CHRS is a very unusual small-cap biopharma stock because it started as. and still remains in part, a biosimilar company. A biosimilar is a generic version of a biologic drug. There are few if any other smid-cap biopharma companies that have launched or are developing biosimilars, from our vantage point. The advantage of developing biosimilars is that there is immensely less risk in bringing these products to market. The disadvantage is that the value of a biosimilar is a fraction of the innovator drug.
CHRS’s biosimilar business started out great with its first biosimilar, UDENYCA (Neulasta biosimilar), but Amgen (Neulasta innovator) was able to mute CHRS’s success with the launch of an on-body version that CHRS is in the process of copying too. However, UDENYCA will likely still bring in $100M this year for CHRS and the company expects upcoming launches of CIMERLI (Lucentis biosimilar approved 8/2/22), and YUSIMRY (Humira biosimilar) to each drive >$100M/annual revenue for CHRS in the coming 2-5 years. The company projects $1.2 to $2.2 billion in revenue by 2026.
CHRS switched gears in early 2021 when it licensed clinical stage, innovative immuno-oncology assets from Chinese biotech Junshi (Source). It’s latest stage IO asset is an anti-PD1, Tori, with some differentiated properties from current anti-PD1 blockbusters such as Keytruda. It recently received a CRL (FDA rejection letter) for its 1st indication for Tori, a very small market, nasopharyngeal carcinoma (NPC). However, CHRS quickly resubmitted to address the “CMC” (not safety or efficacy) issue and has its next PDUFA date this year. It’s next most valuable IO asset currently is its anti-TIGIT antibody.
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BULL THESIS
Rare opportunity for smid-cap investor to invest in a biosimilar company
Good execution on 1st biosimilar (UDENYCA) launch
Lead biosimilar UDENYCA® had $327M revenue in 2021
Good value play currently
EV of <$1B
Only ~4X 2022 product revenue
<1X 2026 (low end) projected revenue
Especially considering possibly 4 new major product launches over next 15 months
Lower risk play - rare find for smid-cap biopharma with biosimilars business
Cash until at least 2024 source
$325 million cash as of March 30, 2022 + credit facility
Model to fund R&D with biosimilar revenue - less/no dilution
4 product launches possible over next 15 months
Anti-PD1 binds a unique epitope and has other differentiating properties
Lucentis biosimilar
Should be approved 8/2/22
May compete for broader $7B anti-VEGF market not just $1.5B Lucentis
Humira biosimilar (YUSIMRY)
$17B Humira market
YUSIMRY already approved by FDA
Awaits Abbvie agreement to launch (July 2023)
Anti-TIGIT asset
Likely undervalued currently
Too soon to understand value despite recent Roche failure for competitive molecule
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This article will likely be updated from time to time
Article History:
Initial publication 4/7/22; Updated 8/3/22
JM/EJV
This article is NOT investment, tax, or legal advice. Please use this as a starting point for your detailed diligence and consult professional advisers before making investment decisions.
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