Coherus BioSciences has been making headlines with the successful launches of their oncology products, LOQTORZI and UDENYCA Onbody. The market is buzzing about their impressive revenue growth, strategic divestitures, and the promising tumor microenvironment focused pipeline. But beneath the surface, a subtle shift is taking place, one that has potentially enormous implications for Coherus' future. While everyone is focused on the oncology wins, Coherus might be quietly positioning itself for a major play in the lucrative inflammatory disease market, leveraging a potent combination of existing biosimilars, strategic partnerships, and upcoming regulatory changes.

Coherus' history has been intricately tied to biosimilars, with their flagship product UDENYCA being a prime example of their success in this arena. However, their recent divestiture of CIMERLI, a ranibizumab biosimilar for ophthalmology, might seem counterintuitive at first glance. After all, CIMERLI was a significant revenue generator, exceeding $100 million in revenue in 2023. Why divest a successful asset when the focus is on driving top-line growth?

The answer might lie in a strategic recalibration. While Coherus is demonstrably committed to oncology, the inflammatory disease market presents an irresistible opportunity, particularly with the impending implementation of the Inflation Reduction Act (IRA) in 2025. The IRA provisions, aimed at lowering drug prices and increasing biosimilar adoption, are poised to create a seismic shift in the inflammatory disease landscape.

Coherus is uniquely positioned to capitalize on this shift. They already have YUSIMRY, a biosimilar to Humira (adalimumab), approved and on the market. While YUSIMRY's growth has been modest so far, the IRA could act as a potent catalyst, driving significant uptake in 2025 and beyond. Coherus' confidence in this scenario is evident in their active engagement in formulary negotiations for 2025. They believe YUSIMRY's attractive price point and the value it offers to healthcare systems and patients will make it a compelling choice in a post-IRA world.

The divestiture of CIMERLI, in this context, takes on a new meaning. It allows Coherus to streamline operations and focus resources on maximizing YUSIMRY's potential. By shedding the ophthalmology franchise, Coherus can redeploy capital and manpower towards expanding YUSIMRY's market share and positioning it as a leading player in the anticipated biosimilar boom.

This hypothesis is further strengthened by analyzing the numbers. While CIMERLI generated significant revenue, it also carried a hefty royalty burden. COGS for CIMERLI included a low to mid-50% royalty on gross profits. The divestiture, therefore, significantly improves Coherus' gross margins, freeing up resources for investment in YUSIMRY.

Furthermore, the $170 million upfront cash payment from the CIMERLI divestiture allows Coherus to reduce its debt burden. The renegotiated agreement with Pharmakon Advisors, enabling a $175 million term loan debt paydown, reduces interest costs by a staggering 70%. This financial maneuvering improves Coherus' financial health and provides further ammunition for investing in YUSIMRY's commercial success.

The puzzle pieces are starting to fit together. Coherus, while maintaining its commitment to oncology, is simultaneously preparing for a potential surge in the inflammatory disease market. Their actions – the CIMERLI divestiture, the IRA-driven formulary negotiations for YUSIMRY, and the aggressive cost-cutting measures – point towards a company gearing up for a two-pronged attack, aiming to dominate both the oncology and inflammatory disease landscapes.

Coherus' history is filled with strategic maneuvers and a knack for recognizing market opportunities. From their early days as BioGenerics to their current incarnation as an oncology powerhouse, they've consistently adapted and evolved. Now, as the IRA looms large, they might be orchestrating another brilliant move, one that could propel them to even greater heights. While the oncology story is compelling, the potential inflammatory disease play, fueled by YUSIMRY and the IRA, might be the hidden ace up Coherus' sleeve, waiting to be revealed.

UDENYCA Franchise Revenue Breakdown

Source: Coherus BioSciences Q1 2024 Earnings Call Transcript [Link]

Emerging Market Growth in UDENYCA Franchise

This chart illustrates the market share growth of the UDENYCA franchise, as reported in the Q1 2024 earnings call. While specific data on emerging markets isn't provided, the overall trend strongly suggests the company's success in expanding its reach, aligning with its strategic focus on capturing a larger portion of the pegfilgrastim market.

"Fun Fact: The global biosimilars market is projected to reach over $100 billion by 2030, driven by factors like patent expiries of blockbuster biologics, rising healthcare costs, and government initiatives to promote biosimilar adoption. Coherus, with its strategic focus and pipeline, is well-positioned to be a major player in this rapidly expanding market."