Coherus BioSciences Inc

CHRS Details

Coherus BioSciences Inc. (NASDAQ: CHRS) is a biotherapeutics company, concentrated on the biosimilar and immuno-oncology market in the United States. The company is currently involved in commercializing UDENYCA, a long-acting granulocyte colony-stimulating factor, in the United States. The company’s product pipeline consists of four drugs namely, CHS-1420 (an adalimumab (Humira) biosimilar), ranibizumab (Lucentis) biosimilar, a bevacizumab (Avastin) biosimilar, and toripalimab, an anti-PD-1 antibody. As of April 20^th, 2021, the company’s market capitalization stood at USD 1.04 billion.

Submission of the Biologics License Application (BLA) for “Toripalimab” to US FDA: As of March 3^rd, 2021, Coherus BioSciences and Junshi BioSciences announced the submission of BLA to the US Food and Drug Administration (FDA) for the treatment of regular or metastatic nasopharyngeal carcinoma (NPC). Toripalimab is the first anti PD1 monoclonal antibody developed in China with the BLA submission to FDA is in process. Coherus BioSciences and Junshi BioSciences entered a partnership for the development and commercialization of toripalimab in the U.S. and Canada.

Adalimumab biosimilar accepted by FDA for review: As of February 17^th, 2021, CHRS announced that the US FDA has agreed to evaluate the BLA for CHS-1420, adalimumab (Humira) biosimilar product, and has set a Biosimilar User Fee Act action date for December 2021. If approved, CHRS plans to launch the adalimumab biosimilar on or after July 1^st, 2023.

CHRS product pipeline (Source: Investor Presentation, FY20)

Robust FY20 Results: The company reported a 33.63% growth in net product revenue to USD 475.82 million in FY20 as compared to USD 356.07 million in FY19. Net Income was USD 132.24 million in FY20 as compared to that of USD 89.83 million in FY19. The company’s net cash from operating activity has increased to USD 154.14 million in FY20 from USD 28.35 million in FY19.

Key Risks: As several of the bigger and more experienced players in the industry have a substantial advantage in research and development of biosimilar products, the company's potential revenue growth in the future could be impacted.

Outlook: The company has recently announced its collaboration with Junshi BioSciences, which is focused on building its immune-oncology franchise. With the long list of products scheduled to be released in FY22, the company is expecting to generate strong cash flow. This cash flow could be used to leverage the commercialization of toripalimab as well as in the development of PD-1 combination therapies to drive long-term growth.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Data Source: Refinitiv, Thomson Reuters, 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, Thomson Reuters)

Stock Recommendation: CHRS has corrected 23.52% in the past 9 months and it is currently trading towards the lower end of the 52-week range of USD 13.53 to USD 22.22. Currently, the stock is trading below its 200 DMA. We have valued the stock using the EV/Sales based relative valuation methodology and arrived at a target price of USD 16.23. Considering the correction in the past 9 months, current trading levels, strong product pipeline, and decent financials, we recommend a “Speculative BUY” rating on the stock at the closing price of USD 14.27, up by 0.13% as of 20^th April 2021.

Catalyst Pharmaceuticals Inc

CPRX Details

Catalyst Pharmaceuticals Inc. (NASDAQ: CPRX) is a bio-pharmaceutical company engaged in developing and commercializing of innovative therapies for people associated with rare chronic neuromuscular and neurological diseases, including Lambert-Eaton myasthenic syndrome (LEMS), anti-MuSK antibody positive myasthenia gravis (MuSK-MG), and other neurological and neuromuscular disorders. As of April 20^th 2021, the company’s market capitalization stood at USD 455.79 million.

Share repurchased program: As of March 22^nd, 2021, CPRX announced the repurchase of USD 40 million of outstanding common shares. CPRX believes that this would reflect on the company’s confidence in its long-term outlook and its ability to generate robust cash flow in the future.

Issuance of U.S. patent for Firdapse: As of October 6^th, 2020, the company announced that it had been issued a new U.S. patent for Firadapse, U.S. Patent No. 10,793,893, which will expire on April 7^th 2034. This would create barrier to entry for other therapeutically equivalent generic competitors.

 

FY20 Results: The company reported a 16.07% increase in product revenue to USD 118.74 million in FY20 as compared to USD 102.30 million in FY19. The total revenue in FY20 is USD 119.07 million including USD 332,186 revenues from the collaborative arrangements (Canada). Net income was USD 74.98 million in FY20 compared to USD 31.87 million in FY19. The company completed the FY20 with cash and cash equivalents of USD 130.23 million without any funded debt.

Key Risks: Currently, CPRX is a single product company with constrained commercialization of Firadapse. If new products do not get into the commercialization stage, which usually takes a long time, then overdependence on one product could affect the company’s revenue for a long period of time.

The approval of products from the US FDA is subjected to rigorous regulation and a substantial amount of time. Any product that fails to comply with the US FDA regulatory norms could impact the company's capital as well as its financial health.

Outlook: The company is looking to acquire innovative technology platforms in other therapeutic categories outside of neuromuscular diseases. To accomplish this, CPRX is looking to invest heavily in research and development activities. This will support the company to build a more diversified portfolio of drug pipelines which can ultimately help in providing greater value to the company.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

Data Source: Refinitiv, Thomson Reuters, 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.

CPRX Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

 Stock Recommendation: CPRX has declined by 8.44% in the past 9 months, and it is currently trading towards the mid-point of the 52-week range of USD 2.87 to USD 5.19. We have valued the stock using the EV/Sales based relative valuation methodology and arrived at a target price of USD 5.02. Considering the adjustments in the past 9 months, current trading levels, strong product pipeline, and reasonable financials, we recommend a “Speculative BUY” rating on the stock at the closing price of USD 4.39, up by 1.85% as of 20^th April 2021.