Coherus BioSciences Inc.

CHRS Details

Coherus BioSciences Inc. (NASDAQ: CHRS) operates as a biopharmaceutical company with a focus on the biosimilar and immuno-oncology markets. Its primary product candidates are UDENYCA (pegfilgrastim-cbqv), a long-acting granulocyte colony-stimulating factor and toripalimab, an anti-PD-1 antibody. Other medications under its portfolio include Humira, Lucentis, and Avastin biosimilars.

Latest News:

• FDA Acceptance for toripalimab: On November 15, 2021, CHRS and its partner Shanghai Junshi Biosciences Co., Ltd. announced the receipt of Orphan Drug Designation (ODD) for toripalimab by the US Food and Drug Administration (FDA) for treating esophageal cancer. This follows the November 01, 2021 news relating to the grant of Priority Review Designation for toripalimab combined with gemcitabine and cisplatin for treating individuals with advanced recurrent or metastatic nasopharyngeal carcinoma (NPC). In addition, the FDA has set a Prescription Drug User Fee Act (PDUFA) action date for April 2022.

Q3FY21 Results:

• Decline in Revenue: The company reported a 27.34% decline in net product revenue to USD 82.50 million in Q3FY21 (ended September 30, 2021) compared to USD 113.55 million in Q3FY20, owing to lower UDENYCA unit sales during the quarter.
• Expansion of Net Losses: Net loss during Q3FY21 was USD 38.53 million vs. a net income of USD 27.93 reported in Q3FY20 due to increased R&D and regulatory expenses.
• Cash and Debt Position: The company exited the quarter with a cash balance (including marketable securities) of USD 468.71 million and total debt of USD 407.17 million.

Key Risks:

• Product Concentration: CHRS currently markets only UDENYCA with minimal commercialization. Dependence on one product could have a long-term impact on the company's revenue if new drugs do not make it to the commercialization stage, which usually takes a long time.
• Customer Concentration: Sales generated from the company's top two customers, McKesson Corporation and AmeriSource-Bergen Corp., collectively represented 80% (40% each) of the total Q3FY21 revenue. Such excessive reliance on a few customers for business could hurt its financial health in the future.

Outlook:

• Estimated FY21 Expenses: CHRS expects full-year FY21 R&D and SG&A expenditures to range between USD 370 to 400 million, except the upfront payment made to Junshi Biosciences in Q1FY21.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Analysis by Kalkine Group)

• % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

CHRS Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

CHRS' share price has increased 38.87% in the past six months and is currently leaning towards the higher-end of the 52-week range of USD 12.21 to USD 22.22. The stock is currently trading above its 50 and 200 DMA levels, and its RSI Index is 69.34. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 16.38.

Considering the significant uptick in the stock price and other technical indicators, we believe the decent business fundamentals are adequately reflected at the current trading levels. Hence, we recommend a "Sell" rating on the stock at the current price of USD 19.22, up 1.59% as of November 16, 2021, 10:59 AM ET.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.