Coherus BioSciences Divests Humira Biosimilar

Taking a Look at Coherus BioSciences (CHRS).

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Coherus Sells Yusimry

A while back, which I mentioned in my previous Coherus BioSciences (CHRS) articles, the company announced at the JP Morgan Health Care Conference that Cimerli and Yusimry were "non-core assets." Fast forward six months, and both assets have been sold. Many who haven’t followed the company and claim to be sophisticated biotech investors will bash the decisions for divesting both franchises. However, management has said multiple times that these were both indeed “non-core assets” and will likely be sold. So, management did exactly what they said they were going to do… now, the $40M price tag that Yusimry sold for is debatable. But again, this varies based on perspective.

Developing biosimilars is significantly cheaper than developing new drugs, costing about 10% of the R&D expenses. CHRS just over $290M on R&D for Yusimry from 2014 to 2023, which included clinical trials and building manufacturing capacity. Since its launch last summer, Yusimry has brought in around $11M, just enough to cover its operating costs. Looking at the numbers, the company faced a net expense of approximately $250M over ten years for Yusimry. This sizable figure, coupled with a current low cash reserve, might dishearten investors. However, this expense spread over a decade represents only a portion of the market potential. Yusimry was actually projected at one time to reach $500M in peak annual revenue at a 10% market share, offering a potentially substantial return on investment (overhyped).

In 2024, the focus for CHRS is on effective commercial execution with their core franchises. If the company can convince the market of its path to cash flow breakeven and profitability, investor confidence will rise. Otherwise, the stock will continue to struggle. The $38M (actual) from the Yusimry sale provides a buffer for CHRS as it navigates this critical period.

This year, the company must deliver results without relying on excuses. The company has streamlined its operations, focusing on high-margin assets like Loqtorzi and Udenyca Onbody, and significantly reducing its debt. Shareholders now expect these steps to translate into strong commercial performance. They need to increase gross profits and reduce operating expenses to achieve cash flow breakeven and profitability.

In conclusion, CHRS is on track to get through 2024, but it’s time for execution now. I’m afraid if the company is unable to show clear consistent signs of cash flow breakeven and profitability by the EOY, it will likely be time to say goodbye to CHRS. That said, the future looks pretty good for the business so far… we just need to be patient and see the results.