Coherus BioSciences, 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.

Thank you, Paul. And good afternoon, everyone. I would like to begin with an update on our toropalimab inspections. As you know, The FDA's PDUFA date for our toropalimab MPC application is December 23rd, 2022. As we have previously noted, travel restrictions related to the COVID-19 pandemic have hindered the FDA's ability to complete inspections in China for the toropalimab VLA, as well as the FDA's review of other VLA. Coheris and our partner, Junji Biosciences, are currently engaged with the agency regarding creative approaches for the completion of the inspections. The FDA granted toropalimab breakthrough therapy designation and has consistently recognized the strength of the clinical data and the unmet need for patients with NTC. With respect to our early stage pipeline, our proprietary ILT4 antibody, CHS1000, a tumor microenvironment modulator, is progressing towards IND, and we are on track for filing in 2023. While the field has focused on T cell checkpoint inhibitors, myeloid checkpoint inhibitors, such as ILT4, may serve as an important approach for overcoming PD-1 resistance. ILT4 is expressed on two important myeloid cell types. dendritic cells that present antigens to T cells, and macrophages that can dampen T cell activation. We believe the mechanism of this myeloid modulator will be complementary with toropalimab and plan to explore the combination in a broad range of solid tumors, including lung cancer. The CHOICE-01 toropalimab non-small cell lung cancer data was recently published in the Journal of Clinical Oncology. a top-tier peer-reviewed journal that is highly respected and widely read by oncologists. The publication reflects the importance of this data set in the context of combination therapies. I'll now turn it over to Dr. Raj Dias, our chief medical officer, to discuss the toropalimab combination studies in further detail.

Thank you, Teresa. So, it's important to realize that the CHOICE-01 data in non-small cell lung cancer showed mean PD-L1 status. As Dave said, it's one of the reasons why we think there's a significant rationale to explore toripalamab in combination with other IO agents, and specifically TIGIT, and in particular, as a potential treatment for lung cancer. TIGIT is an important checkpoint, and the data and the literature both support that it's important to antitumor activity. As both PD-1 and TIGIT disrupt co-stimulatory receptors through very distinct mechanisms, this provides a rationale. for the anti-tumor potential of dual PD-1 TIGIT blockade. With our PD-1, with its mechanistic points of differentiation, together with our FC silent TIGIT, exploring the patient subsets that are suited for IO combinations will be a key focus of our toropalimab TIGIT clinical study. We're on target to begin our phase one 2A study of toropalimab in combination with TIGIT in multiple tumor types, including non-small cell lung cancer, small cell lung cancer, hepatocellular carcinoma, and all comers late this year or early next year. Our partner Junshi is also making good progress with their tissue antibody trial in combination with Tori PowerLab in a dose expansion study in China, exploring complementary tumor types, including non-small cell lung cancer and esophageal carcinoma, and we look forward to emerging data sets in the first half of 2023. I'll now turn the call back to Denny for some closing remarks. Denny? Thank you, Raj.

We believe this quarter marks an inflection point for Coherence. Severly is our new revenue growth driver, and we are now a multi-product company. With three more product launches projected over the next 12 months, an increasingly diversified portfolio will drive top-line revenue growth in 2023 and beyond, putting us on a path to profitability in 2024.

And with that, I'd like to open the call to questions. Operator?

Thank you. At this time, we will conduct a question and answer session. During this session, we would like to advise that each person is allowed only one question and one follow-up question. Any further questions will require you to rejoin the queue. As a reminder, to ask a question or rejoin the queue, you'll need to press star one one on your telephone and wait for your name to be announced. Please stand by while we compile the Q&A roster. Our first question comes from Salim Syed with Mizuho. Thank you for standing by. Salim, your line is now open.

Great. Thanks so much, guys, and thanks for the caller and the question. I guess I'll ask my question on the TOR of Paliumeb inspection, if I can. I'm curious what you guys, when you guys talk about opportunities or creative approaches, I'm curious what the book ends here on what is being discussed with the FDA. You know, in particular, have they ruled out virtual inspection or is that still in the cards? And then I guess I'll just like lump it in here if I can. Just also when you say opportunities, does that have any regards to timing here, just given COVID cases are going to be rising again in China? Thank you.

Thanks, Saleem. Excellent question. We first want to praise the FDA for the very creative response they've taken in terms of addressing the COVID situation in China. We have a very strong collaboration ongoing with them. I'll let Dr. LaValley provide you a little more color as best we can on that and then address your time. Teresa?

Yeah. Hi, Salim. Thanks. So while the COVID-19 pandemic has hindered travel, we are encouraged that the situation is improving. While there are certain outbreaks, they're not in all regions. The quarantine time is decreasing, and we're seeing more folks travel to China. All I really can say about our discussions with the FDA is that they are engaged, and we are pursuing creative approaches to try to meet the requirements to get through the approval process.

Okay. And then I guess for my follow-up there, your guidance seems to still exclude the 25 million milestone payment. So is your base case that approval is not going to happen in 2022?

Our guidance has excluded that milestone the whole time.

Okay. All right. Thanks so much, guys. Appreciate it.

Thank you, Celine.

Thank you. Our next question comes from Douglas Sao with HC Wainwright. Thank you for standing by. Douglas, your line is now open.

Hi, can you hear me?

Yes, Doug, we can. Thank you. Great, thank you. Just wanted to start with a question on Simerly. I'm just curious what you're seeing in the early days of the launch Is the volume that you're seeing and interest coming from accounts that were already using a significant amount of Lucentis? And just curious, are they using similarly just basically just for the swap out from Lucentis, or is it just creating an opportunity for them to rethink broadly their uses and selection of anti-digest? Thank you.

Thanks, Doug. Let me first say that we're very pleased with the launch of Simile. I think Paul and his team have just done a great job there. As we pointed out with our remarks, we surpassed the other NCP on the market, Biogen, after one month in terms of market share. You recall that with Udenica, we had a large pharma that got out some six months ahead of us, and it took us four months to surpass them in terms of market share. We're very bullish about the trajectory here with Summerlee and how that's going and the people that Paul has been able to recruit and go forward and provide the education, particularly with respect to the label, the interchangeability, and so on, which is really key to the biosimilar market conversion. With respect to your specific question and the particular patients and so on, I'll let Paul make some additional remarks. Paul? Thanks, Tony. Hi, Doug. Yeah. recall from previous conversations, you know, our focus at the time of launch was on around 450 accounts that were driving 80% of the Lucentis business. So that's where our focus has been. That's been where the sales have been coming from. And they seem to be coming from both switch patients and newly started patients. So as Denny said, we're very pleased with the uptake and the receptivity, and we'll be looking forward to update you guys as the launch progresses.

Did you have a follow-up, Doug?

No, that's it. Thank you.

Thank you. Our next question comes from Georgie Yordanov with Cohen. Georgie, thank you for standing by. Your line is now open.

Thank you so much for taking our questions. Maybe starting on some early questions, Our consultant checks indicate that basically we see like two camps of retinal specialists, those whose prescribing is largely dictated by the insurance companies and feel comfortable prescribing a biosimilar, and then those who are willing to go through the insurance hoops to get patients to the product they want to prescribe. So maybe does it match what you guys are seeing? And maybe if you can talk about your strategy in tackling both of these groups. And maybe related to that, as we think about those insurance and payers, have you provided any guidance in terms of where do you expect to be with coverage in both commercial and Medicare?

Thank you for that question, Georgie. I think one of the remarkable things about this market is there's an incredible reservoir of patients that are on reformulated Avast and about 44% And I think that the conversion of this market to biosomal lucentis similarly, I think, is well-positioned to take advantage of that. With respect to your question, your first part of your question, I'll let Paul go ahead and take that and go on and talk a little bit about insurance coverage. Paul? Yeah, Georgie. Yeah, so, you know, I think retinal specialists, you know, have a mix within their patient base of payers. They've got patients that are pure Medicare fee-for-service. others that are commercial or Medicare Advantage. So, you know, where we're focusing our efforts is around really that bulk of the Lucentis prescribers that have the mix of those, which is really important, you know, based on my earlier comments, that we were able to get 100% of policy coverage for the Medicare fee-for-service population. That's the majority of wet AMD, which is the biggest bulk of this market, and we're 40% of the Lucentis businesses. So, So now that reimbursement pathway is underway. With respect to the commercial coverage, you know, if the doctor has to use, you know, off-label Avastin because of a step edit, they will very often transition those patients to a branded agent because of, you know, efficacy or safety parameters. And so switching is very common. And our plan is to be, you know, the next in line after that Avastin trial. You know, as for commercial and Medicare Advantage coverage, you know, those negotiations are underway with commercial players. Payers usually takes a quarter or so to get those online, but I'm very encouraged by the dialogue that's occurring.

And maybe as a follow-up to that, I guess some of the things that we've also heard in our text is that some of the doctors are already seeing that insurance companies are requiring a step through biosimilar lucentis. before you can use Lucentis. Do you have any data on that? When you're talking about coverage, is the majority of the coverage in a similar fashion where they require a step through you before you can go to branded products?

I think it's a little early to quantify the full impact of the payer coverages. That's all occurring right now is the as the commercial and Medicare Advantage, you know, payers are sorting out their formularies. You know, but suffice it to say, you know, with our differentiated label, it's certainly putting Cimerly in a very advantageous position, you know, as it relates to our clinical profile there. So, we'll keep you abreast as the payer coverage unfolds.

Got it. Thank you so much, and congratulations.

Thanks, Tarjan.

Thank you. Our next question comes from Jason Gerbery with Bank of America. Thank you for standing by, Jason. Your line is now open.

Hey, guys. Thanks for taking my question. This is for Jason Gerbery. So my first question is with regards to Udenica. I'm just wondering if you have any follow-ups regarding the status of the OBI filing in calendar year 2022. And then my second question is with regards to biosimilar Humira. Can you speak to launch preparations and what you are doing to prepare for the launch and how you envision payers adopting biosimilars that launch mid-2023 when they can only start contracting mid-year? Is it your sense that PBMs will contract annually and look to avoid having more than three product offerings? Thank you.

Thank you. Thank you very much. I'll handle the first one. And we have consistently guided to a 2022 filing for the OBI and a 2023 launch. And we stand by that guidance. And I think that we are quite certain of that. And so, we have no further comments upon that. I'll let Paul address your issues with respect to the UMira market and the payers and so on. Paul? Yeah. Hi. Thank you for your question. So, yeah. I mean, we're in really full launch. operational and executional mode. And we intend to launch with a comprehensive commercial and patient services infrastructure, you know, to support the use similar launch. But as you would imagine, it's a pretty competitive market. So I'm not going to provide specific details at this time. Suffice it to say, we will be ready July 2023 to commercialize and launch with our team. and with ample supply guarantees for payers. So, you know, we do expect that there will be biosimilars on commercial formularies and Medicare Advantage formularies in 2023. I think because most of us, including USMRI, will be launching midyear, you know, you'll see a half-year effect that we expect USMRI to deliver meaningful contribution in the second half year with accelerated uptake beyond that. As for formulary designs, too early to tell right now, obviously, because, you know, those formularies aren't announced. But I'd expect to see both, you know, biosimilars, you know, on many of those formularies. The only additional comments I would make with respect to the Bayers and USMRI is that I think that we very prudently planned and invested in very large capacity manufacturing. So we're one of the few teams that can provide I think a significant percentage of the market even to the largest payers with our ability to do so. And I think that will benefit us with respect to our conversations with payers and so on.

Thank you.

Thank you. Our next question comes from Chris Schott with JPMorgan. Thank you for standing by.

Thanks so much for the questions. Great, thanks so much for the questions. My first one was on Udenica, and I was turning my hands around how you're thinking about on-body device pricing versus other biosimilars. I guess I'm asking less about a specific price, but I'm just trying to understand as we see kind of pricing continuing to decline across the broader Udenica market, Does that have a read-across in terms of the size of the opportunity for on-body? Or is that on-body market almost an independent market relative to what we are seeing today? And then I have one follow-up after that.

Thanks for your question, Chris. Paul, do you want to talk to Chris a little bit about pricing on-body and how we do things and how we've kept the ASPM? Yeah, thanks, Chris. I think what we've seen really from the COVID pandemic was the creation of two distinct markets and segments within the Pegfield Raspin class. You had your, you know, your on-body segment, you know, where OnPro still retains 45% of the market share. That is where the reservoir of new market share growth will come from when we launch our on-body device in 2023. So that's where we're going to get our gains there and that's where the opportunity is you know how you price it and it's expected that the reimbursement which is really the most important thing you know is what's going to drive it and that's why we've been maintaining you know a disciplined price approach because a lower price today results in a lower reimbursement tomorrow and we want to position you know our on-body injector device in a favorable position compared to new hostile homegrown.

Okay, thank you. And the second one is, the second one I was just wondering is about the two, seven, I think I heard you say at least $275 million in 2023 sales. I just want to get my hands around that number. So I think you're estimating $100 million for, with similarly, and I'm just trying to get my hands around, I guess I would leave about $175 million for Udenica, as well as biosimilar Humira and Tori. So can you just elaborate on the dynamics there? Was that just kind of a floor number? I'm trying to get my hands around that figure. Thank you.

Thank you, Chris. Yes, that's the floor. And yes, you got that right. That's 100. Similarly, given the trajectory of USMRI at this point, although we're only a month or so into launch, we feel comfortable talking about a floor for you summary of 100. I'm sorry, similarly of 100. Thank you. And also the rest of the portfolio in aggregate, as you point out. We will, of course, update you as time goes on. We'll have more visibility with the similarly launch, particularly once we get the J code in, which should happen right around the end of, I think, Q1 in 2023. But we're feeling pretty good about it, and we're thus able to put a floor under it.

Okay. Thanks so much. Thank you. Thank you.

Our next question comes from Xiao Guo with Barclays. Thank you for standing by. Your line is now open.

Good afternoon. This is Xiao for Pilates Process. And actually, thanks for taking our questions. Here's a quick one for toripalimab. With the positive phase III data in NSCLC that we see in choice 01, could you add some color on potential supplemental BLA application for NSCLC and potential following pathway? Thank you very much.

Thank you. Thank you very much. Great question. I'll let Dr. LaValley address that. Theresa?

Yeah, we agree. The data are compelling and show a distinct overall survival advantage. But the FDA, as they've indicated from the February ODAC, has stated that single country data without the applicability to U.S. medical practice does not warrant regulatory flexibility for non-small cell lung cancer. So, while the Choice 01 study in the U.S. would not be ready for submission, what it can be leveraged is in terms of looking at our combinations, it establishes the contribution of components of toropalimab and really positions us for our pipeline with our Digest study about to open in non-small cell lung cancer and looking at other opportunities for doing additional studies in non-small cell lung cancer.

That is very helpful. Thank you. Thank you.

Thank you. As a reminder, to ask a question or rejoin the queue, you will need to press star 11 on your telephone and wait for your name to be announced. Our next question comes from Ash Verma with UBS. Ash, your line is now open. Hello.

Hey, guys. Congrats on all the progress. Thanks for taking my question. I had two. So I guess I can similarly wanted to understand, you know, in 30 days, if there is anything that surprised you in the marketplace compared to your previous assumptions, is interchangeability helping? Do you think pull labels still an advantage? The wild formulation, do you think that's still not a hurdle? And if biosimilar Avastin is any kind of like a hindrance at all for your uptake? And then on the second one, so Yosemite, so the high concentration, are you still investing behind that? The $75 million cost optimization that you mentioned, is that general savings across the board, or are you rationalizing some programs here?

Thank you very much for the question, Ash. I'll let Paul address your summary questions secondarily, and I will address your use summary questions first. Yes, we continue to invest and have ongoing efforts with respect and high concentration. We think that's important to have that in the market as we go forward, and we anticipate having that directly after launch in the U.S. Paul, do you want to talk a little bit about the summer lease situation, the vials and the markets on?

Yeah, sure, Danny.

Hi, Ash. You know, I think we were really prepared coming into this launch. You know, that's what Coheris does great. You know, we enter markets with a deep understanding of the customer. We do our diligence. We talk to them. And we were very prepared for this. I think if there's one thing that did surprise me, it's that how quickly – retinal specialists are getting comfortable with biosimilars. So the education that we're doing with them is really lowering their concerns. They're responding very favorably to our complete label and differentiated clinical profile. The interchangeability is giving them greater confidence that they can safely switch currently treated LUCENTIS patients and expect the same outcomes. So all of that, I think, has been very reinforced. And so, you know, that's why it's given us confidence to, you know, to provide, you know, the target projections for 2023. Let me get to your question on the $75 million savings. I'll let Mr. Stilwell address that. David? Sure. Yeah. Thank you for that, Ash. As we said, we... The $75 million in 2023 expense reductions come from across the company. We are continuously reviewing processes, programs, vendors, and headcounts. It's safe to say that Denny and I scrub every dollar before it heads out the door. And when we can find opportunities to reduce costs without impacting launches and overall strategy, we are going to do so. So I have the options to defer certain investments. and when I can identify those options without impacting our launches, I will make those, I will defer those costs. For instance, there are certain manufacturing activities which we have the opportunity to delay the subsequent years, and so we can take advantage of that. That's just an example, but the expense reductions come from across the company, and they are opportunistic. I think, just one more point, Ash. I think that our program spends our are really super targeted and, as McDavid said, very well-scripted. So we haven't really cut any programs per se here. We did a few... They do a few things differently here and there. But I think the key take-home message that McDavid delivers is we're very careful not to impact the commercial launches, particularly you've seen, you know, suddenly off to a strong start. We're not going to cut things that are really, really important, particularly to the top line, but we're going to be fairly relentless with respect to squeezing things out of the middle line than we possibly can.

All right. Great. Thanks, guys. Thank you.

Thank you. Our last question comes from Doug Sao at HC Wainwright. Doug, your line is open.

Hi, thanks for taking the follow-up. Just a quick question. I think I heard, I just want to clarify that you said that there was some loss of coverage for Eugenica in some markets. Can you just provide a little more color on that? Thank you.

Yeah, sure, Doug. Yeah, you know, as you know, these health plans undergo formulary reviews periodically, and, you know, we evaluate those in a business case, and, you know, sometimes we choose not to participate because of the you know, the discount rebates that are required. And so, I think most of the, any of the reduction in coverage that we did see were more in the, you know, the regional areas spotted throughout the country. That being said, you know, we still have very strong and robust coverage for Udenica across the country, 100% on all the Medicare fee-for-service lives, strong coverage in commercial as well as Medicare Advantage. So, You know, we're going to continue to balance those, you know, those pricing tradeoffs. The last point I'd add, Doug, is we're going to make sure that we're in a strong position for the launch of the out-of-body system in 2023. And Paul and his team are actively reviewing the coverage in that context. Okay. Thank you.

Thank you.

Thank you. At this time, I would now like to turn the call back over to Denny Lanphier, CEO, for closing remarks.

Thank you, Operator, and thanks, everyone, for attending our call. We look forward to keeping you all updated as we continue progress in the coming months with the launch of Summerlee and the next three launches coming up. Thank you. Bye-bye.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.