This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk11: Good day and thank you for standing by. Welcome to the Q4 2023 Coherence Biosciences, Inc. Earnings 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, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Jamie Taylor, Head of Investor Relations for Coheris.
spk22: Thank you, Operator. Good afternoon and welcome to Coheris Bioscience's fourth quarter and full year 2023 earnings conference call. Joining me today to discuss our results are Denny Lanphier, Chief Executive Officer of Coheris, Brian McMichael, Interim Chief Financial Officer, Paul Reeder, Chief Commercial Officer, Rosh Diaz, Chief Medical Officer, and Teresa Lavalley, Chief Development Officer. Before we get started, I would like to remind you that today's call includes forward-looking statements regarding Coherence's current expectations about future events. These statements include, but are not limited to, the following. Our ability to advance our pipeline, projections of future growth, revenue, expenses, headcount, and debt levels, and the timing of any return to profitability or cash flow positivity. All of 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 those implied by the forward-looking statements. These statements are not guarantees of future performance, and are subject to substantial risks and uncertainties, including risks and uncertainties inherent in the clinical drug development process that are discussed in our press release that we issued today, as well as the documents that we file with the SEC. 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 statement. With that, I'll turn the call over to Denny.
spk16: Thanks, Jamie, and thank you all for joining us on the call today. I'm pleased to report to you today strong fourth quarter results, rounding out an important year of transition for Coheris as we sharpened our focus on innovative oncology, positioning the company for new levels of efficiency and growth in 2024 and beyond. Our strategy and our mission are clear, to extend the lives of cancer patients. Today, we are delivering on this strategy in every front, positioning Coheris for long-term sustainable growth as an oncology company. We believe this strategy creates long-term shareholder value as we develop and deliver next-generation oncology treatments for patients. We continue on the path that we set forward last year, which is to, first, drive sales growth and revenues across the oncology portfolio with new product launches of Udenica and Lactorsi. Secondly, simultaneously reduce our spend and in-use costs. realign our balance sheet by reducing our debt, and advance our high-potential pipeline focused on the tumor microenvironment and those complementary with our PD-1. We experienced double-digit sales growth in 2023, and I'll let Paul Reeder, our Chief Commercial Officer, discuss continued progress on Lebanon and share growth in just a moment. Let me start with the spending and headcount reductions in 2024. Now, last year we began a multifaceted process of driving new efficiencies through headcount reductions, product divestitures, and business process integration for greater efficiencies. Today, as part of this plan to position us for sustainable growth, we are announcing a 30% headcount reduction for 2024 and cost reductions as part of our transformation. We are projecting an SG&A plus R&D spend for 2024 of $250 million to $265 million, which is reduced from $301 million in 2023, which itself was reduced from about $400 million in 2022. This reduction was the result of a rigorous evaluation of every role within the company with the objective to reduce or eliminate FTE spend wherever possible. These actions demonstrate that we remain highly committed to returning to profitability as soon as possible, and cash flow positivity in 2024 remains our goal. Now, as previously stated, monetization of ex-U.S. rights is one of the cash management levers we seek to use to preserve our capital. Accordingly, we have agreed with Jun Shi to defer and reduce the $25 million approval milestone payment scheduled for this quarter, Q1 2024. This payment is now bifurcated into two parts, $12.5 million to be paid next quarter, Q2 2024, an additional payment of $12.5 million to be paid in Q1 2025, such second tranche to be potentially reduced by proceeds from the monetization of Canadian Torpal map rights. June sheet. With respect to realignment of our balance sheet and reduction of debt, we are pleased at the financial outcome for the divestiture of our ophthalmology franchise. Our efforts to strengthen our balance sheet and overall capital structure are progressing well, and we recently announced the renegotiated agreement with Farm Account Advisors to pay down $175 million in term loan debt, decreasing our term loan interest payment burden by roughly 70% moving into the remainder of 2024. The ophthalmology divestiture also allows us to streamline operations. Today, Coheris is a leaner, more efficient, and more nimble organization, capable of competing in the marketplace with even greater focus, agility, and intensity, tightly focused on being a sustainable and growing oncology company. With Lactorsi, we are gaining predictable and growing high margin revenues from our innovative product and are able to realize the synergies of having two adjacent oncology products. I want to congratulate our R&D and regulatory teams for their success in securing three product approvals in 2023 from the FDA. This is a major accomplishment for any company, especially one of our size. The FDA approvals of the Eudetica Autoinjector, the Eudetica OnBody Injector, and Lactorsi in nasopharyngeal cancer have positioned us for further commercial success in 2024, capitalizing on synergies. Each of these products aligns to our vision of oncology leadership, and each paves the way for the impressive slate of tumor microenvironment-focused immuno-oncology assets in our development pipeline. As Dr. Diaz will describe shortly, first-in-class and potential best-in-class drug candidates have the potential to deliver on our vision of extending patient survival and driving long-term shareholder value creation. Now, with that, I'll turn it over to my Chief Commercial Officer, Mr. Paul Reeder. Paul?
spk15: Thank you, Denny. Good afternoon, everyone. We ended 2023 with strong momentum to the business. With the divestiture of the ophthalmology franchise, we'll use this momentum in 2024 A hyper focus on our oncology business drive top line growth of our core oncology assets, Udenica and Lactorsi. For the fourth quarter, combined net product revenue was $91.4 million, an increase of 23% over Q3. Full year 2023 net product revenue was $256.6 million, a 22% increase over 2022. And I'll speak to each brand and we'll begin with oncology, starting with Udenica. I'm excited to announce that in Q4, Udenica eclipsed one million units sold since its launch, a significant and important milestone in demonstration of our customers' belief in Udenica and Coheris' continued commitment to cancer patients. Now that both the Udenica auto-injector and on-body presentations are launched, our strategy moving forward is to deliver profitable revenue market share growth fueled by three drivers. First, Udenica is the only Pegfill Graston brand with three device options to meet the unique needs of providers and patients. This strengthens our competitive position and allows us to compete on factors other than price. Second, the launch of Udenica OnBody, a novel and proprietary state-of-the-art delivery system for Pegfill Graston and enabling us to compete now within the entire Pegfield Grasta market. And third, we come into 2024 with payer coverage of nearly two times that of 2023, opening up access to significantly more patient lives. Our disciplined execution of this strategy is delivering a third consecutive quarter of Udenica revenue and demand growth. In Q4, net sales were $36.2 million, an increase of 10% quarter-over-quarter. Total unit demand grew 7% quarter-over-quarter, driven by increased payer coverage, continued growth of the pre-filled syringe presentation, and accelerated adoption of autoinjector. Customer enthusiasm for the Udenica autoinjector presentation led to a 129% demand growth quarter-over-quarter. And since commercial launch in May of 2023, 727 accounts have ordered the auto-injector presentation. Udenica OnBody was launched last month in February with high customer demand for a unique and differentiated OnBody device, coupled with confirmed payer coverage, is leading to encouraging demand uptake in these first few weeks of launch, with 138 accounts already ordering OnBody. Based on data from Acuvia, Rolling four-week Udenica market share as of March 1st was 26%, representing an increase of 15 market share points versus the same time period in 2023. Udenica is now a franchise and the only Peckville Grasta brand with three presentation offerings now becoming the total solution for oncology providers. With respect to our non-core assets, I'll start with Yosemite. Q4, we sold 3,800 cartons, generating net sales of $2.2 million. Full year 2023 net sales were $3.6 million. We continue to expect slower growth for Humira biosimilars through 2024 until the implementation of the Inflation Reduction Act 2025. Regarding similarly, net revenue in Q4 grew to $52.4 million, an increase of 31% quarter-per-quarter. Whole year 2023 net revenue is $125.4 million, exceeding our guidance of at least $100 million. Similarly, market share within the ranibizumab class is 34% in Q4, an increase of six market share points quarter over quarter. Let me conclude now with Lactorsi, our other core oncology asset. Lactorsi plus chemo is the first and only FDA-approved treatment for recurrent or metastatic NPC in all lines of therapy. We launched January 2nd, and it's going well, with demand uptake tracking to expectations. For Q4, we recorded $600,000 in sales based on initial wholesaler stocking to support the commercial launch. NPC is a rare cancer, and we estimate that the U.S. NPC market is valued up to $200 million at peak, consisting of approximately 2,000 recurrent or metastatic MPC patients who are diagnosed each year and are split evenly between those in first line versus second line plus. With Lactorsi's broad indication in all lines of therapy, we are executing a plan to establish Lactorsi plus chemo as a new standard of care. And our ambition is to make Lactorsi available to as many MPC patients as quickly as possible. Our conviction in achieving this ambition is bolstered by the following. First, we have strong advocacy from the nation's leading opinion leaders in MPC. During the multidisciplinary head and neck cancer symposium, well, just two weeks ago, we held over 50 one-on-one in-person meetings with the nation's top opinion leaders. And over 90% of them affirmed universally that Lactorsi plus chemo will become the new standard of care in MPC. based on its FDA-approved indication and the strength of the Phase III data that includes significant improvements on progression-free and overall survival. Second, Lactorsi has achieved preferred listing on both the ASCO and NCCN NPC guidelines. Raj will speak to this further, but Lactorsi is the only PD-1 with a Category 1 designation with NCCN for first-line use, a clear differentiator for Lactorsi and a core message in the Lock Towards You promotional message campaign. Third, we've confirmed payer coverage now to label, with payers representing approximately 95% of targeted lives. This includes Medicare fee-for-service. Fourth, the innovative tools we deploy to identify MPC patients are bearing fruit. We've invested in and deployed real-time claims associated with NPC ICD-10 codes, as well as electronic medical record data sources to help identify appropriate NPC patients, de-identified, of course. These tools alert our field teams in real time when an oncologist has an NPC patient, which then triggers two actions. First, a Lactorsi sales call with that doctor, and second, hyper-targeted, branded digital advertising to that oncologist. In terms of early impact, over 60% of accounts that have ordered Lactorsi thus far were sourced from the use of these tools. Last and most important, oncologists are prescribing Lactorsi. Since launch, we've had 59 accounts order Lactorsi comprised of both clinics and hospitals. With respect to the 33 NCCN designated cancer centers, 55% already added Lactorsi to formulary with the remaining centers in P&T review, and I'm confident we'll have successful outcomes with these centers as well. In summary, we're excited to become a trusted partner within the head and neck community and to bring new hope for greater survival for MPC patients nationwide. With that, I'll now hand it over to Raj.
spk04: Thanks very much, Paul, and good afternoon, everyone. The past few months have been an exciting time for Loctosi, which remains the foundational element of our immuno-oncology portfolio. Following FDA approval on October the 27th last year, final overall survival data from the pivotal registration study Jupiter-2 was published in JAMA in November, showing a hazard ratio for survival of 0.63, favoring the Loctosi arm, which represents a 37% risk reduction in mortality in patients living with advanced NPC. This overall survival advantage is not only statistically significant, but also very clinically meaningful, as NPC patients have not, up until now, had any approved treatment options for their disease. Within six weeks of approval, Loctosi was also included in the NCCN guidelines for NPC by the NCCN head and neck panel, with a very strong positioning. First-line disease, Loctosi, is listed as a preferred therapy and the only checkpoint inhibitor with Category 1 designation, which does reflect the highest level of evidence and also uniformity of the panel member's decision. The second line and beyond, Loctorsi is the only agent listed as a preferred therapy, and both designations are very reflective of both strength of the data and the clear unmet medical need. Outside NPC, several additional positive Phase III datasets have been published over the past few months, all in high-tier journals. including the NEOTORCH study in JAMA, showing a positive and profound event-free survival benefit favoring toripalamab in perioperative locally advanced non-small cell lung cancer, TORCHlight in nature medicine with a positive progression-free survival benefit in triple negative breast cancer, and Renotorch in the annals of oncology showing a PFS benefit in renal cell carcinoma. In addition, positive randomized phase two data in locally advanced gastroesophageal junction carcinoma in nature medicine. We've been very consistent in our communication that our strategic approach in tumors outside NPC will be in developing toripalimab in combinations of partnerships, and therefore these positive data sets across additional tumor types sets us up well for partnerships, not only in NPC but also beyond, toripalimab forming the backbone for investigation in combination with other novel investigational agents. A recent example of this was our Inovio partnership, where we announced that we will be supplying toripalamab in combination with Inovio's DNA-based vaccine directed against HPV-positive tumors for investigation in a registration-enabling study in locally advanced head and neck squamous cell carcinoma, a tumor type that is complementary to our current indication in NPC. Regarding our clinical stage pipeline, we remain excited about the potential to combine our novel agents on top of the tauripalimab backbone. By targeting both the T cell with tauripalimab and also the tumor microenvironment with our novel agents, the aim will be to make the tumor microenvironment more favorable to anti-tumor effect and therefore realize potential additive benefit. Regarding Casdozo-Ketog, our first-in-class and only clinical stage anti-IL-27 molecule, we presented data at ESMO-IO in December in advanced non-small cell lung cancer. where Casdozo demonstrated monotherapy responses in PD-L1 refractory non-small cell lung cancer with no safety concerns. These encouraging data position us well for further investigation of Casdozo in this tumor type in combination with Tori, and we are currently enrolling patients in a new arm in our Casdozo Phase 1b study, evaluating Casdozo in combination with Toripalamab in patients with advanced non-small cell lung cancer. The study is currently open, and we have patients active on study. and we anticipate presenting data from this study either later this year or early next year. For Hepatothelial Carcinoma, we presented CasDozo data in first-line HTC at ASCO GI in January, with CasDozo in combination with Atizo and Bev demonstrating an overall response rate of 38% by RESIST and 43% by MRESIST, including complete responses in three subjects. Recall earlier data that we presented from this study last year showed an overall response rate of 27% with only partial responses. So this increase in response rate together with deepening of the responses is very encouraging. Moving forward, we will be investigating Casdozo in combination with toripalamab and bevacizumab in first-line HCC, which we anticipate will start late this year. We're particularly encouraged that the clinical activity observed with our IELTS 27 antagonist, Casdozo, has, in addition to clinical response, demonstrated immune activation in liver and lung patients. The biomarker work from these two clinical studies have revealed an association of higher levels of IL-27 expression in tumors and CAS-DOSA response. We will continue to evaluate if IL-27 expression is informative for indication selection or if it can improve patient outcomes as a predictive biomarker. Other tumor types besides lung cancer and HCC that have high levels of IL-27 expression include head and neck cancer, gastric cancer, and triple negative breast cancer. Octalysia has demonstrated activity in several of these tumor types and supports the potential for additional synergies of the Casdozo-Tori combination treatment in some of these additional cancers. Finally, CHS114, our CCR8 antibody, nearing completion of the dose escalation stage of our phase one study without any safety concerns. Non-clinical data presented at CITSE last year highlighted the potential for targeting CCRA to deplete Tregs in the tumor microenvironment to enhance anti-tumor response in head and neck squamous cell. Once dose escalation is complete, we plan to expand with toripalamab in patients with head and neck cancer where the biology of the target shows strong disease linkage. I'll now turn it over to Teresa.
spk20: Thank you, Raj. And good afternoon, everyone. I want to once again thank the FDA for taking the approval action in a timely manner and much faster than the BASUFA six-month time period for the Eugenica On-Body Supplement after our resubmission in October. With both the Eudenica on-body approval and approval of Lactorsi for all lines of therapy and all patient subsets of nasopharyngeal carcinoma, the Coherence oncology franchise is well-positioned. Lactorsi is a next-generation PD-1 inhibitor with potent activation of T cells, including demonstrating significant activity in tumors that are less inflamed. Our Lactorsi Mechanism of Action paper, recently published in Cancer Immunology Immunotherapy, describes its potent activity on T cells that is attributed to both high binding affinity for PD-1 and its binding at a unique epitope, the FG loop of PD-1. Lactorsi is the foundation of our IO franchise, and we are excited to explore clinical opportunities to extend patient survival with novel combinations, particularly with agents that target mechanisms of PD-1 resistance due to immune suppression in the tumor microenvironment. Immune suppressive M2 macrophages have been well characterized to dampen the immune system. Our CHS1000 program and anti-ILT4 antibody is on track for IND submission in the second quarter of this year. We'll be presenting the preclinical data from our CHS1000 program at AACR in April. The poster presentation presents the non-clinical characterization of CHS1000, showing it as an ILT4 selective and potent antibody that promotes an inflammatory immune response. Tumor types with high expression of IL-T4 include lung, head and neck, liver, breast, and ovarian cancer. In addition to advancing new lactorsy indications with combination treatments using the coherence pipeline targeting the TME, we have a number of exciting novel external combinations and discussions. Another important partnering initiative is exploring novel combinations with Casdozo and CHS114. Given their safety profiles, strong line of sight to tumor indications, and immune modulation in cancer patients, there are several rational combinations, such as bispecific antibodies, including T-cell engagers, ADCs, targeted therapies, and even CAR-T therapies. I'll now turn the call to Brian. Thank you, Teresa, and good afternoon, everyone.
spk10: I'll briefly review the results for the quarter and the full year. As Paul covered revenues, I will start with costs and expenses. Costs of goods sold increased significantly for the year to $159 million compared to 70.1 in the prior year, driven primarily by our non-core products. Specifically, in Q4 2023, We recorded a $47 million charge for the write-down of slow-moving USMRI inventory and related firm purchase commitments. In addition, Simerly COGS included a low to mid 50% royalty on gross profits. Gross margin for the fourth quarter was 8%. Excluding the $47 million write-down, gross margin for the quarter would have been 59%, including the royalty on Simerly gross profits mentioned earlier, and the mid single digit royalty we pay to Udenica. We pay on Udenica net sales. We ended the year with a R&D expense totaling $109.4 million, down $89.9 million from the prior year. R&D expense for Q4 2023 was $26.4 million, a decrease of $2.7 million from the same period in the prior year. The declines reflected Expenditures in 2022 that did not reoccur in 2023, namely the $35 million digit option fee in Q1 2022 and other de-scoped co-development costs with Junqi, the cost of preparing for launches of new products that happened during 2023, and savings with reduced headcount. SG&A expense for the year was $192 million, down from $198.5 million in the prior year. For the quarter, FT&A expense was $49.5 million, down $4.1 million and 8% compared to a year ago. The decreases primarily reflected savings from lower headcount, partially offset by other costs. For the fourth quarter, 2023, we reported a net loss of $79.7 million, or 71 cents per share, compared to a net loss of $58.9 million, or 76 cents per share for the same period in 2022. Cash and cash equivalents and investments in marketable securities were $117.7 million as of December 31st, 2023, compared to $192 million at December 31st, 2022. Our 2023 results included $40.5 million of interest expense. We expect to reduce our cash flow borrowing costs by more than $24 million on an annualized basis following the partial pay down using proceeds from the similarly divestiture. In addition, we expect to save at least $25 million on an annualized basis in OPEX due to headcount reductions associated with the divestiture and the reduction in force. After factoring in these savings in addition to those expected from the termination of the TIGER program that we announced in January, O'Harris is introducing a 2024 guidance range of combined R&D and SG&A expense of $250 million to $265 million. This guidance includes approximately $40 million of stock-based compensation expense and excludes the effects of strategic acquisitions, collaborations and investments, the exercise of rights or options related to collaboration programs, and any other transactions or circumstances not yet identified or quantified. With that, I'll turn the call back over to Denny.
spk16: Thank you, Brian. Operator, we're ready to open the line up for questions. Thank you.
spk11: Thank you. As a reminder, to ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again.
spk18: One moment for questions. Our first question comes from Robin Karnoskas with Truist Securities.
spk11: You may proceed.
spk32: Hey, this is Nishant. I'm on for Robin. Thanks for taking our question. So I have one on Udenica and one on Lacturgy. So with Udenica, you continue to increase market share. It's up 7% point quarter by quarter. But however, the sales are up by 10%. Can you provide more color? How much was the effect of net selling price reduction this quarter? And for Lacturgy, you mentioned the launch is going well. Can you provide more color as in whether, you know, the drug has been used more in frontline or second line settings? Thank you.
spk16: Thank you. Thank you very much. Paul will be happy to address your question with respect to you, Danica. And then secondarily, the question of launch of first line versus second line for a black jersey. Paul? Yeah.
spk15: Hi, Mishan. Thanks for your question. Yeah. So the effect of the net selling price quarter over quarter was in the you know, the mid single digit range. And as I mentioned in my remarks, our focus now that we've launched and have all three presentations is that we're now going to drive the franchise to profitable market share and revenue growth. And that's going to be our plan in 2024 and beyond. We're going to do that because we have now all three presentations, can access the entire market, We've locked in great payer coverage and, you know, we've been able to have a, you know, a competitive ASP. So we're looking forward to a successful 2024 with Udenica Franchise. Regarding Loctorsi and your question about, you know, are we getting first line or second line? You know, we're just a couple months into it. I'll be better able on our first quarter call to give you more specifics. But what our intelligence tells us now is we're getting patients across all lines of therapy. And that's not unexpected given that, you know, we've got the indication for all lines of treatment, you know, but many of the patients that are, you know, have just gotten chemo in second line, they're going to get locked towards it immediately now. So we're getting it in both lines, which is great, and the launch is going very well.
spk13: So I think as an ancillary response to your question, Nishan,
spk16: Perhaps Dr. Dias would like to comment on the selection of Lactorsi as a PD-1 for patients diagnosed with MPC. Yeah, happy to.
spk04: So I can tell you as a physician, doctors tend to be very evidence-based and data-driven. What I will say is that Lactorsi has three things that other checkpoint inhibitors do not have. First of all, we have data from a randomized control study. And not only do we have data, we have overall survival data, which is actually the gold standard that oncologists look for. I mentioned the 37% risk reduction in terms of survival advantage with the addition of LOCTO-AV. Secondly, of course, we have a label. And other checkpoint inhibitors do not have a label. And not only do other checkpoint inhibitors not have labels, there's no other indicated therapeutic agents for NPC inhibitors. And thirdly, I'll say to Denny's point, we also have preferred positioning in terms of NCCN guidelines. We are the only category one listed agent for first line in terms of immunotherapy, and I think that really does reflect the strength of the data and the confidence in the data in this area of unmet need.
spk18: Thank you, Raj. Thank you for your question, Lashon. Thank you.
spk11: Thank you. One moment for questions. Our next question comes from with Citigroup. You may proceed.
spk06: Hi, Denny and team. Thank you for taking the questions. On the liver cancer study, I'm just curious. I think the key comp there is Imbrave 150. Nominally, you are above those numbers. Of course, the numbers are small. I'm just curious if you could comment as to how much better you think you'd need to be than the Embrave 150 benchmark to be on a go-forward decision with your triple combo. Thank you.
spk17: Thanks, Yigal. Dr. Dias can address that.
spk04: Yeah, so you're absolutely right. The Embrave data with the TeaserBev is actually the only – so the TeaserBev is the license indication right now. So we've shown a response rate, as I said, of 38%, 43% with M-Resist. I think we'll be looking – this is the kind of range we're actually looking for for further development, right? So I think with the data that we presented at ASCO GI in January is – is exactly what we were looking for, and we will be following up with a further study that's going to start later this year if we're looking at that triplet combination.
spk20: Yeah, and if I can add to that, Yugi, I think in a 30-patient study, the numbers are higher, but it's not an apples-to-apples comparison. So we were excited, as Rush mentioned, in both the deepening of response and the improvement in response, and the study continues to evaluate data. But important in a 30-patient Phase II study is also to look at how those responses track with IL-27 biology. So while the numbers, again, are small, very provocative studies that we see an association of IL-27 expression with response. Additionally, this is a program that has shown pre-clinically that there is strong activity in HCC in multiple models. The biology of IL-27 coming from the tissue resident macrophages, so liver macrophages, Cooper cells, is really one known to dampen the immune response. And that activity that was specific in preclinical models to liver cancer and lung cancer translated to humans. So I think that with the biomarker data in the responding patients showing modulation of the IL-27 pathway in association with response, and the high levels of IL-27 expressions have us incredibly excited to do the Tori, ASDOZO, BEV combination.
spk04: And maybe one last thing I'll add, safety is always important. Safety is important. We showed a very, you know, there's a very clean safety profile as well. Very important.
spk18: Thank you, Ekal.
spk06: Okay, can I ask another one? I was just curious on... On CH114, Teresa, you mentioned the dose escalation, and then you're going to do the combo with Tori. I think in your slide deck in early January, you indicated there'd be some data in the first half of the year for the phase one. I wasn't sure if that was still the expectation or just help understand that, please. Thank you.
spk20: Yes. We plan to present the dose escalation in the first half of the year at a major medical conference.
spk18: Okay. Thank you. Okay.
spk11: Thank you. One moment for questions. Our next question comes from Colleen Cousy with Baird. You may proceed.
spk26: Hi. Thanks for taking our questions. I think revenue guidance is something you've given in the past. It looks like you're not providing revenue guidance for 2024. So can you just talk a little bit about that decision and what you think some of the levers are for revenue growth this year?
spk16: All right. Thanks, Colleen. I'll take that one and let Paul back fill. I think the primary issue is that we have freshly launched the Eugenica OnBody. We're very excited about the enthusiasm that's been received in the market. But the ultimate trajectory of that across the 2024, it is not yet known. It's only been out of the market, you know, for about a month. As Paul pointed out, though, we have seen 129% increase with respect to the auto-injector uptake, and the trailing four-week data for Udenica itself is up north of 25% up from Q4. So that's all very, very compelling. I think that would give us greater certainty with respect to the trajectory of and the steepness of the trajectory, once we get a little further into Q1 and get that below us, all the indicators are positive. But I think certainly on the next call, we'll be able to give you some additional information on that. With respect to Lactorsi, as Paul indicated, we're very pleased with the launch. Our digital strategy over the last two years of basically developing a relationship with the patient is very, very good. We are very pleased at the uptake, very pleased at P&T committees and how well we're doing there. But I think that's going to take a little bit of time. It takes a month or two to get on a formulary for a P&T committee in a major hospital someplace in the East Coast or something. So we're happy to do that, but we just would like probably another quarter under our belts before we go ahead and we do projections with respect to revenue. But on the topic of revenue, though, I would make one key point. I want to make one key point for you, is the quality of the revenues is just as important, if not more important, as the size of the revenues. And we expect that the margins and the quality of the revenues, for example, with Lactorsi and Udenica, will lead to greater profitability as we go into the backside of the year. And as Paul said, that's really where we're focused. We want to drive the top line, but we also really, the quality of the revenues, especially with a product like Lacturazine, is going to be far better, more stable, and more sustainable than your typical biosimilar.
spk26: That's helpful. Thank you. And maybe a follow-up on some of your comments and just a quick clarification on cash flow positivity. I think you said the goal is cash flow positivity in 2024. Can you just clarify, is that guidance for cash flow positivity in 2024 or not specifically, maybe dependent on revenue or other factors?
spk16: Without being able to predict revenues, I can't really predict cash flow positivity, but I would just make the key point that I think that we've made substantial progress with respect to reducing our SG&A and R&D line, even in the face of several launches over the past 12 months. We have reduced our headcount over the past two years from 22 to 23 to 24, from 360 to 290, and now targeting 215 FTEs by the end of this year. I mentioned our overall SG&A reductions. So I think that we are running a very, very efficient organization as we focus on oncology. At the same time, we're driving the revenues higher, as you can see. And then lastly, we're making very good progress reducing our interest costs. Brian recapitulated that for us, but a 70% reduction in our fixed term loan interest costs, where we're paying SOFR plus eight. I think that that's really very significant. So we're going to continue in this direction. And just where those two lines cross, we can't quite predict, but that's our North Star and our guiding light where we're going.
spk25: That's helpful. Thanks for taking our questions.
spk11: Thank you. One moment for questions. Our next question comes from Michael Nedelkovich with TD Cowan. You may proceed.
spk09: Hi. Thanks for the question. So you have a wealth of opportunities in terms of various combinations and various tumor types and indications where those combinations might be tested. Can you give us a sense of pipeline priorities and when those priorities might translate into discrete go-no-go trials or even pivotal trials? Thank you.
spk16: Thanks for the question, Michael. I'll let Dr. LaValley address that. Teresa?
spk20: Yeah, Michael, thanks. As we've talked about with the CAS-DOZO, the lung cancer study is open. I mean, that's a home-run kind of strategy, a high bar. But given the monotherapy activity of CAS-DOZO, which was not expected to see in cancer patients, The TORI combination should show by data by the end of this year or early next year. We're also looking at earlier lines of treatment based off of the TORI positive data trials, such as NeoTorch, to further explore lung cancer. The HCC study we plan to open later this year, so data next year. As we mentioned, the 114, the CCR8 antibody, will be presenting next quarter. So I think the news flow from that plus a number of partnerships. We've already announced the Inovio one. You'll see other ones, and that will be generating data next year. They'll also be presented. And, you know, the part that isn't appreciated about toropalimab is Junshi continues to develop it and is now all of their studies are multiregional clinical trials, which would make it acceptable to the FDA. And so they have a phase three ongoing with their pipeline. So we'll be watching. While we're not part of that study or funding that study, clearly as it gets registered, we have the market share. So we'll be watching for that. And that study opened last year. So typical small cell lung cancer phase three metrics. So later in the next couple of years.
spk18: Thanks, Michael. Thank you.
spk11: One moment for questions. Our next question comes from Chris Schott with JPMorgan Chase. You may proceed.
spk08: Hi, this is Ethan Brown on for Chris Schott. Thanks for taking our questions. Just to start off, can you maybe offer some color on how you're thinking about OPEX looking past 2024, given On one hand, you have the pipeline that you're trying to progress and then balancing that against the company's past profitability. And then I have one more question after that.
spk16: I'll let Brian McMichael take a shot at that. Brian?
spk10: Yeah, so we're not providing guidance beyond 24 at this time. As we get into, as we sort out some of the things we're working on with our capital structure, We'll have a better idea of how we'll move forward from there. And that'll inform how we move forward in 2026.
spk16: I would say after we achieve profitability and cash flow positivity, we intend to stay profitable, if that's your question. I would offer you one other point, which is, you know, we expect to reach peak sales and two and a half to three years. And we further expect continued increase in market share for Udenica, you know, over the, you know, the short to medium term. So both of those things will continue to drive top line for us. And further, we'll continue to show very high degree of discipline with respect to controlling our expenses in SG&A, as you've seen already.
spk08: That's very helpful. Thank you. Just pivoting over to Udenica, is there any color you can offer on how much sales at this point is coming from the auto injector versus the traditional presentation? And maybe more broadly, just your expectations for pricing looking to 2024? And maybe more specifically, if you think Coheris is now more insulated versus other players, given you have the whole suite of products approved and in the market?
spk16: Yeah, that's a very, very good question. It's a very observant nuance. I'll let Paul address that particular issue, the three presentations and our ability to have a sustainable franchise in the market and support pricing. Paul? Yeah. Hey, Chris, thanks for your question.
spk15: So, you know, our whole strategy, you know, with Udenica, with the three presentations, is to give the customers, you know, choice. so that they can choose the presentation that meets the unique needs of the patient and the doctor. And no other brand can do that. We saw pretty impressive growth with auto-injector in the fourth quarter, driven largely in the clinic market. And that's because now we've got nurses that were using it, had great experience with it, liked it, and it's starting to now get its foothold into the into the workflow in the offices. As it relates to the percent of the AI business to the total Udenica, it was still under 10%. So the workhorse continued to be the pre-filled syringe presentation. But as we see in 2024, that's all going to take a new shape now that we have our on-body device launched, as well as the auto-injector and the pre-filled syringe. But as I mentioned in my remarks, Chris, You know, moving forward in year six of this brand's life cycle, you know, we're getting that second wave of growth, and our focus is really going to be around driving profitable revenue and market share growth. And we are confident we're going to do that in 2021.
spk16: Ethan, the other point that I would make is we've played the long-term game here with Eugenica and market, as Paul said. We're six years in. We invested significantly both in the auto injector, some $25 million in years past, It took us at least three or four years to bring forward the on-body. That was probably a $35 billion investment. We underwent a number of years where we had very strong discipline around pricing and ASP management, consider ourselves good stewards of ASP. In the interim, others have exited the market with aggressive pricing. We're still there. The new market entrants really haven't had an impact on the business. And I think that the significant market share increase, like the four-week trailing, 25%, and our look forward here for 2024 shows that our long-term strategy is paying off. We're the only folks that have three presentations. We're positioned for market stability and sustainability as we go forward now with peg-tailed grass, and that's where we want to be.
spk18: Thank you, guys, for the questions.
spk11: Thank you. And as a reminder, to ask a question, please press star 1 1 on your telephone and wait for your name to be announced. One moment for questions.
spk18: And I'm not showing any further questions.
spk11: I'll now like to turn the call back over to Danny Lanphier for any closing remarks.
spk16: Thank you, operator. And thank you all for joining us on our Q4 full year 2023 call this afternoon. We're pleased with our progress on all fronts to drive our sales higher, strictly control our expenses, reduce our debt, and advance our pipeline. We are entering 2024 with strong upward momentum and a clear organizational focus on extending survival for patients with cancer.
spk18: We look forward to seeing you all at the upcoming investor conferences and on our next call. Thank you. Thank you for your participation. You may now disconnect. Goodbye. Thank you. Bye. Thank you
spk00: Thank you.
spk11: Good day and thank you for standing by. Welcome to the Q4 2023 Coherence Biosciences Inc. Earnings 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, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Jamie Taylor, Head of Investor Relations for Coheris.
spk22: Thank you, operator. Good afternoon and welcome to Coheris Bioscience's fourth quarter and full year 2023 earnings conference call. Joining me today to discuss our results are Denny Lanphier, Chief Executive Officer of Coheris, Brian McMichael, Interim Chief Financial Officer, Paul Reeder, Chief Commercial Officer, Rosh Diaz, Chief Medical Officer, and Teresa Lavallee, Chief Development Officer. Before we get started, I would like to remind you that today's call includes forward-looking statements regarding Coherence's current expectations about future events. These statements include, but are not limited to, the following, our ability to advance our pipeline projections of future growth, revenue, expenses, headcount, and debt levels, and the timing of any return to profitability or cash flow positivity. All of 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 those implied by the forward-looking statements. These statements are not guarantees of future performance. and are subject to substantial risks and uncertainties, including risks and uncertainties inherent in the clinical drug development process that are discussed in our press release that we issued today, as well as the documents that we file with the SEC. 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 statement. With that, I'll turn the call over to Denny.
spk16: Thanks, Jamie, and thank you all for joining us on the call today. I'm pleased to report to you today strong fourth quarter results, rounding out an important year of transition for Coheris as we sharpened our focus on innovative oncology, positioning the company for new levels of efficiency and growth in 2024 and beyond. Our strategy and our mission are clear, to extend the lives of cancer patients. Today, we are delivering on this strategy in every front, positioning Coheris for long-term sustainable growth as an oncology company. We believe this strategy creates long-term shareholder value as we develop and deliver next-generation oncology treatments for patients. We continue on the path that we set forward last year, which is to, first, drive sales growth and revenues across the oncology portfolio with new product launches of Udenica and Lactorsi. Secondly, simultaneously reduce our spend and in-use costs. realign our balance sheet by reducing our debt, and advance our high-potential pipeline focused on the tumor microenvironment and those complementary with our PD-1. We experienced double-digit sales growth in 2023, and I'll let Paul Reeder, our Chief Commercial Officer, discuss continued progress on Lebanon and share growth in just a moment. Let me start with the spending and headcount reductions in 2024. Now, last year, we began a multifaceted process of driving new efficiencies through headcount reductions, product divestitures, and business process integration for greater efficiencies. Today, as part of this plan to position us for sustainable growth, we are announcing a 30% headcount reduction for 2024 and cost reductions as part of our transformation. We are projecting an SG&A plus R&D spend for 2024 of $250 million to $265 million, which is reduced from $301 million in 2023, which itself was reduced from about $400 million in 2022. This reduction was the result of a rigorous evaluation of every role within the company with the objective to reduce or eliminate FTE spend wherever possible. These actions demonstrate that we remain highly committed to returning to profitability as soon as possible, and cash flow positivity in 2024 remains our goal. Now, as previously stated, monetization of ex-U.S. rights is one of the cash management levers we seek to use to preserve our capital. Accordingly, we have agreed with Jun Shi to defer and reduce the $25 million approval milestone payment scheduled for this quarter, Q1 2024. This payment is now bifurcated into two parts, $12.5 million to be paid next quarter, Q2 2024, an additional payment of $12.5 million to be paid in Q1 2025, such second tranche to be potentially reduced by proceeds from the monetization of Canadian TORPALMAP rights. This reflects our strong partnership and high level of cooperation with Junxi. With respect to realignment of our balance sheet and reduction of debt, we are pleased at the financial outcome for the divestiture of our ophthalmology franchise. Our efforts to strengthen our balance sheet and overall capital structure are progressing well, and we recently announced the renegotiated agreement with Pharmacon Advisors to pay down $175 million in term loan debt decreasing our term loan interest payment burden by roughly 70% moving into the remainder of 2024. The ophthalmology divestiture also allows us to streamline operations. Today, Coheris is a leaner, more efficient, and more nimble organization, capable of competing in the marketplace with even greater focus, agility, and intensity, tightly focused on being a sustainable and growing oncology company. With Lactorsi, we are gaining predictable and growing high margin revenues from our innovative product and are able to realize the synergies of having two adjacent oncology products. I want to congratulate our R&D and regulatory teams for their success in securing three product approvals in 2023 from the FDA. This is a major accomplishment for any company, especially one of our size. The FDA approvals of the Udenica autoinjector, Udenica on-body injector, and Lactorsi in nasopharyngeal cancer have positioned us for further commercial success in 2024, capitalizing on synergies. Each of these products aligns to our vision of oncology leadership, and each paves the way for the impressive slate of tumor microenvironment-focused immuno-oncology assets in our development pipeline. As Dr. Diaz will describe shortly, first-in-class and potential best-in-class drug candidates who have the potential to deliver on our vision of extending patient survival and driving long-term shareholder value creation. Now with that, I'll turn it over to my Chief Commercial Officer, Mr. Paul Reeder. Paul?
spk15: Thank you, Denny. Good afternoon, everyone. We ended 2023 with strong momentum to the business. With the divestiture of the ophthalmology franchise, we'll use this momentum in 2024 A hyper focus on our oncology business drive top line growth of our core oncology assets, Udenica and Lactorsi. For the fourth quarter, combined net product revenue was $91.4 million, an increase of 23% over Q3. Full year 2023 net product revenue was $256.6 million, a 22% increase over 2022. And I'll speak to each brand and we'll begin with oncology, starting with Udenica. I'm excited to announce that in Q4, Udenica eclipsed one million units sold since its launch, a significant and important milestone in demonstration of our customers' belief in Udenica and Coheris' continued commitment to cancer patients. Now that both the Udenica auto-injector and on-body presentations are launched, our strategy moving forward is to deliver profitable revenue and market share growth fueled by three drivers. First, Udenica is the only Pegfill Graston brand with three device options to meet the unique needs of providers and patients. This strengthens our competitive position and allows us to compete on factors other than price. Second, the launch of Udenica OnBody, a novel and proprietary state-of-the-art delivery system from Pegfill Graston, enabling us to compete now within the entire Pegfell Grasta market. And third, we come into 2024 with payer coverage nearly two times that of 2023, opening up access to significantly more patient lives. Our disciplined execution of this strategy is delivering a third consecutive quarter of Udenica revenue and demand growth. In Q4, net sales were $36.2 million, an increase of 10% quarter over quarter. Total unit demand grew 7% quarter-over-quarter, driven by increased payer coverage, continued growth of the pre-filled syringe presentation, and accelerated adoption of auto-injector. Customer enthusiasm for the Udenica auto-injector presentation led to a 129% demand growth quarter-over-quarter. And since commercial launch in May of 2023, 727 accounts have ordered the auto-injector presentation. Udenica OnBody was launched last month in February with high customer demand for a unique and differentiated OnBody device, coupled with confirmed payer coverage, is leading to encouraging demand uptake in these first few weeks of launch, with 138 accounts already ordering OnBody. Based on data from Acubia, rolling four-week Udenica market share as of March 1st was 26%, representing an increase of 15 market share points versus the same time period in 2023. Udenica is now a franchise and the only Peckville Grasta brand with three presentation offerings now becoming the total solution for oncology providers. With respect to our non-core assets, I'll start with USIMRI. In Q4, we sold 3,800 cartons, generating net sales of $2.2 million. Full year 2023 net sales were $3.6 million. We continue to expect slower growth for Humira biosimilars through 2024 until the implementation of the Inflation Reduction Act 2025. Regarding similarly, net revenue in Q4 grew to $52.4 million, an increase of 31% quarter per quarter. Full year 2023 net revenue is $125.4 million. exceeding our guidance of at least $100 million. Similarly, market share within the ranibizumab class was 34% in Q4, an increase of six market share points quarter over quarter. Let me conclude now with Lactorsi, our other core oncology asset. Lactorsi plus chemo is the first and only FDA-approved treatment for recurrent rheumatostatic NPC in all lines of therapy. We launched January 2nd and it's going well, with demand uptake tracking to expectations. For Q4, we recorded $600,000 in sales based on initial wholesaler stocking to support the commercial launch. MPC is a rare cancer, and we estimate that the US MPC market is valued up to $200 million at peak, consisting of approximately 2,000 recurrent or metastatic MPC patients who are diagnosed each year and are split evenly between those in first line versus second line plus. With Lactorsi's broad indication in all lines of therapy, we are executing a plan to establish Lactorsi plus chemo as a new standard of care. And our ambition is to make Lactorsi available to as many NPC patients as quickly as possible. Our conviction in achieving this ambition is bolstered by the following. First, we have strong advocacy from the nation's leading opinion leaders in MPC. During the multidisciplinary head and neck cancer symposium, well, just two weeks ago, we held over 50 one-on-one in-person meetings with the nation's top opinion leaders. And over 90% of them affirmed universally that Lactorsi plus chemo will become the new standard of care in MPC based on its FDA-approved indication and the strength of the phase three data. that includes significant improvements on progression-free and overall survival. Second, Lactorsi has achieved preferred listing on both the ASCO and NCCN NPC Guidelines. Raj will speak to this further. Lactorsi is the only PD-1 with a Category 1 designation with NCCN for first-line use, a clear differentiator for Lactorsi, and a core message in the Lactorsi Promotional Message Campaign. We've confirmed payer coverage now to label with payers representing approximately 95% of targeted lives. This includes Medicare fee-for-service. Fourth, the innovative tools we deploy to identify MPC patients are bearing fruit. We've invested in and deployed real-time claims associated with MPC ICD-10 codes as well as electronic medical record data sources. to help identify appropriate NPC patients, de-identified, of course. These tools alert our field teams in real time when an oncologist has an NPC patient, which then triggers two actions. First, a Lactorsi sales call with that doctor, and second, hyper-targeted, branded digital advertising to that oncologist. In terms of early impact, over 60% of accounts that have ordered Lactorsi thus far were sourced from the use of these tools. Last and most important, oncologists are prescribing Lactorsi. Since launch, we've had 59 accounts order Lactorsi comprised of both clinics and hospitals. With respect to the 33 NCCN designated cancer centers, 55% have already added Lactorsi to formulary with the remaining centers in P&T review. And I'm confident we'll have successful outcomes centers as well. In summary, we're excited to become a trusted partner within the head and neck community and to bring new hope for greater survival for MPC patients nationwide. With that, I'll now hand it over to Raj.
spk04: Thanks very much, Paul, and good afternoon, everyone. The past few months have been an exciting time for Loctosi, which remains the foundational element of our immuno-oncology portfolio. Following FDA approval on October the 27th last year, final overall survival data from the pivotal registration study, Jupiter-2, was published in JAMA in November, showing a hazard ratio for survival of 0.63, favoring the Lactose arm, which represents a 37% risk reduction in mortality in patients living with advanced NPC. This overall survival advantage is not only statistically significant, but also very clinically meaningful, as NPC patients have not, up until now, had any approved treatment options for their disease. Within six weeks of approval, Lactose was also included in the NCCN guidelines for NPC by the NCCN head and neck panel, with a very strong positioning. First-line disease, Lactose, is listed as a preferred therapy and the only checkpoint inhibitor with Category 1 designations. uniformity of the panel members' decision. The second line and beyond, Loctorsi is the only agent listed as a preferred therapy, and both designations are very reflective of both strength of the data and the clear unmet medical need. Outside NPC, several additional positive Phase III datasets have been published over the past few months, all in high-tier journals, including the NEOTORCH study in JAMA, showing a positive and profound event-free survival benefit favoring toripalamab in perioperative locally advanced non-small cell lung cancer. Torchlight in nature medicine with a positive progression-free survival benefit in triple negative breast cancer. And Renotorch in the annals of oncology showing a PFS benefit in renal cell carcinoma. In addition, positive randomized phase two data in locally advanced gastroesophageal junction carcinoma has also been published recently in Nature Medicine. It's been very consistent in our communication that our strategic approach in tumors outside NPC will be in developing toripalimab in combinations of partnerships, and therefore these positive data sets across additional tumor types sets us up well for partnerships, not only in NPC but also beyond, toripalimab forming the backbone for investigation in combination with other novel investigational agents. A recent example of this was our Inovio partnership, where we announced that we will be supplying toripalamab in combination with Inovio's DNA-based vaccine directed against HPV-positive tumors for investigation in a registration-enabling study in locally advanced head and neck squamous cell carcinoma, a tumor type that is complementary to our current indication in NPC. Regarding our clinical stage pipeline, we remain excited about the potential to combine our novel agents on top of the tauripalimab backbone. By targeting both the T cell with tauripalimab and also the tumor microenvironment with our novel agents, the aim will be to make the tumor microenvironment more favorable to anti-tumor effect and therefore realize potential additive benefit. Regarding castozoketog, our first-in-class and only clinical stage anti-IL-27 molecule, we presented data at ESMO-IO in December in advanced non-small cell lung cancer. where Casdozo demonstrated monotherapy responses in PD-L1 refractory non-small cell lung cancer with no safety concerns. These encouraging data position us well for further investigation of Casdozo in this tumor type in combination with TORI, and we are currently enrolling patients in a new arm in our Casdozo Phase 1b study, evaluating Casdozo in combination with TORI Palimab in patients with advanced non-small cell lung cancer. The study is currently open, and we have patients active on study. And we anticipate presenting data from this study either later this year or early next year. Well, hepatothelial carcinoma, we presented CasDozo data in first-line HTC at ASCO GI in January, with CasDozo in combination with Atizo and Bev demonstrating an overall response rate of 38% by resist and 43% by MResist, including complete responses in three subjects. Recall earlier data that we presented from this study last year showed an overall response rate of 27% with only partial responses. So this increase in response rate together with deepening of the responses is very encouraging. Moving forward, we will be investigating Casdozo in combination with toripalamab and bevacizumab in first-line HCC, which we anticipate will start late this year. We're particularly encouraged that the clinical activity observed with our IL-27 antagonist, Casdozo, has, in addition to clinical response, demonstrated immune activation in liver and lung patients. The biomarker work from these two clinical studies have revealed an association of higher levels of IL-27 expression in tumors and CAS-DOSA response. We will continue to evaluate if IL-27 expression is informative for indication selection or if it can improve patient outcomes as a predictive biomarker. Other tumor types besides lung cancer and HCC that have high levels of IL-27 expression include head and neck cancer, gastric cancer, and triple negative breast cancer. Octology has demonstrated activity in several of these tumor types and supports the potential for additional synergies of the Casdozo-Tori combination treatment in some of these additional cancers. Finally, CHS114, our CCR8 antibody, is nearing completion of the dose escalation stage of our phase one study without any safety concerns. Non-clinical data presented at CITSE last year highlighted the potential for targeting CCRA to deplete Tregs in the tumor microenvironment to enhance anti-tumor response in head and neck squamous cell. Once dose escalation is complete, we plan to expand the study to explore CHS114 in combination with toripalamab in patients with head and neck cancer where the biology of the target I'll now turn it over to Teresa.
spk20: Thank you, Raj. And good afternoon, everyone. I want to once again thank the FDA for taking the approval action in a timely manner and much faster than the PSUFA six-month time period for the Eugenica On-Body Supplement after our resubmission in October. With both the Eugenica On-Body approval and approval of Loctorsi for all lines of therapy and all patient subsets of nasopharyngeal carcinoma. The Coherence oncology franchise is well positioned. Loctorsi is a next generation PD-1 inhibitor with potent activation of T cells, including demonstrating significant activity in tumors that are less inflamed. Our Loctorsi mechanism of action paper recently published in Cancer Immunology Immunotherapy, describes its potent activity on T cells that is attributed to both high binding affinity for PD-1 and its binding at a unique epitope, the FG loop of PD-1. Lactorsi is the foundation of our IO franchise, and we are excited to explore clinical opportunities to extend patient survival with novel combinations particularly with agents that target mechanisms of PD-1 resistance due to immune suppression in the tumor microenvironment. Immune suppressive M2 macrophages have been well characterized to dampen the immune system. Our CHS1000 program, an anti-ILT4 antibody, is on track for IND submission in the second quarter of this year. We'll be presenting the preclinical data from our CHS1000 program at AACR in April. The poster presentation presents the non-clinical characterization of CHS1000, showing it as an IL-T4 selective and potent antibody that promotes an inflammatory immune response. Tumor types with high expression of IL-T4 include lung, head and neck, liver, breast, and ovarian cancer. In addition to advancing new Lactorsi indications with combination treatments using the Coheris pipeline targeting the TME, we have a number of exciting novel external combinations and discussions. Another important partnering initiative is exploring novel combinations with CasDozo and CHS114. Given their safety profiles, strong line of sight to tumor indications, and immune modulation in cancer patients, there are several rational combinations, such as bispecific antibodies, including T-cell engagers, ADCs, targeted therapies, and even CAR-T therapies. I'll now turn the call to Brian.
spk10: Thank you, Teresa, and good afternoon, everyone. I'll briefly review the results for the quarter and the full year. As Paul covered revenues, I will start with costs and expenses. Costs of goods sold increased significantly for the year to $159 million compared to 70.1 in the prior year, driven primarily by our non-core products. Specifically, in Q4 2023, we recorded a $47 million charge for the write-down of slow-moving USIMRI inventory and related firm purchase commitments. In addition, Simerly COGS included a low to mid 50% royalty on gross profits. Gross margin for the fourth quarter was 8%. Excluding the $47 million write-down, gross margin for the quarter would have been 59%, including the royalty on Simerly gross profits mentioned earlier and the mid single-digit royalty we pay on Udenica Net Sales. We ended the year with a R&D expense totaling $109.4 million, down $89.9 million from the prior year. R&D expense for Q4 2023 was $26.4 million, a decrease of $2.7 million from the same period in the prior year. The declines reflected expenditures in 2022 that did not reoccur in 2023. namely the $35 million digit option fee in Q1 2022 and other de-scoped co-development costs with Junqi, the cost of preparing for launches of new products that happened during 2023, and savings with reduced headcount. SD&A expense for the year was $192 million, down from $198.5 million in the prior year. For the quarter, SD&A expense was $49.5 million, down $4.1 million in 8% compared to a year ago. The decreases primarily reflected savings from lower headcount, partially offset by other costs. For the fourth quarter, 2023, we reported a net loss of $79.7 million, or 71 cents per share, compared to a net loss of $58.9 million, or 76 cents per share, for the same period in 2022. Cash and cash equivalents and investments in marketable securities, were $117.7 million as of December 31st, 2023 compared to $192 million at December 31st, 2022. Our 2023 results included $40.5 million of interest expense. We expect to reduce our cash flow borrowing costs by more than $24 million on an analyzed basis following the partial pay down using proceeds from the similarly divestiture. In addition, we expect to save at least $25 million on an annualized basis in OPEX due to headcount reductions associated with the divestiture and the reduction in force. After factoring in these savings in addition to those expected from the termination of the TIGER program that we announced in January, O'Hare is introducing a 2024 guidance range of combined R&D and SG&A expense of $250 million to $265 million. This guidance includes approximately $40 million of stock-based compensation expense and excludes the effects of strategic acquisitions, collaborations and investments, the exercise of rights or options related to collaboration programs, and any other transactions or circumstances not yet identified or quantified. With that, I'll turn the call back over to Denny.
spk16: Thank you, Brian. Operator, we're ready to open the line up for questions. Thank you.
spk11: Thank you. As a reminder, to ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again.
spk18: One moment for questions. Our first question comes from Robin Karnoskas with Truist Securities.
spk11: You may proceed.
spk32: Hey, this is Nishant. I'm one for Robin. Thanks for taking our questions. So I have one on Eugenica and one on Lactarzy. So with Eugenica, you continue to increase market share. It's up 7% point quarter to quarter. But however, the sales are up by 10%. Can you provide more color? How much was the effect of net selling price reduction this quarter? And for Lactarzy, you mentioned the launch is going well. Can you provide more color as in whether, you know, the drug has been used more in frontline or second line settings? Thank you.
spk16: Thank you. Thank you very much. Paul will be happy to address your question with respect to you, Danica. And then secondarily, the question of launch of first line versus second line for a black jersey. Paul?
spk15: Yeah. Hi, Michonne. Thanks for your question. Yeah. So the effect of the net selling price quarter over quarter was in the mid single digit range. And as I mentioned in my remarks, our focus now that we've launched and have all three presentations is that we're now going to drive the franchise to profitable market share and revenue growth. And that's going to be our plan in 2024 and beyond. We're going to do that because we have now all three presentations, can access the entire market, we've locked in great payer coverage, and we've been able to have a competitive ASP. So we're looking forward to a successful 2024 with Udenica Franchise. Regarding Lactorsi and your question about, you know, are we getting first line or second line, you know, we're just a couple months into it. I'll be better able on our first quarter call to give you more specifics, but what our intelligence tells us now is we're getting patients across all lines of therapy, and that's not unexpected given that, you know, we've got the indication for all lines of treatment, you know, but many of the patients that are you know, have just gotten chemo in second line, they're going to get Lactorsi immediately now. So we're getting it in both lines, which is great, and the launch is going very well.
spk16: So I think as an ancillary response to your question, Nishan, perhaps Dr. Dias would like to comment on the selection of Lactorsi as a PD-1 for patients diagnosed with MPC. Okay. Yeah, happy to.
spk04: So I can tell you as a physician, doctors tend to be very evidence-based and data-driven. What I will say is that Loctosi has three things that other checkpoint inhibitors do not have. First of all, we have data from a randomized control study. And not only do we have data, we have overall survival data, which is actually the gold standard that oncologists look for. And I mentioned the 37% risk reduction in terms of survival advantage with the addition of Loctul-Z. Secondly, of course, we have a label and other checkpoint inhibitors do not have a label and not only do other checkpoint inhibitors not have labels, there's no other indicated therapeutic agents for NPC. And thirdly, I'll say to Denny's point, we also have preferred positioning in terms of NCCN guidelines. We are the only category one listed agent for first line in terms of immunotherapy, and I think that really does reflect the strength of the data and the confidence in the data in this area of unmet need.
spk18: Thank you, Raj. Thank you for your question, Nishant. Thank you. Thank you.
spk11: One moment for questions. Our next question comes from Yagal Nokomovitz with Citigroup. You may proceed.
spk06: Hi, Denny and team. Thank you for taking the questions. On the liver cancer study, I'm just curious. I think the key comp there is Imbrave 150. Nominally, you are above those numbers. Of course, the numbers are small. I'm just curious if you could comment as to how much better you think you'd need to be than the Imbrave 150 study. benchmark to be on a go-forward decision with your triple combo. Thank you.
spk17: Thank you, Gav. Dr. Dias can address that.
spk04: Yeah, so you're absolutely right. The Embrave data with Atizobev is actually the only – Atizobev is the license indication right now. So we've shown a response rate, as I said, of 38%, 43% with MRESIST. I think we'll be looking at this as the kind of range we're actually looking for for further development, right? So I think with the data that we presented at ASCO GI in January is exactly what we were looking for, and we will be following up with a further study that's going to start later this year if we're looking at that triplet combination.
spk20: Yeah, and if I can add to that, Yugi. I think in a 30-patient study, the numbers are higher, but it's not an apples-to-apples comparison. So, we were excited, as Rush mentioned, in both the deepening of response and the improvement in response, and the study continues to evaluate data. But important in a 30-patient phase two study is also to look at how those responses track with IL-27 biology. So when, while the numbers again are small, very provocative that we see an association of IL-27 expression with response. Additionally, this is a program that has shown preclinically that there is strong activity in HCC in multiple models. The biology of IL-27 coming from the tissue resident macrophages, so liver macrophages, Cooper cells, is really one known to dampen the immune response. And that activity that was specific in preclinical models to liver cancer and lung cancer translated to humans. So I think that with the biomarker data in the responding patients showing modulation of the IL-27 pathway in association with response and the high levels of IL-27 expression have us incredibly excited to do the TORI, ASDOZO, BEV combination.
spk04: And maybe one last thing I'll add. Safety is always important. We showed a very clean safety profile as well. Very important.
spk18: Thank you, Yigal.
spk06: Okay. Can I ask another one? I was just curious on CH114, Theresa, you mentioned the dose escalation and then you're going to do the combo with torii. I think in your slide deck in early January, indicated there'd be some data in the first half of the year for the phase one. I wasn't sure if that was still the expectation or just help understand that, please. Thank you.
spk20: Yes. We plan to present the dose escalation in the first half of the year at a major medical conference.
spk18: Okay. Thank you. Okay.
spk11: Thank you. One moment for questions. Our next question comes from Colleen Cousy with Baird. You may proceed.
spk26: Hi. Thanks for taking our questions. I think revenue guidance is something you've given in the past. It looks like you're not providing revenue guidance for 2024. So can you just talk a little bit about that decision and what you think some of the levers are for revenue growth this year?
spk16: Hi. Thanks, Colleen. I'll take that one and let Paul back fill. I think the primary issue is that we have freshly launched the Udenica OnBody program. We're very excited about the enthusiasm that's been received in the market, but the ultimate trajectory of that across 2024 is not yet known. It's only been out in the market, you know, for about a month. As Paul pointed out, though, we have seen 129% increase with respect to the autoinjector uptake, and the trailing four-week data for Udenica itself is up north of 25% up from Q4. So that's all very, very compelling. I think that would give us greater certainty with respect to the trajectory and the steepness of the trajectory. Once we get a little further into Q1 and get that below us, all the indicators are positive. But I think certainly on the next call, we'll be able to give you some additional information on that. With respect to Lactorsi, as Paul indicated, we're very pleased with the launch. Our digital strategy over the last two years of basically a developing a relationship with the patient is very, very good. We are very pleased at the uptake, very pleased at P&T committees and how well we're doing there. But I think that's going to take a little bit of time. It takes a month or two to get on a formulary for a P&T committee in a major hospital someplace in the East Coast or something. So we're happy to do that, but we just would like probably another quarter under our belts before we go ahead and we do projections with respect to revenue. But on the topic of revenue, though, I would make one key point for you is the quality of the revenues is just as important, if not more important, as the size of the revenues. And we expect that the margins and the quality of the revenues, for example, with Lactorsi and Udenica, will lead to greater profitability as we go into the backside of the year. And as Paul said, that's really where we're focused. We want to drive the top line, but we also really, the quality of the revenues, especially with a product like Lactorsi, is going to be far better, more stable, and more sustainable than your typical biosimilar.
spk26: That's helpful. Thank you. And maybe a follow-up on some of your comments and just a quick clarification on cash flow positivity. I think you said the goal is Is cash flow positivity in 2024? Can you just clarify, is that guidance for cash flow positivity in 2024 or not specifically, maybe dependent on revenue or other factors?
spk16: Without being able to predict revenues, I can't really predict cash flow positivity. But I would just make the key point that I think that we've made substantial progress with respect to reducing our SG&A and R&D line, even in the face of several launches over the past 12 months. We have reduced our headcount over the past two years from 22 to 23 to 24, from 360 to 290, and now targeting 215 FTEs by the end of this year. I mentioned our overall SG&A reductions. So I think that we are running a very, very efficient organization as we focus on oncology. At the same time, we're driving the revenues higher, as you can see. And then lastly, we're making very good progress reducing our interest costs. Brian recapitulated that for us. But, you know, a 70% reduction in our fixed term loan interest costs where we're paying SOFR plus aid, I think that's really very significant. So we're going to continue in this direction. And just where those two lines cross, we can't quite predict, but that's our North Star and our guiding light where we're going.
spk25: That's helpful. Thanks for taking our questions.
spk11: Thank you. One moment for questions. Our next question comes from Michael Nedelkovich with TD Cowan. You may proceed.
spk09: Hi. Thanks for the question. So you have a wealth of opportunities in terms of various combinations and various tumor types and indications where those combinations might be tested. Can you give us a sense of pipeline priorities and when those priorities might translate into discrete go-no-go trials or even pivotal trials. Thank you.
spk16: Thanks for the question, Michael. I'll let Dr. LaValley address that. Teresa?
spk20: Yeah, Michael, thanks. As we've talked about with the CAS-DOZA, the lung cancer study is open. I mean, that's a home-run kind of strategy, a high bar strategy. But given the monotherapy activity of Casdozo, which was not expected to see in cancer patients, the TORI combination should show by data by the end of this year or early next year. We're also looking at earlier lines of treatment based off of the TORI positive data trials such as NeoTorch to further explore lung cancer. The HCC study we plan to open later this year, so data next year. As we mentioned, the 114, the CCR8 antibody, will be presenting next quarter. So, I think the news flow from that, plus a number of partnerships. We've already announced the Inovio one. You'll see other ones, and that will be generating data next year. They'll also be presented. And the, you know, the part that isn't appreciated about toropelomab, June she continues to develop it and is now all of their studies are multi regional clinical trials which would make it acceptable to the FDA and so they have a phase three ongoing with their pipeline so we'll be watching while we're not part of that study or funding that study clearly as it gets registered we have the market share so we'll be watching for that and that study opens last year So, typical small cell lung cancer phase three metrics. So, later in the next couple of years.
spk18: Thanks, Michael. Thank you.
spk11: One moment for questions. Our next question comes from Chris Schott with JPMorgan Chase. You may proceed.
spk08: Hi, this is Ethan Brown on for Chris Schott. Thanks for taking our questions. Just to start off, can you maybe offer some color on how you're thinking about OpEx looking past 2024, given on one hand you have the pipeline that you're trying to progress and then balancing that against the company's past profitability? And then I have one more question after that.
spk16: I'll let Brian McMichael take a shot at it. Brian? Yeah, so we're not providing guidance beyond
spk10: at this time. As we get into, as we sort out some of the things we're working on with our capital structure, we'll have a better idea of how we'll move forward from there. And that'll inform how we move forward in 2026.
spk16: I would say after we achieve profitability and cash flow positivity, we intend to stay profitable, if that's your question. Right. I would offer you one other point, which is, you know, we expect Lactorsi to reach peak sales in two and a half to three years, and we further expect a continued increase in market share for Udenica, you know, over the short to medium term. So both of those things will continue to drive top line for us. And further, we'll continue to show very high degree of discipline in with respect to controlling our expenses in SG&A, as you've seen already.
spk08: That's very helpful. Thank you. And then just pivoting over to Udenica, is there any color you can offer on how much sales at this point is coming from the auto-injector versus the traditional presentation? And maybe more broadly, just your expectations for pricing looking to 2024? And maybe more specifically, if you think Coherence is now more insulated versus other players, given you have the whole suite of products approved and in the market?
spk16: Yeah, that's a very, very good question, Barry. It's a very observant nuance. I'll let Paul address that particular issue, the three presentations and our ability to have a sustainable franchise in the market and support pricing. Paul? Yeah. Hey, Chris, thanks for your question.
spk15: So, you know, our whole strategy, you know, with Udenica with the three presentations is to give the customers, you know, choice so that they can choose the presentation that meets the unique needs of the patient and the doctor. And that's no other brand can do that. We saw pretty impressive growth with auto injector in the fourth quarter, driven largely in the clinic market. And that's because now we've got nurses that were using it, had great experience with it, liked it, and it's starting to now get its foothold into the workflow in the offices. As it relates to the percent of the AI business to the total, Udenica, it was still under 10%. So the workhorse continued to be the pre-filled syringe presentation. But as we see in 2024, That's all going to take a new shape now that we have our on-body device launched, as well as the auto-injector and the pre-filled syringe. But as I mentioned in my remarks, Chris, you know, moving forward in year six of this brand's life cycle, you know, we're getting that second wave of growth, and our focus is really going to be around driving profitable revenue and market share growth. And we are confident we're going to do that in 2021.
spk16: Ethan, the other point that I would make is we played the long-term game here with Eugenica and Market, as Paul said. We're six years in. We invested significantly, both in the auto injector, some $25 million in years past. It took us at least three or four years to bring forward the on-body. That was probably a $35 million investment. We underwent a number of years where we had very strong discipline around pricing and ASP management, consider ourselves good stewards of ASP. In the interim, you know, others have exited the market with aggressive pricing. We're still there. The new market entrants really haven't had an impact on the business. And I think that the significant market share increase, like the four-week trailing 25%, and our look forward here for 2024 shows that our long-term strategy is paying off. We're the only folks that have the three presentations. We're positioned for market stability and sustainability as we go forward now with PEG-2 aggressive.
spk18: And that's where we want to be. Thank you guys for the questions.
spk11: Thank you. And as a reminder, to ask a question, please press star 1-1 on your telephone and wait for your name to be announced.
spk18: One moment for questions.
spk11: And I'm not showing any further questions. I'll now like to turn the call back over to Danny Lanphier for any closing remarks.
spk16: Thank you, Operator, and thank you all for joining us on our Q4 full year 2023 call this afternoon. We're pleased with our progress on all fronts to drive our sales higher, strictly control our expenses, reduce our debt, and advance our pipeline. We are entering 2024 with strong upward momentum and a clear organizational focus on extending survival for patients with cancer.
spk18: We look forward to seeing you all at the upcoming investor conferences and on our next call. Thank you.
spk11: Thank you for your participation you may now disconnect.
Disclaimer