Q2 2023 Coherus BioSciences Inc Earnings Call
Good day, and thank you for standing by welcome to the coherence Biosciences second quarter 20 twenty-three conference call.
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Please be advised that today's conference is being recorded I would now like to hand it over.
Over to your Speaker Today America Suzuki please.
Good afternoon, everyone and thank you for joining us.
We issued a press release earlier today announcing our financial results for the second quarter of 2023.
Release can be found in the courtyard.
Biosciences website, there's also attached to the form 8-K, we filed with the F. C T right.
Thank you for calling foods forward looking statements regarding coherence is perfect expectations about future events.
[noise] statements include but are not limited to our ability to gain approval for multiple new products launched them projections of expenses and revenues projections of future market share for any product.
Spectation for market opportunity for any indication our expectations about completing the merger with surface ecology.
Any of our return to being cash flow positive and expectations about our future <unk>.
Oh. These forward looking statements include substantial risks and uncertainties that are beyond our control and could cause actual results performance or achievement.
From those implied by the forward looking statements.
Statements are not guarantee future performance and are subject to substantial risks and uncertainties.
According to risks and uncertainties about our ability to complete the merger with surface ecology.
The anticipated benefits that transaction.
[noise] scuffed in our press release, we issued today as well as the documents that we find with Jesse.
Oh Lucky statements provided on the call today are made.
<unk> no duty to update a revised any forward looking statements.
Second quarter 2023 results are not necessarily executive results of future areas.
Would it be in today's call or to anyone.
<unk> extra Theresa barely cheap develop enough, Sir Hector Rushy Dias chief.
Chief Medical Officer, all reader, Chief commercial office, Sir David Silva, Chief Financial Officer.
Now turn the call over to Danny.
Thank you American and thank you all for joining us today on our Q2 2023 frames call.
This past quarter, we continued to make good progress in our strategy.
You know what company funded by.
Revenues from F D a approved products.
Sent to that objective demonstrated strong execution in queue to cross research solving M commercialization value chain.
Specifically beside the merger agreement with service on College.
Hi, Science teenage I owe company that shares our vision and impacting the tumor micro environment essentially represents the next step change the therapeutic benefit check.
A moment, our chief development Officer factor in the Valley.
Recap for Ya mechanism of action synergies.
And surpass S 388 114.
N T I L 27 map and see.
Alright ma'am.
Well also update Ya.
Yeah, Sir Alex before.
Towards the end you're filing.
With respect to development.
And rushed.
When she brought officer.
<unk> for you projected timing data emerging from various ongoing studies.
<unk>.
I guess I'll update you of course.
Now with respect to commercial performance saw strong execution across the product and the presentations court.
Product revenues 58.59, almost two X Q1.
Have you done it a strategy manage average selling price.
Follow up presentation much.
Otto and checked her body device has been successful.
You wanted to do that like auto injector in April are pleased with the market reception.
Continue to project you Jessica.
Trouble at lunch this year.
Regarding similarly, as you recall.
Reimbursement Q code was April 1st and we projected subsequent increased market.
This has now occurred.
Paul Rader R. Cheap commercial officer will provide additional background color.
Additionally, we have successfully launched.
Argue microbus art.
Really innovative pricing addressing unmet access needs providing.
Providing low cost alternative high priced competitors.
Finally, our chief Financial Officer Mcdavid Stillwell.
Short on our financial position.
Digital color.
Sir Roger will allow us to produce a projected spending over the 2023 2025 planning period.
We continue to focus sharply I'm holding the line expenses, while driving the top line.
<unk> reached cash flow positive.
2024.
Now with that I'll hand, it over to Paul.
Oh.
Thanks to any good afternoon, everyone.
Now the midpoint or 18 months five product launch.
Three products launched over the last nine months, we were executing plans to launch two more by the end of the year.
Total number of marketed assets increased to six over an 18 month time period.
Believe these product launches drive top line revenue growth over the coming years.
Combined similarly, and you dedicate net revenue Q2 $58.5 million <unk>.
An increase of 81 per cent over to one.
Well now speak to each branch will start with similarly.
<unk>.
A strategic approach to the park first to maximize the conversion.
Distinguished service business circuit.
Grow sure through new patient stars and conversion from other anti venture products.
Primary care to similarly sales acceleration.
Product specific to your code, which was successfully implemented on April 1st.
Facilitate seamless timely billing every embarrassment retinal practice.
Similarly, net sales in queue to 26.7 billion compared to 6.2 million in Q1.
Driven by quite frequently demand quarter over quarter.
Similarly market share within the <unk> class also more than quadrupled 17 per cent Q to appear.
4.1% one.
During queue to increase the cumulative number of accounts and ordered similarly by 75 per cent to.
321.
Those 72% every ordered.
New accounts continued to grow with the first three weeks of July .
The other night and you want a couch ordering similarly.
Bringing your total to dial 412.
And Q2 market share amongst ordering accounts was 45%, which reflects the potential with similarly once accounts to get a dog.
Reordering reflects do patient stars and conversions from other products and with the crowd nature of the disease and frequency of injections. This results compounded growth.
Therefore, we continue to expect the 2023 separate from that revenues will exceed $100 billion.
Now turn to your daughter.
Magenta can net revenue grew 21 per cent quarter over quarter $31.7 million compared to $26 2 million in Q1.
This increase was driven primarily by 10% increase in overall demand.
<unk> you feel strange business you Gotta.
Can market share and Q2 was 12.2 per cent.
From 11.5%.
These share gains have continued July .
Did you go to the bank Progressive Prefilled syringe segment.
Been increasingly competitive or.
Our strategy is to to balance price sure in order to maintain a strong ESP in advance are larges of two new presentations the longer term objected to regain sure.
A large <unk> auto injector commercially and tune in this presentation represents the first innovation.
Progressed in class eight years.
And addressed as a large market segment.
Served by your last <unk> <unk>, our body device, which still retains 42 per cent of the park.
Later this year, we anticipate launching our third presentation.
<unk> body check if a prude.
Will compete directly with the last.
We believe you Detica franchise is well positioned regain market share getting in the second half of 2020.
Turning now to your summary similar.
<unk>.
The high cost of <unk> treatment is a problem for the health care system.
Many patients R.
Patient centric strategy.
Provide you separate at a single transparent low price.
The large you separate July 3rd at a list price of $995, a carton for two auto injectors, representing a discount but more than 85% error.
We are working with multiple partners to make <unk> available to patients.
February is available for sale to retail channels, including the Mark Cubin cost-plus drugs company and through its team puberty card independent retailers nationwide.
We're also working with specialty pharmacy partners, such as superior Biologics services more than 1.5 billion patients across the country.
We expect to sign up more distribution M. P. B M partners in the coming months.
Yeah, I will get that market is highly competitive and humira rotates formulary position. During this information period, nearly all P. B M health plant formularies, we expect steady growth Biosimilars 2024.
Significant acceleration of a similar.
With the implementation of inflation reduction of 2025.
Continue to target up to 10% sure the I don't live in that market for you <unk>.
The 2026th 2027 times right.
R. Luis <unk> Globe February operating expenses will allow us to generate good <unk>.
And enable us to compete for the long term.
<unk>.
Well now provide an update on <unk>.
Watching the company's first oncology product is a critical step forward the advancement or Io franchise. Our mission is to extend cancer patient survival offering new hope to patients nasal spiritual her stolen is an excellent example.
Today, you approximately 2000 N P C patients diagnosed annually in the U S have no F D a approved treatments, including biotherapeutics.
P C clearly constitutes a high but.
For a parliament of his next generation <unk> inhibitor and different proof will be the first and only can you want inhibitor in the U S indicated for relapsed metastatic Basil <unk>.
Given the impressive final overall survival data presented it ask.
And feedback from the top head <unk> with whom we engaged in the color.
We believe <unk> plus chemotherapy well established a new standard of care at M. P C and all lines of therapy, including first line and.
And will be practice change.
You feel confident towards Taliban plus chemo will gain a dominant market share it.
An estimate the M P C market opportunity get Pete.
Reach up to $200 million.
During our queue, one call announced large NPC effects dot com.
<unk> to be a primary source C state information for patients and their caregivers to learn about M. P C.
Also launched a sister site for health care professionals.
Our aspiration is to identify it appropriately a cage with all NPC patients or their caregivers Express Ivy end of the year and I'm pleased to report that such large you enrolled.
Rolled over 1500, MPC patients and caregivers it's work.
We will be ready to launch an.
Educate doctors are towards <unk> differentiated mechanism of action and the impressive overall survival benefit demonstrated NNPC and irrespective of PTO one expression steps.
We are ready to launch towards <unk> directly upon potential approval with.
With significant overlap between you Detica customers and tour of help have targeted prescribers large a tour of <unk> as being a patient integrated into our existing oncology.
Sure.
With that I will now hand, it over to Theresa.
Thank you.
Good afternoon.
I'm Amy.
Alright.
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Okay.
Kenneth Street.
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Three years.
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23, three lines in July .
You can enter a auto injector.
<unk>.
And my.
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March 2023 and lines and can.
And the F D. A review at T V.
I'm fine.
Yeah.
Alright.
Later this year.
Additionally.
<unk> alright.
You know has all required.
Or schedule.
Clinical site.
Plan to be completed by early.
And the manufacturing is excellent.
Yes.
With only a few observations.
Readily address.
E S T E R alright.
Frank in Paris.
Right.
Scheduling an eight.
Excellent.
Still believe in <unk> corner.
<unk>.
<unk>.
At 2023.
And then there are no treatment.
<unk> 98.
Very positive.
Significant clinically.
Overall survival data.
L as well as Frank Irebi.
Tomorrow.
Yeah, I hope I'll be.
Accurate and timely manner.
And a call the inspection.
Taliban.
Generation T y.
Activation it's detail.
Right.
[noise] humorous at our legs.
Triple negative breast cancer.
For a power madness.
And we are excited.
Clinical opportunity.
<unk>.
The agent at target.
Humor microenvironment.
<unk>.
With our reason an airplane at this tiny.
The emergency services.
Perfect oncology.
Amy developed ILP for everybody.
Emily Kelly.
Pipeline.
Q well characterized.
Alright.
M T right now.
S. R S 388.
And I also need.
And immune suppressant.
At campaign.
And that's <unk> that's S T L E K.
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Antibody directed at <unk>.
Four Q macrophages.
Macrophages tolerate more.
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With a merger with Sir.
We must have appointments or N E T T M antibody.
Emily.
Hello.
Right now.
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Humor migraine.
And that has been cancelled.
Reactivate.
Like out right.
Some side effects.
Combining.
<unk> strong.
Rationale clinical data.
Alright.
Each of these programs.
Okay.
Right.
<unk>.
Including one.
In practice.
We look forward to that surface oncology.
Alright and can help.
Alright quite are digits.
Our portfolio priority based on <unk>.
Alabama.
And now.
The rash.
Thanks, very much Theresa good afternoon, everyone.
With respect to totally Panamax. Several strong data sets were presented at <unk> across different human types of settings together the showcase the consistency of activity of Tori proud of that at the next generation P. D. One.
Main excited about as potential fraud, the backbone of combinations other normal Asia, particularly with our manager cellphone coverage.
Hey, now highlighted in Africa included festival at the final overall survival analysis typical studied nasopharyngeal cause.
The significant benefit in overall survival inventory pilot hazard ratio 0.63, the consistent effect on overall survival across PDL, one states since of course, particularly important.
There are no currently approved chemotherapy P C.
Updated data sets will also prevents the non small cell lung cancer. The final overall survive unannounced pivotal choice zero, one study comparing chemotherapy plus or minus tori showing it hasn't ratio of seven three favorite Vittorio as well as positive data in the neutral or study a large phase III.
Nonsponsor Lancaster study showing a hazard ratio of coins for.
Four event free survival favoring Vittorio.
Finally based on towards like results are presented that application is statistically significant benefit triple negative breast cancer.
Earlier this year <unk> also announced that the phase III study of Tori.
Walter lung cancer was positive results anticipate to be present.
Yeah.
You will also be running a large multinational phase III study with an anticipated start later this year to include U S sites.
Pulling toward Palomas in combination with that Dcla at Buddy is consolidation therapy limited stage.
Lung cancer.
This will be the first multi national multi.
Multi regional registration studies Tori Palomas and include U S patients and this is a great example of how combinations.
Cross human types could enable product registration opportunities to worry about them out in the U S.
Regarding oxygen.
Phase one two a study looking at the 22 digit combination you're currently active in the U S and will generate data subjects with its double combination.
To the encouraging more <unk> evaluating teeth bared such a combination in HCC will have have to send you the cost.
<unk> that we were planning for the expansion phase and our current phase 128 study given the high disease linkage with I P. V. I expression. HTC is also an indication that are shown promising activity with Srs 388.
Evolving tillich data from other competitive programs into info I'll further development of this combination as we have previously stages.
Regarding a recent manage with some colors should we are very excited about the potential combined with some assets with Tori palomas.
388 27 asset.
Encouraging activity, both as monotherapy wholesale lung cancer as well as in combination.
The nation the main checkpoint inhibitor day by the cellular customer <unk>.
Importantly responses have been shown in Pryor P D. One experience as well as <unk> subjects.
Anticipate presentation of the full available date fifth and quarter for this year for the monitor everyday.
And quarter, one next year for the combination states that in a SEC.
After we complete our service furniture.
We will have the opportunity to work with a wider portfolio targeting now.
The T cell, but also the tumor micro environment with a potential synergies that that could bring to improve patient benefit.
Hulu and there's a broad portfolio of the coming week.
As to how to best invest in and prioritize these assets taking into account timelines.
<unk> environment unmet medical need a potential patient benefit.
The ability of technical and regulated success costs and other factors and we look forward to sharing more specific clinical plans across assets Subitize later in the year.
Now turn the call over to achieve financial upset savings too.
David.
Thank you rush.
Day, we reiterate our earlier financial guidance for 2023.
Project revenue growth from accelerating separately sales and the launches of February you Detica auto injector and once approved guernica.
<unk> on body injector and to our account.
For the full year, we expect to record at least $275 million in net sales with at least $100 million Similarly product credit.
We continue to tightly manage our expenses and even with the expected edition of surface oncology related operating expenses in the fourth quarter.
Anticipate meeting or prior 2023 guidance range of $350 million to $335 million for a combined R&D SG&A expenses.
Range excludes any upfront or milestone collaboration payments or the cost of the surface oncology Archer.
For my review of second quarter financial results I'll touch on just a few highlights of the details are in the press release K and 10-Q filed this afternoon.
Net revenue was $58.7 million during the three months ended June 30th 2023, representing an 81% increase over the prior quarter.
This included $31.7 billion net sales of you Detica and $26 $7 million net sales of separately as well as approximately $200000 to loyalties, we received from a license to our <unk> formulation.
Cost of goods sold for the three months ended June 30th 2023 $24.8 million.
Recall that eugenic Cogs includes a mid single digit royalty on net sales payable through the first half of 2024.
Similarly, Cogs includes unload 50 per cent royalty on gross profits.
We continue to focus on keeping tight control on operating costs and research and development expense for the three months ended June 30th 2023, and 2022 was $23.3 million and $41.6 billion respectively.
Difficult decline in RMT expense compared to the prior year quarter, primarily resulted from the reduction in scope of the tour come about collaboration agreements and also the capitalization of certain Yosemite cost inventory of 2023 that breaks benefits R&D during the second quarter of 2022.
We are beginning to realize the savings from the cost cutting program, we announced earlier this year.
Primarily as a result of reduced head count.
General and administrative expense decline.
SG&A was reduced to $45.1 billion in Q2 23.
From $51.3 million.
The second quarter of 2022.
With higher revenue and lower expenses, we reported a lower net loss for the second quarter of 2023 $42.9 million or 49 cents per share.
Paired to a net loss of $52 million or 65 cents per share for the same period in 2022.
We expect operating losses will continue to moderate as product revenues increase.
And as we continue to constrain operating expenses.
Cash cash equivalents and investments and marketable securities for $144 $7 million as of June 30th 2023.
Compared to $191.7 million at December 31, 2022.
We expect the surface oncology merger to add $20 billion to $25 billion in cash to our balance sheet at closing.
We have also stated that the merger.
Will reduce our R&D expenses through 2025 by approximately 50 million dollar budget.
They will provide a bit more detail on our assumptions supporting that assertion.
Prior to the surface deal are major planned R&D activities through the 2025 second period included the Orange phase three clinical trial to expand for a panel about stable beyond.
We also plan to phase one two clinical trial to evaluate CHS 006 or tissue targeted antibody in combination with foreign combat.
Load by initiation of a phase two three registration study.
As well as completion of pre IMD activities for ILP at a party and a phase one too clinical trial.
Additionally, we had planned to advance to other preclinical programs to I N G.
Following the completion of the surface oncology murderer.
Polio prioritization project to determine which programs are most promising and competitively position.
We currently expect that we will advance that's R. F 388 in combination with <unk>.
For a second time non small cell lung cancer.
114 in combination with foreign Paramount for first line heading next.
Sir.
As well as certain other projects that make the cut.
Multiple programs will not make the cut.
Those we plan to stop did not initiate or the gate.
Sending additional competitor data.
And we will provide additional details that are industrial event in the fourth quarter.
You're focused on ensuring the success of our new product launches and generation of anticipated revenue growth.
And we will continue to maintain tight control over our operating expenses as we aimed toward a potential return to being cash flow positive over the course of 2024.
And the call for Ginny for closing remarks prior to the question.
Thank you ma'am, David we're pleased with our progress this quarter.
Now take your questions operator. Please proceed.
We will now conduct a question and answer session. As a reminder to ask a question. Please press star one one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one one again please.
Please stand by while we compile the Q&A roster.
My first call comes from the line of <unk> of Citigroup.
You're wrong.
<unk> regarding your Deneke could you talk about the relative contribution of the auto injector, which was launched in the middle of the <unk> the quarter and whether you're seeing a mix shift away from the prefilled syringe or or injectors growing share as well and then more generally once you get the <unk> on the market as well could you provide any <unk>.
<unk> comments around the the relative split in the market between Prefilled syringe auto injector and Andy OPI. Thanks.
Thank you for the question.
I'll have Paul Rader R. Chief commercial officer addressed that for you I'll just preface his remarks by saying whoever that we <unk> of course is our foundation products in the face of our sales. So our efforts in bringing forward. All these various presentations is really to solidify.
Revenue stream for the mid longterm identical.
Deneke and with that said I'll <unk> I'll go ahead and answer your more specific questions regarding relative contribution of auto injector PFS in the future of our body.
Yeah. Thank you. Thanks for your question Nigel So just to just to.
Recap the market here is about 42% of the iPhone market and then the other 58%.
He had off a segment.
The PFS operates in the in the ear off this segment today. So the launch of the auto injector any opioids is going to enable that you direct a franchise to really target that 42% of the market is dominated now bye.
That equates to about 550000 units per year. So.
So in tune because we just we just launched the auto injector in June we're still working through <unk> coverage, we're working through getting it on with formularies. The operational aspects. So it was relatively minor contribution to the overall you dedicate business in queue to that over the course of the suck.
Have your data into 2024, we will now have three presentations to attack the entire remarks.
And the auto injector, an opioid will enable us two shots on goal ended at 42% of your approach it's hard to project right now the actual with the actual splits going to be until we get all three into the market and.
See what the payer coverage is going to look like competitive dynamics, but suffice it to say we feel very very.
Encouraged about our opportunity to be able to differentiate with three presentation and grow share over the course of the <unk>.
Can have your 10 to 24.
Thanks, and then just two other quick ones on similarly, obviously, they're very very strong performance in the second quarter. Following the queue code can you just comment briefly on how much of that was contributed from inventory or stocking and then on the broader question just of the sales projected through the whole company.
You reiterated the guidance of or at least 275, obviously you were 10% above the upper end of guidance. This quarter are you thinking about raising the the guidance for the full year. Thanks.
Hum.
<unk> well I'll take we'll give you one of those two natural.
And then we'll move on to another caller I'd part can you just answer the question of this I'm really sorry for that.
Yeah, So nodule as as we reported.
Certainly as we reported and.
Unexpected the activation of the queue code was gonna unlock.
The reimbursement hurdle and that occurred so all of the.
Sales increase for similarly was driven by the quadrupling of demand.
And.
And while you do see maybe some higher levels of inventory, which was normal with your at a high launch acceleration period like we are now so when you have it.
Dozens and dozens of new accounts ordering it and ordering regularly you're going to see the wholesalers keeping inventory, but that those sales were driven largely by demand growth in market share growth organic into the business.
As it relates to the the guidance.
MC David mentioned, we're maintaining guidance of $275 billion for the year with at least $100 million coming for similarly.
I would say that I would say that we feel very good about the attraction that we're getting in the market for <unk>.
And Q2, we'd like forward trajectory that we're seeing with with respect to that the market uptake.
Think that we've heard critical mass with respect to similarly.
We've administered more than 65000 doses and I think once you earn that trust.
The ophthalmologist and they have confidence in the company and confidence in the product I think you are in a better position. So I think that we definitely have some strong momentum going into the second half of the year I would certainly.
Yeah. Thank you very much.
Thank you very much.
Please keep your questions to one in a follow up if you would please for time limit. Thank you very much standby.
Our next question comes from Robin <unk> of Truth Securities Robyn Your lines open.
Alright, Thank you and congrats on all the progress this corner I got my My main question is can treat maybe you can give us a little bit more color about what is in <unk> onsite inspections.
Inspections that are scheduled and and what logistically has to happen for the F. D. A and that'd be my first question that I have a phone line.
And thanks wrapping.
Hello.
Or at.
There are always at.
At 10 here.
Sorry about that.
With a covered.
Travel restrictions China anymore.
L a manufacturing inspection.
As you know like Paul.
We have right now.
Right right.
Right.
Upstate.
Alrighty and we will.
That clinical Ssilence excellent.
Pretty straightforward.
Max.
Streamlined.
And then at the address.
A different dimension.
And that's.
Coming up with an accident.
Typically you aren't towards that.
Like the deadline.
February when he got there will.
Will be collaborating closely with our rpms tried to get <unk>.
Yes.
And how long it took him to jail.
Alright.
But I will say that the FDA.
To honor their word.
Campaign that way.
Find out the line in fact, the manufacturing and.
Extra onions, we are went up the stairs.
Okay.
And for that I am very grateful.
<unk>.
And <unk>.
You're welcome.
Yeah I was just just to elaborate on that they have to go over to China again, and they've already scheduled the exact dates 19 that they won't have the delay.
Yeah, there's that uhm the pharmacist that you mentioned market, Sharon <unk> kind of going from 11% to 12.2 mm now with the body with the auto injector Akitas talk a little bit about you know the <unk>.
<unk> as how quickly that uhm auto injector might contribute to up taken should there be like.
Steady stream of share increase or would you think it's more like.
And loaded.
<unk>.
Yeah. Thanks for your question Robbins, I think with you Detica auto injector.
It's likely to expect more of a steady increase over the second half yours, we continue to get air access.
And start working.
On the operational implementation.
Particularly in the hospital segments, where you're gonna get <unk> committees.
Order sets in the EMR, so hospitals don't move quick so that.
It takes a little bit of time, you'll be getting the most important thing is there has been really positive receptivity by the customers.
For having an alternative volume growth.
Patients that wanted to.
Have it at home injection experience.
Auto injector fish that needs. So so really it's just working through the operational and the.
Are access.
Issues that we will continue to to work out over the course of the quarter of the second half of the year.
Alright, congratulations guys. Thank you.
Thanks, Robyn Uhm, just also with respect to the auto injector pump. It further but I think that we've got between 1005 thousand training devices, but the auto injector out in the field that will call. We have Robert <unk> see me demonstrates.
Yeah, the Mark that receptivity is very high.
Great job by the corporate upstream too.
Provide a device that so easy and flexible to use for a patient convenience.
Thank you very much.
One moment for our next question.
The next question comes from Michael Middle Covid of TB Conan Michael Your line is open.
Hello, Thank you for the question.
I know, it's early days, but I'm curious if you could give us a sense of how the some relaunch is doing so far.
And did the actions of any of your Biosimilar competitors surprising.
And then I'm also specifically curious how your collaboration with cost plus drugs is going so far can you see any early indicators that this channel could perhaps be more meaningful for Houston reason, you initially thought or that you might want to expand the collaboration to other products.
Thank you Michael for the question.
But that one or two Paul Rader, but I would say that we generally speaking we felt that the market did not eight another high cost alternative in this market you felt the best place to be competitive with a low cost alternative.
Product is only been launched a thing for less than a month or maybe a month as of now. So I think it's fairly early days with respect to our market formation or to make conclusions about how the market's going Paul may have some additional colored for you and your other topics.
Thanks, studying and thanks for your question Michael.
There's about a rule it out typically comment on the actions of our competitors, what we really focused on was where we.
The opportunity was in this market.
And that's to bring a transparent low price product to address this.
Six orben a problem of of the cost of that a little bit about treatment.
Our decision.
Partner with Clark Cubans Cost-plus drug company really centered around two reasons number one.
Both Mark Cubin and coherence.
Figures and we considered biosimilar out of Lehman that debit tree is an ideal opportunity to partner together to innovate within the highest drug category.
Second we both share ambition to offer patients safe affordable medicines are transparent prices <unk> summary, this idea.
Really into that bottle.
Unfolds over the course of the year as we.
As we expand the coverage.
Coverage of the distribution network it <unk>.
Educate providers employers healthcare systems about <unk> and its price point is something that we are.
We're executing upon in earnest and I think we'll be able to report more on our performance that are Q3 Cole.
Just some additional comments Doug.
Karen with Paul's remarks.
We view, we view the bill towards our target, 10% market share in the long term trajectory out the 26 and 27. So we don't think this is a market where you come and have very very highest sales out of the K. We think this is going to build over time and our strategy is to build this market up over time.
As we go forward.
Larry access with Antevert at 2023 limit how much we can do this year, but I think starting next year and then more significantly into 2025.
I think we'll see a lot more attraction there so I would I would just manage expectations that way.
Okay. Thank you.
Thank you very much.
One moment for our next question.
Our next question comes from Douglas South of HD Wainwright Douglas Your line is open.
Hi, good afternoon, and thanks for taking my questions Uhm.
They're getting maybe.
Following up on that last question or your last comment you know you expect us to take place over time.
And.
Being realistic about you know the contracting situation with with with add fee for 2023.
Does that suggest that your own strategy you have an expectation that it will evolve and that Wow, you had not necessarily been that asking for some of the large payers.
Or pbms in 2023 that over time, you will will look to increase your penetration there.
Do Ya.
Yeah. Thanks.
Having been in this market for a long time, they they own this market.
Or the innovator and I think there is significant incentives for Ivy to continue to have significant market share as the market turns towards Biosimilar. This year. My point simply is just going to take some time to work through all that <unk> is going to show up in 2025, I think that will be an important events protraction, but but I I would say.
A squeeze are more linear trajectory for a market like this.
As opposed to the acceleration for example that we're seeing under similarly, right, where you get something like <unk> and there are significant.
Opportunity to move the market more quickly. So I think each of these markets are just a little different and I just think the trajectory <unk> little flatter. Moreover, time, but I think it'll it'll pick up <unk> 24 and 25.
Okay, and then just a quick follow up in terms of you Danica it sounds like most of the growth just came from the <unk>.
Any comment what drove I mean refinance it seem that we started to see his.
Great to see that product start to move in.
And in the right direction again.
I'll take that one so I think that the progressive market is very dynamic.
With people coming in and out and so forth, but I think we've effectively managed our average selling price of that market to be attractive we maintain a very high average selling price there and I think.
That is yielded benefits and we will continue across the additional presentations are any further.
Further comment on the performance of the PFS. Thank you too.
I think it's a combination of things, but any mention but also.
Having additional presentation launches has created opportunities for the you Detica franchise, where we didn't have before and so whether that's with payers are where the doubts with.
Clinics or hospitals, they see the value in having.
Device off tricks plus I think I will go into this for competitive reasons, but.
Outstanding execution by the by the commercial team <unk>.
Strategies.
That are driving organic demand and and that is bearing fruit and we expect that to continue with the second half of the year. So I think it's a great estimate that you are five into the lifecycle.
We're seeing the second wait for your dedicated the device options. We continue to expect market sure it'll growth in the second half year and beyond.
Okay, great. Thank you.
Thank you very much.
Moment for our next question.
The next question comes from the line of Bulgy Prasad.
You are [noise].
Good evening. This is Sha <unk>, taking I'll has this just so quick while on tolerate seems to lack your partner <unk> announced that it was approved in China for extensive stage small cell lung cancer, you may based on <unk> positive survival results, if the O S <unk> I've heard of that.
<unk> first line options in the U S for extensive stage small cell lung cancer, such as <unk> would you consider changing your product strategy with Corey as <unk> as he could've potentially for <unk>. The U S market and if I remember a craft the F. D. A has granted tolerate all.
Can drive designation back in April 20th on the two which was after the <unk>. Thank you.
Thanks for that question that that's a very interesting observation perspective also.
Rushed ISR Chief Medical Officer.
Thanks for the question so.
And my comments that the small cell lung cancer was positive.
Get to actually present the data. So we anticipate that that will be presented later this year.
As you know the current standard is it on the side.
In terms of the.
Can't stand the therapy plus or minus.
<unk> based on actually a very marginal overall survival benefit for those too.
Agents Uhm I think as we look at the U S or strategy is is is.
I mentioned, the fact that we will be initiating a earliest stage studying small cell lung cancer. That's limited stage and that's without combination really outside N. P. C. A major focus will be with combinations, we do butare palometa as very.
Very good PD, one next generation, which which we will form the foundation of combination therapy. So that's really our strategy.
Indications over and above.
A carton and NBC indications.
I think it is really an excellent point.
C.
<unk> continues to demonstrate really strong efficacy with a grade safety profile.
And settings monetary priorities conjunction with chemotherapy.
We think this sets it up very very well for combinations.
Have keen interest in pursuing combinations for the number of products post approval of the MPC indication of for example.
Seize or others combination agent. So we expect to be busy on the deal.
Once the story gets approved to really.
Broadly proliferated to sign into college.
<unk> very helpful. Thank you.
Thank you one moment for our next question.
Our next question comes from the line of Chris shot at J P. Morgan Chris Your line is open.
Great. Thanks, very much just just two for me I'm, just trying to make a biosimilar humira in the market I. Appreciate this will take some time just given at these positioning et cetera, but I.
I guess I'm still trying to my hands around do you kind of think of this as pairs and you.
You know kinda channel and making annual decisions about either what Cup park, they're gonna cover or how they're going to approach. This or do you think this is a market. That's in flux, where you can see kind of multiple decisions being made in a given year just as we're trying to kind of evaluate the the evolution of this.
Question I want to make sure I've got my hands around this site just following the surface acquisition and with the portfolio reward here's helpful. But it just as we think about kind of 2024 opex relative to 2023, just directionally is that a similar level of spend does it up next year is down I'm trying to kind of balance the some of the synergies you're talking about.
Relative to what the baseline expense might've been otherwise.
Just any directional color would be kind of appreciate their thank you.
Thanks, Chris So let me let me think the first one with respect to do summary.
So is it.
Similar story, and then I'll, let mcdavid stairwell address your questions Sir per yard over the next year.
Directions unspent.
I think that it's very very early days with.
With respect to the humor about similar opportunity there's a lot of people in the market. There is a diversity of pricing strategies diversity of channel strategy is going forward.
Folks.
I I mean.
<unk> sort of wax low wax and so on so I think that's mark information is gonna take a while for this to sort of shake up so I really wouldn't make any conclusions about that maybe until we get into next year and see how things are kind of going I think it's just way way too early to say are all winners or losers with respect to the surf reorganized.
Tax and spend.
Settling that went over to make David Stillwell for comment.
So Chris I think it's too early for us to be putting up your a direction, where R&D spend as chewing specific the 2024 I will tell you though that.
We are beginning to reap the benefits of the cost cutting programs will be put into place. The sheer and we are intensely focused on constraining b expense mind throughout this company and we are also intensely focused on returning to being cash flow positive.
Over the course of 2024 so.
All of that is very much top of mind for us.
As we update this company and as we make decisions about about R&D programs and we look forward to updating everybody in the fourth quarter.
We've had our portfolio prioritization program post closing of the surface oncology acquisition.
I think that'll be the most relative time.
<unk> to be able to provide some more information about that.
Just give you one more on that one little more color.
Where we do not anticipate starting any.
Expensive phase III next year, those with the way the portfolio is possession those like your role in the 2025, when we anticipate heavy revenues or that so we're we're not going to go out and hang out real expensive phase III studies to make.
100 $100 million.
That's right David pointed out we're really focused on driving the business back to profitability cash flow activity next year.
And so we're going to we're going to start there.
Also the other point I would make is we have a very strong track record here of delivering on our projections for spending control.
Last year, we said, we'd take our 435 spend down to about three and a quarter. We've done that we did a riff.
And we said, we'd recognise savings put on that.
Gone ahead and delivered on what we said on the spending side and so I think you'll see us continue with that sort of very very tight discipline. We don't have a lot of additional heads if we're going to add.
Just a few with respect to the sort of psychology merger. So I think we're relatively tight fisted when it comes to spend it.
Alright, I appreciate the call. Thank you.
Thank you one moment for our next question.
The next question comes from the line of Jason Gerberding, Jason Your line is open.
Hey, guys. This is five on to tell on for Jason.
Two questions for me first time, Lucentis and you look at the market opportunity are you seeing any surprises in terms of pricing brand share attention or just the shift of market to other treatment alternatives and then the second on gross margins. Maybe if you can provide some commentary on how you see gross margins in the second half of two.
23, and in 2024, it looks like we're seeing stepped down even absent one time inventory costs. So just wanted to get some thoughts on how we should think about that moving forward. Thank you.
Thanks.
We're actually very pleased with the way the Lucentis biosimilar suddenly market.
Shaping up for those.
I had the opportunity to attend.
The American society of retinal specialist be in Seattle at my entire commercial did last weekend, we made a presentation on there and what really struck me about that was the way it called <unk> really has been embraced by the ophthalmologist at the very very solid partner as I indicated earlier, we have.
Over 65000 injections now.
The ophthalmology market is one in which doctors have long term relationship with <unk>.
At least facials 10, 15, 20 years and that means there's trust and what that translates to is that these ophthalmologist F. Two in a very similar fashion trust manufacturers and the companies.
Had issues with new products that have come in and said they really wanted to make sure that any product that shows that it's safe and efficacious for their patients. But this means that you have to sort of get a critical mass of administrations under your belt and then they know that it's safe and efficacious product and working well you've done that and then they will adopt into your practice.
We've seen that too this is Paul recital. So overall, we think thats going very well.
I think Paul reiterated places, where we're focused in terms of getting the scripts and Paul.
Yeah.
I think the getting through that.
Q code was really the the primary barrier that opened up a lot of practices that we're ready to adopt biosimilar stitches.
One of the the ability to build electronically and not take on the annual process. So I think what we're seeing in the market now is a real a real.
Optimism around Rowland Biosimilars could play in the market and which similarly brings to them in the Ranibizumab class is a product that.
Is interchangeable which means that they can feel confident.
That they can switch a stable we said this patient to similarly and get the same results.
And that level of confidence in the safety.
Is really baring out now.
The experience, but the doctors are seeing they told US last week on multiple occasions that the product is delivering on the clinical profile and all of that now just breeds continued off to optimism for the for adopting similarly, and it will help to contribute to share gains.
The second half of the year. So I think we're really hitting our stride here. Yeah. I think just wanted us from expert Henry David I think the interchange ability is really important. This is a non by consulate molecule. So this is this is really an amino acid sequence and we have exactly the same amino acid sequence.
The same formulation.
The same.
Excipients and buffers in th and so on so this is this is really.
The same product being administered so I think that gives the physicians amount of August .
A lot of comfort and confidence his pulse edge over now.
Birth date issue with the cute so.
I think we're rather bullish on them.
David.
The other better.
Our gross margin is obviously going to be a function of the product next and the cost of the various products.
Similarly sales increased similarly, as a larger influence on the overall gross margin and similarly cost of goods includes a low to mid 50 per cent royalty.
Gross profits.
So.
<unk> revenue mix evolves, so will the gross margin.
And next year.
Mmm, we'll have the increasingly.
Control.
Gold and the overall, Chris arguments however.
One of our next next year that you've done a code of.
Royalty comes up exactly if you do it.
Royalty political digit royalty.
Net sales bill.
Hold off.
In July 24, so that'll be a business that will.
Thank you. Thank you for your question.
Thank you please stand by for our final question.
Our final question comes from the line of Ash from from UBS ask your line is open.
You guys. Thanks for taking my question. So just wanted to ask about the pricing advice Malecki Maietta you can just type of.
Icing is a one off or does it send the complaint for you to price <unk> lean forward.
Is this type of level of discount that you can get the existing products much faster now what is what you were previously thinking.
So I just would be helpful to get some comments on that thanks.
I think so.
Each of the product.
<unk>.
Specifically for the market that there and and our conclusion is indicated or with respect to this matter about summer pricing is he really didn't need a another hire high priced high whack competitor in the market. So we felt this was the right place to go and we take the strategy this market.
Is unique built from the bottom up with a very low price that does not apply to the other markets that does not apply to college 80 are competing ones or even <unk>.
The highest the highest ASD that for five years.
So I think it's.
Particular pricing strategy is unique to what's going on over on the Meyer about similar side of the business, which is part of the key and.
And a number of other moving parts.
Okay.
Thank you very much at this time I would now like to turn the conference call back too Tinny Lanphear for closing remarks.
Thank you operator, thank you all for joining us on our Q2 2023 call. We are pleased with the progress that we've made so far we look forward to seeing you on our on our next call to be some time in November . We further look forward to seeing you and analysts day, which would probably be in late November December of time.
Frame.
Both the merger closure. Thank you bye bye.
Thank you this concludes today's sky.
You may now disconnect.
Mmm.
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