Coherus BioSciences, Inc. [CHRS] Filings

10-Q 1 chrs-20220630x10q.htm 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022

☐	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: 001-36721

Coherus BioSciences, Inc.

(Exact name of registrant as specified in its charter)

Delaware

27-3615821

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer Identification No.)

333 Twin Dolphin Drive, Suite 600

Redwood City, California 94065

(650) 649-3530

(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
Common Stock, $0.0001 par value per share	CHRS	The Nasdaq Global Market

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. Yes ☒ No ☐

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). Yes ☒ No ☐

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.


Large accelerated filer	☒	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 ☐ No ☒

As of July 31, 2022, 77,724,589 shares of the registrant’s common stock were outstanding.

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COHERUS BIOSCIENCES, INC.

FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2022

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		Page
	CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS	3
PART I	FINANCIAL INFORMATION	5
ITEM 1	Unaudited Condensed Consolidated Financial Statements	5
	Condensed Consolidated Balance Sheets	5
	Condensed Consolidated Statements of Operations	6
	Condensed Consolidated Statements of Comprehensive Loss	7
	Condensed Consolidated Statements of Stockholders’ Equity (Deficit)	8
	Condensed Consolidated Statements of Cash Flows	9
	Notes to Condensed Consolidated Financial Statements	10
ITEM 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
ITEM 3	Quantitative and Qualitative Disclosure About Market Risk	41
ITEM 4	Controls and Procedures	42
PART II	OTHER INFORMATION	43
ITEM 1.	Legal Proceedings	43
ITEM 1A.	Risk Factors	43
ITEM 2	Unregistered Sales of Equity Securities and Use of Proceeds	101
ITEM 3	Defaults Upon Senior Securities	101
ITEM 4	Mine Safety Disclosures	101
ITEM 5	Other Information	101
ITEM 6.	Exhibits	101

Exhibit Index		101
Signatures		103
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.

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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 and timing of the review for the original BLA resubmission for toripalimab;

●

whether we or our CIMERLI™ partner, Bioeq AG (“Bioeq”), can overcome import restrictions that could affect the timing of the launch of CIMERLI in the United States;

●

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;

●

the scope of protection we are able to establish and maintain for intellectual property rights covering our product candidates;

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●

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 products and 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 the war 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.

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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)


	June 30,		December 31,
	2022		2021
Assets
Current assets:
Cash and cash equivalents	$	275,484	$	417,195
Trade receivables, net		115,711		123,022
Inventory		31,744		37,642
Prepaid manufacturing		7,176		13,666
Other prepaid and other assets		16,669		10,798
Total current assets		446,784		602,323
Property and equipment, net		9,553		7,813
Inventory, non-current		75,954		55,610
Goodwill and intangible assets		3,563		3,563
Other assets, non-current		10,149		10,025
Total assets	$	546,003	$	679,334
Liabilities and Stockholders’ Equity (Deficit)
Current liabilities:
Accounts payable	$	17,486	$	16,159
Accrued rebates, fees and reserves		64,547		79,027
Accrued compensation		16,928		22,014
Accrued and other current liabilities		41,793		48,127
Total current liabilities		140,754		165,327
Term loans		196,037		75,513
Convertible notes		224,928		332,767
Lease liabilities, non-current		6,811		7,251
Other liabilities, non-current		102		750
Total liabilities		568,632		581,608
Commitments and contingencies (Note 8)
Stockholders’ equity (deficit):
Common stock ($0.0001 par value; shares authorized: 300,000,000; shares issued and outstanding: 77,702,749 and 76,930,096 at June 30, 2022 and December 31, 2021, respectively)		7		7
Additional paid-in capital		1,173,722		1,147,843
Accumulated other comprehensive loss		(270)		(270)
Accumulated deficit		(1,196,088)		(1,049,854)
Total stockholders' equity (deficit)		(22,629)		97,726
Total liabilities and stockholders’ equity (deficit)	$	546,003	$	679,334

See accompanying notes.

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Coherus BioSciences, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except share and per share data)

(unaudited)


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
Net revenue	$	60,151	$	87,643	$	120,266	$	170,677
Costs and expenses:
Cost of goods sold		11,277		16,696		20,647		24,207
Research and development		41,611		54,766		124,528		258,258
Selling, general and administrative		51,276		40,345		100,029		79,736
Total costs and expenses		104,164		111,807		245,204		362,201
Loss from operations		(44,013)		(24,164)		(124,938)		(191,524)
Interest expense		(6,580)		(5,747)		(15,549)		(11,395)
Loss on debt extinguishment		—		—		(6,222)		—
Other income, net		443		11		475		72
Loss before income taxes		(50,150)		(29,900)		(146,234)		(202,847)
Income tax provision		—		—		—		—
Net loss	$	(50,150)	$	(29,900)	$	(146,234)	$	(202,847)

Basic and diluted net loss per share	$	(0.65)	$	(0.40)	$	(1.89)	$	(2.73)

Weighted-average number of shares used in computing basic and diluted net loss per share		77,554,717		75,559,697		77,405,040		74,203,858

See accompanying notes.

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Coherus BioSciences, Inc.

Condensed Consolidated Statements of Comprehensive Loss

(in thousands)

(unaudited)


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
Net loss	$	(50,150)	$	(29,900)	$	(146,234)	$	(202,847)
Other comprehensive loss:
Unrealized gain on available-for-sale securities, net of tax		—		40		—		3
Foreign currency translation adjustments, net of tax		2		—		—		—
Comprehensive loss	$	(50,148)	$	(29,860)	$	(146,234)	$	(202,844)

See accompanying notes.

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Coherus BioSciences, Inc.

Condensed Consolidated Statements of Stockholders’ Equity (Deficit)

(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 (Deficit)
Balances at December 31, 2021	76,930,096	$	7	$	1,147,843	$	(270)	$	(1,049,854)	$	97,726
Net loss	—		—		—		—		(96,084)		(96,084)
Issuance of common stock upon exercise of stock options	102,632		—		544		—		—		544
Issuance of common stock upon vesting of restricted stock units ("RSUs")	491,087		—		—		—		—		—
Taxes paid related to net share settlement of RSUs	(185,644)		—		(2,658)		—		—		(2,658)
Stock-based compensation expense	—		—		13,037		—		—		13,037
Other comprehensive loss, net of tax	—		—		—		(2)		—		(2)
Balances at March 31, 2022	77,338,171		7		1,158,766		(272)		(1,145,938)		12,563
Net loss	—		—		—		—		(50,150)		(50,150)
Issuance of common stock upon exercise of stock options	4,499		—		8		—		—		8
Issuance of common stock upon vesting of RSUs	173,867		—		—		—		—		—
Taxes paid related to net share settlement of RSUs	(58,771)		—		(642)		—		—		(642)
Issuance of common stock under the employee stock purchase plan ("ESPP")	244,983		—		1,655		—		—		1,655
Stock-based compensation expense	—		—		13,935		—		—		13,935
Other comprehensive gain, net of tax	—		—		—		2		—		2
Balances at June 30, 2022	77,702,749	$	7	$	1,173,722	$	(270)	$	(1,196,088)	$	(22,629)


						Accumulated
				Additional		Other				Total
	Common Stock			Paid-In		Comprehensive		Accumulated		Stockholders'
	Shares		Amount	Capital		Loss		Deficit		Equity
Balances at December 31, 2020	72,513,348	$	7	$	1,043,991	$	(270)	$	(762,754)	$	280,974
Net loss	—		—		—		—		(172,947)		(172,947)
Issuance of common stock upon exercise of stock options	451,883		—		4,429		—		—		4,429
Issuance of common stock upon vesting of RSUs	252,846		—		—		—		—		—
Taxes paid related to net share settlement of RSUs	(95,169)		—		(1,730)		—		—		(1,730)
Stock-based compensation expense	—		—		16,982		—		—		16,982
Other comprehensive loss, net of tax	—		—		—		(37)		—		(37)
Balances at March 31, 2021	73,122,908		7		1,063,672		(307)		(935,701)		127,671
Net loss	—		—		—		—		(29,900)		(29,900)
Issuance of common stock upon exercise of stock options	686,145		—		4,009		—		—		4,009
Issuance of common stock upon vesting of RSUs	9,334		—		—		—		—		—
Issuance of common stock to Shanghai Junshi Biosciences Ltd. ("Junshi Biosciences"), net of issuance costs	2,491,988				40,903		—		—		40,903
Issuance of common stock under the ESPP	154,325		—		1,985		—		—		1,985
Stock-based compensation expense	—		—		11,512		—		—		11,512
Other comprehensive gain, net of tax	—		—		—		40		—		40
Balances at June 30, 2021	76,464,700	$	7	$	1,122,081	$	(267)	$	(965,601)	$	156,220

See accompanying notes.

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Coherus BioSciences, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)


	Six Months Ended
	June 30,
	2022		2021
Operating activities
Net loss	$	(146,234)	$	(202,847)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization		1,654		1,726
Stock-based compensation expense		26,729		28,479
Write-off of prepaid manufacturing services related to the termination of CHS-2020		—		3,210
Non-cash interest expense from amortization of debt discount & issuance costs		4,677		2,064
Upfront and option payments to Junshi Biosciences		35,000		136,000
Loss on debt extinguishment		6,222		—
Other non-cash adjustments, net		1,208		1,896
Changes in operating assets and liabilities:
Trade receivables, net		7,327		15,243
Inventory		(14,203)		(3,860)
Prepaid manufacturing		6,490		2,335
Other prepaid, current and non-current assets		(6,223)		(3,556)
Accounts payable		1,423		(773)
Accrued rebates, fees and reserves		(14,480)		2,229
Accrued compensation		(5,086)		(7,428)
Accrued and other current and non-current liabilities		(8,586)		26,461
Net cash (used in) provided by operating activities		(104,082)		1,179

Investing activities
Purchases of property and equipment		(1,495)		(560)
Purchases of investments in marketable securities		—		(140,330)
Proceeds from maturities of investments in marketable securities		—		15,000
Upfront and option payments to Junshi Biosciences		(35,000)		(136,000)
Net cash used in investing activities		(36,495)		(261,890)

Financing activities
Proceeds from 2027 Term Loans, net of debt discount & issuance costs		191,190		—
Proceeds from issuance of common stock to Junshi Biosciences, net of issuance costs		—		40,903
Proceeds from issuance of common stock upon exercise of stock options		552		8,446
Proceeds from purchase under the employee stock purchase plan		1,655		1,985
Taxes paid related to net share settlement of RSUs		(3,300)		(1,730)
Repayment of 2022 Convertible Notes and premiums		(109,000)		—
Repayment of 2025 Term Loan, premiums and exit fees		(81,750)		—
Other financing activities		(481)		(313)
Net cash (used in) provided by financing activities		(1,134)		49,291

Net decrease in cash, cash equivalents and restricted cash		(141,711)		(211,420)
Cash, cash equivalents and restricted cash at beginning of period		417,635		541,598
Cash, cash equivalents and restricted cash at end of period	$	275,924	$	330,178

See accompanying notes.

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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 cancer treatments and commercialization of its portfolio of United States Food and Drug Administration (“FDA”)-approved biosimilars. The Company’s strategy is to develop and commercialize innovative cancer treatments 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 (pegfilgrastim-cbqv), a biosimilar to Neulasta, a long-acting granulocyte-colony stimulating factor, in the United States. The FDA approved YUSIMRY™ (adalimumab-aqvh) 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”). On August 2, 2022, the FDA approved CIMERLI (ranibizumab-eqrn), a Lucentis biosimilar, and commercial launch is planned for October 2022 in the United States.

The Company’s product pipeline comprises the following four product candidates: toripalimab, an anti-PD-1 antibody being developed in collaboration with Junshi Biosciences; CHS-006, an antibody targeting TIGIT being developed in collaboration with Junshi Biosciences; and two wholly-owned preclinical immuno-oncology programs, CHS-1000, an antibody targeting ILT4, and CHS-3318, an antibody targeting CCR8. In May 2022, the Company discontinued development of its bevacizumab (Avastin) biosimilar product candidate from Innovent Biologics (Suzhou) Co., Ltd. (“Innovent”).

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

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each period and updated to reflect current information. Accounting estimates and judgements are inherently uncertain and therefore actual results could differ from these estimates.

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 for the six months ended June 30, 2022 and 2021:



(in thousands)	At January 1,
At beginning of period:	2022		2021
Cash and cash equivalents	$	417,195	$	541,158
Restricted cash		440		440
Total cash, cash equivalents and restricted cash	$	417,635	$	541,598

	At June 30,
At end of period:	2022		2021
Cash and cash equivalents	$	275,484	$	329,738
Restricted cash		440		440
Total cash, cash equivalents and restricted cash	$	275,924	$	330,178

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 June 30, 2022 and December 31, 2021.

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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 $60.2 million and $120.3 million during the three and six months ended June 30, 2022, respectively, and $87.6 million and $170.7 million during the three and six months ended June 30, 2021, respectively.

Gross revenues by significant customer as a percentage of total gross revenues are as follows:


	Three Months Ended				Six Months Ended
	June 30, 2022		June 30, 2021		June 30, 2022		June 30, 2021
McKesson Corporation	36	%	39	%	37	%	39	%
AmeriSource-Bergen Corporation	46	%	38	%	45	%	38	%
Cardinal Health, Inc.	17	%	22	%	17	%	21	%

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:


	Six Months Ended June 30, 2022
	Chargebacks				Other Fees,
	and Discounts				Co-pay
	for Prompt				Assistance
(in thousands)	Payment		Rebates		and Returns		Total
Balances at December 31, 2021	$	29,665	$	54,004	$	26,054	$	109,723
Provision related to sales made in:
Current period		220,178		38,075		39,353		297,606
Prior period		(2,147)		(3,165)		(556)		(5,868)
Payments and customer credits issued		(216,130)		(44,816)		(44,402)		(305,348)
Balances at June 30, 2022	$	31,566	$	44,098	$	20,449	$	96,113


	Six Months Ended June 30, 2021
	Chargebacks				Other Fees,
	and Discounts				Co-pay
	for Prompt				Assistance
(in thousands)	Payment		Rebates		and Returns		Total
Balances at December 31, 2020	$	40,580	$	54,058	$	28,760	$	123,398
Provision related to sales made in:
Current period		237,745		61,190		50,039		348,974
Prior period		(2,850)		(1,890)		(2,818)		(7,558)
Payments and customer credits issued		(247,641)		(52,213)		(50,726)		(350,580)
Balances at June 30, 2021	$	27,834	$	61,145	$	25,255	$	114,234

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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 values 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 no transfers between Level 1, Level 2 and Level 3 during the periods presented.

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
	June 30, 2022
(in thousands)	Level 1		Level 2		Level 3		Total
Financial Assets:
Cash and cash equivalents (money market funds)	$	275,484	$	—	$	—	$	275,484
Restricted cash (money market funds)		440		—		—		440
Total financial assets	$	275,924	$	—	$	—	$	275,924


	Fair Value Measurements
	December 31, 2021
(in thousands)	Level 1		Level 2		Level 3		Total
Financial Assets:
Cash and cash equivalents (money market funds)	$	417,165	$	—	$	—	$	417,165
Restricted cash (money market funds)		440		—		—		440
Total financial assets	$	417,605	$	—	$	—	$	417,605

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4. Inventory

Inventory consisted of the following:


	June 30,		December 31,
(in thousands)	2022		2021
Raw materials	$	7,685	$	4,870
Work in process		69,593		65,117
Finished goods		30,420		23,265
Total	$	107,698	$	93,252

The Company began capitalizing YUSIMRY inventory in the second quarter of 2022 and had $1.9 million of such inventory recognized on the balance sheet at June 30, 2022. 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 June 30, 2022 and December 31, 2021, the non-current portion of inventory consisted of raw materials, work in process and a portion of finished goods. The following tables presents the inventory balance sheet classifications:


	June 30,		December 31,
(in thousands)	2022		2021
Inventory	$	31,744	$	37,642
Inventory, non-current		75,954		55,610
Total	$	107,698	$	93,252

Prepaid manufacturing of $7.2 million as of June 30, 2022 includes prepayments of $3.5 million to a contract manufacturing organization (“CMO”) for manufacturing services for UDENYCA, which the Company expects to be converted into inventory within the next twelve months; and prepayments of $3.7 million to various CMOs for research and development pipeline programs. Prepaid manufacturing of $13.7 million as of December 31, 2021 included prepayments of $8.3 million to a CMO for manufacturing services for UDENYCA; and prepayments of $5.4 million to various CMOs for research and development pipeline programs.

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 $