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Edited Transcript of CHRS earnings conference call or presentation 8-Nov-18 9:30pm GMT

Q3 2018 Coherus BioSciences Inc Earnings Call

Redwood City Dec 21, 2018 (Thomson StreetEvents) -- Edited Transcript of Coherus BioSciences Inc earnings conference call or presentation Thursday, November 8, 2018 at 9:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Chris Thompson

Coherus BioSciences, Inc. - SVP of Sales

* David Arrington

Coherus BioSciences, Inc. - VP of IR & Corporate Affairs

* Dennis M. Lanfear

Coherus BioSciences, Inc. - Chairman, President & CEO

* James Hassard

Coherus BioSciences, Inc. - SVP of Marketing & Market Access

* Jean-Frédéric Viret

Coherus BioSciences, Inc. - CFO

* Michael Chen

Coherus BioSciences, Inc. - SVP of Commercial Analytics & Trade

* Paula O'Connor

Coherus BioSciences, Inc. - EVP of Clinical Development and Medical Affairs

* Vincent R. Anicetti

Coherus BioSciences, Inc. - COO

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Conference Call Participants

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* Christopher Thomas Schott

JP Morgan Chase & Co, Research Division - Senior Analyst

* Jason Howard Kolbert

H.C. Wainwright & Co, LLC, Research Division - Former MD & Senior Healthcare Analyst

* Kenneth Charles Cacciatore

Cowen and Company, LLC, Research Division - MD and Senior Research Analyst

* Michael Eric Ulz

Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst

* Mohit Bansal

Citigroup Inc, Research Division - VP and Analyst

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Presentation

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Operator [1]

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Ladies and gentlemen, thank you for standing by, and welcome to the Coherus BioSciences Third Quarter Earnings Conference Call. My name is Michelle, and I will be your conference operator for the call today. (Operator Instructions) And as a reminder, this conference call is being recorded.

I would now like to turn the call over to David Arrington, Vice President, Investor Relations and Corporate Affairs. Please go ahead.

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David Arrington, Coherus BioSciences, Inc. - VP of IR & Corporate Affairs [2]

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Thank you, Michelle, and good afternoon, everyone. After close of market today, we issued a first (sic) [third] quarter press release. This release can be found on the Coherus BioSciences website.

Joining me for today's call will be Denny Lanfear, President, CEO and Chairman; Dr. Jean Viret, Chief Financial Officer; Vince Anicetti, Chief Operating Officer; Dr. Paula O'Connor, Executive Vice President, Clinical Development and Medical Affairs Jim Hassard, Senior Vice President, Marketing and Market Access; Chris Thompson, Senior Vice President of Sales; Michael Chen, Senior Vice President Commercial Analytics & Trade.

Before we begin our formal remarks, I would like to remind you that we will be making forward-looking statements with respect to product development plans, all of which involve certain assumptions, risks and uncertainties that are beyond our control and could cause actual results to differ from these statements. A description of these risks can be found on our most recent Form 10-Q, which we filed this afternoon after market close.

In addition, Coherus BioSciences does not undertake any obligation to update any forward-looking statements made during this call.

I will now turn the call over to Denny Lanfear, President, CEO and Chairman of Coherus.

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Dennis M. Lanfear, Coherus BioSciences, Inc. - Chairman, President & CEO [3]

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Thank you, David, and thank you all for joining us today.

As announced last Friday, we are excited that on November 2, 2018, the FDA granted approval to UDENYCA, the first pegfilgrastim biosimilar approved in both the United States and Europe. We would like to thank the FDA for the efficient review of the resubmission, and I would like to thank my entire team at Coherus as well as our strategic partners for working tirelessly to bring UDENYCA to patients.

As we've previously guided to the market, the company was confident that the resubmitted immunogenicity and comparability package would support approval in the U.S. just as it did in Europe. I would also note that UDENYCA was approved with full label and with full 3-year dating.

We believe UDENYCA's approval will enable Coherus to deliver significant value to all stakeholders in the oncology marketplace, which we'll provide more color on a little later in the call.

Now let me discuss pricing and the availability of UDENYCA in the United States. UDENYCA's list price will be $4,175, which represents a discount of 33% over Neulasta's list price, and is also below Neulasta's current average selling price of $4,422.

We will discuss the price rationale in more detail in just a moment, but I would note that most importantly, we believe this price will deliver long-term economic benefit to patients and savings to the health care system. This price also reflects long-term value that UDENYCA is poised to deliver in terms of quality of services to the oncology marketplace, including to patients. Beyond list price, we also have contracting plans that we believe will deliver additional value to payers, providers and patients in the long-term, facilitating uptake and market conversion.

Now with respect to the launch timing, UDENYCA will be available for patients on January 3, 2019. We believe this is the best date for our product launch for a few reasons. First of all, there's a lead-time for product approval to completing packaging and labeling for our final product, which is now well underway. Vince Anicetti, our Chief Operating Officer, will discuss this a little further later on in the call.

Moreover, our Medicare Q code is expected to be available on January 1. This is important timing to consider as the Q code is a key requirement to support seamless reimbursement to our Medicare patients, which constitute about 50% of the market. We do not want our customers to experience any reimbursement missteps upon starting utilization.

Lastly, commercial payer formularies typically reset in January, which will allow us to align their decision timing with our launch, allowing us to synchronize timing with these essential market entities.

On today's call, we would like to provide some additional color and detail with respect to the value proposition in the market. So I've invited 3 members of our commercial team to join me, and they will expand on some of the market dynamics in the different segments and how UDENYCA's value proposition will deliver on the needs of each.

First, Mr. Jim Hassard is our Senior Vice President of Marketing and Market Access, and Jim will expand on our value proposition in each of these places. Mr. Michael Chen is with us, and he's our Senior Vice President of Commercial Analytics & Trade. And Mike will provide initiative details on market structure, segments and the opportunity in each. Mr. Chris Thompson is with us. He is our Senior Vice President of Sales. Mr. Thompson will discuss our organizational structure as well as our strategic plan for approaching our customers. Mr. Vince Anicetti is with us, our Chief Operating Officer, as I indicated. He will discuss the product launch, preparation status of the supply. And of course, our Chief Financial Officer, Dr. Jean Viret, will discuss with you our quarter 3 financial results. Finally, let me now introduce you Dr. Paula O'Connor, our Executive Vice President of Clinical Development and Medical Affairs. Today, Dr. O'Connor will be discussing with you our approval and our medical affairs support plans for launch. Paula?

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Paula O'Connor, Coherus BioSciences, Inc. - EVP of Clinical Development and Medical Affairs [4]

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Thank you for the introduction, Denny.

With the approval of UDENYCA, the team at Coherus has delivered on our promise to bring high-quality biosimilar products to the market and, thereby, improved access to important biologic drugs for patients, delivering choice without compromise.

In getting UDENYCA approved, we at Coherus have demonstrated our leadership in biosimilar drug development and clinical science. The team has delivered a clinical trial program that has supported U.S. and EU approval while adding to the understanding of the immunogenicity of pegfilgrastim product.

Getting approved was the first step in delivering our promise. The medical affairs team will extend our leadership position in biosimilar development by providing patients and other customers with the information needed to confidently utilize UDENYCA. The medical affairs team will focus on educating patients and caregivers about UDENYCA, the biosimilar development pathway and the potential for biosimilars to ease the burden of cost in health care. The team will also work to understand the issues faced by our customers in choosing to utilize UDENYCA.

Our medical affairs field team is staffed with advanced practice nurses, PharmDs, PhDs and MDs, all with more than 60 years of industry experience. The team is being deployed throughout the nation to support the successful launch of UDENYCA. We look forward to the success of this launch.

I will now turn the call over to Jim Hassard, VP of Marketing and Market Access, to discuss the UDENYCA value proposition.

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James Hassard, Coherus BioSciences, Inc. - SVP of Marketing & Market Access [5]

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Thank you, Paula. Needless to say, the Coherus commercial team is excited to have FDA approval of UDENYCA. As discussed on our last call, our overall launch strategy is to provide a holistic, value proposition to all stakeholders that goes beyond pricing and includes patient and reimbursement services, high-quality staff and reliable high-quality supply.

Choice without compromise is not a slogan. It is a promise to deliver value to patients, providers and payers in a customer-friendly manner. We are committed to world-class execution in terms of access and reimbursement, sales force effectiveness, brand planning and scientific support.

In September of this year, we began advertising our coming soon patient and reimbursement services under the corporate brand of Coherus Complete. We've received good feedback from providers regarding the breadth of the service offering aimed to rival services offered for Neulasta. coheruscomplete.com has been launched and will serve as the portal where patients and providers will access various reimbursement-related information and services. These services will include co-pay support for eligible UDENYCA patients.

With the FDA approval of UDENYCA, we've also launched udenyca.com. As we proceed towards product availability, we'll continue to build out udenyca.com as a resource and reference center for providers. You should also note that with Coherus first product approval, we have updated coherus.com to include UDENYCA and additional resources regarding biosimilars.

An additional component of the UDENYCA value proposition is obviously pricing and contracting. As Denny mentioned, our list price or wholesaler acquisition cost of $4,175 per unit is 33% lower than the list price for Neulasta. This price is attractive to payers without diminishing the value proposition of UDENYCA.

Many commercial payers continue to base their payment of drugs on a schedule involving list price. This means that the list price of UDENYCA has the potential of delivering significant savings to commercial payers compared to Neulasta. I should also note, as Denny noted, that UDENYCA list price is lower than the average selling price or ASP for Neulasta, which will deliver immediate savings to Medicare and patients as well.

Starting tomorrow, we will begin communication of the UDENYCA list price to providers, payers and pricing compendia. The FDA approval of UDENYCA also allows us to complete and submit our application for various reimbursement codes to the Center for Medicare Services or CMS. We expect to have a CMS Q code for UDENYCA by early January coinciding with product launch.

For more detail on the launch opportunity, I'd like to turn it over to my colleague, Michael Chen, Senior Vice President, Commercial Analytics & Trade. Michael?

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Michael Chen, Coherus BioSciences, Inc. - SVP of Commercial Analytics & Trade [6]

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Thanks, Jim.

I'd like to add a few comments about how we see the pegfilgrastim biosimilar marketing opportunity. Neulasta is and historically has been one of the largest oncology biologics in the U.S., representing roughly $4 billion in sales annually. It is backbone supportive care to myelosuppressive chemotherapy. Generally, pegfilgrastim therapy is episodic with a high degree of patient turnover and with many new patients, thus lower barriers to adoption versus [smart] therapy with many stable patients.

The market has several segments, which have varying economic drivers. We believe that we have opportunity to bring value to the various market segments, especially those which are disadvantaged on pricing. There is still need for biosimilar education, however, the oncology market has had experience with more successful U.S. biosimilar entry and believe success in the short-acting G-CSF market of (inaudible).

We have done considerable market research and have had many discussions with key stakeholders to understand the main value drivers and best practices. The key market stakeholders are composed of group purchase organizations or GPOs, which facilitate pricing and contracting for community oncology clinics, 340B and non-340B hospitals and, of course, the payers. The trend in Neulasta pricing structure creates economic winners and losers, generally with larger clinic customers benefiting and hospitals being more disadvantaged on pricing.

We believe that we have built the proper value drivers and customer support to bring value to the different stakeholders and maintain critical services to support patients and providers.

Finally, UDENYCA will be able to bring immediate cost savings, lower out-of-pocket patient costs and long-term aggregate savings to the health care system.

We have studied, planned and readied for launching UDENYCA into the market. And I would like to introduce Chris Thompson, Senior Vice President of Sales to talk more about our launch plans.

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Chris Thompson, Coherus BioSciences, Inc. - SVP of Sales [7]

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Thank you, Michael. Good afternoon, everyone.

I'm very excited to provide you with an update on our plans for a robust and successful launch of UDENYCA. In terms of our field ramp-up, we are pleased to announce that all of our field sales and support positions are fully staffed, trained and deployed. Our field team is comprised of 7 regional sales directors and 67 oncology account managers, which are our frontline customer-facing team; 7 key account directors aligned to our regions which call on large IDNs and oncology clinics; 3 group purchasing organization national account directors who cover accounts like Visiant, Premier, ION, McKesson, VitalSource and Apexus; 4 payer national account directors who focus on national, regional and government payers; 7 medical science liaisons aligned to our sales regions and can engage in deeper clinical discussions with providers; and 7 field reimbursement specialists whose focus will be on oncology provider billing and reimbursement employees.

I'm truly excited about the caliber of people that we've been able to attract and their excitement for bringing UDENYCA to market. This team has over 1,700 years of combined pharmaceutical experience and over 800 years of oncology experience. They are extremely talented in the areas of contracting and the buy and bill oncology business model as well as being knowledgeable of their targeted customers.

In terms of sales force size, the Coherus field team is a size consistent with the traditional branded biologic launch and supports our branding of choice without compromise.

As a sales organization, we intend to be front and center in supporting our customers as they choose UDENYCA for better patient access, support and value. Additionally, I'm confident this team will be able to deliver sales and support to ensure significant market penetration. As Mike Chen previously discussed, we'll be focused on segments of the business that have pent-up demand and desire to derive true cost savings for their patients and want to achieve that savings without sacrificing critical patient support services, which we will provide. One such segment is hospitals. As a matter of fact, the largest GPO representing hospital providers, Visiant, recently issued a press release entitled Visiant Applauds FDA Approval of Biosimilar UDENYCA. This truly represents what I hear from customers on a routine basis as they attempt to balance the high cost of important medicines with delivering high-value care.

During the time between now and launch, the team is focused on sharing the clinical and economic benefits of UDENYCA with providers, helping customers understand our patient support services branded under Coherus Complete, securing dates for hospital P&T review and approval of UDENYCA, securing GPO contracts and gaining commitments for first orders in January.

In summary, let me end where I started. We have a very talented sales organization that's excited and prepared to compete, and we have the right tools and strategies necessary to deliver on the promise. With a robust supply at hand, my team and I are able to focus on executing on a comprehensive launch across all segments.

Now let me turn it over to our Chief Operating Officer, Vince Anicetti, who will further elaborate on our abundance of supply to satisfy the market demand. Vince?

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Vincent R. Anicetti, Coherus BioSciences, Inc. - COO [8]

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Thank you, Chris. I'm happy to review our production plans and progress towards our January launch.

First, I'm pleased to say that we remain on track with our production operations to support a vigorous launch. We are proud to say that all UDENYCA manufacturing operations performed in the USA.

Our 2018 drug substance and drug product launch campaigns have been successfully completed. We have abundant market supply capacity, and we are prepared to meet our highest expected demand for an extended period of time.

With the FDA approval, we have begun our product label and packaging operations. Our first batches begin to arrive at the main distribution site later this month and will be available for our January 3, 2019 launch.

In addition to our production status, which is going very well, I would like to add a few positive notes from our FDA review that was completed recently with the approval.

First, as Denny mentioned, UDENYCA drug product was approved with the shelf life of 36 months. This reflects excellent product quality results and a robust stability program and will provide us additional supply chain flexibility in the future.

In addition, subsequent to our last earnings call, we received and successfully completed 2 additional FDA inspections at our production and testing sites. These inspections included KBI Biopharma, our drug substance manufacturer and a contract microbiology testing laboratory.

All UDENYCA production sites have successfully completed FDA inspections during the course of the FDA review, and our production network has achieved a consistently positive inspection record with U.S. and EU regulators, and our quality organization is working with all of our sites to ensure that we maintain this record in the future.

With that, I'll now turn over the call to Dr. Jean Viret, our Chief Financial Officer.

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Jean-Frédéric Viret, Coherus BioSciences, Inc. - CFO [9]

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Thank you, Vince. I will now walk you through the main aspects of this quarter's financial performance.

Research and development expense decreased this quarter over the same quarter last year by $11 million. The decrease in R&D expenses period-over-period was mainly due to the reduction in manufacturing, clinical and analytical costs associated with our anti-TNF programs, CHS-0214 and CHS-1420. These cost decreases were partially offset by the costs associated by the manufacturing of UDENYCA. Again, this quarter, just like it is the case for previous recent quarters, we are expensing all costs relating -- related to the production of UDENYCA. Now that UDENYCA is approved for commercialization in the U.S., we will capitalize those costs into inventory going forward.

General and administrative expenses increased by $11.4 million this quarter over the same quarter last year. This increase was mainly attributable to the costs associated with hiring a sales force and completing the commercial infrastructure to launch and sell UDENYCA in the United States.

Net loss attributable to Coherus for the third quarter of 2018 was $58.8 million or $0.87 per share, compared to a net loss of $60 million or $1.09 per share for the same period in 2017.

Our cash and cash equivalents and marketable securities totaled $117.2 million as of September 30, 2018, compared to $159.8 million as of June 30, 2018.

Our use of cash in operations during the third quarter of 2018 was $42.8 million, below our guidance of $48 million to $53 million for that quarter.

I will turn over the call back to David Arrington.

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David Arrington, Coherus BioSciences, Inc. - VP of IR & Corporate Affairs [10]

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Thank you, Jean. We will now open up the line for questions. Operator, could you please put through the first question?

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from Ken Cacciatore of Cowen and Company.

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Kenneth Charles Cacciatore, Cowen and Company, LLC, Research Division - MD and Senior Research Analyst [2]

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Just a question, as you're describing the market that you want to approach in hospitals, can you frame the percentage of Neulasta sales kind of directly into the category that it seems like you want to go to first? And then, wanted to get your perspective, if you could -- I know it's a competitor, but on Mylan's launch, had a little bit of slower ramp, some of the learnings from that, why it's maybe a little bit slower, what you might be doing a little bit differently? And then just lastly, since you've been approved, any thoughts on actions that Amgen has been taking to kind of maneuver ahead of your positioning into the segment -- into the hospital segment?

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Dennis M. Lanfear, Coherus BioSciences, Inc. - Chairman, President & CEO [3]

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Ken, thank you very much for your 3-point question. So let me hand off the question regarding the size of the hospital segments, so the 340Bs and the -- our large hospital segments to Michael Chen who will address that. Mike, can you give Ken a little color on that?

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Michael Chen, Coherus BioSciences, Inc. - SVP of Commercial Analytics & Trade [4]

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Sure. Thanks, Ken, nice to meet you. Basically, the way we see the hospital segment, we would estimate probably about 60% of Neulasta sales goes through the hospital segment. 340B, we would estimate about half of the units, so 340B there's going to be some significant or some -- yes, more price concessions based on the way that, that works. But the hospital overall is pretty large. Most of the business is going through the outpatient clinics of those systems.

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Dennis M. Lanfear, Coherus BioSciences, Inc. - Chairman, President & CEO [5]

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With respect to the -- thank you, Michael. With respect to the Mylan question, perhaps Jim Hassard some additional insight, some comments on Mylan. Jim, any comment there on Ken's point?

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James Hassard, Coherus BioSciences, Inc. - SVP of Marketing & Market Access [6]

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Yes, Ken, I don't want to speak specifically. As you said, they're a competitor. One thing I will say is, as we've evaluated our strategy, we really focus on 4 areas of the value proposition, kind of 4 basic components. They are obviously price and contracting, and we've talked a lot about that today. Obviously, services as well. So the services that we've described in terms of patient and provider services, reimbursement services, those are obviously very important. And we've seen -- not everybody is able to -- or has come to market with those services. And lastly, the fourth is supply. And we are very proud to say that we do have ample supply to enter the broad marketplace. And again, some competitors that have entered the market maybe haven't had that same luxury.

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Dennis M. Lanfear, Coherus BioSciences, Inc. - Chairman, President & CEO [7]

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Does that about answer it for you, Ken, for a follow-up, are you fine?

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Kenneth Charles Cacciatore, Cowen and Company, LLC, Research Division - MD and Senior Research Analyst [8]

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That's great. Thank you.

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Dennis M. Lanfear, Coherus BioSciences, Inc. - Chairman, President & CEO [9]

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Okay, terrific. So we'll now take the next question. Operator, could you put that one through.

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Operator [10]

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Our next question comes from Mohit Bansal of Citigroup.

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Mohit Bansal, Citigroup Inc, Research Division - VP and Analyst [11]

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Can you help me understand the dynamics between the payers and GPOs in the context of Neulasta end market? If you get into contracts with the large oncology centers, what could be the role of PBMs here and -- who are paying for the drug and how much of the roadblock or support they could create? Then I have a follow-up after that.

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Dennis M. Lanfear, Coherus BioSciences, Inc. - Chairman, President & CEO [12]

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So your question is the dynamics between the -- sorry the PBMs and the GPOs, Mohit?

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Mohit Bansal, Citigroup Inc, Research Division - VP and Analyst [13]

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Yes, yes. So I mean PBMs would be -- like so you get into context with the GPOs, but the payers -- not PBMs but the payers are actually paying for the drug. So how does this work here? If you get into contracts with the hospitals, who decides and who could create the...

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Dennis M. Lanfear, Coherus BioSciences, Inc. - Chairman, President & CEO [14]

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Yes, okay, great. Okay, and thank you for that clarification now. So Jim Hassard and his group is responsible for relationships with the payers. I'll let Jim talk a little bit about that, the progress we're making there and some of the other things. And in terms of contracting, I'll let Mr. Chen make some remarks about our progress with contracting with the GPOs. Jim, you want to go first?

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James Hassard, Coherus BioSciences, Inc. - SVP of Marketing & Market Access [15]

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Yes, absolutely. So Mohit, just to clarify, one, this marketplace is primarily medical benefit. So this is -- you mentioned PBMs or pharmacy benefit managers, they're typically not as involved within this space, again about 95% of the sales go through providers and, thus, it is a medical benefit primarily. Needless to say though, we have had now discussions with all of the payers that are responsible for medical benefit, and we have a contracting plan in place ready to roll.

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Dennis M. Lanfear, Coherus BioSciences, Inc. - Chairman, President & CEO [16]

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And Jim, can you just comment a little further on our objectives as far as the payers, regional and national?

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James Hassard, Coherus BioSciences, Inc. - SVP of Marketing & Market Access [17]

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Yes, absolutely. Great question, Denny, and a great trigger for me. The other thing, Mohit, is our objective with the payers is actually for parity coverage. We believe that, again, the value proposition for UDENYCA will be competitive within the marketplace. We want parity coverage and we also want providers to have that decision point and that choice.

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Dennis M. Lanfear, Coherus BioSciences, Inc. - Chairman, President & CEO [18]

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Thank you. And as a follow-up, Mr. Chen will make some remarks about the group purchasing organizations and our progress there? Michael?

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Michael Chen, Coherus BioSciences, Inc. - SVP of Commercial Analytics & Trade [19]

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So the GPOs really act as consolidating the members under contracts to get preferential pricing. So there's different GPOs that will service the clinic side -- the community-based clinics. There's a different set of GPOs that will historically service kind of the hospital side. So it makes a nice concentrated group of contracting entities that we can go and deploy and speak to about contracting, and we'll be doing that over the next few weeks.

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Dennis M. Lanfear, Coherus BioSciences, Inc. - Chairman, President & CEO [20]

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Great. I think it's also fair to say, Mohit, we don't see any apparent conflict between the objectives of the GPOs and the objectives of the payer which would create some dynamic tension as you point out, not in this marketplace, for the reasons that Mr. Hassard outlined. I hope that helps.

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Mohit Bansal, Citigroup Inc, Research Division - VP and Analyst [21]

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This is helpful. If I can just squeeze one more in. Your competitor talks in terms of prefilled syringe market being the target market. In terms of your discussions with the GPOs, do you see it differently? And what Coherus as a company needs to do to overcome an obstacle named Onpro here?

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Dennis M. Lanfear, Coherus BioSciences, Inc. - Chairman, President & CEO [22]

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Yes, I'll -- I think that's a good topic for Chris Thompson, our VP of Sales. Chris, do you want to take that one from Mohit?

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Chris Thompson, Coherus BioSciences, Inc. - SVP of Sales [23]

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So Mohit, thanks for your question. Actually we look at the whole market as a potential for us, not just the prefilled market. The primary -- the first thing I'd say is that if you look at the on-body product right now, it's stopped growing. It's flattened out and it continues to be flat, that market. And as you look at the sales trends of on-body, what you see is that it was primarily driven by economics. When they had a contract in place that rewarded the utilization of Onpro, the utilization was going up, and now it's diminished and it's flat. We believe that through our economic value proposition as well as the services that we're going to provide to patients and to our oncology offices that we're going to be able to sell through the on-body system. So that's why we looked at the whole market basket as our opportunity.

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Dennis M. Lanfear, Coherus BioSciences, Inc. - Chairman, President & CEO [24]

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And just to remind you, Mohit, we have previously said we felt 10% to 15% of the patients in that general ZIP Code actually had a need for such a product to have that benefit. So we think that the significant amount of the market here is approachable. And our strategy is to approach the market very, very broadly and comprehensively, and not at all in a selected or targeted fashion.

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Operator [25]

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Our next question comes from Mike Ulz of Baird.

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Michael Eric Ulz, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst [26]

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I just had a question with respect to pricing, and maybe -- you helped put it in the context of Neulasta but maybe if you can also put it in the context of Mylan's biosimilar and then maybe talk a little bit about your strategy behind that?

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Dennis M. Lanfear, Coherus BioSciences, Inc. - Chairman, President & CEO [27]

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Thanks a lot for the call. I'll let Mr. Hassard address the issue of the pricing. Jim?

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James Hassard, Coherus BioSciences, Inc. - SVP of Marketing & Market Access [28]

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Yes, so Mike, again, thank you. And you are correct. The pricing for UDENYCA is similar to Mylan's product. And the reason that we did that, we wanted a price that was attractive to payers without diminishing the overall value proposition of UDENYCA. We recognized that we need to be attractive to the payer market, but they are -- again, as I mentioned to you, there are other value components that really drive this. It's not just price. We believe that contracting, as Chris Thompson has talked about, we believe that the services that we outlined and, more so, we do believe that we've got a competitive advantage when it comes to supply.

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Michael Eric Ulz, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst [29]

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Got you. And then just maybe in terms of adoption. It sounds to me like you're probably targeting the hospitals, at least initially. Maybe you can talk about longer term in terms of the clinics and how you drive adoption there and maybe it's some of these other services, et cetera, that you're talking about. But any comments there would be helpful.

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Dennis M. Lanfear, Coherus BioSciences, Inc. - Chairman, President & CEO [30]

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Yes, we'd like to be clear. We are going to approach all segments of the market. We're not going to selectively approach simply the clinics or just the hospitals or whatever. That being said, there is an adoption cycle with each of the segments, which is unique. However, our view is that we are best served by moving forward very comprehensively and very broadly in the market. Lastly, I would say that we will be in a better position to talk about uptake and a few other things after we get the first quarter to sales under our belts and we see how the market is developing.

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Operator [31]

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Our next question comes from Jason Kolbert of H.C. Wainwright.

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Jason Howard Kolbert, H.C. Wainwright & Co, LLC, Research Division - Former MD & Senior Healthcare Analyst [32]

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One of the questions that was asked earlier and I'd like to follow up is, what is Amgen doing to protect their market share? And I have to tell you, on Saturday, I turned on the TV and I saw the first Onpro commercial. So I just wondered what kind of advertising or other types of marketing are you planning on doing as you gear up for launch?

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Dennis M. Lanfear, Coherus BioSciences, Inc. - Chairman, President & CEO [33]

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Thanks a lot, Jason. Actually those ads have been out for quite some time now. I see them at the gym in the morning sometimes. Jim Hassard would be happy to address some of those issues for you. Jim?

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James Hassard, Coherus BioSciences, Inc. - SVP of Marketing & Market Access [34]

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Yes, Jason. Thanks again for the question. On the marketing side, as Chris had mentioned, we're going to have marketing materials, programs. We're going to sell the clinical benefits and the clinical details of UDENYCA, in addition to the services -- the patient services that we plan to offer. We are aware of some of the moves that Amgen have made in addition to advertising. We're aware of those. And again, for competitive reasons, we don't want to give details. But again, there have been no surprises to date. I think that, again, they have done what we thought that they would do.

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Jason Howard Kolbert, H.C. Wainwright & Co, LLC, Research Division - Former MD & Senior Healthcare Analyst [35]

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And can you talk just a little bit about the strategy in terms of making sure you have all of the managed care formularies accessed and ready to go in January?

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James Hassard, Coherus BioSciences, Inc. - SVP of Marketing & Market Access [36]

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Yes. I think, Jason, a big piece of this is just having the coding. And we talked about that, having that Q code in place. And then I think it is executing our contracting strategy across all segments of the marketing, and GPOs and also with the payers that manage the medical benefit.

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Jason Howard Kolbert, H.C. Wainwright & Co, LLC, Research Division - Former MD & Senior Healthcare Analyst [37]

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If I was going to ask one follow-up, it would be, any progress towards partnering in Europe?

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Dennis M. Lanfear, Coherus BioSciences, Inc. - Chairman, President & CEO [38]

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We haven't had too much to say about partnering in Europe, Jason, for the time being. As we indicated earlier, we had been approached by some parties in Europe. We continue to chat with some folks, but I think that the company's best focus is in the U.S. market.

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Operator [39]

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Our next question comes from Chris Schott of JPMorgan.

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Christopher Thomas Schott, JP Morgan Chase & Co, Research Division - Senior Analyst [40]

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First one I had was on pricing. I guess with the lower gross price you're coming out with, how should we think about net price here? Is it something that should be close to that list price or could there be a decent discount on top of the gross price? And then, I had a couple of follow-ups up after that.

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Dennis M. Lanfear, Coherus BioSciences, Inc. - Chairman, President & CEO [41]

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Chris Thompson will comment. Chris, do you want to talk a little bit about the price?

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Chris Thompson, Coherus BioSciences, Inc. - SVP of Sales [42]

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Sure. First of all, Chris, thanks for the congratulations, appreciate that. As it relates to the actual net pricing, we have a comprehensive contracting strategy that we're going to be rolling out with our GPO customers in the coming probably next week. And we're not going to obviously divulge what that strategy is, suffice to say that it is going to be competitive and it's designed to win.

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Christopher Thomas Schott, JP Morgan Chase & Co, Research Division - Senior Analyst [43]

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Okay. And then, just a couple of other ones. Second, in terms of the ramp in SG&A to support the launch, is there any color you could provide there just sort of thinking about our models about -- as the sales force comes on board and some of these support services? How should we be thinking about the SG&A trends from here?

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Dennis M. Lanfear, Coherus BioSciences, Inc. - Chairman, President & CEO [44]

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Thanks for the question, Chris. Jean, do you want to take that one?

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Jean-Frédéric Viret, Coherus BioSciences, Inc. - CFO [45]

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Yes. Thank you for your question, Chris. Well, we've just published our SG&A results and that reflects the full hiring of the sales force. So we've purposefully not put guidance out there, but you can imagine that what we put out just for Q3 is likely to be similar and would be useable in the future. So it is a form of guidance without guiding specifically. We don't expect great additional cost going forward in SG&A, and you should see something but it would be somewhere in line. You'll have a full burden of the sales force, that sales force came towards the latter part of the quarter, so it's going to be slightly higher. But if you think about it, 70 employees and 200 fully loaded, it's not going to add a lot in a year. I hope that's helpful.

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Christopher Thomas Schott, JP Morgan Chase & Co, Research Division - Senior Analyst [46]

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Yes, that's helpful. And then the final thing I just have is just a bigger picture question. When you think about this market longer term, is there a sense of like how high do you think biosimilar penetration can reach in this market? Is this something that's going to kind of top out at 30% or 40%? Or do you think you can get penetration, when you think of all the players involved here, that could be something that converts a majority of this market over to the biosimilars? [So any] kind of updated thoughts or latest thoughts of when we look out 3 to 5 years, where we could go with penetration?

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Dennis M. Lanfear, Coherus BioSciences, Inc. - Chairman, President & CEO [47]

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And I would let my teammates on the commercial side jump in, but generally speaking, I believe that we're bullish on the overall penetration of the market. In Europe you've seen 75%, 80% in the short-acting market. The short-acting market here in the U.S. has done very, very well, of course, with Granix and the Teva product out there. We think that the overall biosimilar penetration can readily get above 70-ish percent, and so on. So I think that this particular market, with the importance of pegfilgrastim, Neulasta to it, I think will convert perhaps more rapidly than one would expect. And so I think that we'll see a robust conversion, and so on. And I think most people believe that to be true. Mr. Hassard, do you have any additional comment with respect to the market?

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James Hassard, Coherus BioSciences, Inc. - SVP of Marketing & Market Access [48]

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No, I think, again, you mentioned the time frame of 3 years. I think if you look, it's been about 3 to 4 years that Zarxio, Granix have been in the marketplace, and you see that, that short-acting marketplace is now, as Denny mentioned, is split about 30% or 1/3, 1/3, 1/3. So biosimilars or at least competitors of it have at least taken about 65% in that market.

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Dennis M. Lanfear, Coherus BioSciences, Inc. - Chairman, President & CEO [49]

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I think we'd be very happy if we had 35% of the market after a couple of years. I think that would be good.

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Operator [50]

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There are no further questions. I'd like to turn the call back over to Denny Lanfear for final comments.

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Dennis M. Lanfear, Coherus BioSciences, Inc. - Chairman, President & CEO [51]

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Thank you. Thank you all for joining us on our quarterly call this afternoon. Certainly, the company has a significant milestone here with the approval in the U.S. I would say you'll have some additional color at the follow-on investment conferences. There's a few we are going to through November and December. We look forward to seeing you all there, and thank you all for your ongoing support. Bye-bye.

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Operator [52]

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Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program, and you may all disconnect. Everyone, have a great day.