Coherus Oncology, Inc.

Good day, and thank you for standing by. Welcome to the Coherence Biosciences Incorporated Q3 2022 conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 1 1 on your telephone. You will then hear an automated message letting you know that your hand is raised. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Marek Ciesiowski, Senior Vice President of Investor Relations. Marek, please go ahead.

Thank you, Raul. Good afternoon, everyone, and thank you for joining us. We issued a press release earlier today announcing our financial results for the third quarter of 2022. This release can be found on the Coherence Biosciences website It is also attached to our form 8K. Today's call includes forward-looking statements regarding Coherence's current expectations about future events. These statements include, but are not limited to, our ability to gain approval for multiple new products and launch them, timing of the end of our decline in revenue and timing of our ability to gain market share for any of our approved products, expectations of our revenue growth, projections of expenses and revenue, our future manufacturing capacity, and our ability to return to profitability in 2024. All these forward-looking statements involve substantial risks and uncertainties that are beyond our control and could cause actual results, performance, or achievements to differ from results, performance, or achievements implied by the forward-looking statements. These statements are not guarantees of future performance and are subject to substantial risks and uncertainties that are discussed in our press release that we issued today, as well as the documents that we filed with the FCC. including those in our quarterly report on Form 10-Q for the third quarter that we filed today. Forward-looking statements provided on the call today are made as of this date, and we undertake no duty to update or revise any forward-looking statements. Quarterly results for the third quarter are not necessarily indicative of results for future periods. With me today on today's call are Danny Lanphier, CEO of Coheris, Dr. Teresa Lavalle, Chief Development Officer, Dr. Rosh Dias, Chief Medical Officer, Paul Reeder, Chief Commercial Officer, and McDavid Silva, Chief Financial Officer. I will now turn the call over to Danny.

Thank you, Mark, and good afternoon, everyone. Thank you all for joining us on our Q3 2022 conference call. Today, I'll first review for you the market situation with respect to our two products and provide a little color for you. Following that, our CFO, Mr. Stilwell, will discuss our financials in further detail, particularly our efforts to reduce expenses as we focus on driving back to profitability. Our Chief Commercial Officer, Mr. Ryder, will provide an update of our similarly launched progress and eugenic market overview. And finally, our Chief Development Officer, Dr. Teresa Lavalle, and our Chief Medical Officer, Dr. Raj Dias, will review our I.O. pipeline progress. This past quarter, we became a multi-product company as we continue to effectively execute on our strategy of funding our innovative IO pipeline with revenues from our approved products, thereby positioning coherence for long-term growth. Now, last quarter, the Pegasus Gradsden market became increasingly more competitive in anticipation of upcoming launches of new competitors. The incumbents in the market intensified their price discounting, which impacted Denica's revenues for the quarter. We continue our strategy to manage pricing for Udenica to support the expected on-body injector launch in 2023, which we believe will serve as the next wave of Udenica market share growth. We project the Q3 2022 to be our revenue nadir, as we will have now begun a series of launches, making us a multi-product company. Our second commercial asset, similarly, has now launched into the $7 billion anti-VEGF retinal market, and we look forward to the subsequent plan launches over the coming months. As we move through this period of anticipated revenue inflection, we continue our efforts to identify efficiencies in the business and reduce expenditures. This effort is bearing fruit, and Mr. Stilwell will provide additional details on an additional $75 million in expense reductions per our plan through year-end 2023. This quarter, the company's revenue growth driver baton passed from Udenica to Simerly. Our initial launch trajectory for Simerly suggests that we are on pace to deliver at least $100 million in revenue in 2023 from this product. With the anticipated launches of Tor Palmat, U Simerly, and Udenica OBI next year, we look forward to growing our top-line revenue to at least $275 million across the portfolio. which represents the lower bound of our internal forecast for 2023. Given our projected top line growth and active management of expenses, we are projecting a return to profitability in 2024. I'll now turn the call over to Mr. Stilwell for a review of the company's financial results. McDavid? Thank you, Denny. The details of our financial results are in the press release 8K and 10Q we filed this afternoon, so I'll focus on just a few highlights. For the third quarter of 2022, we reported an $86.7 million net loss on a GAAP basis, or $1.11 per share, compared to a net loss of $38.5 million, or $0.49 per share, in the third quarter of 2021. Cash used in operating activities was $37 million for the third quarter of 2022. Udenica net revenues were $45 million, a decline from the prior quarter resulting from lower share and lower net price due to increased competition in the Peckville Graston market. Eugenica cost of goods sold increased significantly in the third quarter of 2022 to $35.2 million due to the write-down of $26 million of inventory at risk of reaching expiration prior to sale. Recall that our Eugenica strategy includes careful stewardship of our average selling price. The write-down is in large part the result of our choice to not pursue larger volumes of sales at steeply discounted prices. The inventory we wrote down originated through manufacturing orders placed in 2019 and early 2020 before the COVID pandemic impacted our business. Gross margin for the third quarter was 22%. Excluding the $26 million write-down, gross margin for the quarter would have been 80%. including the mid-single-digit royalty we pay on Eugenica net sales. Research and development expense for the three months ended September 30, 2022, was $45.8 million, as compared to $54.1 million in the same period of 2021. The decrease was driven by lower development costs as several clinical studies were completed in 2021, partially offset by higher compensation expense. Dining, general, and administrative expense for the three months into September 30, 2022 was $44.8 million, compared to $39.9 million for the same period in 2021. The increase was primarily driven by higher commercialization expenses to prepare for multiple anticipated new product launches in 2022 and 2023. We ended the quarter with cash and cash equivalents of $287 million. compared to a balance of $275.5 million at the end of the prior quarter. The FDA's approval of similarly during the third quarter was a milestone that opened access to a $50 million tranche of debt through our credit facility with PharmaCon advisors, which we drew in late September. We are reducing our combined SG&A and R&D expense guidance for 2022 from a range of $375 million to $395 million previously. to $375 million to $385 million. We continuously review processes, programs, vendors, and headcount for additional opportunities to reduce costs without impacting our launches and overarching strategy. For 2023, we have identified an additional $75 million in such expense reductions, and we expect total combined R&D and SG&A expenses to decline next year relative to 2022. Today's reduction in 2022 R&D and SG&A expense guidance results from identification of cost savings across the company. With anticipated rapid top-line revenue growth expected from multiple new product launches through next year, as well as the reduction in 2023 operating expenses, we believe we have the ability to execute our new product launches and continue our R&D investments. As Denny indicated earlier, we project these developments will return us to profitability in the first half of 2024. With that, I'll turn the call to Paul Reeder, our Chief Commercial Officer. Paul. Thank you, McDavid, and good afternoon. We are continuing to make excellent progress in the commercialization of our product pipeline and plan to launch four new products over the next 12 months, led by Simerly, which launched into the retina market on October 3rd. Let me begin with Udenica. Our strategy is to maximize long-term value of the Udenica franchise and to optimize the trade-offs between price and share and to maintain a base share that will enable growth when our on-body device launches in 2023. Velasta OnPro retains 45% market share, so the on-body segment will serve as the next wave of market share growth for the Udenica franchise. While quarterly fluctuations with ASP can be expected, evidence of our overall pricing discipline is reflected in Udenica's ASP, which currently holds the second highest ASP in the class. This is important because a higher ASP will be a competitive advantage against Elasta OnPro when we launch our on-body device upon FDA approval. For the third quarter, Udenica net sales were $45 million compared to $60 million in the prior quarter. The majority of the sequential decline was driven by a 12% decline in demand and a 9% decline in net selling price. Market share was 13.5%, a 1.5% decline from the prior quarter. Overall demand units in the third quarter declined 12%, primarily in the clinic and non-340B segments, respectively, which were impacted by irreversible price discounting by competitor biosimilars and reduced commercial payer coverage in some markets. Now, I'd like to talk about the rest of our product portfolio, which includes Simerly, our Lucentis biosimilar, Torpalimab, our PD-1 inhibitor, and Usimri, our Humira biosimilar. As Denny indicated, Simerly is now our revenue growth driver as we enter the $7 billion anti-VEGF market. Biosimilar market formation is now well underway, we were very pleased with the commercial launch, which commenced on October 3rd. As you know, Simmerly was FDA approved as the first and only fully interchangeable biosimilar to Lucentis, and with all five FDA approved indications, both dosage strengths and 12 months of interchangeability exclusivity. This complete label has been well received by retinal specialists, giving them the confidence that they can safely transition currently treated Lucentis patients to similarly and expect the same clinical outcomes. While we're only six weeks into the launch, let me share with you some very encouraging early data points. First is sales. Launch to date, we sold over 1,800 units. In our first month, our market share was greater than the Biogen biosimilar, which launched in July. Second, we're getting excellent access to prescribers as our sales and key account teams have delivered more than 1,600 similarly presentations to targeted retinal specialists. This reinforces our decision to hire an experienced and dedicated retina sales team who have extensive retina experience and existing customer relationships. By reallocating resources from Udenica, total end count. Third is market access. Similarly, has confirmed coverage now on 100% of Medicare fee-for-service lives, enabling the reimbursement pathway for claims submitted under Medicare Part B, which is the majority of patients with WED-AMD and 40% of Lucentis business. Our application for a permanent Q code has been submitted, and we expect to launch the code due to 2023. Given this positive reception of similarly by providers and the success of the launch so far, we project that 2023 revenues will be at least $100 million. We will, of course, keep you updated from time to time as the launch progresses into 2023. Now, regarding to our PaloMap, we're very excited about the potential to bring to oncologists and patients what would be the first and only PD-1 inhibitor indicated for nasal pharyngeal carcinoma, and to establish a new standard of care in all lines of therapy, including first-line. Our oncology commercial capabilities have been built to scale, with significant overlap between eudectic customers and toropalimab-targeted prescribers. Therefore, the launch of toropalimab will be efficiently integrated into our existing oncology commercial infrastructure. Commercial launch preparations are on track, and the field-facing teams have been fully trained. We will be ready to launch Tora Palabem directly upon FDA approval. Now regarding UCIMRI, or Humira Biosimilar. UCIMRI was approved by FDA last December, and we are preparing for launch in July 2023. EMEA's U.S. net sales were $17 billion in 2021, and we look forward to competing in this large market. We continue to believe that price, supply, and product presentation will serve as the key criteria used in making formulary decisions, and USMRI is positioned well to compete on each of these criteria. With respect to supply, we are prepared to commit to supply guarantees and have invested more than $45 million in large-scale, state-of-the-art manufacturing. Our first-year manufacturing capacity exceeds 1 million units, or about 10% of the overall market, and we have the potential to triple that capacity in the current facility. At the time of launch, we will have 500,000 UCIMERI units ready for distribution. We will be a high-volume, low-cost manufacturer, enabling us the ability to also deliver a highly competitive price. Our USIMRI strategy is thus well aligned with the formulary decision makers, payers, and PBMs, as we both seek to make the adalumin map biosimilar market as large as possible, as quickly as possible. We see this alignment as a source of competitive advantage. In short, we are confident we will deliver a compelling value proposition and be a significant competitor in the marketplace. Now I'll turn the call over to Dr. Lavallee for an update on the development of our pipeline. Teresa.