Ladies and gentlemen, thank you for standing by. Welcome to Coherus Ophthalmology Franchise Divestiture 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 will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would like now to turn the conference over to Jami Taylor, Head of Investor Relations. Please go ahead.
Thank you, Michelle. Good morning, everyone, and thank you for joining us today. I am Jami Taylor, Head of Investor Relations at Coherus. Earlier today, we issued a press release announcing the divestiture of our CIMERLI ophthalmology franchise to Sandoz in a $170 million upfront all-cash deal. That announcement is the sole and primary topic of this call. With us today to offer insight into this news is Denny Lanfear, Chairman and Chief Executive Officer of Coherus. Available during the Q&A portion of our call today are Bryan McMichael, Interim Chief Financial Officer, and Paul Reider, Chief Commercial Officer. I would like to remind you that today's call includes forward-looking statements regarding Coherus's current expectations about future events.
These statements include, but are not limited to, the following: statements regarding how we will use the proceeds from the divestiture, whether the divestiture will allow Coherus to reduce headcount and overhead costs, projections of future growth, and whether the closing of the divestiture will occur in a timely manner or at all. 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 about our ability to complete the divestiture on a timely basis or at all, and 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, Denny, I'll now turn the call over to you.
Thank you very much, Jami, and we are very pleased to host this call today announcing this exciting and important development for Coherus. One that is fully aligned with our stated strategy, focusing our business on oncology, where we continue to demonstrate positive momentum and sustainable growth. For this reason, otherwise, the divestiture of our CIMERLI ophthalmology franchise optimizes value for our shareholders. It's the right deal at the right time, right value for us. Let me now review the transaction and point out its advantages for Coherus. As Jami indicated, first, it's a $170 million upfront all-cash deal with Sandoz, with additional payments up for inventory. Importantly, this monetizes our non-core assets outside of oncology. Further, it addresses our term loan debt and reduces our interest payments.
It sharpens our focus and drives alignment of our capital structure to our strategy, as we previously discussed with you on our last earnings call. Most importantly, it advances our mission for a sustainable and growing business in oncology. Related to the proceeds of this transaction, there is an estimated additional $20 million in payments for product inventory on hand that will add to our balance sheet cash. Now, this transaction was possible because it is a reflection of Coherus's commercial excellence, particularly in the buy-and-bill space in the U.S. The transaction includes a transfer of CIMERLI Biologics License Application and supporting commercial infrastructure. This infrastructure includes the ophthalmology sales force and select field reimbursement.
It monetizes our expertise in buy and bill, which remains and will fuel our success in advancing Coherus's retained oncology franchise and pipeline with LOQTORZI and UDENYCA in its three presentations, which I'll describe in just a moment. Further, it provides Sandoz with access to our proprietary franchise management system and commercial software, which has been key to our success both in UDENYCA and in with YUSIMRY. Now, the YUSIMRY divestiture, as I indicated, enhances our focus and synergies across the commercial portfolio with our products. Paul Reider, our Chief Commercial Officer, is here today to take your questions on this topic, but importantly, it focus our commercial and marketing efforts singularly in oncology, where we project continued growth. It leverages that footprint in oncology, with some 90%-95% overlap in the call points.
As you know, LOQTORZI is about a $200 million market opportunity, has recently been launched. It is the only IO treatment with preferred category one designation under NCCN in combination with gemcitabine and cisplatin, and the only NCCN regimen in second-line treatment later. We are pleased with the launch of LOQTORZI, the distributors are stocked, the patients are dosed, and our sales ramp now being initiated. With respect to UDENYCA, as you know, last year, in 2023, we experienced strong quarter-over-quarter revenue growth. We now have a strong ASP to support our Q1 2024 on-body launch. We have three presentations which provide long-term market share growth: the auto-injector, the prefilled syringe, and the on-body. The auto-injector demand is increasing nicely. We'll have a little more to say about that on our quarterly call in March.
Significantly, with respect to the UDENYCA franchise, the payer coverage has nearly doubled versus 2023. Now, one of the more important things we wanted to achieve this year, as I have discussed with you before, is bringing our balance sheet in alignment with our revenue structure. This transaction, importantly, has the potential to reduce our debt when closed. Such potential is reduce our term loan exposure by 70%, and thereby reducing our annual interest rate payments by some $25 million. It also provides us the opportunity to reduce our non-core burden. We will now move forward with the plans that we discussed on our last call to reduce headcount and reduce our overhead costs by singularly focusing on oncology. Lastly, and most importantly, as I said, it advances our strategy in sharpening our focus on building a sustainable and growing oncology business with LOQTORZI and UDENYCA.
We believe our recent achievements demonstrate our continued momentum in this direction. The launch of LOQTORZI, the approval of the UDENYCA on-body, and presentation of positive phase 2 clinical data with casdozokitug, our first-in-class IL-27 targeted antibody at ASCO GI last week. As you can see from our pipeline slide, our products are moving well through mid-phase clinical trials, with casdozokitug now in phase 2 and 2 indications, lung and liver. CHS-114, our CCR8 molecule, which is highly selective, moving forward, phase 1, 2, and the filing of CHS-1000, our ILT4 asset. Before we go to the questions, then, let me just recap for you the direction of the company. We are committed to building a sustainable and growing oncology business and continue to make good strides.
This transaction extends our runway and reduces our cash burn, and advances our efforts to align our expense structure and our revenue structure. It executes on the strategy to sharpen our focus on and quickly advance our oncology portfolio of marketed first and best-in-class development stage assets. It greatly enhances our commercialization and marketing efforts, where we have strong synergies across revenue stage products like LOQTORZI and UDENYCA. And lastly, this transaction was made possible as it is a reflection of the value of our commercial excellence, primarily, and I would say, in Medicare Part D Buy and Bill in the United States. With that, operator, we're happy to take questions.
Thank you. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster. The first question comes from Yigal Nochomovitz with Citigroup. Your line is open.
Yeah. Hi, Denny and team. Thanks for taking the question. Could you just run into a little bit more detail as far as the thinking behind this, this transaction? Obviously, CIMERLI is, is one of your, your best products growing, I think, almost 50% last quarter. So could you just talk a bit about what the, what the profit margins are and what you, what you achieved for this transaction in, in terms of a cash flow multiple? Because it, it looks like the product was, was growing very, very nicely, and, and what the... If you could talk about the net, the net profit margin on this, on this asset. Thanks.
Thanks for your question, Yigal. You know, we'll have a little more to say about the impact on net profit margins with respect to this divestiture on our call in March. But I would just point out to you a couple things, key things with respect to the CIMERLI franchise. As you know, and has been previously disclosed, the CIMERLI asset was in-licensed, I think, for about $1 million in 2019. And I think this monetization is a good outcome for the company. Importantly, though, unlike, for example, LOQTORZI or even UDENYCA, similarly has a gross profit split of approximately 50% represented as a royalty, which impacts the margin significantly.
However, like UDENYCA has a low single-digit, mid-single-digit royalty, which is soon to expire, and LOQTORZI has a 20% royalty, with very, very significant margins. Of those three products, this was the least profitable of the three. More so to the point, though, this transaction allows us to reduce our term loan debt importantly, and allows us to focus the company very, very sharply on a growing and sustainable oncology business. So we felt that it was prudent at this time to reduce our debt, bring our balance sheet in alignment with our revenues. And I think that this transaction and the value of this transaction is a strong reflection of the company's ability to build in the buy-and-bill space Medicare Part B.
One other point that I would make is, post-close, we will talk a little more about how we'll be able to make certain changes to our cost structure, both in terms of headcount and in terms of our overall, reduction in expenses, to bring things into alignment as we go through 2024, which, as we previously discussed, is one of our prime drivers.
Okay, got it. And then just two quick follow-ups. You know, given that you're this is now an even sharper focus on oncology, as you note, is there any potential that you might do something similar in terms of divestiture with the Humira biosimilar? And then at one point in time, I believe you had talked about an Eylea biosimilar, but it sounds like given this announcement, that that's less likely or unlikely. Thanks.
Taking your last question first, we would not be proceeding with an Eylea biosimilar, as we are exiting the ophthalmology business, so on. With respect to your Humira question, I would just refer you to our recent J.P. Morgan presentation, in which we described our core assets, in oncology, LOQTORZI and UDENYCA, and non-core assets outside of oncology, CIMERLI and YUSIMRY .
Okay. All right, thanks, Danny. Appreciate it.
Please stand by for the next question. The next question comes from Douglas Tsao with H.C. Wainwright. Your line is now open.
Hi, good morning. Thanks for taking the questions. I guess, Denny, you, you addressed a lot of my questions, but I'm just curious, you know, what made you think now was the right time to necessarily execute this transaction, versus perhaps waiting a bit, little bit longer? Obviously, CIMERLI seemed poised to have a really strong year, and I think, and I understand your point that it's your, you know, least profitable product, but perhaps, you know, would have given some investors some comfort in terms of your your performance in, into 2024. And should we interpret this as a, a vote of confidence in terms of what you've seen, both with the UDENYCA on-body as well as LOQTORZI, just in the early stages of their commercialization? Thank you.
Thanks for your question, Doug. I would make a couple of key points. First, the Surface Oncology merger of last summer accelerated our move to immuno-oncology and provided us with a robust portfolio of pipeline assets focused in the tumor microenvironment. Secondarily, as you know, we were recently gotten the approval of LOQTORZI in nasopharyngeal cancer and are quite focused on expanding and owning that market. Similarly, we also now have the approval of the on-body for UDENYCA, and the on-body auto-injector is picking up in terms of market penetration.
With respect to the timing, we believe that this particular point in time allows us to address some of our balance sheet issues with respect to our leverage in our term loan, and at the same time, facilitating completion of our move to immuno-oncology.
Great. Thank you so much.
Please stand by for our next question. The next question comes from Chris Schott with J.P. Morgan. Your line is now open.
Hi, this is Ethan on for Chris. Thanks for taking my question. First, just wanted to get your latest thoughts on pipeline prioritization and if today's sale changes any of the timelines on those investments.
Hi, thanks for your question. No, this does not change the timing of our pipeline. I would simply point out, though, that we recently announced that we would no longer be prosecuting the development of the TIGIT asset and return that to our partners at Junshi. This is less of a reflection of TIGIT as it is a reflection of the very high-quality pipeline we're able to put in place, vis-a-vis the Surface Oncology merger of last year. Particularly our IL-27 asset. Casdozokitug is moving along very nicely, and recently showed some excellent progress in liver and lung. And we feel that that being a first-in-class asset, the competitive profile is just far superior to TIGIT. Also considering, of course, that casdozokitug has a single-agent monotherapy activity, and TIGIT does not.
But you do make a strong point. This does allow us to focus more sharply on the IO pipeline and our assets in the tumor microenvironment for further development.
Great. And then one more question, just more broadly, any updated thoughts on Coherus' timelines to profitability following this deal?
Yeah, great question. You can expect more color on that on our call in March, our fourth quarter call. But this divestiture now will allow us to focus the organization, streamline certain operations, reduce headcount, reduce COGS, reduce manufacturing costs, reduce royalty costs, et cetera, and sharpen our focus and gain efficiencies internally. We'll have a little more to say about that, but one of the key things that I like about this transaction, it allows us to have a more efficient, streamlined organization in one therapeutic area.
Great. Thank you so much for the questions, and congratulations on the deal.
Thank you.
Please stand by for the next question. The next question comes from Colleen Kusy with Baird. Your line is now open.
Great, thanks. Good morning, and congrats on the transaction. Thanks for taking our questions. Thanks for all the color so far, but a couple quick ones from us. Sounds like we'll get some guidance on OpEx on the Q4 call, but do you owe anything to your partners, BioAct, on this transaction?
No, we do not.
Great. You had mentioned the potential to reduce the term loan by 70%. What are the factors that would dictate how much of that term loan you're able to pay down?
Thank you for the question, Colleen. I think the proceeds from the divestiture is the first issue. That term loan is for about $250 million. We expect to take the proceeds of $170 million and pay down that term loan. Additionally, there are proceeds from monetization of inventory, which, you know, we currently estimate to be around $20 million. Our plan is to pay down 170 plus an additional 5, reducing that term loan exposure to about $75 million. We may have a little more to say about that in the near future. But I would use those numbers for now, and that would take about $15 million in cash and put it on the balance sheet.
I think that is very important. The Surface Oncology transaction last summer put about $20 million on the balance sheet, and this also put about $20 million on the balance sheet. Both positive.
Great. Thanks for taking our questions.
Please stand by for the next question. The next question comes from Robin Karnauskas with Truist Securities. Your line is now open.
Hey, guys. Thanks for taking my question. So it strikes me a little bit after listening to all the answers you've given, that you're transitioning into, like, a biotech-type company. So I have two questions there. How do we think about Tori revenue streams and, like, how much money you have to pour in to make that drug even bigger and what it is currently able to produce? And then following up on a previous question, can you commit to being profitable in 2024? I just think you're transitioning into a different company, and I think we just have to figure out how to think about modeling the new entity.
Thank you, Robin. Thank you very, first of all, with respect to LOQTORZI, you know, Toripalimab, there's been considerable enthusiasm in the market for that product. There is no treatment for nasopharyngeal cancer, and as we indicated, previously, that we estimate that to be about a $150-$200 million product. That product has about 80% gross margins, as there is a 20% royalty, back to our partners at Junshi. I would characterize the commercialization cost for that product as fairly modest. We've talked before in our previous calls about our digital strategy and our ability to reach out to all these patients, and our ability also to build a community around those patients on npcfacts.com.
To your second point, yes, our intent is to build a biotechnology company focused in oncology, a sustainable and growing oncology company. That is, that is our ambition, and we feel that streamlining our products and focusing on oncology is the best way to achieve that. The monetization of this asset really allows us to address our balance sheet issues. We took that during a period of time when it was presumed there would be a number of indications for PD-1, and those indications, you know, due to policy changes at the FDA did not materialize. So I think this is prudent to address this now and focus solely on oncology. With respect to modeling and with this in hand, now we're going to complete the transaction. We look forward to closing in the first half of this year.
When we get that out of the way, we will come back to you with some additional modeling parameters going forward, so you can shape up your models and take a look at profitability. But both the products that, that we have, we, we think have very good margins. And in particular, I would say that UDENYCA, with its three presentation formats, is well-positioned to see increased share gains, across 2024, just as we saw increased share gains across, 2023. I think we started about 10.5% market share with UDENYCA in Q1, and we exited about 17.5% market share. So with our on body and our auto injector, we look forward to further gains through 2024.
A follow-up question on LOQTORZI. So if you think about coming out of J.P. Morgan, there was a lot of talk about taking with big pharma and large cap biotech, taking more risks in IO, really thinking about new combinations. How do you have any new ideas that you have about combining tori with other assets? How is big pharma and biotech thinking about your drug coming out of J.P. Morgan?
That, that's a great question, Robin. Just prior to J.P. Morgan, we announced a partnership with INOVIO, whereby they would use LOQTORZI in conjunction with their products in phase three studies. The cost to us is the COGS and the supply of drug for the studies. We are not contributing to the actual cost of the study itself. We think this is an ideal paradigm for us. Dr. LaVallee, our Chief Development Officer, is in conversations with a number of other parties with similar types of arrangements, whereby we would provide drug in consideration for their development. In this fashion, we believe that we can garner additional label claims for LOQTORZI in various cancers in combination. Overall, I think that we have a robust strategy for partnering with LOQTORZI.
We also have, for example, our partner, Junshi, is about to initiate a phase 3 in non-small cell lung, I should say small cell lung, with their BTLA. So LOQTORZI, as you know, is a second generation PD-1, and there's been substantial interest in the environment for others, to use it in combination with their products. So you will be hearing more about this throughout 2024, these partnering efforts.
Great. Thank you.
Please stand by for the next question. The next question comes from Michael Nedelcovych with TD Cowen. Your line is now open.
Thank you for the question. I have one really on casdozokitug. What indications will be the focus for expansion of this agent in development? Should we assume it's lung and hepatocellular carcinoma? And do you now have adequate funds to fully interrogate those tumor types, for example, in controlled phase two trials? And kind of along those lines, I think you had initially planned an R&D or pipeline day at the end of last year and had shifted to Q1 of this year. Are you still planning to do an R&D day like that?
Hi, Michael. Thanks, thanks for your question. Yes, we are. The short answer is yes, we are planning to do an R&D day. Obviously, we wanted to get this particular transaction completed before we went ahead and did R&D day and made a comprehensive presentation to investors. So I think you can expect that after the transaction closes, and after we'll be able to address certain structural and cost issues for you comprehensively. With respect to the development of the pipeline, I think that in particular, the liver data that was presented at ASCO GI was very, very promising. I would refer you to that. We're happy to take a side call from you on that with Dr. LaVallee and so forth.
But, there's also some additional work being developed across several other indications.
Got it. Thanks. I look forward to the R&D day. Appreciate it.
We have time to take one more question. So please stand by for the last question. The last question comes from Balaji Prasad with Barclays. Your line is now open.
Good morning, this is Shaw subbing for Balaji. Thanks for taking our question. So let's talk about your top-line growth outlook after this transaction, and how much of the new Onpro market share that you believe you will take, and you believe to what extent will it cover the lost revenue carved out from this transaction, and with a different top-line mix, and what do you expect for the margins for 2024 and after that? Thank you so much.
Thank you. That's a great question. I would make the following points. With respect to the biosimilar revenues, those revenues, of course, are poorer quality than you would have with either YUSIMRY or with UDENYCA, given the, you know, approximately 50%, royalty profit split, with that asset and the, and the COGS, and so on. As you rightly point out, we expect growth across the UDENYCA franchise, particularly, with in consideration for on-body. As you know, the innovator's device, Onpro, has approximately 42%, I believe, of the market, and I think that 42% market is fair game for us, with on-body. That's 42% of the 1.2 million units that go out.
So there are several hundred thousand units per year that can be addressed. And again, we'll have a little more to say about that on our call. In conjunction, though, I think also the interesting thing about the UDENYCA market is the auto-injector, which we think portends well for the future. We're making good strides there now. It's been out for about six months and has seen further adoption. With respect to the overall margins, I won't comment on that directly now today with the projections, but you can expect us to have a little more to say about that after we complete this. We're able to shape up our organization consistent with this divestiture.
Thanks for the additional color.
Thank you.
I would now like to turn the call over to Denny Lanfear, CEO, for closing remarks.
Thank you, operator. Thank you all for joining us today. First, I want to commend my commercial team, particularly the ophthalmology team with CIMERLI, as for being recognized and validated, clear leaders in the field, and making this great achievement possible for our organization. The value of this franchise is reflected with this transaction, strong reflection of our company's track record and competency, Medicare Part B, buy and bill, which portends also very strong results for our UDENYCA franchise. With this transaction, Sandoz accesses our unmatched expertise in this commercial area. This expertise remains and will fuel our success, advancing retained oncology franchises, including LOQTORZI and UDENYCA, as I mentioned in the presentations, and bringing them to patients. Thank you all for joining us this morning, and we'll see you on our call.
This concludes today's conference call. Thank you for participating. You may now disconnect.