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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

2022-02-23 compared with 2021-02-25 · 565 added, 589 removed, 535 unchanged (68% of the section changed)

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We are exposed to market risk related to changes in foreign exchange rates.

We contract with CROs and contract manufacturers globally and thus we face foreign exchange risk as a result of entering into transactions denominated in currencies other than U.S.

We contract with CROs and contract manufacturers globally and thus we face foreign exchange risk as a result of entering into transactions denominated in currencies other than United States dollars.

Due to the uncertain timing of expected payments in foreign currencies, we do not utilize any forward exchange contracts.

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INDEX TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm

Consolidated Financial Statements

Consolidated Balance Sheets

Report of Independent Registered Public Accounting Firm (PCAOB ID 42 )

Audited Consolidated Financial Statements

Consolidated Ba lance Sheets

Consolidated Statements of Operations

Consolidated Statements of Comprehensive Income (Loss)

Consolidated Statements of Comprehensive (Loss) Income

Consolidated Statements of Stockholders’ Equity (Deficit)

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Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Coherus BioSciences, Inc., (the Company) as of December 31, 2020 and 2019, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity (deficit), and cash flows for each of the three years in the period ended December 31, 2020, and the related notes (collectively referred to as the “consolidated financial statements”).

We have audited the accompanying consolidated balance sheets of Coherus BioSciences, Inc., (the Company) as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive (loss) income, stockholders' equity (deficit), and cash flows for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with U.S.

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved especially challenging, subjective or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Estimate of Reserves for Chargebacks and Rebates

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Estimated chargebacks are recorded as a reduction of trade receivables on the consolidated balance sheet and totaled $29.3 million at December 31, 2021.

Estimated rebates are presented within accrued rebates, fees and reserves on the consolidated balance sheet and totaled $54.1 million at December 31, 2020.

Estimated rebates are presented within accrued rebates, fees and reserves on the consolidated balance sheets and totaled $54.0 million at December 31, 2021.

Auditing the estimates for chargebacks and rebates was complex due to the judgmental nature of the assumptions used.

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We also assessed the completeness and accuracy of current and historical channel and payer mix and discount rate data used in management’s estimates and performed sensitivity analyses to determine the effect of changes in assumptions, where appropriate.

Excess and Obsolete Inventory Reserve

Description of the Matter

As of December 31, 2021, the Company had $93.3 million of inventory which included $4.9 million of raw materials, $65.1 million of work in progress and $23.3 million of finished goods.

As disclosed in Note 1 to the Company’s consolidated financial statements, inventories are stated at the lower of cost or net realizable value.

The Company assesses its inventory levels along with its purchase commitments each reporting period and writes down inventory that is either expected to be at risk of expiration prior to sale or has a cost basis in excess of its expected net realizable value.

Auditing management's estimates for excess inventory involved subjective auditor judgment because the estimates rely on a number of factors that are affected by market and economic conditions outside the Company's control.

In particular, the excess inventory calculations are sensitive to significant assumptions, including the expected demand for the Company’s product, the effect on demand of competitive products and the Company's purchase commitments.

How We Addressed the Matter in Our Audit

We obtained an understanding, evaluated the design, and tested the operating effectiveness of internal controls over the Company's excess and obsolete inventory reserve process including management’s review of the significant assumptions described above and controls over the completeness and accuracy of the information used to develop the estimate.

Our substantive audit procedures included, among others, evaluating methodologies used and data utilized in the analysis for inventory expected to be at risk for expiration or excess.

We evaluated purchase commitments or alternative uses, compared forecasted demand to historical trends, compared actual inventory levels to forecasted demand requirements, and evaluated the sensitivity of sales forecast assumptions on the amount of inventory reserves recorded.

/s/ Ernst & Young LLP

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Inventory, non-current

Operating lease right-of-use assets

Intangible assets

Restricted cash, non-current

Other assets, non-current

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Accounts payable

Accrued rebates, fees and reserve

Accrued rebates, fees and reserves

Accrued compensation

Accrued liabilities

Other current liabilities

Accrued and other current liabilities

Total current liabilities

Contingent consideration, non-current

Convertible notes due 2022

Convertible notes due 2022 - related parties

Convertible notes due 2026

2022 Convertible Notes

2022 Convertible Notes - related parties

2026 Convertible Notes

2025 Term loan

Lease liabilities, non-current

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Accumulated deficit

( 1,049,854 )

Total stockholders' equity

Total liabilities and stockholders’ equity

See accompanying notes to consolidated financial statements.

See accompanying notes.

Coherus BioSciences, Inc.

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Year Ended December 31,

Net product revenue

Operating expenses:

Cost and expenses:

Cost of goods sold

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Selling, general and administrative

Total operating expenses

Income (loss) from operations

Total cost and expenses

(Loss) income from operations

Interest expense (includes related party expense of $ 2,541 , $ 2,498 and $ 2,457 for the years ended December 31, 2021, 2020 and 2019, respectively)

Other income, net

Net income (loss) before income taxes

Other (expense) income, net

Net (loss) income before income taxes

Income tax provision

Net income (loss)

Net loss attributable to non-controlling interest

Net income (loss) attributable to Coherus

Net income (loss) per share attributable to Coherus:

Weighted-average number of shares used in computing net income (loss) per share attributable to Coherus:

See accompanying notes to consolidated financial statements.

Net (loss) income

Net (loss) income per share:

Weighted-average number of shares used in computing net (loss) income per share:

See accompanying notes.

Coherus BioSciences, Inc.

Consolidated Statements of Comprehensive Income (Loss)

Consolidated Statements of Comprehensive (Loss) Income

(in thousands)

Year Ended December 31,

Net income (loss)

Other comprehensive income (loss):

Net (loss) income

Other comprehensive (loss) income:

Foreign currency translation adjustments, net of tax

Comprehensive income (loss)

Comprehensive loss attributable to non-controlling interest

Comprehensive income (loss) attributable to Coherus

See accompanying notes to consolidated financial statements.

Comprehensive (loss) income

See accompanying notes.

Coherus BioSciences, Inc.

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(in thousands, except share and per share data)

Total Coherus

Stockholders'

Comprehensive

Stockholders'

Equity (Deficit)

Balances at December 31, 2018

Issuance of common stock in connection with common stock offerings, net of underwriters discounts, commissions and offering costs

Issuance of common stock upon exercise of stock options

Issuance of common stock upon vesting of restricted stock units ("RSUs")

Issuance of common stock under the employee stock purchase plan ("ESPP")

Stock-based compensation expense

Cumulative translation adjustment

Distributions to non-controlling interest

Purchase of the remaining non-controlling interest

Net loss attributable to Coherus

Balances at December 31, 2018

Issuance of common stock in connection with common stock offerings, net of underwriters discounts, commissions and offering costs

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Stock-based compensation expense

Cumulative translation adjustment

Net income attributable to Coherus

Balances at December 31, 2019

Cumulative translation adjustment

Issuance of common stock upon exercise of stock options

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Taxes paid related to net share settlement of bonus payout in RSUs

Stock-based compensation expense

Purchase of capped call options related to convertible notes due 2026

Cumulative translation adjustment

Net income attributable to Coherus

Stock-based compensation expense

Balances at December 31, 2020

See accompanying notes to consolidated financial statements.

Issuance of common stock upon exercise of stock options

Issuance of common stock upon vesting of RSUs

Issuance of common stock under the ESPP

Issuance of common stock to Junshi Biosciences, net of issuance costs

Taxes paid related to net share settlement of RSUs

Stock-based compensation expense

Balances at December 31, 2021

( 1,049,854 )

See accompanying notes.

Coherus BioSciences, Inc.

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Operating activities

Net income (loss)

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

Net (loss) income

Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:

Depreciation and amortization

Remeasurement of fair-value contingent consideration

Stock-based compensation expense

Write-off of prepaid manufacturing services related to the termination of CHS-2020

Write-off of inventory that did not meet acceptance criteria, net

Non-cash accretion of discount on marketable securities

Non-cash interest expense from amortization of debt discount

Impairment of property and equipment

Excess and obsolete inventory

Other non-cash adjustments

Non-cash operating lease expense

Upfront license fee payment to Junshi Biosciences

Upfront and milestone based license fee payments

Other non-cash adjustments, net

Changes in operating assets and liabilities:

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Prepaid manufacturing

Other prepaid and current assets

Other assets, non-current

Other prepaid, current and non-current assets

Accounts payable

Accounts payable - related parties

Accrued rebates, fees and reserve

Accrued rebates, fees and reserves

Accrued compensation

Accrued and other liabilities

Lease liabilities

Other liabilities, non-current

Net cash provided by (used in) operating activities

Accrued and other current and non-current liabilities

Net cash (used in) provided by operating activities

Investing activities

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Proceeds from maturities of investments in marketable securities

Proceeds from sale of investments in marketable securities

Upfront license fee payment to Junshi Biosciences

Upfront and milestone based license fee payments

Purchase of non-controlling interest related to InteKrin Russia

Purchase of non-controlling interest related to InteKrin Russia - related party

Net cash used in investing activities

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Proceeds from 2025 Term Loan, net of issuance costs

Proceeds from issuance of common stock to Junshi Biosciences, net of issuance costs

Proceeds from issuance of common stock upon exercise of stock options

Proceeds from purchase under the employee stock purchase plan

Taxes paid related to net share settlement of bonus payout in RSUs

Taxes paid related to net share settlement of RSUs

Principal payments for finance lease obligations

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Effect of exchange rate changes in cash, cash equivalents and restricted cash

Net increase (decrease) in cash, cash equivalents and restricted cash

Net (decrease) increase in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash at beginning of period

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Purchase of property and equipment in accounts payable and accrued liabilities

Non-cash non-controlling interest reflected in additional paid in capital

Non-cash employee bonuses settled in common stock

Common stock offering costs in accounts payable and accrued liabilities

See accompanying notes to consolidated financial statements.

See accompanying notes.

Coherus BioSciences, Inc.

Notes to Consolidated Financial Statements

Organization and Operations

Organization and Significant Accounting Policies

Description of the Business

Coherus BioSciences, Inc.

(the “Company” or “Coherus”) is a commercial-stage biotherapeutics company, focused on the biosimilar and immuno-oncology market primarily in the United States.

(the “Company” or “Coherus”) is a commercial-stage biopharmaceutical company focused on the research, development and commercialization of innovative immunotherapies to treat cancer.

The Company’s strategy is to build a leading immuno-oncology franchise funded with cash generated through net sales of its diversified portfolio of FDA-approved therapeutics.

The Company’s headquarters and laboratories are located in Redwood City, California and in Camarillo, California, respectively.

The Company’s product pipeline comprises of four drugs, CHS-1420 (an adalimumab (Humira) biosimilar), a ranibizumab (Lucentis) biosimilar in-licensed for U.S.

and Canadian commercial rights from Bioeq AG, a bevacizumab (Avastin) biosimilar in-licensed for U.S.

commercial rights from Innovent Biologics (Suzhou) Co., Ltd.

and toripalimab, an anti-PD-1 antibody being developed in collaboration with Shanghai Junshi Biosciences Co., Ltd.

The Company commercializes UDENYCA® (pegfilgrastim-cbqv), a biosimilar to Neulasta, a long-acting granulocyte-colony stimulating factor, in the United States.

Basis of Presentation and Summary of Significant Accounting Policies

The Company sells UDENYCA, a biosimilar to Neulasta, a long-acting granulocyte-colony stimulating factor, in the United States.

The FDA-approved YUSIMRY in December 2021, which the Company plans to launch in the United States on or after July 1, 2023, per the terms of an agreement with Humira manufacturer, AbbVie.

The Company’s product pipeline comprises three product candidates, toripalimab, an anti-PD-1 antibody being developed in collaboration with Junshi Biosciences Co., Ltd., CIMERLI, a Lucentis biosimilar candidate in-licensed for commercial rights in the United States and Canada from Bioeq, and a bevacizumab (Avastin) biosimilar in-licensed for commercial rights in the United States from Innovent Biologics (Suzhou) Co., Ltd.

Basis of Consolidation

The accompanying consolidated financial statements have been prepared in accordance with U.S.

generally accepted accounting principles (“U.S.

The accompanying consolidated financial statements include the accounts of Coherus and its wholly owned subsidiaries as of December 31, 2020:

Coherus Intermediate Corp, InteKrin Therapeutics Inc.

(“InteKrin”) and InteKrin’s wholly-owned subsidiary, InteKrin Russia.

Unless otherwise specified, references to the Company are references to Coherus and its consolidated subsidiaries.

All intercompany transactions and balances have been eliminated upon consolidation.

As of December 31, 2020, the Company had an accumulated deficit of $ 762.8 million and cash and cash equivalents of $ 541.2 million.

The Company had $ 132.2 million in net income for the year ended December 31, 2020.

The Company believes that its current available cash, cash equivalents and cash collected from UDENYCA® sales will be sufficient to fund its planned expenditures and meet the Company’s obligations for at least 12 months following its financial statement issuance date .

The Company may need to raise additional funds in the future;

however there can be no assurance that such efforts will be successful or that, in the event that they are successful, the terms and conditions of such financing will be favorable.

If the Company is unable to obtain adequate financing when needed, it may have to delay, reduce the scope of or suspend one or more of its clinical trials, or research and development programs.

GAAP and include the accounts of Coherus and its wholly-owned subsidiaries.

The Company does not have any significant interests in variable interest entities.

All material intercompany transactions and balances have been eliminated upon consolidation.

Use of Estimates

The preparation of financial statements in conformity with U.S.

GAAP requires management to make judgements, estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosures reported in the financial statements.

Management uses significant judgment when making estimates including, but not limited to:

those related to revenue recognition, including determining the nature and timing of satisfaction of performance obligations, and determining the standalone selling price of performance obligations, and variable consideration such as rebates, chargebacks, sales returns and sale allowances, as well as milestones included in collaboration and license arrangements;

related to its stock-based compensation, valuation of deferred tax assets, impairment of goodwill and long-lived assets, the valuation of acquired intangible assets, valuation and reserves for inventory, clinical trial accruals, contingent consideration, convertible notes valuation, as well as certain accrued liabilities.

Management bases its estimates on historical experience and on other various assumptions that are believed to be reasonable under the circumstances.

GAAP requires management to make judgements, estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosures.

Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances.

These estimates form the basis for making judgments about the carrying values of assets and liabilities when these values are not readily apparent from other sources.

Estimates are assessed each period and updated to reflect current information, such as the economic considerations related to the impact that the recent COVID-19 outbreak could have on the Company’s significant accounting estimates.

Accounting estimates and judgements are inherently uncertain and the actual results could differ from these estimates.

During the second quarter of 2020, the Company identified that certain of its commercial payer invoices were erroneously overstated.

The Company received a refund of $ 7.5 million from these payers related to fiscal year 2019 which resulted in an increase in net product revenue of $ 7.5 million for the year ended December 31, 2020.

The refund adjustment resulted in an increase in basic and diluted net income per share of $ 0.11 and $ 0.09 , respectively, during the year ended December 31, 2020.

Accrued commercial payer rebates of $ 27.9 million and $ 14.0 million were recorded in accrued rebates, fees and reserve as of December 31, 2020 and December 31, 2019, respectively, in the consolidated balance sheet.

Foreign Currency

The functional currency of InteKrin Russia, which the Company acquired in February 2014, is the Russian Ruble.

Accordingly, the financial statements of this subsidiary are translated into U.S.

dollars using appropriate exchange rates.

Unrealized gains or losses on translation are recognized in accumulated other comprehensive loss in the consolidated balance sheet.

For the years ended December 31, 2020, 2019 and 2018, the foreign exchange gains and losses recorded in other income, net in the consolidated statements of operations were a net loss of $ 333,000 , net gain of $ 239,000 and a net loss of $ 571,000 , respectively.

Segment Reporting and Revenue by Geographic Region

The Company operates and manages its business as one reportable and operating segment, which is the business of developing and commercializing biosimilar products and, as part of the InteKrin acquisition, small molecules.

The Company operates and manages its business as one reportable and operating segment, which is the business of developing and commercializing human pharmaceutical products.

The Company’s chief executive officer, who is the chief operating decision maker, reviews financial information on an aggregate basis for purposes of allocating resources and evaluating financial performance.

All revenue is generated in the United States of America and all Long-lived assets are primarily maintained in the United States of America.

All revenue is generated and all long-lived assets are primarily maintained in the United States.

Cash, Cash Equivalents and Restricted Cash

Cash, cash equivalents and restricted cash are comprised of cash and highly liquid investments with remaining maturities of 90 days or less at the date of purchase.

The Company limits cash investments to financial institutions with high credit standings;

therefore, management believes that there is no significant exposure to any credit risk in the Company’s cash, cash equivalents and restricted cash.

The following table provides a reconciliation of cash, cash equivalents and restricted cash within the consolidated balance sheets and which, in aggregate, represent the amount reported in the consolidated statements of cash flows (in thousands):

Cash, cash equivalents and restricted cash comprise cash and highly liquid investments with original maturities of 90 days or less.

Year Ended December 31,

(in thousands)

At beginning of period:

Cash and cash equivalents

Restricted cash

Restricted cash - non-current

Total cash, cash equivalents and restricted cash

Restricted cash – non-current consists of deposits for a letter of credit that the Company has provided to secure its obligations under certain facility and other leases.

At end of period:

Cash and cash equivalents

Restricted cash

Total cash, cash equivalents and restricted cash

Restricted cash consists of deposits for letters of credit that the Company has provided to secure its obligations under certain leases and is included in other assets, non-current on the consolidated balance sheets.

The Company classifies the up-front and milestone payments related to licensing arrangements as cash flows from investing activities in its consolidated statements of cash flows.

Investments in Marketable Securities

Investments in marketable securities primarily consist of corporate debt obligations and commercial paper.

Management determines the appropriate classification of investments in marketable securities at the time of purchase based upon management’s intent with regards to such investment and reevaluates such designation as of each balance sheet date.

The Company’s investment policy requires that it only invests in highly rated securities and limit its exposure to any single issuer.

All investments in marketable securities are held as “available-for-sale” and are carried at the estimated fair value as determined based upon quoted market prices or pricing models for similar securities.

All investments in marketable debt securities are held as available-for-sale and are carried at the estimated fair value as determined based upon quoted market prices or pricing models for similar securities.

The Company classifies investments in marketable securities as short-term when they have remaining contractual maturities of one year or less from the balance sheet date.

Unrealized gains and losses are reported as a component of accumulated comprehensive income (loss), with the exception of unrealized losses believed to be related to credit losses, which, if any, are recognized through earnings in the period the impairment occurs.

The Company periodically assesses its marketable securities for impairment and credit losses.

Unrealized gains and losses on available-for-sale securities are reported as a component of accumulated comprehensive income (loss), with the exception of unrealized losses believed to be related to credit losses, if any, which are recognized in earnings in the period the impairment occurs.

Impairment assessments are made at the individual security level each reporting period.

When the fair value of an investment is less than its cost at the balance sheet date, a determination is made as to whether the impairment is related to a credit loss and, if it is, the portion of the impairment relating to credit loss is recorded as an allowance through net income.

Realized gains and losses and declines in value judged to be other than temporary, if any, on available-for-sale securities are included in other income, net, based on the specific identification method.

For the years ended December 31, 2020, 2019 and 2018, interest income from marketable securities was $ 0.6 million, $ 1.6 million and $ 1.4 million, respectively.

Realized gains and losses and declines in value, if any, on available-for-sale securities are included in other (expense) income, net, based on the specific identification method.

During 2021, 2020 and 2019, interest income from marketable securities was $ 1.4 million, $ 0.6 million and $ 1.6 million, respectively.

Trade Receivables

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The corresponding expense for the credit loss allowance is reflected in selling, general and administrative expenses.

The credit loss allowance was immaterial as of December 31, 2020.

Concentration of Credit Risk

The Company’s financial instruments that are exposed to concentration of credit risk consist primarily of cash, cash equivalents and restricted cash.

The Company maintains its cash in bank accounts, which at times exceed federally insured limits.

The Company attempts to minimize the risks related to cash, cash equivalents and restricted cash by investing in money markets with a broad and diverse range of financial instruments.

The credit loss allowance was immaterial as of December 31, 2021 and 2020.

Concentrations of Risk

The Company’s financial instruments that are exposed to concentration of credit risk consist primarily of cash, cash equivalents, investments and accounts receivable.

The Company attempts to minimize the risks related to cash, cash equivalents and investments by

investing in a broad and diverse range of financial instruments.

The investment portfolio is maintained in accordance with the Company’s investment policy, which defines allowable investments, specifies credit quality standards and limits the credit exposure of any single issuer.

The Company also maintains restricted cash in money market funds that invest primarily in U.S.

Treasury securities.

The Company has not recognized any losses from credit risks on such accounts during any of the periods presented.

The Company believes it is not exposed to significant credit risk on its cash and money market funds.

The Company is subject to credit risk from trade receivables related to the product sales in the United States.

To date, the Company has not experienced significant losses with respect to the collection of trade receivables.

The Company believes that its allowance for doubtful accounts was adequate at December 31, 2020.

The Company entered into a strategic commercial supply agreement with KBI Biopharma (“KBI”) for the supply of UDENYCA®.

There were no material losses from credit risks on such accounts during any of the periods presented.

The Company is not exposed to any significant concentrations of credit risk from these financial instruments.

The Company is subject to credit risk from trade receivables related to product sales and monitors the credit worthiness of customers that are granted credit in the normal course of business.

In general, there is no requirement for collateral from customers.

The Company has not experienced significant losses with respect to the collection of trade receivables.

The Company believes that its allowance for expected credit losses was adequate at December 31, 2021.

The Company entered into a strategic commercial supply agreement with KBI Biopharma for the supply of UDENYCA.

The Company currently has not engaged back-up suppliers or vendors for this single-sourced service.

If KBI is not able to manufacture the supply needed in the quantities and timeframe required, the Company may not be able to supply the product in a timely manner.

Fair Value of Financial Instruments

Fair value accounting is applied to all financial assets and liabilities and non-financial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis.

Prior to the regulatory approval of the product candidates, the Company incurred expenses for the manufacture of drug product that could potentially be available to support the commercial launch of its products.

The Company began to capitalize inventory costs associated with UDENYCA® after receiving regulatory approval for UDENYCA® in November 2018 when it was determined that the inventory had a probable future economic benefit.

If KBI Biopharma is not able to manufacture the supply needed in the quantities and timeframe required, the Company may not be able to supply the product in a timely manner.

Substantially all of the Company’s revenues are in the United States to three wholesalers.

UDENYCA is currently the only product sold by the Company and accounted for all of the Company’s revenues in 2021, 2020 and 2019.

The Company has no significant monetary assets or liabilities in foreign currencies, and the Company has not had material foreign currency impacts for all years presented.

Inventory is stated at the lower of cost or estimated net realizable value with cost determined under the first-in first-out method.

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The Company primarily uses actual costs to determine the cost basis for inventory.

The determination of whether inventory costs will be realizable requires management review of the expiration dates of UDENYCA®

compared to its forecasted sales.

If actual market conditions are less favorable than projected by management, write-downs of inventory may be required, which would be recorded as cost of goods sold in the consolidated statement of operations.

The determination of excess or obsolete inventory requires judgment including consideration of many factors, such as estimates of future product demand, current and future market conditions, product expiration information, and potential product obsolescence, among others.

Although the Company believes the assumptions used in estimating potential inventory write-downs are reasonable, if actual market conditions are less favorable than projected by management, write-downs of inventory, charges related to firm purchase commitments, or both may be required which would be recorded as cost of goods sold in the consolidated statement of operations.

Adverse developments affecting the Company’s assumptions of the level and timing of demand for its products include those that are outside of the Company’s control such as the actions taken by competitors and customers, the direct or indirect effects of the COVID-19 pandemic, and other factors.

Prior to the regulatory approval of our product candidates, the Company incurred expenses for the manufacture of drug product that could potentially be available to support the commercial launch of our products.

I nventory costs are capitalized when future commercialization is considered probable and the future economic benefit is expected to be realized, based on management’s judgment.

A number of factors are considered, including the current status in the regulatory approval process, potential impediments to the approval process such as safety or efficacy, viability of commercialization and marketplace trends.

All inventory on the consolidated balance sheet as of December 31, 2021 was related to UDENYCA.

The Company began to capitalize inventory costs associated with UDENYCA after receiving regulatory approval in November 2018.

Property and Equipment

Property and equipment is stated at cost less accumulated depreciation and amortization.

Maintenance and repairs are charged to expense as incurred, and costs of improvements are capitalized.

Depreciation and amortization is recognized using the straight-line method over the following estimated useful lives:

Maintenance and repairs are charged to expense as incurred.

Interest costs incurred during the construction of major capital projects are capitalized until the underlying asset is ready for its intended use, at which point the capitalized interest costs are amortized as depreciation or amortization expense over the life of the underlying asset.

When the Company disposes of property and equipment, it removes the associated cost and accumulated depreciation from the related accounts in the consolidated balance sheets and include any resulting gain or loss in the consolidated statements of operations.

Eligible costs of internal use software and implementation costs of certain hosting arrangements are capitalized

and amortized over the estimated useful life of the software or associated hosting arrangement, as applicable.

Depreciation and amortization are recognized using the straight-line method over the following estimated useful lives:

Computer equipment and software

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Shorter of lease term or useful life

Impairment of Long Lived Assets and Acquired Intangible Asset

The Company reviews long-lived assets, including property and equipment, and indefinite-lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable.

An impairment loss would be recognized when the estimated undiscounted future cash flows expected to result from the use of the asset and its eventual disposition is less than its carrying amount.

Impairment, if any, is measured as the amount by which the carrying value of a long-lived asset exceeds its fair value.

There were no impairments recorded during the year ended December 31, 2020.

For the years ended December 31, 2019 and 2018, the Company recorded an impairment of property and equipment of $ 0.1 million and $ 3.9 million, respectively, in research and development within the statement of operations.

The intangible assets of $ 2.6 million as of December 31, 2020 and 2019 comprise of acquired in-process research and development (“IPR&D”), which represents the fair value assigned to research and development assets that have not reached technological feasibility.

The Company reviews amounts capitalized as acquired IPR&D for impairment at least annually, and whenever events or changes in circumstances indicate that the carrying value of the assets might not be recoverable.

If the carrying value of the acquired IPR&D exceeds its fair value, then the intangible asset is written-down to its fair value.

As of December 31, 2020, there have been no such impairments.

Once the product candidate derived from the indefinite-lived intangible asset has been developed and commercialized, the useful life will be determined, and the carrying value of the finite-lived asset will be amortized prospectively over the estimated useful life.

Alternatively, if the product candidate is abandoned, the carrying value of the intangible will be charged to research and development expense.

Goodwill represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired.

The Company tests goodwill for impairment at least annually or more frequently if events or changes in circumstances indicate that this asset may be impaired.

The goodwill test is based on our single operating segment and reporting unit structure.

The Company compares the fair value of its reporting unit to its carrying value.

If the carrying value of the net assets assigned to the reporting unit exceeds the fair value of the reporting unit, then the Company would need to determine the implied fair value of the reporting unit’s goodwill.

If the carrying value of the reporting unit’s goodwill exceeds its implied fair value, then the Company would record an impairment loss equal to the difference.

No goodwill impairment was identified through December 31, 2020.

Goodwill and Intangible Assets

Goodwill represents the excess of the consideration transferred over the estimated fair value of assets acquired and liabilities assumed in a business combination.

Intangible assets are measured at their respective fair values as of the acquisition date and may be subject to adjustment within the measurement period, which may be up to one year from the acquisition date.

Intangible assets related to acquired in-process research and development (“IPR&D”) projects are considered to be indefinite-lived until the completion or abandonment of the associated research and development efforts.

Goodwill and intangible assets with indefinite useful lives are not amortized and are tested for impairment annually, or more frequently if events or changes in circumstances indicate that it is more likely than not that the assets are impaired.

Intangible assets of $ 2.6 million as of December 31, 2021 and 2020 consist of IPR&D.

There were no impairments to goodwill or intangible assets during the years ended December 31, 2021, 2020 and 2019.

When development is successfully completed, which generally occurs when regulatory approval is obtained, the associated assets are deemed finite-lived and amortized over their respective estimated useful lives beginning at that point in time.

Intangible assets with finite useful lives are amortized over their estimated useful lives, primarily on a straight-line basis, and are reviewed for impairment when facts or circumstances indicate that the carrying value of these assets may not be recoverable.

Impairment of Long-Lived Assets

Long-lived assets, including property and equipment and finite-lived intangible assets, are reviewed for impairment whenever facts or circumstances either internally or externally may indicate that the carrying value of an asset may not be recoverable.

If there is an indication of impairment, the Company tests for recoverability by comparing the estimated undiscounted future cash flows expected to result from the use of the asset to the carrying amount of the asset or asset group.

If the asset or asset group is determined to be impaired, any excess of the carrying value of the asset or asset group over its estimated fair value is recognized as an impairment loss.

There were no material impairments recorded during the years ended December 31, 2021, 2020 and 2019.

Accrued Research and Development Expense

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The Company determines the actual costs through monitoring patient enrollment, discussions with internal personnel and external service providers regarding the progress or stage of completion of trials or services and the agreed-upon fee to be paid for such services.

Net Product Revenue

The Company accounts for sales of UDENYCA® under Topic 606 Revenue from Contracts with Customers .

The Company sells UDENYCA® to wholesalers and distributors, (collectively, “Customers”).

The Customers then resell UDENYCA® to hospitals and clinics (collectively, “Healthcare Providers”) pursuant to contracts with the Company.

government-mandated or privately-negotiated rebates, chargebacks and discounts with respect to the purchase of UDENYCA®.

The Company also enters into rebate arrangements with payers, which consist primarily of commercial insurance companies and government entities, to cover the reimbursement of UDENYCA® to Healthcare Providers.

The Company sells to wholesalers and distributors, (collectively, “Customers”).

The Customers then resell to hospitals and clinics (collectively, “Healthcare Providers”) pursuant to contracts with the Company.

In addition to distribution agreements with Customers and contracts with Healthcare Providers, the Company enters into arrangements with group purchasing organizations (“GPOs”) that provide for United States government-mandated or privately-negotiated rebates, chargebacks and discounts.

The Company provides co-payment assistance to patients who have commercial insurance and meet certain eligibility requirements.

Revenue from product sales is recognized when a Customer controls the product, which occurs upon delivery of UDENYCA® to and acceptance by that Customer.

Revenue from product sales is recognized at the point when a Customer obtains control of the product and the Company satisfies its performance obligation, which generally occurs at the time product is shipped to the Customer.

Payment terms differ by jurisdiction and customer, but payment terms typically range from 30 to 67 days from date of shipment.

Product Sales Discounts and Allowances

Revenue from product sales is recorded at the net sales price (“transaction price”), which includes estimates of variable consideration for which reserves are established and that result from chargebacks, rebates, co-pay assistance, prompt-payment discounts, returns and other allowances that are offered within contracts between the Company and its Customers, Healthcare Providers, payers and GPOs relating to the sales of UDENYCA®.

These reserves are based on the amounts earned or to be claimed on the related sales and are classified as reductions in trade receivables (if the amounts are payable to a Customer) or current liabilities (if the amounts are payable to a party other than a Customer).

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The actual amount of consideration ultimately received may differ.

If actual results in the future vary from the Company’s estimates, the estimates will be adjusted, which will affect the net product revenue in the period that such variances become known.

If actual results in the future vary from the Company’s estimates, the estimates will be adjusted, which will affect net product revenue in the period that such variances become known.

Chargebacks are discounts that occur when Healthcare Providers purchase directly from a Customer.

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Rebate amounts owed after the final dispensing of the product to a benefit plan participant are based upon contractual agreements or legal requirements with these public sector benefit providers.

Certain rebate amounts commensurate with share utilization of UDENYCA® relative to other pegfilgrastim products.

The accrual for rebates is based on statutory or contractual discount rates and expected utilization.

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To the extent that the services received are distinct from the sale of products to the customer, these payments are classified in selling, general and administrative expense in the Company’s consolidated statements of operations, otherwise they are included as a reduction in product revenue.

Royalty Revenue

Royalty revenue from licensees, which is based on sales to third-parties of licensed products, is recorded when the third-party sale occurs and the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied).

Royalty revenue was insignificant for the periods presented and is included in total revenues.

Cost of Goods Sold

Cost of goods sold consists primarily of third-party manufacturing, distribution, and overhead costs associated with UDENYCA®.

Cost of goods sold consists primarily of third-party manufacturing, distribution, and certain overhead costs.

A portion of the costs of producing UDENYCA sold to date was expensed as research and development prior to the FDA approval of UDENYCA and, therefore, it is not reflected in the cost of goods sold.

On May 2, 2019, the Company and Amgen Inc.

and Amgen USA Inc.

(collectively “Amgen”) settled a trade secret action brought by Amgen.

During the first quarter of 2021, the UDENYCA inventory with no inventory value was fully utilized.

On May 2, 2019, the Company and Amgen settled a trade secret action brought by Amgen.

As a result, cost of goods sold reflects a mid-single digit royalty on net product revenue, which began on July 1, 2019.

The royalty cost will continue for five years pursuant to the settlement.

Cost of goods sold for the year ended December 31, 2019, included write-off of prepaid manufacturing costs of $ 1.3 million due to the cancellation of certain manufacturing reservations, and $ 0.4 million due to the write-off of excess and obsolete inventory.

There were no material inventory write-offs recorded during the years ended December 31, 2020 and 2018.

In 2021, 2020 and 2019, cost of goods sold included write-offs for inventory of $ 5.1 million, $ 2.2 million and $ 0.4 million, respectively, that did not meet the Company’s acceptance criteria, net of credits received from manufacturers.

In 2019, cost of goods sold included write-off of prepaid manufacturing costs of $ 1.3 million due to the cancellation of certain manufacturing reservations.

Research and Development Expense

Research and development costs are charged to expense as incurred.

Research and development expense includes, among other costs, salaries and other personnel-related costs, consultant fees, preclinical costs, cost to manufacture drug candidates, clinical trial costs and supplies, laboratory supply costs, upfront and milestone payments under the licensing agreements and facility-related costs.

Costs incurred under agreements with third parties are charged to expense as incurred in accordance with the specific contractual performance terms of such agreements.

Third-party costs include costs associated with manufacturing drug candidates, preclinical and clinical support activities.

In certain cases, amounts received as reimbursement for research and development activities from the Company’s collaborators are recognized as a reduction in research and development expense when the Company engages in a research and development project, jointly with another party, with both parties incurring costs while actively participating in project activities and sharing costs and potential benefits of the arrangement.

Costs incurred under arrangements where the Company provides research services approximate the amount of revenues recorded.

Advance payments for goods or services to be received in the future to be utilized in research and development activities are deferred and capitalized.

The capitalized amounts are expensed as the related goods are delivered or the services are rendered.

The Company considers regulatory approval of product candidates to be uncertain, and product manufactured prior to regulatory approval may not be sold unless regulatory approval is obtained.

The Company expenses manufacturing costs as incurred to research and development expense for product candidates prior to regulatory approval.

If, and when, regulatory approval of a product is obtained, the Company will begin capitalizing manufacturing costs related to the approved product into inventory.

Costs associated with the development, validation and scaling of manufacturing processes at new third party suppliers and regulatory registration of new third-party manufacturing facilities are recognized as research and development expenses.

These costs generally comprise of all costs incurred in such activities prior to the process performance qualification (“PPQ”) production commencement stage at new manufacturing facilities.

Costs incurred after the PPQ production commencement at new manufacturing facilities are capitalized as inventory as the regulatory approval at that point becomes probable and the net realizable value of the batches produced during this stage of the process is recoverable.

Research and development expense represents costs incurred to conduct research, such as the discovery and development of our product candidates.

The Company recognizes all research and development costs as they are incurred.

The Company currently tracks research and development costs incurred on a product candidate basis only for external research and development expenses.

The Company’s external research and development expense consists primarily of:

● expense incurred under agreements with consultants, third-party CROs, and investigative sites where a substantial portion of the Company’s preclinical studies and all of its clinical trials are conducted;

● costs of acquiring originator comparator materials and manufacturing preclinical study and clinical trial supplies and other materials from CMOs, and related costs associated with release and stability testing;

● costs associated with manufacturing process development activities;

● upfront and milestone payments related to licensing and collaboration agreements.

Internal costs are associated with activities performed by the Company’s research and development organization and generally benefit multiple programs.

These costs are not separately allocated by product candidate.

Unallocated, internal research and development costs consist primarily of:

● personnel-related expense, which include salaries, benefits and stock-based compensation;

● facilities and other allocated expense, which include direct and allocated expense for rent and maintenance of facilities, depreciation and amortization of leasehold improvements and equipment, laboratory and other supplies.

Products manufactured prior to regulatory approval may not be sold unless regulatory approval is obtained.

The Company expenses manufacturing costs as incurred as research and development expense for products that have not been approved until future commercialization is considered probable and the future economic benefit is expected to be realized, based on management’s judgment.

The Company began to capitalize inventory costs associated with UDENYCA after receiving regulatory approval in November 2018.

License Agreements

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To determine whether the licensing transactions should be accounted for as a business combination or as an asset acquisition, the Company makes certain judgments, which include assessing whether the acquired set of activities and assets would meet the definition of a business under the relevant accounting rules.

If the acquired set of activities and assets does not meet the definition of a business, the transaction is recorded as an acquisition of assets and, therefore, any acquired IPR&D that does not have an alternative future use is charged to expense at the acquisition date.

If the acquired set of activities and assets does not meet the definition of a business, the transaction is recorded as an asset acquisition and therefore, any acquired IPR&D that does not have an alternative future use is charged to expense at the acquisition date.

To date none of the Company’s license agreements have been considered to be the acquisition of a business.

Selling, General and Administrative Expense

Selling, general and administrative expenses are primarily comprised of compensation and benefits associated with sales and marketing, finance, human resources, legal, information technology and other administrative personnel, outside marketing, advertising and legal expenses and other general and administrative costs.

Selling, general and administrative expenses comprise primarily compensation and benefits associated with sales and marketing, finance, human resources, legal, information technology and other administrative personnel, outside marketing, advertising and legal expenses and other general and administrative costs.

The Company expenses the cost of advertising, including promotional expenses, as incurred.

Advertising expenses were $ 3.8 million, $ 4.5 million and $ 2.8 million for the years ended December 31, 2020, 2019 and 2018, respectively.

Advertising expenses were $ 8.7 million, $ 3.8 million and $ 4.5 million in 2021, 2020 and 2019, respectively.

Stock-Based Compensation

The Company measures the cost of equity-based service awards based on the grant-date fair value of the award.

The compensation cost is recognized as expense on a straight-line basis over the vesting period for options and restricted stock units (“RSU”).

The Company’s compensation programs include stock-based awards, and the related grants under these programs are accounted for at fair value.

The fair values are recognized as compensation expense on a straight-line basis over the vesting period with the related costs recorded in cost of goods sold, research and development, and selling, general and administrative expense, as appropriate.

The Company accounts for forfeitures as they occur.

On January 1, 2019, the Company adopted the ASU No.

2018-07, Improvements to Nonemployee Share-Based Payment Accounting , which simplifies the accounting for share-based payments to nonemployees by aligning it with the accounting for share-based payment to employees, with certain exceptions.

Prior to the adoption of ASU No.

2018-07, the Company accounted for equity instruments issued to non-employees using the fair value approach.

These equity instruments consisted of stock options, which were valued using the Black-Scholes option-pricing model.

Stock-based compensation expense was recognized as the equity instruments were earned.

The measurement of stock-based compensation was subject to periodic adjustments as the underlying equity instruments vested.

The Company utilizes the Black-Scholes option-pricing model for estimating fair value of its stock options and ESPP granted.

Option valuation models, including the Black-Scholes option-pricing model, require the input of highly subjective assumptions, and changes in the assumptions used can materially affect the grant-date fair value of an award.

These assumptions include the risk-free rate of interest, expected dividend yield, expected volatility and the expected life of the award.

For RSUs, the Company bases the fair value of awards on the closing market value of the common stock at the date of grant.

The Company uses the liability method of accounting for income taxes.

Under this method, deferred tax assets and liabilities are determined based on the differences between the financial reporting and the tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse.

The Company must then assess the likelihood that the resulting deferred tax assets will be realized.

A valuation allowance is provided when it is more likely than not that some portion or all of a deferred tax asset will not be realized.

Due to the Company’s lack of earnings history, the net deferred tax assets have been fully offset by a valuation allowance.

The Company utilizes the liability method of accounting for deferred income taxes.

Under this method, deferred tax liabilities and assets are recognized for the expected future tax consequences of temporary differences between the carrying amounts and the tax basis of assets and liabilities.

A valuation allowance is established against deferred tax assets because, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

The Company’s policy is to record interest and penalties on uncertain tax positions as income tax expense.

The Company recognizes uncertain income tax positions at the largest amount that is more likely than not to be sustained upon audit by the relevant taxing authority.

An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained.

The Company does not expect its unrecognized tax benefits to change significantly over the next twelve months.

The Company’s policy is to recognize interest and/or penalties related to income tax matters in income tax expense.

The Company had accrued no amounts for interest and penalties related to income tax matters in the Company’s consolidated balance sheet at December 31, 2020 and 2019.

The Company does not expect its unrecognized tax benefits to change significantly in 2022.

Operating and Finance Leases

The Company adopted ASU 2016-02, Leases on January 1, 2019.

The Company elected the package of practical expedients upon transition, which allows it to apply the guidance prospectively, without reassessing prior conclusions related to contracts containing leases, lease classification and initial direct costs.

Accordingly, the results for the years ended December 31, 2020 and 2019 are presented under Topic 842, and the results for the year ended December 31, 2018 are presented in accordance with the prior lease

guidance, ASC Topic 840:

The new standard also provides practical expedients for an entity’s ongoing accounting.

The Company elected an accounting policy that does not recognize right-of-use assets and lease liabilities related to short-term leases.

The Company also elected the practical expedient to not separate lease and non-lease components for its facility and vehicle leases.

The Company did not elect to apply the hindsight expedient.

The Company determines if an arrangement is a lease at inception.

Operating leases are included in operating lease right-of-use assets, other current liabilities, and lease liabilities, non-current in the consolidated balance sheets.

The Company does not recognize right-of-use assets and lease liabilities related to short-term leases.

The Company also does not separate lease and non-lease components for its facility and vehicle leases.

Operating leases are included in other current liabilities, other assets, non-current, and lease liabilities, non-current in the consolidated balance sheets.

The lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise any such options.

The Company recognizes operating lease expense for these leases on a straight-line basis over the term of the lease.

In 2019, the Company entered into a vehicle lease agreement, pursuant to which it currently leases 42 vehicles.

Delivery of the vehicles commenced during the first quarter of 2020.

The term of each leased vehicle commences upon the delivery of the vehicle and is for a period of 36 months .

The term under the Company’s vehicle lease agreement is 36 months .

The vehicles leased under this arrangement were classified as finance leases.

Assets acquired under finance leases are included in property and equipment, net, other current liabilities, and lease liabilities, non-current in the consolidated balance sheets and are depreciated to operating expenses on a straight-line basis over their estimated useful lives.

With the exception of initial adoption of the new lease standard, where the Company’s incremental borrowing rate used was the rate on the adoption date (January 1, 2019), the operating and finance lease ROU assets and the lease liabilities are recognized based on the present value of lease payments over the lease term at the lease commencement date.

Finance leases are included in property and equipment, net, accrued and other current liabilities, and lease liabilities, non-current in the consolidated balance sheets and assets under Finance leases are depreciated to operating expenses on a straight-line basis over their estimated useful lives.

The operating and finance lease right-of-use assets and the lease liabilities are recognized based on the present value of lease payments over the lease term at the lease commencement date.

The Company uses its incremental borrowing rate based on the information available at the commencement date in determining the lease liabilities as the Company's leases generally do not provide an implicit rate.

Net Income (Loss) per Share Attributable to Coherus

Basic net income (loss) per share attributable to Coherus is calculated by dividing the net income (loss) attributable to Coherus by the weighted-average number of shares of common stock outstanding for the period, without consideration for potential dilutive common shares.

Diluted net income (loss) per share is computed by dividing the net income (loss) by the weighted average number of common shares outstanding for the period plus any diluted potential common shares outstanding for the period determined using the treasury stock method for options, RSUs and ESPP and using the if-converted method for the convertible notes (see Note 14).

Comprehensive Income (Loss)

Comprehensive income (loss) is composed of two components:

net income (loss) and other comprehensive income (loss).

Other comprehensive income (loss) refers to gains and losses that under U.S.

GAAP are recorded as an element of stockholders’ equity (deficit), but are excluded from net income (loss).

The Company’s other comprehensive income (loss) included foreign currency translation adjustments for the years ended December 31, 2020, 2019 and 2018.

Net (Loss) Income per Share

Basic net (loss) income per share is calculated by dividing the net (loss) income by the weighted-average number of shares of common stock outstanding for the period, without consideration for potential dilutive common shares.

Diluted net income per share is computed by dividing the net income by the weighted-average number of common shares outstanding for the period plus any potential

dilutive common shares outstanding for the period determined using the treasury stock method for options, RSUs and ESPP and using the if-converted method for the convertible notes.

Diluted net loss per share is computed by dividing net loss by the weighted-average number of common shares outstanding for the period, without consideration for any potential dilutive common share equivalents as their effect would be antidilutive (see Note 12.

Net (Loss) Income Per Share).

Comprehensive (Loss) Income

Comprehensive (loss) income is composed of two components:

net (loss) income and other comprehensive (loss) income.

Other comprehensive (loss) income refers to gains and losses that under U.S.

GAAP are recorded as an element of stockholders’ equity, but are excluded from net (loss) income.

The Company’s other comprehensive (loss) income include foreign currency translation adjustments in 2021, 2020 and 2019.

Reclassifications

Certain prior year amounts in the consolidated balance sheets and consolidated statements of cash flows have been reclassified to conform with the current year presentation in 2021.

As a result, there was no change to total assets on the consolidated balance sheet or net cash provided by operating activities on the consolidated statements of cash flows for the prior years.

Recent Accounting Pronouncements

The following are the recent accounting pronouncements adopted by the Company in 2020:

Effective January 1, 2020, the Company adopted ASU No.

2016-13, Financial Instruments — Credit Losses, (Topic 326):

Measurement of Credit Losses on Financial Instruments ( ASU 2016-13) , which changed the impairment model for most financial assets and certain other instruments.

For trade receivables and other instruments, the Company uses a new forward-looking expected loss model that generally results in the earlier recognition of allowances for losses.

The Company is exposed to credit losses primarily through receivables from customers.

The Company’s expected loss allowance methodology for the receivables is developed using historical collection experience, current and future economic market conditions, a review of the current aging status and financial condition of the entities.

Specific allowance amounts are established to record the appropriate allowance for customers that have a higher probability of default.

ASU 2016-13 also eliminates the concept of “other-than-temporary” impairment when evaluating available-for-sale debt securities and instead focuses on determining whether any impairment is a result of a credit loss or other factors.

An entity will recognize an allowance for credit losses on available-for-sale debt securities, rather than an other-than-temporary impairment that reduces the cost

basis of the investment.

The adoption of the new guidance did not have a material impact on the Company’s consolidated financial statements.

In January 2017, the FASB issued ASU No.

2017-04, Intangibles-Goodwill and Other:

Simplifying the Test for Goodwill Impairment (ASU 2017-04), which simplifies the current requirements for testing goodwill for impairment by eliminating the second step of the two-step impairment test to measure the amount of an impairment loss.

ASU 2017-04 is effective for the Company’s interim and annual reporting periods during the year ending December 31, 2020, and all annual and interim reporting periods thereafter.

The Company adopted this accounting standard as of January 1, 2020.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes .

The new guidance removes certain exceptions for recognizing deferred taxes for investments, performing intra-period allocation and calculating income taxes in interim periods.

It also adds guidance to reduce complexity in certain areas, including recognizing deferred taxes for tax goodwill and allocating taxes to members of a consolidated group.

The Company adopted this guidance as of January 1, 2021.

The adoption did not have a material impact on the Company’s consolidated financial statements.

In August 2018, the FASB issued ASU No.

2018-13, Fair Value Measurements (ASU 2018-13), which eliminates certain disclosure requirements for fair value measurements, and requires public entities to disclose certain new information and modifies some disclosure requirements.

The new guidance is effective for the Company’s interim and annual reporting periods during the year ending December 31, 2020, and all annual and interim reporting periods thereafter.

The Company adopted this accounting standard as of January 1, 2020.

In October 2020, the FASB issued ASU 2020-10, Codification Improvements , which updates various codification topics by clarifying or improving disclosure requirements to align with the SEC’s regulations.

The Company adopted this guidance as of January 1, 2021.

The adoption did not have a material impact on the Company’s consolidated financial statements.

The following are the recent accounting pronouncements that the Company has not yet adopted:

In August 2020, the FASB issued ASU No.

2020-06 , Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”), which reduces the number of accounting models for convertible debt instruments and convertible preferred stock as well as amends the derivatives scope exception for contracts in an entity’s own equity.

ASU 2020-06 is effective for the Company on January 1, 2022, with early adoption permitted.

The Company is currently evaluating the potential impact that this standard may have on its consolidated financial statements and related disclosures.

The Company has reviewed other recent accounting pronouncements and concluded they are either not applicable to the business or that no material effect is expected on the consolidated financial statements as a result of future adoption.

The Company initiated United States sales of UDENYCA on January 3, 2019.

The Company recorded net revenue of $ 326.6 million, $ 475.8 million and $ 356.1 million during 2021, 2020 and 2019, respectively.

Revenue by significant Customer was distributed as follows:

Year Ended December 31,

McKesson Corporation

AmeriSource-Bergen Corporation

Cardinal Health, Inc.

Total revenue

Product Sales Discounts and Allowances

The activities and ending reserve balances for each significant category of discounts and allowances, which constitute variable consideration, were as follows:

Year Ended December 31, 2021

and Discounts

(in thousands)

Balance at December 31, 2020

Provision related to sales made in:

Current period

Payments and customer credits issued

Balance at December 31, 2021

Year Ended December 31, 2020

and Discounts

(in thousands)

Balance at December 31, 2019

Provision related to sales made in:

Current period

Payments and customer credits issued

Balance at December 31, 2020

Chargebacks and discounts for prompt payment are recorded as a reduction in trade receivables, and the remaining reserve balances are classified as current liabilities in the accompanying consolidated balance sheets.

Fair Value Measurements

Financial assets and liabilities are recorded at fair value.

The carrying amounts of certain of the Company’s financial instruments, including cash and cash equivalents, restricted cash, investments in marketable securities, accounts receivable, accounts payable and other current liabilities approximate their fair value due to their short maturities.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs.

The accounting guidance describes a fair value hierarchy based on three levels of inputs that may be used to measure fair value, of which the first two are considered observable and the last is considered unobservable.

These levels of inputs are the following:

The fair value of financial instruments are classified into one of the following categories:

● Level 1 — Quoted prices in active markets for identical assets or liabilities.

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● Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The Company’s financial instruments consist of Level 1 assets and Level 3 liabilities.

Where quoted prices are available in an active market, securities are classified as Level 1.

Level 1 assets consist of highly liquid money market funds that are included in cash and cash equivalents, and restricted cash.

There were no unrealized gains and losses in the Company’s investments in these money market funds .

In certain cases where there is limited activity or less transparency around inputs to valuation, securities are classified as Level 3.

Level 3 liabilities consist of the contingent consideration.

A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

Unrealized gains and losses in the Company’s investments in these money market funds were insignificant in 2021, 2020 and 2019.

There were no transfers between Level 1 , Level 2 and Level 3 during the periods presented.

Financial assets and liabilities subject to fair value measurements on a recurring basis and the level of inputs used in such measurements are as follows (in thousands):

The fair values of cash equivalents approximate their carrying values due to the short-term nature of such financial instruments.

Financial assets and liabilities measured at fair value on a recurring basis are summarized as follows:

Fair Value Measurements

December 31, 2021

(in thousands)

Financial Assets:

Money market funds

Cash and cash equivalents (money market funds)

Restricted cash (money market funds)

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December 31, 2020

(in thousands)

Financial Assets:

Money market funds

Cash and cash equivalents (money market funds)

Restricted cash (money market funds)

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Contingent consideration

Contingent Consideration

As part of the InteKrin acquisition in February 2014, the Company recognized contingent consideration associated with potential payments to be made to the former InteKrin stockholders upon (i) the first dosing of a human subject in the first Phase 2 Clinical Trial for CHS-131 (“Earn-Out Payment”), which was achieved and settled by the Company in March 2015, and (ii) per a compound transaction agreement as defined in the purchase agreement (the “Compound Transaction Payment”).

The size of the Compound Transaction Payment consideration is tiered based on the size of a license or similar agreement with a third party and the timing of such agreement.

The fair value measurement of the Compound Transaction Payment uses a probability-weighted discounted cash flow approach based on significant inputs not observable in the market and thus represents a Level 3 measurement within the fair value hierarchy.

The Compound Transaction analysis as of December 31, 2020 applied a 20 % risk-adjusted discount rate to measure present value and also captured an additional 8.0 % credit spread for counterparty credit risk given the cash payment.

The expected cash flow is based on estimates provided by the Company’s management including the timing and probability of occurrence.

The value of the consideration is tiered based on the value of a license or similar agreement with a third party and the timing of such agreement.

Generally, increases or decreases in the probability of occurrence would result in a directionally similar impact in the fair value measurement of the Compound Transaction Payment and it is estimated that a 1 % increase (decrease) in the probability of occurrence would result in an immaterial fair value fluctuation.

For the years ended December 31, 2020, 2019 and 2018, the Company recognized a loss of $ 0 , a loss of $ 42,000 and a gain of $ 3.2 million in other income, net in the consolidated statement of operations, respectively, as a result of the change in the fair value of the Compound Transaction Payment.

The following table sets forth a summary of changes in the estimated fair value of the contingent consideration (in thousands):

Balance as of December 31, 2017

Change in fair value of the contingent consideration liability

Balance as of December 31, 2018

Change in fair value of the contingent consideration liability

Balance as of December 31, 2019

Change in fair value of the contingent consideration liability

Balance as of December 31, 2020

The decrease of $ 3.2 million in the fair value of the Compound Transaction Payment during the year ended December 31, 2018 was primarily a result of a decrease in the probability of occurrence from 33 % to 10 % and an extension in the timing of occurrence to a later date.

As part of the InteKrin acquisition in February 2014, the Company recognized contingent consideration associated with potential payments, which would be payable to the former InteKrin stockholders if the Company enters into a compound transaction agreement as defined in the InteKrin purchase agreement.

In February 2020, the Company announced that it is seeking strategic alternatives to finance this program externally.

As of December 31, 2021 and 2020, the $ 0.1 million fair value of the contingent consideration was recorded in other liabilities, non-current on the consolidated balance sheets.

1.5 % Convertible Notes due 2026

The estimated fair value of the 1.5 % Convertible Notes due 2026, which the Company issued in April 2020 (see Note 8) is influenced by interest rates, the Company’s stock price and stock price volatility and is determined by prices observed in market trading.

The estimated fair value of the 1.5 % Convertible Notes due 2026, which the Company issued in April 2020 (see Note 7.

Debt Obligations) is influenced by interest rates, the Company’s stock price and stock price volatility and is determined by prices observed in market trading.

The market for trading of the Convertible Notes due 2026 is not considered to be an active market and therefore the estimate of fair value is based on Level 2 inputs.

The estimated fair value of the Convertible Notes due 2026 was approximately $ 269.1 million (par value $ 230.0 million) as of December 31, 2020.

The estimated fair value of the Convertible Notes due 2026 was $ 271.9 million and $ 269.1 million (par value $ 230.0 million) as of December 31, 2021 and 2020, respectively.

8.2 % Convertible Notes due 2022

The estimated fair value of the 8.2 % Convertible Senior Notes Due 2022, which the Company issued on February 29, 2016 (see Note 8) is based on an income approach.

The estimated fair value was approximately $ 113.7 million (par value $ 100.0 million) as of December 31, 2020 and represents a Level 3 valuation.

When determining the estimated fair value of the Company’s long-term debt, the Company uses a single factor binomial lattice model which incorporates the terms and conditions of the convertible notes and market based risk measurement that are indirectly observable, such as credit risk.

The estimated fair value of the 8.2 % Convertible Senior Notes Due 2022, which the Company issued on February 29, 2016 (see Note 7.

Debt Obligations) is based on an income approach.

When determining the estimated fair value of the Company’s 8.2 % Convertible Notes due 2022, the Company used a single factor binomial lattice model which incorporates the terms and conditions of the convertible notes and market-based risk measurement that are indirectly observable, such as credit risk and therefore the estimate of fair value is based on Level 3 inputs.

The lattice model produces an estimated fair value based on changes in the price of the underlying common shares price over successive periods of time.

An estimated yield based on market data is used to discount straight debt cash flows.

The principal amount outstanding under the Company’s Term Loan (see Note 8) of $ 75 million as of December 31, 2020 is subject to variable interest rate, which is based on a fixed percentage plus three month LIBOR (“LIBOR”), and as such, the Company believes the carrying amount of these obligations approximates fair value.

The Company began capitalizing inventory in November 2018 once the FDA approved UDENYCA®.

Inventory consisted of the following (in thousands):

The estimated fair value was $ 108.4 million and $ 113.7 million (par value $ 100.0 million plus premium of $ 9.0 million) as of December 31, 2021 and 2020, respectively.

2025 Term Loan

The principal amount outstanding under the Company’s 2025 Term Loan (see Note 7.

Debt Obligations) as of December 31, 2021 of $ 75 .0 million is subject to a variable interest rate, which is based on three month LIBOR (“LIBOR”) plus a fixed percentage, and as such, the Company believes the carrying amount of these obligations approximates fair value.

Inventory consisted of the following:

(in thousands)

Raw Materials

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Finished goods

Balance sheet classification (in thousands):

Inventory expected to be sold more than twelve months from the balance sheet date is classified as inventory, non-current on the consolidated balance sheets.

As of December 31, 2021 and 2020, t he non-current portion of inventory consisted of raw materials and work in process, as well as a portion of finished goods at December 31, 2020.

The following table presents the inventory b alance sheet classifications:

(in thousands)

Inventory, non-current

Inventory expected to be sold in periods more than twelve months from the balance sheet date is classified as inventory, non-current on the consolidated balance sheets.

As of December 31, 2020 and 2019, the non-current portion of inventory consisted of raw materials and a portion of work in process.

Prepaid manufacturing of $ 19.4 million as of December 31, 2020 includes prepayments of $ 8.9 million to a contract manufacturing organization (“CMO”) for manufacturing services for UDENYCA®, which the Company expects to be converted into inventory within the next twelve months ;

and prepayments of $ 10.5 million to various CMOs for other research and development pipeline programs.

Prepaid manufacturing of $ 13.7 million as of December 31, 2021 includes prepayments of $ 8.3 million to a CMO for manufacturing services for UDENYCA, which the Company expects to be converted into inventory during 2022;

and prepayments of $ 5.4 million to various CMOs for research and development pipeline programs.

Prepaid manufacturing of $ 19.4 million as of December 31, 2020 includes prepayments of $ 8.9 million to a CMO for manufacturing services for UDENYCA;

and prepayments of $ 10.5 million to various CMOs for other research and development pipeline programs.

Other Assets, non-current of $ 2.1 million on the consolidated balance sheet as of December 31, 2020 primarily includes prepayments of $ 1.3 million made to a CMO for manufacturing services for UDENYCA®, which the Company expects to be converted into inventory after twelve months.

The other assets, non current balance was immaterial as of December 31, 2019.

In February 2021, the Company announced the discontinuation of the development of CHS-2020, a biosimilar of Eylea as part of a realignment of research and development resources toward other development programs.

As a result, the Company recognized $ 11.2 million within research and development expense on the consolidated statement of operations in 2021, which included an impairment charge of $ 3.2 million for the write-off of prepaid manufacturing services no longer deemed to have future benefits.

Balance Sheet Components

Property and Equipment, Net

Property and equipment, net are as follows (in thousands):

Property and equipment, net consisted of the following:

(in thousands)

Machinery and equipment

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Property and equipment, net

Depreciation and amortization expense was $ 2.9 million, $ 3.3 million and $ 3.2 million for the years ended December 31, 2020, 2019 and 2018, respectively.

During the year ended December 31, 2018, the Company identified an impairment indicator in machinery and equipment and upon further analysis recorded an impairment loss of $ 3.9 million within research and development expense in the consolidated statement of operations, given the undiscounted future cash flows were less than the carrying amount of the related machinery and equipment.

There were no material impairments of property and equipment for the years ended December 31, 2020 and 2019.

Accrued Liabilities

Accrued liabilities are as follows (in thousands):

Accrued clinical and manufacturing

Depreciation and amortization expense was $ 3.5 million, $ 2.9 million and $ 3.3 million in 2021, 2020 and 2019, respectively.

There were no material impairments of property and equipment in 2021, 2020 and 2019.

Accrued and Other Current Liabilities

Accrued and other current liabilities consisted of the following:

(in thousands)

Accrued manufacturing and clinical

Accrued co-development costs for toripalimab

Accrued other

Accrued liabilities

The Company initiated U.S.

sales of UDENYCA® on January 3, 2019.

The Company recorded net product revenue of $ 475.8 million and $ 356.1 million during the years ended December 31, 2020 and 2019, respectively.

There was no product revenue during the year ended December 31, 2018.

Revenue by significant Customer was distributed as follows:

December 31, 2020

December 31, 2019

Percent of Total

AmeriSource-Bergen Corp

Total revenue

Product Sales Discounts and Allowances

The activities and ending reserve balances for each significant category of discounts and allowances, which constitute variable consideration, were as follows (in thousands):

Year Ended December 31, 2020

and Discounts

Balance at December 31, 2019

Provision related to sales made in:

Current period

Payments and customer credits issued

Balance at December 31, 2020

Year Ended December 31, 2019

and Discounts

Balance at December 31, 2018

Activity related to 2019 sales

Payments and customer credits issued

Balance at December 31, 2019

Licensing Arrangements

On November 4, 2019, the Company entered into a license agreement with Bioeq IP AG (now Bioeq AG, or “Bioeq”) for the commercialization of a biosimilar version of ranibizumab (Lucentis) in certain dosage forms in both a vial and pre-filled syringe presentation (the “Licensed Products”).

Under this agreement, Bioeq granted to the Company an exclusive, royalty-bearing license to commercialize the Licensed Products in the field of ophthalmology (and any other approved labelled indication) in the United States.

Bioeq will supply to the Company the Licensed Products in accordance with terms and conditions specified in the agreement and a manufacturing and supply agreement to be executed by the parties in accordance therewith.

The agreement’s initial term continues in effect for ten years after the first commercial sale of a Licensed Product in the United States, and thereafter renews for an unlimited period of time unless otherwise terminated in accordance with its terms.

Under the agreement, Bioeq must use commercially reasonable efforts to develop and obtain regulatory approval of the Licensed Products in the U.S.

in accordance with a development and manufacturing plan, and the Company must use commercially reasonable efforts to commercialize the Licensed Products in accordance with a commercialization plan.

Additionally, the Company must commit certain pre-launch and post-launch resources to the commercialization of the Licensed Products for a limited time as specified in the agreement.

Lease liabilities, current

Total Accrued and other current liabilities

Collaborations and Other Arrangements

Junshi Biosciences

On February 1, 2021, the Company entered into Collaboration Agreement with Junshi Biosciences for the co-development and commercialization of toripalimab, Junshi Biosciences’ anti-PD-1 antibody, in the United States and Canada.

Under the terms of the Collaboration Agreement, the Company paid $ 150.0 million upfront for exclusive rights to toripalimab in the United States and Canada, options in these territories to Junshi Biosciences’ anti-TIGIT antibody and next-generation engineered IL-2 cytokine, and certain negotiation rights to two undisclosed preclinical immuno-oncology drug candidates.

The Company will have the right to conduct all commercial activities of toripalimab in the United States and Canada.

The Company will be obligated to pay Junshi Biosciences a 20 % royalty on net sales of toripalimab and up to an aggregate $ 380.0 million in one-time payments for the achievement of various regulatory and sales milestones.

If the Company exercises its options, it will be obligated to pay an option exercise fee for each of the anti-TIGIT antibody and the IL-2 cytokine of $ 35.0 million per program.

Additionally, for each exercised option, the Company will be obligated to pay Junshi Biosciences an 18 % royalty on net sales and up to an aggregate $ 255.0 million for the achievement of various regulatory and sales milestones.

Under the Collaboration Agreement, the Company retains the right to collaborate in the development of toripalimab and the other licensed compounds and will pay for a portion of these co-development activities up to a maximum of $ 25.0 million per licensed compound per year.

Additionally, the Company is responsible for certain associated regulatory and technology transfer costs for toripalimab and other licensed compounds and will reimburse Junshi Biosciences for such costs.

The Company recognized research and development expense of $ 39.4 million in the consolidated statement of operations for the year ended December 31, 2021, and had $ 1.9 million recorded in accrued and other current liabilities on the consolidated balance sheets as of December 31, 2021 related to the co-development, regulatory and technology transfer costs.

The Company accounted for the licensing transaction as an asset acquisition under the relevant accounting rules.

The Company paid Bioeq an upfront and a milestone payment aggregating to € 10 million ($ 11.1 million), which was recorded as research and development expense in the Company’s consolidated statement of operations for the year ended December 31, 2019.

The Company is obligated to pay Bioeq an aggregate of up to € 25 million in additional milestone payments in connection with the achievement of certain development and regulatory milestones with respect to the Licensed Products in the United States.

The Company will share a percentage of gross profits on sales of Licensed Products in the United States with Bioeq in the low to mid fifty percent range.

The additional milestone payments and royalties are contingent upon future events and, therefore, will be recorded when it is probable that a milestone will be achieved or when royalties are due.

As of December 31, 2020 and 2019, the Company did not have any outstanding obligations for milestones and royalties to Bioeq.

In addition, the Company recorded research and development expense of $ 145.0 million during the first quarter of 2021, related to the upfront payment for exclusive rights to toripalimab in the United States and Canada.

The Company had entered into a Right of First Negotiation agreement with Junshi Biosciences and paid a fee of $ 5.0 million which was fully expensed as research and development expense in the fourth quarter of 2020.

The Right of First Negotiation fee was fully credited against the total upfront license fee obligation under the Collaboration Agreement.

As of December 31, 2021, the Company did not have any outstanding milestone or royalty payment obligations to Junshi Biosciences.

In January 2022, the Company took steps that it expects will result in the payment to Junshi Biosciences of an additional $ 35.0 million upon the closing of the exercise of our option to license JS006, a TIGIT-targeted antibody, in the United States and Canada.

The $ 35.0 million payment for the option to license JS006 will be reflected in our first quarter 2022 financial statements (see Note 14.

Subsequent Events).

The additional milestone payments, option fees and royalties are contingent upon future events and, therefore, will be recorded when it is probable that a milestone will be achieved, option fees will be incurred or when royalties are due.

In connection with the Collaboration Agreement, the Company entered into the Stock Purchase Agreement with Junshi Biosciences agreeing, subject to customary conditions, to acquire certain equity interests in the Company.

Pursuant to the Stock Purchase Agreement, on April 16, 2021, the Company issued 2,491,988 unregistered shares of its common stock to Junshi Biosciences, at a price per share of $ 20.06 , for an aggregate value of approximately $ 50.0 million cash.

Under the terms of the Stock Purchase Agreement, Junshi Biosciences

is not permitted to sell, transfer, make any short sale of, or grant any option for the sale of the common stock for the two-year period following its effective date.

The Collaboration Agreement and the Stock Purchase Agreement were negotiated concurrently and were therefore evaluated as a single agreement.

The Company used the “Finnerty” and “Asian put” valuation models and determined the fair value for the discount for lack of marketability was $ 9.0 million at the date the shares were issued.

The fair value of the DLOM was attributable to the Collaboration Agreement and was included as an offset against the research and development expense in the consolidated statement of operations for the year ended December 31, 2021.

Innovent Biologics (Suzhou) Co., Ltd.

On January 13, 2020, the Company entered into a license agreement (the “License Agreement”) with Innovent Biologics (Suzhou) Co., Ltd.

(“Innovent”) for the development and commercialization of a biosimilar version of bevacizumab (Avastin) in any dosage form and presentations (“bevacizumab Licensed Product”) in the United States and Canada (the “Territory”).

On January 13, 2020, the Company entered into a license agreement with Innovent for the development and commercialization of a biosimilar version of bevacizumab (Avastin) in any dosage form and presentations in the United States and Canada.

Under the License Agreement, Innovent granted to the Company an exclusive, royalty-bearing license to develop and commercialize the bevacizumab Licensed Product in the field of treatment, prevention or amelioration of any human diseases and conditions as included in the label of Avastin.

Under the License Agreement, the Company also acquired an option to develop and commercialize Innovent’s biosimilar version of rituximab (Rituxan®) in any dosage form and presentations (the “rituximab Licensed Product” and together with the bevacizumab Licensed Product, the “Innovent Licensed Products”) in the Territory.

Under the License Agreement, the Company also acquired an option to develop and commercialize Innovent’s biosimilar version of rituximab (Rituxan) in any dosage form and presentations in the Territory.

Subject to the terms of the License Agreement, the Company may exercise its option within 12 months of its receipt of certain regulatory materials from Innovent.

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Under the License Agreement, the Company acquired the right to require Innovent to perform technology transfer for the manufacturing of the Innovent Licensed Products in the Territory and, upon completion of such technology transfer, the Company will have the exclusive right to manufacture the Innovent Licensed Products in the Territory.

Under the agreement, the Company committed to pay Innovent a $ 5.0 million upfront payment and an aggregate of up to $ 40.0 million in milestone payments in connection with the achievement of certain development, regulatory and sales milestones with respect to the bevacizumab Licensed Product and, if the Company’s option is exercised, an aggregate of up to $ 40.0 million in milestone payments in connection with the achievement of certain development, regulatory and sales milestones with respect to the rituximab Licensed Product.

Under the License Agreement, the Company committed to pay Innovent a $ 5.0 million upfront payment and an aggregate of up to $ 40.0 million in milestone payments in connection with the achievement of certain development, regulatory and sales milestones with respect to the bevacizumab Licensed Product and, if the Company’s option is exercised, an aggregate of up to $ 40.0 million in milestone payments in connection with the achievement of certain development, regulatory and sales milestones with respect to the rituximab Licensed Product.

The Company will share a percentage of net sales of Innovent Licensed Products with Innovent in the mid-teens to low twenty percent range.

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The Company recorded research and development expense of $ 7.5 million during the year ended December 31, 2020 related to an upfront payment and a milestone payment for the bevacizumab Licensed Product.

During the year ended December 31, 2021, the Company recognized research and development expense of $ 1.1 million related to bevacizumab Licensed Product development activities directly with Innovent.

As of December 31, 2021, the Company did not have any outstanding milestone or royalty payment obligations to Innovent.

The additional milestone payments, option fee for licensing of rituximab (Rituxan®), manufacturing technology transfer fee and royalties are contingent upon future events and, therefore, will be recorded when it is probable that a milestone will be achieved, option fee or manufacturing technology transfer fee will be incurred or when royalties are due.

The additional milestone payments, option fee for licensing of rituximab (Rituxan), manufacturing technology transfer fee and royalties are contingent upon future events and, therefore, will be recorded when such payments become probable.

On November 4, 2019, the Company entered into a license agreement with Bioeq for the commercialization of a biosimilar version of ranibizumab (Lucentis) in certain dosage forms in both a vial and pre-filled syringe presentation.

Under this agreement, Bioeq granted to the Company an exclusive, royalty-bearing license to commercialize the Bioeq Licensed Products in the field of ophthalmology (and any other approved labelled indication) in the United States.

Bioeq will supply to the Company the Bioeq Licensed Products in accordance with terms and conditions specified in the agreement and a manufacturing and supply agreement to be executed by the parties in accordance therewith.

The agreement’s initial term continues in effect for ten years after the first commercial sale of a Bioeq Licensed Product in the United States, and thereafter renews for an unlimited period of time unless otherwise terminated in accordance with its terms.

Under the agreement, Bioeq must use commercially reasonable efforts to develop and obtain regulatory approval of the Bioeq Licensed Products in the United States in accordance with a development and manufacturing plan, and the Company must use commercially reasonable efforts to commercialize the Bioeq Licensed Products in accordance with a commercialization plan.

Additionally, the Company must commit certain pre-launch and post-launch resources to the commercialization of the Bioeq Licensed Products for a limited time as specified in the agreement.

The Company accounted for the licensing transaction as an asset acquisition under the relevant accounting rules.

The Company is obligated to pay Bioeq an aggregate of up to € 12.5 million in additional milestone payments in connection with the achievement of certain development and regulatory milestones with respect to the Bioeq Licensed Products in the United States.

The Company will share a percentage of gross profits on sales of Bioeq Licensed Products in the United States with Bioeq in the low to mid fifty percent range.

The additional milestone payments and royalties are contingent upon future events and, therefore, will be recorded when it is probable that a milestone will be achieved or when royalties are due.

As of December 31, 2021 and 2020, the Company did not have any outstanding obligations for milestones and royalties to Bioeq.

Debt Obligations

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The 2026 Convertible Notes are general unsecured obligations and will be subordinated to the Company’s designated senior indebtedness (as defined in the indenture for the 2026 Convertible Notes) and structurally subordinated to all existing and future indebtedness and other liabilities, including trade payables.

The 2026 Convertible Notes accrue interest at a rate of 1.5 % per annum, payable semi-annually in arrears on April 15 and October 15 of each year, beginning on October 15, 2020, and will mature on April 15, 2026 , unless earlier repurchased or converted.

The 2026 Convertible Notes accrue interest at a rate of 1.5 % per annum, payable semi-annually in arrears on April 15 and October 15 of each year, since October 15, 2020, and will mature on April 15, 2026 , unless earlier repurchased or converted.

At any time before the close of business on the second scheduled trading day immediately before the maturity date, noteholders may convert their 2026 Convertible Notes at their option into shares of the Company’s common stock, together, if applicable, with cash in lieu of any fractional share, at the then-applicable conversion rate.

The initial conversion rate is 51.9224 shares of common stock per $ 1,000 principal amount of the 2026 Convertible Notes, which represents an initial conversion price of approximately $ 19.26 per share of common stock.

The initial conversion price represents a premium of approximately 30.0 % over the last reported sale of $ 14.815 per share of the Company’s common stock on the Nasdaq Global Market on April 14, 2020.

The conversion rate and conversion price will be subject to customary adjustments upon the occurrence of certain events.

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The repurchase price will be equal to the principal amount of the 2026 Convertible Notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the applicable repurchase date.

The 2026 Convertible Notes will have customary provision relating to the occurrence of “events of default” (as defined in the Indenture for the 2026 Convertible Notes).

The 2026 Convertible Notes have customary provisions relating to the occurrence of “events of default” (as defined in the Indenture for the 2026 Convertible Notes).

The occurrence of such events of default could result in the acceleration of all amounts due under the 2026 Convertible Notes.

As of December 31, 2021, the Company was in full compliance with these covenants and there were no events of default under the 2026 Convertible Notes.

The 2026 Convertible Notes are accounted for in accordance with ASC 470-20, Debt with Conversion and Other Options (“ASC 470-20”) and ASC 815-40, Contracts in Entity’s Own Equity (“ASC 815-40”).

Under ASC 815-40, to qualify for equity classification (or nonbifurcation, if embedded) the instrument (or embedded feature) must be both (1) indexed to the issuer’s stock and (2) meet the

requirements of the equity classification guidance.

The Company determined that the 2026 Convertible Notes do contain embedded features indexed to its own stock, but do not meet the requirements for bifurcation, and therefore do not need to be separately accounted for as an equity component.

Since the embedded conversion feature meets the equity scope exception from derivative accounting, and also since the embedded conversion option does not need to be separately accounted for as an equity component under ASC 470-20, the proceeds received from the issuance of the convertible debt were recorded as a liability on the consolidated balance sheet.

The Company evaluated the features embedded in the 2026 Convertible Notes under the relevant accounting rules and concluded that the embedded features do not meet the requirements for bifurcation, and therefore do not need to be separately accounted for as

an equity component.

The proceeds received from the issuance of the convertible debt were recorded as a liability on the consolidated balance sheets.

Capped Call Transactions

In connection with the pricing of the 2026 Convertible Notes, the Company also paid $ 18.2 million to enter into privately negotiated capped call transactions with one or more of the Option Counterparties.

In connection with the pricing of the 2026 Convertible Notes, the Company also paid $ 18.2 million to enter into privately negotiated capped call transactions with one or a combination of the initial purchasers, their respective affiliates and other financial institutions (the “option counterparties”).

The capped call transactions are generally expected to reduce the potential dilution upon conversion of the 2026 Convertible Notes in the event that the market price per share of the Company’s common stock, as measured under the terms of the capped call transactions, is greater than the strike price of the capped call transactions, which initially corresponds to the conversion price of the 2026 Convertible Notes, and is subject to anti-dilution adjustments generally similar to those applicable to the conversion rate of the 2026 Convertible Notes.

The cap price of the capped call transactions will initially be $ 25.9263 per share, which represents a premium of approximately 75.0 % over the last reported sale price of the Company’s common stock of $ 14.815 per share on April 14, 2020, and is subject to certain adjustments under the terms of the capped call transactions.

The Company evaluated the capped call transactions under ASC 815-10 and determined that it should be accounted as a separate transaction from the 2026 Convertible Notes and that the capped calls should be classified as equity instruments.

Therefore, the capped call premium paid in the amount of $ 18.2 million was recorded as a reduction to additional paid-in capital.

The capped call transactions are accounted for as separate transactions from the 2026 Convertible Notes and classified as equity instruments.

Therefore, the total $ 18.2 million capped call premium paid was recorded as a reduction to additional paid-in capital on the consolidated balance sheets.

The capped calls will not be subsequently re-measured as long as the conditions for equity classification continue to be met.

The Company incurred $ 0.9 million of debt issuance costs relating to the issuance of the 2026 Convertible Notes, which were recorded as a reduction to the notes on the consolidated balance sheet.

The debt issuance costs is being amortized and recognized as additional interest expense over the six-year contractual term of the notes using the effective interest rate method.

The following table summarizes information about the components of the 2026 Convertible Notes (in thousands):

The debt issuance costs are being amortized and recognized as additional interest expense over the six-year contractual term of the notes using the effective interest rate method.

The following table summarizes components of the 2026 Convertible Notes:

(in thousands)

Principal amount of the 2026 Convertible Notes

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Total 2026 Convertible Notes

If the 2026 Convertible Notes were to be converted on December 31, 2020, the holders of the 2026 Convertible Notes would receive common shares with an aggregate value of $ 207.6 million based on the Company’s closing stock price of $ 17.38 as of December 31, 2020.

The following table presents the components of interest expense related to 2026 Convertible Notes (in thousands):

If the 2026 Convertible Notes were converted on December 31, 2021, the holders of the 2026 Convertible Notes would have received common shares with an aggregate value of $ 190.6 million based on the Company’s closing stock price of $ 15.96 as of December 31, 2021.

The following table presents the components of interest expense related to 2026 Convertible Notes:

Year Ended December 31,

(in thousands)

Stated coupon interest

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Total interest expense

The remaining unamortized debt discount and debt offering costs related to the Company’s 2026 Convertible Notes of approximately $ 7.0 million as of December 31, 2020, will be amortized using the effective interest rate over the remaining term of the 2026 Convertible Notes of 5.3 years.

The remaining unamortized debt discount and debt offering costs related to the Company’s 2026 Convertible Notes of $ 5.7 million as of December 31, 2021, will be amortized using the effective interest rate over the remaining term of the 2026 Convertible Notes of 4.3 years.

The annual effective interest rate is 2.1 % for the 2026 Convertible Notes.

Future payments on the 2026 Convertible Notes as of December 31, 2020 are as follows (in thousands):

Year ending December 31,

Future payments on the 2026 Convertible Notes as of December 31, 2021 are as follows:

Year ending December 31, (in thousands)

2026 and beyond

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8.2% Convertible Notes due 2022

On February 29, 2016, the Company issued and sold $ 100.0 million aggregate principal amount of its 8.2 % Convertible Senior Notes (the “2022 Convertible Notes”) and received total net proceeds of approximately $ 99.2 million, after deducting issuance costs of $ 0.8 million.

On February 29, 2016, the Company issued and sold $ 100.0 million aggregate principal amount, which excludes a 9.0 % premium due at maturity or redemption, of its 2022 Convertible Notes and received total net proceeds of approximately $ 99.2 million, after deducting issuance costs of $ 0.8 million .

The 2022 Convertible Notes constitute general, senior unsubordinated obligations of the Company and are guaranteed by certain subsidiaries of the Company.

The 2022 Convertible Notes bear interest at a fixed coupon rate of 8.2 % per annum payable quarterly in arrears on March 31, June 30, September 30 and December 31 of each year, which commenced on March 31, 2016, and mature on March 31, 2022 , unless earlier converted, redeemed or repurchased.

The 2022 Convertible Notes bear interest at a fixed coupon rate of 8.2 % per annum payable quarterly in arrears on March 31, June 30, September 30 and December 31 of each year, since March 31, 2016 , and will mature on March 31, 2022 , unless earlier converted, redeemed or repurchased.

If the Company fails to satisfy certain registration or reporting requirements, then additional interest will accrue on the 2022 Convertible Notes at a rate of up to 0.50 % per annum in the aggregate.

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The 2022 Convertible Notes were issued to Healthcare Royalty Partners III, L.P., for $ 75.0 million in aggregate principal amount, and to three related party investors, KKR Biosimilar L.P., MX II Associates LLC, and KMG Capital Partners, LLC, for $ 20.0 million, $ 4.0 million, and $ 1.0 million, respectively, in aggregate principal amount.

The 2022 Convertible Notes are convertible at the option of the holder at any time prior to the close of business on the business day immediately preceding March 31, 2022 at the initial conversion rate of 44.7387 shares of common stock per $ 1,000 principal amount of 2022 Convertible Notes, which is equivalent to an initial conversion price of approximately $ 22.35 per share, and is subject to adjustment in certain events.

Upon conversion of the 2022 Convertible Notes by a holder, the holder will receive shares of the Company’s common stock together, if applicable, with cash in lieu of any fractional share.

The 2022 Convertible Notes are redeemable in whole, and not in part, at the Company’s option on or after March 31, 2020, if the last reported sale price per share of common stock exceeds 160 % of the conversion price on 20 or more trading days during the 30 consecutive trading days preceding the date on which the Company sends notice of such redemption to the holders of the 2022 Convertible Notes.

At any time before the close of business on the business day immediately preceding March 31, 2022, the 2022 Convertible Note noteholders may convert their 2022 Convertible Notes at their option into shares of the Company’s common stock, together, if applicable, with cash in lieu of any fractional share, at the then-applicable conversion rate.

The initial conversion rate is 44.7387 shares of common stock per $ 1,000 principal amount of the 2022 Convertible Notes, which represents an initial conversion price of approximately $ 22.35 per share of common stock.

The initial conversion price represents a 60 % premium over the average last reported sale price of our common stock over the 15 trading days preceding the date the 2022 Convertible Notes were issued.

The conversion rate and conversion price will be subject to customary adjustments upon the occurrence of certain events.

The 2022 Convertible Notes are redeemable in whole, and not in part, at the Company’s option with effect from March 31, 2020, if the last reported sale price per share of common stock exceeds 160 % of the conversion price on 20 or more trading days during the 30 consecutive trading days preceding the date on which the Company sends notice of such redemption to the holders of the 2022 Convertible Notes.

At maturity or redemption, if not earlier converted, the Company will pay 109 % of the principal amount of the 2022 Convertible Notes maturing or being redeemed, together with accrued and unpaid interest, in cash.

The 2022 Convertible Notes contain customary events of default (as defined in the 2022 Convertible Note purchase agreement), the occurrence of which could result in the acceleration of all amounts due under the 2022 Convertible Notes.

These events of default include, among others, certain failures to pay amounts due on the 2022 Convertible Notes, to deliver the consideration due upon conversion or to settle uninsured judgments, decrees or orders exceeding $ 10.0 million, and certain defaults on other indebtedness for money borrowed of at least $ 10.0 million, insolvency-related events and breaches of representations, subject, in some cases, to a cure period.

The 2022 Convertible Notes also contain covenants restricting the Company’s ability to incur additional indebtedness for borrowed

money or convertible preferred stock and to pay dividends or make distributions on the Company’s equity interests, subject to certain exceptions.

The 2022 Convertible Notes contain customary negative covenants and events of default, the occurrence of which could result in the acceleration of all amounts due under the 2022 Convertible Notes.

The 2022 Convertible Notes also contain covenants restricting the Company’s ability to incur additional indebtedness for borrowed money or convertible preferred stock and to pay dividends or make distributions on the Company’s equity interests, subject to certain exceptions.

As of December 31, 2021, the Company was in full compliance with these covenants and there were no events of default under the 2022 Convertible Notes.

The 2022 Convertible Notes are accounted for in accordance with ASC Subtopic 470-20, Debt with Conversion and Other Options .

Pursuant to ASC Subtopic 470-20, the Company evaluated the features embedded in the 2022 Convertible Notes and concluded that the embedded features are not required to be bifurcated and accounted for separately from the host debt instrument.

The Company evaluated the features embedded in the 2022 Convertible Notes under the relevant accounting rules and concluded that the embedded features do not meet the requirements for bifurcation, and therefore do not need to be separately accounted for as an equity component.

The Company granted the holders of the 2022 Convertible Notes certain registration rights requiring the Company to register, under the Securities Act of 1933, as amended, the resale of the shares of common stock issuable upon conversion or settlement of the 2022 Convertible Notes.

On April 13, 2020, the Company entered into an amendment (the “Second Amendment”) to the 2022 Convertible Note Purchase Agreement, dated as of February 29, 2016 (the “Note Purchase Agreement”), which amended the definition of Restricted Payment to exclude any payment (including a premium) to a counterparty under a Permitted Bond Hedge Transaction (as defined in the Note Purchase Agreement).

The Second Amendment also added to the Note Purchase Agreement a definition of Permitted Bond Hedge Transaction, with such definition including any capped call option (or substantively equivalent derivative transaction) relating to the Company’s common stock purchased by it in connection with any issuance of indebtedness or convertible indebtedness.

The following table summarizes information about the components of the 2022 Convertible Notes as of December 31, 2020 and 2019 (in thousands):

The following table summarizes components of the 2022 Convertible Notes:

(in thousands)

Principal amount of the 2022 Convertible Notes

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2022 Convertible Notes - related parties

Total 2022 Convertible Notes

Total 2022 Convertible Notes, net carrying amount

In January 2022, the Company entered into the 2027 Term Loans (see Note 14.

Subsequent Events).

Since the Company expects to refinance the 2022 Convertible Notes with proceeds from the 2027 Term Loans which will be funded no later than April 1, 2022, subject to the delivery certain customary deliverables and which mature in 2027, the 2022 Convertible Notes were classified as non-current on the December 31, 2021 consolidated balance sheets.

The contractual future payments on the 2022 Convertible Notes as of December 31, 2021, without consideration of the expected refinancing, is $ 111.1 million due in 2022, inclusive of $ 2.1 million of interest.

If the 2022 Convertible Notes were converted on December 31, 2021, the holders of the 2022 Convertible Notes would receive common shares with an aggregate value of $ 71.4 million based on the Company’s closing stock price of $ 15.96 .

The following table presents the components of interest expense of the 2022 Convertible Notes for the years ended December 31, 2020, 2019 and 2018 (in thousands):

The following table presents the components of interest expense of the 2022 Convertible Notes:

Year Ended December 31,

(in thousands)

Stated coupon interest

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Total interest expense

The remaining unamortized debt discount and debt offering costs related to the Company’s 2022 Convertible Notes of approximately $ 2.5 million as of December 31, 2020, will be amortized using the effective interest rate over the remaining term of the 2022 Convertible Notes of 1.25 years.

The annual effective interest rate is 9.48 % for the 2022 Convertible Notes.

Future payments on the 2022 Convertible Notes as of December 31, 2020 are as follows (in thousands):

Year ending December 31,

Total minimum payments

Less amount representing interest

2022 Convertible Notes, principal amount

Less debt discount and debt issuance costs on 2022 Convertible Notes

Net carrying amount of 2022 Convertible Notes

The remaining total unamortized debt discount and debt offering costs related to the Company’s 2022 Convertible Notes and 2022 Convertible Notes – related parties of $ 0.5 million as of December 31, 2021, will be amortized using the effective interest rate over the remaining term of three months from the balance sheet date.

The annual effective interest rate is 9.5 % for the 2022 Convertible Notes and 2022 Convertible Notes – related parties.

2025 Term Loan

On January 7, 2019 (the “2025 Term Loan Closing Date”), the Company entered into a credit agreement (the “2025 Term Loan”) with affiliates of Healthcare Royalty Partners (together, the “Lender”).

The 2025 Term Loan consists of a six-year term loan facility for an aggregate principal amount of $ 75.0 million (the “Borrowings”).

The obligations of the Company under the loan documents are guaranteed by the Company’s material domestic U.S.

subsidiaries.

The obligations of the Company under the loan documents are guaranteed by the Company’s material domestic United States subsidiaries.

The Borrowings under the 2025 Term Loan bear interest through maturity at 7.00 % per annum plus three month LIBOR.

Pursuant to the terms of the 2025 Term Loan, the interest rate was reduced to 6.75 % per annum plus LIBOR as of January 1, 2020 as the consolidated net sales for UDENYCA for the fiscal year ending December 31, 2019 were in excess of $ 250.0 million.

Interest is payable quarterly in arrears and varies with LIBOR.

The Company adopted the prospective method to account for future cash payments.

Under the prospective method, the effective interest rate is not constant, and any change in the expected cash flows is recognized prospectively as an adjustment to the effective yield.

As of December 31, 2020, the effective interest rate is 10.47 %.

The Company is required to pay principal on the Borrowings in equal quarterly installments beginning on the four year anniversary of the Term Loan Closing Date (or, if consolidated net sales of UDENYCA® in the fiscal year ending December 31, 2021 are less than $ 375.0 million, beginning on the three year anniversary of the Term Loan Closing Date), with the outstanding balance to be repaid on January 7, 2025 , the maturity date.

The Company is also required to make mandatory prepayments of the Borrowings under the Term Loan, subject to specified exceptions, with the proceeds of asset sales, extraordinary receipts, debt issuances and specified other events including the occurrence of a change in control.

Interest is payable quarterly in arrears.

Under the prospective method to account for future cash payments adopted by the Company, the effective interest rate is not

constant, and any change in the expected cash flows is recognized prospectively as an adjustment to the effective yield.

As of December 31, 2021, the effective interest rate was 10.7 %.

Pursuant to the terms of the 2025 Term Loan, the Company was required to begin paying principal on the Borrowings in equal quarterly installments beginning on the third anniversary of the 2025 Term Loan Closing Date, with the outstanding balance to be repaid on January 7, 2025, the maturity date.

However, in January 2022, the Company entered into the 2027 Term Loans (see Note 14.

Subsequent Events) and voluntarily prepaid all amounts outstanding under the 2025 Term Loan, pursuant to which a payoff amount of $ 81.9 million was outstanding.

Since the Company expected to refinance the 2025 Term Loan with proceeds from Tranche A of the 2027 Term Loans which was funded on January 5, 2022 and will mature in 2027, the 2025 Term Loan was classified as non-current on the December 31, 2021 consolidated balance sheets.

If all or any of the Borrowings are prepaid or required to be prepaid under the 2025 Term Loan, then the Company shall pay, in addition to such prepayment, a prepayment premium equal to (i) with respect to any prepayment paid or required to be paid on or prior to the three year anniversary of the Credit Agreement Closing Date, 5.00 % of the Borrowings prepaid or required to be prepaid, plus all required interest payments that would have been due on the Borrowings prepaid or required to be prepaid through and including the three year anniversary of the 2025 Term Loan Closing Date , (ii) with respect to any prepayment paid or required to be paid after the three year anniversary of the 2025 Term Loan Closing Date but on or prior to the four year anniversary of the 2025 Term Loan Closing Date, 5.00 % of the Borrowings prepaid or required to be prepaid , (iii) with respect to any prepayment paid or required to be paid after the four year anniversary of the 2025 Term Loan Closing Date but on or prior to the five year anniversary of the 2025 Term Loan Closing Date, 2.50 % of the Borrowings prepaid or required to be prepaid , and (iv) with respect to any prepayment paid or required to be prepaid thereafter, 1.25 % of the Borrowings prepaid or required to be prepaid .

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Upon the prepayment or maturity of the Borrowings (or upon the date such prepayment or repayment is required to be paid), it is required to pay an additional exit fee in an amount equal to 4.00 % of the total principal amount of the Borrowings.

The obligations under the Term Loan are secured by a lien on substantially all of the Company’s and its Guarantors’ tangible and intangible property, including intellectual property.

The obligations under the 2025 Term Loan are secured by a lien on substantially all of the Company’s tangible and intangible property, including intellectual property.

The 2025 Term Loan contains certain affirmative covenants, negative covenants and events of default, including, covenants and restrictions that among other things, restrict the ability of the Company and its subsidiaries to, incur liens, incur additional indebtedness, make loans and investments, engage in mergers and acquisitions, in asset sales, and declare dividends or redeem or repurchase capital stock.

Additionally, the consolidated net sales for UDENYCA® must not be lower than $ 70.0 million for the

fiscal year ending December 31, 2019, (b) $ 125.0 million for the fiscal year ending December 31, 2020, and (c) $ 150.0 million for each fiscal year thereafter.

Additionally, the consolidated net sales for UDENYCA must not be lower than $ 70.0 million for the fiscal year ending December 31, 2019, (b) $ 125.0 million for the fiscal year ending December 31, 2020, and (c) $ 150.0 million for each fiscal year thereafter.

A failure to comply with these covenants could permit the Lender under the 2025 Term Loan to declare the Borrowings, together with accrued interest and fees, to be immediately due and payable.

On April 13, 2020, the Company entered into an amendment to the Term Loan, which amended the Term Loan’s indebtedness covenant such that the Company could incur Convertible Bond Indebtedness (as defined in the credit agreement governing the Term Loan) in an amount not to exceed the greater of $ 230.0 million or 20 % of the Company’s market capitalization.

The following table summarizes information about the components of the Term Loan (in thousands):

As of December 31, 2021, the Company was in full compliance with these covenants and there were no events of default under the 2025 Term Loan.

The following table summarizes components of the 2025 Term Loan:

(in thousands)

Principal amount of the 2025 Term Loan

Unamortized debt discount and debt issuance costs

The following table presents the components of interest expense:

December 31, 2020

December 31, 2019

Exit fee due on payment of 2025 Term Loan

2025 Term Loan, gross

Unamortized exit fee, debt discount and debt issuance costs, net

Net carrying amount of 2025 Term Loan

The following table presents the components of interest expense of the 2025 Term Loan:

Year Ended December 31,

(in thousands)

Stated coupon interest

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Interest expense

The remaining unamortized debt discount and debt offering costs related to the Term Loan of approximately $ 0.5 million as of December 31, 2020, will be amortized using the effective rate over the remaining term of the Term Loan of 4 years .

Future payments on the Term Loan as of December 31, 2020 are as follows (in thousands):

Year ending December 31,

In January 2022 , the 2025 Term Loan was refinanced with proceeds from the 2027 Term Loans which mature in 2027 (see Note 14.

Subsequent Events).

Therefore, the 2025 Term Loan was classified as non-current on the consolidated balance sheets at December 31, 2021.

If the refinancing had not occurred, the future payments on the 2025 Term Loan as of December 31, 2021 would be as follows:

Year ending December 31, (in thousands)

Total minimum payments

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2025 Term Loan, gross

Less debt discount and debt issuance costs on Term Loan

Less unamortized exit fee, debt discount and debt issuance costs, net

Net carrying amount of 2025 Term Loan

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Purchase Commitments

The Company entered into agreements with a vendor to secure raw materials and a CMO to manufacture its commercial supply of UDENYCA®.

As of December 31, 2020, the Company’s contractual obligations under the terms of the agreements are as follows (in thousands):

Years ending December 31,

The Company entered into agreements with certain vendors to secure raw materials and certain CMOs to manufacture its supply of products.

As of December 31, 2021, the Company’s non-cancelable contractual obligations under the terms of its agreements are as follows:

Years ending December 31, (in thousands)

Total obligations

The Company enters into contracts in the normal course of business with contract research organizations for preclinical studies and clinical trials and CMO for the manufacture of drug materials.

The Company enters into contracts in the normal course of business with contract research organizations for preclinical studies and clinical trials and CMOs for the manufacture of clinical trial materials.

The contracts are cancellable, with varying provisions regarding termination.

If a contract with a specific vendor were to be terminated, the Company would only be obligated for products or services that the Company had received as of the effective date of the termination and any applicable cancellation fees.

Contingencies

On March 3, 2017, Amgen filed an action against the Company, KBI BioPharma Inc., the Company’s employee Howard S.

Weiser and Does 1-20 in the Superior Court of the State of California, County of Ventura.

The complaint alleges that the Company engaged in unfair competition and improperly solicited and hired certain former Amgen employees in order to acquire and access trade secrets and other confidential information belonging to Amgen.

On June 1, 2017, Amgen filed a Second Amended Complaint, which alleges as to Coherus (i) unfair competition under California Business and Professions Code Section 17200 et seq., (ii) misappropriation of trade secrets, (iii) aiding and abetting breach of duty of loyalty and (iv) tortious interference with contract.

As to defendant Weiser, the Second Amended Complaint alleges (i) unfair competition under California Business and Professions Code Section 17200 et seq., (ii) misappropriation of trade secrets, (iii) breach of contract, (iv) violation of Penal Code Section 502 and (v) breach of duty of loyalty.

KBI BioPharma Inc.

is not named as a defendant in the Second Amended Complaint.

The Second Amended Complaint seeks injunctive relief and monetary damages.

On May 2, 2019, the Company and Amgen settled the trade secret action brought by Amgen.

The details of the settlement are confidential but the Company will continue to market UDENYCA® and began paying a mid-single digit royalty to Amgen for five years starting on July 1, 2019.

If a contract with a specific vendor were to be terminated, the Company would generally only be obligated for products or services that the Company had received as of the effective date of the termination and any applicable cancellation fees.

Guarantees and Indemnifications

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In the cases where the Company believes that a reasonably possible or probable loss exists, it will disclose the facts and circumstances of the claims, including an estimate range, if possible.

In July 2015, the Company entered into the office space for its corporate headquarters in Redwood City, California under an operating lease agreement, which has been subject to amendments to secure additional space such that the total headquarters leased space is approximately 47,789 square feet.

The Lease Agreement, provides for certain limited rent abatement and contains annual scheduled rent increases over the lease term.

The lease terminates in September 2024 and contains a one -time option to extend the lease term for five years .

The Company also leases laboratory facilities in Camarillo, California.

In October 2019, the Company entered into a new laboratory facility lease (“New Camarillo Lease”) of approximately 25,017 square feet in a new location in Camarillo, California as the current Camarillo

leases terminated in June 2020 and December 2020.

The New Camarillo Lease provides for certain limited rent abatement and annual scheduled rent increases over the lease term.

The lease commenced in January 2020 and terminates in May 2027 , and contains a one -time option to extend the lease term for five years .

Legal Proceedings

The Company is a party to various legal proceedings and claims that arise in the ordinary, routine course of business and that have not been fully resolved.

The outcome of such legal proceedings and claims is inherently uncertain.

Accruals are recognized for such legal proceedings and claims to the extent that a loss is both probable and reasonably estimable.

The best estimate of a loss within a range is accrued;

however, if no estimate in the range is better than any other, then the minimum amount in the range is accrued.

If its determined that a material loss is reasonably possible and the loss or range of loss can be estimated, the possible loss is disclosed.

Sometimes it is not possible to determine the outcome of these matters or, unless otherwise noted, the outcome (including in excess of any accrual) is not expected to be material, and the maximum potential exposure or the range of possible loss cannot be reasonably estimated.

The Company did not have any material accruals in the consolidated balance sheets as of December 31, 2021 and 2020.

There are no material pending legal proceedings, other than ordinary routine litigation incidental to the business, to which the Company or any of its subsidiaries is a party, or that any of the Company or its subsidiaries' property is subject.

The Company leases approximately 47,789 square feet of office space for its corporate headquarters in Redwood City, California.

This lease terminates in September 2024 and contains a one -time option to extend the lease term for five years .

The Company also leases approximately 25,017 square feet for its laboratory facilities in Camarillo, California which commenced in January 2020.

This lease terminates in May 2027 and contains a one -time option to extend the lease term for five years .

Both facility leases provide for certain limited rent abatement and annual scheduled rent increases over their respective lease terms.

The Company determined that the above facility leases were operating leases.

The options to extend the lease terms for these leases were not included as part of the right-of-use asset or lease liability as the Company was not reasonably certain it would exercise those options.

In 2019, the Company entered into a vehicle lease agreement, pursuant to which it currently leases 42 vehicles.

The options to extend the lease terms for these leases were not included as part of the right-of-use asset or lease liability as it was not reasonably certain the Company would exercise those options.

In 2019, the Company entered into a vehicle lease agreement, pursuant to which the Company currently leases approximately 50 vehicles.

Delivery of the vehicles commenced during the first quarter of 2020.

The term of each leased vehicle commences upon the delivery of the vehicle and is for a period of 36 months .

The term of each leased vehicle is 36 months and commences upon the delivery of the vehicle.

The vehicles leased under this arrangement were classified as finance leases.

In determining the present value of the lease payments, the Company used the incremental borrowing rate based on the information available on January 1, 2019 (adoption date of ASC 842) for the leases that commenced prior to that date.

For the leases that commenced prior to January 1, 2019 (adoption date of ASC 842), the Company determined the present value of the lease payments using the incremental borrowing rate on that date.

For all other leases, the Company used the incremental borrowing rate on the lease commencement or the lease modification date, as applicable.

The supplemental information related to Company’s leases is as follows (in thousands):

Supplemental information related to the Company’s leases is as follows:

(in thousands)

Balance Sheet Classification

Operating lease

Operating lease right-of-use assets

Other assets, non-current

Finance lease

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Total leased assets

(in thousands)

Balance Sheet Classification

Operating lease liabilities, current

Other current liabilities

Accrued and other current liabilities

Operating lease liabilities, non-current

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Finance lease liabilities, current

Other current liabilities

Accrued and other current liabilities

Finance lease liabilities, non-current

1 unchanged sentence

Total finance lease liabilities

Operating lease costs were $ 3.1 million, $ 2.4 million and $ 2.2 million for the years ended December 31, 2020, 2019 and 2018, respectively.

Cash paid for amounts included in the measurement of the operating lease liabilities for the years ended December 31, 2020 and 2019 was $ 3.2 million and $ 2.7 million, respectively, and was included in net cash used in operating activities in the consolidated statements of cash flows.

Finance lease costs and cash paid for amounts included in the measurement of finance lease liabilities were immaterial during the years ended December 31, 2020 and 2019.

As of December 31, 2020, the maturities of the operating lease liabilities were as follows (in thousands):

Years ending December 31,

Operating lease costs were $ 3.1 million, $ 3.1 million and $ 2.4 million in 2021, 2020 and 2019, respectively.

Cash paid for amounts included in the measurement of the operating lease liabilities in 2021 and 2020 was $ 3.4 million and $ 3.2 million, respectively, and was included in net cash used in operating activities in the consolidated statements of cash flows.

Finance lease costs and cash paid for amounts included in the measurement of finance lease liabilities were immaterial during 2021, 2020 and 2019.

As of December 31, 2021, the maturities of the lease liabilities were as follows:

Years ending December 31, (in thousands)

Operating leases

Finance leases

2025 and beyond

2026 and thereafter

Total lease payments

Less imputed interest

Operating lease liabilities

Lease liabilities

As of December 31, 2021 and 2020, the weighted average remaining lease term for operating leases was 3.2 years and 4.1 years, respectively.

The weighted average discount rate used to determine the operating lease liabilities was 8.0 % and 8.1 % as of December 31, 2021 and 2020, respectively.

The weighted average remaining lease term for finance leases was 2.4 years as of December 31, 2020.

The weighted average discount rate used to determine the finance lease liabilities was 5.8 % as of December 31, 2020.

Stockholders’ Equity

Common Stock Offerings

In January 2016, the Company’s shelf registration statement on Form S-3 (File No.

333-208625) (the “Shelf Registration Statement”) was declared effective by the SEC.

As of January 18, 2019, the Company’s Shelf Registration Statement expired.

On October 28, 2016, the Company entered into a sales agreement (the “Sales Agreement”) with Cowen to sell shares of the Company’s common stock, with aggregate gross sales proceeds of up to $ 100,000,000 , from time to time, through an at-the-market equity offering program under which Cowen acted as its sales agent (the “ATM Offering Program”).

Cowen was entitled to compensation for its services equal to 3.0 % of the gross proceeds of any shares of common stock sold through Cowen under the Sales Agreement.

The Company had no obligation to sell any shares under the Sales Agreement, and could at any time suspend solicitation and offers under the Sales Agreement.

The shares were issued pursuant to the Company’s Shelf Registration Statement.

The Company filed a prospectus supplement, dated October 28, 2016, with the SEC in connection with the offer and sale of the shares pursuant to the Sales Agreement.

In 2018, the Company issued and sold 1,799,504 shares of common stock at a weighted average price of $ 12.14 per share through its ATM Offering Program and received total gross proceeds of $ 21.8 million.

After deducting commission of $ 0.7 million and offering expense of $ 0.1 million, the net proceeds were $ 21.0 million.

In January 2019, the Company issued and sold 761,130 shares of common stock at a weighted average price of $ 11.17 per share through its ATM Program and received total gross proceeds of $ 8.5 million.

After deducting commission of $ 0.3 million, the net proceeds were $ 8.2 million.

As of January 18, 2019, the Company’s Shelf Registration Statement expired and accordingly the ATM Offering Program was terminated.

In May 2018, the Company completed an underwritten public offering of 5,948,274 shares of its common stock at a price to the public of $ 14.50 per shares, which includes the closing of the full exercise of the underwriters’ option to purchase an additional 775,861 shares of common stock.

The Company received total gross proceeds from the offering of $ 86.3 million.

After deducting underwriting discounts and commissions of $ 5.2 million and offering expenses of $ 0.3 million, the net proceeds were $ 80.8 million.

Stock Option Plans and Stock-Based Compensation

The weighted average remaining lease term for finance leases was 1.7 years and 2.4 years as of December 31, 2021 and 2020, respectively.

The weighted average discount rate used to determine the finance lease liabilities was 5.8 % as of December 31, 2021 and 2020, respectively.

Stock-Based Compensation and Employee Benefits

Equity Incentive Plans

In October 2014, the Company’s board of directors and its stockholders adopted the 2014 Equity Incentive Plan (the “2014 Plan”), which became effective upon the closing of the Company’s IPO on November 6, 2014.

In October 2014, the Company’s board of directors and its stockholders adopted the 2014 Equity Incentive Plan, which became effective upon the closing of the Company’s IPO on November 6, 2014.

The 2014 Plan is subject to automatic annual increases in the number of shares available for issuance on the first business day of each fiscal year equal to four percent ( 4 %) of the number of shares of the Company’s common stock outstanding as of such date or a lesser number of shares as determined by the Company’s board of directors.

All remaining shares under the Company’s 2010 Stock Plan (the “2010 Plan”) were transferred to the 2014 Plan upon adoption and any additional shares than would otherwise return to the 2010 Plan as a result of forfeiture, termination or expiration of the awards will return to the 2014 Plan.

All remaining shares under the Company’s 2010 Stock Plan (the “2010 Plan”) were transferred to the 2014 Plan upon adoption and any additional shares that would otherwise return to the 2010 Plan as a result of forfeiture, termination or expiration of the awards will return to the 2014 Plan.

The 2014 Plan provided for the Company to grant shares and/or options to purchase shares of common stock to employees, directors, consultants and other service providers.

As of December 31, 2020, the Company had 240,467 shares of common stock available for future issuance.

In June 2016, the Company adopted the 2016 Employment Commencement Incentive Plan (the “2016 Plan”).

While the 2014 Plan allows for non-qualified or incentive stock options, all option grants made since June 2016 have been for non-qualified stock options.

Under the 2010 Plan, no awards have been issued since 2014, and there were no shares of common stock available for future issuance as of December 31, 2021.

There were 468,671 shares of common stock available for future issuance as of December 31, 2021 under the 2014 Plan.

In June 2016, the Company adopted the 2016 Employment Commencement Incentive Plan.

The 2016 Plan is designed to comply with the inducement exemption contained in Nasdaq’s Rule 5635(c)(4), which provides for the grant of non-qualified stock options, restricted stock units, restricted stock awards, performance awards, dividend equivalents, deferred stock awards, deferred stock units, stock payment and stock appreciation rights to a person not previously an employee or director of the Company, or following a bona fide period of non-employment, as an inducement material to the individual’s entering into employment with the Company.

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The 2016 Plan does not provide for any annual increases in the number of shares available.

Stock option exercises are settled with common stock from the plans’ previously authorized and available pool of shares.

If any shares subject to an award granted under the 2014 Plan or the 2016 Plan expire or become forfeited, terminated or canceled without the issuance of shares, the shares subject to such awards are added back into the authorized pool on the same basis that they were removed.

In addition, shares withheld to pay for minimum statutory tax obligations with respect to full-value awards are added back into the

authorized pool.

The annual grant to eligible employees can vary on the type of award, and the award size is determined by the employee’s grade level.

Stock Options

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These stock options generally vest over four years , expire in ten years from the date of grant and are generally exercisable after vesting.

The following table sets forth the summary of option activities under the 2016 and 2014 Plans:

The following table sets forth the summary of option activities under the 2016 Plan and the 2014 Plan:

Options Outstanding

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( 1,316,361 )

Forfeited/Cancelled

Forfeited/Canceled

( 2,297,784 )

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During the years ended December 31, 2021, 2020 and 2019, the estimated weighted-average grant-date fair value of options granted was $ 9.80 , $ 10.94 and $ 9.52 per share, respectively, and the aggregate intrinsic value of options exercised was $ 9.7 million, $ 14.6 million and $ 10.3 million, respectively.

The Company recognized stock-based compensation expenses of $ 30.3 million, $ 31.4 million and $ 33.3 million for the years ended December 31, 2020, 2019 and 2018, respectively, related to stock options.

As of December 31, 2020, total unrecognized stock-based compensation expenses related to unvested employee stock options was $ 68.5 million, which is expected to be recognized on a straight-line basis over a weighted-average period of approximately 2.6 years.

The intrinsic value is defined as the difference between the current market value and the exercise price.

The Company recognized stock-based compensation expense of $ 36.7 million, $ 30.3 million and $ 31.4 million in 2021, 2020 and 2019, respectively, related to stock options.

As of December 31, 2021, total unrecognized stock-based compensation expenses related to unvested stock options was $ 61.4 million, which is expected to be recognized on a straight-line basis over a weighted-average period of 2.6 years.

Restricted Stock Units

In August 2017, the Compensation Committee of the Company’s board of directors approved the granting of restricted stock units (“RSUs”) to its employees.

The Company grants restricted stock units (“RSUs”) primarily to its employees.

RSUs are share awards that entitle the holder to receive freely tradable shares of our common stock upon vesting.

The RSUs cannot be transferred and are subject to forfeiture if the holder’s employment terminates prior to the release of the vesting restrictions.

The Company’s RSUs generally vest over two to three years from the applicable grant date, provided the employee remains continuously employed with the Company.

The fair value of RSUs is equal to the closing price of our common stock on the applicable grant date of the RSUs.

The Company’s RSUs generally vest over one to three years from the applicable grant date, provided the employee remains continuously employed with the Company.

The estimated fair value of RSUs is based on the closing price of our common stock on the grant date.

The following table sets forth the summary of RSUs activity, under the 2014 Plan:

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Balances at December 31, 2020

RSUs cancelled

RSUs canceled

Balances at December 31, 2021

The total fair value of RSUs vested was $ 8.4 million, $ 4.1 million and $ 2.7 million during the years ended December 31, 2021, 2020 and 2019, respectively.

The total estimated grant date fair value of RSUs was $ 21.2 million, $ 4.3 million and $ 78,000 granted during the years ended December 31, 2020, 2019 and 2018, respectively.

The total estimated grant date fair value of RSUs was $ 27.9 million, $ 21.2 million and $ 4.3 million granted during the years ended December 31, 2021, 2020 and 2019, respectively.

The estimated weighted-average grant-date fair value per share of RSUs granted during the years ended December 31, 2021, 2020 and 2019 was $ 16.86 , $ 17.86 and $ 15.11 , respectively.

The Company recognized stock-based compensation expense related to RSUs of $ 6.5 million, $ 0.8 million and $ 0.7 million for the years ended December 31, 2020, 2019 and 2018, respectively.

As of December 31, 2020, total unrecognized stock-based compensation expenses related to unvested RSUs was $ 12.6 million, which is expected to be recognized on a straight-line basis over a weighted-average period of approximately 1.8 years.

The Company recognized stock-based compensation expense related to RSUs of $ 13.5 million, $ 6.5 million and $ 0.8 million in 2021, 2020 and 2019, respectively.

As of December 31, 2021, total unrecognized stock-based compensation expenses related to unvested RSUs was $ 20.7 million, which is expected to be recognized on a straight-line basis over a weighted-average period of 1.8 years.

Employee Stock Purchase Plan

In October 2014, the Company’s board of directors and its stockholders approved the establishment of the 2014 Employee Stock Purchase Plan (“ESPP”).

In October 2014, the Company’s board of directors and its stockholders approved the establishment of the ESPP.

The ESPP provides for annual increases in the number of shares available for issuance on the first business day of each fiscal year equal to the lesser of one percent ( 1 %) of the number of shares of the Company’s common stock outstanding as of such date or a number of shares as determined by the Company’s board of directors.

1 unchanged sentence

Eligible employees may purchase common stock at 85 % of the lesser of the fair market value of the Company’s common stock on the first or last day of the offering period.

The offering periods of ESPP are on May 16 and November 16 .

The Company recognized stock-based compensation expenses related to ESPP of $ 1.4 million, $ 1.3 million and $ 0.8 million for the years ended December 31, 2020, 2019 and 2018, respectively.

The offering periods of the ESPP are on May 16 and November 16 .

The Company recognized stock-based compensation expense related to the ESPP of $ 1.2 million, $ 1.4 million and $ 1.3 million in 2021, 2020 and 2019, respectively.

As of December 31, 2021, there was $ 0.6 million of unrecognized compensation expense associated with the ESPP, which is expected to be recognized over an estimated weighted-average period of 4.5 months.

Stock-Based Compensation

The stock-based compensation expense is reflected in the consolidated statements of operations as follows (in thousands):

Stock-based compensation expense is reflected in the consolidated statements of operations as follows:

Year Ended December 31,

(in thousands)

Cost of goods sold (1)

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The expected term represents the period for which the stock-based awards are expected to be outstanding and is based on the options’ vesting term and contractual term.

The Company elected to use the “simplified method” for estimating the expected term, which is calculated as the mid-point between the vesting period and the contractual term of the options, as it has limited historical information to develop expectations about future exercise patterns and post-vesting employment termination behavior.

Through December 31, 2020, the Company elected to use the “simplified method” for estimating the expected term, which is calculated as the mid-point between the vesting period and the contractual term of the options, as it has limited historical information to develop expectations about future exercise patterns and post-vesting employment termination behavior.

Beginning January 1, 2021, the expected term is calculated using historical exercise data.

Expected Volatility:

The expected volatility for the years ended December 31, 2020 and 2019 is based on the Company’s historical stock price volatility.

The expected volatility for the year ended December 31, 2018 is based on an average historical stock price volatility of industry peers as the Company did not have sufficient trading history for its common stock in those reporting periods.

The expected volatility in 2021, 2020 and 2019 is based on the Company’s historical stock price volatility.

Risk-Free Interest Rate:

The Company based the risk-free interest rate by using an equivalent to the expected term based on the U.S.

Treasury constant maturity rate as of the date of grant.

The Company based the risk-free interest rate by using an equivalent to the expected term based on the United States Treasury constant maturity rate as of the date of grant.

Expected Dividends:

2 unchanged sentences

In 2019, the Company’s Compensation Committee approved the Company’s matching of the employees 401(k) Plan (the “401(k) Plan”) whereby eligible employees may elect to contribute up to the lesser of 90 % of their annual compensation or the statutorily prescribed annual limit allowable under Internal Revenue Service regulations.

The Company made matching contributions of 50 % of the first $ 6,000 of each participant’s contributions into the 401(k) Plan during the years ended December 31, 2020 and 2019.

The Company recorded compensation expense related to the match of $ 0.8 million for each of the years ended December 31, 2020 and 2019.

The components of income (loss) before income taxes are as follows (in thousands):

Beginning January 1, 2021, the Company made matching contributions of 100 % of the first 4 % of eligible compensation, up to a maximum of $ 7,500 .

In 2020 and 2019, the Company made matching contributions of 50 % of the first $ 6,000 of each participant’s contributions.

The Company recorded compensation expense related to the match of $ 1.7 million, $ 0.8 million and $ 0.8 million in 2021, 2020 and 2019, respectively.

The components of (loss) income before income taxes are as follows:

Year Ended December 31,

Provision for (benefit from) income taxes (in thousands):

(in thousands)

Provision for income taxes:

Year Ended December 31,

(in thousands)

Provision for income taxes

Income tax provision for the years ended December 31, 2020 and 2019 of $ 3.5 million and $ 2.9 million, respectively, primarily relates to state taxes in jurisdictions outside of California, for which the Company has a limited operating history.

There was no income tax provision for the year ended December 31, 2018 due to the Company’s history of losses and valuation of allowances against the deferred tax assets.

A reconciliation of the statutory U.S.

federal rate to the Company’s effective tax rate is as follows:

There was no income tax provision in 2021 due to the Company’s history of losses and valuation of allowances against the deferred tax assets.

The income tax provisions in 2020 and 2019 of $ 3.5 million and $ 2.9 million, respectively, primarily relate to state taxes in jurisdictions outside of California, for which the Company has a limited operating history.

A reconciliation of the statutory United States federal rate to the Company’s effective tax rate is as follows:

Year Ended December 31,

Percent of pre-tax income:

federal statutory income tax rate

United States federal statutory income tax rate

State taxes, net of federal benefit

5 unchanged sentences

Effective income tax rate

Significant components of the Company’s net deferred tax assets as of December 31, 2020 and 2019 consist of the following (in thousands):

The components of the Company’s net deferred tax assets as of December 31, 2021 and 2020 consist of the following:

(in thousands)

Net operating loss carryforwards

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Net deferred tax assets

ASC 740 (“ASC 740”) requires that the tax benefit of net operating losses, temporary differences and credit carry forwards be recorded as an asset to the extent that management assesses that realization is “more likely than not.” Realization of the future tax benefits is dependent on our ability to generate sufficient taxable income within the carry forward period.

Because of our recent history of operating losses, management believes that recognition of the deferred tax assets arising from the above-mentioned future tax benefits is currently not likely (as defined in ASC 740) to be realized and, accordingly, has provided a valuation allowance.

The valuation allowance decreased by $ 22.7 million and $ 13.4 million during the years ended December 31, 2020 and 2019, respectively and increased by $ 54.6 million during the year ended December 31, 2018.

As of December 31, 2020, the Company had federal net operating loss carryforwards of approximately $ 430.3 million, which will start to expire beginning in 2036 , and various state net operating loss carryforwards of approximately $ 44.6 million, which have various expiration dates beginning in 2031 .

As of December 31, 2020, the Company had federal research and development credit carryforwards for federal income tax purposes of approximately $ 48.2 million, which will start to expire in 2031 , and state research and development credit carryforwards of approximately $ 18.0 million, which can be carried forward indefinitely.

In assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized.

The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which the temporary differences representing net future deductible amounts become deductible.

Due to the weight of the negative evidence, which is primarily its history of losses outweighing other positive evidence, the Company has determined that it is more likely than not that its federal net deferred tax assets and certain state net deferred tax assets will not be realized, and therefore, the federal and certain state net deferred tax assets are fully offset by a valuation allowance at December 31, 2020 and 2019.

The deferred tax assets were primarily comprised of net operating losses, tax credit carryforwards and stock-based compensation.

Utilization of the net operating loss carryforwards and credits may be subject to a substantial annual limitation due to the ownership change limitations provided by Section 382 of the Internal Revenue Code of 1986, as amended, and similar state provisions.

The annual limitation may result in the expiration of net operating losses and credits before utilization.

The tax benefit of net operating losses, temporary differences and credit carry forwards is recorded as an asset to the extent that management assesses that realization is “more likely than not.” The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which the temporary differences representing net future deductible amounts become deductible.

Due to the Company’s history of losses, and lack of other positive evidence, the Company has determined that it is more likely than not that its Federal net deferred tax assets and certain state net deferred tax assets will not be realized, and therefore, the Company has fully offset the Federal and certain state net deferred tax assets by a valuation allowance as of December 31, 2021 and 2020.

The valuation allowance increased by $ 72.4 million during the year ended December 31, 2021 and decreased by $ 22.7 million and $ 13.4 million during the years ended December 31, 2020 and 2019, respectively.

As of December 31, 2021, the Company had operating loss carryforwards for federal income of $ 533.5 million, which will start to expire in the year 2036 , and various states net operating loss carryforwards of $ 83.7 million, which have various expiration dates beginning in 2031 .

As of December 31, 2021, the Company had federal research and development credit carryforwards for federal income tax purposes of $ 54.0 million, which will start to expire in the year 2031 , and state research and development credit carryforwards of $ 23.5 million, which have no expiration date.

Utilization of the net operating loss and tax credit carryforwards may be subject to an annual limitation due to historical or future ownership percentage change rules provided by the Internal Revenue Code of 1986, as amended, and similar state provisions.

The annual limitation may result in the expiration of certain net operating loss and tax credit carryforwards before their utilization.

Under the new enacted tax law, the carry forward period of net operating losses generated from 2018 forward is indefinite.

1 unchanged sentence

Therefore, the annual limitation may result in the expiration of certain net operating losses and tax credit carryforwards before their utilization.

The Company files U.S.

California and other state income tax returns with varying statutes of limitations.

The Company files United States, California and other state income tax returns with varying statutes of limitations.

The tax years from 2011 forward remain open to examination due to the carryover of unused net operating losses and tax credits.

A reconciliation of the Company’s unrecognized tax benefits for the years ended December 31, 2020, 2019 and 2018 is as follows (in thousands):

A reconciliation of the Company’s unrecognized tax benefits during 2021, 2020 and 2019 is as follows:

Year Ended December 31,

(in thousands)

Balance at beginning of year

2 unchanged sentences

Balance at end of year

As of December 31, 2020, 2019 and 2018, the Company had approximately $ 13.2 million, $ 11.6 million and $ 18.1 million, respectively, of unrecognized benefits, none of which would currently affect the Company’s effective tax rate if recognized due to the Company’s deferred tax assets being fully offset by a valuation allowance.

The Company does not believe there will be any material changes in its unrecognized tax positions over the next twelve months.

During the years ended December 31, 2020, 2019 and 2018 the Company did not recognize accrued interest and penalties related to unrecognized tax benefits.

The Company does not anticipate a material adjustment of unrecognized tax benefits during the next 12 months that impacts the rate for tax positions of prior years.

Net Income (Loss) Per Share Attributable to Coherus

The following table sets forth the computation of the basic and diluted net income (loss) per share attributable to the Company (in thousands, except share and per share data):

As of December 31, 2021, 2020 and 2019, the Company had $ 15.5 million, $ 13.2 million and $ 11.6 million, respectively, of unrecognized benefits, none of which would currently affect the Company’s effective tax rate if recognized due to the Company’s deferred tax assets being fully offset by a valuation allowance.

During 2021, 2020 and 2019, the Company did not recognize accrued interest and penalties related to unrecognized tax benefits.

The Company does not anticipate a material adjustment of unrecognized tax benefits during the next twelve months from the balance sheet date as reductions for tax positions of prior years.

The Company files United States, state and foreign income tax returns with varying statutes of limitations.

The tax years from inception in 2011 forward remain open to examination due to the carryover of unused net operating losses and tax credits.

Net (Loss) Income Per Share

The following table sets forth the computation of the basic and diluted net (loss) income per share:

Years Ended December 31,

Basic net income (loss) per share

Net income (loss) attributable to Coherus

(in thousands, except share and per share data)

Basic net (loss) income per share

Net (loss) income

Weighted-average common shares outstanding

Basic net income (loss) per share attributable to Coherus

Diluted net income (loss) per share

Net income (loss) attributable to Coherus

Basic net (loss) income per share

Diluted net (loss) income per share

Net (loss) income

Add interest expense on 2026 Convertible Notes, net of tax

Numerator for diluted (loss) net income per share attributable to Coherus

Denominator for basic net income (loss) per share attributable to Coherus

Numerator for diluted net (loss) income per share

Denominator for basic net (loss) income per share

Add effect of potential dilutive securities:

Stock options, including purchases from contributions to ESPP

Stock options, including shares subject to ESPP

Restricted stock units

Shares issuable upon conversion of convertible notes

Denominator for diluted net income (loss) per share attributable to Coherus

Diluted net income (loss) per share attributable to Coherus

The following outstanding dilutive potential shares were excluded from the calculation of diluted net income (loss) per share attributable to Coherus due to their anti-dilutive effect:

Denominator for diluted net (loss) income per share

Diluted net (loss) income per share

The following outstanding dilutive potential shares were excluded from the calculation of diluted net (loss) income per share due to their anti-dilutive effect:

The following outstanding dilutive potential shares were excluded from the calculation of diluted net (loss) income per share due to their anti-dilutive effect:he following outstanding dilutive potential shares were excluded from the calculation of diluted net (loss) income per share due to their anti-dilutive effect:

Year Ended December 31,

Stock options, including purchases from contributions to ESPP

Stock options, including shares subject to ESPP

Restricted stock units

Shares issuable upon conversion of 2022 Convertible Notes

Shares issuable upon conversion of 2026 Convertible Notes

Related Party Transactions

Transactions Associated with Medpace Agreement

A prior member of the Company’s board of directors is also the president and chief executive officer of Medpace Inc.

As such, Medpace was deemed to be a related party until the director’s resignation on March 1, 2018.

As a result, the Company no longer reflects balances and transactions associated with Medpace as related party in its consolidated financial statements as of March 1, 2018.

The Company recognized $ 1.5 million during year ended December 31, 2018 for services rendered by Medpace within research and development expense in the consolidated statements of operations.

Convertible Notes — Related Parties

In February 2016, the Company issued Convertible Notes to certain related parties (some companies affiliated with members of the Company’s board of directors), for an aggregate principal amount of $ 25.0 million (see Note 8 for related party disclosure).

InteKrin Acquisition

In February 2014, the Company completed the acquisition of the InteKrin for total consideration of $ 5.0 million.

Lanfear, the chief executive officer of the Company, was the chairman of the board and acting president of InteKrin at the time of the acquisition.

As such, the InteKrin acquisition was a related party transaction.

Lanfear also owned 10 % of the outstanding securities of InteKrin Russia, a majority owned subsidiary of InteKrin.

In September 2018, InteKrin acquired the outstanding 17.5 % of securities of InteKrin Russia held by its non-controlling owners for $ 0.7 million.

As a result of this purchase of the non-controlling ownership in InteKrin Russia, Mr.

Lanfear, who was one of the non-controlling stockholders of InteKrin Russia, received $ 0.4 million in consideration for his shares.

In February 2016, the Company issued the 2022 Convertible Notes to certain related parties (certain companies affiliated with members of the Company’s board of directors), for an aggregate principal amount of $ 25.0 million (see Note 7.

Debt Obligations).

Consulting services

In October 2020, the Company entered into a consulting agreement with Lanfear Advisors owned by Mr.

Jonathan Lanfear who is the brother of Dennis Lanfear, the Company’s President, Chief Executive Officer and Chairman of the Board of Directors.

Jonathan Lanfear provided consulting services with respect to the Collaboration Agreement executed with Junshi Biosciences in February 2021 and the Letter Agreement with Junshi Biosciences related to the Collaboration Agreement dated January 9, 2022 (See Note 6.

Collaborations and Other Arrangements).

In addition to the hourly consulting fee paid to Lanfear Advisors under the consulting agreement, the Company granted fully vested stock options to purchase 65,000 shares of common stock with an exercise price of $ 17.60 per share to Mr.

Lanfear in February 2021 upon the execution of the Collaboration Agreement with Junshi Biosciences and recognized stock-based compensation expense of $ 0.8 million.

The Company recorded cash consulting expense of $ 0.2 million and $ 0.3 million in 2021 and 2020, respectively, with respect to these consulting services.

Total liabilities recognized in accounts payable and accrued and other current liabilities on the consolidated balance sheets with respect to these services were $ 0.0 million and $ 0.3 million as of December 31, 2021 and 2020, respectively.

Subsequent Events

On February 1, 2021, the Company entered into an Exclusive License and Commercialization Agreement (the “Collaboration Agreement”) with Junshi Biosciences for the co-development and commercialization of toripalimab, Junshi Biosciences’ anti-PD-1 antibody in the United States and Canada.

Under the terms of the Collaboration Agreement, the Company will pay $ 150.0 million upfront for exclusive rights to toripalimab in the United States and Canada, options in these territories to Junshi Biosciences’ anti-TIGIT antibody and next-generation engineered IL-2 cytokine, and certain negotiation rights to two undisclosed preclinical immuno-oncology drug candidates.

The Company will have the right to conduct all commercial activities of toripalimb in the United States and Canada.

If the Company exercise its options, it will be obligated to pay an option exercise fee for each of the anti-TIGIT antibody and the IL-2 cytokine of $ 35.0 million per program.

Under the Collaboration Agreement, the Company retains the right to collaborate in the development of toripalimab and the

other licensed compounds, and will pay for a portion of these co-development activities up to a maximum of $ 25.0 million per licensed compound per year.

Closing of the Collaboration Agreement is subject to clearance under the Hart-Scott Rodino Antitrust Improvements Act (the “HSR Act”).

In connection with the Collaboration Agreement, the Company entered into a stock purchase agreement (the “Stock Purchase Agreement”) with Junshi Biosciences agreeing, subject to customary conditions, to acquire certain equity interests in the Company.

Pursuant to the Stock Purchase Agreement, the Company has agreed to issue 2,491,988 unregistered shares of its common stock, at a price per share of $ 20.0643 , for an aggregate value of approximately $ 50.0 million, to Junshi Biosciences as a portion of the consideration for the Collaboration.

2027 Term Loans

In January 2022, the Company entered into the Loan Agreement with the Collateral Agent and the Lenders that provides for a senior secured term loan facility of up to $ 400.0 million (inclusive of a $ 100.0 million uncommitted additional facility amount) to be funded in four committed tranches:

(i) a Tranche A Loan in an aggregate principal amount of $ 100.0 million that was funded on January 5, 2022;

(ii) a Tranche B Loan in an aggregate principal amount of $ 100.0 million to be funded no later than April 1, 2022, subject to the delivery of evidence of repayment, repurchase or redemption of indebtedness outstanding under our 8.2 % Convertible Notes due 2022 and certain customary deliverables;

(iii) a Tranche C Loan in an aggregate principal amount of $ 50.0 million to be funded at our option between April 1, 2022 and March 17, 2023, subject to certain conditions including the first FDA approval of a BLA for our product candidate toripalimab in the United States;

and (iv) a Tranche D Loan in an aggregate principal amount of $ 50.0 million to be funded at our option between April 1, 2022 and March 17, 2023, subject to certain conditions including the first FDA approval of a BLA for our product candidate CHS-201 (ranibizumab biosimilar) in the United States.

The Company has the right to request an uncommitted additional facility amount of up to $ 100.0 million after the Tranche A Closing Date that will be subject to new terms and conditions.

The 2027 Term Loans mature on either (i) the fifth anniversary of the Tranche A Closing Date;

or (ii) October 15, 2025, if the outstanding aggregate principal amount of our 2026 Convertible Notes is greater than $ 50.0 million on October 1, 2025.

The 2027 Term Loans bear interest at 8.25 % plus three-month LIBOR per annum with a LIBOR floor of 1.00 %.

In the event of the cessation of LIBOR, the benchmark governing the interest rate will be replaced with a rate based on the secured overnight financing rate published by the Federal Reserve Bank of New York as described in the Loan Agreement.

Interest is payable quarterly in arrears.

Repayment of outstanding principal of the 2027 Term Loans will be made in five equal quarterly payments of principal commencing after January 5, 2026.

In January 2022, the Company paid to the Lenders a funding fee equal to 2.00 % of the Lenders’ total committed amount to fund the Tranche A Loan, Tranche B Loan, Tranche C Loan and Tranche D Loan, payable on the Tranche A Closing Date.

In addition, in the event any of the 2027 Term Loans is prepaid in whole or in part prior to the Maturity Date or is accelerated, it will be subject to a prepayment fee.

Prior to the third anniversary of the Tranche A Closing Date, the prepayment fee is 3.00 % of the principal amount prepaid.

After the third anniversary but prior to the fourth anniversary of the Tranche A Closing Date, the prepayment fee is 2.00 % of the principal amount prepaid;

thereafter and prior to the Maturity Date, the prepayment fee is 1.00 % of the principal amount prepaid.

In addition to the prepayment fees, in connection with a full or partial prepayment of a tranche prior to the second anniversary of the applicable funding, a “make-whole” amount will be payable equal to the foregone interest from the date of prepayment through the second anniversary of the Tranche A Closing Date.

The obligations under the Loan Agreement are secured pursuant to customary security documentation, including a guaranty and security agreement among the Credit Parties and the Collateral Agent which provides for a lien on substantially all of the Company’s tangible and intangible assets and property, including intellectual property.

Pursuant to the Loan Agreement, and subject to certain restrictions, proceeds of the 2027 Term Loans were and will be used to fund our general corporate and working capital requirements except for the following:

in January 2022, proceeds of the Tranche A Loan were used to repay in full all amounts outstanding under the 2025 Term Loan, as well as all associated costs and expenses pursuant to which a payoff amount of $ 81.9 million was outstanding;

and proceeds of the Tranche B Loan will be used at our option to repay, repurchase or redeem in cash, in full, our existing 8.2 % Convertible Notes due 2022 as well as all associated costs and expenses.

The Loan Agreement contains certain customary representations and warranties.

In addition, the Loan Agreement includes affirmative covenants, such as the requirement to maintain minimum trailing twelve month net sales in an amount that begins at $ 200 million in the current quarter and increases to $ 210 million for the quarter ended March 30, 2024 and increases to be as much as $ 300 million for the quarter ended December 31, 2024.

Further, the Loan Agreement includes certain other affirmative covenants and negative covenants, including, covenants and restrictions that among other things, restrict our ability to, incur liens, incur additional indebtedness,

make investments, engage in certain mergers and acquisitions or asset sales, and declare dividends or redeem or repurchase capital stock.

The Loan Agreement also contains customary events of default, including among other things, our failure to make any principal or interest payments when due, the occurrence of certain bankruptcy or insolvency events or our breach of the covenants under the Loan Agreement.

Upon the occurrence of an event of default, the Lenders may, among other things, accelerate our obligations under the Loan Agreement.

A change of control of Coherus triggers a mandatory prepayment of the 2027 Term Loans within ten business days.

Junshi Biosciences – TIGIT Option Exercises

On January 9, 2022, the Company entered into a Letter Agreement with Junshi Biosciences related to the Collaboration Agreement (the “TIGIT Exercise Letter Agreement”).

Under the TIGIT Exercise Letter Agreement, the Company notified Junshi Biosciences of its election to exercise the license option for the TIGIT program described in the Collaboration Agreement (the “TIGIT Program”), with the TIGIT Exercise Letter Agreement effective on the date that all applicable waiting periods and approvals required under antitrust laws with respect to such exercise by the Company of the license option for the TIGIT Program have expired or have been terminated (in the case of waiting periods) or been received (in the case of approvals), in each case, without the imposition of any conditions (the “TIGIT Exercise Letter Agreement Effective Date”).

The Company will pay the option exercise payment of $ 35.0 million to Junshi Biosciences no later than 10 days following the TIGIT Exercise Letter Agreement Effective Date and, if applicable, will pay up to $ 255 million in development regulatory and sales milestones and an 18 % royalty on net product revenue as set forth under the Collaboration Agreement.

Pursuant to the TIGIT Exercise Letter Agreement, Coherus will lead further development of the TIGIT antibodies included in the TIGIT Program, including JS006, in the United States and Canada, after the date it makes the option exercise payment and will be responsible for the associated development costs as set forth in the Collaboration Agreement.

In January 2022, the Company initiated the process for the exercise of our option to license JS006, a TIGIT-targeted antibody, in the United States and Canada from Junshi Biosciences, expanding the companies’ 2021 immuno-oncology collaboration agreement .

Antibodies blocking TIGIT (T cell immunoglobulin and ITIM domain) have shown potential for synergistic anti-tumor activity in combination with PD-1/PD-L1 inhibitors.

In pre-clinical studies, JS006 has demonstrated strong binding affinity and inhibition of the TIGIT pathway.

IND applications allowing clinical development of JS006 have been approved in China and in the United States.

A dose escalation, dose expansion clinical trial (NCT05061628) evaluating the safety, tolerability and pharmacokinetic properties of JS006 as monotherapy and in combination with PD-1 inhibitor toripalimab in patients with advanced solid tumors is ongoing in China.

The Company plans to advance toripalimab in combination with JS006 in a clinical trial in North America later in 2022.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7A. Quantitative and Qualitative Disclosures About Market Risk