Good day and thank you for standing by. Welcome to the Quarter 2, 2021, Kuherus Conference Call. At this time, all participants are in a listen only mode. I would now like to hand the conference over to your speaker today, Matt David Stilwell, Chief Financial Officer. Please go ahead, sir.
Thank you.
Good afternoon, everyone, and thank you for joining us. We issued a press release earlier announcing our 2021 Q2 results. This release can be found on the coherus biosciences website. Today's call includes forward looking statements regarding Coherus' current expectations. These statements include, but are not limited to, Our ability to advance our biosimilar and immuno oncology product candidates through development and registration, our commercialization of UDENYCA and other Potential products in the future, our ability to meet our R and D and SG and A expense guidance for 2021, as well as our uses of capital, all of which involve certain assumptions, risks and uncertainties that are beyond our control and could cause actual results to differ from these statements.
These statements are not guarantees of future performance and are subject to certain risks Uncertainties are discussed in documents that we filed with the Securities and Exchange Commission, specifically in our quarterly report on Form 10 Q for the quarter ended June 30, 2021 that we filed earlier this afternoon. The forward looking statements stated today are made as of this date, With me on today's call are Dean Lanphier, CEO of Coherus Paul Reeder, EVP of Commercial Operations and Market Access I'm Chris Thompson, Executive Vice President of Sales. And I will now turn the call over to Denny.
Thanks, McDavid, and thank you all for joining us this afternoon. Today, I'll provide updates on UDENYCA performance, our biosimilar pipeline and progress with torapalumab, our PD-one antibody. We're pleased with our progress as we transform Coherus from a single product biosimilar company to a diversified multiproduct biopharma company with multiple oncology assets. Over the next 2 years, we anticipate bringing 4 new products to market in the United States, complementing UDENYCA. Our diversified product portfolio will generate growing and durable cash to invest in the large rapidly developing immuno oncology market, but torapelimab is our foundational asset.
Now let me first turn to UDENYCA. In the Q2 of 2021, we recorded $88,000,000 in net sales uDENYCA as compared to $83,000,000 in the Q1. UDENYCA market share as reported by IQVIA declined a point quarter to quarter from 20% to a 19% share. Wholesaler inventory was stable in the 2nd quarter Compared to the prior quarter end, it was not a factor in 2nd quarter revenue. Recall the 1st quarter revenue was negatively impacted by the burn off About 9 days of wholesaler inventory that accumulated the seasonal buy ins at year end 2020.
Later in the call, Paul Reeder will provide additional details with respect to our expectations for the second half UDENYCA performance. Now let me update you on the excellent progress we're making with our biosimilar pipeline. Together with UDENYCA, our biosimilars of Lucentis, Humeira and Avastin addressed an aggregate $28,000,000,000 in market opportunity. We've already demonstrated our ability to use our branded marketing and capabilities to penetrate competitive areas with biosimilar. We believe we will experience similar success taking significant share In these new biosimilar markets, our objective is to take at least 10% of each of these new markets and in some cases as with UDENYCA Even greater market share.
Our next expected biosimilar launch is CHS-two zero one, our Lucentis biosimilar candidate. I'm pleased to report that our partner BioAg recently submitted the BLA to the FDA. Assuming the filing is accepted for review, we anticipate a standard 12 month review and approval cycle. We are excited about the potential approval of this product in 2022 and believe we will be among the 1st biosimilar Lucentis candidates to market actively participating in the market formation. Launch planning is underway.
Now with respect to our Humira biosimilar CHS-fourteen twenty, the FDA review is progressing well We believe that the application is on track for December 2021 target date. You may recall that we expect to launch CHS-fourteen twenty in the United States on or after July 1, 2023. Regarding CHS-three zero five, our Avastin biosimilar, we are currently conducting A three way PK study to support BLA, which we expect to file in the 1st part of 2022. Once approved, the Avastin commercial will further leverage our commercial oncology capabilities with nearly identical customer base as UDENYCA and torapelumab, adding incremental margin Now let me make a few remarks with respect to torapalimed and provide you with positive update regarding our BLA filing in nasal pharyngeal carcinoma or NPC. As you may recall, the registration strategy called for filing the second and third line MPC BLA and then post approval Filing a supplemental BLA for first line treatment events.
FDA has now agreed to accept the first line submission for concurrent evaluation with the second and third line data, thereby accelerating time to potential approval for the first line indication. JUPITER 2, the clinical trial evaluating torkpalumab first line MPC generated strong progression free survival and overall survival data that were presented this June in the plenary session at ASCO. The rolling BLA submission for all indications is expected to be completed this quarter and we continue to project approval in the first half of twenty twenty two. Now I'm also pleased to report that torapalumab clinical data will be presented in September at 2 medical conferences. Data from the Phase 3 first line non small cell lung cancer study, which we earlier reported had met the primary endpoint of progression free survival Will be presented at the World Conference on Lung Cancer.
The JUPITER-six Phase 3 study in esophageal Squamous cell carcinoma, which also met its co primary endpoints of progression 3 and overall survival will be featured at the annual meeting of the European Saiyadi from Medical Oncology. Junshi continues to make good progress with additional torefelumab clinical trials in lung cancer, which represents approximately 45% of the PD-one market opportunity. Phase 3 studies Evaluating torapelumab and neoadjuvant at small cell lung cancer and EGFR positive patients who have failed TKI treatment are enrolling rapidly with data expected next year. Phase 3 study in small cell lung cancer with co primary endpoints of progression free and overall survival is now fully enrolled and is also expected to read out to 2022. You'll find details of these studies on Slide 20 of the August investor presentation, which we posted to our website earlier today.
Beyond lung cancer, in 2022, we also project data from a Phase 3 study in first line treatment of triple negative breast cancer And 2 Phase 3 trials in hepatocellular carcinoma, 1 for the first line treatment and 1 in the neoadjuvant setting, as detailed on Slide 21 of the investor presentation. Torpilumab is the foundation of our immuno oncology franchise And developing it in combination with other agents that can improve response rates is a key part of our strategy. JS-six, The TIGIT antibody for which we have option rights is now being evaluated by Jun Shi in a Phase 1 clinical trial and is progressing well. I'll now turn the call over to Paul Reeder, our Executive Vice President of Commercial Operations and Market Access for some additional color on the market dynamics Proceed going forward for UDENYCA. Paul?
Thank you, Denny. The pemphylgrastimarket grew approximately 2% quarter to quarter. UDENYCA ended the quarter with 19% share of the overall petrographs of the market. This 1% decline in UDENYCA market share in the quarter came primarily from the least profitable segment of the market, which were 340 Beauty Hospitals. Since the end of 2020, Overall, Neulasta share has declined 5 percentage points, validating customers' willingness to move away from Onpro, and we expect this trend to continue.
Going forward, despite the COVID pandemic, we believe that taking share from Onpro will be a source of growth For biosimilars and especially for UDENYCA, we are projecting market share within the second half of twenty twenty one, Driven by the stability in our Q3 ASP compared to competitor ASPs and the redeployment of our field teams to in person sales calls. With respect to revenues, we expect modest second half growth compared to the first half of twenty twenty one. However, There are 2 major uncertainties that are largely beyond our control, therefore difficult to handicap. The first is COVID resurgence With attendant impact on market growth, share movement and sales force access. And the second is the level of price erosion precipitated by our competitors.
We remain confident in our ability to respond quickly Manage either challenge to maximize our available opportunities. I'll now turn it back over to McDavid for a review of the quarter's financial results.
Thanks, Paul. The details of our financial results are in the press release and in the 10 Q we filed this afternoon. So I'll focus now on just a few highlights. For the Q2 of 2021, we reported a $29,900,000 net loss on a GAAP basis. Cash flow from operating activities was essentially breakeven at negative $200,000 for the Q2 of 2021.
As detailed earlier in the call, net product revenue was $88,000,000 an increase from the $83,000,000 in UDENYCA net sales Cost of goods as a percentage of net revenues increased from the prior quarter. In the Q1, we depleted the inventory manufactured and fully since prior to UDENYCA approval. And so the 2nd quarter was the 1st period with per unit acquisition costs fully reflected within COGS. We expect a similar gross margin in the 3rd quarter and then an improvement in the 4th quarter. For the full year 2021, we expect gross margins of around 85%, including In mid single digit royalty, we owe through mid-twenty 24.
In the long run, starting in 2024, We expect UDENYCA gross margins to return to 90% or higher as we realize the benefits of a significant manufacturing process improvement and royalty expiration. Research and development expenses for the Q2 of 2021 were $54,800,000 compared to $26,200,000 for the same period in 2020. The increase reflects cost to advance our late stage pipeline. Recall that we expect to bring 4 Additional products to market in the next 2 years, and we are investing in activities such as regulatory affairs and manufacturing scam up For CHS-fourteen twenty, development and EMA filings for torapalumab and the clinical trial for CHS-three zero five. R and D expense for the quarter was partially offset by a $9,000,000 credit due to the accounting treatment Of the Coherus equity purchased by Junxi Biosciences in the 2nd quarter.
Selling, general and administrative expenses were $40,300,000 in the Q2 of 2021 as compared to $34,100,000 in the year ago quarter. The increase was primarily driven by higher stock based compensation expense as well as UDENYCA commercialization activities, which increased compared to the year ago quarter, which was heavily impacted by the COVID lockdowns of the spring of 2020. We ended the 2nd quarter with cash, cash equivalents and marketable securities of $454,400,000 compared to a balance of $399,500,000 at March 31, 2021. And recall that during the Q2, Coherus Received $50,000,000 from Junji Biosciences' purchase of common stock associated with the torapalumab licensing transaction. We are maintaining our full year guidance for R and D and SG and A expenses of $370,000,000 to $400,000,000 Excluding the Q1 upfront payments to Junxi Biosciences, and this range includes approximately $50,000,000 to $55,000,000 and stock based compensation expense.
And I'll now turn the call back to Denny for closing remarks.
Thank you, McDavid. In closing, I'd like to congratulate and thank my colleagues and teammates at Coherus on the strong progress we are making on the transformation to a diversified biopharma company With multiple products in oncology, their hard work is very much appreciated. The result of our team's efforts are 2 products currently in the registration process, Also, a 3rd BLA is soon to be filed for torapalumab. We're advancing rapidly on our objective to transition from 1 approved product, UDENYCA, Support approved products in United States over the next year. In 2023, we expect to have 5 products launched generating revenue.
Over the next several months, we anticipate clinical data announcements, medical presentations and regulatory milestones for both our biosimilars and tarpalumab. We look forward to providing updates through the Q4, where we'll have our Analyst Day event in New York City. Operator, we can now turn the line over to questions. Thank you.
Thank you. Our first question from the line of Douglas Tsao of H. C. Wainwright. Sir, your line is open.
Hi, good afternoon. Thanks for taking the questions. Just any as a starting point, just curious to hear your perspectives In terms of what we're seeing in the UDENYCA market, it seems like from the biosimilar makers, pricing has sort of stabilized, but the innovator continues to sort of take some pricing discount. How do you see that playing out through the balance of the year?
Hi, Doug. Thanks for the question. Yes, I'll hand that question over to Paul Reeder, our Executive VP of Marketing. Paul, would you like to address Doug's question?
Yes, sure Doug. Yes, I mean, we definitely are watching the Race to the bottom for Amgen and pushing the price down. They have the lowest ASP in the market and Really for biosimilar competitors, really need to recognize that the meaningful growth will Only come from taking share from the originator and swapping growth among biosimilars is not a sustainable strategy. From a pricing standpoint, Our Q3 published ASP has increased 1% over Q2. So by comparison to the originator, You can see the declines there.
But we remain focused on value over the long term And to maintain the highest ASP price while maximizing share.
And then another question, I know we're It's maybe a little early, but just looking ahead to 14/20, just curious at what point just given the likelihood of Approval at the end of this year and then launching 18 months later, would we expect to see some commercial build out for that product?
That's a great question, Doug. We are currently performing some market research around The potential structure for the sales force, but we are on record earlier as indicating that we believe that will be primarily a Payor driven market access, driven operation. So we do not see substantial increases On the commercialization side to support that product, although there probably will be some marginal increases, but not substantial.
Okay. And so just given the fact that you're not going to be spending that much, should we anticipate those would be sort of stream on just a few months before the actual launch?
I'll decline to actually at this point describe The breadth of our efforts in various places of the organization to support that, but we do not expect, example, to put a substantial number of boots on the ground and move that product. Okay, great. Thank you.
Thank you. Next question from the line of Salim Syed of Mizuho. Sir, your line is open.
Great. Thanks so much for the question, guys, and good afternoon. So a couple for me, if I can. 1 on Actually both on UDENYCA. So when we look at the data, it looks like the Stencil is starting to pick up a little bit more share, Thanks for the question.
Share, more quickly now than previously, even though they have a slightly higher ASP from you, I'm just wondering if you could just give us a little bit Color with the dynamic there. And then the second on your on body device, given the trial mentions on Clinical Heroes, And some of the data points seem to me to suggest that we could get data potentially this summer or early fall from those trials. Is that a Correct assumption or when do you expect we should be able to get some data from there? And what does it mean for you to potentially be the only biosimilar With an approved on body device, if that were to occur. Thank you.
Well, thanks for the question, Salim. I'll take the first one, the second question rather first, And I'll let Paul address Zinfenso and so on. With respect to the OnBody device, I think that if we would reiterate our previous Amit, that we are pleased with the progress that we are making with respect to that product. As you know, we have had some Expenditures disclosed over the past year for other delivery of modalities for UDENYCA. I'll probably decline to give you timelines for data, but I think that product is moving along.
Paul, do you want to say a little bit about Zincenzo and what's going on in the market?
Yes, sure. Salim, I'll kind of reiterate our focus here at coherus, which is the gainshare for ModPro. It's got over 50% of the market. It's likely that any of the new biosimilar entrants are going to pick up a couple of share points or not. What we're seeing is Their share is coming from primarily that 340B segment.
It's the least profitable segment for us. That's where we're seeing some market share gains. But our focus is really to take share for ModPro both in the short and long term.
Understood. Thanks so much.
Thanks, Flynn.
We take the next question from the line of Chris Charles of JPMorgan, your line is open.
Great. Thanks so much for the questions. I just want on UDENYCA and then a bigger picture one. On Eugenica, I think sorry if I misheard this. During the prepared remarks, I think you expected ASP stability going forward.
I just didn't know, is that relative to peers Or on an absolute basis. And I just as I think about just price going forward, is the more stable dynamic, is that Mix driving that or are you actually seeing some of the competitive dynamics in the space maybe starting to normalize a bit? And then my bigger picture question, I think you've talked about building out the IO portfolio over time, but there also seems to be a lot of opportunities, I guess, in the broader oncology market. So would there be any interest in the company to add, I guess non IO oncology assets to the mix and that there's obviously some very large spaces there. There seems to be a number of ex U.
S. Kind of me too assets being developed there as well. And I just didn't know, is it about the strategy? Could that be something you look at as well? Or is the focus very much on IO
Thank you for the question, Chris. Let me take the ASP question first. As you know, we consider ourselves Good guardians of ASP, we try to keep our prices, our price decrease as modest as possible. I think our track record and our ASP record reflects that. That being said, we can't control the pricing behavior of other competitors in the market Regardless of their motivations and so on, we are currently somewhat stable with our ASP For this quarter, but looking forward several quarters in the future, there might be additional The changes and decreases as required.
With respect to oncology products,
I think you bring up
a very interesting point. We of course currently have a few immuno oncology products that Came over with the Junshi collaboration, the TIGIT, the engineered IL-two, etcetera. Our focus is on the cancer immunity cycle, Well, I think it's fair to say that in conjunction with toropelumab, our PD-one, we are now getting a fair amount of Incoming oritures, pardon or tours for various assets to use with torapelumab. So I think it's fair to say that we remain open minded about the assets that we look at. But I would also say that the June sheet digit It's sort of front and center for us as that data reads out, so end of the year and into 2022.
But we are seeing significant our entry into the market with the PD-one though is causing significant interest.
Makes sense. Thanks.
Great. Next question from the line of Jason Garveri of Bank of America. Sir, your line is open.
Hi, this is Ashwin on for Jason. So I have 2. One is on Humira. So looks like AbbVie is now saying that they expect 2 interchangeable biosimilars. And we've seen the first two interchangeable biosimilars getting approval recently.
So to what extent is your 10% projected share predicated on any assumption around interchangeable biosimilar either for you or for competitors. That's the first one. And the second one, just on gross margin. So you Say that I think 85% in 2021, should we expect around the same level for 2022 and 2023 before it jumps to 90% in 2024? Thanks.
Thanks for your question. I'll let David take Gross margin question. I'll speak to the issue of interchangeability with HUMIRA. We don't believe that the lack of interchangeability is significant impediment to market penetration. We think it's more perhaps of a segmentation issue.
And as we've said previously, we believe that The payers will probably have the loudest voice in terms of selection of The biosimilar of choice for them. So we look forward to that. We consider ourselves to be very adept biosimilar competitors, And we think that we will do very, very well in the market, which is the reason why we are Projecting 10% of recent market share before the Humira biosimilar post entry. Now with respect to your questions on gross margins and so on, I'll let David Stone will address that. David?
Yes.
Thanks, Ash. So as we said in the prepared remarks, the Q2 was the 1st period in In which the full per unit acquisition cost of UDENYCA was realized. And so that was mostly responsible for the increase in the cost of goods as a percent of net price Our net sales. I would add though that there was a separate element to the Q2 and it will also be available and obvious in the Q3 that the actual lots of UDENYCA that we were utilizing in the second and in the third quarters Were lots that were manufactured prior to a process improvement. And so those lots actually were relatively low yielding lots And therefore, more expensive knots.
And we expect to move through those by the end of the third quarter and then for gross margin to come back down From that point in the Q4 and to be relatively stable through 20222023. So that's the trajectory that
we expect for cost of goods.
Got it. Okay. Thanks for taking our questions.
Thank
you. There are no further questions. Presenters, please continue.
Thank you very much for joining us today.
Dan, thank you very much. We look forward to providing you another update on our next quarterly call, and we look forward to seeing you at our Investor Day in New York in Q4. Thank you.
Goodbye.
That concludes today's conference call. Thank you everyone for participating. You may now all disconnect.