizon, we expect that our total addressable market will have grown considerably, particularly given our demonstrated ability to execute deals as well as internally develop assets. We are confident in our ability to replicate our Udenica success in new therapeutic areas and deliver long-term growth to our investors. And with that, we're happy to take your questions.

In terms of our future growth trajectory. The total addressable market available to Coherus will expand to about 10 billion in 2022 and will expand further to about 30 billion in 2023.

Over our five year planning horizon, we expect that our total addressable market well, thus grown considerably.

Particularly given our demonstrated ability to execute deals as well as internally develop assets.

We are confident in our ability to replicate our you deneke success, and new therapeutic areas and deliver a long term growth to our investors.

And with that we're happy to take your questions.

Ladies and gentlemen to ask a question of buying phone. Please press star one or your telephone keypad.

We have a question from Steve seek from Cowen and company. Your line is open.

Good afternoon, and thanks for taking my questions.

I have two so first wasting and Q2 in terms of cobot.

How much that relates dynamics in H. too.

And maybe give us an idea.

A modest patient starts are coming to the office given that it is a critical care products, Tom and importantly, what's going on with your customer base of the competitors I think they can gain Dan what your expectations for 2020.

Thank you for the question I I understand your question to be first of all.

What are the coal that dynamics that are impacting Q2, what types of things would impact that are closely related and secondarily.

Operator: Ladies and gentlemen, to ask a question via telephone, please press star 1 on your telephone. We have a question from Stacy Kuh from Collin & Company. Your line is open.

What does the competitive over site of that particular thing have that Chris Thompson answer that Chris.

Stacy Kuh: Good afternoon, and thanks for taking my questions. I have two.

Thanks, Denny Thanks, Stacy for your question.

First on local banks had an impact on the initiation of treatment and really we have some tailwinds for growth.

Dennis M. Lanfear: So, first, what are you seeing in Q2 in terms of the COVID-19 impact and kind of how might that relate to dynamics in H2? Kind of maybe give us an idea of the amount of patients that are still coming into the office, given that it is a critical care product. And importantly, what's going on with your customer base, with the competitors? Are they making gains, and what are your expectations for 2020?

At the same time recently, the ASCO and NCCN guidelines.

And expanded and.

Hey, congrats from utilization thresholds.

Additionally, sequestration has been suspended so now reimbursement is the full 6% of new losses SDN Medicare. So we see some upside there, but as cobot began to work its way through the health care system. We did see an uptake on pro at the expense of Neulasta Prefilled syringe as well as you deneke along with it.

Chris Thompson: Thank you for the question. I understand your question to be, first of all, what are the COVID dynamics that are impacting Q2? What types of things would impact that are COVID related? And secondarily, what is the competitive oversight of that particular thing? How did Chris Thompson answer that?

Decrease in new patient visits as Denny said.

That said, we believe that these changes are really going be transient nation and nature as delaying treatment is dangerous.

As Dan pointed out and the cancer area.

Chris Thompson: Thanks, Denny, and thanks, Stacey, for your questions. First, you know, while COVID has had an impact on the initiation of treatment, we really have some tailwinds for growth at the same time. Recently, the ASCO and NCCN guidelines have been expanded and will increase pay for grasp and utilization thresholds. Additionally, sequestration has been suspended, so now reimbursement is the full 6% of new LAFTAs, ASP, and Medicare, so we see some upside there. But as COVID began to work its way through the health care system, we did see an uptake in Onpro at the expense of new LAFTA prefilled syringes, as well as Udenica, along with a decrease in new patient visits, as Denny had said. That said, we believe that these changes are really going to be transient in nature, and treatment is dangerous, as Denny had pointed out, in the cancer area. We've had great momentum from Q4 to Q1, and we expect this momentum to continue.

We've had great momentum from Q4 to Q1, and we expect this momentum to continue.

Yes, Thanks, Chris I would just say with respect to the other biosimilar competitors, we do not believe there is any cobot related.

Effect.

I guess just to clarify my question I guess, the first unless just trying to figure out if there any follow through two h. too given what you're seeing in Q2 and then.

Potentially what the competitors like doing since they were aiming to start negotiations at midyear.

I'm just trying to understand if that's something that hospitals are focused on right now.

Well I think that it's fair that Chris could answer then add some additional color, but I think that it's fair to say that particularly in the hospital segment and particularly.

In hotspot, such as the northeast and the upper Midwest people are very concerned about dealing with covance. So that's been front and center.

I think that's actually a competitive disadvantage for other bio similar competitors.

Dennis M. Lanfear: Thanks, Chris. I would just say that with respect to the other biosimilar competitors, we do not believe there is any COVID-related effect.

As we indicated on the back side of co bid whether that happens in Q3 Q4 as somewhat expected whatever.

Stacy Kuh: I guess just to clarify my question: I guess the first one was just to try to figure out if there is any follow-through to H2, given what you're seeing in Q2, and then potentially what the competitors are doing since they were aiming to start negotiations in mid-year. Just trying to understand if that's something that hospitals are focused on right now.

We see a return to growth.

During that period of time and a resumption. So I don't really see a read through for that particular.

Yes, the competitive.

Dennis M. Lanfear: Well, I think that it's fair that Chris could answer and add some additional color, but I think that it's fair to say that, particularly in the hospital segment and particularly in the hotspots, such as the Northeast and the upper Midwest, people are very concerned about dealing with COVID. So that's been front and center. I think that's actually a competitive disadvantage for other biosimilar competitors. As we indicated, on the backside of COVID, whether that happens, you know, in Q3 or Q4, as some would expect, or whatever, we see a return to growth during that period of time and a renewal. So I don't really see a read through for that particular competitive, the dynamic at this particular point in time. Chris, any further comment on that one?

Dynamic at this particular point in time, Chris any further comment on that one.

No I agree day.

Q3, Q4, obviously is fluid right and.

Right now we're watching it very carefully as everyone else's, but.

It's a fluid environment right now.

Thank you.

And then.

Second question was that Dennis just wondering if you've been in contact with biotech.

And then.

Have you already finished running the validation then could you maybe remind us at the issue and any details if it was already resolved.

Thank you.

Yes, we are in very close communication with bio whack.

As well as their manufacturing partner I, just had a call with bionic. This morning's it's a matter of fact.

Chris Thompson: No, I agree, Denny. You know, Q3 and Q4, obviously, it's fluid, right? And right now, we're watching it very carefully, as everyone else is, but it's a fluid environment right now.

We have a very good handle on the requirements that the FDA. Once the C. Did you may recall it was pursuant to relocating a fermenter into it and additional building on the same campus in running the same process in that same vessel button. Another building they wanted to seem at some additional data.

Dennis M. Lanfear: Thank you.

Michael Thomas Nedelcovych: And then a second question on Lucentis; just wondering if you've been in contact with BioAcc, and then have you already finished running the validation, and could you maybe remind us of the issue and any details, and if it was already resolved?

We are in the process of developing that data we indicated earlier that it would take about four months to develop that data. Once it started so that process has initiated we will then have to analyze that data included in the be law and file it and that's what drives the timing.

Dennis M. Lanfear: Thank you.

Dennis M. Lanfear: ...

Dennis M. Lanfear: Yes, we are in very close communication with BioWAC, as well as their manufacturing partner. I just had a call with BioWare this morning, as a matter of fact. We have a very good handle on the requirements that the FDA wants to see.

Dennis M. Lanfear: As you may recall, it was pursuant to relocating a fermenter into an additional building on the same campus and running the same process in that same vessel but in another building. They wanted to see some additional data. We are in the process of developing that data. We indicated earlier that it would take about four months to develop that data once it started, so that process has begun. We will then have to analyze that data, include it in the BLA, and file it, and that's what drives the timing into QC.

Into Q2.

Okay.

I would just appreciate that I would appreciate the other callers asking one question. Please.

Thank you.

Your next question is from.

Mike follows from Baird. Your line is open.

Hey, guys and thanks for taking the question.

Maybe just.

Just for new share your current thoughts on additional business development activities from here.

I'm just curious how you're thinking about that is maybe one or two additional products and kind of what does the profile look like or preference for the profile in terms of.

Dennis M. Lanfear: I would just appreciate that. I would appreciate the other callers asking me one question, please. Thank you.

Indication for example in college GE and then maybe.

Turning to the launch timing is it something that's very interested in more near tour term or could that be.

Mohit Bansal: Your next question is from Mike Falls from Baird. Your line is open.

Dennis M. Lanfear: Hey guys, and thanks for taking the question. Just so you can share your current thoughts on additional business development activities from here. I'm just curious, you know, how you're thinking about that, maybe one or two additional products and kind of what the profile looks like, or preference for the profile in terms of, indication, for example, oncology, and then maybe, in terms of a launch timing, is it something that you're interested in more near term, or could that be? and potentially longer term as well. Thanks.

Actually longer term as well thanks.

Sure sure Mike.

As we discussed before our primary focus for deals are oncology assets, particularly.

Additional assets, which would dovetail very well with you Deneke I think the of Aston agreement within event was representative of that we would seek to strike other such.

Agreements are preferred.

Hi, good time for launch of one of those products is certainly between now and 2023 that as say products. They show up post 2023 are up significantly less interest to us.

And I would not rule out doing a a non biosimilar al said, however, I would say that we are sharply focused in oncology on this point very sharply focused.

Dennis M. Lanfear: Sure Mike. As we discussed before, our primary focus for deals is oncology assets, particularly additional assets which would dovetail very well with Udenica. I think the Avastin agreement with InnoVent was representative of that. We would seek to strike other such... and agreements, our preferred.

Given that that's where the the commercial forces at this time.

Lastly.

I believe that we're making good progress and number of directions. We we've talked previously about completing additional transactions we have one additional oncology assets.

Dennis M. Lanfear: The time for the launch of one of those products is certainly between now and 2023. That is to say, products that show up post-2023 are of significantly less interest to us. I would not rule out doing a non-biosimilar asset. However, I would say that we are sharply focused on oncology at this point. Very sharply focused, given that that's where the commercial force is at this time.

In the plan.

For launch of prior to 2025 as you can see to comprise the six assets, we technically have five assets right now.

Great. Thank you.

Your next question is from Mohammed bin South from Citigroup. Your line is open.

Hey, guys. Thank you very much for taking my call question and also I hope everyone is staying safe out there.

Dennis M. Lanfear: Lastly, I believe that we're making good progress in a number of directions. We've talked previously about completing additional transactions. We have one additional oncology asset in the plan for launch prior to 2025, as you can see, to comprise the six assets. We technically have five assets.

Just wanted to drag a little bit deeper on the under the trends you talked about in first quarter regarding but inventory drawdown as that as.

The T. funtv trends so on inventory is it possible to quantify or was it wasnt a material impact.

Dennis M. Lanfear: Great, thank you.

Douglas Dylan Tsao: Your next question is from Mohit Bansal from Citigroup. Your line is open.

Mohit Bansal: Hey guys, thank you very much for taking my call and asking my question, and also I hope everyone is staying safe out there. I just wanted to dwell a little bit deeper on the trends you talked about in the first quarter regarding inventory drawdown as well as the 340B trends. So on inventory, is it possible to quantify or was there a material impact of inventory drawdown? And do you anticipate this coming back as we move through the year? And on the pricing side, the 340B dynamic is interesting. Do you think it was a one-off phenomenon? And as unemployment rates rise, do you expect it could be something which could impact you or other companies as well in 2020 as well as 2021 going forward? Thank you.

And then to draw down, which do you anticipate this coming back as we move to the yen and on the pricing side. The chief RGB dynamic is interesting do you think it was a one off phenomena.

And then unemployment rates rise do you expect it could it could pretty much be something which could impact you or other companies is that it's going to be 20, Uzelac 2031 going forward. Thank you.

I'll give you one question Mohit.

Actually I'll give you two I'll give you the I'll give you the I'll give a I'll, let JV answer we'll give you. The inventory question and then I understand you to inquire with respect to the 340 B.

Dennis M. Lanfear: Okay, so I'll give you one question, Mohit. Actually, I'll give you two. I'll give you the, I'll give you the, I'll give, I'll let J.V.

Impact and whether we see that is is transferred weather.

John you want to take that well, yes. So let me first address your question on inventory.

Dennis M. Lanfear: answer. We'll give you the inventory question, and then I understand you to inquire with respect to the 340B impact and whether we see that as transit or whether. John, do you want to take that one? Yeah, so let me first address your question on inventory.

We started the year at the high end of a range and then ended Q1 at the low end of a range.

Yeah, so over the past year.

On the wholesalers build up inventory at the end of fourth quarter, but that's what happened.

And going forward and all else equal, we expect inventory to be mid range of what we've observed.

Jean Baret: We started the year at the high end of the range and then ended Q1 at the low end of the range that you saw over the past year. The wholesalers built up inventory at the end of the fourth quarter. That's what happened.

A second question you had was about the 340 be mix shift and.

That is part actually maybe I would expand that than say talk in the context of GTN expansion, so little bit of GTN expansion. However, there were three major components with approximately equal magnitudes first.

Jean Baret: And going forward, and all is equal, we expect inventory to be mid-range of what we've observed. The second question you had was about the 340B makeshift, and that is part actually, maybe I would expand that and say talk in the context of a GTN expansion. So a little bit of GTN expansion, however, there were three major components with approximately equal magnitudes. First, we looked at the segment cells mix, where we saw a shift in cell mix towards the 340B segment. That was one factor. And that is, I believe, you know, transient.

We the segment sales mix, where we saw a shift in sales mix towards the frequently do segment that was one factor and that is I believe you will transient I think the 340 be saying by and large likes bio similars more over the he originator.

Second we saw an increase in co pay which has no won't QM phenomenon because.

Doesnt and we don't is expected to recur for rest of year.

Jean Baret: I think the 340B segment, by and large, likes biosimilars more than the originator. Second, we saw an increase in copay, which is a normal Q1 phenomenon because it doesn't, and we don't expect this to recur for the rest of the year. And third, there was an increase in discounting as you put 2020 contracts in place to drive unique share growth for the remainder of the year.

There was an increase in discounting as you put 2020 contracts in place production each share growth for the remainder of a year.

Got it already has some thank you for Mike I don't see my pipe I question.

Thank you. Thank you we'll give you another shot.

Your next question is from Thomas Chow from H.C. Wainwright.

Hi, good afternoon, thanks for taking the questions.

Mohit Bansal: Got it. Very helpful. Thank you for answering my five-part question.

Yes, just curious you know Denny what you're seeing from a competitive landscape standpoint, and you know obviously it sounds like you picked up some share in the Threeforty Phoenix.

Dennis M. Lanfear: Thank you. Thank you. We'll give you another shot, Mohit.

Douglas Dylan Tsao: Your next question is from Douglas Tsao from H.C. Wainwright. Your line is open.

In one Q.

How do you see that playing out I think one of your competitors will get pass through status.

Douglas Dylan Tsao: Hi, good afternoon. Thanks for taking the questions. You know, just curious, you know, Denny, what you're seeing from a competitive landscape standpoint, and, you know, obviously, it sounds like you picked up some share in the 340p mix in 1Q. You know, how do you see that playing out?

You know kind of kept passage task you didn't notice at the beginning of April have you seen any change there and have you should have taken in reaction to defend your share where you've been so successful. Thank you.

Thanks for your thanks for your question.

Doug Christy well take a shot at that one for is are we done thanks Tony.

Dennis M. Lanfear: I think one of your competitors will get pass-through status, you know, or pass-through status at the beginning of April. Have you seen any change there? And have you sort of taken any action to defend your share where you've been so successful? Thank you.

So you'd mentioned pass through status, that's true that Sandoz did receive pass through status.

In April but they have not received their Q code yet and.

We believe that not having that.

Chris Thompson: Thanks for your question, Doug. Chris, do you want to take a shot at that one for Doug?

Really.

Presents a real barrier for them, but not only for them, but it will present, a barrier for Pfizer and all other competitors to follow not having a Q code.

Dennis M. Lanfear: Thanks, Sammy.

Chris Thompson: So, you mentioned pass-through status. It's true that Sandusk did receive pass-through status in April, but they have not received their Q code yet, and we believe that not having that, you know, really presents a real barrier for them, but not only for them, but it'll present a barrier for Pfizer and all other competitors to follow, not having a Q code. And we believe the additional market entrants will create increased pressure on the innovator, and that's where the share will come from, rather than from each of the biosimilars against one another.

Right now there their shares pretty insignificant and I think that.

You'll see that with future entrance into the market.

You know the the originator.

Doug: Is that helpful, Doug? Yeah, it is.

Dennis M. Lanfear: When would we expect Sanders to get the Q?

Chris Thompson: I think we're on July, maybe July 1st, Trish?

Chris Thompson: Yeah.

Dennis M. Lanfear: Something like that. You'd have to confirm it, though.

Doug: Great, thank you so much. That's very helpful. Thank you.

Christopher Thomas Schott: Your next question is from Chris Schott from J.P. Morgan. Your line is open.

Dennis M. Lanfear: Thanks very much. Just maybe a two-parter on Udenica in 2Q. I think you mentioned earlier a transient uptick in on-pro use. Can you maybe just quantify what you're seeing there in terms of shares as we move through April? So basically, how much of a share gain are we thinking about? And maybe just a bigger picture question on Udenica in 2Q. I guess when we consider your ongoing share gains balanced against some of this reduced patient access, is it still reasonable to think about sequential growth for Udenica in the quarter? Or, at this point, could we actually be seeing Udenica temporarily kind of down sequentially and then rebounding as the year continues?

Dennis M. Lanfear: Thanks so much.

Dennis M. Lanfear: Let me take the last one first, Chris. And then I'll let Chris Thompson take the first part. There's no question that there will be a COVID impact in Q2. But, you know, it would be modest.

Dennis M. Lanfear: There are areas of the business which are not impacted, but there are areas which are impacted, right? So, no, we will not have a, you know, maintained, you know, unique, you know, growth into Q2, I would not say. That's pretty tough in this phase.

Dennis M. Lanfear: COVID, particularly in the Northeast and the Upper Midwest and some of those particular areas. However, I think that it's also important to keep in mind that people are planning, you know, their exit out of the COVID crisis in terms of treatment. And particularly on the clinic side, I think they're very active in getting back to business. And hospitals have very active programs, for example, for resuming cancer care.

Dennis M. Lanfear: So we think that referrals and so forth are going to go through. But there's, there's, there's no question that Q2 is going to be a very fluid quarter with COVID wafting through significantly on the front. And then, you know, whatever happens as we tend to work through it on the backside of it. Very, very, very, very, tough to call Q2, I would say. Chris, do you have additional comment

Chris Thompson: Yeah, thanks, Denny. You know, as I said earlier, we have seen some minimal migration to on-probe. It's early in the COVID game, though, right now, and it's fluid, and it's hard to tell. But we did give some on, you know, some ground to on-probe. But that's, it really has been limited to really hot spots in the United States where COVID is really prevalent, the big cities in the Northeast, the upper Midwest. And we gave up some share, but so did the new LASTA pre-filled syringes. And we believe that this will be transient. First, now more than ever, you know, really, hospitals and clinics have indicated a desire to really purchase drug supplies that are made in the United States. That's a big deal right now because Udenic is made in America with an ample, reliable, and uninterrupted supply. And thirdly, I'd say that Udenica really offers superior value along with full service. You know, whatever ground we may lose in this COVID, it'll be transient, and I see it coming back pretty quickly.

Christopher Thomas Schott: Great, thank you. Thank you.

Balaji V. Prasad: Thank you, Chris.

Steven: Your next question is from Balaji Prasad from Barclays. Your line is now open.

Steven: Hi, this is Steven on behalf of Balaji. Thanks for taking our questions.

Dennis M. Lanfear: My question is on biosimilar lucentis. I would just be interested to get your thoughts on the recently announced Bausch partnership with Stata to commercialize biosimilar lucentis in the U.S. and how, if at all, this changes your view on the biosimilar lucentis market. And then for your own partnered biosimilar with BioAcc, is it still your expectation to launch this in 2021 if the BLA is filed by the end of the year? Thank you.

Dennis M. Lanfear: Thanks for your question. First of all, I would say that we've been tracking that Stata asset, and we knew they would be seeking a U.S. partner. However, I would also say we believe we're very well positioned, given our demonstrated expertise in Part B, to do very well in this therapeutic area. You know, with respect to the ophthalmology market, our progress with the company's bio-ecopower, we expect will enable us to be there at market formation. And we'll go ahead and get the BLA filed near the end of this year, and at that time, we'll have some additional comment on the particular launch window and timing. So we're to the point where we've got everything boxed up for the FDA, and we've got that ready to go. We'll give you an update, in particular on the launch timing, but overall, we don't see the entry of STATA changing our calculus or aspirations for the ophthalmology market.

This particular therapeutic area.

You know with respect to the ophthalmology market our progress with the companies you know <unk> similar we expect will enable us to be there AD market formation and we'll go ahead and get the.

P.L.A. filed near the end this year and at that time of some additional comment on that particular launch window and time, so more to the point, where we've got everything boxed up for the F.D.A. and we've got that ready to go we'll give you an update in particular the lunchtime.

But overall, we don't see the entry of started changing our our our calculus or aspirations for the optimal g. market.

Okay, ladies and gents on that if you have a question at this time. Please press star one on your telephone keypad.

Operator: Ladies and gentlemen, if you have a question at this time, please press star 1 on your telephone feedback. If you have a question at this time, please press star, then the number one on your telephone keypad. We will pause for just a moment to see if there are any additional questions. And there are no further questions at this time. Presenters, you may continue.

If you have a question at this time. Please pass tired then to number one on your telephone keypad.

Several possible just a moment to see if there are any additional questions.

And there are no further questions have takes time per cent guess he may continue.

Dennis M. Lanfear: Thank you everyone for attending our earnings call. Good day.

Thank you everyone for attending are things call.

Good day, yeah. Thank you. Thank you very much and will be very new additional update on q. too and hopefully will be on the backside coven around that time bye-bye.

Dennis M. Lanfear: Yeah, thank you. Thank you very much. And we'll be providing you with an additional update on Q2. And hopefully, we'll be on the backside of COVID around that time. Bye-bye. Ladies and gentlemen, this concludes today's conference call. Thank you for participating.

Ladies and gentlemen. These concludes today's conference call. Thank you for participating you may not have these can right.

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Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.