Coherus BioSciences, Inc. (NASDAQ:CHRS)
Baird 2017 Global Healthcare Conference Call
September 7, 2017 9:05 AM ET
Denny Lanfear – President and Chief Executive Officer
Jean Viret – Chief Financial Officer
Mike Ulz – Robert W. Baird
Good morning everyone and thanks for joining us. I’m Mike Ulz, one of the biotech analyst here at Baird. And it’s my pleasure to introduce Denny Lanfear, President and CEO; as well as Jean Viret CFO from Coherus BioSciences. Format for today is fireside chat, so please feel free to ask questions if you have any. But before we get into the Q&A I’ll just turn it over to Denny and Jean Viret to give us a quick overview of the company for anyone who’s not familiar with the story.
Thank you, Michael, and thank you for the opportunity to be with you today at the Baird conference. So Coherus is a leading pure-play standalone biosimilars company. We have several products underdevelopment. Our lead product of course is CHS-1701, which is a pegfilgrastim, Neulasta biosimilar. We’ll talk a little bit today about where we are in terms of the resubmission of the BLA filing with the FDA. Happy to take any questions on that.
Our second product is CHS-1420, which is a Humira biosimilar. There’s a number of things going on there, particularly in terms of the legal battle front which is a primary impediment to market entry course for that product. We also have underdevelopment CHS-0214 and the company has enrolled in etanercept biosimilar. We most recently filed an IPR pursuant to a patent known as Brockhaus in the U.S. on August 7 covered that on our call. We’re happy to illustrate those issues and conversations a little bit more for you.
And then lastly in terms of the pipeline we have a couple products there that we’ve previously talked about, and the first is a Lucentis biosimilar, CHS-3351. The company is making good progress on that. In the context of discussing which products we go after and why. We’re happy to take some questions around that. And we’ve also have worked on Avastin biosimilar, although things here say that’s de-prioritized in the context of the overall pipeline, a little bit behind Lucentis biosimilar at this time.
Just in terms of the CHS-1701 story, company’s been quite busy over the summer. We are on track in terms of the resubmission, key issues around the assay have been addressed, for example, the higher sensitivity antibody assay percent to direction from FDA has now been completed, and we are now gone into validation phase with that. We completed the development of that assay in two separate shops to make sure that we had the opportunity to process those samples in a timely manner consistent with our guidance both in June and in our August 7 call.
In terms of CHS-1420, the Humira biosimilar, we believe that the readout on the ‘619 IPR will happen probably Monday or latest on Tuesday with that. There is four separate IPRs pursuant to the ‘619. We’ll be able to – happy to talk about that a little later and take questions for Michael, but this particular sort of patents addresses the so-called non-buffered formulations of Humira and will talk also about some of the additional patents that we’ve gotten on that.
So with that I’ll strop. Progress is good on the product development front. And I’ll let JV make some remarks pursuant to the company’s financings over the course of summer. JV?
Thank you, Denny, and thank you, Mike, for having us today. In mid-August this year we did a private pipe with Temasek two tranche deals. The first tranche closed and it was $75 million. So first it took quite a bit of time to get this deal done. We’ve been in discussion with Temasek or pretty much six months in the beginning of the year. We found Temasek team was a great team to work with scientifically competent, financially savvy, and they know obviously the biotech space very well on biosimilar in particular.
After we receive our complete response letter, they went into further diligence with us and decided that they were interested in making this investment. We have an opportunity to invest again when we receive approval hopefully next year and at that point they can invest another $75 million under price that would determined by the current market conditions at that time, meaning that we will use mechanism that is similar to what we use today probably slightly different to be negotiated, but at prices that will be prevailing then.
Thanks. Mike, we’re happy to take any additional questions you have or from the audience.
Q – Mike Ulz
Great. Well, thanks for that introduction and maybe just we can start with a big picture question about just the biosimilar market in the U.S. and how things have evolved over the past few years and what makes it more attractive today than in the past.
That’s a great question. The biosimilar market in the U.S. as you know is a bit behind the market in Europe, where there’s been approvals and there’s been products on the market and so forth. For example, there’s been progressed in G-CSF analogs on the market there for quite sometime. And it was only last year that Zarxio was approved.
I think there’s two broad categories of things that you have to think about when you look at the development of market. The first is the regulatory environment, and how the FDA has gone forward and what’s going on there. And then the second key issue of course is a legal environment.
So in terms of the regulatory environment we’ve seen two products go through the FDA in 10 months both from Amgen. We’ve seen two products go through with three-month extensions and we’ve seen six products get complete response letters. So I think that folks are dialing into the expectations of the FDA and how best to address regulatory developments and how to be successful there, ourselves included, I think we have a very good handle now on expectations and how you deal with the accelerated timeframes that the biosimilar review process imposes on companies.
I think though that the real issue is the legal front in how that has impacted things. Certainly in terms of the large anti-TNFs which are very large market entities that is Humira and Enbrel, what you’ve seen is legal maneuverings which are precluded market entry passed the original patent. So Amgen as you know in 2012 earned patents, Brockhaus and other patents which we have challenged that take patent extensions out to 2028, 2029 giving 30 years or so of patent coverage for the products.
In terms of Humira, I think that the environment in the landscape there has evolved pretty much as we thought. It has now become a battle on the – I’d say the formulation IP front both in terms of buffered and non-buffered formulations. As you know in May we had a therapeutic use patent 135 struck down, that was pretty much a major impediment to penetrating the markets. So now we have to focus on dismantling some of these formulation barriers.
In terms of market uptick the third category, I think Zarxio was done very well, the biosimilars, Zarxio, and I would also include Humira product with that, have about 40% market share, the short acting market which is pretty good, a year and a half or so. And we’ll have to see how others do in the various other spaces anti-TNFs and oncology space. We think there is a distinct difference between the episodic oncology market, and the chronic markets that you see with the anti-TNFs in terms of how to get into those markets and so on, but first you have to get pass through regulators.
Talk about just the FDA and understanding some of the requirements there. Have you noticed the change or tone in view with the new administration at all and the FDA commissioner toward biosimilars?
Well, we believe that Scott leads – being named commissioner of the FDA is a very positive thing both for biosimilars and others. Scott has a very deep understanding of the drug development process, the healthcare system. And he’s a physician, he’s a scientist. Many people have worked with Scott in the past. I think Scott was just an excellent choice for the FDA.
If you look at his opening remarks when he joined FDA he made a point to his team there of balancing the benefits and the risks as they looked at products particularly biosimilars to try to control healthcare pricing. So Scott’s point I think was that they have to be very judicious in moving these products forward and getting them approved and more competition in the market will reign in prices. So that’s clearly where he’s coming from.
Biolight, Scott has transmitted that message down through his organization in FDA. All of our interactions with FDA are very, very positive and proactive. We find them very cooperate of partners as we develop our products, very good questions and so on. I think that everyone is poling on the horse in the same direction as far as industry and the FDA.
I think that in certain cases such as immunogenicity with pegfilgrastim, they have set high standards reasonably, so happy to talk about that subsequently. But I think overall Scott’s got it right and I think over the next few years, the healthcare system will see the benefits of this leadership.
Maybe you can talk about your approach to biosimilar development and any advantages or potentially disadvantage you might have relative to some of your larger competitors?
That’s a good question. So we’re a smaller company than others, so we have to think, play a bit smarter. There’s large entities in this space who have lots of big tanks and low cogs and lots of resources. So we’re very careful I think in two fronts. Number one, how we have fashioned the company with our platform, so that we can very effectively address the products. And number two, how we select the products. So in the first hand, as you know we have focused our platform on analytics process science, legal issues and then clinical regulatory.
In terms of the products we’ve gone after, I think that you’ve seen the benefit of this in terms of each aspect of the platform. For example, with pegfilgrastim the clinical biology is very challenging. The pharmacokinetics studies have been very challenging for most players. If you look at Sandoz, the reasons why they withdrew the application from Europe, you’ll see that in terms of the complete response in the U.S. And that’s an area clearly where we had a very novel clinical design and we’re able to show I think excellent data in terms of bioequivalence.
The other area I think that comes into play quite a bit in the platform is legal issues as I pointed out. You can go ahead and develop these products and get them approved, but if you can’t get them out of market because there’s dozens and dozens of blocking patents, it’s a bit for naught. And I think what you see is some of the folks that have gone through and actually gotten, for example, Humira is approved, we’re unable now to launch and they’re going to be locked up in litigation.
On the other hand, we have been I think judicious in terms of challenging certain patents and knocking them down. We’ve been very careful in navigating around certain patents. For example with the CHS-1701 pegfilgrastim product with Amgen, I would characterize our patent exchange process their dependence is very successful. We avoided many of the pitfalls that some other folks bumped into. Amgen was only able to assert one patent against us which they have so called ‘707 patent.
We filed for dismissals that it’s just so you know. ‘707 is a patent that addresses the use of hydrophobic interaction chromatography with the purification of pegfilgrastim. So firstly, we don’t use hydrophobic interaction chromatography, it also necessitates the use of certain salts in combinations acetates and salty buffers and things, and we don’t use those salts either. Neither of those two facts kept Amgen from asserting that against us, but I think we’re confident that not too much is going to come out of that. And we’ve talked a long time how we sort of engineer around patents, I think that’s a very good example of that.
So I think as a smaller biosimilars company, you have to be very careful in picking your battles and selecting your products, and making sure that you can be successful in the areas that you go after. But I think it’s fair to say that legally we’re on the front lines in terms of CHS-1420 Humira biosimilar. And I think developmentally we’re certainly in the lead in terms of the pegfilgrastim market and in that biosimilar. And as we look at other products we’re going to also apply the same criteria very judicious selection of follow-on products.
Maybe if we can focus on CHS-1701 and mentioned in your remarks obviously multiple companies are targeting a biosimilar Neulasta, but there’s been some challenges there. Maybe you can just help us understand why developing a biosimilar is more challenging?
Yes. So Neulasta is challenging, pegfilgrastim is challenging surprisingly so. This molecule is constructed first as a primary amino acid sequence of pegfilgrastim induced up. And then there is a 20 kilodalton polyethylene glycol tail attached to the end terminus of a molecule through a specific chemistry that was developed with [indiscernible] Olaf Kinstler back in Amgen and that patent expired in October of 2015. But the combination of the protein plus the polythene glycol tail to gives this molecule very unusual ADME properties when injected. Specifically it has a very high variability.
So you can get 50% to 60% coefficients of variation when you inject the same patient with the same product twice in a row. So this will recavic on your designs for pharmacokinetic studies to show that you’re in biosimilar, because you have to come 80% to 125% of the originator.
The second problem where that it is, that it up regulates its own receptor. So that’s a little dicey because the same molecule that clears it through a set of enzymes secondary to the receptor uptick is its own target, so you have to deal with that. And the third issue that you have to grapple with is that it’s an endogenous protein. So the regulators are being very, very careful, they don’t put a biosimilar product on the market that could potentially cause antibodies to your own endogenous filgrastim in our G-CSF.
So what happened there is, as you know back in the day, they were EPOGEN products in which antibodies were formed to endogenous EPO. And those patients of course endured anemia and other dendritic effect. So they’re being very careful because you really don’t – you really can’t have a situation where you generate antibodies to your own signally molecule for white blood cell production.
So that’s the reason why the bar is very high in terms of the antigenicity. Now that the other problem with the antigenicity is there really aren’t any antibodies, right. You haven’t seen any neutralizing antibodies and the antigenicity of those molecules are very low. So the issue of sort of proving that you have less antigenicity somehow comes down to proving a negative so this is quite difficult. And you end up having to sample the noise floor of your assays and so on, and it’s a little dicey. And this is what we’re involved in right now. So I think it’s going to be tough to sort through a lot of this, but I think we have a good plan and we’ve worked out with the agency on it, but I think those are the final reasons for the molecule so hard.
But on the other hand if you get to the finish line first as we hope, you have a $4 billion U.S. market that’s very attractive for a whole variety of structural reasons and we think we did very strong uptick there in sales in the subsequent years.
Maybe you can just comment on the CRL and specifically what the FDA requested?
So the complete response letter was bifurcated into two broad areas. The first were issues pursuant to the immunogenicity and the immunogenicity assay. The second set of questions and observations by the agency had to do with process issues, some analytics as the CMC issues. And as we said on our call, the second part pursuant to the process and specifications in the CMC issues is I think while entails work is straightforward and we believe that can be handled in the context of the overall timeline for reprocessing certain samples. So we’ve got a whole team working on that in addressing that and I would represent that that’s going to very well and we’re happy with the progress there.
In terms of the questions pursuant to the immunogenicity assay they asked us for example to reanalyze a certain subset of samples with a revised assay that had much higher sensitivity than the assay that we used. So with that required us to do is to go off and redevelop a revised higher sensitivity assay. We did that in two different shops, so we would be well prepared if either of them failed, but they’ve now successfully built on that. And then subsequently you have to validate that assay, develop the validation protocol and file that with the FDA and so on. And you also of course have to process the samples.
So we’re currently now in the revalidation phase, we don’t expect any issues there, because the development went well as we had talked about. We covered that I think in some detail in our call on August 7. And we look forward to meeting the FDA probably sometime in Q4 depending on their availability and so on, and getting feedback on our approach to answering this question. So we’re currently assembling those documents to interact with them on that and so forth. But I would say that we’re in a pretty good shape on the immunogenicity end of things in terms of answering their questions and reprocessing the certain samples and so on.
The time you took you to develop the immunogenicity assay, was that sooner than you had originally expected?
It was – when we talked about the complete response letter with the market, the money after we received it, I think we discussed that we thought we’d have that assay redeveloped by the end of summer. It was on that timeline I think it’s – I think we talked about that on the call which was on 7, so took about the same time. We didn’t perceive any particular technical or scientific hurdles and redeveloping that assay with that sensitivity indeed that was the case, and now we do not anticipate any paroles in terms of validation in the subsequent reprocessing of samples.
You mentioned potentially meeting with the FDA in 4Q. Could you potentially have some of those, some of that analysis done that you can share with us?
Let me see. The schedule for actual processing of samples I think that will probably occur sometime in the second half of this year as we’re trying to get the filing done by the end of the year. Although, depending on interactions with the FDA, we’re certainly not going to rush the file. And if it takes another month or so to get it absolutely correct, we’re going to take time to make sure that that filing gets in and it’s as good as we can make it.
We will process those samples, but I would just manage your expectations that we will probably not talk to the market or consider it especially material than to make an announcement that we’ve grown off and we’ve processed the samples and now we’re saying this. And we have said that when the FDA accepts the resubmission we will announce that which we think is important. But we are not committed to making any intermediate announcements to the market as we progress between here and there.
Can you just talk about those timelines when you think you’re filing…
Yes, I think it’s roughly – I’m getting to it, I think it’s roughly by the end of year. We would hope – we have to go back and forth with the U.S. FDA and develop our packages and so forth. To a fair degree depends on FDA’s timing whether you can get a 30-day meeting in 30 days or your 30-day meeting clock really takes 60 days how busy they are, they’re pretty slumped. I think that FDA is doing a fabulous job, they just kept BsUFA II through which is really very rewarding and so on, but they sort of have a lot to do there. And Scott’s leadership I think didn’t really show up until May or June. So I think they’re now marching along very quickly, but we’ll how quickly we can get the meetings back and forth. And if there’s anything that we think is appropriate to disclose to the market’s material, of course we’d do that.
Maybe just one last question on CHS-1701. You mentioned the patent dance with Amgen. Just curious where you are in the process and kind of remaining timeframe there?
In terms of the patent dance?
Well, the patent dance is completed. And as I incurred earlier, they chose to serve one patent against us, I suppose I felt that was reasonable to do. I think we have emotion in play to just assist that. We’re quite confident that that will not be our fruitful approach as I indicated. We don’t use hydrophobic interaction chromatography, we don’t use the combination of salts cited in the patent, the so-called ‘707 patent. And if you – anyone want a copy of that, contact Patrick O’Brien, would be happy to send it to you. But we consider patent dance has been very successful with Amgen on this front.
Maybe in the last five minutes we will shift to CHS-1420, which is your Humira biosimilar. And you mentioned this earlier, you have IPR decision next week for ‘619, maybe you can just comment on your level of confidence in gaining a favorable decision there?
Well, I’ll took at deep into my crystal ball here.
Humira, ‘135 maybe is that…
You know, I don’t know – we filed an IPR ‘166 which was buffered formulations. I think we felt that should have been instituted, but the issue that the patent office deliberates is the reasonable likelihood of success. So if you sort of put your mind into the late 90s, and you say, well, you know, I’m a scientist in the late 90s and what is the reasonable likelihood of success if I do this, I’ll have a stable formulation. The answer to that depends and often derived as no, it was not. And so therefore it’s recently unexpected and you deserve the patent.
On the other hand, ‘619 comes much later. The ‘619 family is in the mid-2000s. Some of the prior art for example that is in our IPRs is Gokarn. Gokarn is 2005-2006. Timing marched on, people done a lot of work. There was actually the Humira label itself which talked about 50 mgs per ml. Gokarn actually disclosed non-buffered protein formulations that they could self-buffer and so on. So when we put together the IPR for ‘619 we chose to actually assemble four separate IPRs with four separate arguments, and we really only need one of these to go through, but they’re based on prior art and a reasonable likelihood of success.
And then we think we’re in pretty good shape there because people have known for decades that protein self-buffer at higher protein concentrations. So once you get 10, 25, 35, 50 mgs per ml, the active groups on the protein provide buffering. Now if you have protein that’s very dilute, then it does not have that self-buffering capability, and that’s why you use acetate buffers or citrate buffers and so on. So that’s the key issue.
We think that there are strong arguments for the prior art and for motivation there’s – for example, there is Franzen, there is the existence of the citrate buffer, which everybody knew it causes stinging. So it’s pretty obvious to take the stinging offensive buffer constituents out. It was known that these proteins will self-buffer in terms of their own pH. Lastly I’d say there was products like Gamimune out during that prior to that which are blood products IgGs 50 mgs per ml. Those also self-buffered without buffers. So it’s certainly known the proteins can do this.
Now whether or not the patent office will agree that this was a reasonable likelihood of success and this prior art should be viewed as we suggest is another thing altogether. But I think that’s I think some fairly strong arguments in terms of institution of ‘619. So we’ll be very gratified if ‘619 gets instituted, it will of course help direct our efforts in terms of where we go with the product and selection of formulations as we go forward into the patent dance. But I don’t really know how the patent office is going to deal with it, but we’ll just have to see, but we’ll know Monday or Tuesday I think.
Maybe you can just – maybe last question here in the last minute. Maybe you can just talk about scenarios in terms of the next steps assuming you don’t get an institution versus if you do.
Yes. So if you don’t get instituted and then there you have to challenge them actually in district court, which is doable. Also, the only thing you can really go after in terms of the IPRs I think is prior art. You can rave a much more robust set of arguments in district court and go forward. It takes more time and so on, but it could be fruitful. But I think that one of the things we have done to prepare for that, of course, is develop our own patent state. And with the Humira biosimilar product I think we have a number of our patents that are already been allowed and issued both in the buffered realm and the non-buffered realm. I believe we have – we’re up to 10 patents or patent allowances in non-buffered realm. So – and we’ve been very busy with that, we’ve laid out a very broad patent landscape in that dimension.
Great. Looks like we’re out of time here. So why don’t we end it there. Thanks.
Thank you very much for joining us today. I wish we’ll talk on Monday.
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Coherus BioSciences Presents at Baird 2017 Global Healthcare Conference (Transcript)