Biosimilar Setbacks Will Curb Returns But Slight Hope Endures

Key Takeaways

• Heavy reliance on a few late-stage products and uncertain clinical outcomes create significant risk for both revenue and earnings sustainability.
  
• Downward pricing pressure, biosimilar competition, and slow product uptake threaten long-term profitability despite innovation and new market strategies.
  
• Intense competition, pipeline concentration, regulatory risks, and evolving market dynamics could constrain Coherus Oncology's growth prospects, profitability, and long-term commercial relevance.

Catalysts

A biopharmaceutical company, researches, develops, and commercializes immunotherapies to treat cancer in the United States.

• While Coherus Oncology is positioned to benefit from the rising global burden of cancer and increased demand for innovative oncology therapies, the company's heavy reliance on a small number of late-stage pipeline products-such as LOQTORZI, CHS-114, and casdozokitug-creates substantial risk of revenue and earnings shortfall if clinical trial results in key indications disappoint or are delayed.
  
• Although ongoing innovation in precision oncology and label expansions through strategic collaborations may support future revenue growth, cost containment efforts by payers and stricter reimbursement requirements for novel cancer drugs could put downward pressure on realized drug prices and limit net margin expansion longer term.
  
• While robust global partnerships and ex-U.S. licensing deals could provide access to new markets and some cost offsets, intensifying biosimilar competition and looming patent expiries in the oncology sector threaten to erode pricing power and gross margins, especially as standard PD-1 therapies go off-patent, impacting the long-term profitability of Coherus' branded transition.
  
• Despite strong guideline support and initial penetration for LOQTORZI in nasopharyngeal cancer, slower adoption in the community setting and the challenge of converting awareness into broad usage could cause the revenue ramp to fall short of expectations; this sluggish uptake could prevent the company from reaching its projected $150 million to $200 million NPC market opportunity.
  
• While a strong balance sheet and cost reductions provide near-term financial stability, persistently high research and development outlays, coupled with the long and uncertain timelines for regulatory approval, could lead to negative earnings and cash burn well into the next decade if future data readouts fail to convert into commercial success.

Coherus Oncology Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more pessimistic perspective on Coherus Oncology compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
• The bearish analysts are assuming Coherus Oncology's revenue will decrease by 51.1% annually over the next 3 years.
• The bearish analysts are not forecasting that Coherus Oncology will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Coherus Oncology's profit margin will increase from 21.7% to the average US Biotechs industry of 14.2% in 3 years.
• If Coherus Oncology's profit margin were to converge on the industry average, you could expect earnings to reach $4.5 million (and earnings per share of $0.04) by about August 2028, down from $59.1 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 36.0x on those 2028 earnings, up from 1.7x today. This future PE is greater than the current PE for the US Biotechs industry at 14.3x.
• Analysts expect the number of shares outstanding to grow by 0.88% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.3%, as per the Simply Wall St company report.

Coherus Oncology Future Earnings Per Share Growth

Risks

• Fierce competition in both the CCR8 Treg depleter class and immuno-oncology broadly-including active development by large biopharma and the potential for rapid advances in new modalities such as cell and gene therapy-could limit the long-term commercial viability and relevance of Coherus Oncology's current lead assets, ultimately capping future revenues and market share.
  
• Company financials reveal a heavy reliance on near-term clinical catalysts and a concentrated pipeline, with any setbacks such as delays, negative data readouts, or regulatory challenges in the ongoing studies for CHS-114 or casdozokitug potentially leading to substantial revenue shortfalls and increased cash burn as R&D costs persist without new product launches.
  
• The company projects peak revenue for LOQTORZI in nasopharyngeal cancer not until 2028 and faces slow adoption in key community oncology settings, so if payer pressure, guideline changes, or commercial execution falters, net margins and overall earnings could be impaired by lower-than-expected sales ramp and continued high SG&A spending.
  
• Success in expanding pipeline indications and ex-U.S. licensing is highly dependent on favorable clinical data, competitive partnering terms, and sustained market demand; failure to secure strong global partners or monetize international rights could leave Coherus with higher capital intensity and greater exposure to regional regulatory risks, impacting long-term profitability and cash flow.
  
• Long-term sectoral risks such as rising payer and government cost-containment measures, price sensitivity toward expensive oncology drugs, and stricter reimbursement requirements could reduce Coherus Oncology's pricing power and profit margins, especially as more biosimilars and alternative therapies enter the market, exerting downward pressure on future earnings potential.

Valuation

• The assumed bearish price target for Coherus Oncology is $1.1, which represents the lowest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Coherus Oncology's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $7.0, and the most bearish reporting a price target of just $1.1.
  
• In order for you to agree with the bearish analysts, you'd need to believe that by 2028, revenues will be $31.7 million, earnings will come to $4.5 million, and it would be trading on a PE ratio of 36.0x, assuming you use a discount rate of 7.3%.
  
• Given the current share price of $0.88, the bearish analyst price target of $1.1 is 20.0% higher. Despite analysts expecting the underlying buisness to decline, they seem to believe it's more valuable than what the market thinks.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.