Coherus BioSciences Runs into Supply Issues

Taking a Look at the Recent News on Coherus BioSciences (CHRS).

I've transitioned to exclusively logging my weekly activity and tracking my portfolio in real-time on Savvy Trader.

For those not yet in the loop, I invite you to join me on this journey. Subscribe using the link below to gain direct insights:

Savvy Trader | Portfolio

By subscribing, you'll engage directly with me regarding specific companies, access my performance in real-time (with data starting under a year), and get detailed views of my investments, real-time trading actions, cash positions, and more. This move is driven by my commitment to transparency. I believe that sharing my analytical insights and the reasoning behind my investment choices offers immense value, empowering you with the information you need to make informed decisions.

“Labeling and Packaging” Issues

Last Friday after hours, Coherus BioSciences (CHRS) sneakingly released an 8-K SEC filing, instead of a press release, discussing supply chain issues affecting their Udenyca franchise. In a nutshell, the supply disruption stems from capacity constraints at a third-party manufacturing facility responsible for labeling and packaging. This delay is expected to deplete supply by mid-October, with production resuming in mid-October and product availability in early November.

That said, they are taking steps to minimize disruptions, such as expedited shipping and they plan to strengthen and diversify its supply chain by engaging an additional packaging partner by early 2025. The company also reconfirmed its financial guidance for the year, despite the short-term supply challenges.

My Take

As I've mentioned many times in previous articles, CHRS has had its fair share of hiccups in the past, to the point where there's little margin for error now. Unfortunately, this news couldn't have come at a worse time—right when CHRS is about to hit an inflection point.

However, I don't think this labeling and packaging issue will affect them as much as many people on social platforms suggest. I believe their views are clouded by frustration and overthinking hypothetical worst-case scenarios.

With CHRS reaffirming their guidance for the year and any significant damage unlikely to show until Q4 of 2024 (if at all), I think the thesis for CHRS remains intact. This is especially true considering the ramp-up of their products taking market share. While some speculate that this news might negatively impact the market share for Udenyca, we don't know if it's as bad as people are making it out to be—it's all speculation. Plus, with interest rates being cut by the Federal Reserve, the overall environment may be favorable.

Unless this information becomes a net negative and accounts start telling CHRS to "kick rocks," I remain confident. If that happens, I would be worried and would reevaluate my stance immediately. But this doesn’t warrant to act irrationally.

I feel there was an expectation ingrained in us about where CHRS would be with continued execution for the rest of the year, assuming no issues. Now that these issues have arisen, many of us have forgotten about their future potential, even though these supply issues are likely not a significant threat. We've developed a "get rich quick" expectation within a specific time frame, which I think is a terrible way to approach an investment—especially one that's notorious for hiccups and is extremely high risk. This is simply not reasonable or realistic, particularly for a company like CHRS.

Personally, if we see a dip below $1 per share, I'll continue to add. But for now, I'm holding until we hear from management about this news next quarter and assess their business performance. Taking a long-term, reasonable perspective, the thesis still seems intact at the moment.