UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number:
(Exact name of registrant as specified in its charter)
| ||
(State or other jurisdiction of |
| (I.R.S. Employer Identification No.) |
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(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
☒ | Accelerated filer | ☐ | ||
Non-accelerated filer | ☐ | Smaller reporting company | ||
Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of April 30, 2022,
COHERUS BIOSCIENCES, INC.
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2022
TABLE OF CONTENTS
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Management’s Discussion and Analysis of Financial Condition and Results of Operations | 26 | ||
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UDENYCA®, YUSIMRY™ and CIMERLI™, whether or not appearing in large print or with the trademark symbol, are trademarks of Coherus, its affiliates, related companies or its licensors or joint venture partners, unless otherwise noted. Trademarks and trade names of other companies appearing in this Quarterly Report on Form 10-Q are, to the knowledge of Coherus, the property of their respective owners. |
2
CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements regarding future events and our future results that are subject to the safe harbors created under the Securities Act of 1933, as amended (the “Securities Act”), and the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Any statements that are not statements of historical facts contained in this Quarterly Report on Form 10-Q may be deemed to be forward-looking statements. In some cases, you can identify forward-looking statements by words such as “aim,” “anticipate,” “assume,” “attempt,” “believe,” “contemplate,” “continue,” “could,” “due,” “estimate,” “expect,” “goal,” “intend,” “may,” “objective,” “plan,” “predict,” “potential,” “seek,” “should,” “strive,” “target,” “will,” “would” and other similar expressions that are predictions of or indicate future events and future trends, or the negative of these terms or other comparable terminology. These forward-looking statements include, but are not limited to, statements about:
● | whether we will be able to continue to maintain or increase sales for our products in the United States; |
● | our expectations regarding our ability to develop and commercialize toripalimab and CHS-006 and our other product candidates in the United States and Canada, including whether the trial results, data package or biologics license application (“BLA”) for toripalimab will be sufficient to support regulatory approval; |
● | our ability to address comments raised in the complete response letter for the original BLA for toripalimab, timing to resubmit the original BLA for toripalimab and timing of the review for the original BLA resubmission for toripalimab; |
● | whether our CIMERLI™ partner, Bioeq AG (“Bioeq”), will be able to obtain regulatory approval in the United States, whether we or Bioeq can overcome import restrictions that could affect the timing of the launch in the United States, or whether we will be able successfully to initiate sales of Bioeq’s biosimilar candidate upon such approval; |
● | our ability to receive marketing authorization for the on-body injector presentation of UDENYCA®, including the timing of receiving such marketing authorization, if approved; |
● | our ability to maintain regulatory approval for our products and our ability to obtain and maintain regulatory approval of our product candidates, if and when approved; |
● | our expectations regarding government and third-party payer coverage and reimbursement; |
● | our ability to manufacture our product candidates in conformity with regulatory requirements and to scale up manufacturing capacity of these products for commercial supply; |
● | our reliance on third-party contract manufacturers to supply our product candidates for us; |
● | our expectations regarding the potential market size and the size of the patient populations for our product candidates, if approved for commercial use; |
● | our financial performance, including, but not limited to, projected future performance of our gross margins, research and development expenses and selling and general administrative expenses; |
● | the implementation of strategic plans for our business, product and product candidates; |
● | the initiation, timing, progress and results of future preclinical and clinical studies and our research and development programs; |
3
● | the scope of protection we are able to establish and maintain for intellectual property rights covering our product candidates; |
● | our expectations regarding the scope or enforceability of third-party intellectual property rights, or the applicability of such rights to our product candidates; |
● | the cost, timing and outcomes of litigation involving our product candidates; |
● | our reliance on third-party contract research organizations to conduct clinical trials of our product candidates; |
● | the benefits of the use of our product candidates; |
● | the rate and degree of market acceptance of our current or any future product candidates; |
● | our ability to compete with companies currently producing competitor products, including Neulasta, Humira and Lucentis; |
● | developments and projections relating to our competitors, our market opportunity and our industry; and |
● | the potential impact of COVID-19 and the continuation of hostilities in Ukraine on our business and prospects. |
We have based these forward-looking statements on our current expectations about future events. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Our actual results may differ materially from those suggested by these forward-looking statements for various reasons, including those identified in Part II, Item 1A Risk Factors and discussed elsewhere in this Quarterly Report on Form 10-Q. Given these risks and uncertainties, you are cautioned not to place undue reliance on forward-looking statements. The forward-looking statements included in this report are made only as of the date hereof. Except as required under federal securities laws and the rules and regulations of the Securities and Exchange Commission (“SEC”), we do not undertake, and specifically decline, any obligation to update any of these statements or to publicly announce the results of any revisions to any forward-looking statements after the distribution of this report, whether as a result of new information, future events, changes in assumptions or otherwise.
This Quarterly Report on Form 10-Q also contains estimates, projections and other information concerning our industry, our business, and the markets for certain diseases, including data regarding the estimated size of those markets, and the incidence and prevalence of certain medical conditions. Information that is based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties and actual events or circumstances may differ materially from events and circumstances reflected in this information. Unless otherwise expressly stated, we obtained this industry, business, market and other data from reports, research surveys, studies and similar data prepared by market research firms and other third parties, industry, medical and general publications, government data, publicly filed reports and similar sources.
4
PART I. FINANCIAL INFORMATION
ITEM 1. Unaudited Condensed Consolidated Financial Statements
Coherus BioSciences, Inc.
Condensed Consolidated Balance Sheets
(in thousands, except share and per share data)
(unaudited)
March 31, | December 31, | |||||
| 2022 |
| 2021 | |||
Assets |
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Current assets: |
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Cash and cash equivalents | $ | | $ | | ||
Trade receivables, net |
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Inventory |
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Prepaid manufacturing |
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Other prepaid and other assets |
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Total current assets |
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Property and equipment, net |
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Inventory, non-current |
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Goodwill and intangible assets |
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Other assets, non-current |
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Total assets | $ | | $ | | ||
Liabilities and Stockholders’ Equity |
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Current liabilities: |
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Accounts payable | $ | | $ | | ||
Accrued rebates, fees and reserves |
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Accrued compensation |
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Accrued and other current liabilities |
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Total current liabilities |
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Term loans | | | ||||
Convertible notes | | | ||||
Lease liabilities, non-current |
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Other liabilities, non-current |
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Total liabilities |
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Commitments and contingencies (Note 8) |
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Stockholders’ equity: |
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Common stock ($ |
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Additional paid-in capital |
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Accumulated other comprehensive loss |
| ( |
| ( | ||
Accumulated deficit |
| ( |
| ( | ||
Total stockholders' equity |
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Total liabilities and stockholders’ equity | $ | | $ | |
See accompanying notes.
5
Coherus BioSciences, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except share and per share data)
(unaudited)
Three Months Ended | ||||||
March 31, | ||||||
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| 2022 |
| 2021 | ||
Net revenue | $ | | $ | | ||
Costs and expenses: |
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Cost of goods sold |
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Research and development |
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Selling, general and administrative |
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Total costs and expenses |
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Loss from operations |
| ( | ( | |||
Interest expense |
| ( |
| ( | ||
Loss on debt extinguishment | ( | — | ||||
Other income, net |
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Net loss before income taxes |
| ( |
| ( | ||
Income tax provision |
| — |
| — | ||
Net loss | $ | ( | $ | ( | ||
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Basic and diluted net loss per share | ( | ( | ||||
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Weighted-average number of shares used in computing basic and net loss per |
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See accompanying notes.
6
Coherus BioSciences, Inc.
Condensed Consolidated Statements of Comprehensive Loss
(in thousands)
(unaudited)
Three Months Ended | ||||||
March 31, | ||||||
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| 2022 |
| 2021 | ||
Net loss | $ | ( | $ | ( | ||
Other comprehensive loss: |
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Unrealized loss on available-for-sale securities, net of tax | | ( | ||||
Foreign currency translation adjustments, net of tax |
| ( |
| — | ||
Comprehensive loss | $ | ( | $ | ( |
See accompanying notes.
7
Coherus BioSciences, Inc.
Condensed Consolidated Statements of Stockholders’ Equity
(in thousands, except share and per share data)
(unaudited)
Accumulated | |||||||||||||||||
Additional | Other | Total | |||||||||||||||
Common Stock | Paid-In | Comprehensive | Accumulated | Stockholders' | |||||||||||||
|
| Shares |
| Amount |
| Capital |
| Loss |
| Deficit |
| Equity | |||||
Balances at December 31, 2021 |
| | $ | | $ | | $ | ( | $ | ( | $ | | |||||
Net loss |
| — |
| — |
| — |
| — |
| ( |
| ( | |||||
Issuance of common stock upon exercise of stock options |
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| — |
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| — |
| — |
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Issuance of common stock upon vesting of restricted stock units ("RSUs") |
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| — |
| — |
| — |
| — |
| — | |||||
Taxes paid related to net share settlement of RSUs | ( | — | ( | — | — | ( | |||||||||||
Stock-based compensation expense |
| — |
| — |
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| — |
| — |
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Other comprehensive loss, net of tax |
| — |
| — |
| — |
| ( |
| — |
| ( | |||||
Balances at March 31, 2022 |
| | $ | | $ | | $ | ( | $ | ( | $ | |
Accumulated | |||||||||||||||||
Additional | Other | Total | |||||||||||||||
Common Stock | Paid-In | Comprehensive | Accumulated | Stockholders' | |||||||||||||
|
| Shares |
| Amount |
| Capital |
| Loss |
| Deficit |
| Equity | |||||
Balances at December 31, 2020 |
| | $ | | $ | | $ | ( | $ | ( | $ | | |||||
Net loss |
| — |
| — |
| — |
| — |
| ( |
| ( | |||||
Issuance of common stock upon exercise of stock options |
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| — |
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| — |
| — |
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Issuance of common stock upon vesting of RSUs |
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| — |
| — |
| — |
| — |
| — | |||||
Taxes paid related to net share settlement of RSUs | ( | — | ( | — | — | ( | |||||||||||
Stock-based compensation expense |
| — |
| — |
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| — |
| — |
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Other comprehensive loss, net of tax |
| — |
| — |
| — |
| ( |
| — |
| ( | |||||
Balances at March 31, 2021 |
| | $ | | $ | | $ | ( | $ | ( | $ | |
See accompanying notes.
8
Coherus BioSciences, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Three Months Ended | ||||||
March 31, | ||||||
| 2022 |
| 2021 | |||
Operating activities |
|
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Net loss | $ | ( | $ | ( | ||
Adjustments to reconcile net loss to net cash (used in) provided by operating activities: |
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Depreciation and amortization |
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Stock-based compensation expense |
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Write-off of prepaid manufacturing services related to the termination of CHS-2020 | — | | ||||
Non-cash interest expense from amortization of debt discount & issuance costs |
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Upfront and option payments to Shanghai Junshi Biosciences Ltd. ("Junshi Biosciences") |
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Loss on debt extinguishment | | — | ||||
Other non-cash adjustments, net | | | ||||
Changes in operating assets and liabilities: |
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Trade receivables, net |
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Inventory |
| ( |
| ( | ||
Prepaid manufacturing |
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Other prepaid, current and non-current assets |
| ( |
| ( | ||
Accounts payable |
| |
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Accrued rebates, fees and reserves |
| ( |
| ( | ||
Accrued compensation |
| ( |
| ( | ||
Accrued and other current and non-current liabilities |
| ( |
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Net cash (used in) provided by operating activities |
| ( |
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Investing activities |
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Purchases of property and equipment |
| ( |
| ( | ||
Purchases of investments in marketable securities |
| — |
| ( | ||
Upfront and option payments to Junshi Biosciences |
| ( |
| ( | ||
Net cash used in investing activities |
| ( |
| ( | ||
Financing activities |
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Proceeds from 2027 Term Loans, net of debt discount & issuance costs | | — | ||||
Proceeds from issuance of common stock upon exercise of stock options |
| | | |||
Taxes paid related to net share settlement of RSUs |
| ( | ( | |||
Repayment of 2022 Convertible Notes and premiums | ( | — | ||||
Repayment of 2025 Term Loan, premiums and exit fees | ( | — | ||||
Other financing activities | ( | ( | ||||
Net cash (used in) provided by financing activities |
| ( |
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Net decrease in cash, cash equivalents and restricted cash |
| ( |
| ( | ||
Cash, cash equivalents and restricted cash at beginning of period |
| |
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Cash, cash equivalents and restricted cash at end of period | $ | | $ | |
See accompanying notes.
9
Coherus BioSciences, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
1. Organization and Summary of Significant Accounting Policies
Organization
Coherus BioSciences, Inc. (the “Company” or “Coherus”) is a commercial-stage biopharmaceutical company focused on the research, development and commercialization of innovative immunotherapies to treat cancer. The Company’s strategy is to build a leading immuno-oncology franchise funded with cash generated through net sales of its diversified portfolio of FDA-approved therapeutics. The Company’s headquarters and laboratories are located in Redwood City, California and in Camarillo, California, respectively. The Company sells UDENYCA, a biosimilar to Neulasta, a long-acting granulocyte-colony stimulating factor, in the United States. The United States Food and Drug Administration (“FDA”) approved YUSIMRY™ in December 2021, which the Company plans to launch in the United States on or after July 1, 2023, per the terms of an agreement with Humira manufacturer, AbbVie Inc. (“AbbVie”).
The Company’s product pipeline comprises the following
Basis of Consolidation
The accompanying unaudited condensed consolidated financial statements include the accounts of Coherus and its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated upon consolidation. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X of the Securities Act of 1933, as amended (the “Securities Act”). Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements. These unaudited condensed consolidated financial statements reflect all adjustments, including normal recurring accruals, that the Company believes are necessary to fairly state the financial position and the results of the Company’s operations and cash flows for interim periods in accordance with U.S. GAAP. Interim-period results are not necessarily indicative of results of operations or cash flows for a full year or any subsequent interim period.
The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 (the “2021 Form 10-K”) filed with the SEC.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make judgements, estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosures. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. These estimates form the basis for making judgments about the carrying values of assets and liabilities when these values are not readily apparent from other sources. Estimates are assessed each period and updated to reflect current information. Accounting estimates and judgements are inherently uncertain and therefore actual results could differ from these estimates.
10
Cash, Cash Equivalents and Restricted Cash
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheets which, in aggregate, represent the amount reported in the condensed consolidated statements of cash flows:
March 31, | ||||||
(in thousands) |
| 2022 |
| 2021 | ||
At beginning of period: | ||||||
Cash and cash equivalents | $ | | $ | | ||
Restricted cash | | | ||||
Total cash, cash equivalents and restricted cash | $ | | $ | | ||
At end of period: | ||||||
Cash and cash equivalents | $ | | $ | | ||
Restricted cash |
| |
| | ||
Total cash, cash equivalents and restricted cash | $ | | $ | |
Restricted cash consists of deposits for letters of credit that the Company has provided to secure its obligations under certain leases and is included in other assets, non-current on the condensed consolidated balance sheets.
Investments in Marketable Securities
Investments in marketable securities primarily consist of corporate debt obligations and commercial paper. Management determines the appropriate classification of investments in marketable securities at the time of purchase based upon management’s intent with regards to such investment and reevaluates such designation as of each balance sheet date. The Company’s investment policy requires that it only invests in highly rated securities and limit its exposure to any single issuer. All investments in debt marketable securities are held as “available-for-sale” and are carried at the estimated fair value as determined based upon quoted market prices or pricing models for similar securities.
The Company classifies investments in marketable securities as short-term when they have remaining contractual maturities of one year or less from the balance sheet date. Unrealized gains and losses on available-for-sale securities are reported as a component of accumulated comprehensive income loss, with the exception of unrealized losses believed to be related to credit losses, if any, which are recognized in earnings in the period the impairment occurs. Impairment assessments are made at the individual security level each reporting period. When the fair value of an investment is less than its cost at the balance sheet date, a determination is made as to whether the impairment is related to a credit loss and, if it is, the portion of the impairment relating to credit loss is recorded as an allowance through net income. Realized gains and losses on available-for-sale securities are included in other income, net, based on the specific identification method.
Trade Receivables
Trade receivables are recorded net of allowances for chargebacks, cash discounts for prompt payment and credit losses. The Company estimates an allowance for expected credit losses by considering factors such as historical experience, credit quality, the age of the accounts receivable balances, and current economic conditions that may affect a customer’s ability to pay. The corresponding expense for the credit loss allowance is reflected in selling, general and administrative expenses. The credit loss allowance was immaterial as of March 31, 2022 and December 31, 2021.
11
Recent Accounting Pronouncements
The Company has reviewed recent accounting pronouncements and concluded they are either not applicable to the business or that no material effect is expected on the condensed consolidated financial statements as a result of future adoption.
2. Revenue
The Company recorded net revenue of $
Gross revenues by significant customer as a percentage of total gross revenues are as follows:
Three Months Ended |
| ||||
March 31, 2022 |
| March 31, 2021 |
| ||
McKesson Corporation | | % | | % | |
AmeriSource-Bergen Corporation | | % | | % | |
Cardinal Health, Inc. | | % | | % |
Product Sales Discounts and Allowances
The activities and ending reserve balances for each significant category of discounts and allowances, which constitute variable consideration, were as follows:
Three Months Ended March 31, 2022 | ||||||||||||
| Chargebacks |
|
| Other Fees, |
| |||||||
and Discounts | Co-pay | |||||||||||
for Prompt | Assistance | |||||||||||
(in thousands) | Payment | Rebates | and Returns | Total | ||||||||
Balances at December 31, 2021 | $ | | $ | | $ | | $ | | ||||
Provision related to sales made in: |
| |||||||||||
Current period | | | | | ||||||||
Prior period | ( | ( | ( | ( | ||||||||
Payments and customer credits issued |
| ( | ( | ( | ( | |||||||
Balances at March 31, 2022 | $ | | $ | | $ | | $ | |
Three Months Ended March 31, 2021 | ||||||||||||
| Chargebacks |
|
| Other Fees, |
| |||||||
and Discounts | Co-pay | |||||||||||
for Prompt | Assistance | |||||||||||
(in thousands) | Payment | Rebates | and Returns | Total | ||||||||
Balances at December 31, 2020 | $ | | $ | | $ | | $ | | ||||
Provision related to sales made in: | ||||||||||||
Current period |
| | | | | |||||||
Prior period | ( | ( | ( | ( | ||||||||
Payments and customer credits issued |
| ( |
| ( |
| ( |
| ( | ||||
Balances at March 31, 2021 | $ | | $ | | $ | | $ | |
12
Chargebacks and discounts for prompt payment are recorded as a reduction in trade receivables, and the remaining reserve balances are classified as current liabilities in the accompanying unaudited condensed consolidated balance sheets.
3. Fair Value Measurements
The fair value of financial instruments are classified into one of the following categories:
● | Level 1 — Quoted prices in active markets for identical assets or liabilities. |
● | Level 2 — Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. |
● | Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. |
A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Where quoted prices are available in an active market, securities are classified as Level 1. Level 1 assets consist of highly liquid money market funds that are included in cash and cash equivalents, and restricted cash. There were
There were
Financial assets and liabilities subject to fair value measurements on a recurring basis and the level of inputs used in such measurements were as follows:
Fair Value Measurements | ||||||||||||
March 31, 2022 | ||||||||||||
(in thousands) |
| Level 1 |
| Level 2 |
| Level 3 |
| Total | ||||
Financial Assets: |
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|
|
|
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Cash and cash equivalents (money market funds) | $ | | $ | | $ | | $ | | ||||
Restricted cash (money market funds) |
| |
| |
| |
| | ||||
Total financial assets | $ | | $ | | $ | | $ | |
| Fair Value Measurements | |||||||||||
December 31, 2021 | ||||||||||||
(in thousands) |
| Level 1 |
| Level 2 |
| Level 3 |
| Total | ||||
Financial Assets: |
|
|
|
|
|
|
|
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Cash and cash equivalents (money market funds) | $ | | $ | — | $ | — | $ | | ||||
Restricted cash (money market funds) |
| |
| — |
| — |
| | ||||
Total financial assets | $ | | $ | — | $ | — | $ | |
13
4. Inventory
Inventory consisted of the following:
| March 31, | December 31, | ||||
(in thousands) | 2022 | 2021 | ||||
Raw Materials | $ | | $ | | ||
Work in process |
| |
| | ||
Finished goods |
| |
| | ||
Total | $ | | $ | |
Inventory expected to be sold more than twelve months from the balance sheet date is classified as inventory, non-current on the condensed consolidated balance sheets. As of March 31, 2022 and December 31, 2021, the non-current portion of inventory consisted of raw materials, work in process and a portion of finished goods.
| March 31, | December 31, | ||||
(in thousands) | 2022 | 2021 | ||||
Inventory | $ | | $ | | ||
Inventory, non-current |
| |
| | ||
Total | $ | | $ | |
Prepaid manufacturing of $
In February 2021, the Company announced the discontinuation of the development of CHS-2020, a biosimilar of Eylea® as part of a realignment of research and development resources toward other development programs. As a result, during the quarter ended March 31, 2021, the Company recognized $
14
5. Balance Sheet Components
Property and Equipment, Net
Property and equipment, net consists of the following:
| March 31, | December 31, | ||||
(in thousands) | 2022 | 2021 | ||||
Machinery and equipment | $ | | $ | | ||
Computer equipment and software |
| |
| | ||
Furniture and fixtures |
| |
| | ||
Leasehold improvements |
| |
| | ||
Finance lease right of use assets | | | ||||
Construction in progress |
| |
| | ||
Total property and equipment |
| |
| | ||
Accumulated depreciation and amortization |
| ( |
| ( | ||
Property and equipment, net | $ | | $ | |
Depreciation and amortization expense was $
Accrued and Other Current Liabilities
Accrued and other current liabilities are summarized as follows:
| March 31, | December 31, | ||||
(in thousands) | 2022 | 2021 | ||||
Accrued manufacturing and clinical | $ | | $ | | ||
Accrued co-development costs for toripalimab | | | ||||
Lease liabilities, current | | | ||||
Accrued other |
| |
| | ||
Total Accrued and other current liabilities | $ | | $ | |
6. Collaborations and Other Arrangements
Junshi Biosciences
On February 1, 2021, the Company entered into an Exclusive License and Commercialization Agreement (the “Collaboration Agreement”) with Junshi Biosciences for the co-development and commercialization of toripalimab, Junshi Biosciences’ anti-PD-1 antibody, in the United States and Canada.
Under the terms of the Collaboration Agreement, the Company paid $
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In March 2022, the Company paid $
The licensing transaction and the exercise of the option were accounted for as asset acquisitions under the relevant accounting rules. The Company recognized research and development expense of $
As of March 31, 2022, the Company did not have any outstanding milestone or royalty payment obligations to Junshi Biosciences. The additional milestone payments, option fee the IL-2 cytokine and royalties are contingent upon future events and, therefore, will be recorded when it is probable that a milestone will be achieved, option fee will be incurred or when royalties are due.
In connection with the Collaboration Agreement, the Company entered into a stock purchase agreement (the “Stock Purchase Agreement”) with Junshi Biosciences agreeing, subject to customary conditions, to acquire certain equity interests in the Company. Pursuant to the Stock Purchase Agreement, on April 16, 2021, the Company issued
Innovent Biologics (Suzhou) Co., Ltd.
On January 13, 2020, the Company entered into a license agreement (the “License Agreement”) with Innovent for the development and commercialization of a biosimilar version of bevacizumab (Avastin) in any dosage form and presentations (“bevacizumab Licensed Product”) in the United States and Canada (the “Territory”). Under the License Agreement, Innovent granted to the Company an exclusive, royalty-bearing license to develop and commercialize the bevacizumab Licensed Product in the field of treatment, prevention or amelioration of any human diseases and conditions as included in the label of Avastin. Under the License Agreement, the Company also acquired an option to develop and commercialize Innovent’s biosimilar version of rituximab (Rituxan®) in any dosage form and presentations (the “rituximab Licensed Product” and together with the bevacizumab Licensed Product, the “Innovent Licensed Products”) in the Territory.
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Under the License Agreement, the Company committed to pay Innovent a $
On May 3, 2022, the Company provided notice of termination of the License Agreement to Innovent pursuant to Section 13.6 of the License Agreement. In connection therewith, the Company has discontinued development of the bevacizumab Licensed Product.
Bioeq
On November 4, 2019, the Company entered into a license agreement with Bioeq for the commercialization of a biosimilar version of ranibizumab (Lucentis) in certain dosage forms in both a vial and pre-filled syringe presentation (the “Bioeq Licensed Products”). Under this agreement, Bioeq granted to the Company an exclusive, royalty-bearing license to commercialize the Bioeq Licensed Products in the field of ophthalmology (and any other approved labelled indication) in the United States. Bioeq will supply to the Company the Bioeq Licensed Products in accordance with terms and conditions specified in the agreement and a manufacturing and supply agreement to be executed by the parties in accordance therewith. The agreement’s initial term continues in effect for
Under the agreement, Bioeq must use commercially reasonable efforts to develop and obtain regulatory approval of the Bioeq Licensed Products in the United States in accordance with a development and manufacturing plan, and the Company must use commercially reasonable efforts to commercialize the Bioeq Licensed Products in accordance with a commercialization plan. Additionally, the Company must commit certain pre-launch and post-launch resources to the commercialization of the Bioeq Licensed Products for a limited time as specified in the agreement.
The Company accounted for the licensing transaction as an asset acquisition under the relevant accounting rules. The Company paid Bioeq an upfront and a milestone payment aggregating to €
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7. Debt Obligations
A summary of the Company’s debt obligations, including level within the fair value hierarchy, is as follows:
At March 31, 2022 | |||||||||||||
(in thousands) | Principal | Unamortized Debt Discount and Debt Issuance Costs | Net | Estimated |
| Level | |||||||
Financial Liabilities: |
|
|
|
|
| ||||||||
2027 Term Loans | $ | | $ | ( | $ | | $ | | * | ||||
2026 Convertible Notes | $ | | $ | ( | $ | | $ | | Level 2 | ||||
At December 31, 2021 | |||||||||||||
(in thousands) | Principal | Unamortized Exit Fee, Debt Discount and Debt Issuance Costs | Net | Estimated |
| Level | |||||||
Financial Liabilities: |
|
|
|
|
|
| |||||||
2026 Convertible Notes | $ | | $ | ( | $ | | $ | | Level 2 | ||||
2022 Convertible Notes | $ | | $ | ( | $ | | $ | | Level 3 | ||||
2025 Term Loan | $ | | $ | | $ | | $ | | * |
* | The principal amount outstanding is subject to a variable interest rate, which is based on the three-month LIBOR plus a fixed percentage. Therefore, the Company believes the carrying amount of these obligations approximates fair value. |
2027 Term Loans
The Company entered into a loan agreement (the “Loan Agreement”) with BioPharma Credit, PLC, (as the “Collateral Agent”), BPCR Limited Partnership (as a “Lender”), and Biopharma Credit Investments V (Master) LP, acting by its general partner, BioPharma Credit Investments V GP LLC (as a “Lender”) that provides for a senior secured term loan facility of up to $
The 2027 Term Loans mature on either (i) the fifth anniversary of the Tranche A Closing Date; or (ii) October 15, 2025, if the outstanding aggregate principal amount of the Company’s 2026 Convertible Notes is greater than $
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The Company adopted the prospective method to account for future cash payments. Under the prospective method, the effective interest rate is not constant, and any change in the expected cash flows is recognized prospectively as an adjustment to the effective yield.
The obligations under the Loan Agreement are secured pursuant to customary security documentation, including a guaranty and security agreement among the Credit Parties and the Collateral Agent which provides for a lien on substantially all of the Company’s tangible and intangible assets and property, including intellectual property.
Pursuant to the Loan Agreement, and subject to certain restrictions, proceeds of the 2027 Term Loans were and will be used to fund the Company’s general corporate and working capital requirements except for the following: in January 2022, proceeds of the Tranche A Loan were used to repay in full all amounts outstanding under the Company’s $
The Loan Agreement contains certain customary representations and warranties. In addition, the Loan Agreement includes affirmative covenants, such as the requirement to maintain minimum trailing twelve-month net sales in an amount that begins at $
As of March 31, 2022, the Company was in full compliance with these covenants and there were no events of default under the 2027 Term Loans.
In connection with the closing of Tranche A, the Company incurred $
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The following table presents the components of interest expense related to the 2027 Term Loans:
| Three Months Ended | ||
March 31, | |||
(in thousands) | 2022 | ||
Stated coupon interest | $ | | |
Amortization of debt discount and debt issuance costs, Tranche B | | ||
Amortization of debt discount and debt issuance costs, unfunded Tranches C and D | | ||
Amortization of debt discount and debt issuance costs, funded Tranche A |
| | |
Total interest expense | $ | |
Future payments on the 2027 Term Loans as of March 31, 2022 are as follows:
Year ending December 31, (in thousands) | |||
Remainder of 2022 - interest only | $ | | |
2023 - interest only | | ||
2024 - interest only |
| | |
2025 - interest only |
| | |
2026 and thereafter | | ||
Total minimum payments |
| | |
Less amount representing interest |
| ( | |
2027 Term Loans, gross |
| | |
Less unamortized debt discount and debt issuance costs, net |
| ( | |
Net carrying amount of 2027 Term Loans | $ | |
1.5% Convertible Senior Subordinated Notes due 2026
In April 2020, the Company issued and sold $
At any time before the close of business on the second scheduled trading day immediately before the maturity date, noteholders may convert their 2026 Convertible Notes at their option into shares of the Company’s common stock, together, if applicable, with cash in lieu of any fractional share, at the then-applicable conversion rate. The initial conversion rate is
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Convertible Notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the applicable repurchase date.
The 2026 Convertible Notes have customary provisions relating to the occurrence of “events of default” (as defined in the Indenture for the 2026 Convertible Notes). The occurrence of such events of default could result in the acceleration of all amounts due under the 2026 Convertible Notes.
The Company evaluated the features embedded in the 2026 Convertible Notes under the relevant accounting rules and concluded that the embedded features do not meet the requirements for bifurcation, and therefore do not need to be separately accounted for as an equity component. The proceeds received from the issuance of the convertible debt were recorded as a liability on the condensed consolidated balance sheets.
Capped Call Transactions
In connection with the pricing of the 2026 Convertible Notes, the Company also paid $
The capped call transactions are accounted for as separate transactions from the 2026 Convertible Notes and classified as equity instruments; thus, they are recorded as a reduction to additional paid-in capital on the consolidated balance sheets. The capped calls will not be subsequently re-measured as long as the conditions for equity