Many investors have probably never heard of Coherus BioSciences (CHRS). The small-cap biotech was one of the first in the industry to commit to bringing generic biologic drugs, or biosimilars, to market. Those efforts were rewarded after a few speed bumps. The company's first biosimilar, a copycat version of the cancer drug Neulasta from Amgen (AMGN), is the leading product in that market. It even outsells Neulasta!
Despite the early success, competition has created significant headwinds for the company's only product. Revenue is expected to fall to roughly $225 million in 2022, compared to $476 million in 2020. But Coherus BioSciences will not be remembered as a flash in the pan.
The biotech could launch up to four new products by the end of 2023. In fact, it has already earned U.S. Food and Drug Administration (FDA) approval for a biosimilar of Humira from AbbVie (ABBV). Two more products could earn approval by the end of 2022.
Management is so confident in its strategy and growth trajectory it thinks the business could deliver between $1.2 billion to $2.2 billion in annual revenue by 2026. That would represent between 5.4x and 9.7x growth, respectively, from expected 2022 sales. Can Coherus BioSciences realistically meet those expectations?
Bringing New Products to Market
Execution will be key for the business in the next 24 months. Coherus BioSciences has done a solid job rounding out its suite of scientific advisors and executives in the last year. The company still needs to earn regulatory approvals, prepare manufacturing operations, and expand commercial infrastructure.
- Regulatory approvals: The company has an approval for Yusimry, its Humira biosimilar, in hand. It cannot legally launch until July 2023 when patent protections expire. The FDA will make an approval decision on Cimerli, its Lucentis biosimilar, in August 2022 – just a few weeks away. Meanwhile, the FDA will make an approval decision for toripalimab ("Tori"), a novel cancer drug that isn't a biosimilar, in December 2022. Both Cimerli and Tori can launch immediately following approval.
- Manufacturing: Coherus BioSciences only manufactures assets in the United States. However, multiple drug candidates were in-licensed from international partners. Cimerli was developed by Bioeq in Europe, while toripalimab was developed by Junshi Biosciences in China. The company must await FDA approval before transferring manufacturing to the United States.
- Commercial infrastructure: Investors may treat FDA approval as the final bookend on development, but it only marks the beginning of commercial operations. Coherus BioSciences can leverage much of its existing sales team initially, but will need to expand sales, marketing, and payor relationships as the portfolio scales.
There have been delays here and there regarding regulatory filings or requests for data (each time the fault of partners). However, the company's exemplary commercial execution to date suggests the return to revenue growth is achievable after multiple new products are launched.
Coherus BioSciences has set a goal of capturing at least 10% market share with every biosimilar product. That could yield meaningful growth in the years ahead.
- Udenyca (marketed) owns roughly 17% of its market, which is impressive considering half the market is off limits to biosimilars altogether.
- Cimerli (approval decision August 2022) will compete in a roughly $1 billion market opportunity. Ramping up to a 10% market share would translate to $100 million in annual revenue. If an adjacent market is included, as the company believes, then the total opportunity could reach $6 billion.
- Yusimry (launching July 2023) will compete in a roughly $16 billion market opportunity, although that should fall by more than half relatively quickly. Ramping to a 10% market share in a $5 billion market opportunity would translate to $500 million in annual revenue.
- Udenyca OBI (not yet submitted to regulators) is a novel formulation of Udenyca. If approved, then it could open up the other half of the market currently off limits to biosimilars. This product alone could double the company's revenue in the first year of launch -- if it launches.
Cash flow from biosimilars are expected to fund the development of an emerging portfolio of immuno-oncology drugs. The foundation will be built on Tori. It's not a biosimilar, but a novel anti-PD-1 antibody that may earn approvals for over one dozen unique oncology indications. For reference, Keytruda from Merck (MRK) is also an anti-PD-1 antibody. It will become the world's bestselling drug by 2023 when Humira faces competition from nearly 10 different biosimilars.
Coherus BioSciences expects to earn FDA approval to treat a rare throat cancer in December 2022 and launch Tori in early 2023. Internal estimates suggest it could generate over $100 million in annual revenue in this indication alone. However, the real opportunity resides in treating more common cancers and in future combination therapies.
The company is leveraging its core competency -- developing antibody drugs -- to develop a handful of drug candidates that could make Tori more effective. It has licensed a few others from external partners. These combinations may not make meaningful revenue contributions until later this decade, but they could power Tori's annual revenue potential well over $1 billion.
Don't Overlook This Commercial Drug Developer
Biosimilars get a bad rap among investors, but they're key to powering this business higher in the next few years. In fact, many pharma titans have leaned on biosimilars for revenue growth, too. Amgen now generates almost 10% of total annual revenue from copycat biologic drugs.
The small size of Coherus BioSciences works in favor of investors. Whereas another $200 million in annual revenue may not move the needle for the largest companies, it would nearly double the company's sales. Given the number of new product launches on the horizon, investors shouldn't overlook the small-cap biotech. It's completely realistic to generate over $1 billion in annual revenue by 2026.
